<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1997
REGISTRATION NO. 333-35995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NATIONAL DATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389 58-0977458
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION) CLASSIFICATION CODE
NUMBER)
---------------
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
(404) 728-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
E. MICHAEL INGRAM
GENERAL COUNSEL AND SECRETARY
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
(404) 728-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
JOEL J. HUGHEY WARREN J. HAUSER ROBERT A. SCHWED
MARK F. MCELREATH SOURCE INFORMATICS REBOUL, MACMURRAY,
ALSTON & BIRD LLP INC. HEWITT,
ONE ATLANTIC CENTER 45 ROCKEFELLER PLAZA MAYNARD & KRISTOL
1201 WEST PEACHTREE SUITE 912 45 ROCKEFELLER PLAZA
STREET NEW YORK, NEW YORK NEW YORK, NEW YORK
ATLANTA, GEORGIA 30309- 10111 10111
3424 (212) 841-0610 (212) 841-5700
(404) 881-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE (2)(3)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (including
rights to purchase
shares of Common Stock
or Series A Junior
Participating
Preferred Stock)..... 1,555,556 shares $0.06 $96,962.00 $100.00
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Represents the estimated number of shares of Common Stock, par value
$.125 per share ("NDC Common Stock"), issuable by the Registrant upon
consummation of the merger (the "Merger") of a subsidiary of the
Registrant with and into Source Informatics Inc. ("Source"), assuming
exercise of all rights to purchase common stock, par value $.01 per
share, of Source ("Source Common Stock").
(2) Pursuant to Rules 457(f)(2) and 457(f)(3), the registration fee was
computed on the basis of the stated value of the Source Common Stock and
the preferred stock, par value $1.00 per share, of Source ("Source
Preferred Stock") as of June 30, 1997, since Source had an accumulated
deficit as of such date.
(3) Registration fee was paid with the filing of the original registration
statement on September 19, 1997.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SOURCE INFORMATICS INC.
2394 EAST CAMELBACK ROAD
PHOENIX, ARIZONA 85016
, 1997
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders
("Special Meeting") of Source Informatics Inc. ("Source") to be held at The
Lotos Club, located at 5 East 66th Street, New York, New York, at 9:30 a.m.,
local time, on , 1997.
At this important meeting, you will be asked to consider and vote upon the
adoption of an Agreement and Plan of Merger, dated as of August 20, 1997 and
amended as of November 7, 1997 (the "Merger Agreement"), which provides for
the merger (the "Merger") of a wholly owned subsidiary of National Data
Corporation ("NDC") with and into Source. If the proposed Merger is
consummated, Source will become a wholly-owned subsidiary of NDC and each
outstanding share of Source capital stock will be converted into the right to
receive cash and shares of NDC common stock on the basis set forth in the
Merger Agreement and described in the enclosed Proxy Statement/Prospectus.
Adoption of the Merger Agreement requires the affirmative vote of (i) the
holders of a majority of the shares of Source common stock entitled to vote at
the Special Meeting and (ii) the holders of a majority of the shares of Source
preferred stock entitled to vote at the Special Meeting.
Enclosed are the: (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, and (iii) Proxy for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the Merger Agreement and the
Merger, including a description of the conditions to consummation of the
Merger and the effects of the Merger on the rights of Source stockholders and
contains financial and other information about Source. Please give this
information your careful attention.
The Board of Directors has unanimously approved and adopted the Merger
Agreement and consummation of the transactions contemplated therein, and
unanimously recommends that you vote FOR adoption of the Merger Agreement.
We look forward to seeing you at the Special Meeting.
Sincerely,
Handel E. Evans
Chairman of the Board
<PAGE>
SOURCE INFORMATICS INC.
2394 EAST CAMELBACK ROAD
PHOENIX, ARIZONA 85016
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT THE LOTUS CLUB ON , 1997
, 1997
To the Stockholders of Source Informatics Inc.:
NOTICE IS HEREBY GIVEN that the special meeting of stockholders ("Special
Meeting") of Source Informatics Inc. ("Source") will be held at The Lotos
Club, 5 East 66th Street, New York, New York, at 9:30 a.m., local time, on
, 1997, for the following purposes:
1. The Merger. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of August 20, 1997 and amended as of
November 7, 1997 (the "Merger Agreement"), by and among Source, National
Data Corporation ("NDC") and Dunkirk, Inc. ("Sub"), pursuant to which,
among other matters, Sub will merge with and into Source (the "Merger"),
with Source becoming a wholly-owned subsidiary of NDC and each share of
Source capital stock being converted into the right to receive cash and
shares of common stock of NDC, all as more fully described in the
accompanying Proxy Statement/Prospectus. A copy of the Merger Agreement is
set forth in Annex A to the accompanying Proxy Statement/Prospectus and is
incorporated by reference herein.
2. Other Business. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on November 3, 1997,
are entitled to receive notice of and to vote at the Special Meeting or any
adjournments or postponements thereof. Adoption of the Merger Agreement
requires the affirmative vote of (i) the holders of a majority of the shares
of Source common stock entitled to vote at the Special Meeting and (ii) the
holders of a majority of the shares of Source preferred stock entitled to vote
at the Special Meeting.
HOLDERS OF SOURCE COMMON STOCK AND SOURCE PREFERRED STOCK ("SOURCE CAPITAL
STOCK") WHO GIVE WRITTEN DEMAND FOR APPRAISAL OF THEIR SHARES BEFORE TAKING OF
THE VOTE ON THE MERGER AGREEMENT, DO NOT VOTE IN FAVOR OF ADOPTION OF THE
MERGER AGREEMENT, AND COMPLY WITH THE FURTHER PROVISIONS OF APPLICABLE
DELAWARE LAW, WILL BE ENTITLED TO RECEIVE, IF THE MERGER IS CONSUMMATED, THE
"FAIR VALUE" (AS DEFINED BY DELAWARE LAW) OF THEIR SOURCE CAPITAL STOCK IN
CASH. A VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT WILL NOT CONSTITUTE A
DEMAND FOR APPRAISAL RIGHTS, NOR WILL A FAILURE TO VOTE AGAINST ADOPTION OF
THE MERGER AGREEMENT CONSTITUTE A WAIVER OF APPRAISAL RIGHTS. A COPY OF THE
APPLICABLE DELAWARE STATUTORY PROVISIONS IS SET FORTH IN ANNEX B TO THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND A SUMMARY OF SUCH PROVISIONS IS
SET FORTH UNDER "THE MERGER--APPRAISAL RIGHTS."
THE BOARD OF DIRECTORS OF SOURCE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
Warren J. Hauser
Secretary
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1997
PROXY STATEMENT
SOURCE INFORMATICS INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
PROSPECTUS
NATIONAL DATA CORPORATION
COMMON STOCK
(PAR VALUE $.125 PER SHARE)
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.01 par value ("Source Common Stock"), and the holders of Series A
Convertible Preferred Stock, $1.00 par value ("Source Preferred Stock"), of
Source Informatics Inc., a Delaware corporation ("Source"), in connection with
the solicitation of proxies by the Source Board of Directors for use at the
special meeting of stockholders to be held at 9:30 a.m., local time, on ,
1997, at The Lotos Club, located at 5 East 66th Street, New York, New York, and
any adjournments or postponements thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon, among other
things, a proposal to adopt an Agreement and Plan of Merger, dated as of August
20, 1997 as amended as of November 7, 1997 (the "Merger Agreement") by and
among Source, National Data Corporation ("NDC") and Dunkirk, Inc. ("Sub"),
which provides for, among other things, the merger of Sub with and into Source
(the "Merger") with Source becoming a wholly-owned subsidiary of NDC. See
"Summary," "The Merger" and Annex A to this Proxy Statement/Prospectus.
Upon consummation of the Merger, each outstanding share of Source Common
Stock (excluding shares held by Source or any of its subsidiaries or by NDC or
any of its subsidiaries, and excluding shares held by stockholders who perfect
their statutory dissenters' rights) shall cease to be outstanding and shall be
converted into and exchanged for the right to receive: (x) the amount, if any,
equal to the quotient of (A) $31,750,000 less the Preferred Stock Merger
Consideration (hereinafter defined), and less Source's expenses directly
associated with this transaction (the "Transaction Expenses"), and (B) the
total number of shares of Source Common Stock outstanding at the Closing Date
(hereinafter defined), (y) that fraction of a share (the "Common Base Exchange
Ratio") of the common stock, $.125 par value of NDC (the "NDC Common Stock")
equal to 1,099,716 shares (the "Payment Shares") divided by the total number of
shares of Source Common Stock outstanding at the Closing Date; provided,
however, that the Payment Shares shall first be reduced by that number of
shares of NDC Common Stock payable to the holders of options and warrants to
purchase Source Common Stock in consideration of the cancellation of any such
outstanding options and warrants; and (z) that fraction of a share of NDC
Common Stock equal to 455,840 shares (the "Stock Escrow") divided by the total
number of shares of Source Common Stock outstanding at the Closing Date,
subject to the provisions of the Merger Agreement relating to the working
capital adjustment and indemnification and subject to the provisions of the
Escrow Agreement (hereinafter defined). Based on the market price of NDC Common
Stock on , 1997 and an estimate of the Transaction Expenses on such date,
each outstanding share of Source Common Stock would receive $ and shares
of NDC Common Stock.
Upon consummation of the Merger each outstanding share of Source Preferred
Stock (excluding shares held by Source or any of its subsidiaries or by NDC or
any of its subsidiaries, and excluding shares held by stockholders who perfect
their statutory dissenters' rights) shall cease to be outstanding and shall be
converted and exchanged for the right to receive an amount equal to $11.33 (the
"Preferred Stock Merger Consideration"), subject to adjustment to equal the
amount such holder of Source Preferred Stock would otherwise receive if such
holder were redeemed on the Closing Date pursuant to the terms of the Source
Preferred Stock designation (the "Designation").
Pursuant to the NDC Rights Agreement (hereinafter defined), each share of NDC
Common Stock issued in connection with the Merger upon conversion of Source
Common Stock shall be accompanied by an NDC Right. See "Certain Differences in
the Rights of NDC And Source Stockholders."
This Proxy Statement/Prospectus also constitutes a Prospectus of NDC relating
to the 1,555,556 shares of NDC Common Stock issuable to Source stockholders in
the Merger.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS IN
EVALUATING AN INVESTMENT IN NDC COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON
PAGE 24.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/ PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is , 1997, and it is first
being mailed or otherwise delivered to Source stockholders on or about ,
1997.
<PAGE>
AVAILABLE INFORMATION
NDC is subject to the reporting and informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy and information statements,
and other information filed by NDC with the Commission may be inspected and
copied at the principal office of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be available
at the Commission's Regional Offices at 7 World Trade Center, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates and also may be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. In addition, reports, proxy statements and other
information concerning NDC may be inspected at the offices of the New York
Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York 10005.
This Proxy Statement/Prospectus constitutes a part of a Registration
Statement on Form S-4 (together with any amendments thereto, the "Registration
Statement"), which has been filed by NDC with the Commission under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"). This Proxy Statement/Prospectus omits certain
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits thereto for further
information with respect to NDC and the securities to which this Proxy
Statement/Prospectus relates. Statements contained in this Proxy
Statement/Prospectus concerning the provisions of certain documents filed as
exhibits to the Registration Statement are necessarily brief descriptions
thereof, and are not necessarily complete, and each such statement is
qualified in its entirety by reference to the full text of such document.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST FROM: NATIONAL DATA CORPORATION, NATIONAL DATA PLAZA, ATLANTA,
GEORGIA 30329-2010, ATTN: CORPORATE SECRETARY, (404) 728-2855. SOURCE
INFORMATICS INC. IS NOT SUBJECT TO THE REPORTING AND INFORMATIONAL
REQUIREMENTS OF THE EXCHANGE ACT AND NO SOURCE DOCUMENTS HAVE BEEN
INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT/PROSPECTUS. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE AT LEAST
FIVE BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.
All information contained herein with respect to NDC and its subsidiaries
has been supplied by NDC. All information with respect to Source and its
subsidiaries has been supplied by Source including, but not limited to, "The
Merger--Background of the Merger," "The Merger--Reasons for the Merger," "The
Merger--Interests of Certain Persons in the Merger" and "Source Informatics
Inc."
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus
and, if given or made, such information or representation should not be relied
upon as having been authorized by NDC or Source. Neither the delivery of this
Proxy Statement/Prospectus nor any distribution of the securities to which
this Proxy Statement/Prospectus relates shall, under any circumstances, create
any implication that there has been no change in the affairs of NDC, Source,
or any of their respective subsidiaries since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Proxy Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, any securities other than the securities
to which it relates or an offer to sell or a solicitation of an offer to
purchase the securities offered by this Proxy Statement/Prospectus in any
jurisdiction in which such an offer or solicitation is not lawful.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by NDC with the Commission (NDC File No. 001-
12392) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Proxy Statement/Prospectus:
NDC documents:
(i) NDC's Annual Report on Form 10-K for the fiscal year ended May 31,
1997, as amended;
(ii) NDC's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997, as amended;
(iii) The description of NDC Common Stock contained in NDC's Registration
Statement on Form 8-A as filed with the Commission on October 5, 1993; and
(iv) The description of NDC Series A Junior Participating Preferred Stock
contained in NDC's Registration Statement on Form 8-A as filed with the
Commission on January 22, 1991, as amended on October 5, 1993.
All documents filed by NDC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Proxy Statement/Prospectus and
prior to the date of the Special Meeting are hereby incorporated by reference
in this Proxy Statement/Prospectus and shall be deemed a part hereof from the
date of filing of such document.
Any statement contained herein, in any amendment or supplement hereto or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement and this Proxy Statement/Prospectus to the extent that a statement
contained herein, in any amendment or supplement hereto or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement, this Proxy
Statement/Prospectus, or any amendment or supplement hereto. The information
contained in this Proxy Statement/Prospectus should be read in conjunction
with the foregoing materials.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 3
SUMMARY................................................................... 6
Parties to the Merger................................................... 6
Special Meeting; Record Date............................................ 7
The Merger.............................................................. 8
Market Prices and Dividends............................................. 19
Comparison of Certain Unaudited Per Share Data.......................... 20
Recent Developments..................................................... 20
Selected Financial Data................................................. 21
SELECTED FINANCIAL DATA OF NDC (HISTORICAL)............................... 21
SELECTED FINANCIAL DATA OF SOURCE (HISTORICAL)............................ 22
SELECTED PRO FORMA COMBINED FINANCIAL DATA OF NDC, SOURCE AND PMSI
DATABASE................................................................. 23
RISK FACTORS.............................................................. 24
GENERAL INFORMATION....................................................... 27
Special Meeting......................................................... 26
Record Date............................................................. 26
Votes Required.......................................................... 26
Recommendation of Source's Board of Directors........................... 28
THE MERGER................................................................ 28
General................................................................. 28
Background of the Merger................................................ 28
Reasons for the Merger.................................................. 30
Exchange Ratios......................................................... 31
Common Exchange Ratio Adjustment........................................ 31
Working Capital Adjustment.............................................. 32
Indemnification......................................................... 33
Escrow Agreement........................................................ 34
The Stockholder Representative.......................................... 35
Fractional Shares....................................................... 35
Termination of Stock Options............................................ 35
Effective Time and Closing Date......................................... 35
Distribution of NDC Certificates........................................ 36
Certain Federal Income Tax Consequences................................. 37
Management and Operations After the Merger.............................. 38
Interests of Certain Persons in the Merger.............................. 38
Conditions to Consummation.............................................. 40
Regulatory Approvals.................................................... 41
Amendment, Waiver and Termination....................................... 42
Conduct of Business Pending the Merger.................................. 43
Expenses and Fees....................................................... 44
Accounting Treatment.................................................... 44
Voting Agreement........................................................ 44
Appraisal Rights........................................................ 45
Resales of NDC Common Stock............................................. 47
SOURCE INFORMATICS INC.................................................... 48
Business................................................................ 48
Selected Financial Information.......................................... 48
Management's Discussion and Analysis of Financial Condition and Results
of Operation........................................................... 49
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Security Ownership of Directors, Executive Officers and Principal
Securityholders of Source.............................................. 51
CERTAIN DIFFERENCES IN THE RIGHTS OF NDC AND SOURCE STOCKHOLDERS.......... 53
Authorized Capital Stock................................................ 53
Directors and Classes of Directors...................................... 56
Stockholder Meetings.................................................... 56
Anti-Takeover Provisions................................................ 57
Stockholder Rights Plan................................................. 57
EXPERTS................................................................... 58
LEGAL MATTERS............................................................. 58
</TABLE>
<TABLE>
<S> <C>
ANNEXES:
ANNEX A--Agreement and Plan of Merger, dated as of August 20, 1997, by
and among NDC, Sub and Source
ANNEX B--Certain Provisions of Delaware Law
ANNEX C--Form of Escrow Agreement
ANNEX D--Financial Statements of Source Informatics Inc.
ANNEX E--Pro Forma Financial Information
</TABLE>
5
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. This summary is not intended to be a complete
description of the matters covered in this Proxy Statement/Prospectus and is
subject to and qualified in its entirety by reference to the more detailed
information contained elsewhere in this Proxy Statement/Prospectus, including
the Annexes hereto, and in the documents incorporated by reference in this
Proxy Statement/Prospectus. The Merger Agreement is set forth in Annex A to
this Proxy Statement/Prospectus and reference is made thereto for a complete
description of the terms of the Merger. Stockholders are urged to read
carefully the entire Proxy Statement/Prospectus, including the Annexes. As used
in this Proxy Statement/Prospectus, the terms "NDC" and "Source" refer to such
corporations, respectively, and where the context requires, such corporations
and their respective subsidiaries, except that "Source" shall, except where
noted, refer to such corporation and its subsidiaries after giving effect to
the Divestiture (hereinafter defined).
PARTIES TO THE MERGER
NDC. NDC is a Delaware corporation that was incorporated in 1967. NDC is a
leading provider of high-volume information services and application systems to
the health care and payment systems markets. NDC serves a diverse customer base
comprised of almost 120,000 health care providers, 3,500 health care plans,
more than 750,000 merchant locations, 35,000 corporations and 400 banking
institutions, as well as federal and state government agencies. NDC markets its
services directly to merchants and health care providers and indirectly through
business alliances with a wide range of banks, insurance companies and
distributors.
NDC is one of the largest independent providers of health care information
services and integrated payment systems and services in the United States,
processing transactions at an annualized rate of approximately 3 billion at the
end of fiscal 1997. NDC provides electronic claims processing and adjudication
services, practice management systems, electronic data interchange ("EDI")
services, billing services, business office management services and clinical
data base information for pharmacies, dentists, physicians, hospitals, health
maintenance organizations, managed care companies, clinics and nursing homes,
as well as other health care providers. Management believes that NDC is the
largest independent processor of real-time health care transactions in the
country, and that it is well positioned to capitalize on the growing demand for
cost containment and improved patient care in the health care industry. By the
end of fiscal 1997, approximately 41% of NDC's total revenue was derived from
NDC's health care systems and services, which represent the fastest growing
portion of NDC's business.
NDC's Global Payment Systems LLC subsidiary ("Global Payment Systems" or
"Global") offers such services as authorization, equipment deployment, customer
support, back office processing, merchant accounting and card issuing services
on an outsourcing basis for banks and other participants in the payment systems
industry. Global also offers information reporting and EDI services, cash
management systems and services and electronic tax filing and payment services
to government and corporate customers. In recent years, NDC has expanded the
range of payment instruments services offered and distribution channels. NDC
recently introduced a purchase card processing program that provides electronic
payment capabilities for business-to-business purchasing transactions.
Approximately 29% of NDC's total revenue for fiscal 1997 was derived from
Global.
The Integrated Payment Systems business unit provides a broad range of
payment acceptance services primarily in partnership with banks. Under its Bank
Alliance Program, as well as through other distribution channels, it adds
sales, marketing and risk management services to the range of services provided
by Global Payment Systems. NDC's Integrated Payment Systems unit accounted for
approximately 30% of NDC's total revenue for fiscal 1997.
6
<PAGE>
For the year ended May 31, 1997, NDC reported total revenues of $433.9
million, and net income of $38.8 million. As of May 31, 1997, NDC had total
consolidated assets of $521.7 million and consolidated stockholders' equity of
$277.5 million.
NDC's principal executive offices are located at National Data Plaza,
Atlanta, Georgia 30329-2010, and its telephone number is (404) 728-2000. For
additional information regarding NDC and its business, see "Available
Information," "Incorporation of Certain Information by Reference" and "--
Selected Financial Data."
Source. Source is a leading provider of proprietary health care information,
technology and consulting services, primarily to the pharmaceutical and retail
pharmacy markets. Source's services enable clients to better understand
individual prescriber, payer, consumer, pharmaceutical manufacturer, pharmacy
benefit manager and retail pharmacy behavior in order to compete more
effectively in the market place. Source typically enters into significant,
long-term relationships with its clients, providing integrated services to
executives in the sales, marketing, market research and information technology
areas of these organizations.
Source provides a broad array of information, data mining and integrated
marketing decision-making tools. The Source database is a repository of
intelligence on managed care organizations, prescribers, retailers,
prescriptions and non-personalized patient data. The principal database (the
"Alpha Database") contains information on 1.6 billion prescriptions dispensed
by retail and mail order pharmacies over the previous 12 months. Over 90% of
the prescriptions in the Alpha Database are matched to over 1,000,000
prescribers, linking them at the individual script level. Source jointly
exploits its databases in an operating venture with Pharmaceutical Marketing
Services Inc. ("PMSI"). Simultaneously with the consummation of the Merger, NDC
will acquire all of PMSI's interest in such operating venture ("Source US")
through the acquisition of PMSI Database to which PMSI contributed all of its
interest in Source US. See "The Merger--General."
Source provides critical competitive intelligence for client companies' sales
representatives, linking the dispensed prescriptions back to the prescribers in
their territory. Source also provides sales force managers with direct and
comparative benchmarks to measure sales force performance and determine
compensation at the individual territory level. Source's services enable client
companies to target prescribers by their overall prescribing habits or by the
mode of payment for prescriptions they write. Clients can identify the highest
potential prescribers and their specific characteristics, and access market
intelligence on the prescriber's practice. Other services match prescriptions
to more than 850 health care payment plans, profiling the individual managed
care plans and providing insight into their strategies. Source has recently
launched new database services to enable pharmaceutical company clients to
measure market share activity at the individual pharmacy level.
For the year ended June 30, 1997 Source generated total revenues of $59.9
million and net income of $6.5 million. Source has 400 employees. Source's
principal executive offices are located at 2394 East Camelback Road, Phoenix,
Arizona, 85016 and its telephone number is (602) 381-9500. For additional
information regarding Source and its business, see "Source Informatics Inc."
and "--Selected Financial Data."
As a condition to the consummation of the Merger, prior to the Effective
Time, Source shall, pursuant to that certain Securities Transfer Agreement
between Pharmaceutical Marketing Services, Inc. ("PMSI") and Source (the
"Source Divestiture Agreement"), complete the divestiture (the "Divestiture")
of (i) its business operated in Europe as of August 20, 1997 ("Source Europe"),
(ii) all of the shares of PMSI held by Source or any subsidiary of Source, and
(iii) all of the stock of those subsidiaries conducting the European business.
See "--Divestiture of Source Europe."
SPECIAL MEETING; RECORD DATE
The Special Meeting will be held at 9:30 a.m., local time on , 1997, at
The Lotos Club, 5 East 66th Street, New York, New York. At the Special Meeting,
Source's stockholders will consider and vote upon adoption of the Merger
Agreement and the consummation of the transactions contemplated therein, and
transact
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such other business as may properly come before the Special Meeting. Source's
Board of Directors has fixed the close of business on November 3, 1997, as the
record date for determining the Source stockholders entitled to receive notice
of and to vote at the Special Meeting (the "Record Date"). As of the Record
Date, there were 5,800,193 shares of Source Common Stock and 1,041,667 shares
of Source Preferred Stock issued and outstanding and entitled to be voted at
the Special Meeting. For additional information with respect to the Special
Meeting, including the Record Date and votes required for adoption, see
"General Information."
THE MERGER
General. The Merger Agreement provides that Sub shall merge with and into
Source, which shall be the surviving corporation of the Merger and, as a result
thereof, become a wholly-owned subsidiary of NDC. At the time the Merger
becomes effective, (x) each outstanding share of Source Common Stock (excluding
shares held by Source or any of its subsidiaries or by NDC or any of its
subsidiaries, and excluding shares as to which dissenters' rights are
perfected) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive cash and shares of NDC Common Stock, and (y)
each outstanding share of Source Preferred Stock (excluding shares held by
Source or any of its subsidiaries or by NDC or any of its subsidiaries, and
excluding shares as to which dissenter's rights are perfected) shall be
converted into the right to receive cash. Pursuant to the NDC Rights Agreement,
each share of NDC Common Stock issued in connection with the Merger upon
conversion of the Source Common Stock shall be accompanied by an NDC Right
(hereinafter defined). If the Merger Agreement is adopted at the Special
Meeting, all required governmental and other consents and approvals are
obtained, and all of the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (as permitted), the Merger
will be consummated. A copy of the Merger Agreement is set forth in Annex A to
this Proxy Statement/Prospectus. See "The Merger."
Simultaneously with and as a condition to the consummation of the Merger, NDC
will consummate the acquisition (the "Stock Purchase") of all of the
outstanding shares of common stock of PMSI Database Holdings, Inc. ("PMSI
Database") pursuant to that certain Stock Purchase Agreement, dated as of
August 20, 1997 (the "Stock Purchase Agreement"), by and among PMSI, PMSI
Database and NDC. If the Stock Purchase Agreement is adopted by the
stockholders of PMSI at a special meeting called therefor, all required
governmental and other consents and approvals obtained, and all of the other
conditions to the obligations of the parties to consummate the Stock Purchase
are either satisfied or waived (as permitted), the transactions contemplated by
the Stock Purchase Agreement will be consummated.
Exchange Ratios. The Merger Agreement provides that upon consummation of the
Merger:
(a) Subject to a working capital adjustment (discussed below), each
outstanding share of Source Common Stock (excluding shares held by Source or
any of its subsidiaries or by NDC or any of its subsidiaries, and excluding
shares of Source Common Stock as to which dissenters' rights are perfected)
issued and outstanding immediately prior to the Effective Time (hereinafter
defined) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive the following:
(i) the amount (the "Common Cash Amount"), if any, equal to the quotient
of (A) $31,750,000 (the "Aggregate Cash Amount") less the Preferred Stock
Merger Consideration (hereinafter defined), and less Source's expenses
directly associated with this transaction (the "Transaction Expenses"), and
(B) the total number of shares of Source Common Stock outstanding as of the
Closing Date;
(ii) that fraction of a share of NDC Common Stock equal to the quotient
of (A) 1,099,716 shares (the "Payment Shares") less the Option Shares
(hereinafter defined), and (B) the total number of shares of Source Common
Stock outstanding as of the Closing Date (the "Common Base Exchange
Ratio"); provided, however, if the sum of the Preferred Stock Merger
Consideration (hereinafter defined) and the Transaction Expenses exceeds
the Aggregate Cash Amount (the "Excess Expense"), then the Payment
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Shares will be reduced by that number of shares of NDC Common Stock equal
to the Excess Expense divided by the average of the daily closing sale
prices of NDC Common Stock as reported on the NYSE Composite Transactions
reporting system (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as chosen by NDC) for the
ten consecutive full trading days in which such shares are traded on the
NYSE ending at the close of trading on the last such day (the "Average
Closing Price"), as of the Closing Date; and
(iii) that fraction of a share of NDC Common Stock equal to the quotient
of 455,840 shares (the "Stock Escrow") divided by the total number of
shares of Source Common Stock outstanding as of the Closing Date (the
"Common Escrow Exchange Ratio"). The Stock Escrow will be utilized for
working capital adjustments and for indemnification claims by NDC, all
pursuant to the terms of the Merger Agreement and an escrow agreement (the
"Escrow Agreement") by and among NDC, the representative of the holders of
Source Common Stock (the "Stockholder Representative") and an escrow agent.
At the Closing Date, Source shall prepare and deliver to NDC a schedule
indicating the expenses incurred but unpaid as of the Closing Date which are
directly associated with the transactions contemplated by the Merger Agreement,
including, without limitation, all expenses incurred in connection with
Source's termination of certain employment agreements and an executive pension
plan (in the aggregate such expenses hereinafter the "Transaction Expenses").
In addition, also at the Closing Date, Source shall have secured the
cancellation of all outstanding options and warrants to purchase shares of
Source Common Stock and shall provide to NDC a schedule of the number of shares
of NDC Common Stock (the "Option Shares") payable to the holders of such
options and warrants in consideration of such cancellation. Pursuant to the NDC
Rights Agreement, each share of NDC Common Stock issued in connection with the
Merger upon conversion of Source Common Stock shall be accompanied by an NDC
Right.
Based on the market price of NDC Common Stock on , 1997 and an
estimate of the Transaction Expenses on such date, each outstanding share of
Source Common Stock would receive $ and shares of NDC Common Stock.
These amounts may change, however, at the Closing Date since the Transaction
Expenses and the Option Shares will be determined on or immediately prior to
the Closing Date. In addition, the Preferred Stock Merger Consideration is
subject to adjustment in certain circumstances, on or prior to the Closing
Date. See "Certain Differences in the Rights of NDC and Source Stockholders."
(b) Each share of Source Preferred Stock (excluding shares held by Source or
any of its subsidiaries or by NDC or any of its subsidiaries, and excluding
shares of Source Preferred Stock as to which dissenters' rights are perfected)
issued and outstanding immediately prior to the Effective Time shall cease to
be outstanding and shall be converted and exchanged for the right to receive an
amount equal to $11.33, subject to adjustment to equal that amount that a
holder of Source Preferred Stock would otherwise be entitled to receive for
each share of Source Preferred Stock if the Source Preferred Stock were
redeemed on the Closing Date pursuant to the Designation (such aggregate
amount, as adjusted, the "Preferred Stock Merger Consideration").
The amount of cash and shares of NDC Common Stock to be paid to the holders
of Source Common Stock was determined based on a per share value for the NDC
Common Stock of $43.875, the market price for the NDC Common Stock at the time
NDC, Source and PMSI commenced negotiations. See "The Merger--Background of the
Merger."
Common Exchange Ratio Adjustment. If, at the close of trading on the tenth
trading day immediately preceding the Closing Date (the "Determination Date"),
the Average Closing Price shall be greater than $50.50 (the "Upper Threshold
Price"), the "Common Exchange Ratios" (defined to include the Common Base
Exchange Ratio and the Common Escrow Exchange Ratio) shall each be adjusted to
equal that fraction of a share of NDC Common Stock (rounded to the nearest ten
thousandth of a share) obtained by dividing the product of the Common Base
Exchange Ratio or the Common Escrow Exchange Ratio, as the case may be, and the
Upper
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Threshold Price by the Average Closing Price at the Determination Date. If the
Average Closing Price on the Determination Date shall be less than $37.25 (the
"Lower Threshold Price"), Source shall have the right to refuse to consummate
the Merger provided that Source shall have given written notice of such refusal
to NDC not later than two trading days following the Determination Date. During
the five-day period commencing with its receipt of such notice, NDC shall have
the option, in its sole discretion, to elect to revise the Common Exchange
Ratios to equal that fraction of a share of NDC Common Stock (rounded to the
nearest ten thousandth of a share) obtained by dividing the product of the
Common Base Exchange Ratio or the Common Escrow Exchange Ratio, as the case may
be, and the Lower Threshold Price by the Average Closing Price at the
Determination Date. If NDC makes the election contemplated by the preceding
sentence within such five-day period, it shall give prompt written notice to
Source of such election and the revised Common Exchange Ratios, whereupon the
Merger Agreement shall remain in effect in accordance with its terms (except
that the Common Exchange Ratios shall have been so modified). If the Lower
Threshold Price is not reached, the Board of Directors of Source will take such
action as is required by law and its fiduciary obligations, including, if
appropriate, obtaining the consent of the Source stockholders to proceed with
the Merger.
Working Capital Adjustment. The Stock Escrow shall be adjusted in the manner
described below:
Preliminary Balance Sheet. Source will cause to be prepared and delivered to
NDC a balance sheet for Source as of the most recent month ending more than ten
days prior to the Closing Date (the "Preliminary Balance Sheet") and a
certificate based on such Preliminary Balance Sheet setting forth Source's
calculation of Working Capital, Current Assets and Current Liabilities
(hereinafter defined) as of such date ("Estimated Working Capital," "Estimated
Current Assets" and "Estimated Current Liabilities," respectively). The
Preliminary Balance Sheet shall include and fairly present the consolidated
financial position of Source and its subsidiaries as of the close of business
on the date of the Preliminary Balance Sheet in accordance with generally
accepted accounting principles ("GAAP") applied on a basis consistent with
those used in the preparation of the consolidated balance sheet of Source and
its subsidiaries at March 31, 1997 (the "Source Balance Sheet"). As used
herein, "Working Capital" shall mean the amount equal to Current Assets less
Current Liabilities; "Current Assets" shall mean the amount equal to the sum of
cash, accounts receivable (net of any reserves), inventories, prepaid expenses,
work-in-process, and any other current assets recognized by GAAP; and "Current
Liabilities" shall mean the amount equal to the sum of accounts payable,
accrued current liabilities of Source (other than the current portion of
capitalized lease obligations), accrued sales commissions (but only as to
revenues realized and included in the Source statements of income prior to such
date), accrued bonuses (the amount equal to that percentage of budgeted annual
bonuses for Source's fiscal year 1998 equal to the ratio of the earnings of
Source through the date of calculation to budgeted earnings for the full fiscal
year), accrued vacation pay, current portion of long-term indebtedness, pre-
billed revenues and any other current liabilities recognized by GAAP, but
excluding all Transaction Expenses.
NDC shall have five business days from the receipt of the Preliminary Balance
Sheet and the calculation of Estimated Working Capital, Estimated Current
Assets and Estimated Current Liabilities to review such statement and
calculations and following such review such statements and calculations shall
be final and binding.
If Estimated Current Assets are less than the product of (i) 0.9416 times
(ii) Estimated Current Liabilities (such amount, the "Estimated Working Capital
Adjustment") as of the date of the Preliminary Balance Sheet, the Stock Escrow
payable by NDC shall be decreased by the number of shares of NDC Common Stock
equal to the Estimated Working Capital Adjustment divided by the Average
Closing Price as of the Closing Date; provided, however, in the event this
reduction of the Stock Escrow exceeds 113,960 shares, the Payment Shares shall
then be decreased similarly in an amount equal to such excess.
Closing Balance Sheet. As promptly as practicable, but not later than 30
days after the Closing Date, NDC will cause to be prepared and delivered to the
Stockholder Representative a balance sheet for Source as of the Closing Date
(the "Closing Balance Sheet") setting forth NDC's calculation of Working
Capital, Current Assets and Current Liabilities, each as of the Closing Date
("Closing Working Capital," "Closing Current
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Assets" and "Closing Current Liabilities," respectively). The Closing Balance
Sheet shall include and fairly present the consolidated financial position of
Source and its subsidiaries as of the close of business on the Closing Date in
accordance with GAAP applied on a basis consistent with those used in the
preparation of the Source Balance Sheet.
The Closing Balance Sheet and the calculation of Closing Working Capital,
Closing Current Assets and Closing Current Liabilities shall be deemed final
upon the earliest of (i) the date on which NDC and the Stockholder
Representative jointly agree that such documents are final, (ii) the 30th day
after delivery of such documents, if the Stockholder Representative has not
delivered a notice to expressing disagreement with such calculations and
setting forth its calculation of such amount(s), and (iii) the date on which
all disputes relating to such statements and calculations between the parties
are resolved.
If the Stockholder Representative shall deliver a notice of disagreement, the
Stockholder Representative and NDC, during the 30 days following such delivery,
shall use their reasonable efforts to reach agreement on the disputed items or
amounts (the "Disputed Amounts"). If, during such period, the Stockholder
Representative and NDC are unable to reach such agreement, they shall promptly
thereafter cause Price Waterhouse LLP (or if said firm shall be unwilling to
act thereunder, such other independent accountants of nationally recognized
standing reasonably satisfactory to NDC and the Stockholder Representative),
promptly to review the Merger Agreement and any other documents necessary to
calculate the Disputed Amounts (including all work papers of the parties used
in calculating the Disputed Amounts) and such accountants shall then deliver a
report to NDC and the Stockholder Representative setting forth their
calculations which shall be final and binding.
"Final Current Assets" and "Final Current Liabilities" mean (i) NDC's
calculation of Closing Current Assets and Closing Current Liabilities, if no
notice of disagreement with respect thereto is duly delivered by Source; or
(ii) if such a notice of disagreement is delivered, (a) as agreed by NDC and
Source or (b) in the absence of such agreement, as shown in the independent
accountant's calculation.
If Final Current Assets are less than the product of 0.9416 and Final Current
Liabilities, as defined below (the amount of such shortfall referred to as, the
"Final Working Capital Deficit"), the holders of Source Common Stock (the
"Stockholders") shall pay to NDC the amount of the Final Working Capital
Deficit out of the Stock Escrow in the manner provided in the Escrow Agreement.
If Final Current Assets are greater than the product of 0.9416 and Final
Current Liabilities (the amount of such surplus referred to as, the "Final
Working Capital Surplus"), NDC shall pay to the escrow agent, to be held in
accordance with the Escrow Agreement, that number of shares of NDC Common Stock
equal to the quotient of the Final Working Capital Surplus divided by the
Average Closing Price as of the date Final Working Capital was determined.
Allocation with PMSI. NDC, Source and PMSI have agreed to the following
adjustment in order to properly allocate the working capital adjustment based
on their respective Closing Balance Sheets. For purposes of such allocation,
"Total Current Assets" shall mean the sum of Final Current Assets and "Final
Current Assets" calculated pursuant to the Stock Purchase Agreement; "Total
Current Liabilities" shall mean the sum of Final Current Liabilities and "Final
Current Liabilities" calculated pursuant to the Stock Purchase Agreement;
"Current Asset Allocation Amount" shall mean the product of (1) Final Current
Assets divided by Total Combined Assets, and (2) the Total Working Capital
Deficit or Total Working Capital Surplus, as the case may be; and "Total
Combined Assets" shall mean the sum of Final Current Assets and "Final Current
Assets" calculated under the Stock Purchase Agreement.
If Total Current Assets are less than the product of (i) 0.9975 times (ii)
Total Current Liabilities (the "Total Working Capital Deficit"), then the
Stockholders shall pay to NDC the Current Asset Allocation Amount out of the
Stock Escrow in the manner provided in the Escrow Agreement. If Total Current
Assets are greater than the product of (i) 0.9975 times (ii) Total Current
Liabilities (the "Total Working Capital Surplus"), then NDC shall pay to the
Stockholders pursuant to the instructions of the Stockholder Representative
that number of shares of
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NDC Common Stock equal to the quotient of the Current Asset Allocation Amount
and the Average Closing Price as of the date Final Working Capital was
determined.
For purposes of any adjustments based on the Closing Balance Sheet, the
parties shall take into account any adjustment made at closing pursuant to the
Preliminary Balance Sheet.
Indemnification. Pursuant to the Merger Agreement, the Stockholders jointly
and severally agree to indemnify, defend, and hold harmless NDC, Source, and
their respective officers, directors, controlling persons, affiliates and
representatives, and each of them (the "Indemnitees"), from, against, for and
in respect of any and all losses asserted against, or paid, suffered or
incurred by, an Indemnitee and resulting from, based upon, or arising out of:
(a) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any Stockholder or Source contained in or
made pursuant to the Merger Agreement or in any certificate, schedule, or
exhibit furnished by the Stockholders or Source in connection therewith;
(b) a breach of or failure to perform any covenant or agreement of the
Stockholders or Source made in the Merger Agreement;
(c) any and all taxes arising out of or associated with the Divestiture;
(d) any and all taxes arising out of or associated with certain sales by
Source; or
(e) any and all losses relating to certain litigation ongoing as of the
date of the Merger Agreement.
The Stockholders will have no liability to the Indemnitees under or in
connection with a breach of any of the representations, warranties, covenants
or agreements made or to be performed by the Stockholders or Source contained
in the Merger Agreement unless written notice asserting an indemnification
claim based thereon is given to the Stockholder Representative prior to August
31, 1999.
The Stockholders shall have no liability with respect to the matters
described above until the total of all losses with respect thereto exceeds
$200,000 in which event the Stockholders shall be obligated to indemnify the
Indemnitees for all such losses; provided, however, that each individual claim
of $10,000 or less shall not be indemnifiable, and shall not be included in
determining whether the $200,000 threshold has been reached. In no event shall
the aggregate liability of the Stockholders exceed the lesser of (i) the
aggregate value of the Indemnification Escrow Amount (hereinafter defined), and
(ii) $20,000,000.
All disputes arising under the indemnification provisions of the Merger
Agreement (other than claims in equity) shall be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association.
Escrow Agreement. Pursuant to the terms of the Merger Agreement, the Stock
Escrow (455,840 shares of NDC Common Stock decreased by the adjustment, if any,
based on the Preliminary Balance Sheet discussed above), will be distributed to
and will be held by the escrow agent pursuant to the terms of the Escrow
Agreement, a copy of which is attached to this Proxy Statement/Prospectus as
Annex C.
Working Capital Escrow. A total of 113,960 of the Stock Escrow shares, less
any shares paid to NDC as the result of an adjustment based on the Preliminary
Balance Sheet, are reserved to cover an adjustment, if any, based on the
Closing Balance Sheet (the "Working Capital Escrow Amount"). The Stockholder
Representative, or the Stockholders with respect to their individual percentage
interest, may direct the escrow agent to sell, from time to time, any or all of
the shares of NDC Common Stock in the Working Capital Escrow Amount at such
prices as are commercially reasonable at the time of sale. Any and all cash
proceeds from the sale of such shares shall remain in escrow as part of the
Working Capital Escrow Amount, except that at the end of each calendar month,
if the aggregate value of the Working Capital Escrow Amount exceeds 133% of the
aggregate value of the Stock Escrow as of the Closing Date, the Escrow Agent
shall distribute to the Stockholders that amount in cash or shares of NDC
Common Stock equal to their respective percentage interest in such surplus.
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If, prior to the ninetieth day after the Effective Time (the "Distribution
Date" with respect to the Working Capital Escrow Amount), NDC shall be entitled
to an adjustment based on the Closing Balance Sheet, the escrow agent shall
distribute to NDC from the Working Capital Escrow Amount an amount in cash, in
immediately available funds, equal to such adjustment claim, and, if the
Working Capital Escrow Amount does not contain any cash, or contains an amount
of cash insufficient to satisfy the claim, then the escrow agent shall
distribute to NDC from the Working Capital Escrow Amount that number of shares
of NDC Common Stock equal to the quotient (rounded to the next highest whole
number) obtained by dividing the amount of the claim not paid in cash by the
Average Closing Price as of the date Final Working Capital was determined.
If the adjustment based on the Closing Balance Sheet is pending as of the
Distribution Date with respect to the Working Capital Escrow Amount, the escrow
agent shall retain an amount equal to the disputed claim amount and promptly
deliver to the Stockholders a distribution of cash, if any, in immediately
available funds, and shares of NDC Common Stock from the Working Capital Escrow
Amount equal to any remaining amounts in the Working Capital Escrow Amount. The
disputed amount shall be paid to NDC or the Stockholders, as the case may be,
upon the final resolution as agreed by NDC and the Stockholder Representative
in writing of the amount of the adjustment claim.
Indemnification Escrow. A total of 341,880 of the Stock Escrow shares are
reserved to cover claims by NDC based on the indemnification provisions of the
Merger Agreement (the "Indemnification Escrow Amount"). The Stockholder
Representative, or the Stockholders with respect to their individual percentage
interest, may direct the escrow agent to sell, from time to time, any or all of
the shares of NDC Common Stock in the Indemnification Escrow Amount at such
prices as are commercially reasonable at the time of sale. Any and all cash
proceeds from the sale of such shares shall remain in escrow as part of the
Indemnification Escrow Amount, except that at the end of each calendar month,
if the aggregate value of the Indemnification Escrow Amount exceeds
$20,000,000, the escrow agent shall distribute to the Stockholders that amount
in cash or shares of NDC Common Stock equal to their respective percentage
interest in such surplus.
If, prior to August 31, 1999 (the "Distribution Date" with respect to the
Indemnification Escrow Amount) NDC shall be entitled to a payment based on an
indemnification claim, the escrow agent shall distribute to NDC from the
Indemnification Escrow Amount an amount in cash, in immediately available
funds, equal to such claim, and, if the Indemnification Escrow Amount does not
contain any cash, or contains an amount of cash insufficient to satisfy the
claim, then the escrow agent shall distribute to NDC from the Indemnification
Escrow Amount that number of shares of NDC Common Stock equal to the quotient
(rounded to the next highest whole number) obtained by dividing the amount of
the claim not paid in cash by the Average Closing Price as of the date the
notice of claim was received by the escrow agent.
If an indemnification claim is pending as of the Distribution Date with
respect to the Indemnification Escrow Amount, the escrow agent shall retain an
amount equal to the disputed claim amount and promptly deliver to the
Stockholders a distribution of cash, if any, in immediately available funds,
and shares of NDC Common Stock from the Indemnification Escrow Amount, equal to
any remaining amounts in the Indemnification Escrow Amount. The disputed amount
shall be paid to NDC or the Stockholders, as the case may be, upon the final
resolution as agreed by NDC and the Stockholder Representative in writing of
the amount of the outstanding claim.
General. Any and all cash dividends or other cash income with respect to the
Stock Escrow shall be paid into and remain in escrow and shall be available for
purposes of adjustments or distributions. Each Stockholder shall have the right
to direct the escrow agent in writing as to the exercise of voting rights with
respect to shares in the Stock Escrow held by the escrow agent on behalf of
such Stockholder, and the escrow agent shall comply with any such directions if
received in a timely manner. In the absence of such directions, the escrow
agent shall not vote any such shares in the Stock Escrow. The escrow agent
shall invest the cash amount, if any, included in the Working Capital and
Indemnification Escrow Amounts as directed by the Stockholder Representative or
the Stockholders, provided that should the Stockholder Representative or the
Stockholders fail to so direct the escrow agent, NDC shall be authorized to so
direct the escrow agent, and,
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provided further that such investments shall be limited to (i) direct
obligations of the United States of America, (ii) obligations for which the
full faith and credit of the United States of America is pledged to provide for
the payment of principal and interest, (iii) commercial paper rated of the
highest quality by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group, a division of McGraw-Hill Inc. ("S&P"), and (iv)
certificates of deposit issued by a commercial bank (which may be the escrow
agent or any affiliate of the escrow agent) whose long-term debt obligations
are rated at least A2 by Moody's or at least A by S&P, in each case having a
maturity not in excess of 90 days, or a money market fund that invests
exclusively in said investments.
The Stockholder Representative. The Stockholder Representative shall mean a
committee comprised of Messrs. Dennis Turner, Handel Evans and Patrick Welsh.
Mr. Turner is the Chief Executive Officer and a director of Source. Mr. Evans
is the Chairman of the Board of Directors of Source. Mr. Welsh is a director of
Source and a general partner of the respective sole general partners of several
affiliated private investment funds, including Welsh, Carson, Anderson & Stowe
V, L.P. and Welsh, Carson, Anderson & Stowe IV, L.P., that are stockholders of
Source. The Stockholder Representative shall have the responsibility and
authority to enforce any adjustment based on the Closing Balance Sheet, the
indemnification provisions of the Merger Agreement, and the terms and
conditions of the Escrow Agreement, all on behalf of the Stockholders.
Votes Required. Adoption of the Merger Agreement and consummation of the
transactions contemplated therein requires the affirmative vote of the holders
of a majority of the outstanding shares of Source Common Stock and Source
Preferred Stock entitled to vote at the Special Meeting, voting as a single
class, and of the holders of a majority of the outstanding shares of Source
Preferred Stock entitled to vote at the Special Meeting. As of the Record Date,
Source's directors and executive officers, and their affiliates, held
approximately 74.9% of the outstanding shares of Source Common Stock entitled
to vote at the Special Meeting and 50% of the outstanding shares of Source
Preferred Stock entitled to vote at the Special Meeting. Pursuant to the Voting
Agreement (hereinafter defined), the holders of approximately 98% of the
outstanding shares of Source Preferred Stock have agreed to vote all of their
shares of Source Preferred Stock in favor of adoption of the Merger Agreement.
See "General Information--Voting Agreement." As of the Record Date, NDC, its
directors and executive officers, and their affiliates, held no shares of
Source Common Stock or Source Preferred Stock.
Recommendation of the Source Board of Directors. The Board of Directors of
Source believes that the Merger is in the best interests of Source and its
stockholders and has unanimously approved the Merger Agreement and the
consummation of the transactions contemplated therein. The Source Board of
Directors unanimously recommends that the stockholders vote FOR adoption of the
Merger Agreement and the consummation of the transactions contemplated therein.
In deciding to approve the Merger Agreement and the consummation of the
transactions contemplated therein, Source's Board of Directors considered a
number of factors, including the terms of the Merger, the compatibility of the
operations of Source and NDC, and the financial condition, results of
operations, and future prospects of Source and NDC. See "The Merger--Reasons
for the Merger."
Effective Time and Closing Date. If the Merger is adopted by the requisite
votes of the Source stockholders, all required governmental and other consents
and approvals are obtained, and the other conditions to the obligations of the
parties to consummate the Merger are either satisfied or waived (as permitted),
the Merger will be consummated and will become effective on the date and at the
time that a Certificate of Merger, reflecting the Merger, becomes effective
with the Secretary of State of the State of Delaware (the "Effective Time").
Assuming satisfaction of all conditions to consummation, the Merger is expected
to become effective during the fourth quarter of calendar 1997. NDC and Source
each has the right, acting unilaterally, to terminate the Merger Agreement
should the Merger not be consummated by January 31, 1998. The closing of the
Merger shall take place on the date the Effective Time occurs or such other
date as the parties shall agree (the "Closing Date") which NDC and Source
anticipate will be not more than five business days following the Special
Meeting. See "The Merger--Effective Time and Closing Date" and "--Amendment,
Waiver, and Termination."
14
<PAGE>
Delivery of NDC Certificates. Promptly after the Effective Time, each record
holder of shares of Source Common Stock and Source Preferred Stock ("Source
Capital Stock") outstanding at the Effective Time will be mailed a transmittal
letter (with instructions) to use in effecting the surrender and cancellation
of Source Capital Stock certificates in exchange for NDC Common Stock and/or
cash. NDC shall not be obligated to deliver the consideration to which any
former holder of Source Capital Stock is entitled until such holder surrenders
such holder's certificate or certificates representing such holder's shares of
Source Capital Stock for exchange. The certificate or certificates so
surrendered shall be duly endorsed as the exchange agent may require. See "The
Merger--Distribution of NDC Certificates."
Certain Federal Income Tax Consequences. The Merger is intended to be a tax-
free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). No opinion of counsel or
Internal Revenue Service regarding tax consequences of the Merger has been or
will be secured in connection with the Merger. Assuming the Merger qualifies as
a reorganization, no gain or loss should be recognized for federal income tax
purposes by Source stockholders as a result of the Merger, except that gain or
loss will be recognized with respect to cash received in lieu of fractional
shares or as a result of the exercise of appraisal rights. If for any reason
the Merger does not so qualify, exchanging stockholders will recognize gain or
loss on a sale of their stock. A discussion of matters regarding qualification
for tax free reorganization treatment is set forth below. Upon the sale or
exchange of NDC Common Stock, a holder of such stock generally will recognize
capital gain or loss equal to the difference between the amount of cash and the
fair market value of any property received upon the sale or exchange and such
holder's adjusted tax basis in the NDC Common Stock. Under recently enacted
legislation, long-term capital gains recognized by certain non-corporate
holders of NDC Common Stock generally will be subject to a maximum federal
income tax rate of 20% if the shares sold or exchanged are held for more than
18 months, and to a maximum federal income tax rate of 28% if such shares are
held for more than one year but are not held for more than 18 months. Tax
consequences to dealers in NDC Common Stock, non-United States holders of NDC
Common Stock or others who have a special tax status or to persons who received
their shares through the exercise of employee stock options or otherwise as
compensation may be different and such persons should consult their tax
advisors as to the tax consequences of a sale or exchange of NDC Common Stock."
See "The Merger--Certain Federal Income Tax Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER AND OTHER FACTORS, AND BECAUSE
VARIOUS FACTUAL MATTERS MUST BE RESOLVED FAVORABLY FOR TAX FREE REORGANIZATION
TREATMENT TO APPLY, EACH HOLDER OF SOURCE CAPITAL STOCK IS URGED TO CONSULT
SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
SUCH HOLDER OF THE MERGER (INCLUDING THE APPLICATION AND EFFECT OF FOREIGN,
STATE AND LOCAL INCOME AND OTHER TAX LAWS).
Interests of Certain Persons in the Merger. Certain members of Source's
management and the Board of Directors of Source have interests in the Merger in
addition to their interests as stockholders of Source generally. These include,
among other things, provisions in the Merger Agreement relating to
indemnification and eligibility for certain NDC employee benefits and
provisions regarding severance in agreements between Source and certain of its
executive officers. See "The Merger--Management and Operations After the
Merger" and "--Interests of Certain Persons in the Merger."
Conditions To Consummation. Consummation of the Merger is subject to various
conditions, including among other matters: (i) adoption of the Merger Agreement
by the requisite votes of Source stockholders; (ii) receipt of all governmental
and other consents and approvals necessary to permit consummation of the
Merger, including expiration or termination of the statutory waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act")
(which expiration occurred on November 7, 1997); (iii) consummation of the
Stock Purchase; (iv) the consummation of the Divestiture; (v) consummation of
certain agreements related
15
<PAGE>
to the Merger Agreement; (vi) cancellation by Source of all outstanding options
and warrants; and (vii) satisfaction of certain other traditional conditions.
The foregoing are the material conditions to the consummation of the Merger.
See "The Merger--Conditions to Consummation" and "--Amendment, Waiver, and
Termination."
Regulatory Approvals. The statutory waiting period under the HSR Act expired
on November 7, 1997. See "The Merger--Regulatory Approvals."
Conduct Of Business Pending The Merger. Pursuant to the Merger Agreement,
Source has agreed, among other things, to operate its business only in the
ordinary course and to take no action that would adversely affect its ability
to perform its covenants and agreements under the Merger Agreement. In
addition, Source has agreed not to take certain actions relating to the
operation of Source pending consummation of the Merger without the prior
written consent of NDC, except as otherwise permitted by the Merger Agreement,
including: (i) amending its Certificate of Incorporation or Bylaws; (ii)
entering into, modifying, amending or terminating any material contract; (iii)
repurchasing, redeeming or otherwise acquiring any shares of Source Capital
Stock; (iv) subject to certain exceptions, issuing any additional shares of
Source Capital Stock or giving any person the right to acquire any such shares,
or issuing any long-term debt; (v) subject to certain exceptions, granting any
increase in compensation or benefits, or paying any bonus, to any of its
directors, officers or employees; or (vi) modifying or adopting any employee
benefit plans, including any employment contract. Furthermore, Source has
agreed that prior to the Effective Time, it shall (i) consummate the
Divestiture; (ii) terminate certain employment agreements and its executive
pension plan; and (iii) satisfy all intercompany accounts in connection with
the Divestiture. See "The Merger--Conduct of Business Pending the Merger."
Termination. The Merger Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time by mutual consent of the
Boards of Directors of Source and NDC. In addition, the Merger Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time by either NDC
or Source if (i) the other party materially breaches and does not timely cure
any representation, warranty, covenant or other agreement contained in the
Merger Agreement, (ii) any consent or approval of certain regulatory
authorities is denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for
appeal, (iii) the Source stockholders fail to adopt the Merger Agreement and
the transactions contemplated thereby at the Special Meeting, (iv) any of the
conditions precedent to the obligations of the terminating party to consummate
the Merger cannot be satisfied or fulfilled by January 31, 1998, or (v) the
Merger has not been consummated by January 31, 1998. In addition, NDC may
unilaterally terminate the Merger Agreement if the Source Board of Directors
fails to reapprove or resolves not to affirm the Merger or recommends entering
into a transaction other than the Merger involving a merger, share exchange,
consolidation or transfer of substantially all of Source's assets. Furthermore,
Source may unilaterally terminate the Merger Agreement in the event that the
Average Closing Price of the shares of NDC Common Stock is less than the Lower
Threshold Amount as of the Determination Date, subject to NDC's right to revise
the Common Exchange Ratios based on the Lower Threshold Price. See "--Common
Exchange Ratio Adjustment" and "The Merger--Amendment, Waiver and Termination."
Expenses And Fees. The Merger Agreement provides that each party shall be
responsible for its own costs and expenses incurred in connection with the
negotiation and consummation of the transactions contemplated by the Merger
Agreement, except that each of NDC and Source shall pay one-half of the filing
fees payable in connection with the HSR filings, and NDC shall pay all costs
associated with the Registration Statement and this Proxy Statement/Prospectus
and printing costs incurred in connection with the Registration Statement and
this Proxy Statement/Prospectus.
If the Merger Agreement is terminated because (i) Source shall fail to call
the Special Meeting, (ii) the stockholders of Source fail to approve the
Merger, (iii) the Board of Directors of Source, to the exclusion of a competing
proposal, shall fail to reaffirm its approval of the Merger or shall have
affirmed, recommended or authorized another merger, share exchange,
consolidation or transfer of substantially all of the assets of Source
16
<PAGE>
(a "Competing Proposal"), or (iv) Source has entered a binding agreement with
respect to a Competing Proposal, then Source shall promptly pay NDC all the
out-of-pocket costs and expenses of NDC, including costs of counsel, investment
brokers, actuaries and accountants up to a maximum of $750,000 (the "NDC
Expenses").
In addition to the foregoing, if the Merger Agreement is terminated because
(i) Source fails to call the Special Meeting, or (ii) the stockholders of
Source fail to approve the Merger Agreement, then Source shall pay to NDC the
NDC Expenses plus $3,000,000.
Further, if within twelve months following the termination of this Agreement:
(i) by NDC because Source's Board of Directors shall have failed to reaffirm
its approval of the Merger or shall have affirmed, recommended or authorized
the entering into any other merger, share exchange, consolidation or transfer
of substantially all of the assets of Source; or, (ii) by Source because it has
entered into negotiations with a third party relating to the foregoing and
pursuant to the continuing fiduciary duties of Source's Board of Directors as
required by applicable law, Source has entered into a binding agreement with
such third party; any third-party shall acquire, merge with, combine with,
purchase substantially all of the assets of, or engage in any other business
combination with, or purchase any equity securities involving an acquisition of
50% or more of the voting stock of Source, or enter into any binding agreement
to do any of the foregoing, such third-party that is a party to the business
combination shall pay to NDC, as a condition to consummation of such business
combination, an amount in cash equal to $3,000,000.
Accounting Treatment. It is anticipated that the Merger will be accounted for
under the "purchase" method of accounting. See "The Merger--Accounting
Treatment."
Resale of NDC Common Stock. The NDC Common Stock issued in connection with
the Merger will be freely transferable by the holders of such shares, except
for those holders who may be deemed to be "affiliates" (generally including
directors, certain executive officers and holders of 10% or more of the
outstanding capital stock) of Source or NDC under applicable federal securities
laws. See "The Merger--Resale of NDC Common Stock."
Voting Agreement. NDC and the holders of a majority of Source Preferred Stock
(the "Preferred Stockholders") have entered into a voting agreement (the
"Voting Agreement") which provides that the Preferred Stockholders will vote
such Preferred Stockholder's shares of Source Preferred Stock in favor of the
Merger, the execution and delivery by Source of the Merger Agreement and the
approval of the terms thereof and each of the other transactions contemplated
by the Merger Agreement, provided that the Merger Agreement has not been
amended or waived so as to in any manner (i) affect the rights of the Preferred
Stockholders or their representatives or increase the Preferred Stockholders'
obligations thereunder or (ii) increase the consideration payable to the
holders of Source Common Stock, without the prior consent of the Preferred
Stockholders.
The Voting Agreement also provides that the Preferred Stockholders shall vote
(or cause to be voted) such Preferred Stockholder's shares of Source Preferred
Stock against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or winding
up of or by Source or (ii) any amendment of Source's Certificate of
Incorporation or Bylaws or other proposal or transaction involving Source or
any of its subsidiaries which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement. Each Preferred Stockholder has also agreed that such Stockholder
shall not (i) transfer, or consent to any transfer of, any or all of the such
stockholder's shares or any interest therein, except pursuant to the Merger;
(ii) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of such shares or any interest therein,
(iii) grant any proxy, power of attorney or other authorization in or with
respect to such shares, except for the Voting Agreement, or (iv) deposit such
shares into a voting trust or enter into a voting agreement or arrangement with
respect to such shares, subject to certain limited exceptions.
17
<PAGE>
The Voting Agreement will terminate upon the earlier of the Effective Time,
the date upon which the Merger Agreement is terminated in accordance with its
terms, or December 15, 1997.
Appraisal Rights. Holders of Source Capital Stock have the right to demand
appraisal of their shares of Source Capital Stock and, upon satisfaction of
certain specified procedures, to receive cash in respect of the "fair value"
(as defined by Delaware law) of their shares of Source Capital Stock in
accordance with applicable Delaware law. The procedures to be followed by
dissenting stockholders are summarized under "The Merger--Appraisal Rights" and
a copy of the applicable Delaware statutory provisions is set forth in Annex B
to this Proxy Statement/Prospectus. FAILURE TO FOLLOW SUCH PROVISIONS PRECISELY
MAY RESULT IN LOSS OF APPRAISAL RIGHTS.
In general, any dissenting stockholder who perfects his statutory appraisal
rights to be paid the "fair value" of his Source Capital Stock in cash will
recognize gain or loss for federal income tax purposes upon receipt of such
cash. See "The Merger--Certain Federal Income Tax Consequences."
DIVESTITURE OF SOURCE EUROPE
Concurrent with the Merger, and as a condition of closing, Source will divest
Source Europe. Source Europe is a development stage business focused on
building a range of services similar to Source's United States operations
("Source US"), for clients in continental Europe. While Source Europe is
currently developing software and databases to deliver prescriber-linked
prescription services and has delivered initial services to certain clients,
the business will need further funding to continue business development through
cash flow selfsufficiency. Source Europe may also require additional investment
in the event of problems with the development of the software and databases,
delays in bringing products to market or delays in obtaining government
approval to launch prescriber-based services in certain countries. Source
Europe has incurred operating losses since inception in 1994.
In June 1997, PMSI and Source commenced negotiations on a proposal for PMSI
to acquire 100% of Source Europe. Source appointed investment bankers to
negotiate on its behalf, and a specially formed committee of PMSI's independent
directors not affiliated with Source retained investment bankers to negotiate
for PMSI. On August 20, 1997, NDC, Source and PMSI executed definitive
agreements whereby PMSI will acquire 100% of Source Europe and NDC will acquire
100% of Source US (including PMSI's interest in Source) together with the Over-
the-Counter Physician Database business of PMSI (the "OTC Business"), for a
total purchase price of $153.0 million, payable 75% in registered shares of NDC
Common Stock and 25% in cash. The Merger Agreement and the Stock Purchase
Agreement are subject to the approval of the stockholders of Source and PMSI.
In negotiating the terms of the transfer of Source Europe to PMSI, Source
acknowledged that the current value of Source Europe is inherently speculative,
given the risks associated with such business, and that PMSI would be assuming
significant risks in agreeing to complete the development and commercialization
of Source Europe. Source also recognized that, if such risks could be overcome,
the projections of Source Europe's cash flows prepared by Source's management
would indicate a significantly higher discounted present value than the
negotiated current value of Source Europe, which reflected the risks to
achieving successful commercialization. Under all the circumstances, including
the desire of Source's Board to take advantage of NDC's attractive proposal to
acquire the rest of Source, the need for additional resources to complete the
development and commercialization of Source Europe and the absence of any other
offers to acquire Source Europe, the Source Board concluded that the terms of
the transfer of Source Europe were fair to Source stockholders. See "The
Merger--Background of the Merger" and "The Merger--Certain Federal Income Tax
Consequences."
18
<PAGE>
MARKET PRICES AND DIVIDENDS
NDC Common Stock is traded on the NYSE under the symbol "NDC." The following
table sets forth the high and low sale prices per share of NDC Common Stock on
the NYSE, and the dividends declared per share of NDC Common Stock with respect
to each quarterly period since June 1, 1996. There is no established trading
market for shares of Source Capital Stock. No cash dividends have been declared
or paid on Source Common Stock or Source Preferred Stock.
<TABLE>
<CAPTION>
SALE PRICES PER
SHARE OF
NDC DIVIDENDS DECLARED
COMMON STOCK PER SHARE OF
---------------- NDC
HIGH LOW COMMON STOCK
---------------- ------------------
<S> <C> <C> <C>
FISCAL 1996
Quarter ended August 31, 1995............. 26.63 20.50 .075
Quarter ended November 30, 1995........... 28.00 22.00 .075
Quarter ended February 29, 1996........... 35.00 20.00 .075
Quarter ending May 31, 1996............... 40.25 29.88 .075
FISCAL 1997
Quarter ended August 31, 1996............. 44.50 33.75 .075
Quarter ended November 30, 1996........... 46.63 37.88 .075
Quarter ended February 29, 1997........... 47.50 35.00 .075
Quarter ending May 31, 1997............... 44.00 33.75 .075
FISCAL 1998
Quarter ended August 31, 1997............. 46.50 36.3125 .075
Quarter ending November 30, 1997
(through November 10, 1997).............. 43.875 34.50 --
</TABLE>
On August 19, 1997, the last trading day prior to public announcement that
NDC and Source had executed the Merger Agreement, the last reported sale price
per share of NDC Common Stock on the NYSE was $36.81. On November 10, 1997, the
last reported sale prices per share of NDC Common Stock on the NYSE was
$36.625. SOURCE STOCKHOLDERS SHOULD OBTAIN CURRENT MARKET QUOTATIONS FOR NDC
COMMON STOCK.
The Merger Agreement provides for the filing of a listing application with
the NYSE covering the shares of NDC Common Stock issuable pursuant to the
Merger. It is a condition to consummation of the Merger that NDC use its
reasonable efforts to ensure that such shares of NDC Common Stock be authorized
for listing on the NYSE effective upon official notice of issuance. See "The
Merger--Conditions to Consummation."
19
<PAGE>
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following summary presents selected comparative unaudited per share data
for NDC and Source on a historical basis and on a pro forma combined basis
assuming the Merger and the Stock Purchase had been effective during the period
presented, and on an equivalent pro forma combined basis assuming the Merger
and the Stock Purchase had been effective during the period presented. The
Merger is reflected under the purchase method of accounting and pro forma data
is derived accordingly. The information shown below should be read in
conjunction with the historical financial statements of NDC and Source,
including the respective notes thereto, appearing elsewhere or incorporated by
reference herein, and with the unaudited pro forma financial information
including the notes thereto, appearing elsewhere herein. See "Available
Information," "Incorporation of Certain Information by Reference," "Annex D--
Financial Statements of Source Informatics Inc.," and "Annex E--Pro Forma
Combined Financial Information."
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
MAY 31, 1997 AUGUST 31, 1997
------------ ------------------
<S> <C> <C>
NET INCOME PER SHARE:
NDC Historical........................... $ 1.38 $ 0.38
Pro Forma Combined....................... 1.37 0.31
Equivalent Pro Forma(a).................. 0.99 0.22
DIVIDENDS PER COMMON SHARE:
NDC Historical........................... 0.30 0.08
Pro Forma Combined....................... 0.30 0.08
Equivalent Pro Forma(a).................. 0.22 0.06
STOCKHOLDER'S EQUITY (BOOK VALUE) PER
COMMON SHARE:
(AT PERIOD END)
NDC Historical........................... 10.45 10.77
Pro Forma Combined....................... 11.02 10.86
Equivalent Pro Forma(a).................. 7.93 7.82
</TABLE>
- --------
(a) Excludes the effect of the cash to be issued in conjunction with the Merger
and the Stock Purchase.
RECENT DEVELOPMENTS
On October 14, 1997, NDC signed a definitive agreement to acquire Physician
Support Systems, Inc., a publicly-held Delaware corporation ("PSS"), in
exchange for approximately 4,230,000 shares of NDC Common Stock. PSS provides
business management services to physicians and hospitals in 29 states. For the
year ended December 31, 1996 and the nine months ended September 30, 1997, PSS
reported total revenues of $75.2 million and $81.7 million, respectively, and
net loss of $9.7 million and pro forma net income of $2.7 million,
respectively. As of September 30, 1997, PSS had total consolidated assets of
$117.4 million and consolidated stockholders' equity of $52.0 million. The PSS
transaction is subject to the approval of the PSS stockholders as well as other
standard closing conditions and is expected to close by January 31, 1998.
On November 6, 1997, NDC announced that Robert L. Walker will become chief
financial officer of NDC effective December 1, 1997. Mr. Walker previously
served as chief financial officer of Providian Corporation, a Louisville,
Kentucky based insurance and financial services company whose business includes
credit card and other consumer lending offerings.
20
<PAGE>
SELECTED FINANCIAL DATA
Set forth below is certain unaudited historical consolidated selected
financial data relating to NDC and Source and certain unaudited pro forma
combined selected financial data, giving effect to the Merger and the Stock
Purchase on a purchase accounting basis. This information should be read in
conjunction with the historical financial statements of NDC and Source,
including the respective notes thereto, and with the unaudited pro forma
combined financial information, appearing elsewhere in this Proxy
Statement/Prospectus or incorporated by reference herein. See "Available
Information," "Incorporation of Certain Information by Reference," "Annex D--
Consolidated Financial Statements of Source Informatics Inc.," and "Annex E--
Pro Forma Financial Data." In the opinion of management of NDC, interim
unaudited historical data reflect and include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of such
data. Unaudited results of operations for the three months ended August 31,
1997, are not necessarily indicative of results which may be expected for any
other interim period or for the fiscal year as a whole.
SELECTED FINANCIAL DATA OF NDC (HISTORICAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of NDC and
has been derived from and should be read in conjunction with NDC's Annual
Report on Form 10-K and Quarterly Report on Form 10-Q, which are incorporated
by reference herein. See "Available Information" and "Incorporation of Certain
Information by Reference."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FISCAL YEARS ENDED MAY 31
----------------- ---------------------------------------------
AUGUST AUGUST
31, 1997 31, 1996 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............. $120,102 $101,164 $433,860 $325,803 $278,083 $237,659 $239,810
Operating income
(loss)............... 19,633 13,934 66,656 (11,834) 28,426 18,423 14,894
Income (loss) from
continuing
operations........... 10,604 8,205 38,753 (8,458) 18,421 12,226 8,045
PER SHARE DATA:
Income (loss) from
continuing
operations........... $ 0.38 $ 0.30 $ 1.38 $ (0.31) $ 0.79 $ 0.55 $ 0.37
Cash dividends........ 0.075 0.075 0.30 0.30 0.30 0.29 0.29
Fully diluted weighted
average number of
common and common
equivalent shares
outstanding.......... 28,201 27,800 28,039 27,189 23,481 22,351 18,803
BALANCE SHEET DATA (AT
PERIOD END):
Total assets.......... $529,403 $369,417 $521,683 $368,039 $255,758 $214,864 $203,391
Long-term
obligations.......... 156,407 12,853 155,690 13,324 26,410 21,664 20,254
Total stockholders'
equity............... 286,912 242,134 277,470 233,299 164,651 134,723 124,001
</TABLE>
21
<PAGE>
SELECTED FINANCIAL DATA OF SOURCE (HISTORICAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of Source
more fully set forth in Annex D.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED JUNE 30,
--------------------------- ------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996 1995 1994 1993
------------- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................... $15,300 $13,484 $ 59,885 $ 51,812 $ 48,710 $ 45,757 $ 28,831
Operating income (loss).... 338 1,041 6,680 4,315 3,610 (1,797) (16,217)
Income (loss) from
continuing operations..... 203 979 6,479 3,766 2,610 (4,946) (17,680)
BALANCE SHEET DATA (AT PERIOD
END):
Total assets............... 24,262 24,885 27,641 27,566 26,420 23,874 15,544
Long-term obligations...... 8,179 5,909 7,490 6,525 5,822 4,797 6,574
Total stockholders'
equity.................... (45,298) (50,551) (45,051) (51,530) (55,296) (57,906) (52,960)
</TABLE>
22
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
OF NDC, SOURCE AND PMSI DATABASE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected pro forma combined financial
information as of and for the year ended May 31, 1997, and the three months
ended August 31, 1997, giving effect to the Merger and the consummation of the
Stock Purchase using the purchase method of accounting. The pro forma combined
financial information represents the historical operations of NDC, Source and
PMSI Database adjusted for the effects of the Merger and the Stock Purchase as
well as the effects of NDC's acquisition of NDC Healthcare EDI Services, Inc.
consummated in October 1996. This information has also been adjusted to conform
presentation format and accounting policy to those of NDC. For comparability
purposes, Source and PMSI Database's three months ended September 30, 1997 and
twelve months ended June 30, 1997, respectively, are used in conjunction with
the NDC three and twelve months ended August 31, 1997 and May 31, 1997. The
weighted average common shares outstanding and related per share data has been
adjusted to reflect the maximum number of shares of NDC Common Stock issuable
in the Merger and the Stock Purchase.
The pro forma combined financial information is provided for informational
purposes only and is not necessarily indicative of actual results that would
have been achieved had the Merger and the Stock Purchase been consummated at
the beginning of the period presented or of future results.
Historically, the financial results of Source US (the principal business of
Source and PMSI Database, operated as a joint venture) have varied from quarter
to quarter. These fluctuations are principally due to the timing of customer
commitments to new products and services and the timing of delivery of Source
US services. For example, many of the pharmaceutical manufacturing customers of
Source US report results on a calendar year basis. In general, commitments are
made by Source US's customers in the summer and fall for delivery in the first
part of the next calendar year. Source US's fiscal year begins July 1. Source
typically incurs expenses during the first half of its fiscal year (the last
half of the calendar year) in preparation for roll-out of new products and
services to meet customer requirements. Consequently, during Source US's first
quarter, significant expense with respect to new products is incurred to
generate revenues which should be recognized in future quarters. See "Source
Informatics Inc.--Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The selected pro forma combined financial information is derived from the Pro
Forma Combined Financial Information attached to this Proxy
Statement/Prospectus as Annex E. This information should be read in conjunction
with the historical financial statements of NDC and Source, including the
respective notes thereto, appearing elsewhere or incorporated by reference
herein.
<TABLE>
<CAPTION>
PRO FORMA COMBINED
----------------------------
THREE
YEAR ENDED MONTHS ENDED
MAY 31, 1997 AUGUST 31, 1997
------------ --------------- ---
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................................... $523,605 $141,637
Operating income............................. 73,061 19,056
Income from continuing operations............ 42,110 9,506
PER SHARE DATA:
Income from continuing operations............ 1.37 0.31
Cash dividends............................... 0.30 0.08
Weighted average common shares outstanding... 30,654 30,816
BALANCE SHEET DATA (AT AUGUST 31, 1997):
Total assets................................. 627,089
Long-term obligations........................ 164,359
Total stockholders' equity................... 317,727
</TABLE>
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RISK FACTORS
In addition to the other information contained in this Proxy
Statement/Prospectus, the following factors should be considered carefully in
evaluating an investment in NDC Common Stock.
COMPETITION
The markets for the applications systems and services offered by NDC are
highly competitive. Competition in the health care transaction processing and
payment systems markets affects NDC's ability to gain new customers and the
prices it can charge. The key competitive factors for NDC are functionality of
products, quality of service and price. Many of NDC's competitors have access
to significant capital and management, marketing and technological resources
that are equal to or greater than those of NDC, and there can be no assurance
that NDC will continue to be able to compete successfully with them. In
addition, NDC competes with businesses that internally perform data processing
or other services offered by NDC.
MARKETS AND APPLICATIONS
NDC's future growth and profitability will depend, in part, upon the further
expansion of the health care transaction processing and payment systems
markets, the emergence of other markets for electronic transaction processing
services and NDC's ability to penetrate such markets. Further expansion of
these markets is dependent upon the continued growth in the number of
transactions available to be processed and the continued automation of
traditional paper-based processing systems. NDC's ability to penetrate such
markets will depend, in turn, upon its ability to apply its existing
technology, or to develop new technology, to meet the particular service needs
of each new market. There can be no assurance that markets for NDC's services
will continue to expand and develop or that NDC will be successful in its
efforts, or have adequate financial, marketing and technological resources to
penetrate new markets.
INTEGRATED PAYMENT SYSTEMS BUSINESS
NDC's merchant customers have liability for charges disputed by cardholders.
However, in the case of merchant fraud, or insolvency or bankruptcy of the
merchant, NDC may be liable for any of such charges disputed by cardholders.
NDC requires cash deposits and other types of collateral by certain merchants
to minimize any such contingent liability. Based on its historical loss
experience, NDC has established reserves for estimated losses on transactions
processed which management believes are adequate. There can be no assurance,
however, that such reserves for losses will be adequate. Any such losses in
excess of reserves could have a material adverse effect on the financial
condition and results of operations of NDC.
HEALTH CARE INFORMATION SERVICES
Federal and state governments have recently focused significant attention on
health care reform. It is not possible to predict which, if any, proposal that
has been or will be considered will be adopted. There can be no assurance that
the health care regulatory environment will not change so as to restrict the
existing operations of, impose additional requirements on or limit the
expansion of NDC. Costs of compliance with changes in government regulations
may not be subject to recovery by NDC through price increases.
Significant media and public attention has recently been focused on the
health care industry due to ongoing federal and state investigations
purportedly related to certain referral and billing practices. The Office of
the Inspector General and the Department of Justice have initiated hospital
and laboratory billing review projects in certain states and are expected to
extend such projects to additional states, including states in which NDC, upon
the consummation of its acquisition of PSS, will operate. These projects
increase the likelihood of governmental investigations of hospitals,
laboratories and other institutions for which NDC and PSS perform services.
Although PSS currently monitors, and, upon the consummation of its acquisition
of PSS, NDC intends to continue to monitor, billing practices and arrangements
to ensure compliance with prevailing industry practices under applicable laws,
such laws are complex and constantly evolving and there can be no assurance
that governmental investigators will not take positions that are inconsistent
with industry practices.
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ACQUISITION RISKS
NDC completed five acquisitions in fiscal 1997, and intends to seek
additional acquisition opportunities and alliance relationships with other
businesses that will allow it to increase its market penetration,
technological capabilities, product offerings and distribution capabilities.
There can be no assurance that NDC will be able successfully to identify
suitable acquisition candidates, complete acquisitions, integrate acquired
operations into its existing operations or expand into new markets. There can
also be no assurance that future acquisitions will not have an adverse effect
upon NDC's operating results, particularly in the fiscal quarters immediately
following the completion of such acquisitions while the operations of the
acquired business are being integrated into NDC's operations. Once integrated,
acquired operations may not achieve levels of revenues, profitability or
productivity comparable with those achieved by NDC's existing operations, or
otherwise perform as expected. Specifically, with regard to the acquisition of
Source, certain products currently under development may never reach
technological feasibility which could have a material adverse effect upon
NDC's operating results. See "Annex E--Pro Forma Financial Information." NDC
may incur indebtedness in the future, including through borrowings under a
credit facility, if a credit facility is available, to finance acquisitions.
As a result, NDC expects to be subject to risks associated with debt
financing, including the risk that interest rates may increase, the risk that
NDC's cash flow will be insufficient to meet required payments on its debt and
the risk that NDC may be unable to refinance or repay the debt as it comes
due. In addition, NDC competes for acquisition and expansion opportunities
with companies that have substantially greater resources.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW, CERTAIN CHARTER AND BY-LAW
PROVISIONS AND STOCKHOLDER RIGHTS PLAN
Certain provisions of NDC's Certificate of Incorporation and By-laws could
delay, defer or prevent a takeover attempt that a stockholder might consider
in its best interest. These provisions may adversely affect prevailing market
prices for NDC Common Stock. These provisions, among other things, classify
NDC's Board of Directors into three classes as nearly equal in number as the
total number of directors permits, each of which serves for different three-
year terms, and authorize the Board of Directors to issue preferred stock in
one or more classes or series and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any action on the part of the stockholders. The rights of the holders of NDC
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of NDC. NDC has no current plans to issue
shares of preferred stock. NDC also maintains a stockholder rights plan which
entitles its stockholders , upon the happening of certain events, to purchase
preferred stock of NDC. These NDC Rights (hereinafter defined) may have
certain anti-takeover effects because the rights will cause substantial
dilution to a person or group that attempts to acquire NDC on terms not
approved by the Board of Directors of NDC unless the offer is conditioned on a
substantial number of NDC Rights being acquired. In addition, Section 203 of
the Delaware General Corporation Law ("DGCL") prohibits certain persons from
engaging in business combinations with NDC, which may also have the effect of
delaying, deterring or preventing a change of control of NDC.
NEW PRODUCT INTRODUCTIONS
With NDC's acquisition of Source and PMSI Database, NDC plans to introduce
products and services different from those NDC has traditionally provided. The
market for these products and services is characterized by rapid technological
change, frequent new product introductions, evolving industry standards and
changing customer needs. There can be no assurance that NDC will be successful
in developing and marketing these new products and services or that Source's
current or new products and services will adequately meet the quickly changing
demands of Source's pharmaceutical company customers. In addition, in order to
meet its customers demands, Source has undertaken a number of development
projects, including efforts to update its core mainframe-based products.
Because it is generally not possible to predict the time required and costs
involved in reaching certain research, development and engineering objectives,
estimated product development schedules could require extensions. NDC believes
that the future success of the Source business will depend in large part
25
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on its ability to maintain and enhance its current product and service
offerings and to continually develop and introduce new products and services
that will keep pace with technological advances and satisfy evolving customer
requirements. Further, there can be no assurance that NDC will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products and services. If NDC is unable to
develop and introduce new products and services in a timely manner, or if a
new or updated product does not achieve market acceptance, NDC's financial
condition and results of operations could be materially adversely affected.
FORWARD-LOOKING STATEMENTS
When used in this Proxy Statement/Prospectus and elsewhere by management or
NDC from time to time, the words "believes," "anticipates," "expects" and
similar expressions are intended to identify forward-looking statements
concerning NDC's operations, economic performance and financial condition,
including in particular, the likelihood of NDC's success in developing and
expanding its business. These statements are based on a number of assumptions
and estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of NDC, and reflect future
business decisions which are subject to change. A variety of factors could
cause actual results to differ materially from those anticipated in NDC's
forward-looking statements, some of which include competition in the market
for NDC's services, continued expansion of NDC's processing and payment
systems markets, successfully completing and integrating acquisitions in
existing and new markets and other risk factors that are discussed herein and
from time to time in other NDC reports and other filings with the Commission.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date they are made. NDC undertakes no
obligations to publicly release the results of any revisions to such forward-
looking statements that may be made to reflect events or circumstances after
the date hereof, or thereof, as the case may be, or to reflect the occurrence
of unanticipated events.
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GENERAL INFORMATION
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished by Source to its
stockholders in connection with the Special Meeting of the stockholders of
Source to be held at 9:30 a.m., local time, on , 1997, at The Lotos Club, 5
East 66th Street, New York, New York, and at any adjournments and
postponements thereof, to consider and vote upon a proposal to adopt the
Merger Agreement and consummation of the transactions contemplated therein,
and to transact such other business as may properly come before the Special
Meeting.
This document is also being furnished by NDC to Source stockholders as a
prospectus in connection with the issuance by NDC of shares of NDC Common
Stock upon consummation of the Merger.
The Merger Agreement provides for a transaction whereby a wholly-owned
subsidiary of NDC will merge with and into Source, with Source as the
surviving corporation of the Merger becoming a wholly-owned subsidiary of NDC.
At the Effective Time, each share of issued and outstanding Source Capital
Stock (excluding shares held by Source or any of its subsidiaries or by NDC or
any of its subsidiaries, and excluding shares as to which dissenters' rights
are perfected) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive shares of NDC Common Stock and/or cash.
Pursuant to the NDC Rights Agreement, each share of NDC Common Stock issued in
connection with the Merger upon conversion of Source Common Stock shall be
accompanied by an NDC Right. See "The Merger--Exchange Ratios" and "Certain
Differences in the Rights of NDC and Source Stockholders."
If the Merger Agreement is adopted at the Special Meeting, all required
governmental and other consents and approvals are obtained, and all of the
other conditions to the obligations of the parties to consummate the Merger
are either satisfied or waived (as permitted), the Merger will be consummated.
See "The Merger--Conditions to Consummation."
RECORD DATE
The Source Board of Directors has fixed the close of business on November 3,
1997, as the record date for determining the Source stockholders entitled to
receive notice of and to vote at the Special Meeting. Only holders of record
of Source Capital Stock as of the Record Date are entitled to notice of and to
vote at the Special Meeting. As of the Record Date, there were 5,800,193
shares of Source Common Stock issued and outstanding and held by 143 holders
of record and 1,041,667 shares of Source Preferred Stock issued and
outstanding and held by 52 holders of record. Holders of Source Common Stock
are entitled to one vote on each matter considered and voted on at the Special
Meeting for each share of Source Common Stock held of record at the close of
business on the Record Date. Holders of Source Preferred Stock are entitled to
one vote on each matter considered and voted on at the Special Meeting for
each share of Source Preferred Stock held of record at the close of business
on the Record Date. The presence, in person or by properly executed proxy, of
the holders of a majority of the outstanding shares of Source Common Stock
entitled to vote at the Special Meeting is necessary to constitute a quorum of
the holders of Source Common Stock at the Special Meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of Source Preferred Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum of the holders of Source Preferred
Stock at the Special Meeting. Abstentions will be counted as shares present
for purposes of determining the presence of a quorum but will not be counted
as votes cast for purposes of determining whether a proposal has received
sufficient votes for adoption. Consequently, abstentions will have the effect
of a vote against the Merger.
VOTES REQUIRED
Adoption of the Merger Agreement and consummation of the transactions
contemplated therein requires the presence of a quorum and the affirmative
vote of: (i) the holders of a majority of the outstanding shares of Source
Common Stock and Source Preferred Stock entitled to vote thereon at the
Special Meeting, voting as a single class, and (ii) the holders of a majority
of the outstanding shares of Source Preferred Stock entitled to vote
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thereon at the Special Meeting. Abstentions will have the effect of a vote
against the Merger. The holders of approximately 98% of the outstanding shares
of Source Preferred Stock have agreed to vote all of such shares in favor of
the adoption of the Merger Agreement. See "The Merger--Voting Agreement."
As of the Record Date, Source directors and executive officers, and their
affiliates, beneficially owned approximately 74.9% of the outstanding shares
of Source Common Stock entitled to vote at the Special Meeting and 50% of the
outstanding shares of Source Preferred Stock entitled to vote at the Special
Meeting. As of the Record Date, NDC and its directors and executive officers,
and their affiliates, held no shares of Source Common Stock or Source
Preferred Stock. See "The Merger--Voting Agreement."
RECOMMENDATION OF SOURCE'S BOARD OF DIRECTORS
For the reasons described below, the Board of Directors of Source has
unanimously adopted the Merger Agreement, believes the Merger is in the best
interests of Source and its stockholders, and unanimously recommends that
stockholders of Source vote FOR adoption of the Merger Agreement and the
consummation of the transactions contemplated therein. See "The Merger--
Reasons for the Merger."
THE MERGER
The following information describes certain information pertaining to the
Merger. This description does not purport to be complete and is qualified in
its entirely by reference to the Annexes hereto, including the Merger
Agreement, a copy of which is set forth in Annex A to this Proxy
Statement/Prospectus and is incorporated herein by reference. All stockholders
are urged to read the Annexes in their entirely.
GENERAL
The Merger Agreement provides that Sub will merge with and into Source,
which shall be the surviving corporation of the Merger and, as a result
thereof, become a wholly-owned subsidiary of NDC. At the time the Merger
becomes effective, each outstanding share of Source Capital Stock (excluding
shares held by Source or any of its subsidiaries or by NDC or any of its
subsidiaries, and excluding shares of Source Capital Stock as to which
dissenter's rights are perfected) shall cease to be outstanding and shall be
converted into and exchanged for the right to receive shares of NDC Common
Stock and/or cash. Pursuant to the NDC Rights Agreement, each share of NDC
Common Stock issued in connection with the Merger upon conversion of the
Source Common Stock shall be accompanied by an NDC Right. If the Merger
Agreement is adopted at the Special Meeting, all required governmental and
other consents and approvals are obtained, and all other conditions of the
obligations of the parties to consummate the Merger are either satisfied or
waived (as permitted), the Merger will be consummated.
BACKGROUND OF THE MERGER
Source was formed in April 1996 as a spin-off from Walsh International, Inc.
("Walsh") immediately prior to Walsh's initial public offering. In May 1996,
the Board of Directors of Source began considering a strategic direction for
Source with a view to maximizing shareholder value and creating avenues to
liquidity for Source stockholders.
In May, June and July 1996, Source and its investment bankers had
preliminary discussions regarding business combinations with several
potentially interested parties. In addition, during this period the Source
Board of Directors informally notified PMSI that it was evaluating strategic
alternatives. From a business and strategic perspective, Source management
believed that the acquisition of Source by PMSI might have been attractive
given the significant business relationships between the two parties. In 1991,
PMSI and Walsh, as the predecessor of Source, had entered into an operating
venture to more fully exploit the databases produced by Source. More recently,
PMSI and Source had also reached agreement in principle for PMSI's profit
participation in Source's
28
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efforts to build and commercialize similar databases in major European
markets. After some negotiations, however, Source management was informed that
PMSI was unwilling to pay a purchase price that the Source Board of Directors
would accept.
During the first half of calendar 1996, Source and NDC, which has been a
significant data supplier to Source since inception of the operating venture
between Source and PMSI, commenced discussions with regard to creating a new
information service to deliver daily physician-level prescription data
captured from NDC's health care transaction processing network to Source
clients in the United States. During the course of these discussions, NDC
management suggested that, due to the complementary nature of the businesses,
there be a senior management meeting of all three companies to explore the
potential for further cooperation.
Commencing in November 1996, senior management from NDC, PMSI and Source met
several times to explore the potential synergies among their businesses. While
a possible transaction in which NDC would acquire all of PMSI and Source was
discussed, NDC did not submit an acquisition proposal to PMSI and Source. NDC
expressed the view that, since it had no significant operations outside the
United States, it believed that the greatest benefits would be derived from
cooperative ventures with Source's United States operations, the OTC Business
and NDC's health care transaction processing network, all based and operating
solely in the United States. In May 1997, NDC expressed an interest in
acquiring these parts of the PMSI and Source businesses. NDC's proposal
contemplated the acquisition by NDC of the OTC Business and all the
outstanding capital stock of Source, subject to Source's divestiture of its
interest in Source Europe. The Source Board of Directors determined that the
transaction would substantially achieve its strategic goals.
The Source Board also concluded that the transfer of Source Europe to PMSI
was the best alternative to achieve satisfaction of the divestiture condition
in NDC's proposal within the timeframe of such proposal. In exploring other
possible business combinations, Source had not received any proposals to
acquire Source Europe, which is still in the developmental stage. The Source
Board recognized that the development and commercialization of Source Europe's
data products and services would require capital beyond Source's current
resources and that successful introduction of such products and services in
various European markets would be subject to significant uncertainties. Source
believed that the acquisition of Source Europe would be attractive to PMSI
because it would complement PMSI's existing European businesses and would
thereby enhance PMSI's future market position in Europe.
In June 1997, NDC, PMSI and Source commenced negotiations and reached
preliminary agreement for PMSI to acquire 100% of Source Europe and for NDC to
acquire 100% of Source (including PMSI's interest in Source) together with the
OTC Business, for a total purchase price payable to PMSI and the stockholders
of Source consisting of $153 million, payable 75% in registered shares of NDC
Common Stock and 25% in cash. Source appointed its investment bankers to
negotiate on its behalf both the allocation between Source and PMSI of the
total NDC consideration to be received in the Stock Purchase and the Merger
and the terms of the transfer from Source to PMSI of Source Europe. PMSI was
represented in these negotiations by its own investment bankers.
To date, Source has made significant investments in Source Europe, which
include researching the market potential and entry strategies, entering into
contracts with data vendors, developing databases, gaining regulatory approval
in certain markets, building infrastructure and entering into service
contracts with pharmaceutical companies. From inception on January 1, 1994,
through June 30, 1997, Source Europe incurred an aggregate net loss of $42
million and had revenues of $407,000, which were recognized in fiscal 1997.
The Source Board believes that the creation of significant value by Source
Europe is subject to a number of factors, including receipt of all required
regulatory approvals, the availability of adequate capital resources to
complete development of Source Europe's products and services and the
successful introduction of such products and services in various national
markets.
In negotiating the terms of the transfer of Source Europe to PMSI, Source
acknowledged that the current value of Source Europe is inherently
speculative, given the risks associated with such business, and that PMSI
29
<PAGE>
would be assuming significant risks in agreeing to complete the development
and commercialization of Source Europe. Source also recognized that, if such
risks could be overcome, the projections of Source Europe's cash flows
prepared by Source's management would indicate a significantly higher
discounted present value than the negotiated terms of the Source Divestiture
Agreement, which reflected the risks to achieving successful
commercialization. Under all the circumstances, including the desire of
Source's Board to take advantage of NDC's attractive proposal to acquire the
rest of Source, the need for additional resources to complete the development
and commercialization of Source Europe and the absence of any other offers to
acquire Source Europe, the Source Board concluded that the terms of the
transfer of Source Europe were fair to Source stockholders.
Through July and August 1997, Source, PMSI and NDC continued to negotiate
the final terms of the Stock Purchase and the Merger. These negotiations did
not result in any material changes in the economic terms of the Stock Purchase
or the Merger, however, the negotiations did cover certain other terms of the
Stock Purchase Agreement and the Merger Agreement, including the scope of
representations and warranties, the scope and duration of indemnities and
related escrow arrangements and the principal terms of ancillary agreements
between the parties. On August 20, 1997, the Stock Purchase Agreement, the
Source Divestiture Agreement and the Merger Agreement were executed.
REASONS FOR THE MERGER
The Source Board of Directors, after consideration of relevant business,
financial, legal and market factors, approved the Merger Agreement. Source's
Board did not assign any relative or specific weight to the factors
considered. The factors considered included:
(i) the expressed desire for liquidity of stockholders holding a majority
of the outstanding Source Capital Stock;
(ii) the prospective strategic benefits to the Source business of a
combination with an acquiror that could facilitate expansion into other
aspects of the health care information services industry;
(iii) the fact that a variety of other strategic options had been
explored since the inception of Source, without locating a strategic
partner or buyer willing to offer the potential value offered in the
Merger;
(iv) the opinions, analyses and presentations of Montgomery Securities,
Source's investment bankers;
(v) the structure of the Merger may permit holders of Source Capital
Stock to have their shares converted into NDC Common Stock on a tax free
basis; and
(vi) the financial condition, cash flows and results of operations of
Source and NDC, both on an historical and a prospective basis.
THE BOARD OF DIRECTORS OF SOURCE UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
ADOPTION OF THE MERGER AGREEMENT AND CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREIN.
The NDC Board of Directors, after consideration of relevant business,
financial, legal and market factors, approved the Merger Agreement. The NDC
Board of Directors did not assign any relative or specific weight to the
factors considered. The factors considered included:
(i) the prospective strategic benefits to NDC of a combination with Source
and PMSI Database which could facilitate the growth of NDC's health care
information services business;
(ii) the potential to utilize certain in-process research and development
projects of Source, including significant revisions and additions to the
architecture and functionality of Source's systems, to build upon certain of
NDC's own projects; and
(iii) the potential costs and delays involved in independently developing
service offerings similar to those currently provided and those under
development by Source and PMSI Database;
(iv) the financial condition, cash flows and results of operations of Source
and NDC, both on an historical and a prospective basis.
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EXCHANGE RATIOS
The Merger Agreement provides that upon consummation of the Merger:
(a) Subject to a working capital adjustment (discussed below), each
outstanding share of Source Common Stock (excluding shares held by Source or
any of its subsidiaries or by NDC or any of its subsidiaries, and excluding
shares of Source Common Stock as to which dissenters' rights are perfected)
issued and outstanding immediately prior to the Effective Time shall cease to
be outstanding and shall be converted into and exchanged for the right to
receive the following:
(i) the amount, if any, equal to the quotient of (A) the Aggregate Cash
Amount less the Preferred Stock Merger Consideration, and less the
Transaction Expenses, and (B) the total number of shares of Source Common
Stock outstanding as of the Closing Date;
(ii) that fraction of a share of NDC Common Stock equal to the quotient
of (A) the Payment Shares less the Option Shares, and (B) the total number
of shares of Source Common Stock outstanding as of the Closing Date;
provided, however, if the sum of the Preferred Stock Merger Consideration
and the Transaction Expenses exceeds the Aggregate Cash Amount, then the
Payment Shares will be reduced by that number of shares of NDC Common Stock
equal to the Excess Expense divided by the Average Closing Price, as of the
Closing Date; and
(iii) that fraction of a share of NDC Common Stock equal to the quotient
of the Stock Escrow divided by the total number of shares of Source Common
Stock outstanding as of the Closing Date. The Stock Escrow will be utilized
for working capital adjustments and for indemnification claims by NDC, all
pursuant to the terms of the Merger Agreement and the Escrow Agreement.
At the Closing Date, Source shall prepare and deliver to NDC a schedule
indicating the Transaction Expenses incurred but unpaid as of the Closing Date
including, without limitation, all expenses incurred in connection with
Source's termination of certain employment agreements and an executive pension
plan. In addition, also at the Closing Date, Source shall have secured the
cancellation of all outstanding options and warrants to purchase shares of
Source Common Stock and shall provide to NDC a schedule of the Option Shares
payable to the holders of such options and warrants in consideration of such
cancellation. Pursuant to the NDC Rights Agreement, each share of NDC Common
Stock issued in connection with the Merger upon conversion of Source Common
Stock shall be accompanied by an NDC Right.
Based on the market price of NDC Common Stock on , 1997 and an
estimate of the Transaction Expenses on such date, each outstanding share of
Source Common Stock would receive $ and shares of NDC Common Stock.
These amounts may change, however, at the Closing Date since the Transaction
Expenses and the Option Shares will be determined on or immediately prior to
the Closing Date. In addition, the Preferred Stock Merger Consideration is
subject to adjustment, in certain circumstances, on or prior to the Closing
Date. See "Certain Differences in the Rights of NDC and Source Stockholders."
(b) Each share of Source Preferred Stock (excluding shares held by Source or
any of its subsidiaries or by NDC or any of its subsidiaries, and excluding
shares of Source Preferred Stock as to which dissenters' rights are perfected)
issued and outstanding immediately prior to the Effective Time shall cease to
be outstanding and shall be converted and exchanged for the right to receive
an amount equal to the Preferred Stock Merger Consideration.
The amount of cash and shares of NDC Common Stock to be paid to the holders
of Source Common Stock was determined based on a per share value for the NDC
Common Stock of $43.875, the market price for the NDC Common Stock at the time
NDC, Source and PMSI commenced negotiations. See "The Merger--Background of
the Merger."
COMMON EXCHANGE RATIO ADJUSTMENT
If, at the close of trading on the Determination Date, the Average Closing
Price shall be greater than the Upper Threshold Price, the Common Exchange
Ratios shall each be adjusted to equal that fraction of a share of NDC Common
Stock (rounded to the nearest ten thousandth of a share) obtained by dividing
the product of the Common Base Exchange Ratio or the Common Escrow Exchange
Ratio, as the case may be, and the Upper Threshold Price by the Average
Closing Price at the Determination Date. If the Average Closing Price on the
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Determination Date shall be less than the Lower Threshold Price, Source shall
have the right to refuse to consummate the Merger provided that Source shall
have given written notice of such refusal to NDC not later than two trading
days following the Determination Date. During the five-day period commencing
with its receipt of such notice, NDC shall have the option, in its sole
discretion, to elect to revise the Common Exchange Ratios to equal that
fraction of a share of NDC Common Stock (rounded to the nearest ten thousandth
of a share) obtained by dividing the product of the Common Base Exchange Ratio
or the Common Escrow Exchange Ratio, as the case may be, and the Lower
Threshold Price by the Average Closing Price at the Determination Date. If NDC
makes the election contemplated by the preceding sentence within such five-day
period, it shall give prompt written notice to Source of such election and the
revised Common Exchange Ratios, whereupon the Merger Agreement shall remain in
effect in accordance with its terms (except that the Common Exchange Ratios
shall have been so modified). If the Lower Threshold Price is not reached, the
Board of Directors of Source will take such action as is required by law and
its fiduciary obligations, including, if appropriate, obtaining the consent of
the Source stockholders to proceed with the Merger.
WORKING CAPITAL ADJUSTMENT
The Stock Escrow shall be adjusted in the manner described below:
Preliminary Balance Sheet. Source will cause to be prepared and delivered to
NDC the Preliminary Balance Sheet and a certificate based on such Preliminary
Balance Sheet setting forth Source's calculation of Estimated Working Capital,
Estimated Current Assets and Estimated Current Liabilities. The Preliminary
Balance Sheet shall include and fairly present the consolidated financial
position of Source and its subsidiaries as of the close of business on the
date of the Preliminary Balance Sheet in accordance with GAAP applied on a
basis consistent with those used in the preparation of the Source Balance
Sheet.
NDC shall have five business days from the receipt of the Preliminary
Balance Sheet and the calculation of Estimated Working Capital, Estimated
Current Assets and Estimated Current Liabilities to review such statement and
calculations and following such review such statements and calculations shall
be final and binding.
If Estimated Current Assets are less than the product of (i) 0.9416 times
(ii) Estimated Current Liabilities as of the date of the Preliminary Balance
Sheet, the Stock Escrow payable by NDC shall be decreased by the number of
shares of NDC Common Stock equal to the Estimated Working Capital Adjustment
divided by the Average Closing Price as of the Closing Date; provided,
however, in the event this reduction of the Stock Escrow exceeds 113,960
shares, the Payment Shares shall then be decreased similarly in an amount
equal to such excess.
Closing Balance Sheet. As promptly as practicable, but not later than 30
days after the Closing Date, NDC will cause to be prepared and delivered to
the Stockholder Representative the Closing Balance Sheet setting forth NDC's
calculation of Closing Working Capital, Closing Current Assets and Closing
Current Liabilities. The Closing Balance Sheet shall include and fairly
present the consolidated financial position of Source and its subsidiaries as
of the close of business on the Closing Date in accordance with GAAP applied
on a basis consistent with those used in the preparation of the Source Balance
Sheet.
The Closing Balance Sheet and the calculation of Closing Working Capital,
Closing Current Assets and Closing Current Liabilities shall be deemed final
upon the earliest of (i) the date on which NDC and the Stockholder
Representative jointly agree that such documents are final, (ii) the 30th day
after delivery of such documents, if the Stockholder Representative has not
delivered a notice to expressing disagreement with such calculations and
setting forth its calculation of such amount(s), and (iii) the date on which
all disputes relating to such statements and calculations between the parties
are resolved.
If the Stockholder Representative shall deliver a notice of disagreement,
the Stockholder Representative and NDC shall, during the 30 days following
such delivery, use their reasonable efforts to reach agreement on the Disputed
Amounts. If, during such period, the Stockholder Representative and NDC are
unable to reach such agreement, they shall promptly thereafter cause Price
Waterhouse LLP (or if said firm shall be unwilling to act thereunder, such
other independent accountants of nationally recognized standing reasonably
satisfactory to NDC and the Stockholder Representative), promptly to review
the Merger Agreement and any other documents
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necessary to calculate the Disputed Amounts (including all work papers of the
parties used in calculating the Disputed Amounts) and such accountants shall
then deliver a report to NDC and the Stockholder Representative setting forth
their calculations which shall be final and binding.
If Final Current Assets are less than the product of (i) 0.9416 times (ii)
Final Current Liabilities, the Stockholders shall pay to NDC the amount of the
Final Working Capital Deficit out of the Stock Escrow in the manner provided
in the Escrow Agreement. If Final Current Assets are greater than the product
of (i) 0.9416 times (ii) Final Current Liabilities, NDC shall pay to the
escrow agent, to be held in accordance with the Escrow Agreement, that number
of shares of NDC Common Stock equal to the quotient of the Final Working
Capital Surplus divided by the Average Closing Price as of the date Final
Working Capital was determined.
Allocation with PMSI. NDC, Source and PMSI have agreed to the following
adjustment in order to properly allocate the working capital adjustment based
on their respective Closing Balance Sheets. If Total Current Assets are less
than the product of 0.9975 and Total Current Liabilities, then the
Stockholders shall pay to NDC the Current Asset Allocation Amount out of the
Stock Escrow in the manner provided in the Escrow Agreement. If Total Current
Assets are greater than the product of 0.9975 and Total Current Liabilities,
then NDC shall pay to the Stockholders pursuant to the instructions of the
Stockholder Representative that number of shares of NDC Common Stock equal to
the quotient of the Current Asset Allocation Amount and the Average Closing
Price as of the date Final Working Capital was determined.
For purposes of any adjustments based on the Closing Balance Sheet, the
parties shall take into account any adjustment made at closing pursuant to the
Preliminary Balance Sheet.
INDEMNIFICATION
Pursuant to the Merger Agreement, the Stockholders jointly and severally
agree to indemnify, defend, and hold harmless the Indemnitees, from, against,
for and in respect of any and all losses asserted against, or paid, suffered
or incurred by, an Indemnitee and resulting from, based upon, or arising out
of:
(a) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any Stockholder or Source contained in or
made pursuant to the Merger Agreement or in any certificate, schedule, or
exhibit furnished by the Stockholders or Source in connection therewith;
(b) a breach of or failure to perform any covenant or agreement of the
Stockholders or Source made in the Merger Agreement;
(c) any and all taxes arising out of or associated with the Divestiture;
(d) any and all taxes arising out of or associated with certain sales by
Source; or
(e) any and all losses relating to certain litigation ongoing as of the
date of the Merger Agreement.
The Stockholders will have no liability to the Indemnitees under or in
connection with a breach of any of the representations, warranties, covenants
or agreements made or to be performed by the Stockholders or Source contained
in the Merger Agreement unless written notice asserting an indemnification
claim based thereon is given to the Stockholder Representative prior to August
31, 1999.
The Stockholders shall have no liability with respect to the matters
described above until the total of all losses with respect thereto exceeds
$200,000 in which event the Stockholders shall be obligated to indemnify the
Indemnitees for all such losses; provided, however, that each individual claim
of $10,000 or less shall not be indemnifiable, and shall not be included in
determining whether the $200,000 threshold has been reached. In no event shall
the aggregate liability of the Stockholders exceed the lesser of (i) the
aggregate value of the Indemnification Escrow Amount, and (ii) $20,000,000.
All disputes arising under the indemnification provisions of the Merger
Agreement (other than claims in equity) shall be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association.
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ESCROW AGREEMENT
Pursuant to the terms of the Merger Agreement, the Stock Escrow (455,840
shares of NDC Common Stock decreased by the adjustment, if any, based on the
Preliminary Balance Sheet discussed above), will be distributed to and will be
held by the escrow agent pursuant to the terms of the Escrow Agreement, a copy
of which is attached to this Proxy Statement/Prospectus as Annex C.
Working Capital Escrow. The Working Capital Escrow Amount (a total of
113,960 of the Stock Escrow shares, less any shares paid to NDC as the result
of an adjustment based on the Preliminary Balance Sheet), are reserved to
cover an adjustment, if any, based on the Closing Balance Sheet. The
Stockholder Representative, or the Stockholders with respect to their
individual percentage interest, may direct the escrow agent to sell, from time
to time, any or all of the shares of NDC Common Stock in the Working Capital
Escrow Amount at such prices as are commercially reasonable at the time of
sale. Any and all cash proceeds from the sale of such shares shall remain in
escrow as part of the Working Capital Escrow Amount, except that at the end of
each calendar month, if the aggregate value of the Working Capital Escrow
Amount exceeds 133% of the aggregate value of the Stock Escrow as of the
Closing Date, the Escrow Agent shall distribute to the Stockholders that
amount in cash or shares of NDC Common Stock equal to their respective
percentage interest in such surplus.
If, prior to the Distribution Date with respect to the Working Capital
Escrow Amount, NDC shall be entitled to an adjustment based on the Closing
Balance Sheet, the escrow agent shall distribute to NDC from the Working
Capital Escrow Amount an amount in cash, in immediately available funds, equal
to such adjustment claim, and, if the Working Capital Escrow Amount does not
contain any cash, or contains an amount of cash insufficient to satisfy the
claim, then the escrow agent shall distribute to NDC from the Working Capital
Escrow Amount that number of shares of NDC Common Stock equal to the quotient
(rounded to the next highest whole number) obtained by dividing the amount of
the claim not paid in cash by the Average Closing Price as of the date Final
Working Capital was determined.
If the adjustment based on the Closing Balance Sheet is pending as of the
Distribution Date with respect to the Working Capital Escrow Amount, the
escrow agent shall retain an amount equal to the disputed claim amount and
promptly deliver to the Stockholders a distribution of cash, if any, in
immediately available funds, and shares of NDC Common Stock from the Working
Capital Escrow Amount, equal to any remaining amounts in the Working Capital
Escrow Amount. The disputed amount shall be paid to NDC or the Stockholders,
as the case may be, upon the final resolution as agreed by NDC and the
Stockholder Representative in writing of the amount of the adjustment claim.
Indemnification Escrow. The Indemnification Escrow Amount (a total of
341,880 of the Stock Escrow shares) are reserved to cover claims by NDC based
on the indemnification provisions of the Merger Agreement. The Stockholder
Representative, or the Stockholders with respect to their individual
percentage interest, may direct the escrow agent to sell, from time to time,
any or all of the shares of NDC Common Stock in the Indemnification Escrow
Amount at such prices as are commercially reasonable at the time of sale. Any
and all cash proceeds from the sale of such shares shall remain in escrow as
part of the Indemnification Escrow Amount, except that at the end of each
calendar month, if the aggregate value of the Indemnification Escrow Amount
exceeds $20,000,000, the escrow agent shall distribute to the Stockholders
that amount in cash or shares of NDC Common Stock equal to their respective
percentage interest in such surplus.
If, prior to the Distribution Date with respect to the Indemnification
Escrow Amount, NDC shall be entitled to a payment based on an indemnification
claim, the escrow agent shall distribute to NDC from the Indemnification
Escrow Amount an amount in cash, in immediately available funds, equal to such
claim, and, if the Indemnification Escrow Amount does not contain any cash, or
contains an amount of cash insufficient to satisfy the claim, then the escrow
agent shall distribute to NDC from the Indemnification Escrow Amount that
number of shares of NDC Common Stock equal to the quotient (rounded to the
next highest whole number) obtained by dividing the amount of the claim not
paid in cash by the Average Closing Price as of the date the notice of claim
was received by the escrow agent.
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If an indemnification claim is pending as of the Distribution Date with
respect to the Indemnification Escrow Amount, the escrow agent shall retain an
amount equal to the disputed claim amount and promptly deliver to the
Stockholders a distribution of cash, if any, in immediately available funds,
and shares of NDC Common Stock from the Indemnification Escrow Amount, equal
to any remaining amounts in the Indemnification Escrow Amount. The disputed
amount shall be paid to NDC or the Stockholders, as the case may be, upon the
final resolution as agreed by NDC and the Stockholder Representative in
writing of the amount of the outstanding claim.
General. Any and all cash dividends or other cash income with respect to the
Stock Escrow shall be paid into and remain in escrow and shall be available
for purposes of adjustments or distributions. Each Stockholder shall have the
right to direct the escrow agent in writing as to the exercise of voting
rights with respect to shares in the Stock Escrow held by the escrow agent on
behalf of such Stockholder, and the escrow agent shall comply with any such
directions if received in a timely manner. In the absence of such directions,
the escrow agent shall not vote any such shares in the Stock Escrow. The
escrow agent shall invest the cash amount, if any, included in the Working
Capital and Indemnification Escrow Amounts as directed by the Stockholder
Representative or the Stockholders, provided that should the Stockholder
Representative or the Stockholders fail to so direct the escrow agent, NDC
shall be authorized to so direct the escrow agent, and, provided further that
such investments shall be limited to (i) direct obligations of the United
States of America, (ii) obligations for which the full faith and credit of the
United States of America is pledged to provide for the payment of principal
and interest, (iii) commercial paper rated of the highest quality by Moody's
or S&P, and (iv) certificates of deposit issued by a commercial bank (which
may be the escrow agent or any affiliate of the escrow agent) whose long-term
debt obligations are rated at least A2 by Moody's or at least A by S&P, in
each case having a maturity not in excess of 90 days, or a money market fund
that invests exclusively in said investments.
THE STOCKHOLDER REPRESENTATIVE
The Stockholder Representative shall mean a committee comprised of Messrs.
Dennis Turner, Handel Evans and Patrick Welsh. Mr. Turner is the Chief
Executive Officer and a director of Source. Mr. Evans is the Chairman of the
Board of Directors of Source. Mr. Welsh is a director of Source and a general
partner of the respective sole general partners of several affiliated private
investment funds, including Welsh, Carson, Anderson & Stowe V, L.P. and Welsh,
Carson, Anderson & Stowe IV, L.P., that are stockholders of Source. The
Stockholder Representative shall have the responsibility and authority to
enforce any adjustment based on the Closing Balance Sheet, the indemnification
provisions of the Merger Agreement, and the terms and conditions of the Escrow
Agreement, all on behalf of the Stockholders.
FRACTIONAL SHARES
Pursuant to the terms of the Merger Agreement, each holder of shares of
Source Common Stock exchanged pursuant to the Merger, who would otherwise have
been entitled to receive a fraction of a share of NDC Common Stock shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of NDC Common Stock multiplied by the closing price
per share of NDC Common Stock as reported on the NYSE on the last trading day
immediately preceding the Effective Time. No such holder will be entitled to
dividends, voting rights, or any other rights as a stockholder in respect of
any fractional shares.
TERMINATION OF STOCK OPTIONS
The Merger Agreement provides that, at the Closing Date, Source shall have
secured the cancellation of all outstanding options and warrants to purchase
shares of Source Common Stock and shall provide to NDC a schedule of the
Option Shares payable to the holders of such options and warrants in
consideration of such cancellation.
EFFECTIVE TIME AND CLOSING DATE
If the Merger Agreement is adopted by the requisite votes of Source
stockholders, and all other required governmental and other consents and
approvals are received, and if the other conditions to the obligations of the
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parties to consummate the Merger are satisfied or waived (as permitted), the
Merger will be consummated and effected on the date and at the time a
Certificate of Merger, reflecting the Merger, becomes effective with the
Secretary of State of the State of Delaware. NDC and Source have mutually
agreed to use their reasonable efforts to cause the Effective Time to occur on
the first business day following the last to occur of: (i) the effective date
(including expiration of any applicable waiting period) of the last required
approval or clearance of any regulatory authority having authority over and
approving or exempting the Merger, (ii) the date on which the stockholders of
Source approve the Merger Agreement, and (iii) the date on which the
stockholders of PMSI approve the Stock Purchase Agreement. Assuming
satisfaction of all conditions to consummation of the Merger, the Merger is
expected to be made effective during the fourth quarter of calendar 1997.
Either NDC or Source may terminate the Merger Agreement if the Merger has not
been consummated by January 31, 1998. The closing of the Merger shall take
place on the date the Effective Time occurs or such other date as the parties
shall agree which NDC and Source anticipate will be not more than five
business days following the Special Meeting. See "--Conditions to
Consummation" and "--Amendment, Waiver, and Termination."
DISTRIBUTION OF NDC CERTIFICATES
Promptly after the Effective Time, NDC and Source shall cause the exchange
agent selected by NDC to mail appropriate transmittal materials to each record
holder of Source Common Stock and Source Preferred Stock for use in effecting
the surrender and cancellation of those certificates in exchange for NDC
Common Stock and/or cash (which shall specify that delivery shall be effected,
and risk of loss and title to the certificates theretofore representing shares
of Source Common Stock and Source Preferred Stock shall pass, only upon proper
delivery of such certificates to the exchange agent by the former stockholders
of Source). SOURCE STOCKHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS. After
the Effective Time, each holder of shares of Source Common Stock and Source
Preferred Stock (excluding shares held by Source or any of its subsidiaries or
by NDC or any of its subsidiaries, and excluding shares as to which
dissenters' rights are perfected) issued and outstanding at the Effective Time
shall surrender the certificate or certificates representing such shares to
the exchange agent, and the certificates thus surrendered will be canceled.
Unless otherwise designated by a Source stockholder on the transmittal letter,
certificates representing shares of NDC Common Stock and/or cash issued or
deliverable to Source stockholders in connection with the Merger will be
issued and delivered to the tendering Source stockholder at the address on
record with Source. NDC shall not be obligated to deliver the consideration to
which any former holder of Source Common Stock and Source Preferred Stock is
entitled until such holder surrenders such holder's certificate or
certificates representing such holder's shares for exchange. The certificate
or certificates so surrendered shall be duly endorsed as the exchange agent
may require. No party shall be liable to a holder of Source Common Stock and
Source Preferred Stock for any property delivered in good faith to a public
official pursuant to any applicable abandoned property law.
After the Effective Time, holders of Source certificates will have no rights
with respect to the shares of Source Common Stock and Source Preferred Stock
represented thereby other than the right to surrender such certificates and
receive in exchange therefor the shares of NDC Common Stock and/or cash to
which such holders are entitled, as described above. In addition, no dividend
or other distribution payable to holders of record of NDC Common Stock will be
paid to the holder of any Source certificates until such holder surrenders
such certificates for exchange as instructed. Subject to applicable law, upon
surrender of the certificates, such holder will receive the certificates
representing the shares of NDC Common Stock and/or cash issuable or
deliverable upon the exchange or conversion of such shares of Source Common
Stock and Source Preferred Stock, all withheld dividends or other
distributions (without interest), and any withheld cash payments (without
interest) to which such stockholder is entitled.
If any certificate for NDC Common Stock is to be issued in a name other than
that in which the Source certificate surrendered for exchange is issued, the
Source certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, and the person requesting such exchange shall affix
any requisite stock transfer tax stamps to the certificates surrendered, shall
provide funds for their purchase, or shall establish to the exchange agent's
satisfaction that such taxes are not payable.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger. This discussion is based on the provisions of the
Code, the United States Department of the Treasury Regulations thereunder and
rulings and court decisions as of the date hereof, all of which are subject to
change, possibly retroactive. The discussion is included for general
information purposes only, applies only to Source stockholders, if any, who
hold their stock as a capital asset, and may not apply to Source stockholders,
if any, who received their stock upon the exercise of employee stock options
or otherwise as compensation or have a special tax status. NDC and Source have
not requested a ruling from the Service and neither party is obtaining a tax
opinion from counsel regarding the qualification of the Merger as a tax-free
reorganization within the meaning of Section 368(a) of the Code.
It is intended that the Merger will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code. In order to so qualify,
various factual matters must be true. Among other things, qualification as a
tax-free reorganization is based on Source holding substantially all of its
properties and substantially all of Sub's properties after the Merger. The
Service takes the position that the "substantially all" requirement will be
satisfied if at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by both Source and
Sub immediately prior to the Merger are held by Source after the Merger. Case
authorities apply somewhat different criteria. The relative values of the
assets exchanged in all of the Source and PMSI transactions is a factor in
determining whether the "substantially all" test has been satisfied. As part
of the transactions contemplated by the Merger Agreement, Source is disposing
of its ownership in Source Europe to PMSI. In connection with the preparation
of a fairness opinion rendered to a special committee of PMSI's Board, PMSI's
investment bankers performed a discounted cash flow analysis of the various
business segments to be sold and acquired by PMSI as contemplated by the Stock
Purchase Agreement and the Source Divestiture Agreement, including such an
analysis of certain projections of the cash flows of Source Europe over the
next five years prepared by Source management. The projections assumed receipt
of all required regulatory approvals, the availability of adequate capital
resources to complete development of Source Europe's products and services and
the successful introduction of such products in various national markets. The
analysis assumed a sale of Source Europe at the end of the projected period at
an assumed exit multiple and then discounted the cash flows to present value
at an assumed discount factor. Utilizing this methodology results in a mid-
range value for Source Europe of approximately $29 million. NDC and Source
believe that this value is substantially in excess of the value of Source
Europe at the time of disposition. In addition, NDC and Source believe that
the negotiated terms of the transactions are the proper basis for analyzing
the "substantially all" test. However, there can be no assurance that the
Internal Revenue would not adopt a different valuation methodology or
otherwise challenge compliance with the "substantially all" test. If Source
does not hold substantially all of its assets, as well as substantially all of
Sub's assets immediately after the Merger, or the Merger failed to qualify as
a tax free reorganization for any other reason, then the exchange of Source
Common Stock for NDC Common Stock will be a taxable sale of stock and Source
stockholders will recognize gain or loss on the transaction. If the Merger is
treated as a taxable sale of stock, Source stockholders will be taxed in the
same manner as is described below.
If the Merger is treated as a reorganization as defined in Section 368(a) of
the Code, the following will be the material federal income tax consequences
to the Source stockholders:
(i) No gain or loss will be recognized for federal income tax purposes by
Source stockholders upon the exchange of their shares of Source Common
Stock for shares of NDC Common Stock.
(ii) The basis of the shares of NDC Common Stock to be received by Source
stockholders will be the same as the basis of the Source Common Stock
surrendered in exchange therefor.
(iii) The holding period of the NDC Common Stock to be received by Source
stockholders will include the period during which the shares of Source
Capital Stock surrendered in exchange therefor had been held, provided such
shares were held by such stockholders as a capital asset at the Effective
Time.
(iv) The payment of cash in lieu of fractional shares of NDC Common Stock
will be treated as if the fractional shares were issued as part of the
exchange and then redeemed by NDC. These cash payments
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will be treated as having been received as distributions in full payment in
exchange for the fractional shares of NDC Common Stock redeemed as provided
in Section 302(a) of the Code. Generally, any gain or loss recognized upon
such exchange will be capital gain or loss, provided the fractional share
would constitute a capital asset in the hands of the exchanging
stockholder.
(v) The payment of cash in respect of shares of Source Capital Stock as
to which dissenters' rights are perfected will be subject to capital gains
(loss) treatment.
Holders of Source Preferred Stock who receive solely cash in exchange for
their stock will be treated as having received such payments as distributions
in redemption of their shares of such stock subject to the provisions and
limitations of Section 302 of the Code. After such distribution, if a former
Source stockholder neither owns capital stock nor is deemed to own capital
stock under constructive ownership rules, the redemption will be a complete
termination of interest and will be treated as a distribution in full payment
in exchange for shares of such stock. Accordingly, such stockholder will
recognize gain or loss measured by the difference between the amount of cash
received and such stockholder's adjusted basis in the stock surrendered.
Upon the sale or exchange of NDC Common Stock, a holder of such stock
generally will recognize capital gain or loss equal to the difference between
the amount of cash and the fair market value of any property received upon the
sale or exchange and such holder's adjusted tax basis in the NDC Common Stock.
Under recently enacted legislation, long-term capital gains recognized by
certain non-corporate holders of NDC Common Stock generally will be subject to
a maximum federal income tax rate of 20% if the shares sold or exchanged are
held for more than 18 months, and to a maximum federal income tax rate of 28%
if such shares are held for more than one year but are not held for more than
18 months. Tax consequences to dealers in NDC Common Stock, non-United States
holders of NDC Common Stock or others who have a special tax status or to
persons who received their shares through the exercise of employee stock
options or otherwise as compensation may be different and such persons should
consult their tax advisors as to the tax consequences of a sale or exchange of
NDC Common Stock.
IN CONSIDERING THIS TRANSACTION STOCKHOLDERS SHOULD UNDERSTAND WHILE THE
COMPANY AND SOURCE BELIEVE THIS TRANSACTION WILL BE TREATED AS A TAX FREE
REORGANIZATION THERE IS NO ASSURANCE THAT THIS TRANSACTION WILL BE SO TREATED.
IT MAY BE TREATED AS A TAXABLE SALE OF STOCK RESULTING IN IMMEDIATE TAX
LIABILITY. EACH HOLDER OF SOURCE CAPITAL STOCK IS URGED TO CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH
HOLDER OF THE MERGER (INCLUDING THE APPLICATION AND EFFECT OF FOREIGN, STATE
AND LOCAL INCOME AND OTHER TAX LAWS).
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Source will be the surviving corporation resulting from the Merger and will
become a wholly-owned subsidiary of NDC. The Merger Agreement provides that
from and after the Effective Time, the Board of Directors of Source shall
consist of the directors of Sub immediately prior to the Effective Time. The
Merger Agreement further provides that the officers of Source in office
immediately prior to the Effective Time, together with such additional persons
as may be elected, shall serve as the officers of Source from and after the
Effective Time in accordance with the bylaws of Source. It is not expected
that consummation of the Merger will result in any change in the Board of
Directors or management of NDC or any of its other subsidiaries.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Other than as described herein, no director or executive officer of NDC or
Source, and no associate of any such person, has any substantial interest,
direct or indirect, in the Merger, other than an interest arising from the
ownership of Source Capital Stock, in which case the director or officer
receives no extra or special benefit not shared on a pro rata basis by all
other holders of Source Capital Stock. See "Source Informatics, Inc.--Security
Ownership of Directors, Executive Officers and Principal Securityholders of
Source."
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Certain members of Source's management and Board of Directors may be deemed
to have interests in the Merger in addition to their interests as stockholders
of Source generally. In each case, the Board of Directors of Source either was
aware of these factors or, with respect to interests that arose subsequent to
the Merger Agreement, was aware of their potential, and considered them, among
other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
Indemnification. The Merger Agreement provides that NDC shall for a period
of six years after the Effective Time indemnify the present and former
directors and officers of Source or any of its subsidiaries to the full extent
permitted under the Delaware General Corporation Law (the "DGCL") and by
Source's Certificate of Incorporation and Bylaws, as in effect on the date of
the Merger Agreement, with respect to matters occurring at or prior to the
Effective Time except that as a condition to the consummation of the Merger,
each director and officer of Source shall execute and deliver a waiver of all
claims under such indemnification provisions arising out of the Divestiture
and the allocation of the total consideration between Source with respect to
the Merger and PMSI with respect to the Stock Purchase. NDC shall use its
reasonable efforts to maintain Source's existing directors' and officers'
liability insurance policy (or a policy providing at least comparable
coverage) for a period of three years after the Effective Time of the Merger;
provided, that NDC shall not be obligated to make aggregate premium payments
in respect of such policy which exceed, for the portion relating to Source's
directors and officers, 150% of the annual premium payments on Source's
current policy. Prior to the Closing Date, NDC shall provide Source with a
third-party estimate of the costs associated with maintaining such policies,
which amount shall constitute a liability of Source and shall be included as a
Transaction Expense.
Change In Control And Severance Arrangements. Handel E. Evans and Dennis
M.J. Turner, directors and the Chairman of the Board and the Chief Executive
Officer, respectively, of Source, are also directors and the Chairman of the
Board and the Chief Executive Officer, respectively, of PMSI. In addition,
Patrick J. Welsh, a director of Source, is also a director of PMSI and is a
general partner of the general partner of a significant stockholder of PMSI
("WCAS") and, along with certain of its affiliated entities, is also the
largest stockholder of Source.
Assuming consummation of the Stock Purchase, Messrs. Evans and Turner are
each to receive annual bonuses from PMSI of $570,000. In determining these
bonuses, PMSI's Organization and Compensation Committee considered the
successful completion of the Stock Purchase, the Divestiture and the Merger.
At the consummation of the Merger, the employment by Source of Messrs. Evans
and Turner will be terminated and they will each receive termination payments
(to be paid jointly by PMSI and Source) under their respective employment
agreements with Source aggregating $1.2 million and $880,000, respectively,
after which Mr. Evans will enter into an employment agreement with PMSI as its
full-time Chairman of the Board and Mr. Turner will enter into an employment
agreement with PMSI as its full-time Chief Executive Officer. In the event
that either Source or PMSI do not have sufficient cash available to consummate
the Stock Purchase and the Merger, including related expenses, Messrs. Evans
and Turner have agreed to receive partial payment of their respective
termination payments in the form of registered NDC Common Stock. In addition,
the annual bonuses of four other executives of Source, including Warren J.
Hauser, Vice President and Secretary of PMSI, aggregating $565,000, will
reflect the successful completion of the Stock Purchase.
Mr. Evans, and trusts for the benefit of his family, currently own an
aggregate 247,856 shares of Source Common Stock (representing approximately
3.6% of the Source Capital Stock outstanding and entitled to vote on the
Merger) and options to purchase an additional 201,250 shares of Source Common
Stock, all of which are currently exercisable or become exercisable upon
consummation of the Merger. In addition, Mr. Evans beneficially owns an
aggregate 134,652 shares of PMSI common stock and options to purchase an
additional 300,000 shares of PMSI common stock, 250,000 of which are currently
exercisable.
Mr. Turner, and trusts for the benefit of his family, currently own an
aggregate 242,584 shares of Source Common Stock (representing approximately
3.5% of the Source Capital Stock outstanding and entitled to vote on the
Merger) and options to purchase an additional 151,250 shares of Source Common
Stock, all of which are currently exercisable or become exercisable upon
consummation of the Merger. In addition, Mr. Turner
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beneficially owns an aggregate 133,879 shares of PMSI common stock and options
to purchase an additional 300,000 shares of PMSI common stock, 250,000 of
which are currently exercisable.
Mr. Welsh owns 26,550 shares of Source Common Stock (less than 1% of the
Source Capital Stock outstanding and entitled to vote on the Merger) and may
be deemed to own the aggregate 2,544,147 shares of Source Common Stock (or
approximately 37.19% of the Source Capital Stock outstanding and entitled to
vote on the Merger) owned by WCAS and certain of its affiliated entities. Mr.
Welsh also owns options to purchase an aggregate 7,500 shares of Source Common
Stock all of which will become exercisable upon consummation of the Merger. In
addition, Mr. Welsh owns 15,733 shares of PMSI common stock and may be deemed
to beneficially own an aggregate 746,315 shares of PMSI common stock, owned by
WCAS and related entitles. Mr. Welsh also owns options to purchase an
aggregate 24,000 shares of PMSI common stock, 16,000 of which are currently
exercisable.
Post-Acquisition Compensation and Benefits. The Merger Agreement provides
that, after the Effective Time, NDC will provide generally to officers and
employees of Source and its subsidiaries, employee benefits under employee
benefit plans, on terms and conditions that, when taken as a whole, are
substantially similar to those currently provided by NDC and its subsidiaries
to their similarly situated officers and employees. For purposes of
participation and vesting and benefit accrual (other than benefit accrual
under retirement plans) under such employee benefit plans, service with Source
or its subsidiaries prior to the Effective Time will be treated as service
with NDC or its subsidiaries. Subject to certain exceptions set forth in the
Merger Agreement, NDC will honor all employment, severance, consulting and
other compensation contracts previously disclosed to NDC between Source or any
of its subsidiaries and any current or former director, officer or employee,
and all provisions for vested amounts earned or accrued through the Effective
Time under Source's benefit plans.
CONDITIONS TO CONSUMMATION
The obligations of Source and NDC to consummate the Merger are subject to
the satisfaction or waiver (to the extent permitted) of the following
conditions: (i) the stockholders of Source shall have adopted the Merger
Agreement and the consummation of the transactions contemplated thereby by the
requisite votes; (ii) the required regulatory approvals and clearances
described under "--Regulatory Approvals" shall have been received and shall be
in full force and effect with all waiting periods required by law having
expired, and no such regulatory approval shall be conditioned or restricted in
a manner which would, in the reasonable judgment of the Board of Directors of
NDC, so materially adversely affect the economic or business benefits of the
transactions contemplated by the Merger Agreement that had NDC known of such
condition it would not, in its reasonable judgment, have entered into the
Merger Agreement; (iii) each party shall have received any required consents
of third parties; (iv) the absence of any law or order or any action taken by
any court, governmental, or regulatory authority prohibiting, restricting, or
making illegal the consummation of the Merger; (v) the Registration Statement
of which this Proxy Statement/Prospectus is a part shall have been declared
effective by the Commission and shall not be subject to a stop order or any
threatened stop order, and the shares of NDC Common Stock issuable in
connection with the Merger shall have been qualified, registered or otherwise
approved for exchange under the securities laws of the various states in which
such qualification, registration or approval is required; (vi) the shares of
NDC Common Stock issuable pursuant to the Merger shall have been approved for
listing on the NYSE, subject to effective notice of issuance; (vii) the
accuracy, as of the date of the Merger Agreement and as of the Effective Time,
of the representations and warranties of the other party as set forth in the
Merger Agreement; (viii) prior to the Effective Time, the other party shall
have performed in all material respects all of the agreements, covenants, acts
and undertakings to be performed by it pursuant to the Merger Agreement; and
(ix) each party shall have received customary closing documents, including,
without limitation, an opinion of the other party's counsel, dated the closing
date, as to certain matters.
In addition, the obligations of NDC to consummate the Merger are subject to
the satisfaction or waiver (to the extent permitted) of the following further
conditions: (i) each of Messrs. Brown, Campbell, Douglass, McAferty,
Silverberg, Strimbu, and Weintraub, and Ms. Vaughn, all executive officers of
Source who shall continue in agreed capacities following the Merger, shall
have executed and delivered an employment
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agreement on terms substantially consistent with those set forth in an exhibit
to the Merger Agreement, (ii) Messrs. Evans and Turner shall have executed and
delivered to NDC a noncompetition agreement substantially in form attached to
the Merger Agreement, (iii) the Stock Purchase shall have been consummated
substantially simultaneously with the Effective Time; (iv) the Divestiture
shall have been consummated; (v) less than 10% of the holders of Source
Preferred Stock or Source Common Stock shall have perfected their dissenter's
rights, (vi) each of the directors and officers of Source shall have executed
and delivered the indemnification waivers discussed above under "--
Indemnification," (vii) Source shall have been released from any and all
obligations under the contracts associated with Source's European business
which is part of the Divestiture, (viii) the cancellation by Source of all
outstanding options and warrants; and (ix) the following related agreements
shall have been executed and delivered:
(a) Source European License Agreement--provides for a license by Source
to PMSI the rights to use certain technology and the Source trademark in
certain European countries;
(b) European Services Agreement--Source and NDC will provide certain
transitional services to PMSI to support the European operations Source is
conveying to PMSI in the Divestiture;
(c) Lease Assignment/Subleases--various agreements transferring leases to
Source for office space it currently utilizes and providing a sublease of
certain portions of such space to Walsh International Inc.; and
(d) Scott-Levin Services Agreement--provides for the transfer of data and
services between PMSI Scott-Levin Inc., a subsidiary of PMSI, and Source.
No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. As of the date of this Proxy Statement/Prospectus, the parties have no
reason to believe that any of the conditions set forth above will not be
satisfied.
The conditions to consummation of the Merger may be waived, in whole or in
part, to the extent permissible under applicable law, by the party for whose
benefit the condition has been imposed, without the approval of the Source
stockholders. See "--Amendment, Waiver, and Termination."
REGULATORY APPROVALS
The obligations of NDC and Source to perform under the Merger Agreement and
consummate the Merger are subject to the consent of, filings and registrations
with, and notifications to, all regulatory authorities required for
consummation of the Merger having been obtained or made and being in full
force and effect and the expiration of all waiting periods required by law.
Furthermore, no consent from any regulatory authority which is necessary to
consummate the Merger shall be conditioned or restricted in a manner which in
the reasonable judgment of the Board of Directors of NDC would so materially
adversely impact the economic or business benefits of the Merger that, had
such condition or requirement been known, NDC would not, in its reasonable
judgment, have entered into the Merger Agreement.
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the applicable waiting period has expired or been terminated. NDC and Source
filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on October 7, 1997. The statutory waiting period under the
HSR Act expired on November 7, 1997. At any time before or after consummation
of the Merger, the Antitrust Division or the FTC could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of NDC or Source. At any time before or
after the Effective Time, and notwithstanding that the waiting period under
the HSR Act has expired, any state could take such action under the antitrust
laws as it deems necessary or desirable in the public interest. Such action
could include seeking to enjoin the
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consummation for the Merger or seeking divestiture of substantial assets of
NDC or Source. Private parties may also seek to take legal action under the
antitrust laws under certain circumstances.
NDC and Source believe that the Merger can be effected in compliance with
federal and state antitrust laws; however, there can be no assurance that a
challenge to the consummation of the Merger on antitrust grounds will not be
made or that, if such a challenge were made, NDC and Source would prevail or
would not be required to accept certain adverse conditions in order to
consummate the Merger.
AMENDMENT, WAIVER AND TERMINATION
To the extent permitted by law, Source and NDC, with the approval of their
respective Boards of Directors, may amend the Merger Agreement by written
agreement at any time without the approval of the stockholders of Source,
provided that after the adoption of the Merger Agreement by the Stockholders,
no amendment can be made that, pursuant to Section 251 of the DGCL, requires
further approval by the Stockholders.
Prior to or at the Effective Time, either Source or NDC, acting through its
respective Board of Directors, chief executive officer or other authorized
officer, may waive any default in the performance of any term of the Merger
Agreement by the other party, may waive or extend the time for the fulfillment
by the other party of any of its obligations under the Merger Agreement, and
may waive any of the conditions precedent to the Merger Agreement, except any
condition that, if not satisfied, would result in the violation of an
applicable law or governmental regulation.
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time (a) by the mutual consent of the Boards of
Directors of Source and NDC (b) in the event of any inaccuracy of any
representation or warranty of the other party contained in the Merger
Agreement which cannot be or has not been cured within 30 days after giving
written notice to the breaching party of such inaccuracy and which inaccuracy
would provide the terminating party the ability to refuse to consummate the
Merger under the applicable standards set forth in the Merger Agreement
(provided that the terminating party is not then in breach of any
representation or warranty contained in the Merger Agreement under the
applicable standards set forth in the Merger Agreement or in material breach
of any covenant or other agreement contained in the Merger Agreement), (c) in
the event of a material breach by the other party of any covenant or agreement
contained in the Merger Agreement which cannot be or has not been cured within
30 days after the giving of written notice to the breaching party of such
breach (provided that the terminating party is not then in breach of any
representation or warranty contained in the Merger Agreement under the
applicable standards set forth in the Merger Agreement or in material breach
of any covenant or other agreement contained in the Merger Agreement), (d) if
any approval of any regulatory authority required for consummation of the
Merger and the other transactions contemplated by the Merger Agreement has
been denied by final nonappealable action, or if any action taken by such
authority is not appealed within the time limit for appeal (provided that the
terminating party is not then in breach of any representation or warranty
contained in the Merger Agreement under the applicable standards set forth in
the Merger Agreement or in material breach of any covenant or other agreement
contained in the Merger Agreement), (e) the stockholders of Source fail to
vote their approval of the matters submitted for the approval by such
stockholders at the Special Meeting (provided that the terminating party is
not then in breach of any representation or warranty contained in the Merger
Agreement under the applicable standards set forth in the Merger Agreement or
in material breach of any covenant or other agreement contained in the Merger
Agreement), (f) if the Merger is not consummated by January 31, 1998, provided
that the failure to consummate is not due to the breach by the party electing
to terminate, or (g) if any of the conditions precedent to the obligations of
such party to consummate the Merger cannot be satisfied, fulfilled, or waived
by the appropriate party by January 31, 1998 (provided that the terminating
party is not then in breach of any representation or warranty contained in the
Merger Agreement under the applicable standards set forth in the Merger
Agreement or in material breach of any covenant or other agreement contained
in the Merger Agreement). See "--Expenses and Fees."
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In addition, NDC may unilaterally terminate the Merger Agreement if the
Source Board of Directors fails to reapprove or resolves not to affirm the
Merger or recommends entering into a transaction other than the Merger
involving a merger, share exchange, consolidation or transfer of substantially
all of Source's assets. Furthermore, Source may unilaterally terminate the
Merger Agreement in the event that the Average Closing Price of the shares of
NDC Common Stock is less than the Lower Threshold Amount as of the
Determination Date, subject to NDC's right to revise the Common Exchange
Ratios based on the Lower Threshold Price. See "--Common Exchange Ratio
Adjustment."
CONDUCT OF BUSINESS PENDING THE MERGER
Source has agreed pursuant to the Merger Agreement, unless the prior consent
of NDC is obtained, and except as otherwise contemplated by the Merger
Agreement, to operate its business only in the ordinary course, to preserve
its business organizations and assets and to maintain its rights and
franchises and to take no action that would materially adversely affect either
the ability of either party to perform its covenants and agreements under the
Merger Agreement or the ability of either party to obtain any consents or
approvals pursuant to any contract, law, order or permit that are required for
the transactions contemplated by the Merger Agreement. Source also agreed to
(i) complete the Divestiture, (ii) amend the Designation to provide that the
holders of Source Preferred Stock shall receive the Preferred Stock
Consideration upon consummation of the Merger, (iii) terminate certain
employment agreements and an executive pension plan, (iv) transfer, to the
extent not already accomplished, all trademark registrations for the Source
trademark into the name of Source, and (v) satisfy all indebtedness or other
obligations between any of the subsidiaries involved in the Divestiture or
PMSI or its subsidiaries on the one hand and Source or its subsidiaries on the
other.
In addition, the Merger Agreement contains certain other restrictions
applicable to the conduct of the business of Source prior to consummation of
the Merger, as described below.
Source has agreed pursuant to the Merger Agreement not to take certain
actions relating to the operation of its business pending consummation of the
Merger without the prior approval of NDC. Those actions generally include,
without limitation: (i) amending its Certificate of Incorporation or Bylaws;
(ii) subject to certain exceptions, incurring any additional debt or other
obligation for borrowed money on any asset of Source; (iii) acquiring or
exchanging any shares of Source Capital Stock or paying any dividend or other
distribution in respect of Source Capital Stock; (iv) subject to certain
exceptions, issuing, selling or pledging additional shares of any Source
Capital Stock, any rights to acquire any such stock or any security
convertible into such stock, except pursuant to the exercise of outstanding
stock options; (v) adjusting or reclassifying any of Source Capital Stock;
(vi) subject to certain exceptions, purchasing any securities of or acquiring
control over any other entity; (vii) granting any increase in compensation or
benefits to its employees or officers (except as previously disclosed to NDC
or as required by law), paying any bonus (except as previously disclosed to
NDC or in accordance with any existing program or plan), entering into or
amending any severance agreements with its officers or granting any increase
in compensation or other benefits to any of its directors (except as
previously disclosed to NDC); (viii) entering into or amending any employment
contract that it does not have the unconditional right to terminate without
certain liability, except as previously disclosed to NDC and except for any
amendment required by law; (ix) adopting any new benefit plan or program or
materially changing any existing plan or program; (x) making any significant
changes in tax or accounting methods, except for any change required by law;
(xi) commencing any litigation other than in accordance with past practice or
settling any litigation for material money damages; or (xii) materially
amending or terminating any material contracts including, without limitation,
the Source Divestiture Agreement.
In addition, Source has agreed not to solicit, directly or indirectly, any
acquisition proposal from any other person or entity. Source also has agreed
not to negotiate with respect to any such proposal, to provide information to
any party making such a proposal or to enter into any agreement with respect
to any such proposal, except in compliance with its legal obligations or the
fiduciary obligations of its Board of Directors. Source has also agreed to
cause its advisors and other representatives not to engage in any of the
foregoing activities.
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Pursuant to the Merger Agreement, NDC has agreed that, prior to the
Effective Time, it will continue to conduct its business and the business of
its subsidiaries in a manner designed in its reasonable judgment to enhance
the long-term value of the NDC Common Stock and the business prospects of NDC.
NDC further agrees that it will take no action which would materially
adversely affect either the ability of either NDC or Source to obtain the
consents required by the Merger Agreement or the ability of either NDC or
Source to perform its covenants and agreements contained in the Merger
Agreement.
EXPENSES AND FEES
The Merger Agreement provides that each party shall be responsible for its
own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Merger Agreement, except
that each of NDC and Source shall pay one-half of the filing fees payable in
connection with the HSR filings, and NDC shall pay all costs associated with
the Registration Statement and this Proxy Statement/Prospectus and printing
costs incurred in connection with the Registration Statement and this Proxy
Statement/Prospectus.
If the Merger Agreement is terminated because (i) Source shall fail to call
the Special Meeting, (ii) the stockholders of Source fail to approve the
Merger, (iii) the Board of Directors of Source, to the exclusion of a
competing proposal, shall fail to reaffirm its approval of the Merger or shall
have affirmed, recommended or authorized a Competing Proposal, or (iv) Source
has entered a binding agreement with respect to a Competing Proposal, then
Source shall promptly pay all of the NDC Expenses.
In addition to the foregoing, if the Merger Agreement is terminated because
(i) Source fails to call the Special Meeting, or (ii) the stockholders of
Source fail to approve the Merger Agreement, then Source shall pay to NDC the
NDC Expenses plus $3,000,000.
Further, if within twelve months following the termination of this
Agreement: (i) by NDC because Source's Board of Directors shall have failed to
reaffirm its approval of the Merger or shall have affirmed, recommended or
authorized the entering into any other merger, share exchange, consolidation
or transfer of substantially all of the assets of Source; or, (ii) by Source
because it has entered into negotiations with a third party relating to the
foregoing and pursuant to the continuing fiduciary duties of Source's Board of
Directors as required by applicable law, Source has entered into a binding
agreement with such third party; any third-party shall acquire, merge with,
combine with, purchase substantially all of the assets of, or engage in any
other business combination with, or purchase any equity securities involving
an acquisition of 50% or more of the voting stock of Source, or enter into any
binding agreement to do any of the foregoing, such third-party that is a party
to the business combination shall pay to NDC, as a condition to consummation
of such business combination, an amount in cash equal to $3,000,000.
ACCOUNTING TREATMENT
The Merger is anticipated to be accounted for under the "purchase" method of
accounting, pursuant to which the assets and liabilities of Source will be
recorded at their respective fair values and added to those of NDC as of the
Effective Time. Financial Statements of NDC issued after the Effective Time
will reflect such values and will not be restated retroactively to reflect the
historical financial position or results of operations of Source. See
"Summary."
VOTING AGREEMENT
NDC and the Preferred Stockholders have entered into the Voting Agreement
which provides that the Preferred Stockholders will vote such Preferred
Stockholder's shares of Source Preferred Stock in favor of the Merger, the
execution and delivery by Source of the Merger Agreement and the approval of
the terms thereof and each of the other transactions contemplated by the
Merger Agreement, provided that the Merger Agreement has not been amended or
waived so as to in any manner (i) affect the rights of the Preferred
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Stockholders or their representatives or increase the Preferred Stockholders'
obligations thereunder or (ii) increase the consideration payable to the
holders of Source Common Stock, without the prior consent of the Preferred
Stockholders.
The Voting Agreement also provides that the Preferred Stockholders shall
vote (or cause to be voted) such Preferred Stockholder's shares of Source
Preferred Stock against (i) any merger agreement or merger (other than the
Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by Source or (ii) any amendment of Source's Certificate of
Incorporation or Bylaws or other proposal or transaction involving Source or
any of its subsidiaries which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement. Each Preferred Stockholder has also agreed that such Stockholder
shall not (i) transfer, or consent to any transfer of, any or all of the such
stockholder's shares or any interest therein, except pursuant to the Merger;
(ii) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of such shares or any interest therein,
(iii) grant any proxy, power of attorney or other authorization in or with
respect to such shares, except for the Voting Agreement, or (iv) deposit such
shares into a voting trust or enter into a voting agreement or arrangement
with respect to such shares, subject to certain limited exceptions.
The Voting Agreement will terminate upon the earlier of the Effective Time,
the date upon which the Merger Agreement is terminated in accordance with its
terms, or December 15, 1997.
APPRAISAL RIGHTS
The holders of Source Capital Stock are entitled to appraisal rights under
Section 262 of the Delaware General Corporation Law ("Section 262").
If the Merger is consummated, holders of Source Capital Stock who wish to
exercise their appraisal rights will be entitled to have the "fair value" of
their shares of Source Capital Stock at the Effective Time (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
judicially determined and paid to them in cash, together with interest, if
any, by complying with the provisions of Section 262.
Stockholders of record who desire to exercise their appraisal rights must
satisfy all of the following conditions. A written demand for appraisal of
their Source Capital Stock must be delivered to Source before the taking of
the vote of the Source stockholders on adoption of the Merger Agreement. Such
demand will be sufficient if it reasonably informs Source of the stockholder's
identity and that the stockholder intends thereby to demand appraisal of his
shares. This written demand for appraisal of shares must be in addition to and
separate from voting against, abstaining from voting, or failing to vote on
adoption of the Merger Agreement. Voting against, abstaining from voting, or
failing to vote on adoption of the Merger Agreement will not constitute a
demand for appraisal within the meaning of Section 262.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for adoption of the Merger Agreement. Voting for adoption of the
Merger Agreement, or delivering a proxy in connection with the Special Meeting
(unless the proxy specifies a vote against, or abstaining from voting on,
adoption of the Merger Agreement), will constitute a waiver of a stockholder's
right of appraisal and will nullify any written demand for appraisal submitted
by the stockholder.
A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on such stockholder's
Source Capital Stock certificates. If the Source Capital Stock is owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
such demand must be executed by the fiduciary. If the Source Capital Stock is
owned of record by more than one person, as in a joint tenancy in common, such
demand must be executed by all joint owners. An authorized agent, including an
agent for two or more joint owners, may execute the demand for appraisal for a
stockholder of record; however, the
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agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, he is acting as agent for the record owner.
A record owner, such as a broker, who holds Source Capital Stock as a
nominee for others may exercise appraisal rights with respect to the shares
held for all or less than all beneficial owners of shares as to which the
holder is the record owner. In such case, the written demand must set forth
the number of shares covered by such demand. Where the number of shares is not
expressly stated, the demand will be presumed to cover all shares of Source
Capital Stock outstanding in the name of such record owner.
Stockholders who elect to exercise appraisal rights should mail or deliver
their written demands to: Source Informatics, Inc., 45 Rockefeller Plaza,
Suite 912, New York, New York 10111 Attention: Warren Hauser, General Counsel.
The written demand for appraisal should specify the stockholder's name and
mailing address, the number of shares of Source Common Stock and Source
Preferred Stock owned, and state that the stockholder is thereby demanding
appraisal. Within ten days after the Effective Time, Source must provide
notice of the Effective Time to all stockholders who have complied with
Section 262 and have not voted for adoption of the Merger Agreement.
Within 120 days after the Effective Time, either Source or any stockholder
who has complied with the required conditions of subsections (a) and (d) of
Section 262 and who is otherwise entitled to appraisal rights may file a
petition in the Delaware Court of Chancery demanding a determination of the
fair value of shares of the dissenting stockholders. If a petition for an
appraisal is timely filed, after a hearing on such petition, the Court of
Chancery will determine which stockholders are entitled to appraisal rights
and will appraise the shares of Source Capital Stock owned by such
stockholders, determining the fair value of such shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining fair value, the court is to
take into account all relevant factors. In Weinberger v. UOP, Inc., et al,
decided February 1, 1983, the Delaware Supreme Court expanded the
considerations that could be considered in determining fair value in an
appraisal proceeding, stating that "... proof of value by any techniques or
methods, which are generally considered acceptable in the financial community
and otherwise admissible in court ..." should be considered, and that
". . .[f]air price obviously requires consideration of all relevant factors
involving the value of a company. . .". The Delaware Supreme Court stated that
in making this determination of fair value the court must consider
". . .market value, asset value, dividends, earnings prospects, the nature of
the enterprise and any other facts which were known or which could be
ascertained as of the date of merger and which throw any light on future
prospects of the merged corporation. . .". The court further stated that
". . .elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and note the
product of speculation, may be considered. . .". However, the court noted that
Section 262 provides that fair value is to be determined ". . .exclusive of
any element of value arising from the accomplishment or expectation of the
merger. . .".
At the hearing on such petition filed in the Court of Chancery, the court
will determine the stockholders who have complied with Section 262 and who
have become entitled to appraisal rights. The court may require dissenting
stockholders to submit their stock certificates to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings. Failure of
a dissenting stockholder to submit his certificates may result in the
dismissal of such stockholder's appraisal proceedings.
Stockholders considering seeking appraisal should have in mind that the fair
value of their shares determined under Section 262 could be more than, the
same as, or less than the consideration they are entitled to receive pursuant
to the Merger Agreement if they do not seek appraisal of their shares and that
investment banking opinions as to fairness from a financial point of view are
not necessarily opinions as to fair value under Section 262. The cost of the
appraisal proceeding may be determined by the Court of Chancery and taxed
against the parties as the court deems equitable in the circumstances. Upon
application of a dissenting stockholder, the court may order that all or a
portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including, without limitation, reasonable
attorneys' fees and the fees and expenses of
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experts, be charged pro rata against the value of all shares of Source Capital
Stock entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Effective Time, be entitled to vote for any purpose
the shares of Source Capital Stock subject to such demand or to receive
payment of dividends or other distributions, if any, on such shares, except
for dividends or distributions payable to stockholders of record as of a date
prior to the Effective Time.
At any time within 60 days after the Effective Time, any former holder of
Source Common Stock will have the right to withdraw a demand for appraisal and
to accept the consideration offered in the Merger Agreement; after this
period, such holder may withdraw his demand for appraisal only with the
consent of NDC. If no petition for appraisal is filed with the Court of
Chancery within 120 days after the Effective Time, stockholders' rights to
appraisal shall cease and all stockholders will be entitled to receive the
consideration provided in the Merger Agreement. Inasmuch as NDC has no
obligation to file such a petition, and has no present intention to do so, any
stockholder who desires such a petition to be filed is advised to file it on a
timely basis. However, no petition timely filed in the Court of Chancery
demanding appraisal will be dismissed as to any stockholder without the
approval of the court, and such approval may be conditioned upon such terms as
the court deems just.
Within 120 days after the Effective Time of the Merger, any stockholder who
has complied with subsections (a) and (d) of Section 262 is entitled, upon
written request, to receive from Source a statement setting forth the
aggregate number of shares not voted in favor of the Merger and the aggregate
number of holders of shares who have demanded appraisal. Such written
statement shall be mailed to such stockholder within ten days after such
request is received by Source or within ten days of the expiration of the
period for delivery of demand for appraisal under Section 262, whichever is
later.
THE FOREGOING IS ONLY A SUMMARY OF THE RIGHTS OF A DISSENTING HOLDER OF
SOURCE CAPITAL STOCK. ANY HOLDER OF SOURCE CAPITAL STOCK WHO INTENDS TO
DISSENT SHOULD CAREFULLY REVIEW THE TEXT OF THE DELAWARE STATUTORY LAW SET
FORTH IN ANNEX B TO THIS PROXY STATEMENT/PROSPECTUS AND SHOULD ALSO CONSULT
WITH HIS ATTORNEY. THE FAILURE OF A SOURCE STOCKHOLDER TO FOLLOW PRECISELY THE
PROCEDURES SUMMARIZED ABOVE AND SET FORTH IN ANNEX B TO THIS PROXY
STATEMENT/PROSPECTUS, MAY RESULT IN LOSS OF APPRAISAL RIGHTS. NO FURTHER
NOTICE OF THE EVENTS GIVING RISE TO APPRAISAL RIGHTS OR ANY STEPS ASSOCIATED
THEREWITH WILL BE FURNISHED TO HOLDERS OF SOURCE CAPITAL STOCK, EXCEPT AS
INDICATED ABOVE OR OTHERWISE REQUIRED BY LAW.
In general, any dissenting stockholder who perfects his right to be paid the
"fair value" of his Source Capital Stock in cash will recognize taxable gain
or loss for federal income tax purposes upon receipt of such cash. See
"Certain Federal Income Tax Consequences."
RESALES OF NDC COMMON STOCK
The shares of NDC Common Stock issued in connection with the Merger will be
freely transferable under the Securities Act, except for shares issued to any
stockholder who may be deemed to be an "affiliate" (generally including,
without limitation, directors, certain executive officers, and beneficial
owners of 10% or more of any class of capital stock) of Source for purposes of
Rule 145 under the Securities Act as of the date of the Special Meeting. Such
affiliates may not sell their shares of NDC Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act or other applicable exemption from the
registration requirements of the Securities Act. NDC may place restrictive
legends on certificates representing NDC Common Stock issued to all persons
who are deemed to be "affiliates" of Source under Rule 145. In addition,
Source has agreed to use its reasonable efforts to cause each person or entity
that is an "affiliate" to enter into a written agreement in substantially the
form attached to the Merger Agreement relating to such restrictions on sale or
other transfer. This Proxy Statement/Prospectus does not cover resales of NDC
Common Stock received by any person who may be deemed to be an affiliate of
Source.
47
<PAGE>
SOURCE INFORMATICS INC.
BUSINESS
Source is a leading provider of proprietary health care information,
technology and consulting services, primarily to the pharmaceutical and retail
pharmacy markets. Source's services enable clients to better understand
individual prescriber, payer, consumer, pharmaceutical manufacturer, pharmacy
benefit manager and retail pharmacy behavior in order to compete more
effectively in the market place. Source typically enters into significant,
long-term relationships with its clients, providing integrated services to
executives in the sales, marketing, market research and information technology
areas of these organizations.
Source provides a broad array of information, data mining and integrated
marketing decision-making tools. The Source database is a repository of
intelligence on managed care organizations, prescribers, retailers,
prescriptions and non-personalized patient data. The principal database (the
"Alpha Database") contains information on 1.6 billion prescriptions dispensed
by retail and mail order pharmacies over the previous 12 months. Over 90% of
the prescriptions in the Alpha Database are matched to over 1,000,000
prescribers, linking them at the individual script level. Source jointly
exploits its databases in an operating venture with Pharmaceutical Marketing
Services Inc. ("PMSI"). Simultaneously with the consummation of the Merger,
NDC will acquire all of PMSI's interest in such operating venture ("Source
US") through the acquisition of PMSI Database to which PMSI contributed all of
its interest in Source US. See "--The Merger--General."
Source provides critical competitive intelligence for client companies'
sales representatives, linking the dispensed prescriptions back to the
prescribers in their territory. Source also provides sales force managers with
direct and comparative benchmarks to measure sales force performance and
determine compensation at the individual territory level. Source's services
enable client companies to target prescribers by their overall prescribing
habits or by the mode of payment for prescriptions they write. Clients can
identify the highest potential prescribers and their specific characteristics,
and access market intelligence on the prescriber's practice. Other services
match prescriptions to more than 850 health care payment plans, profiling the
individual managed care plans and providing insight into their strategies.
Source has recently launched new database services to enable pharmaceutical
company clients to measure market share activity at the individual pharmacy
level.
Source operates in the rapidly changing health care market and has an active
research and development effort. This development effort is driven by the
changing needs of its client base, the rapid advances in information systems
technology and evolving industry standards. Source's development efforts
include significant revisions and additions to the architecture and
functionality of Source's systems. Specifically, these efforts involve the
transition from mainframe to client server technologies, the creation of a new
prescription database which provides an enhanced level of detail, and the
development of advanced analysis tools which allows for expanded data
manipulation and multi-variable capabilities through the use of artificial
intelligence.
For the year ended June 30, 1997 Source generated total revenues of $59.9
million and net income of $6.5 million. Source has 400 employees. Source's
principal executive offices are located at 2394 East Camelback Road, Phoenix,
Arizona, 85016 and its telephone number is (602) 381-9500.
SELECTED FINANCIAL INFORMATION
The following table sets forth selected historical financial data of Source
more fully set forth in Annex D.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED JUNE 30,
--------------------------- ------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996 1995 1994 1993
------------- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............. $15,300 $13,484 $ 59,885 $ 51,812 $ 48,710 $ 45,757 $ 28,831
Operating income
(loss)............... 338 1,041 6,680 4,315 3,610 (1,797) (16,217)
Income (loss) from
continuing
operations........... 203 979 6,479 3,766 2,610 (4,946) (17,680)
BALANCE SHEET DATA
(AT PERIOD END):
Total assets.......... 24,262 24,885 27,641 27,566 26,420 23,874 15,544
Long-term
obligations.......... 8,179 5,909 7,490 6,525 5,822 4,797 6,574
Total stockholders'
equity............... (45,298) (50,551) (45,051) (51,530) (55,296) (57,906) (52,960)
</TABLE>
48
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
OPERATING RESULTS FOR THE QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
Revenue. Revenue for the quarter ended September 30, 1997 was $15.3 million,
an increase of $1.8 million or 13.5% over revenue for the quarter ended
September 30, 1996. The increase was driven by new product sales, particularly
in the area of services to help pharmaceutical companies measure market share
activity at the individual retail pharmacy level.
Production Costs. Production costs for the quarter ended September 30, 1997
were $3.7 million, (25% of revenue) compared to $3.6 million (27% of revenue)
for the quarter ended September 30, 1996. The decrease as a percentage of
revenue was due to productivity improvements from continued utilization of
technology to reduce unit costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $11.2 million (73% of revenue) for the quarter
ended September 30, 1997, compared to $8.9 million (66% of revenue) for the
quarter ended September 30, 1996. During the quarter, the company made
significant investments in developing technology based services and new retail
pharmacy programs that have been purchased by customers. The increase in
selling, general and administrative expense as a percentage of revenue in the
quarter ended September 30, 1997 versus the prior year was primarily due to
the increased investment in these two areas to fulfill the requirements of new
contracts. The company expects to begin recognizing the revenue from these
contracts in the second quarter of this fiscal year.
Depreciation and Amortization. Depreciation and amortization expenses for
the quarter ended September 30, 1997, were $1.4 million, an increase of $0.4
million or 38% over depreciation and amortization expenses for the quarter
ended September 30, 1996. The increase was primarily attributable to
depreciation of capital investments for new computer systems, particularly the
company's continuing transition from a mainframe platform to client server
technology.
Interest and Other Income/Interest Expense. For the quarter ended September
30, 1997, Sources net interest expense was $0.1 million compared to $0.1
million for the same period in 1996.
OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
Revenue. Revenue for the year ended June 30, 1997, was $59.9 million, an
increase of $8.1 million or 15.6% over revenue for the year ended June 30,
1996. Revenue grew significantly in the information services and research and
consulting divisions. The growth in the information services division revenue
was driven by increased subscription sales for the Source Alpha database. The
growth in the research and consulting division was driven by sales of newly
launched consulting services. In both divisions growth was driven by increased
business from existing clients and the addition of new clients.
Revenue for the year ended June 30, 1996, was $51.8 million, an increase of
$3.1 million or 6.4% over revenue for the year ended June 30, 1995. This
growth was driven primarily by increases in subscription sales for the Source
Alpha database, in the information services division.
Production Costs. Production costs for the year ended June 30, 1997, were
$14.8 million (25% of revenue) compared to $14.7 million (28% of revenue) for
the year ended June 30, 1996. The decrease as a percentage of revenue was due
to continued implementation of restructuring programs launched during the
prior year. These programs included streamlining the production process and
more effective utilization of technology in order to reduce unit costs.
Production costs for the year ended June 30, 1996, were $14.7 million (28%
of revenue) compared to $15.5 million (32% of revenue) for the year ended June
30, 1995. The decrease as a percentage of revenue was primarily attributable
to the implementation of new restructuring programs designed to reduce unit
costs. These programs included streamlining the production process and more
effective utilization of technology in order to reduce unit costs and improve
operating efficiency.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $33.2 million (55% of revenue) for the year ended
June 30, 1997, as compared to $29.7 million (57% of revenue) for the 1996
fiscal year. The increase was greater than prior years primarily due to one-
time charges for consultants
49
<PAGE>
retained to help Source transition from mainframe to client server technology
and the expansion of work units to support retail chain and pharmacy market
niche development.
Selling, general and administrative expenses were $29.7 million (57% of
revenue) for the year ended June 30, 1996, as compared to $27.7 million (57%
of revenue) for the 1995 fiscal year. The increase was consistent with the
growth of the business and the launch of a market niche penetration strategy,
to expand beyond the Source's traditional market focus. The decrease in
expense as a percentage of revenue was driven by the effective leveraging of
Source's fixed expense base which kept operating costs flat, combined with
minimal increases in employment costs.
Depreciation and Amortization. Computer equipment and software are valued at
their cost on the date of purchase and depreciated over periods of up to five
years. The cost of updating and maintaining Source's databases is expensed as
incurred, as is the cost of developing software for internal use.
Depreciation and amortization expenses for the year ended June 30, 1997,
were $5.2 million, an increase of $2.1 million or 67.7% over depreciation and
amortization expenses for the year ended June 30, 1996. This increase
represented significant investment supporting Source's transition from a
mainframe to client server technology platform.
Depreciation and amortization expenses for the year ended June 30, 1996,
were $3.1 million, an increase of $1.2 million or 63.2% over depreciation and
amortization expenses for the year ended June 30, 1995. The increased cost was
primarily attributable to Source's investment in expanded computing capacity.
Interest and Other Income/Interest Expense. Source invests its excess cash
with major banks, and cash equivalents and marketable securities in a
professionally managed fund.
For the year ended June 30, 1997, Source's net interest expense was $0.1
million as compared to $0.4 million for the same period in 1996. The decrease
was due to reduced borrowing levels given Source's increase in cash flow.
For the year ended June 30, 1996, Source's net interest expense was $0.4
million as compared to $0.9 million for the 1995 fiscal year. The decrease was
due to reduced borrowing levels, given Source's increase in cash flow.
Income Tax Provision. There were no tax provisions for the years ended June
30, 1995, 1996 and 1997 respectively, due to net operating losses generated in
prior years and applied during this period.
In connection with the purchase of Source and PMSI Database, NDC has
allocated $67 million of the purchase price to in-process research and
development ("R&D") projects related to Source US. The results of operations
of PMSI Database include its proportionate share of the Source US results of
operations (approximately 24%), and, as a result, approximately $51 million of
this charge has been attributed by NDC to Source and $16 million to PMSI
Database. These allocations represent NDC's estimated fair value based on risk
adjusted cash flows related to the incomplete projects. The discount rate NDC
used was commensurate with the risk of the cash flows and takes into
consideration the likelihood of completing the projects successfully. The
development of these projects had not yet reached technological feasibility,
and the technology has no alternative future use. Accordingly, these costs
were expensed as of the acquisition date. The technology acquired in these
acquisitions will require substantial additional development by NDC estimated
to cost approximately $10 million over the next three years.
Source's development efforts include significant revisions and additions to
the architecture and functionality of Source's systems, Specifically, these
efforts involve the transition from mainframe to client server technologies,
the creation of a new prescription database which provides an enhanced level
of detail, and the development of advanced analysis tools which allows for
expanded data manipulation and multi-variable capabilities through the use of
artificial intelligence. These efforts are important because the systems are
used by Source to produce its main products and services. Finally, Source, in
conjunction with NDC, is developing a major new software system aimed at
providing more timely pharmaceutical product information to the health care
industry. These projects are necessitated by competitive pressures and rapid
advances in information system technology and, thus, are critical to the
future success of Source.
50
<PAGE>
SEASONALITY OF THE BUSINESS
Historically, Source's financial results have varied from quarter to
quarter, principally due to the timing of customer investments to new products
and services and the timing of delivery of Source US services. For example,
many of the pharmaceutical manufacturing customers of Source US report results
on a calendar year basis. In general commitments are made by Source US's
customers in the summer and fall for delivery in the first part of the next
calendar year. Source US's fiscal year begins July 1. Source typically incurs
expenses during the first half of its fiscal year (the last half of the
calendar year) in preparation for roll-out of new products and services to
meet customer requirements. Consequently, during Source US's first quarter,
significant expense with respect to new products is incurred to generate
revenues which should be recognized in future quarters.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, Source's cash and cash equivalents totaled $4.3
million. Excluding a parent company obligation which will be forgiven at the
Effective Time, Source's current ratio was 0.53:1 at September 30, 1997. In
comparison to the quarter ended September 30, 1996, cash and cash equivalents
increased due to the growth in the company's business and resulting increase
in cash flow.
At June 30, 1997, Source's cash and cash equivalents and marketable
securities totaled $2.8 million. Excluding a parent company obligation which
will be forgiven at the Effective Time, Source's current ratio was 0.63:1.
During the year ended June 30, 1997, cash and cash equivalents and short-term
marketable securities decreased due to the timing in accounts receivable
collection and investments in Source Europe.
Source anticipates that existing cash, together with internally generated
funds, will provide Source with the resources necessary to meet Source's
working capital requirements in fiscal 1998 and subsequent years.
51
<PAGE>
SECURITIES OWNERSHIP
The following table sets forth certain information as of September 30, 1997,
regarding the ownership of Source Common Stock and Preferred Stock by (i)
certain stockholders or groups of related stockholders who, individually or as
a group, are the beneficial owners of 5% or more of any class of the Source
Capital Stock and (ii) the executive officers and directors of Source.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------
NUMBER OF NUMBER OF
SHARES OF SHARES OF
COMMON PERCENT OF PREFERRED PERCENT OF
NAME(1) STOCK(2) CLASS STOCK CLASS
------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Welsh, Carson, Anderson & Stowe
V, L.P. ...................... 1,259,239 21.7% -- --
Welsh, Carson, Anderson & Stowe
IV, L.P. ..................... 964,505 16.6 -- --
c/o Welsh, Carson, Anderson &
Stowe
320 Park Avenue, Suite 2500
New York, New York 10022-6815
Crown Advisors, Ltd. .......... 531,360 9.2 -- --
The Lincoln Building, Suite
3405
60 East 42nd Street
New York, New York 10017
Rohit M. Desai................. 520,833 8.2 520,833 50.0%
c/o Desai Capital Management
Incorporated
540 Madison Avenue
New York, New York 10022
EXECUTIVE OFFICERS AND DIREC-
TORS:
James G. Andress............... 6,250(3) * -- --
David F. Bellet................ 547,675(4) 9.4% -- --
Robert R. Brown................ 19,000(3) * -- --
Handel K. Evans................ 369,856(5) 6.2% -- --
Michael A. Hauck............... 51,636(6) * -- --
Frank J. Pados................. 522,083(7) 8.3% 520,833 50.0%
Dennis M.J. Turner............. 352,084(8) 6.0% -- --
Patrick J. Welsh............... 2,575,697(9) 44.4% -- --
L. John Wilkerson.............. 310,734(10) 5.4% -- --
Warren J. Hauser............... 21,200(11) * -- --
All Executive Officers and
Directors as a group (10
persons)...................... 4,776,215 72.1%
</TABLE>
- -------
* Less than 1%.
(1) Except as otherwise noted below, the persons named in the table have sole
voting power and investment power with respect to all shares set forth in
the table. The shares listed include shares of Common Stock that may be
acquired upon exercise of presently exercisable options, or options that
will become exercisable within 60 days from the date hereof.
(2) Includes shares of outstanding Preferred Stock which are currently
convertible into shares of Common Stock on a 1-to-1 basis.
(3) Consists of shares subject to options granted under Source's Stock Option
and Restricted Stock Purchase Plan.
(4) Includes 531,360 shares held by investment partnerships affiliated with
Crown Advisors Ltd. Mr. Bellet is a general partner of the respective sole
general partners of such investment partnerships, and disclaims beneficial
ownership of such shares. Also includes 5,000 shares issuable upon
exercise of options granted under Source's Stock Option and Restricted
Stock Purchase Plan.
(5) Includes 122,000 shares issuable upon exercise of options granted under
Source's Stock Option and Restricted Stock Purchase Plan.
(6) Includes 40,250 shares issuable upon exercise of options granted under
Source's Stock Option and Restricted Stock Purchase Plan.
(7) Includes 520,833 of Preferred Stock shares held by investment partnerships
affiliated with Rohit B. Desai. Mr. Pados disclaims beneficial ownership
of such shares. Common Stock holdings also include 1,250 shares issuable
upon exercise of options granted under Source's Stock Option and
Restricted Stock Purchase Plan.
(8) Includes 109,500 shares issuable upon exercise of options granted under
Source's Stock Option and Restricted Stock Purchase Plan. Does not include
6,882 shares owned by immediate family members of Mr. Turner as to which
Mr. Turner disclaims beneficial ownership.
(9) Includes an aggregate 2,544,147 shares held by investment partnerships
(including, without limitation, Welsh, Carson, Anderson & Stowe V, L.P.
and Welsh, Carson, Anderson & Stowe IV, L.P.) of which Mr. Welsh is a
general partner of the sole general partner. Mr. Welsh disclaims
beneficial ownership of such shares. Also includes 5,000 shares issuable
upon exercise of options granted under Source's Stock Option and
Restricted Stock Purchase Plan.
(10) Includes 5,000 shares issuable upon exercise of options granted under
Source's Stock Option and Restricted Stock Purchase Plan.
(11) Includes 11,250 shares issuable upon exercise of options granted under
Source's Stock Option and Restricted Stock Purchase Plan.
52
<PAGE>
CERTAIN DIFFERENCES IN THE RIGHTS OF NDC AND SOURCE STOCKHOLDERS
At the Effective Time, Source stockholders automatically will become
stockholders of NDC, and their rights as stockholders will be determined by
NDC's Certificate of Incorporation and Bylaws. The following is a summary of
the material differences in the rights of stockholders of NDC and Source. Both
NDC and Source are Delaware corporations governed by the DGCL. Accordingly,
except as set forth below, there are no material differences between the
rights of an NDC stockholder under NDC's Certificate of Incorporation and
Bylaws and the DGCL, on the one hand, and the rights of a Source stockholder
under Source's Certificate of Incorporation and Bylaws and the DGCL, on the
other hand. This summary does not purport to be a complete discussion of, and
is qualified in its entirety by reference to, the DGCL and the Certificate of
Incorporation and Bylaws of each corporation.
AUTHORIZED CAPITAL STOCK
NDC
The authorized capital stock of NDC consists of 100,000,000 shares of Common
Stock, par value $.125 per share, and 1,000,000 shares of Preferred Stock, par
value $1.00 per share. The following description of the capital stock is
qualified in all respects by reference to the Certificate of Incorporation, as
amended, and Bylaws, as amended, of NDC, copies of which are on file at NDC's
principal executive offices.
NDC Common Stock. The holders of NDC Common Stock, subject to such rights as
may be granted to the holders of NDC Preferred Stock, elect all directors and
are entitled to one vote per share. All shares of NDC Common Stock participate
equally in dividends when, as and if declared by the Board of Directors and
share ratably, subject to the rights and preferences of any NDC Preferred
Stock, in net assets on liquidation. The shares of NDC Common Stock
outstanding are duly authorized, validly issued, fully paid and nonassessable.
The shares of NDC Common Stock have no preference, conversion, exchange,
preemptive or cumulative voting rights.
Stock Purchase Rights. Pursuant to a Rights Agreement dated as of January
18, 1991, each share of NDC Common Stock is issued one NDC right (an "NDC
Right") which entitles the registered holder to purchase from the NDC one one-
hundredth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $1.00 per share (the "NDC Participating Preferred"), at a
purchase price of $45.00 per Unit, subject to adjustment. Until the Separation
Date (as hereinafter defined, see "--Stockholder Rights Plan"), the NDC Rights
are unexercisable and attach to and transfer with the NDC Common Stock
certificates.
The NDC Rights may have certain anti-takeover effects because the rights
will cause substantial dilution to a person or group that attempts to acquire
NDC on terms not approved by the Board of Directors of NDC unless the offer is
conditioned on a substantial number of NDC Rights being acquired. However, the
NDC Rights should not interfere with the Merger or any other business
combination approved by a majority of the directors since the NDC Rights may
be redeemed by NDC at $.01 per NDC Right at any time on or prior to a stock
acquisition. Thus, the NDC Rights are intended to encourage persons who may
seek to acquire control of NDC to initiate such an acquisition through
negotiations with the Board of Directors. However, the effect of the NDC
Rights may be to discourage a third party from making a partial tender offer
or otherwise attempting to obtain a substantial equity position in the equity
securities of, or seeking to obtain control of, NDC. To the extent any
potential acquirers are deterred by the NDC Rights, the NDC Rights may have
the effect of preserving incumbent management in office.
NDC Preferred Stock. NDC is authorized to issue 1,000,000 shares of
Preferred Stock, par value $1.00 per share, none of which is outstanding,
although 300,000 shares of Preferred Stock have been reserved for issuance
pursuant to the NDC Rights described above. NDC Preferred Stock may be issued
from time to time by the Board of Directors of NDC, without stockholder
approval, in such series and with such voting powers, full or limited, and
such designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions as may be fixed by
the Board of Directors. The issuance of NDC Preferred Stock by the Board of
Directors could adversely affect the rights of holders of shares of NDC Common
53
<PAGE>
Stock since NDC Preferred Stock may be issued having preference over the NDC
Common Stock with respect to dividends and in liquidation, and have voting
rights, contingent or otherwise, that could dilute the voting rights, net
income per share and net book value of the NDC Common Stock. In addition,
while the Board of Directors has no current intention of doing so, the ability
of the Board of Directors to issue shares of NDC Preferred Stock and to set
the voting powers and such designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations
or restrictions thereof without further stockholder action could help to
perpetuate incumbent management of NDC or prevent a business combination
involving NDC that is favored by NDC's stockholders. As of the date of this
Proxy Statement/Prospectus, other than in connection with the NDC Rights
described above, the Board of Directors has not authorized the issuance of any
shares of NDC Preferred Stock, and NDC has no agreements, arrangements or
understandings with respect to the issuance of any shares of NDC Preferred
Stock.
Source
The authorized capital stock of Source consists of 12,000,000 shares of
Source Common Stock, $.01 par value, and 2,000,000 shares of Source Preferred
Stock, $1.00 par value. The following description of Source Capital Stock is
qualified in all respects by reference to the Certificate of Incorporation, as
amended, and Bylaws, as amended, of Source, copies of which are on file at
Source's principal executive offices.
Source Common Stock. The holders of Source Common Stock are entitled to one
vote per share on all matters submitted to the stockholders for a vote.
Subject to the preferences of the Source Preferred Stock, all shares of Source
Common Stock participate equally in dividends when, as and if declared by the
Board of Directors and share ratably subject to the rights and preferences of
any Source Preferred Stock, in net assets on dissolution. The shares of Source
Common Stock outstanding are duly authorized, validly issued, fully paid and
nonassessable. The shares of Source Common Stock have no preference,
conversion, exchange or cumulative voting rights.
Source Preferred Stock. The Board of Directors, pursuant to Source's
Certificate of Incorporation, has designated one series, consisting of
1,041,667 shares, of Source Preferred Stock (the "Source Preferred Stock"),
all of which shares are outstanding. The Source Preferred Stock was issued in
connection with the spin-off of Source from Walsh International Inc. ("Walsh")
immediately prior to Walsh's initial public offering of securities in April
1996. The terms of the Source Preferred Stock are based upon and substantially
reflect the terms of a series of preferred stock of Walsh that was issued to
private investors in 1993. The terms of the Source Preferred Stock were
negotiated with such investors in order to induce them to convert their Walsh
preferred shares into Walsh common stock at the time of the public offering,
and are intended to substantially preserve the originally negotiated rights of
the Walsh preferred stock, including redemption rights and liquidation
preference. Because several of such investors were subject to underwriters'
"lock-up" agreements and could not liquidate their Walsh common stock
immediately following the public offering, the Source Preferred Stock also
includes provisions that, in effect, give limited price protection with
respect to the Walsh common stock. See "-- Redemption." The number of shares
designated as Source Preferred Stock may be increased or decreased (but not
below the number then outstanding) by resolution of the Board of Directors.
The rights of the holders of Source Preferred Stock are prior to those of the
holders of Source Common Stock with respect to dividends and amounts
distributable to stockholders upon liquidation.
Redemption. The Source Preferred Stock is subject to mandatory redemption
and, in certain circumstances, optional redemption at the election of the
holder. In general, the redemption price of the Source Preferred Stock per
share is the sum of (i) $11.33, plus (ii) any declared and undistributed
dividends in respect of the Source Preferred Stock, plus (iii) on the date on
which all outstanding shares of Source Preferred Stock are redeemed, the
"Additional Redemption Amount." The Additional Redemption Amount is
calculated, in the case of each holder of Source Preferred Stock, as (a) 74%
of the initial public offering price of the Walsh common stock (i.e., $8.88)
multiplied by the number of shares of Walsh common stock held by such holder
on the date of consummation of the Walsh initial public offering, less (b) the
net proceeds received by such holder from any sales of its shares of Walsh
common stock, less (c) the aggregate value of any securities received by it in
respect of its shares of Walsh common stock pursuant to a merger or other
business combination involving
54
<PAGE>
Walsh, less (d) the aggregate value of Walsh common stock otherwise
transferred by it to unaffiliated third parties, less (e) 50% of the aggregate
value of the shares of Walsh common stock held by it on the date of final
redemption over the amount provided in clause (e). In effect, the Additional
Redemption Amount is designed to compensate the holders of Source Preferred
Stock to the extent that the value of (or proceeds received from disposition
of) their Walsh common stock is less than $8.88 per share (74% of the initial
public offering price of $12 per share). This level of price protection with
respect to the Walsh common stock was a negotiated compromise between Source
and Walsh, on the one hand, and the holders of the Walsh preferred stock, on
the other hand.
The market value of the Walsh common stock (calculated in accordance with
the Source Certificate of Incorporation as the average closing price of the
Walsh common stock for the ten trading days commencing twelve trading days
before September 30) was $11.18. Pursuant to the formula determining the
Additional Redemption Amount, 50% of this value ($5.59) would be deducted from
the maximum $8.88 Additional Redemption Amount. As a result, in general, the
Additional Redemption Amount will be zero unless, as of the date of
determination, the market value of the Walsh common stock is less than $3.29.
The closing price of the Walsh common stock on the Nasdaq National Market was
$10.25 on November 6, 1997.
Pursuant to the existing terms of the Source Certificate of Incorporation,
the shares of Source Preferred Stock would be mandatorily redeemable as
follows: 520,834 shares on September 30, 1997, and the remaining outstanding
shares on June 30, 1998. In August 1997, the holders of the Source Preferred
Stock consented to the deferral of the September 30, 1997 redemption until
December 15, 1997. If the Merger is not consummated on or before such date,
then the 520,834 shares of Source Preferred Stock originally scheduled for
redemption on September 30, 1997 will be manditoraly redeemable. Upon the
occurrence of a change of control event, each holder of Source Preferred Stock
has the right to require Source to redeem such holder's Shares. The Merger
constitutes such a change of control event. The merger consideration payable
to the holders of the Source Preferred Stock equals the amount that such
holders would be entitled to receive upon redemption as of the date of
consummation of the Merger. See "Merger."
DIVIDENDS. Holders of Source Preferred Stock are entitled to share ratably
in all dividends declared and paid to the holders of Source Common Stock.
Furthermore, no dividend may be declared, set aside, or paid to the holders of
Source Common Stock or any other class or series of Source Capital Stock
ranking junior to the Source Preferred Stock unless the full cumulative
dividends (including the dividend, distribution, redemption, purchase or other
acquisition) on all outstanding shares of Source Preferred Stock shall have
been, or shall then be, paid.
CONVERSION. The shares of Source Preferred Stock are convertible, at the
option of the holder thereof, into an equal number of shares of Source Common
Stock (the "Conversion Ratio"). The Conversion Ratio is automatically
proportionately adjusted in the event of a stock split, stock dividend,
issuance of warrants, issuance of convertible debt or securities, or
reclassification with respect to shares of Source Common Stock.
MERGER. In general, in case of any consolidation or share exchange of
Source with, or merger of Source into, any other person, any merger of another
person into Source (including the Merger, but excluding any other merger which
does not result in any reclassification, conversion, exchange, or cancellation
of outstanding shares of Source Common Stock) or any sale or transfer of all
or substantially all of the assets of Source, the holders of shares of Source
Preferred Stock are entitled to receive the same consideration as if such
holder would have received had he converted his Source Preferred Stock into
Source Common Stock immediately prior to such consolidation, merger, share
exchange, sale or transfer. However, in the event of a merger (such as the
Merger) that constitutes a "Change of Control Event" under the Designation,
holders of the Source Preferred Stock have the right to elect to have their
shares redeemed at a redemption price equal to the greater of (a) $11.33 and
(b) the greater of the market price of the Source Common Stock and the price
per share of Source Common Stock in the Change of Control transaction, plus,
in the case of both (a) and (b), the Additional Redemption Amount and any
declared but unpaid dividends or other distributions with respect to the
Source Preferred Stock. The Merger Agreement accordingly provides that the
holders of the Source Preferred Stock are entitled to receive merger
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consideration of $11.33 per share, subject to adjustment to equal the amount
that the holders would receive if their shares had been redeemed (i.e., an
increase to the extent of any applicable Additional Redemption Amount and any
declared but unpaid distributions).
VOTING. Except as hereinafter described and as is required by law, holders
of the Source Preferred Stock have the right and power to vote on any matter
upon which, or in any proceeding at which, the holders of Source Common Stock
are entitled to vote and to be represented at and to receive notice of any
meeting of stockholders. Each holder of Preferred Stock shall be entitled to
that number of votes for each share of Common Stock obtainable upon conversion
of such Stock on the record date for the vote which is being taken, or if no
such record date is established at the date such vote is taken of any written
consent of the stockholders is solicited. The holders of shares of Preferred
Stock and shares of Common Stock shall vote together and not as separate
classes except as otherwise provided herein or by law. The holders of Series A
Preferred Stock will vote as a separate class and approval of 51% of the
holders will be required to create any additional class of preferred stock,
create any class of common stock other than the class presently authorized for
issuance, amend the Certificate of Incorporation or By-laws of the corporation
or increase the number of shares of Series A Preferred Stock authorized for
issuance. In addition, pursuant to the Stockholders Agreement, the consent of
the holders of at least a majority of the outstanding Preferred Stock is
required to approve the Merger.
DIRECTORS AND CLASSES OF DIRECTORS
NDC
The Board of Directors of NDC is divided into three classes as nearly equal
in number as the total number of directors permits. Directors are elected to
each class at successive annual meetings to serve three-year terms. Any newly
created or eliminated directorships resulting from an increase or decrease in
the number of authorized directors are divided equally among the three classes
so as to maintain such classes as nearly equal as possible. Any director or
the entire Board of Directors of NDC may be removed from office only upon the
affirmative vote of at least 80% of the holders of all classes of NDC stock,
voting as a single class.
The above-mentioned provisions (the "NDC Board Provisions") with regard to
the Board of Directors of NDC may have certain anti-takeover effects by
preventing or delaying a change in the membership of the Board of Directors of
NDC. The NDC Board Provisions are intended to encourage persons who may seek
to acquire control of NDC to initiate such an acquisition through negotiations
with the Board of Directors of NDC. However, the effect of the NDC Board
Provisions may be to discourage a third party from making a partial tender
offer or otherwise attempting to obtain a substantial position in the equity
securities of, or seeking to obtain control of, NDC. To the extent any
potential acquirers are deterred by the NDC Board Provisions, the NDC Board
Provisions may have the effect of preserving incumbent management in office.
Source
The Board of Directors of Source consists of 8 members, serving as a single
class. Directors of Source serve until their successors are elected and
qualified. Directors of Source may be removed, with or without cause, by the
affirmative vote of the holders of a majority of the shares of Source Capital
Stock entitled to vote at an election of directors.
STOCKHOLDER MEETINGS
NDC
NDC's Bylaws provide for annual meetings of stockholders to be held on the
fourth Thursday of October and for special meetings to be held on call of the
Chairman or President or at the request of a majority of the members of the
Board of Directors. The NDC Bylaws do not permit stockholders to call a
special meeting of stockholders. Stockholders entitled to vote are entitled to
written notice stating the place, date, hour and, in the case of a special
meeting, the purpose of the meeting, not less than 10 nor more than 50 days
before the date of the meeting. The holders of a majority of the stock issued
and outstanding and entitled to vote at a meeting, present in person or
represented by proxy, constitutes a quorum. When a quorum is present at
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a meeting, the vote of the holders of a majority of the stock having voting
power, present in person or by proxy, can approve any resolution properly
brought before the meeting, except for resolutions: (i) increasing the number
of authorized shares of capital stock; (ii) approving a Business Combination
(as defined in NDC's Certificate of Incorporation; (iii) amending Article
Fourth of NDC's Certificate of Incorporation (Business Combination
provisions); (iv) removing any director or the entire Board of Directors; (v)
amending Article Eighth, Thirteenth, or Fourteenth of NDC's Certificate of
Incorporation (board classes, no stockholder action except at a meeting, and
board authority to alter, amend or repeal bylaws without stockholder
approval); or (vi) requiring a greater vote than is provided by applicable
law. The foregoing resolutions must be approved by the affirmative vote of (i)
50%; (ii) 66.67%; (iii) 66.67%; (iv) 80%; and (v) 80%, respectively of the
stockholders entitled to vote.
Source
Source's bylaws provide for annual meetings to be held on such dates and at
such times as shall be designated by the Board of Directors and for special
meetings to be held (i) at the request of the Chairman or a majority of the
Board of Directors; or (ii) at the request of the President or the Secretary
of Source. Stockholders entitled to vote are entitled to written notice
stating the place, date, hour, and, in the case of a special meeting, the
purpose of the meeting, not less than 10 nor more than 60 days before the date
of the meeting. The holders of a majority of the stock issued and outstanding
and entitled to vote at a meeting, present in person or represented by proxy,
constitute a quorum. When a quorum is present at a meeting, the vote of the
holders of a majority of the stock having voting power, present in person or
by proxy, can approve any resolution properly brought before the meeting,
except where a greater vote is required by applicable law.
ANTI-TAKEOVER PROVISIONS
NDC
The provisions of NDC's Certificate, Bylaws, and the NDC Rights Agreement
contain certain protective provisions, which are intended to facilitate
stability of leadership and enhance the NDC Board of Directors' role in
connection with attempts to acquire control of NDC so that the Board may
further and protect the interests of NDC, its stockholders and its other
constituencies as appropriate under the circumstances. In particular, if the
Board determines that a sale of control is in the best interests of the
stockholders, these protective provisions are designed to enhance the Board's
ability to maximize the value to be received by the stockholders upon such a
sale. Although NDC management believes that the protective provisions are
beneficial to NDC's stockholders, such provisions may also discourage certain
acquisition proposals, which may deprive NDC's stockholders of certain
opportunities to sell their shares at a premium over prevailing market prices.
Pursuant to its authority to issue different series of NDC Preferred Stock,
the Board of Directors of NDC has established the NDC Rights Agreement and has
designated the preferences and rights of the NDC Participating Preferred to
include certain provisions which may have the effect of discouraging
unsolicited offers to acquire NDC. See "--Stockholder Rights Plan."
Source
The provision of Source's Certificate of Incorporation granting the Source
Board of Directors the authority to provide for the issuance of Source
Preferred Stock in series may discourage certain acquisition proposals, which
may deprive Source's stockholders of certain opportunities to sell their
shares at a premium over prevailing market prices. See "--Source Preferred
Stock."
STOCKHOLDER RIGHTS PLAN
NDC
Each share of NDC Common Stock has attached to it an NDC Right issued
pursuant to a Rights Agreement between NDC and Wachovia Bank of North
Carolina, N.A., as Rights Agent (the "NDC Rights Agreement"). Each NDC Right
entitles its registered holder to purchase one one-hundredth of a share of NDC
Participating Preferred at a price of $45.00 (the "Rights Purchase Price"), as
adjusted from time to time under certain circumstances, after the earlier of
(i) the tenth day following the commencement of, or first public announcement
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of an intention to commence, a tender offer or exchange offer which, if
successful, would result in any person or group having beneficial ownership of
15% or more of the outstanding NDC Common Stock (an "Acquiring Person"), and
(ii) the tenth day after the first date of a public announcement that a person
or group has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding NDC Common Stock (the "Stock Acquisition
Date") (in either case, the "Separation Date").
The NDC Rights will not trade separately from the NDC Common Stock unless
and until the Separation Date occurs. The dividend, liquidation and voting
rights of the shares of NDC Participating Preferred, are designed so that the
value of the one one-hundredth of a share of NDC Participating Preferred
purchasable upon the exercise of each NDC Right should approximate the value
of one share of NDC Common Stock.
In the event that any person or group becomes an Acquiring Person, each
holder of an NDC Right, except an Acquiring Person or any affiliate or
associate thereof, will be entitled to purchase at the then-current Rights
Purchase Price shares of NDC Common Stock with a market value of two times the
Rights Purchase Price.
In the event that NDC is acquired in a merger or other business combination,
or 30% or more of its assets or earning power is sold to any person or group
other than NDC or its wholly-owned subsidiaries, then, in each such case, each
holder of an NDC Right, except an Acquiring Person or an affiliate or an
associate thereof, will be entitled to purchase shares of stock of the other
party to the business combination with a market value of two times the Rights
Purchase Price.
Prior to the Stock Acquisition Date the NDC Rights are redeemable for one
cent per NDC Right at the option of the Board of Directors. The NDC Rights
will expire on January 18, 2001 or at an earlier date under certain
circumstances.
The NDC Rights will not prevent a takeover of NDC. The NDC Rights, however,
may cause substantial dilution to a person or group that acquires 20% or more
of the NDC Common Stock unless the NDC Rights are first redeemed or terminated
by the Board of Directors of NDC. Nevertheless, the NDC Rights should not
interfere with a transaction that is, in the opinion of NDC's Board of
Directors, in the best interests of NDC and its stockholders because the NDC
Rights can be redeemed or terminated, as hereinbefore described, before the
consummation of such a transaction.
Source
Source has not adopted any rights or similar plan.
EXPERTS
The consolidated financial statements of NDC at May 31, 1996 and 1997, and
for each of the years in the three-year period ended May 31, 1997,
incorporated by reference from NDC's Annual Report on Form 10-K for the fiscal
year ended May 31, 1997, have been audited by Arthur Andersen LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference in reliance upon such reports given on the
authority of said firm as experts in accounting and auditing.
The financial statements of Source's United States operations at June 30,
1997, and for the year ended June 30, 1997, have been audited by Arthur
Andersen LLP, independent certified public accountants, as set forth in their
report included herein, in reliance upon such report and upon the authority of
said firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the shares of NDC Common Stock being offered hereby is being
passed upon for NDC by Alston & Bird LLP, Atlanta, Georgia. Neil Williams, a
partner of Alston & Bird LLP, is a director and stockholder of NDC.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NATIONAL DATA CORPORATION,
DUNKIRK, INC.,
AND
SOURCE INFORMATICS INC.
DATED AS OF AUGUST 20, 1997
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (THIS "AGREEMENT") IS MADE AND ENTERED
INTO AS OF AUGUST 20, 1997, BY AND AMONG NATIONAL DATA CORPORATION ("NDC"), A
DELAWARE CORPORATION; DUNKIRK, INC. ("SUB"), A DELAWARE CORPORATION; AND
SOURCE INFORMATICS INC. ("SOURCE"), A DELAWARE CORPORATION.
PREAMBLE
The respective Boards of Directors of Source, Sub and NDC are of the opinion
that the transactions described herein are in the best interests of the
parties to this Agreement and their respective stockholders. This Agreement
provides for the acquisition of Source by NDC pursuant to the merger of Sub
with and into Source. At the effective time of such merger, the outstanding
shares of the capital stock of Source shall be converted (except as provided
herein) into the right to receive cash or shares of the common stock of NDC.
As a result, common stockholders of Source shall become stockholders of NDC
and Source shall continue to conduct the business and operations of Source as
a wholly-owned subsidiary of NDC. The transactions described in this Agreement
are subject to the approvals of the stockholders of Source, expiration of the
required waiting period under the HSR Act, the consummation of the Stock
Purchase Agreement dated as of even date herewith by and among PMSI Database
Holdings, Inc. ("Newco"), Pharmaceutical Marketing Services Inc. ("PMSI") and
NDC (the "PMSI Agreement," together with the related agreements in connection
therewith) and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the
Merger for federal income tax purposes shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 12.1 of this
Agreement.
Now, Therefore, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
Transactions and Terms of Merger
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Sub shall be merged with and into Source in accordance with
the provisions of Section 251 of the DGCL and with the effect provided in
Sections 259 and 261 of the DGCL (the "Merger"). Source shall be the Surviving
Corporation resulting from the Merger and shall become a wholly-owned
Subsidiary of NDC and shall continue to be governed by the Laws of the State
of Delaware. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of Source, Sub and NDC and by NDC, as the sole stockholder of Sub.
1.2 Time and Place of Closing. The closing of the transactions contemplated
hereby (the "Closing") will take place at 9:00 A.M. on the date that the
Effective Time occurs (or the immediately preceding day if the Effective Time
is earlier than 9:00 A.M.), or at such other time as the Parties, acting
through their authorized officers, may mutually agree (the "Closing Date").
The Closing shall be held at such location as may be mutually agreed upon by
the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Certificate
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of Delaware (the "Effective Time"). Subject to the terms
and conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the first business day
following the last
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to occur of (i) the effective date (including expiration of any applicable
waiting period) of the last required Consent of any Regulatory Authority
having authority over and approving or exempting the Merger, (ii) the date on
which the stockholders of Source approve this Agreement to the extent such
approval is required by applicable Law and (iii) the date on which the
stockholders of PMSI approve the PMSI Agreement.
ARTICLE 2
Terms Of Merger
2.1 Charter. The Certificate of Incorporation of Source in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 Bylaws. The Bylaws of Source in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 Directors and Officers. The directors of Sub in office immediately prior
to the Effective Time, together with such additional persons as may thereafter
be elected, shall serve as the directors of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of Source in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
2.4 Effect of Stockholder Approval.
(a) The adoption of this Agreement by the Stockholders shall constitute
ratification of this Agreement, the appointment of the Stockholder
Representative in accordance with Section 10.10 and authorization for the
Stockholder Representative to execute and deliver the Escrow Agreement on
behalf of the Stockholders. Upon such adoption, this Agreement shall
constitute the legal, valid and binding obligations of each Stockholder. In
addition, upon such adoption and upon execution and delivery of the Escrow
Agreement by the Stockholder Representative, the Escrow Agreement shall
constitute the legal, valid and binding obligations of each Stockholder.
(b) The adoption of this Agreement by the holders of Source Preferred Stock
shall constitute ratification of this Agreement. Upon such adoption, this
Agreement shall constitute the legal, valid and binding obligation of each
holder of Source Preferred Stock.
ARTICLE 3
Manner of Converting Shares
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of NDC, Source, Sub or the stockholders of any of the foregoing:
(a) Each share of capital stock of NDC issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each share of Sub Common Stock issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall be
converted into one share of Source Common Stock.
(c) Each share of Source Common Stock (excluding shares held by any
Source Entity or any NDC Entity, and excluding shares held by stockholders
who perfect their statutory dissenters' rights as provided in Section 3.7)
issued and outstanding immediately prior to the Effective Time shall cease
to be outstanding and shall be converted into and exchanged for the right
to receive (i) the Common Cash Amount, if any, and that fraction of a share
of NDC Common Stock equal to 1,099,716 shares (the "Payment Shares")
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divided by the total number of shares of Source Common Stock outstanding at
the Closing Date (the "Common Base Exchange Ratio"); provided, however,
that the Payment Shares shall be first reduced by the Option Shares (as
defined in Section 3.1(c)(4) below), and (ii) that fraction of a share of
NDC Common Stock equal to 455,840 shares (the "Stock Escrow") divided by
the total number of shares of Source Common Stock outstanding at the
Closing Date, subject to the provisions of Section 3.2, Article 10 and the
Escrow Agreement (the "Common Escrow Exchange Ratio");
(1) At the Closing Date, the "Common Cash Amount" shall be calculated
by dividing $31,750,000, the aggregate cash consideration payable by
NDC hereunder (the "Aggregate Cash Amount"), less the Preferred Stock
Merger Consideration (as defined in Section 3.1(d)) and the Transaction
Expenses (as defined in Section 3.1(c)(2) below), by the total number
of shares of Source Common Stock outstanding at the Closing Date.
(2) At the Closing Date, Source shall prepare and deliver to NDC a
schedule substantially in the form of Schedule 1 attached hereto (the
"Expense Schedule"), indicating the expenses incurred but unpaid as of
the Closing Date which are of the type disclosed on Schedule 1 and
which are directly associated with the transaction contemplated by this
Agreement, including, without limitation, all expenses incurred in
connection with Source's termination of certain employment agreements
and an executive pension plan pursuant to Section 7.1(d) hereof (the
"Transaction Expenses"); provided, however, if the sum of the Preferred
Stock Merger Consideration and the Transaction Expenses exceed the
Aggregate Cash Amount ("Excess Expense"), then the Payment Shares shall
be reduced by that number of shares of NDC Common Stock equal to the
quotient of (i) the Excess Expense divided by (ii) the Average Closing
Price as of the Closing Date.
(3) If, at the close of trading on the tenth trading day immediately
preceding the Closing Date (the "Determination Date"), the Average
Closing Price shall be greater than $50.50 (the "Upper Threshold
Price"), the "Common Exchange Ratios" (defined to include the Common
Base Exchange Ratio and the Common Escrow Exchange Ratio) shall each be
adjusted to equal that fraction of a share of NDC Common Stock (rounded
to the nearest ten thousandth of a share) obtained by dividing the
product of the Common Base Exchange Ratio or the Common Escrow Exchange
Ratio, as the case may be, and the Upper Threshold Price by the Average
Closing Price at the Determination Date; provided further, that, in the
event that the Average Closing Price on the Determination Date shall be
less than $37.25 (the "Lower Threshold Price" and, together with the
Upper Threshold Price, the "Threshold Prices"), the Common Exchange
Ratios may, at the sole discretion of NDC, and in accordance with the
provisions of Section 11.1(h), each be adjusted to equal that fraction
of a share of NDC Common Stock (rounded to the nearest ten thousandth
of a share) obtained by dividing the product of the Common Base
Exchange Ratio or the Common Escrow Exchange Ratio, as the case may be,
and the Lower Threshold Price by the Average Closing Price at the
Determination Date.
(4) At the Closing Date, Source shall have secured the cancellation
of all outstanding options and warrants to purchase shares of Source
Common Stock and shall provide to NDC a schedule of the number of
shares of NDC Common Stock (the "Option Shares") payable to the holders
of such options and warrants in consideration of such cancellation.
(5) Pursuant to the NDC Rights Agreement, each share of NDC Common
Stock issued in connection with the Merger upon conversion of Source
Common Stock shall be accompanied by a NDC Right.
(d) Each share of Source Preferred Stock (excluding shares held by any
Source Entity or any NDC Entity, and excluding shares held by stockholders
who perfect their statutory dissenters' rights as provided in Section 3.7)
issued and outstanding immediately prior to the Effective Time shall cease
to be outstanding and shall be converted and exchanged for the right to
receive an amount equal to $11.33, subject to adjustment to equal that
amount such holder's shares of Source Preferred Stock would otherwise
receive if such holder were redeemed on the Closing Date pursuant to the
Designation (such aggregate amount, as adjusted, the "Preferred Stock
Merger Consideration").
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3.2 Preliminary Balance Sheet.
(a) Source will cause to be prepared and delivered to NDC a balance sheet
for Source, pro forma giving effect to the Divestiture, as of the most recent
month ending more than ten days prior to the Closing Date (the "Preliminary
Balance Sheet") and a certificate based on such Preliminary Balance Sheet
setting forth Source's calculation of Working Capital, Current Assets and
Current Liabilities as of such date ("Estimated Working Capital," "Estimated
Current Assets" and "Estimated Current Liabilities," respectively). The
Preliminary Balance Sheet shall (w) include the consolidated financial
position of Source and the Source Subsidiaries, (x) fairly present the
financial position of Source and the Source Subsidiaries as at the close of
business on such date in accordance with generally accepted accounting
principles applied on a basis consistent with those used in the preparation of
the balance sheet dated March 31, 1997 (the "Source Balance Sheet") previously
delivered to NDC, (y) include no material increase in long-term indebtedness,
and include line items substantially consistent with those in the Source
Balance Sheet, and (z) be prepared in accordance with accounting policies and
practices consistent with those used in the preparation of the Source Balance
Sheet. As used in this Agreement, "Working Capital" shall mean the amount
equal to Current Assets less Current Liabilities; "Current Assets" shall mean
the amount equal to the sum of cash, accounts receivable (net of any
reserves), inventories, prepaid expenses, work-in-process, and any other
current assets recognized by GAAP; and "Current Liabilities" shall mean the
amount equal to the sum of accounts payable, accrued current liabilities of
Source (other than the current portion of capitalized lease obligations),
accrued sales commissions (but only as to revenues realized and included in
the Source and Source Subsidiaries' statements of income prior to such date),
Accrued Bonuses, accrued vacation pay, current portion of long-term
indebtedness, pre-billed revenues and any other current liabilities recognized
by GAAP, but excluding all Transaction Expenses.
(b) NDC shall have five (5) business days from the receipt of the
Preliminary Balance Sheet and the calculation of Estimated Working Capital,
Estimated Current Assets and Estimated Current Liabilities delivered pursuant
to Section 3.2(a) to review such statement and calculations and following such
review such shall be final and binding upon the parties hereto.
(c) If Estimated Current Assets are less than the product of 0.9416 times
Estimated Current Liabilities (such amount, the "Estimated Working Capital
Adjustment") as of the date of the Preliminary Balance Sheet, the Escrow
Shares payable by NDC pursuant to Section 3.1(c) shall be decreased by the
number of shares of NDC Common Stock equal to the Estimated Working Capital
Adjustment divided by the Average Closing Price as of the Closing Date;
provided, however, in the event this reduction of the Escrow Shares exceeds
113,960 shares, the Payment Shares shall then be decreased similarly in an
amount equal to such excess.
3.3 Closing Balance Sheet.
(a) As promptly as practicable, but not later than 30 days after the Closing
Date, NDC will cause to be prepared and delivered to the Stockholder
Representative a balance sheet, giving effect to the Divestiture, for Source
as of the Closing Date (the "Closing Balance Sheet") setting forth NDC's
calculation of Working Capital, Current Assets and Current Liabilities as of
the Closing Date ("Closing Working Capital", "Closing Current Assets" and
"Closing Current Liabilities," respectively). The Closing Balance Sheet shall
(w) include the consolidated financial position of Source and the Source
Subsidiaries (x) fairly present the consolidated financial position of Source
and the Source Subsidiaries as at the close of business on the Closing Date in
accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the Source Balance Sheet, (y)
include no material increase in long-term indebtedness, and include line items
substantially consistent with those in the Source Balance Sheet, and (z) be
prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the Source Balance Sheet.
(b) The Closing Balance Sheet and the calculation of Closing Working
Capital, Closing Current Assets and Closing Current Liabilities delivered
pursuant to Section 3.3(a) shall be deemed final upon the earliest of (i) the
date on which NDC and the Stockholder Representative jointly agree that such
documents are final, (ii) the 30th day after delivery of such documents
pursuant to Section 3.3(a), if the Stockholder Representative has not
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delivered a notice to expressing disagreement with such calculations and
setting forth its calculation of such amount(s), and (iii) the date on which
all disputes relating to such statements and calculations between the parties
are resolved in accordance with Section 3.3(c). If the Stockholder
Representative delivers a notice of disagreement pursuant to this Section
3.3(b) it shall specify those items or amounts as to which it disagrees, and
it shall be deemed to have agreed with all other items and amounts contained
in the Closing Balance Sheet and the calculation of Closing Working Capital
delivered pursuant to Section 3.3(a) (except to the extent resolution of the
items or amounts to which it expresses disagreement requires conforming
changes to other items and amounts contained in the Closing Balance Sheet or
the calculation of Closing Working Capital).
(c) If the Stockholder Representative shall deliver a notice of disagreement
pursuant to Section 3.3(b), the Stockholder Representative and NDC shall,
during the 30 days following such delivery, use their reasonable efforts to
reach agreement on the disputed items or amounts (the "Disputed Amounts"). If,
during such period, the Stockholder Representative and NDC are unable to reach
such agreement, they shall promptly thereafter cause Price Waterhouse LLP (or
if said firm shall be unwilling to act thereunder, such other independent
accountants of nationally recognized standing reasonably satisfactory to NDC
and the Stockholder Representative), promptly to review this Agreement, the
documents delivered pursuant to Section 3.3(a) and any other documents
necessary to calculate the Disputed Amounts (including all work papers of the
parties used in calculating the Disputed Amounts). In making such calculation,
such independent accountants shall act as experts and not arbitrators and
shall consider only the Disputed Amounts, solely in accordance with the terms
of this Agreement. Such independent accountants shall deliver to the
Stockholder Representative and NDC, as promptly as practicable, a report
setting forth such calculation. Such report shall be final and binding upon
the Stockholders and NDC. The cost of such review and report shall be borne by
(i) the Stockholders if the difference between Final Working Capital (defined
in Section 3.4 below) shown in the independent accountant's calculation and
the Stockholder Representative's calculation of Closing Working Capital
delivered pursuant to Section 3.3(b) is greater than the difference between
Final Working Capital shown in the independent accountant's calculation and
NDC's calculation of Closing Working Capital delivered pursuant to Section
3.3(a), (ii) by NDC if the difference between Final Working Capital shown in
the independent accountant's calculation and the NDC's calculation of Closing
Working Capital delivered pursuant to Section 3.3(a) is greater than the
difference between the Final Working Capital Ratio shown in the independent
accountant's calculation and the Stockholder Representative's calculation of
the Closing Working Capital Ratio delivered pursuant to Section 3.3(b), and
(iii) otherwise equally by the Stockholders and NDC.
(d) The Stockholder Representative and NDC agree that they will, and will
cause their respective independent accountants and Source and its Subsidiaries
to, cooperate and assist in the preparation of the Closing Balance Sheet and
the calculation of Closing Working Capital, Closing Current Assets and Closing
Current Liabilities and in the conduct of the reviews referred to in this
Section 3.3, including, without limitation, making available, to the extent
necessary, relevant books, records, working papers, analyses and schedules,
and permitting representatives of the parties to consult with the respective
employees, auditors, actuaries, attorneys and agents of Source and its
Subsidiaries.
3.4 Adjustment of Purchase Price.
(a) Subject To Section 3.4(c) Below,
(i) If Final Current Assets are less than the product of 0.9416 times
Final Current Liabilities (the amount of such shortfall referred to as, the
"Final Working Capital Deficit"), the Stockholders shall pay to NDC the
amount of the Final Working Capital Deficit as an adjustment to the
Purchase Price, out of the Stock Escrow in the manner provided in the
Escrow Agreement.
(ii) If Final Current Assets are greater than the product of 0.9416 times
Final Current Liabilities (the amount of such surplus referred to as, the
"Final Working Capital Surplus"), NDC shall pay to the escrow agent, to be
held in accordance with the Escrow Agreement, that number of shares of NDC
Common Stock equal to the quotient of the Final Working Capital Surplus
divided by the Average Closing Price as of the date Final Working Capital
is determined.
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(iii) "Final Working Capital" means Closing Working Capital (i) as shown
in NDC's calculation delivered pursuant to Section 3.3(a), if no notice of
disagreement with respect thereto is duly delivered pursuant to Section
3.3(b); or (ii) if such a notice of disagreement is delivered, (A) as
agreed by NDC and the Stockholder Representative pursuant to Section 3.3(b)
or (B) in the absence of such agreement, as shown in the independent
accountant's calculation delivered pursuant to Section 3.3(c); provided
that, in no event shall Final Working Capital be (i) more than the
Stockholder Representative's calculation of Closing Working Capital
delivered pursuant to Section 3.3(b), if any, or (ii) less than the lesser
of NDC's calculation of Closing Working Capital delivered pursuant to
Section 3.3(a) or the Stockholder Representative's calculation of Closing
Working Capital delivered pursuant to Section 3.3(b), if any.
(b) Subject to Section 3.4(c) below,
(i) If Total Current Assets are less than the product of 0.9975 times
Total Current Liabilities (the "Total Working Capital Deficit"), then the
Stockholders shall pay to NDC the Current Asset Allocation Amount as a
further adjustment to the Purchase Price, out of the Stock Escrow in the
manner provided in the Escrow Agreement.
(ii) If Total Current Assets are greater than the product of 0.9975 times
Total Current Liabilities (the "Total Working Capital Surplus"), then NDC
shall pay to the Stockholders pursuant to the instructions of the
Stockholder Representative, as a further adjustment to the Purchase Price,
that number of shares of NDC Common Stock equal to the quotient of the
Current Asset Allocation Amount divided by the Average Closing Price as of
the date Final Working Capital is determined.
(iii) As used herein, "Total Current Assets" shall mean the amount equal
to the sum of Final Current Assets in this Agreement and Final Current
Assets calculated pursuant to the PMSI Agreement; "Total Current
Liabilities" shall mean the amount equal to the sum of Final Current
Liabilities in this Agreement and Final Current Liabilities calculated
pursuant to the PMSI Agreement; "Current Asset Allocation Amount" shall
mean the amount equal to the product of (A) the quotient of Final Current
Assets in this Agreement divided by Total Combined Assets multiplied by (B)
the Total Working Capital Deficit or Total Working Capital Surplus, as the
case may be; and "Total Combined Assets" shall mean the sum of Final
Current Assets under this Agreement and Final Current Assets calculated
under the PMSI Agreement.
(c) For purposes of any adjustments to the Purchase Price made pursuant to
this Section, the parties shall take into account any adjustment made to the
Purchase Price at Closing pursuant to Section 3.2(c) hereof.
3.5 Anti-Dilution Provisions. In the event NDC changes the number of shares
of NDC Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or
similar recapitalization for which a record date is not established) shall be
prior to the Effective Time, the Common Exchange Ratios shall be
proportionately adjusted.
3.6 Shares Held by Source or NDC. Each of the shares of Source Common Stock
and Source Preferred Stock held by any Source Entity or by any NDC Entity
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.7 Dissenting Stockholders. Any holder of shares of Source Common Stock or
Source Preferred Stock who perfects his dissenters' rights in accordance with
and as contemplated by Section 262 of the DGCL shall be entitled to receive
the value of such shares in cash as determined pursuant to such provision of
Law; provided, that no such payment shall be made to any dissenting
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of the DGCL and surrendered to Source the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting stockholder of Source fails
to perfect, or effectively withdraws or loses, his right to appraisal and of
payment for his shares, NDC shall issue and deliver the consideration to which
such holder of shares of Source Common Stock or Source Preferred Stock is
entitled under this Article 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of Source Common Stock
or Source Preferred Stock held by
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him. If and to the extent required by applicable Law, Source will establish
(or cause to be established) an escrow account with an amount sufficient to
satisfy the maximum aggregate payment that may be required to be paid to
dissenting stockholders. Upon satisfaction of all claims of dissenting
stockholders, the remaining escrowed amount, reduced by payment of the fees
and expenses of the escrow agent, will be returned to the Surviving
Corporation.
3.8 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Source Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of NDC Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of NDC Common
Stock multiplied by the market value of one share of NDC Common Stock at the
Effective Time. The market value of one share of NDC Common Stock at the
Effective Time shall be the closing price of such common stock on the NYSE-
Composite Transactions List (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by NDC) on the last
trading day preceding the Effective Time. No such holder will be entitled to
dividends, voting rights, or any other rights as a stockholder in respect of
any fractional shares.
ARTICLE 4
Exchange of Shares
4.1 Exchange Procedures. Promptly after the Effective Time, NDC and Source
shall cause the exchange agent selected by NDC (the "Exchange Agent") to mail
to each holder of record of a certificate or certificates which represented
shares of Source Common Stock and Source Preferred Stock immediately prior to
the Effective Time (the "Certificates") appropriate transmittal materials and
instructions (which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon proper delivery of
such Certificates to the Exchange Agent). The Certificate or Certificates of
Source Common Stock or Source Preferred Stock so delivered shall be duly
endorsed as the Exchange Agent may require. In the event of a transfer of
ownership of shares of Source Common Stock or Source Preferred Stock
represented by Certificates that are not registered in the transfer records of
Source, the consideration provided in Section 3.1 may be issued to a
transferee if the Certificates representing such shares are delivered to the
Exchange Agent, accompanied by all documents required to evidence such
transfer and by evidence satisfactory to the Exchange Agent that any
applicable stock transfer taxes have been paid. If any Certificate shall have
been lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit of
that fact from the holder claiming such Certificate to be lost, mislaid,
stolen or destroyed, (ii) such bond, security or indemnity as NDC and the
Exchange Agent may reasonably require and (iii) any other documents necessary
to evidence and effect the bona fide exchange thereof, the Exchange Agent
shall issue to such holder the consideration into which the shares represented
by such lost, stolen, mislaid or destroyed Certificate shall have been
converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Source Common
Stock and Source Preferred Stock (other than shares to be canceled pursuant to
Section 3.6 or as to which statutory dissenters' rights have been perfected as
provided in Section 3.7) issued and outstanding at the Effective Time shall
surrender the Certificate or Certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2. To the extent required by Section
3.8, each holder of shares of Source Common Stock and Source Preferred Stock
issued and outstanding at the Effective Time also shall receive, upon
surrender of the Certificate or Certificates, cash in lieu of any fractional
share of NDC Common Stock to which such holder may be otherwise entitled
(without interest). NDC shall not be obligated to deliver the consideration to
which any former holder of Source Common Stock or Source Preferred Stock is
entitled as a result of the Merger until such holder surrenders such holder's
Certificate or Certificates for exchange as provided in this Section 4.1. Any
other provision of this Agreement notwithstanding, neither NDC, the Surviving
Corporation nor the Exchange Agent shall be liable to a holder of Source
Common
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Stock or Source Preferred Stock for any amounts paid or property delivered in
good faith to a public official pursuant to any applicable abandoned property,
escheat or similar Law. Adoption of this Agreement by the stockholders of
Source shall constitute ratification of the appointment of the Exchange Agent.
4.2 Rights Of Former Source Stockholders. At the Effective Time, the stock
transfer books of Source shall be closed as to holders of Source Common Stock
and Source Preferred Stock immediately prior to the Effective Time and no
transfer of Source Common Stock or Source Preferred Stock by any such holder
shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 4.1, each Certificate theretofore
representing shares of Source Common Stock or Source Preferred Stock (other
than shares to be canceled pursuant to Section 3.6) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.8 in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which have been declared or made by Source in respect of such shares of Source
Common Stock or Source Preferred Stock in accordance with the terms of this
Agreement and which remain unpaid at the Effective Time. Whenever a dividend
or other distribution is declared by NDC on the NDC Common Stock, the record
date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares of NDC Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of NDC Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any Certificate
until such holder surrenders such Certificate for exchange as provided in
Section 4.1. However, upon surrender of such Certificate, both the NDC Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash
payments payable hereunder (without interest) shall be delivered and paid with
respect to each share represented by such Certificate.
4.3 Escrow Agreement. In connection with the Closing, NDC and the
Stockholder Representative shall have executed and delivered to the other an
escrow agreement (the "Escrow Agreement"), which shall be in the form of
Exhibit 1. The Stock Escrow to be paid pursuant to Section 3.1(c) shall be
paid to and held by the escrow agent pursuant to the terms of the Escrow
Agreement.
ARTICLE 5
Representations and Warranties of Source
Source hereby represents and warrants to NDC as follows:
5.1 Organization, Standing, and Power. Source is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Delaware, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its Assets. Source is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Source Material Adverse Effect. The
minute book and other organizational documents for Source have been made
available to NDC for its review and, except as disclosed in Section 5.1 of the
Source Disclosure Memorandum, are true and complete in all material respects
as in effect as of the date of this Agreement and accurately reflect in all
material respects all amendments thereto and all proceedings of the Board of
Directors and stockholders thereof.
5.2 Authority of Source; No Breach by Agreement.
(a) Source has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery, and
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performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Source, subject to the adoption of this Agreement by the holders of a majority
of the outstanding shares of Source Common Stock, and the adoption of this
Agreement by the holders of a majority of the outstanding shares of Source
Preferred Stock, which are the only stockholder votes required for approval of
this Agreement and consummation of the Merger by Source. Subject to such
requisite stockholder approval, this Agreement represents a legal, valid, and
binding obligation of Source, enforceable against Source in accordance with
its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Source, nor the
consummation by Source of the transactions contemplated hereby, nor compliance
by Source with any of the provisions hereof, will (i) conflict with or result
in a breach of any provision of Source's Certificate of Incorporation or
Bylaws or the certificate or articles of incorporation or bylaws of any Source
Subsidiary or any resolution adopted by the board of directors or the
stockholders of any Source Entity, or (ii) except as disclosed in Section 5.2
of the Source Disclosure Memorandum, constitute or result in a Default under,
or require any Consent pursuant to, or result in the creation of any Lien on
any Asset of any Source Entity under, any material Contract or Permit of any
Source Entity or, (iii) subject to receipt of the requisite Consents referred
to in Section 9.1(b), constitute or result in a Default under, or require any
Consent pursuant to, any Law or Order applicable to any Source Entity or any
of their respective material Assets.
(c) Other than in connection or compliance with the provisions of applicable
state corporate and securities Laws and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to
any employee benefit plans, or under the HSR Act, no notice to, filing with,
or Consent of, any public body or authority is necessary for the consummation
by Source of the Merger and the other transactions contemplated in this
Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of Source consists of (i) 12,000,000 shares
of Source Common Stock, of which 5,800,193 shares are issued and outstanding
as of the date of this Agreement and not more than 7,010,187 shares, excluding
any shares of Source Common Stock issued upon conversion of Source Preferred
Stock, will be issued and outstanding at the Effective Time, and (ii)
2,000,000 shares of Source Preferred Stock, 1,041,667 shares of which are
issued and outstanding as of the date of this Agreement and not more than
1,041,667 shares will be issued and outstanding at the Effective Time. All of
the issued and outstanding shares of capital stock of Source are duly and
validly issued and outstanding and are fully paid and nonassessable under the
DGCL. None of the outstanding shares of capital stock of Source has been
issued in violation of any preemptive rights of the current or past
stockholders of Source.
(b) Except as set forth in Section 5.3(a), or as disclosed in Section 5.3(b)
of the Source Disclosure Memorandum, there are no shares of capital stock or
other equity securities of Source outstanding and no outstanding Equity Rights
relating to the capital stock of Source. Set forth in Section 5.3(b) of the
Source Disclosure Memorandum is the name of each of the holders of record of
Source Common Stock and Source Preferred Stock and that number of shares of
Source Common Stock and Source Preferred Stock, respectively, of which each
holder is the owner (the "Scheduled Stockholders"). Except as specifically
contemplated by this Agreement, no Person has any Contract or any right or
privilege (whether pre-emptive or contractual) capable of becoming a Contract
or Equity Right for the purchase, subscription or issuance of any securities
of Source from Source.
5.4 Source Subsidiaries. Source has disclosed in Section 5.4 of the Source
Disclosure Memorandum all of the Source Subsidiaries that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in
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which it is qualified and/or licensed to transact business, and the number of
shares owned and percentage ownership interest represented by such share
ownership) and all of the Source Subsidiaries that are general or limited
partnerships, limited liability companies, or other non-corporate entities
(identifying the Law under which such entity is organized, each jurisdiction
in which it is qualified and/or licensed to transact business, and the amount
and nature of the ownership interest therein). Except as disclosed in Section
5.4 of the Source Disclosure Memorandum, Source or one of its wholly-owned
Subsidiaries owns all of the issued and outstanding shares of capital stock
(or other equity interests) of each Source Subsidiary. No capital stock (or
other equity interest) of any Source Subsidiary is or may become required to
be issued (other than to another Source Entity) by reason of any Equity
Rights, and there are no Contracts by which any Source Subsidiary is bound to
issue (other than to another Source Entity) additional shares of its capital
stock (or other equity interests) or Equity Rights or by which any Source
Entity is or may be bound to transfer any shares of the capital stock (or
other equity interests) of any Source Subsidiary (other than to another Source
Entity). There are no Contracts relating to the rights of any Source Entity to
vote or to dispose of any shares of the capital stock (or other equity
interests) of any Source Subsidiary. All of the shares of capital stock (or
other equity interests) of each Source Subsidiary held by a Source Entity are
fully paid and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated or organized and are
owned by the Source Entity free and clear of any Lien, except for the pledge
by Source of the stock of one of its Subsidiaries to PMSI pursuant to that
certain Securities Transfer Agreement, between PMSI and Source, (the "Source
Divestiture Agreement"), which pledge will be released at Closing. Except as
disclosed in Section 5.4 of the Source Disclosure Memorandum, each Source
Subsidiary is duly organized, validly existing, and (as to corporations) in
good standing under the Laws of the jurisdiction in which it is incorporated
or organized, and has the corporate or other power and authority necessary for
it to own, lease, and operate its Assets and to carry on its business as now
conducted. Each Source Subsidiary is duly qualified or licensed to transact
business as a foreign corporation or other entity, and in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to
be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Source Material Adverse Effect. The minute book and other
organizational documents for each Source Subsidiary have been made available
to NDC for its review, and, except as disclosed in Section 5.4 of the Source
Disclosure Memorandum, are true and complete in all material respects as in
effect as of the date of this Agreement and accurately reflect in all material
respects all amendments thereto and all proceedings of the Board of Directors
and stockholders thereof. Source has no Subsidiaries other than the Source
Subsidiaries and the Source Divestiture Subsidiaries.
5.5 Financial Statements and Projections.
(a) Each Of The Source Financial Statements (including, in each case, any
related notes) was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements), and fairly presented in all material respects
the consolidated financial position of Source and its Subsidiaries, or Source
and the Source Subsidiaries, as the case may be, as at the respective dates
and the consolidated results of operations and cash flows for the periods
indicated, except that the unaudited interim financial statements do not
contain certain financial statement footnotes otherwise required by GAAP in
full fiscal year financial statements and were or are subject to normal and
recurring year-end adjustments, which were not or are not expected to be
material in amount or effect.
(b) Each of the Joint Venture Financial Statements (including, in each case,
any related notes) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements), and fairly presented in all
material respects the pro forma financial position of the Joint Venture as at
the respective dates and the combined results of operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
do not contain certain financial statement footnotes otherwise required by
GAAP in full fiscal year financial statements and were or are subject to
normal and recurring year-end adjustments which were not or are not expected
to be material in amount or effect.
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(c) Set forth in Section 5.5 of the Source Disclosure Memorandum is a true
and correct copy of the financial projections prepared by Source with respect
to its results of operations, cash flows and capital expenditures through June
30, 1998, including a list of the principal assumptions underlying such
projections. Source has prepared the projections in good faith and does not
have any reason to believe that the assumptions used in preparing the
projections are unrealistic under the circumstances. NDC acknowledges that the
assumptions are subject to significant business and competitive uncertainties
and are dependent upon future business decisions. Accordingly, the projections
cannot be viewed as a guarantee of future performance by Source and no
assurance can be given that the actual results of operations of Source will be
comparable to those reflected in the projections.
5.6 Absence of Undisclosed Liabilities. Neither the Joint Venture nor any
Source Entity has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Source Material Adverse Effect, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Source as of March 31, 1997, included in the Source Financial
Statements delivered prior to the date of this Agreement, or reflected in the
notes thereto or in the Joint Venture Financial Statements or reflected in the
notes thereto. No Source Entity has incurred or paid any Liability since March
31, 1997, except for such Liabilities incurred or paid (i) in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Source Material
Adverse Effect or (ii) in connection with the transactions contemplated by
this Agreement. Except as disclosed in Section 5.6 of the Source Disclosure
Memorandum, no Source Entity is directly or indirectly liable, by guarantee,
indemnity, or otherwise, upon or with respect to, or obligated, by discount or
repurchase agreement or in any other way, to provide funds in respect to, or
obligated to guarantee or assume any Liability of any Person (other than a
Source Entity) for any amount in excess of $100,000.
5.7 Absence of Certain Changes or Events. Since March 31, 1997, except as
disclosed in the Source Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 5.7 of the Source Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Source Material Adverse Effect, and (ii) the Source Entities have not taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Source provided in Article 7.
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the
Source Entities for periods ended on or before June 30, 1996, have been timely
filed or requests for extensions have been timely filed, granted, and have not
expired, and all Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. There is no
audit examination or deficiency or refund Litigation current or pending with
respect to any Taxes, except as reserved against in the Source Financial
Statements or as disclosed in Section 5.8 of the Source Disclosure Memorandum.
All Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the Source Entities, except for any
such Liens which are not reasonably likely to have a Source Material Adverse
Effect.
(b) None of the Source Entities has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the Source
Entities for the period or periods through and including the date of the
respective Source Financial Statements that has been made and is reflected on
such Source Financial Statements is sufficient to cover all such Taxes.
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(d) Deferred Taxes of the Source Entities have been provided for in
accordance with GAAP.
(e) Except as disclosed in Section 5.8(e) of the Source Disclosure
Memorandum, none of the Source Entities is a party to any Tax allocation or
sharing agreement and none of the Source Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Source) or has any Liability for Taxes of
any Person (other than Source and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as
a transferee or successor or by Contract or otherwise.
(f) Each of the Source Entities is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply, in all material respects, with all applicable
information reporting and Tax withholding requirements under federal, state,
and local Tax Laws, and such records identify with specificity all accounts
subject to backup withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the Source Disclosure Memorandum,
none of the Source Entities has made any payments, is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Section 280G or 162(m)
of the Internal Revenue Code.
(h) The income tax basis of (i) all of the issued and outstanding shares of
the Source Divestiture Subsidiaries, in the aggregate, which are being
transferred from Source to PMSI pursuant to the Source Divestiture Agreement,
and (ii) the shares of capital stock of PMSI which are being transferred from
Source to PMSI pursuant to the Source Divestiture Agreement, are disclosed in
Section 5.8 of the Source Disclosure Memorandum.
(i) The distribution of Source from Walsh International Inc. through a
series of transactions described in that certain Master Reorganization
Agreement between Walsh International Inc. and Source dated as of April 16,
1996 and effected on or about such date ("spin-off") qualified as a tax free
distribution described in Section 355 of the Internal Revenue Code. Without
limiting the generality of the foregoing, Source did not at the time of the
spin-off have any plans or intentions of further transferring, exchanging or
otherwise selling all or any part of the capital stock of Source or the Assets
of Source. Source has supplied to NDC accurate and complete copies of all
opinions, correspondence, rulings, memoranda and other information regarding
the tax consequences of such spin-off.
5.9 Assets.
(a) Except as disclosed in Section 5.9 of the Source Disclosure Memorandum
or as disclosed or reserved against in the Source Financial Statements
delivered prior to the date of this Agreement, and except for the pledge by
Source of the stock of one of its Subsidiaries to PMSI pursuant to that
certain Source Divestiture Agreement, which pledge will be released at Closing
and the pledge by Source of shares of PMSI Common Stock held by Source
pursuant to the Source Divestiture Agreement, the Source Entities have good
and marketable title, free and clear of all Liens, to all of their respective
Assets. All tangible properties that are material to the Joint Venture are in
good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with Source's past practices.
(b) All Assets material to the Joint Venture, that are held under leases or
subleases by any of the Source Entities are held under valid Contracts
enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect.
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(c) None of the Source Entities has received notice from any insurance
carrier that (i) any policy of insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect
to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $100,000
pending under such policies of insurance and no notices of claims in excess of
such amounts have been given by any Source Entity under such policies.
(d) The Assets of the Joint Venture include, in the aggregate, all Assets
required to operate the business of the Joint Venture as presently conducted.
5.10 Intellectual Property. Section 5.10 of the Source Disclosure Memorandum
sets forth a complete and accurate list of, and a brief description of all
governmental registrations or applications for governmental registrations of,
all Intellectual Property owned, used or licensed by or to Source or any
Source Entity, which are used in or necessary for the conduct of the Joint
Venture's business, except as to which the absence thereof would not have a
Source Material Adverse Effect ("Source Intellectual Property"). No Source
Entity is in Default under any of its Source Intellectual Property licenses.
No proceedings have been instituted, or are pending or to the Knowledge of
Source threatened, which challenge the rights of any Source Entity with
respect to Source Intellectual Property used, sold or licensed by such Source
Entity in the course of its business, nor has any person claimed or alleged
any rights to such Source Intellectual Property. The conduct of the business
of the Joint Venture does not infringe any Intellectual Property of any other
person. Except as disclosed in Section 5.10 of the Source Disclosure
Memorandum, the Joint Venture is not obligated to pay any recurring royalties
to any Person with respect to any such Source Intellectual Property. Except as
disclosed in Section 5.10 of the Source Disclosure Memorandum, every officer,
director, or employee of any Source Entity is a party to a Contract which
requires such officer, director or employee to assign any interest in any
Intellectual Property developed while in the employ of Source to a Source
Entity and to keep confidential any trade secrets, proprietary data, customer
information, or other business information of the Joint Venture, and, to the
Knowledge of Source, no such officer, director or employee is party to any
Contract with any Person other than a Source Entity which requires such
officer, director or employee to assign any interest in any Intellectual
Property to any Person other than a Source Entity or to keep confidential any
trade secrets, proprietary data, customer information, or other business
information of any Person other than a Source Entity. Except as disclosed in
Section 5.10 of the Source Disclosure Memorandum, to the Knowledge of Source,
no officer, director or employee of any Source Entity is party to any Contract
which restricts or prohibits such officer, director or employee from engaging
in activities competitive with any Person, including any Source Entity. Except
as disclosed in Section 5.10 of the Source Disclosure Memorandum, Source has
plans to modify its software systems to include calendar year 2000 date
conversion and compatibility capabilities, including, but not limited to, date
data century recognition, same century and multiple century formula and date
value calculations, and user interface date data values that reflect the
century.
5.11 Environmental Matters.
(a) Each Source Entity, its Participation Facilities, and its Operating
Properties are, and have been, in compliance in all material respects with all
Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of Source,
threatened before any court, governmental agency, or authority or other forum
in which any Source Entity or any of its Operating Properties or Participation
Facilities (or Source in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as
a defendant (i) for alleged noncompliance (including by any predecessor) with
any Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting)
a site owned, leased, or operated by any Source Entity or any of its Operating
Properties or Participation Facilities, nor is there any reasonable basis for
any Litigation of a type described in this sentence.
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(c) During the period of (i) any Source Entity's ownership or operation of
any of their respective current properties, (ii) any Source Entity's
participation in the management of any Participation Facility, or (iii) any
Source Entity's holding of a security interest in a Operating Property, there
have been no material releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Source Entity's
ownership or operation of any of their respective current properties, (ii) any
Source Entity's participation in the management of any Participation Facility,
or (iii) any Source Entity's holding of a security interest in a Operating
Property, to the Knowledge of Source, there were no material releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property.
5.12 Compliance with Laws. The Joint Venture has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any
such Permit. Except as disclosed in Section 5.12 of the Source Disclosure
Memorandum, none of the Source Entities nor the Joint Venture:
(a) is in Default under any of the provisions of its Certificate of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business; or
(c) since January 1, 1993, has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any Source
Entity or the Joint Venture is not in compliance in any material respect
with any of the Laws or Orders which such governmental authority or
Regulatory Authority enforces, (ii) threatening to revoke any Permits, or
(iii) requiring any Source Entity or the Joint Venture to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any
Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to NDC.
5.13 Labor Relations. No Source Entity is the subject of any litigation
asserting that it or any other Source Entity has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Source Entity to bargain with
any labor organization as to wages or conditions of employment, nor is any
Source Entity party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Source Entity, pending or
threatened, or to the Knowledge of Source, is there any activity involving any
Source Entity's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 Employee Benefit Plans.
(a) Source has disclosed in Section 5.14 of the Source Disclosure
Memorandum, and has delivered or made available to NDC prior to the execution
of this Agreement copies in each case of, all pension, retirement, profit-
sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental,
or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit plans" as
that term is defined in Section 3(3) of ERISA, which is currently, or within
the six (6) years preceding the Closing Date has been, adopted, maintained by,
sponsored in whole or in part by, or contributed to by any Source Entity or
ERISA Affiliate (including any entity which was an ERISA Affiliate during such
six (6) year period) thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "Source Benefit Plans"). Any of the Source
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Source ERISA
Plan." Each Source ERISA
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Plan which is also a "defined benefit plan" (as defined in Section 414(j) of
the Internal Revenue Code) is referred to herein as a "Source Pension Plan."
No Source Pension Plan is or has been a multiemployer plan within the meaning
of Section 3(37) of ERISA.
(b) All Source Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect. Each Source ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service,
and Source is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. No Source Entity has engaged in a
transaction with respect to any Source Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any
Source Entity to a Tax imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA.
(c) No Source Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Source Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Source Pension Plan, and (iii) no increase in
benefits under any Source Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually or
in the aggregate, a Source Material Adverse Effect or materially adversely
affect the funding status of any such plan. Neither any Source Pension Plan
nor any "single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any Source Entity, or the single-
employer plan of any entity which is considered one employer with Source under
Section 4001 of ERISA or Section 414 of the Internal Revenue Code or Section
302 of ERISA (whether or not waived) (an "ERISA Affiliate") has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. No Source Entity has provided,
or is required to provide, security to a Source Pension Plan or to any single-
employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any Source Entity with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Source Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No
notice of a "reportable event," within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Source Pension Plan or by any ERISA Affiliate
within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the Source Disclosure Memorandum,
no Source Entity has any Liability for retiree health and life benefits under
any of the Source Benefit Plans and there are no restrictions on the rights of
such Source Entity to amend or terminate any such retiree health or benefit
Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the Source Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any Source Entity from any Source
Entity under any Source Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any Source Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Source Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or
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Section 302 of ERISA, have been fully reflected on the Source Financial
Statements to the extent required by and in accordance with GAAP.
(h) Neither NDC nor any ERISA Affiliate of NDC shall have any liability or
obligation with respect to (i) employment-related liabilities, whether
contingent or otherwise, arising out of any individual's employment or working
relationship with any ERISA Affiliate of Source or any other entity which
participated in or contributed to any Source ERISA Plan other than Source or
any Source Subsidiary; or (ii) any benefit plan, program, arrangement or
policy maintained or contributed to by any ERISA Affiliate of Source other
than Source or any Source Subsidiary.
5.15 Material Contracts. Except as disclosed in Section 5.15 of the Source
Disclosure Memorandum or otherwise reflected in the Source Financial
Statements or the Joint Venture Financial Statements, none of the Source
Entities, the Joint Venture nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, or retirement Contract,
(ii) any Contract relating to the borrowing of money by any Source Entity or
the guarantee by any Source Entity or the Joint Venture of any such obligation
(other than Contracts evidencing trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Source Entity or the Joint Venture
from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, (iv) any Contract
between or among Source Entities, or other Affiliates of Source, (v) any
Contract involving Intellectual Property (other than Contracts entered into in
the ordinary course with customers and "shrink-wrap" software licenses), (vi)
any Contract relating to the provision of data processing, network
communication, or other technical services to or by any Source Entity or the
Joint Venture, (vii) any Contract relating to the purchase or sale of any
goods or services, including customer contracts, (viii) consulting Contracts,
(ix) and all Contracts referred to in Sections 5.9 and 5.14(a) (other than
Contracts in the case of (iv), (v), (vi), (vii), (viii) and (ix), entered into
in the ordinary course of business and involving payments under any individual
Contract not in excess of $100,000), as of the date of this Agreement
(collectively, the "Source Contracts"). With respect to each Source Contract
and except as disclosed in Section 5.15 of the Source Disclosure Memorandum:
(i) the Contract is in full force and effect; (ii) no Source Entity nor the
Joint Venture is in Default thereunder; (iii) no Source Entity has repudiated
or waived any material provision of any such Contract; (iv) no other party to
any such Contract is, to the Knowledge of Source, in Default in any respect or
has repudiated or waived any material provision thereunder; (v) there exists
no actual, or to the Knowledge of Source, threatened, cancellation,
termination, or limitation of, or any amendment, modification, or change to
any Contract; (vi) no Source Entity has received formal notice that any party
to a Contract will not renew such Contract at the end of its existing term;
and (vi) no Source Contract requires consent for assignment in connection with
the transactions contemplated by this Agreement. All of the indebtedness of
any Source Entity for money borrowed is prepayable at any time by such Source
Entity without penalty or premium.
5.16 Legal Proceedings. There is no litigation instituted or pending, or, to
the Knowledge of Source, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any Source Entity, or against any director,
employee or employee benefit plan of any Source Entity, or against any Asset,
interest, or right of any of them or the Joint Venture, that is reasonably
likely to have, individually or in the aggregate, a Source Material Adverse
Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Source Entity
or the Joint Venture, that are reasonably likely to have, individually or in
the aggregate, a Source Material Adverse Effect. Section 5.16 of the Source
Disclosure Memorandum contains a summary of all Litigation as of the date of
this Agreement to which any Source Entity is a party and which names a Source
Entity as a defendant or cross-defendant or for which any Source Entity or the
Joint Venture has any potential Liability.
5.17 Statements True and Correct. None of the information supplied or to be
supplied by any Source Entity or any Affiliate thereof for inclusion in the
Registration Statement to be filed by NDC with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or
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omit to state any material fact necessary to make the statements therein not
misleading. None of the information supplied or to be supplied by any Source
Entity or any Affiliate thereof for inclusion in any documents to be filed by
a Source Entity or any Affiliate thereof with any Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that any Source Entity or any Affiliate thereof
is responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.18 Regulatory Matters. No Source Entity or any Affiliate thereof has taken
or agreed to take any action or has any Knowledge of any fact or circumstance
that is reasonably likely to materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in
the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
5.19 State Takeover Laws. Each Source Entity has taken all necessary action
to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws"), including Section 203 of
the DGCL.
5.20 Charter Provisions. Each Source Entity has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Certificate of
Incorporation, Bylaws or other governing instruments of any Source Entity or
restrict or impair the ability of NDC or any of its Subsidiaries to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of
any Source Entity that may be directly or indirectly acquired or controlled by
them.
5.21 Stockholders' Voting Agreements. The holders of 51% or more of Source
Preferred Stock have executed and delivered to NDC, as of the date hereof, an
agreement in substantially the form of Exhibit 2 (the "Voting Agreements").
5.22 Board Recommendation. The Board of Directors of Source, at a meeting
duly called and held, has by unanimous vote of the directors present (who
constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger and
the Voting Agreements and the transactions contemplated thereby, taken
together, are fair to and in the best interests of the stockholders and (ii)
resolved to recommend that the holders of the shares of Source Common Stock
and the holders of Source Preferred Stock adopt this Agreement.
ARTICLE 6
Representations and Warranties of NDC
NDC hereby represents and warrants to Source and the Stockholders as
follows:
6.1 Organization, Standing, and Power. NDC is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its material Assets. NDC is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a NDC Material Adverse Effect.
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6.2 Authority; No Breach by Agreement.
(a) NDC has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of NDC. This Agreement
represents a legal, valid, and binding obligation of NDC, enforceable against
NDC in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by NDC, nor the
consummation by NDC of the transactions contemplated hereby, nor compliance by
NDC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of NDC's Certificate of Incorporation or Bylaws, or
(ii) constitute or result in a Default under, or require any Consent pursuant
to, or result in the creation of any Lien on any Asset of any NDC Entity
under, any Contract or Permit of any NDC Entity, or, (iii) subject to receipt
of the requisite Consents referred to in Section 9.1(b), constitute or result
in a Default under, or require any Consent pursuant to, any Law or Order
applicable to any NDC Entity or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by NDC of the
Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock.
(a) The authorized capital stock of NDC consists of (i) 100,000,000 shares
of NDC Common Stock, of which 26,629,947 shares are issued and outstanding as
of August 18, 1997, and (ii) 1,000,000 shares of NDC Preferred Stock, of which
no shares are issued and outstanding. All of the issued and outstanding shares
of NDC Capital Stock are, and all of the shares of NDC Common Stock to be
issued in exchange for shares of Source Common Stock upon consummation of the
Merger, when issued in accordance with the terms of this Agreement, will be,
duly and validly issued and outstanding and fully paid and nonassessable under
the DGCL. None of the outstanding shares of NDC Capital Stock has been, and
none of the shares of NDC Common Stock to be issued in exchange for shares of
Source Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past stockholders of NDC.
(b) Except as set forth in Section 6.3(a), or as provided pursuant to the
NDC Rights Agreement, or as disclosed in Section 6.3 of the NDC Disclosure
Memorandum, there are no shares of capital stock or other equity securities of
NDC outstanding and no outstanding Equity Rights relating to the capital stock
of NDC.
6.4 SEC Filings; Financial Statements.
(a) NDC has timely filed and made available to Source all SEC Documents
required to be filed by NDC since May 31, 1993 (the "NDC SEC Reports"). The
NDC SEC Reports (i) at the time filed, complied in all material respects with
the applicable requirements of the Securities Laws and other applicable Laws
and (ii) did not, at the time they were filed (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such NDC SEC Reports or necessary in order to
make the statements in such NDC SEC Reports, in light of the circumstances
under which they were made, not misleading. No NDC Subsidiary is required to
file any SEC Documents.
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(b) Each of the NDC Financial Statements (including, in each case, any
related notes) contained in the NDC SEC Reports, including any NDC SEC Reports
filed after the date of this Agreement until the Effective Time, complied as
to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and
fairly presented in all material respects the consolidated financial position
of NDC and its Subsidiaries as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount or effect.
6.5 Absence of Undisclosed Liabilities. No NDC Entity has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a NDC
Material Adverse Effect, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of NDC as of May 31, 1996 and
February 28, 1997, included in the NDC Financial Statements delivered prior to
the date of this Agreement or reflected in the notes thereto. No NDC Entity
has incurred or paid any Liability since February 28, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement.
6.6 Absence of Certain Changes or Events. Since May 31, 1996, except as
disclosed in the NDC Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 6.6 of the NDC Disclosure Memorandum, (i)
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a NDC Material
Adverse Effect, and (ii) the NDC Entities have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result
in a material breach or violation of any of the covenants and agreements of
NDC provided in Article 7.
6.7 Compliance with Laws. Each NDC Entity has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any
such Permit. Except as disclosed in Section 6.7 of the NDC Disclosure
Memorandum, none of the NDC Entities:
(a) is in Default under its Certificate of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business; or
(c) since May 31, 1993, has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any NDC Entity
is not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, or (iii) requiring any NDC
Entity to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business.
6.8 Legal Proceedings. There is no Litigation instituted or pending, or, to
the Knowledge of NDC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any NDC Entity, or against any director,
employee or employee benefit plan of any NDC Entity, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any NDC Entity, that are reasonably likely to
have, individually or in the aggregate, a NDC Material Adverse Effect.
6.9 Statements True and Correct. None of the information supplied or to be
supplied by any NDC Entity or any Affiliate thereof for inclusion in the
Registration Statement to be filed by NDC with the SEC, will, when the
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Registration Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any NDC Entity or any Affiliate thereof for inclusion in any
documents to be filed by any NDC Entity or any Affiliate thereof with the SEC
or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents that
any NDC Entity or any Affiliate thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
6.10 Authority of Sub. Sub is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware as a wholly owned
Subsidiary of NDC. The authorized capital stock of Sub shall consist of 1,000
shares of Sub Common Stock, all of which is validly issued and outstanding,
fully paid and nonassessable and is owned by NDC free and clear of any Lien.
Sub has the corporate power and authority necessary to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Sub. This Agreement
represents a legal, valid, and binding obligation of Sub, enforceable against
Sub in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought). NDC, as the sole stockholder of
Sub, has voted prior to the Effective Time the shares of Sub Common Stock in
favor of adoption of this Agreement, as and to the extent required by
applicable Law.
6.11 Tax and Regulatory Matters. No NDC Entity or any Affiliate thereof has
taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in
the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
6.12 Rights Agreement. Execution of this Agreement and consummation of the
Merger and the other transactions contemplated by this Agreement will not
result in the grant of any rights to any Person under the NDC Rights Agreement
(other than as contemplated by Section 3.1) or enable or require the NDC
Rights to be exercised, distributed or triggered.
ARTICLE 7
Conduct of Business Pending Consummation
7.1 Affirmative Covenants of Source.
(a) From the date of this Agreement until the earlier of the Effective Time
or the termination of this Agreement, except as provided in Section 7.1(b)
below, unless the prior written consent of NDC shall have been obtained, and
except as otherwise expressly contemplated herein, Source shall and shall
cause each of its Subsidiaries to (a) operate its business only in the usual,
regular, and ordinary course, (b) preserve intact its business organization
and Assets and maintain its rights and franchises, and (c) take no action
which would (i) materially adversely affect the ability of any Party to obtain
any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement.
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(b) Prior to the Effective Time, Source shall, pursuant to the Source
Divestiture Agreement between Source and PMSI the terms and conditions of
which will have been approved by NDC, complete the divestiture (the
"Divestiture") of (i) its business operated in Europe as of the date of this
Agreement (the "European Business"), (ii) all of the shares of PMSI held by
Source or any Subsidiary of Source, and (iii) all of the stock of those
subsidiaries listed in Section 7.1(b) of the Source Disclosure Memorandum (the
"Source Divestiture Subsidiaries"). In connection with the Divestiture, Source
shall assign all of its interest in and obligations under any and all
Contracts related to the European Business, including but not limited to those
listed in Section 7.1(b) of the Source Disclosure Memorandum (the "European
Contracts"), to the purchaser of the European Business, and shall obtain a
release of all obligations of Source under the European Contracts from the
parties thereto. Other than as required under the terms of the Target
Divestiture Agreement or in connection with the operation of the European
Business in the ordinary course, any matters regarding the conduct, ownership
or divestiture of the European Business shall be undertaken only with the
advance written consent of NDC, which consent will not be unreasonably
withheld.
(c) Prior to the Effective Time, Source shall amend the designation
contained in the Source Certificate of Incorporation relating to the Source
Preferred Stock (such designation, as amended, the "Designation") to provide
that the holders of Source Preferred Stock shall receive the Preferred Stock
Merger Consideration upon consummation of the Merger.
(d) Prior to Closing, Source shall terminate the employment agreements set
forth in Section 5.15 (Nos. 1-14) of the Source Disclosure Memorandum and the
executive pension plan set forth in Section 5.14(9) of the Source Disclosure
Memorandum and shall satisfy any liabilities or obligations arising out of the
termination of such. In addition, prior to Closing Source agrees to cause the
trademark registrations set forth in Section 5.10 of the Source Disclosure
Memorandum, to the extent not already accomplished, to be transferred into the
name of Source.
(e) Prior to Closing, all indebtedness or other obligations or accounts of
any kind between a Source Divestiture Subsidiary or PMSI or its Subsidiaries,
on the one hand and Source or a Source Subsidiary on the other hand will have
satisfied in accordance with Schedule 2 hereto.
7.2 Negative Covenants of Source. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of NDC shall have been obtained, and except as otherwise
expressly contemplated herein, Source covenants and agrees that it will not do
or agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following:
(a) amend the Certificate of Incorporation, Bylaws or other governing
instruments of any Source Entity, including the Certificate of Designation
for the Source Preferred Stock except for the amendment of the Source
Preferred Stock designation provided in Section 7.1(c) above, which may
include a provision to postpone any mandatory redemption provisions, or
(b) except as provided in Section 5.5 of the Source Disclosure Memorandum
and the Source Divestiture Agreement for the purposes set forth therein,
incur any additional debt obligation, capital lease obligation or other
obligation for borrowed money, or make any capital expenditures or impose,
or suffer the imposition, on any Asset of any Source Entity or the Joint
Venture of any Lien or permit any such Lien to exist (other than in
connection with Liens in effect as of the date hereof that are disclosed in
the Source Disclosure Memorandum, the pledge by Source of the stock of one
of its Subsidiaries to PMSI pursuant to the Source Divestiture Agreement,
which pledge will be released at Closing, and the pledge by Source of
shares of PMSI Common Stock held by Source pursuant to the Source
Divestiture Agreement); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Source Entity, or declare or pay any dividend or
make any other distribution in respect of Source's capital stock, excluding
for purposes of this Section 7.2(c) the redemption of Source Preferred
Stock pursuant to Section 3.1(d); or
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(d) except as provided for in this Agreement and in the Source
Divestiture Agreement, or pursuant to the exercise of stock options or
warrants outstanding as of the date hereof and pursuant to the terms
thereof in existence on the date hereof, or as disclosed in Section 7.2(d)
of the Source Disclosure Memorandum, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of Source Common Stock or Source
Preferred Stock or any other capital stock of any Source Entity, or any
stock appreciation rights, or any option, warrant, or other Equity Right;
or
(e) adjust, split, combine or reclassify any capital stock of any Source
Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Source Common Stock or Source
Preferred Stock, or sell, lease, mortgage or otherwise dispose of or
otherwise encumber (x) any shares of capital stock of any Source Subsidiary
(unless any such shares of stock are sold or otherwise transferred to
another Source Entity and except for the pledge by Source of the stock of
one of its Subsidiaries to PMSI pursuant to the Source Divestiture
Agreement, which pledge will be released at Closing) or (y) any Asset other
than in the ordinary course of business for reasonable and adequate
consideration (except for the pledge by Source of shares of PMSI Common
Stock held by Source pursuant to the Source Divestiture Agreement),
excluding for purposes of this Section 7.2(e) the Divestiture; or
(f) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or
less, purchase any securities or make any material investment, either by
purchase of stock of securities, contributions to capital, Asset transfers,
or purchase of any Assets, in any Person other than a wholly owned Source
Subsidiary, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary
course of business, or (ii) the creation of new wholly owned Subsidiaries
organized to conduct or continue activities otherwise permitted by this
Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Source Entity, except in accordance with past practice
disclosed in Section 7.2(g) of the Source Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement and disclosed in Section 7.2(g) of the Source
Disclosure Memorandum; enter into or amend any severance agreements with
officers of any Source Entity; or grant any material increase in fees or
other increases in compensation or other benefits to directors of any
Source Entity except in accordance with past practice disclosed in Section
7.2(g) of the Source Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any Source Entity
and any Person that the Source Entity does not have the unconditional right
to terminate without Liability (other than Liability for services already
rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Source Entity or terminate
or withdraw from, or make any material change in or to, any existing
employee benefit plans of any Source Entity other than any such change that
is required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan, or make
any distributions from such employee benefit plans, except as required by
Law, the terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than in accordance with past practice,
settle any Litigation involving any Liability of any Source Entity or the
Joint Venture for material money damages or restrictions upon the
operations of any Source Entity or the Joint Venture;
(l) without the prior written consent of NDC, which consent shall not be
unreasonably withheld, enter into, modify, amend or terminate any Source
Contract and any other material Contract or waive, release, compromise or
assign any material rights or claims; or
(m) amend the Source Divestiture Agreement or, without the prior written
consent of NDC, waive any conditions to the closing of the transactions
contemplated by the Source Divestiture Agreement.
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7.3 Covenants of NDC. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, unless the prior
written consent of Source shall have been obtained, and except as otherwise
expressly contemplated herein, NDC covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed, in its reasonable judgment, to enhance the long-term value of
the NDC Common Stock and the business prospects of the NDC Entities and to the
extent consistent therewith use all reasonable efforts to preserve intact the
NDC Entities' core businesses and goodwill with their respective employees and
the communities they serve, and (b) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c), or (ii) materially adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement; provided, that the
foregoing shall not prevent any NDC Entity from acquiring any Assets or other
businesses or from discontinuing or disposing of any of its Assets or business
if such action is, in the judgment of NDC, desirable in the conduct of the
business of NDC and its Subsidiaries, provided that such actions shall not
materially delay the Effective Time or materially hinder consummation of the
Merger. NDC further covenants and agrees that it will not, without the prior
written consent of Source, which consent shall not be unreasonably withheld,
amend the Certificate of Incorporation or Bylaws of NDC or, except as
expressly contemplated by this Agreement, the NDC Rights Agreement, in each
case, in any manner adverse to the holders of Source Common Stock as compared
to rights of holders of NDC Common Stock generally as of the date of this
Agreement.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect or a NDC Material Adverse Effect,
as applicable, or (ii) would cause or constitute a material breach of any of
its representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies
of all such reports promptly after the same are filed. If financial statements
are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in stockholders' equity, and cash flows for the
periods then ended in accordance with GAAP consistently applied (subject in
the case of interim financial statements to normal recurring year-end
adjustments that are not material). As of their respective dates, such reports
filed with the SEC will comply in all material respects with the Securities
Laws and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
Laws applicable to such reports.
ARTICLE 8
Additional Agreements
8.1 Registration Statement; Stockholder Approval. As soon as reasonably
practicable after execution of this Agreement, NDC shall prepare and file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and
take any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of NDC Common
Stock upon consummation of the Merger. Source shall cooperate in the
preparation and filing
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of the Registration Statement and shall furnish all information concerning it
and the holders of its capital stock as NDC may reasonably request in
connection with such action. Source shall call Stockholders' Meetings for the
holders of Source Common Stock and Source Preferred Stock, to be held as soon
as reasonably practicable after the Registration Statement is declared
effective by the SEC, for the purpose of voting upon adoption of this
Agreement and such other related matters as it deems appropriate. In
connection with such Stockholders' Meetings, (i) Source shall prepare and mail
a notice of meeting to its stockholders, (ii) Newco and NDC shall furnish to
Source all information that Source may reasonably request in preparation of
such notice of meeting, (iii) the Board of Directors of Source shall recommend
to its stockholders the approval of the matters submitted for approval,
subject only to the Board of Directors' legal obligations (if any) as
directors of Source, and (iv) the Board of Directors and officers of Source
shall use their reasonable efforts to obtain such stockholders' approval. NDC
and Source shall make all necessary filings with respect to the Merger under
the Securities Laws.
8.2 Exchange Listing. NDC shall use its reasonable efforts to list, prior to
the Effective Time, on the NYSE, subject to official notice of issuance, the
shares of NDC Common Stock to be issued to the holders of Source Common Stock
pursuant to the Merger, and NDC shall give all notices and make all filings
with the NYSE required in connection with the transactions contemplated
herein.
8.3 Applications; Antitrust Notification. NDC shall promptly prepare and
file, and Source shall cooperate in the preparation and, where appropriate,
filing of, applications with all Regulatory Authorities having jurisdiction
over the transactions contemplated by this Agreement seeking the requisite
Consents necessary to consummate the transactions contemplated by this
Agreement. To the extent required by the HSR Act, each of the Parties will
promptly file with the United States Federal Trade Commission and the United
States Department of Justice the notification and report form required for the
transactions contemplated hereby and any supplemental or additional
information which may reasonably be requested in connection therewith pursuant
to the HSR Act and will comply in all material respects with the requirements
of the HSR Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
8.4 Filings with State Offices. Upon the terms and subject to the conditions
of this Agreement, Source shall execute and file the Certificate of Merger
with the Secretary of State of the State of Delaware in connection with the
Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use,
and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause
to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
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(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the
other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except
in furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Source shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
Acquisition Proposal with respect to Source to preserve the confidentiality of
the information relating to the Source Entities provided to such Persons and
their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and
which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other
Party or which has had or is reasonably likely to have a Source Material
Adverse Effect or a NDC Material Adverse Effect, as applicable.
8.7 Press Releases. Prior to the Effective Time, Source and NDC shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no Source Entity nor any Stockholder nor any
Affiliate thereof nor any Representatives thereof retained by any Source
Entity shall directly or indirectly solicit any Acquisition Proposal by any
Person. Except to the extent the Board of Directors of Source, after having
consulted with and considered the advice of outside counsel, reasonably
determines in good faith that the failure to take such actions would
constitute a breach of fiduciary duties of the members of such Board of
Directors to Source's stockholders under applicable law, no Source Entity, any
Stockholder or any Affiliate or Representative thereof shall furnish any non-
public information that it is not legally obligated to furnish, negotiate with
respect to, or enter into any Contract with respect to, any Acquisition
Proposal, but Source may communicate information about such an Acquisition
Proposal to its stockholders if and to the extent that it is required to do so
in order to comply with its legal obligations as advised by outside counsel.
Each Stockholder and Source shall promptly advise NDC following the receipt of
any Acquisition Proposal and the details thereof, and advise NDC of any
developments with respect to such Acquisition Proposal promptly upon the
occurrence thereof. Each Stockholder and Source shall (i) immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and (ii) direct and use its reasonable efforts to cause all of its
Affiliates and Representatives not to engage in any of the foregoing.
8.9 Tax Treatment. NDC undertakes and agrees to use its reasonable efforts
to cause the Merger, and to take no action which would cause the Merger not,
to qualify for or as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code for federal income tax purposes.
8.10 State Takeover Laws. Each Source Entity shall take all necessary steps
to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
Takeover Law, including Section 203 of the DGCL.
8.11 Charter Provisions. Each Source Entity shall take all necessary action
to ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any Person under the Certificate of
Incorporation, Bylaws or other governing instruments of any Source Entity or
restrict or impair the ability of NDC or any of its
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Subsidiaries to vote, or otherwise to exercise the rights of a stockholder
with respect to, shares of any Source Entity that may be directly or
indirectly acquired or controlled by them.
8.12 Agreement of Affiliates. Source has disclosed in Section 8.12 of the
Source Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of Source for purposes of Rule 145 under the 1933 Act. Source
shall use its reasonable efforts to cause each such Person to deliver to NDC
not later than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 3, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Source Common
Stock or Source Preferred Stock held by such Person except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of NDC Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder. NDC shall
be entitled to place restrictive legends upon certificates for shares of NDC
Common Stock issued to affiliates of Source pursuant to this Agreement to
enforce applicable provisions of Law. NDC shall not be required to maintain
the effectiveness of the Registration Statement under the 1933 Act for the
purposes of resale of NDC Common Stock by such affiliates.
8.13 Employee Benefits and Contracts. Following The Effective Time, NDC
shall provide generally to officers and employees of the Source Entities
employee benefits under employee benefit and welfare plans on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the NDC Entities to their similarly situated officers
and employees. For purposes of participation, vesting and (except in the case
of NDC retirement plans) benefit accrual under NDC's employee benefit plans,
the service of the employees of the Source Entities prior to the Effective
Time shall be treated as service with a NDC Entity participating in such
employee benefit plans. NDC also shall cause the Surviving Corporation and its
Subsidiaries to honor in accordance with their terms all employment,
severance, consulting and other compensation Contracts disclosed in Section
8.13 of the Source Disclosure Memorandum to NDC between any Source Entity and
any current or former director, officer, or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under the Source Benefit Plans. If so advised by
NDC at least 30 days prior to the Effective Time, Source, on behalf of itself
and each Source Entity, shall terminate its participation in the Source
Informatics America, PMSI Scott-Levin, and Walsh America Retirement Plan (the
"401(k) Plan"), effective no later than the day preceding the Effective Time.
The amendment to the 401(k) Plan which effects such termination shall be
adopted no later than ten (10) days prior to the Effective Time. Immediately
following its adoption, Source shall provide NDC with a copy of such amendment
which (i) terminates Source's participation in the plan, (ii) fully vests
employees of each Source Entity in their account balances under the 401(k)
Plan as of the effective date of the termination; and (iii) provides for lump
sum distributions (which shall be "eligible rollover distributions," within
the meaning of Section 402(c)(4) of the Internal Revenue Code) of the
participants' accrued benefits as soon as practicable following Source's or
its successor's receipt of a letter from the Internal Revenue Service to the
effect that the Source Entities' termination of participation in the 401(k)
Plan and the subsequent distribution of the participants' accounts thereunder
does not adversely affect the 401(k) Plan's qualified status under Section
401(a) of the Internal Revenue Code. The effectiveness of Source's termination
of its participation in the 401(k) Plan may be contingent upon the receipt of
such a letter from the IRS. Under no circumstances may an employee of any
Source Entity, prior to the receipt of such a determination letter, receive a
distribution from the 401(k) Plan on account of Source's termination of its
participation in the plan.
8.14 Indemnification.
(a) Except as set forth in the Waivers, for a period of six years after the
Effective Time, NDC shall, and shall cause the Surviving Corporation to,
indemnify, defend and hold harmless the present and former directors,
officers, employees and agents of the Source Entities (each, an "Indemnified
Party") against all Liabilities arising out of actions or omissions arising
out of the Indemnified Party's service or services as directors, officers,
employees or agents of Source or, at Source's request, of another corporation,
partnership, joint venture, trust or other enterprise occurring at or prior to
the Effective Time to the fullest extent permitted under Delaware Law and by
Source's Certificate of Incorporation and Bylaws as in effect on the date
hereof, including provisions
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relating to advances of expenses incurred in the defense of any Litigation and
whether or not any NDC Entity is insured against any such matter. Without
limiting the foregoing, in any case in which approval by the Surviving
Corporation is required to effectuate any indemnification, the Surviving
Corporation shall direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel
mutually agreed upon between NDC and the Indemnified Party.
(b) NDC shall, or shall cause the Surviving Corporation to, use its
reasonable efforts (and Source shall cooperate prior to the Effective Time in
these efforts) to maintain in effect for a period of three years after the
Effective Time Source's existing directors' and officers' liability insurance
policy (provided that NDC may substitute therefor (i) policies of at least the
same coverage and amounts containing terms and conditions which are
substantially no less advantageous or (ii) with the consent of Source given
prior to the Effective Time, any other policy) with respect to claims arising
from facts or events which occurred prior to the Effective Time and covering
persons who are currently covered by such insurance; provided, that neither
NDC nor the Surviving Corporation shall be obligated to make aggregate premium
payments for such three-year period in respect of such policy (or coverage
replacing such policy) which exceed, for the portion related to Source's
directors and officers, 150% of the annual premium payments on Source's
current policy in effect as of the date of this Agreement (the "Maximum
Amount"). If the amount of the premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, NDC shall use its reasonable
efforts to maintain the most advantageous policies of directors' and officers'
liability insurance obtainable for a premium equal to the Maximum Amount.
Prior to the Closing Date, NDC shall provide Source with an estimate of the
costs associated with maintaining a directors' and officers' liability
insurance policy as discussed above, which estimate shall have been prepared
by an independent third party and which amount shall be listed as a
Transaction Expense on Schedule 1 hereof.
(c) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 8.14, upon learning of any such Liability or Litigation,
shall promptly notify NDC thereof. In the event of any such Litigation
(whether arising before or after the Effective Time), (i) NDC or the Surviving
Corporation shall have the right to assume the defense thereof and neither NDC
nor the Surviving Corporation shall be liable to such Indemnified Parties for
any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof,
except that if NDC or the Surviving Corporation elects not to assume such
defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between NDC or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and NDC or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, that NDC and
the Surviving Corporation shall be obligated pursuant to this paragraph (c) to
pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, (ii) the Indemnified Parties will cooperate in the defense of
any such Litigation, and (iii) neither NDC nor the Surviving Corporation shall
be liable for any settlement effected without its prior written consent; and
provided further that neither NDC nor the Surviving Corporation shall have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall determine, and such determination shall have become final,
that the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable Law.
(d) If NDC or the Surviving Corporation or any successors or assigns shall
consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consolidation or merger or shall
transfer all or substantially all of its assets to any Person, then and in
each case, proper provision shall be made so that the successors and assigns
of NDC or the Surviving Corporation shall assume the obligations set forth in
this Section 8.14.
(e) The provisions of this Section 8.14 are intended to be for the benefit
of and shall be enforceable by, each Indemnified Party and its respective
heirs and representatives.
8.15 Transaction Expenses. NDC agrees that it will cause Source to pay the
Transaction Expenses when due and payable.
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ARTICLE 9
Conditions Precedent to Obligations to Consummate
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 12.6:
(a) Stockholder Approval. The stockholders of Source shall have adopted
this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law or by
the provisions of any governing instruments. The stockholders of Source
shall have agreed to terminate, without recourse, the Source Common
Stockholders Agreement and the Source Preferred Stockholders Agreement, as
applicable, as of the Effective Time.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Board of Directors of NDC would so
materially adversely impact the economic or business assumptions of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such Party would not, in its reasonable judgment,
have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b)) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Source
Material Adverse Effect or a NDC Material Adverse Effect, as applicable. No
Consent so obtained which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner which in
the reasonable judgment of the Board of Directors of NDC would so
materially adversely impact the economic or business assumptions of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such Party would not, in its reasonable judgment,
have entered into this Agreement.
(d) Legal Proceedings. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any Law or Order (whether temporary, preliminary or permanent)
or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under state
securities Laws or the 1933 Act or 1934 Act relating to the issuance or
trading of the shares of NDC Common Stock issuable pursuant to the Merger
shall have been received.
(f) Exchange Listing. The shares of NDC Common Stock issuable pursuant to
the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
9.2 Conditions to Obligations of NDC. The obligations of NDC to perform this
Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by NDC pursuant to Section 12.6(a):
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of Source set forth in
this Agreement shall be assessed as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties
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which are confined to a specified date shall speak only as of such date).
The representations and warranties set forth in Section 5.3 shall be true
and correct (except for inaccuracies which are de minimus in amount). The
representations and warranties set forth in Sections 5.18, 5.19, and 5.20
shall be true and correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of Source set forth in
this Agreement (including the representations and warranties set forth in
Sections 5.3, 5.18, 5.19, and 5.20) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Source Material
Adverse Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Source to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. Source shall have delivered to NDC (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to Source and in Section
9.2(a) and 9.2(b) have been satisfied, and (ii) certified copies of
resolutions duly adopted by Source's Board of Directors and stockholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, all in such reasonable detail as
NDC and its counsel shall request.
(d) Opinion of Counsel. NDC shall have received an opinion of Reboul,
MacMurray, Hewitt, Maynard & Kristol, counsel to Source, dated as of the
Closing, in form reasonably satisfactory to NDC, as to the matters set
forth in Exhibit 4.
(e) Employment Agreements. Each of the persons identified in Section
9.2(e) of the Source Disclosure Memorandum shall have executed and
delivered to NDC an employment agreement on terms substantially consistent
with those set forth on Exhibit 5 (collectively, the "Employment
Agreements").
(f) Noncompetition Agreements. Each of the persons identified in Section
9.2(f) of the Source Disclosure Memorandum shall have executed and
delivered to NDC a noncompetition agreement in substantially the form of
Exhibit 6 (collectively, the "Noncompetition Agreements").
(g) PMSI Agreement. Each and all of the agreements and covenants of the
parties to the PMSI Agreement to be performed and complied with shall be
duly performed and complied with, or duly waived by the appropriate party
thereto, prior to or substantially simultaneously with the Effective Time.
All conditions to the closing of the transactions contemplated under the
PMSI Agreement shall have been satisfied or waived and the consummation of
such transactions shall have occurred concurrently with the Closing.
(h) Additional Agreements. Each of the following agreements, in the form
attached hereto as an Exhibit, with such additions and changes as may be
approved by NDC and all parties thereto, shall have been executed and
delivered to NDC:
(i)Source Europe License Agreement--Exhibit 7.
(ii)East Asia License Agreement--Exhibit 8
(ii)Source Europe Transition Services Agreement--Exhibit 9.
(iii)Assignment of Lease for Source property in Newtown, PA--Exhibit
10.
(iv)Sublease for use of property in Newtown, PA--Exhibit 11.
(v)Sublease for use of property in Phoenix, AZ--Exhibit 12.
(vi)SL Services Agreement--Exhibit 13.
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(i) Stockholder Dissent. Less than 10% of the holders of Source Preferred
Stock or Source Common Stock shall have perfected his dissenters' rights
pursuant to Section 3.6 hereof and Section 262 of the DGCL.
(j) Indemnification Waivers. Each director and officer of Source shall
have executed and delivered to NDC Waivers in substantially the form of
Exhibit 14 which will provide that such director or officer release their
rights of indemnification under the bylaws of Source or Sub or the DGCL or
otherwise with respect to claims arising from their acting or failing to
act in connection with the Divestiture or with the allocation of
consideration to be paid by NDC pursuant to the transactions contemplated
by this Agreement and the PMSI Agreement, except and to the extent such is
covered by directors' and officers' insurance.
(k) European Contract Releases. Source shall have been released from any
and all obligations under the European Contracts to the reasonable
satisfaction of NDC.
(l) Source Divestiture Agreement. Each and all of the agreements and
covenants of the parties to the Source Divestiture Agreement to be
performed and complied with shall be duly performed and complied with in
all material respects prior to or substantially simultaneous with the
Closing. All conditions to the closing of the transactions contemplated
under the Source Divestiture Agreement shall have been satisfied or waived
and the consummation of such transactions shall have occurred concurrently
with the Closing.
(m) Source Options and Warrants. Source shall have secured the
cancellation of all outstanding options and warrants to purchase shares of
Source Common Stock and shall provide to NDC a schedule of the number of
Option Shares payable to the holders of such options and warrants in
consideration of such cancellation.
9.3 Conditions to Obligations of Source. The obligations of Source to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by Source pursuant to Section 12.6(b):
(a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of NDC set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of NDC set
forth in Sections 6.3, 6.4 and 6.11 shall be true and correct in all
material respects. There shall not exist inaccuracies in the
representations and warranties of NDC set forth in this Agreement
(including the representations and warranties set forth in Sections 6.3,
6.4 and 6.11) such that the aggregate effect of such inaccuracies has, or
is reasonably likely to have, a NDC Material Adverse Effect; provided that,
for purposes of this sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse
Effect" or to the "Knowledge" of any Person shall be deemed not to include
such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of NDC to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. NDC shall have delivered To Source (i) a certificate,
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to NDC and in Section 9.3(a)
and 9.3(b) have been satisfied, and (ii) certified copies of resolutions
duly adopted by NDC's Board of Directors and Sub's Board of Directors and
sole stockholder evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as Source and its counsel shall request.
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(d) Opinion of Counsel. Source shall have received an opinion of either
the General Counsel of NDC or Alston & Bird LLP, counsel to NDC, dated as
of the Effective Time, in form reasonably acceptable to Source, as to the
matters set forth in Exhibit 15.
ARTICLE 10
Indemnification
10.1 Agreement of Indemnitors to Indemnify. Subject to the terms and
conditions of this Article 10, Indemnitors jointly and severally agree to
indemnify, defend, and hold harmless Indemnitees, and each of them, from,
against, for and in respect of any and all Losses asserted against, or paid,
suffered or incurred by, an Indemnitee and resulting from, based upon, or
arising out of:
(a) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any Indemnitor or Source contained in or made
pursuant to this Agreement or in any certificate, Schedule, or Exhibit
furnished by Indemnitors or Source in connection herewith (except that
Source shall not be obligated to indemnify NDC for Losses arising out of
the termination or cancellation of a Source Contract by a third party prior
to Closing; provided that such termination or cancellation was not due to
any breach of such Contract by Source), and for purposes of this Section
10.1(a) any qualification of such representations and warranties by
reference to the materiality of matters stated therein or as to matters
having or not having a "Material Adverse Effect,", and any limitation of
such representations and warranties as being "to the knowledge of," or
"known to" or words of similar effect, shall be disregarded, in determining
any inaccuracy, untruth, incompleteness or breach thereof;
(b) a breach of or failure to perform any covenant or agreement of
Indemnitors or Source made in this Agreement;
(c) any and all Taxes arising out of or associated with the Divestiture,
as provided in Section 7.1(b) and determined as provided in Section 10.12;
(d) any and all Taxes arising out of or associated with the matters set
forth on Section 5.8(a)(ii) of the Source Disclosure Memorandum to the
extent that, after using commercially reasonable efforts, NDC has been
unable to collect such amounts from Walsh International Inc. or the
customers involved in the transactions resulting in such Taxes; provided
that NDC shall not pay such amounts to the applicable governmental
authorities without direct assessment, or similar notice, from such
authority directing payment thereof; or
(e) any and all Losses relating to the matter set forth in Section
5.16(2) of the Source Disclosure Memorandum.
10.2 Procedures for Indemnification.
(a) An Indemnification Claim shall be made by an Indemnitee by delivery of a
written notice to the Stockholder Representative requesting indemnification
and specifying the basis on which indemnification is sought and the amount of
asserted Losses and, in the case of a Third Party Claim, containing (by
attachment or otherwise) such other information as such Indemnitee shall have
concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the procedures
set forth in Section 10.3 shall be observed by the Indemnitee and the
Stockholder Representative.
(c) If the Indemnification Claim involves a matter other than a Third Party
Claim, the Stockholder Representative shall have 30 days to object to such
Indemnification Claim by delivery of a written notice of such objection to
such Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute a final and binding acceptance of
the Indemnification Claim by the Stockholder Representative on behalf of all
Indemnitors, and the Indemnification Claim shall be paid in accordance with
subsection (d) hereof. If an objection is timely interposed by the Stockholder
Representative and the dispute is
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not resolved by such Indemnitee and the Stockholder Representative within 15
days from the date the Indemnitee receives such objection, such dispute shall
be resolved by arbitration as provided in Section 10.11.
(d) Upon determination of the amount of an Indemnification Claim, whether by
agreement between the Stockholder Representative and the Indemnitee or by an
arbitration award or by any other final adjudication, such Indemnification
Claim shall be paid out of the Stock Escrow pursuant to the provisions of the
Escrow Agreement.
10.3 Third Party Claims. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the
following terms and conditions:
(a) The Indemnitee shall give the Stockholder Representative written
notice of a Third Party Claim promptly after receipt by the Indemnitee of
notice thereof, and the Stockholder Representative, on behalf of the
Indemnitors, may undertake the defense, compromise and settlement thereof
by representatives of its own choosing reasonably acceptable to the
Indemnitee. The failure of the Indemnitee to notify the Stockholder
Representative of such claim shall not relieve the Indemnitors of any
liability that they may have with respect to such claim except to the
extent the Stockholder Representative demonstrates that the defense of such
claim is prejudiced by such failure. The assumption of the defense,
compromise and settlement of any such Third Party Claim by the Stockholder
Representative shall be an acknowledgment of the obligation of the
Indemnitors to indemnify the Indemnitee with respect to such claim
hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at its sole cost
and expense. If, however, the Stockholder Representative fails or refuses
to undertake the defense of such Third Party Claim within ten (10) days
after written notice of such claim has been given to the Stockholder
Representative by the Indemnitee, the Indemnitee shall have the right to
undertake the defense, compromise and settlement of such claim with counsel
of its own choosing. In the circumstances described in the preceding
sentence, the Indemnitee shall, promptly upon its assumption of the defense
of such claim, make an Indemnification Claim as specified in Section 10.2
which shall be deemed an Indemnification Claim that is not a Third Party
Claim for the purposes of the procedures set forth herein. For purposes of
this paragraph, the Stockholder Representative shall be deemed to have
received notice of the claim specified in Section 5.16(2) of the Source
Disclosure Memorandum and to have agreed to assume the defense thereof
following the Closing; provided, however, that such claim is still subject
to the provisions of Section 10.7 hereof.
(b) If, in the reasonable opinion of the Indemnitee, any Third Party
Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations,
assets, properties or prospects of the Indemnitee (including, without
limitation, the administration of the tax returns and responsibilities
under the tax laws of the Indemnitee), the Indemnitee shall have the right
to control the defense, compromise and settlement of such Third Party Claim
undertaken by the Stockholder Representative, and the costs and expenses of
the Indemnitee in connection therewith shall be included as part of the
indemnification obligations of the Indemnitors hereunder. If the Indemnitee
shall elect to exercise such right, the Stockholder Representative shall
have the right to participate in, but not control, the defense, compromise
and settlement of such Third Party Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted liability
of the Indemnitors under this Article shall be made without the prior
written consent by or on behalf of the Stockholder Representative, which
consent shall not be unreasonably withheld or delayed. Consent shall be
presumed in the case of settlements of $20,000 or less where the
Stockholder Representative has not responded within five business days of
notice of a proposed settlement. If the Stockholder Representative assumes
the defense of such a Third Party Claim, (a) no compromise or settlement
thereof may be effected by the Stockholder Representative without the
Indemnitee's consent unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any person and no effect
on any other claim that may be made against the Indemnitee, (ii) the sole
relief provided is monetary damages that are paid in full by the
Indemnitors, and (iii) the compromise or settlement includes, as an
unconditional term thereof, the giving by the claimant or the plaintiff to
the Indemnitee of a release, in form and substance satisfactory to the
Indemnitee, from all
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liability in respect of such Third Party Claim, and (b) the Indemnitee
shall have no liability with respect to any compromise or settlement
thereof effected without its consent.
(d) In connection with the defense, compromise or settlement of any Third
Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may
reasonably be related to any such claim or action, shall provide access to
the counsel, accountants and other representatives of each party during
normal business hours to all properties, personnel, books, tax records,
contracts, commitments and all other business records of such other party
and will furnish to such other party copies of all such documents as may
reasonably be requested (certified, if requested).
10.4 Other Rights and Remedies Not Affected. The rights of the Indemnitees
under this Article 10 are independent of and in addition to such rights and
remedies as the Indemnitees may have at law or in equity or otherwise based
upon any inaccuracy, untruth, incompleteness or breach of any representation
or warranty of any Indemnitor contained herein or in any certificate, schedule
or exhibit furnished by such party in connection herewith, or based upon the
failure of an Indemnitor to perform any covenant, agreement or undertaking
required by the terms hereof to be performed by such Indemnitor, including
without limitation the right to seek specific performance, recession or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
10.5 Survival. Subject to the time limitations set forth in Section 10.6
below, all representations, warranties and agreements contained in this
Agreement or in any certificate delivered pursuant to this Agreement shall
survive the Closing notwithstanding any investigation conducted with respect
thereto or any knowledge acquired as to the accuracy or inaccuracy of any such
representation or warranty.
10.6 Time Limitations. The Indemnitors will have no liability to the
Indemnitees under or in connection with a breach of any of the
representations, warranties, covenants or agreements made or to be performed
by the Indemnitors or Source contained in this Agreement unless written notice
asserting an Indemnification Claim based thereon is given to the Stockholder
Representative prior to August 31, 1999.
10.7 Limitations as to Amount.
(a) Indemnitors shall have no liability with respect to the matters
described in Section 10.1 (other than the agreements in Sections 3.2 and 3.4)
until the total of all Losses with respect thereto exceeds $200,000 in which
event Indemnitors shall be obligated to indemnify the Indemnitees as provided
in this Article 10 for all such Losses; provided, however, that each
individual claim of $10,000 or less shall not be indemnifiable, and shall not
be includable in determining whether the $200,000 threshold has been reached.
(b) In no event shall the aggregate liability of the Indemnitors under this
Article 10 exceed the lesser of (i) the Aggregate Value (as defined in the
Escrow Agreement) of the Indemnification Escrow Amount (as defined in the
Escrow Agreement), and (ii) $20,000,000.
10.8 Tax Effect and Insurance. The liability of the Indemnitors with respect
to any Indemnification Claim shall be reduced by the tax benefit actually
realized and any insurance proceeds received by the Indemnitees as a result of
any Losses upon which such Indemnification Claim is based, and shall include
any tax detriment actually suffered by the Indemnitees as a result of such
Losses or the claims hereunder. The amount of any such tax benefit or
detriment shall be determined by taking into account the effect, if any and to
the extent determinable, of timing differences resulting from the acceleration
or deferral of items of gain or loss resulting from such Losses and shall
otherwise be determined so that payment by the Indemnitors of the
Indemnification Claim, as adjusted to give effect to any such tax benefit or
detriment, will make the Indemnitee as economically whole as is reasonably
practical with respect to the Losses upon which the Indemnification Claim is
based. Any dispute as to the amount of such tax benefit or detriment shall be
resolved by arbitration as provided in Section 10.11 of this Agreement.
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10.9 Subrogation. Upon payment in full of any Indemnification Claim, whether
such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitors
shall be subrogated to the extent of such payment to the rights of the
Indemnitee against any person or entity with respect to the subject matter of
such Indemnification Claim or Third Party Claim.
10.10 Appointment of Stockholder Representative. Each Indemnitor constitutes
and appoints the Stockholder Representative as his or her true and lawful
attorney-in-fact to act for and on behalf of such Indemnitor in all matters
relating to or arising out of this Article 10 and the liability or asserted
liability of such Indemnitor hereunder, including specifically, but without
limitation, accepting and agreeing to the liability of such Indemnitor with
respect to any Indemnification Claim, objecting to any Indemnification Claim,
disputing the liability of such Indemnitor, or the amount of such liability,
with respect to any Indemnification Claim and prosecuting and resolving such
dispute as herein provided, accepting the defense, compromise and settlement
of any Third Party Claim on behalf of such Indemnitor or refusing to accept
the same, settling and compromising the liability of such Indemnitor
hereunder, instituting and prosecuting such actions (including arbitration
proceedings) as the Stockholder Representative shall deem appropriate in
connection with any of the foregoing, retaining counsel, accountants,
appraisers and other advisers in connection with any of the foregoing, all for
the account of the Indemnitor, such Indemnitor agreeing to be fully bound by
the acts, decisions and agreements of the Stockholder Representative taken and
done pursuant to the authority herein granted. Each Indemnitor hereby agrees
to indemnify and to save and hold harmless the Stockholder Representative from
any liability incurred by the Stockholder Representative based upon or arising
out of any act, whether of omission or commission, of the Stockholder
Representative pursuant to the authority herein granted, other than acts,
whether of omission or commission, of the Stockholder Representative that
constitute gross negligence or willful misconduct in the exercise by the
Stockholder Representative of the authority herein granted.
10.11 Arbitration. All disputes arising under this Article 10 (other than
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at
issue and selected by the Stockholder Representative and NDC in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitration shall be held in such place in Washington, D.C. as may be
specified by the arbitrator (or any place agreed to by the Stockholder
Representative, NDC and the arbitrator). The decision of the arbitrator shall
be final and binding as to any matters submitted under this Article 10;
provided, however, if necessary, such decision and satisfaction procedure may
be enforced by either the Stockholder Representative or NDC in any court of
record having jurisdiction over the subject matter or over any of the parties
to this Agreement. All costs and expenses incurred in connection with any such
arbitration proceeding (including reasonable attorneys fees) shall be borne by
the party against which the decision is rendered, or, if no decision is
rendered, such costs and expenses shall be borne equally by the Indemnitors as
one party and the Indemnitees as the other party. If the arbitrator's decision
is a compromise, the determination of which party or parties bears the costs
and expenses incurred in connection with any such arbitration proceeding shall
be made by the arbitrator on the basis of the arbitrator's assessment of the
relative merits of the parties' positions.
10.12 Divestiture Taxes.
(a) For purposes of 10.1(c) above, a "Tax" shall mean any federal, state,
local or foreign Tax and shall be determined by assuming (i) that the only net
operating loss available to offset income or gain related to the Divestiture
is equal to 30% of the combined net operating loss of the Source Entities
computed as of the Closing Date (determined by assuming that Tax Returns would
have been filed for a period ending on the Closing Date and exclusive of any
loss related to the Divestiture), and (ii) that such Tax attributable to the
Divestiture is represented by the difference between (x) the Tax liability of
Source for a hypothetical reporting period ending on the Closing Date and
including the Divestiture computed based on the assumption contained in
paragraph (i), and (y) the Tax liability of Source for such a period computed
assuming that no taxable income or gain had resulted from the Divestiture.
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(b) Tax Returns for any period including the Divestiture shall be prepared
by NDC and subject to review and approval of the Stockholder Representative
with respect to the treatment of the Divestiture in the Tax Returns and the
determination of the combined net operating loss of the Source Entities.
(c) The Stockholder Representative and NDC agree to cooperate in a
commercially reasonable manner in the preparation and filing of the Tax
Returns for Source for any period including the Divestiture such that such Tax
Returns shall be filed within the applicable filing deadlines.
ARTICLE 11
Termination
11.1 Termination. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the stockholders of Source,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of NDC and Source; or
(b) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any representation or warranty contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach and which
breach is reasonably likely, in the opinion of the non-breaching Party, to
have, individually or in the aggregate, a Source Material Adverse Effect or
a NDC Material Adverse Effect, as applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Source fail to vote their approval of the matters relating
to this Agreement and the transactions contemplated hereby at the
Stockholders' Meeting where such matters were presented to such
stockholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall not have been
consummated by January 31, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by the Party electing to terminate pursuant to
this Section 11.1(e); or
(f) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
11.1(e); or
(g) By NDC, in the event that the Board of Directors of Source shall have
failed to reaffirm its approval of the Merger and the transactions
contemplated by this Agreement (to the exclusion of any other Acquisition
Proposal), or shall have resolved not to reaffirm the Merger, or shall have
affirmed, recommended or authorized entering into any other Acquisition
Proposal or other transaction involving a merger, share exchange,
consolidation or transfer of substantially all of the Assets of Source; or
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<PAGE>
(h) By Source if the Average Closing Price on the Determination Date of
shares of NDC Common Stock shall be less than the Lower Threshold Amount;
subject, however, to the following three sentences. If Source elects to
refuse to consummate the Merger pursuant to this Section 11.1(h), it shall
give written notice thereof to NDC not later than two trading days
following the Determination Date. During the five-day period commencing
with its receipt of such notice, NDC shall have the option, in its sole
discretion, to elect to revise the Common Exchange Ratios to equal that
fraction of a share of NDC Common Stock (rounded to the nearest ten
thousandth of a share) obtained by dividing the product of the Common Base
Exchange Ratio or the Common Escrow Exchange Ratio, as the case may be, and
the Lower Threshold Price by the Average Closing Price at the Determination
Date. If NDC makes an election contemplated by the preceding sentence,
within such five-day period, it shall give prompt written notice to Source
of such election and the revised Common Exchange Ratios, whereupon the
condition to consummation provided in this Section 11.1(h) shall be deemed
to be satisfied and this Agreement shall remain in effect in accordance
with its terms (except as the Common Exchange Ratios shall have been so
modified), and any references in this Agreement to "Common Exchange Ratios"
shall thereafter be deemed to refer to the Common Exchange Ratios as
adjusted pursuant to this Section 11.1(h); or
(i) By Source in the event that Source has entered into negotiations with
a third party in accordance with Sections 8.1 and 8.8 of this Agreement,
and pursuant to the continuing fiduciary duties of the Source's Board of
Directors as required by applicable Law, Source has entered into a binding
Acquisition Proposal with a third party.
11.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 11.1, this Agreement shall become void
and have no effect, except that (i) the provisions of this Section 11.2 and
Article 12 and Section 8.6(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 11.1(b), 11.1(c) or
11.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving
rise to such termination.
ARTICLE 12
Miscellaneous
12.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"Accrued Bonuses" shall mean the amount equal to that percentage of
budgeted annual bonuses for Source's fiscal year 1998 equal to the ratio of
the earnings of Source through the date of calculation to budgeted earnings
for the full fiscal year. All budgeted amounts used herein to be as set
forth in Schedule 5.5 of the Source Disclosure Memorandum.
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the acquisition of
a substantial equity interest in, or a substantial portion of the assets
of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
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<PAGE>
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"Amended and Restated Alpha Database License Agreement" shall mean that
certain Amended and Restated Alpha Database License Agreement dated July 1,
1994 by and among Walsh International Holdings Limited and Walsh America
Limited and PMSI and all customer, data provider and service contracts,
agreements or understandings relating thereto.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of
such Person or any Affiliate of such Person and wherever located.
"Average Closing Price" shall mean the average of the daily closing sales
prices of NDC Common Stock as reported on the NYSE Composite Transactions
reporting system (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as chosen by NDC) for the
ten consecutive full trading days in which such shares are traded on the
NYSE ending at the close of trading on the date specified.
"Certificate of Merger" shall mean the Certificate of Merger to be
executed by Source and filed with the Secretary of State of the State of
Delaware relating to the Merger as contemplated by Section 1.1.
"Closing Balance Sheet" shall mean the balance sheet which includes the
consolidated financial position of Source and the Source Subsidiaries as of
the Closing Date delivered to the Stockholder Representative.
"Closing Date" shall mean the date on which the Closing occurs.
"Closing Working Capital" shall mean the Working Capital determined based
on the Closing Balance Sheet.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit,
(ii) any occurrence of any event that with the passage of time or the
giving of notice or both would constitute a breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right of any
Person to exercise any remedy or obtain any relief under, terminate or
revoke, suspend, cancel, or modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to
increase or impose any Liability under, any Contract, Law, Order, or
Permit, where, in any such event, such Default is reasonably likely to
have, individually or in the aggregate, a Source Material Adverse Effect or
a NDC Material Adverse Effect, as applicable.
"Determination Date" shall mean the close of trading on the tenth trading
day immediately preceding the Closing Date.
"DGCL" shall mean the Delaware General Corporation Law.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and
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<PAGE>
Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"),
and other Laws relating to emissions, discharges, releases, or threatened
releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Material.
"Equity Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares of
the capital stock of a Person or by which a Person is or may be bound to
issue additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exhibits" 1 through 15, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"Final Working Capital" shall mean Closing Working Capital (i) as shown
in NDC's calculation delivered pursuant to Section 3.3(a), if no notice of
disagreement with respect thereto is duly delivered pursuant to Section
3.3(b); or (ii) if such a notice of disagreement is delivered, (A) as
agreed by NDC and the Stockholder Representative pursuant to Section 3.3(b)
or (B) in the absence of such agreement, as shown in the independent
accountant's calculation delivered pursuant to Section 3.3(c); provided
that, in no event shall Final Working Capital be (i) more than the
Stockholder Representative's calculation of Closing Working Capital
delivered pursuant to Section 3.3(b), if any, or (ii) less than the lesser
of NDC's calculation of Closing Working Capital delivered pursuant to
Section 3.3(a) or the Stockholder Representatives calculation of Closing
Working Capital delivered pursuant to Section 3.3(b), if any.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title II
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Indemnification Claim" shall mean a claim for indemnification under
Article 10.
"Indemnitees" shall mean NDC, Source and their respective officers,
directors, controlling persons, Affiliates and Representatives.
"Indemnitors" shall mean the Stockholders.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know how, inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Joint Venture Financial Statements" shall mean a balance sheet of the
Joint Venture (including related notes and schedules, if any), and the
related statements of income and cash flows for the Joint Venture
(including related notes and schedules, if any) for the period ended March
31,1997.
"Joint Venture" shall mean the combination of the business conducted in
the United States by Source and its subsidiaries as of the date of this
Agreement and the PMSI Joint Venture Interest.
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<PAGE>
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known after due inquiry by the
chairman, president, chief financial officer, chief accounting officer,
chief operating officer, general counsel, any assistant or deputy general
counsel, or any senior, executive or other vice president or general
manager of such Person and the knowledge of any such persons obtained or
which would have been obtained from a reasonable investigation.
"Law" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to
it), or the transactions contemplated by this Agreement.
"Losses" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including
special and consequential damages), liabilities, costs, and expenses,
including interest, penalties, cost of investigation and defense, and
reasonable attorneys' and other professional fees and expenses.
"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq National Market" shall mean the Nasdaq National Market, a
district tier of The Nasdaq Stock Market operated by The Nasdaq Stock
Market, Inc., a wholly-owned subsidiary of the National Association of
Securities Dealers Automated Quotations System.
"NDC Capital Stock" shall mean, collectively, the NDC Common Stock, the
NDC Preferred Stock and any other class or series of capital stock of NDC.
"NDC Common Stock" shall mean the $0.125 par value common stock of NDC.
"NDC Disclosure Memorandum" shall mean the written information entitled
"National Data Corporation Disclosure Memorandum" delivered prior to the
date of this Agreement to Source describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made unless such disclosure is reasonably
adequate to inform the other party that each matter disclosed would be
responsive to another section of disclosure in the Disclosure Memorandum.
"NDC Entities" shall mean, collectively, NDC and all NDC Subsidiaries.
"NDC Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of NDC as of February 28,
1997, and as of May 31, 1996 and 1995, and the related statements of
income, changes in stockholders' equity, and cash flows (including related
notes and
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schedules, if any) for the nine months ended February 28, 1997, and for
each of the three fiscal years ended May 31, 1996, 1995 and 1994, as filed
by NDC in SEC Documents, and (ii) the consolidated balance sheets of NDC
(including related notes and schedules, if any) and related statements of
income, changes in stockholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect
to periods ended subsequent to February 28, 1997.
"NDC Material Adverse Effect" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence,
has a material adverse impact on (i) the financial position, business, or
results of operations of NDC and its Subsidiaries, taken as a whole, or
(ii) the ability of NDC to perform its obligations under this Agreement or
to consummate the Merger or the other transactions contemplated by this
Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) actions and omissions of NDC (or any of its
Subsidiaries) taken with the prior informed written Consent of Source in
contemplation of the transactions contemplated hereby, and (b) the direct
effects of compliance with this Agreement on the operating performance of
NDC, including expenses incurred by NDC in consummating the transactions
contemplated by this Agreement.
"NDC Preferred Stock" shall mean the $1.00 par value preferred stock of
NDC.
"NDC Rights Agreement" shall mean that certain Rights Agreement, dated
January 18, 1991, between NDC and Wachovia Bank of North Carolina, N.A., as
Rights Agent.
"NDC Rights" shall mean the preferred stock purchase rights issued
pursuant to the NDC Rights Agreement.
"NDC Subsidiaries" shall mean the Subsidiaries of NDC and any corporation
or other organization acquired as a Subsidiary of NDC in the future and
held as a Subsidiary by NDC at the Effective Time.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Operating Property" shall mean any property owned, leased, or operated
by the Party in question or by any of its Subsidiaries or in which such
Party or Subsidiary holds a security interest or other interest (including
an interest in a fiduciary capacity), and, where required by the context,
includes the owner or operator of such property, but only with respect to
such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator
of such facility or property, but only with respect to such facility or
property.
"Party" shall mean either Source or NDC, and "PARTIES" shall mean both
Source and NDC.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may
be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PMSI Joint Venture Interest" shall mean all of the rights, benefits,
obligations and interests of PMSI under the Amended and Restated Alpha
Database License Agreement.
"Preliminary Balance Sheet" shall mean the balance sheet which includes
the consolidated financial position of Source and the Source Subsidiaries
as of the most recent month ending more than ten days prior to the Closing
Date delivered to NDC.
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"Purchase Price" shall mean the total consideration to be paid to the
Stockholders by NDC for the purchase of the Source Common Stock and the
Source Preferred Stock, pursuant to Section 3.1 of this Agreement.
"Registration Statement" shall mean the Registration Statement on Form S-
4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by NDC under the 1933
Act with respect to the shares of NDC Common Stock to be issued to the
stockholders of Source in connection with the transactions contemplated by
this Agreement.
"Regulatory Authorities" shall mean, collectively, the SEC, the NYSE, the
NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other governmental
or regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, commissions, boards or bodies having
jurisdiction over the Parties and their respective Subsidiaries.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a
Person.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Significant Subsidiary" shall mean any present or future consolidated
Subsidiary of the Party in question, the assets of which constitute ten
percent (10%) or more of the consolidated assets of such Party as reflected
on such Party's consolidated statement of condition prepared in accordance
with GAAP.
"Source Balance Sheet" shall mean the balance sheet which includes the
consolidated financial position of Source and the Source Subsidiaries at
March 31, 1997.
"Source Common Stock" shall mean the $0.01 par value common stock of
Source.
"Source Disclosure Memorandum" shall mean the written information
entitled "Source Informatics Inc. Disclosure Memorandum" delivered prior to
the date of this Agreement to NDC describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made unless such disclosure is reasonably
adequate to inform the other party that each matter disclosed would be
responsive to another section of disclosure in the Disclosure Memorandum.
"Source Entities" shall mean, collectively, Source and all Source
Subsidiaries.
"Source Financial Statements" shall mean (i) the consolidated balance
sheet (including related notes and schedules, if any) of Source and its
Subsidiaries as of June 30, 1996, and the related statement of income,
changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for the fiscal year ended June 30, 1996, and (ii)
the consolidated balance sheet of Source and the Source Subsidiaries
(including related notes and schedules, if any) as of March 31, 1997, and
related statement of income and cash flows (including related notes and
schedules, if any) with respect to the nine month period ended March 31,
1997.
"Source Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of the Joint Venture, or (ii) the
ability of Source to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this
Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) actions and omissions of Source (or any of its
Subsidiaries) taken with the prior informed written Consent of NDC in
contemplation of the transactions contemplated hereby, and (b) the direct
effects of compliance with this Agreement on the operating performance of
Source, including expenses incurred by Source in consummating the
transactions contemplated by this Agreement.
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"Source Preferred Stock" shall mean the $1.00 par value preferred stock
of Source.
"Source Subsidiaries" shall mean the Subsidiaries of Source, which shall
include the Source Subsidiaries described in Section 5.4 and any
corporation or other organization acquired as a Subsidiary of Source in the
future and held as a Subsidiary by Source at the Effective Time but which
exclude the Source Divestiture Subsidiaries.
"Stockholder Representative" shall mean a committee comprised of Messrs.
Dennis Turner, Handel Evans and Patrick Welsh.
"Stockholders" shall mean the holders of Source Common Stock.
"Stockholders' Meetings" shall mean either or both, as indicated, of the
meeting of the holders of Source Common Stock and Source Preferred Stock to
be held pursuant to Section 8.1, including any adjournment or adjournments
thereof.
"Sub Common Stock" shall mean the $0.01 par value common stock of Sub.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii)
in the case of partnerships, serves as a general partner, (iii) in the case
of a limited liability company, serves as a managing member, or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof.
"Surviving Corporation" shall mean Source as the surviving corporation
resulting from the Merger.
"Tax Return" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary
group that includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local, or foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposes or required to be withheld by the United States or any
state, county, local or foreign government or subdivision or agency
thereof, including any interest, penalties, and additions imposed thereon
or with respect thereto.
"Third Party Claim" shall mean any Litigation (including, without
limitation, a binding arbitration or an audit by any taxing authority) that
is instituted against an Indemnitee by a Person other than an Indemnitor
and which, if prosecuted successfully, would result in a Loss for which
such Indemnitee is entitled to indemnification hereunder.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Aggregate Cash Amount..................................... Section 3.1(c)
Certificates.............................................. Section 4.1
Closing................................................... Section 1.2
Closing Current Assets.................................... Section 3.3(a)
Closing Current Liabilities............................... Section 3.3(a)
Closing Date.............................................. Section 1.2
Common Base Exchange Ratio................................ Section 3.1(c)
Common Cash Amount........................................ Section 3.1(c)
</TABLE>
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<TABLE>
<S> <C>
Common Escrow Exchange Ratio............................. Section 3.1(c)
Common Exchange Ratio.................................... Section 3.1(c)
Current Asset Allocation................................. Section 3.4(b)
Current Assets........................................... Section 3.2(a)
Current Liabilities...................................... Section 3.2(a)
Disputed Amounts......................................... Section 3.3(c)
Divestiture.............................................. Section 7.1(b)
Effective Time........................................... Section 1.3
Employment Agreements.................................... Section 9.1(k)
ERISA Affiliate.......................................... Section 5.14(b)
Escrow Agreement......................................... Section 4.3
Estimated Current Assets................................. Section 3.2(a)
Estimated Current Liabilities............................ Section 3.2(a)
Estimated Working Capital................................ Section 3.2(a)
Estimated Working Capital Adjustment..................... Section 3.2(c)
European Business........................................ Section 7.1(b)
European Contracts....................................... Section 7.1(b)
Excess Expense........................................... Section 3.1(c)
Exchange Agent........................................... Section 4.1
Expense Schedule......................................... Section 3.1(c)
Final Working Capital Deficit............................ Section 3.4(a)
Final Working Capital Surplus............................ Section 3.4(a)
Indemnified Party........................................ Section 8.14(a)
Lower Threshold Amount................................... Section 3.1(c)
Maximum Amount........................................... Section 8.14
Merger................................................... Section 1.1
NDC SEC Reports.......................................... Section 6.4(a)
Noncompetition Agreements................................ Section 9.2(k)
Option Shares............................................ Section 3.1(c)
Payment Shares........................................... Section 3.1(c)
Preferred Stock Merger Consideration..................... Section 3.1(d)
PMSI Agreement........................................... Section 3.1(c)
Scheduled Stockholders................................... Section 5.3
Source Benefit Plans..................................... Section 5.14
Source Contracts......................................... Section 5.15
Source Divestiture Agreement............................. Section 5.4
Source Divestiture Subsidiaries.......................... Section 7.1(b)
Source ERISA Plan........................................ Section 5.14
Source Intellectual Property............................. Section 5.10
Source Pension Plan...................................... Section 5.14
Stock Escrow............................................. Section 3.1(c)
Takeover Laws............................................ Section 5.19
Threshold Prices......................................... Section 3.1(c)
Total Combined Assets.................................... Section 3.4(b)
Total Current Assets..................................... Section 3.4(b)
Total Current Liabilities................................ Section 3.4(b)
Total Working Capital Deficit............................ Section 3.4(b)
Total Working Capital Surplus............................ Section 3.4(b)
Transaction Expenses..................................... Section 3.1(c)
Upper Threshold Amount................................... Section 3.1(c)
Voting Agreements........................................ Section 5.21
Working Capital.......................................... Section 3.2(a)
</TABLE>
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<PAGE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
12.2 Expenses.
(a) Excluding the Transaction Expenses and except as otherwise provided in
this Section 12.2, each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that each of
the Parties shall bear and pay one-half of the filing fees payable in
connection with the HSR Act.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated pursuant to any of Sections 11.1(c)
(but only on the basis of failure of the agreement provided in Section 8.1
that Source shall call meetings of the Stockholders of Source for the
purpose of voting on the adoption of this Agreement), 11.1(d)(ii) (but only
as it relates to approval of Source's stockholders), or
(ii) if this Agreement is terminated by NDC pursuant to Section 11.1(g),
or
(iii) if this Agreement is terminated by Source pursuant to Section
11.1(i),
and the conditions to the obligations of Source hereunder pursuant to Section
9.1, except for the provisions of Section 9.1(a), and Section 9.3(a) and
9.3(b), have been satisfied, then Source shall promptly pay NDC all documented
out-of pocket costs and expenses of NDC, including costs of counsel,
investment bankers, actuaries and accountants up to a maximum amount of
$750,000.
(c) In addition to the foregoing, if, this Agreement is terminated pursuant
to Section 11.1 (c) (but only on the basis of failure of the agreement
provided in Section 8.1 that Source shall call meetings of the Stockholders of
Source for the purpose of voting on the adoption of this Agreement) or Section
11.1(d)(ii) (but only with respect to approval of the stockholders of Source),
Source shall pay to NDC an amount in cash equal to the sum of $3,000,000,
which sum represents compensation for NDC's loss as the result of the
transactions contemplated by this Agreement not being consummated.
(d) In addition to the foregoing, if, after the date of this Agreement and
within twelve (12) months following any termination of this Agreement by NDC
pursuant to Section 10.1(g) or any termination of this Agreement by Source
pursuant to Section 10.1(i) of this Agreement, any third-party shall acquire,
merge with, combine with, purchase substantially all of the Assets of, or
engage in any other business combination with, or purchase any equity
securities involving an acquisition of 50% or more of the voting stock of
Source, or enter into any binding agreement to do any of the foregoing
(collectively, a "Business Combination"), such third-party that is a party to
the business combination shall pay to NDC, as a condition consummation of the
Business Combination, an amount in cash equal to $3,000,000, which sum
represents additional combination for NDC's loss as a result of the
transactions contemplated by this Agreement not being consummated. In the
event such third-party shall refuse to pay such amounts within ten days of
demand therefore by NDC, the amount shall be an obligation of Source and shall
be paid by Source promptly upon notice to Source by NDC. Notwithstanding the
foregoing, the payment required by this Section 12.2(d) will only come due if
a third party that was involved in discussions or negotiations with Source on
or before the termination of this agreement consummates the Business
Combination.
(e) Nothing contained in this Section 12.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
12.3 Brokers and Finders. Except for Montgomery Securities Corporation as to
Source and except for Lazard Freres & Co. LLC as to NDC, each of the Parties
represents and warrants that neither it nor any of its
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<PAGE>
officers, directors, employees, or Affiliates has employed any broker or
finder or incurred any Liability for any financial advisory fees, investment
bankers' fees, brokerage fees, commissions, or finders' fees in connection
with this Agreement or the transactions contemplated hereby. In the event of a
claim by any broker or finder based upon his or its representing or being
retained by or allegedly representing or being retained by Source or any
Stockholder or by NDC, each of Source and the Stockholders and NDC, as the
case may be, agrees to indemnify and hold the other Party harmless of and from
any Liability in respect of any such claim.
12.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than
as provided in Sections 8.13 and 8.14.
12.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after stockholder approval
of this Agreement has been obtained; provided, that after any such approval by
the holders of Source Common Stock, there shall be made no amendment that
pursuant to Section 251 of the DGCL requires further approval by such
stockholders.
12.6 Waivers.
(a) Prior to or at the Effective Time, NDC, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Source or the Stockholders, to waive or extend the time for the compliance or
fulfillment by Source or the Stockholders of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
the obligations of NDC under this Agreement, except any condition which, if
not satisfied, would result in the violation of any Law. No such waiver shall
be effective unless in writing signed by a duly authorized officer of NDC.
(b) Prior to or at the Effective Time, Source, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
NDC, to waive or extend the time for the compliance or fulfillment by NDC of
any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of Source and the Stockholders
under this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective unless
in writing signed by a duly authorized officer of Source.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
12.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
12.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage
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<PAGE>
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
Source or any Stockholder: Source Informatics Inc.
Suite 912
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5760
Attention: Mr. Warren Hauser, Esq.
Copy to Counsel: Reboul, MacMurray, Hewitt, Maynard &
Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: Mr. Robert A. Schwed, Esq.
NDC: National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Telecopy Number: (404) 728-2990
Attention: E. Michael Ingram, Esq.
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: B. Harvey Hill, Jr., Esq.
12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
12.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
12.11 Captions; Articles and Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this
Agreement.
12.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. No party to this Agreement shall
be considered the draftsman. The parties acknowledge and agree that this
Agreement has been reviewed, negotiated, and accepted by all parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
12.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of
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<PAGE>
the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
12.14 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
National Data Corporation
/s/ E. Michael Ingram
By: _________________________________
Name: E. Michael Ingram
Title: Senior Vice President
Dunkirk, Inc.
/s/ E. Michael Ingram
By: _________________________________
Name: E. Michael Ingram
Title: Senior Vice President
Source Informatics Inc.
/s/ Warren Hauser
By: _________________________________
Name: Warren Hauser
Title: Vice President
A-49
<PAGE>
AMENDMENT NO. ONE TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. ONE (this "Amendment") is made and entered into as of
November 7, 1997, by and among NATIONAL DATA CORPORATION ("NDC"), a Delaware
corporation; DUNKIRK, INC. ("Sub"), a Delaware corporation; and SOURCE
INFORMATICS INC. ("Source"), a Delaware corporation.
PREAMBLE
WHEREAS, NDC, Sub and Source entered into an Agreement and Plan of Merger
dated as of August 20, 1997 (the "Agreement"), which, among other things,
provided that NDC would acquire Source pursuant to the merger of Sub with and
into Source (the "Merger"); and
WHEREAS, pursuant to Section 9.2 (h)(ii) of the Agreement, it is a condition
to NDC's obligation to consummate the Merger that Source and Walsh
International Inc. ("Walsh") execute and deliver to NDC a licensing
arrangement between Source and Walsh relating to operations of Walsh in Asia
(the "East Asia License Agreement"); and
WHEREAS, NDC, Source and Walsh have agreed to terminate negotiations with
respect to the East Asia License Agreement and NDC, Sub and Source have agreed
to remove the consummation of such agreement from the conditions precedent to
consummation of the Merger; and
WHEREAS, NDC, Sub and Source desire to amend the Agreement to reflect the
elimination of such condition; and
WHEREAS, NDC, Sub and Source are of the opinion that the foregoing is in the
best interests of the parties and their respective stockholders.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
A. Section 9.2(h) of Article 9 of the Agreement shall be deleted in its
entirety and replaced with the following:
(H) ADDITIONAL AGREEMENTS. Each of the following agreements, in the form
attached hereto as an Exhibit, with such additions and changes as may be
approved by NDC and all parties thereto, shall have been executed and
delivered to NDC:
(i)Source Europe License Agreement--Exhibit 7.
(ii)Source Europe Transition Services Agreement--Exhibit 8.
(iii)Assignment of Lease for Source property in Newtown, PA--Exhibit 9.
(iv)Sublease for use of property in Newtown, PA--Exhibit 10.
(v)Sublease for use of property in Phoenix, AZ--Exhibit 11.
(vi)SL Services Agreement--Exhibit 12.
B. Section 9.2(j) of Article 9 of the Agreement shall be deleted in its
entirety and replaced with the following:
(J) INDEMNIFICATION WAIVERS. Each director and officer of Source shall
have executed and delivered to NDC Waivers in substantially the form of
Exhibit 13 which will provide that such director or officer release their
rights of indemnification under the bylaws of Source or Sub or the DGCL or
otherwise with respect to claims arising from their acting or failing to
act in connection with the Divestiture or with the allocation of
consideration to be paid by NDC pursuant to the transactions contemplated
by this Agreement and the PMSI Agreement, except and to the extent such is
covered by directors' and officers' insurance.
C. Section 9.3(d) of Article 9 of the Agreement shall be deleted in its
entirety and replaced with the following:
(D) OPINION OF COUNSEL. Source shall have received an opinion of either
the General Counsel of NDC or Alston & Bird LLP, counsel to NDC, dated as
of the Effective Time, in form reasonably acceptable to Source, as to the
matters set forth in Exhibit 14.
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<PAGE>
D. The definition of "Exhibits" in Section 12.1 of Article 12 of the
Agreement shall be deleted in its entirety and replaced with the following:
"EXHIBITS" 1 through 14, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
E. The "List of Exhibits" shall be deleted in its entirety and replaced with
the following:
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. Form of Escrow Agreement. ((S) 4.3).
2. Form of Stockholders' Voting Agreement. ((S) 5.21).
3. Form of agreement of affiliates of Source. ((S) 8.12).
Matters as to which Reboul, MacMurray, Hewitt, Maynard & Kristol will
4. opine. ((S) 9.2(d)).
5. Terms of Employment Agreements. ((S) 9.2(f)).
6. Form of Noncompetition Agreement. ((S) 9.2(g)).
7. Form of Source Europe License Agreement.
8. Form of Source Europe Transition Services Agreement.
9. Form of Assignment of Lease for Source property in Newtown, PA.
10. Form of Sublease for use of property in Newtown, PA.
11. Form of Sublease for use of property in Phoenix, AZ.
12. Form of SL Services Agreement.
13. Form of Waiver. ((S) 9.2(k)).
14. Matters as to which Alston & Bird LLP will opine. ((S) 9.3(d)).
</TABLE>
All capitalized terms contained in this Amendment and no otherwise defined
shall have the meaning ascribed to them in the Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
National Data Corporation
/s/ E. Michael Ingram
By: ____________________________
Name: E. Michael Ingram
Title: Senior Vice President
Dunkirk, Inc.
/s/ E. Michael Ingram
By: ____________________________
Name: E. Michael Ingram
Title: Senior Vice President
Source Informatics Inc.
/s/ Warren J. Hauser
By: ____________________________
Name: Warren J. Hauser
Title: Vice President
A-51
<PAGE>
ANNEX B
DISSENTERS' RIGHTS
B-1
<PAGE>
DELAWARE STATUTORY LAW RELATING TO APPRAISAL RIGHTS
262 Appraisal Rights. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this Section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this Section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a non-stock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Sections 251, 252, 254, 257, 258, 263 or 264 of this
chapter:
(1) Provided, however, that no appraisal rights under this Section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except: (a) shares of stock of the corporation
surviving or resulting from such merger or consolidation, or depository
receipts in respect thereof; (b) shares of stock of any other corporation
or depository receipts in respect thereof, which shares of stock or
depository receipts at the effective date of the merger or consolidation
will be either listed on a national securities exchange or designated as a
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders; (c) cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a. and b. of
this paragraph; or (d) any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this Section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this Section, including those set forth in
subsections (d) and (e), shall apply as nearly as is practicable.
B-2
<PAGE>
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this Section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this Section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all of the shares of the constituent corporation,
and shall include in such notice a copy of this Section; provided that, if
the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date
of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of the notice, demand
in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of
the effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary and assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with the provisions of subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his
B-3
<PAGE>
demand for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by one or more
publications at least one week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publications shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this Section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
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(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this Section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this Section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this Section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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ANNEX C
FORM OF ESCROW AGREEMENT
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ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of ,
1997, by and among National Data Corporation, a Delaware corporation ("NDC")
and , the representative (the "Stockholder Representative") of the common
stockholders of Source Informatics Inc., a Delaware corporation ("Source"),
identified on Schedule I hereto (each a "Stockholder" and collectively the
"Stockholders").
WITNESSETH
Dunkirk, Inc. ("Sub") is a wholly owned subsidiary of NDC and each of NDC
and Sub is a party to an Agreement and Plan of Merger (the "Merger Agreement")
with Source, dated as of August , 1997, pursuant to which Sub has on this
date merged (the "Merger") with and into Source with Source surviving the
Merger and becoming a wholly owned subsidiary of NDC. Pursuant to Section
3.1(c) of the Merger Agreement, the Stockholders each received in exchange for
each share of Source Common Stock, (i) the Common Cash Amount, if any, and the
Payment Shares, and (ii) the contingent right to receive shares of NDC Common
Stock.
Pursuant to the terms of the Merger Agreement, 455,840 shares of NDC Common
Stock, decreased by the number of shares of NDC Common Stock equal to the
Estimated Working Capital Adjustment divided by the Average Closing Price as
of the Closing Date (the "Stock Escrow"), have been distributed to and will be
held by the Escrow Agent pursuant to the terms of this Agreement until
termination of this Agreement as provided herein.
The Stockholders have agreed to adjust the purchase price of their shares of
Source Common Stock pursuant to Section 3.4 of the Merger Agreement, and to
indemnify NDC pursuant to Article 10 of the Merger Agreement.
Now, Therefore, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
Establishment of Escrow
1.1 Escrow Amount. On this date, NDC has delivered an executed stock
certificate in negotiable form representing the Stock Escrow to the Escrow
Agent and hereby names the Stockholder Representative the representative of
the pro rata interests of the Stockholders in the Stock Escrow. The Escrow
Agent acknowledges receipt of the Stock Escrow and agrees to hold and disburse
the Stock Escrow for the benefit of NDC and the Stockholders, as the case may
be, in accordance with the provisions of this Agreement with the same force
and effect as if the Stock Escrow had been delivered by NDC to each
Stockholder and subsequently delivered by such Stockholder to the Escrow
Agent.
1.2 Stockholder Percentage Interests. As soon as practicable after receipt
of executed transmittal materials from all record holders of Source Common
Stock as of the Effective Time, the Escrow Agent shall prepare and deliver to
the Stockholder Representative and NDC a schedule, substantially in the form
of Schedule I hereto, showing for each Stockholder (i) the respective
percentage interest (the "Percentage Interest") of each such Stockholder in
the Stock Escrow, and (ii) the corresponding interest of each Stockholder in
the Working Capital Escrow Amount and the Indemnification Escrow Amount
(hereinafter the "Stockholder Accounts"), initially expressed in shares of NDC
Common Stock, and thereafter, expressed in cash, if any, and shares of NDC
Common Stock. Such schedule shall be revised and re-distributed after any sale
of Escrow Shares or any distribution of any portion of the Escrow Amount
pursuant to this Agreement.
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ARTICLE 2
Definitions
As used in this Agreement, the following terms shall have the following
meanings:
2.1 "Aggregate Value" with respect to either the Working Capital Escrow
Amount or the Indemnification Escrow Amount, as indicated, shall mean the
cash amount, if any, in such escrow and the shares of NDC Common Stock in
such escrow, valued at the Average Closing Price as of the date specified.
2.2 "Distribution Date" shall mean with regard to the Working Capital
Escrow Amount, the date that is ninety (90) calendar days from the date of
the Effective Time, and with regard to the Indemnification Escrow Amount,
August 31, 1999.
2.3 "Escrow Amount" shall mean the Indemnification Escrow Amount and the
Working Capital Escrow Amount.
2.4 "Escrow Shares" shall mean the Indemnification Shares and the Working
Capital Shares.
2.5 "Indemnification Escrow Amount" shall mean, as of the date of this
Agreement, the Indemnification Shares, and from and after the date of this
Agreement, in accordance with Article 4 hereof, the cash, if any, from the
sale of Indemnification Shares and any remaining Indemnification Shares.
2.6 "Indemnification Shares" shall mean, as of the date of this
Agreement, 341,880 shares of NDC Common Stock included in the Stock Escrow,
and from and after the date hereof, in accordance with Article 4 hereof,
any Indemnification Shares remaining in escrow.
2.7 "Stockholder Representative" shall mean a committee comprised of
Messrs. Dennis Turner, Handel Evans and Patrick Welsh.
2.8 "Working Capital Escrow Amount" shall mean, as of the date of this
Agreement, the Working Capital Shares, and from and after the date of this
Agreement, in accordance with Article 4 hereof, the cash, if any, from the
sale of Working Capital Shares and any remaining Working Capital Shares.
2.9 "Working Capital Shares" shall mean, as of the date of this
Agreement, 113,960 shares of NDC Common Stock, less any shares paid to NDC
as an Estimated Working Capital Adjustment, included in the Stock Escrow,
and from and after the date hereof, in accordance with Article 4 hereof,
any Working Capital Shares remaining in escrow.
2.10 Any other capitalized term used herein but not defined herein shall
have the same meaning as provided in the Merger Agreement.
ARTICLE 3
Term; Distribution of Escrow Amount; Limits
3.1 Term. The term of this Agreement shall commence at the Effective Time
and shall terminate at such time as all of the Escrow Amount has been
distributed to the Stockholders or NDC pursuant to the terms of this
Agreement.
3.2 Adjustment of Escrow Amount. The Escrow Amount subject to this Agreement
shall be adjusted as follows: If, between the date of this Agreement and the
Distribution Date with respect to the Working Capital Escrow Amount, NDC shall
be entitled to an adjustment pursuant to Section 3.4 of the Merger Agreement
(an "Adjustment Claim"), then NDC shall deliver to the Escrow Agent a notice
thereof (a "Notice of Obligation") setting forth the Adjustment Claim amount,
and upon receipt of such Notice of Obligation by the Escrow Agent,
(i) the Escrow Agent shall distribute to NDC from the Escrow Amount an
amount in cash, in immediately available funds, equal to such Adjustment
Claim, and, if the Escrow Amount does not contain any cash, or contains an
amount of cash insufficient to satisfy the Adjustment Claim, then
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(ii) the Escrow Agent shall distribute to NDC from the Escrow Amount that
number of shares of NDC Common Stock equal to the quotient (rounded to the
next highest whole number) obtained by dividing the amount of the
Adjustment Claim not paid in cash pursuant to Section 3.2(i) above, by the
Average Closing Price as of the date Final Working Capital is determined
pursuant to Section 3.3(b) of the Merger Agreement.
3.3 Distribution of Working Capital Escrow Amount. If the adjustment
provided for in Section 3.4 of the Merger Agreement is pending as of the
Distribution Date with respect to the Working Capital Escrow Amount, the
disputed Adjustment Claim (the "Disputed Working Capital Escrow Amount") for
purposes of the calculations in the following sentence of this Section 3.3
shall be based on the Closing Balance Sheets prepared by NDC pursuant to
Section 3.3(a) of the Merger Agreement and Section 1.3(a) of the PMSI
Agreement, and equal to the sum of (i) the Final Working Capital Deficit, and
(ii) the Current Asset Allocation Amount. Upon determination of the Disputed
Working Capital Escrow Amount in accordance with the preceding sentence, the
Escrow Agent shall promptly deliver to the Stockholders a distribution of
cash, if any, in immediately available funds, and shares of NDC Common Stock
from the Working Capital Escrow Amount, equal to the difference between the
Aggregate Value as of the Distribution Date of the Working Capital Escrow
Amount and the aggregate Disputed Working Capital Escrow Amount with respect
to the pending Adjustment Claim (the "Undisputed Working Capital Escrow
Amount"), and such amount shall be paid to the respective Stockholders in
accordance with their respective Percentage Interests. Any delivery of NDC
Common Stock to Stockholders shall be of full shares and any fractional
portions shall be rounded to a whole number by the Escrow Agent so that the
number of shares remaining in escrow to be delivered will be fully allocated
among such Stockholders. Upon the final resolution as agreed by NDC and the
Stockholder Representative in writing of the amount of the Adjustment Claim
(the "Final Claim Amount") for which a Disputed Working Capital Escrow Amount
was retained in escrow after the Distribution Date, the Escrow Agent shall
promptly distribute to NDC an amount in cash, if any, in immediately available
funds, and shares of NDC Common Stock from the Escrow Amount with an Aggregate
Value as of the date of final resolution equal to the Final Claim Amount and
shall deliver any remaining Disputed Working Capital Escrow Amount to the
Stockholders in accordance with their respective Percentage Interests.
3.4 Adjustment of Indemnification Escrow Amount. The Indemnification Escrow
Amount subject to this Agreement shall be adjusted from time to time, as
follows: If, between the date of this Agreement and the Distribution Date with
respect to the Indemnification Escrow Amount, NDC shall be entitled to be
indemnified pursuant to an Indemnification Claim under Article 10 of the
Merger Agreement, then NDC shall deliver to the Escrow Agent a Notice of
Obligation setting forth the amount of the Indemnification Claim, and upon
receipt of such Notice of Obligation by the Escrow Agent,
(i) the Escrow Agent shall distribute to NDC from the Indemnification
Escrow Amount an amount in cash, in immediately available funds, equal to
such Indemnification Claim; provided that such distribution of cash from
the Indemnification Escrow Amount shall be distributed in equal proportions
from each Stockholder Account, and provided further that the Escrow Agent
shall have the authority to sell shares of NDC Common Stock in any
Stockholder Account in order to satisfy such proportional distribution
requirement; and, if the Indemnification Escrow Amount does not contain any
cash, or contains an amount of cash insufficient to satisfy the
Indemnification Claim, then
(ii) the Escrow Agent shall distribute to NDC from the Indemnification
Escrow Amount that number of shares of NDC Common Stock equal to the
quotient (rounded to the next highest whole number) obtained by dividing
the amount of the Losses asserted in the Indemnification Claim and not paid
in cash pursuant to Section 3.4(i) above, by the Average Closing Price as
of the date of the Notice of Obligation.
3.5 Distribution of Indemnification Escrow Amount. If there are
Indemnification Claims pending as of the Distribution Date with respect to the
Indemnification Escrow Amount, the amount of Losses under such disputed
Indemnification Claims (the "Disputed Indemnification Escrow Amount") for
purposes of the calculations in the following sentence of this Section 3.5
shall be as decided in writing by NDC and the
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Stockholder Representative; provided, that if NDC and the Stockholder
Representative are not able to agree on the Disputed Indemnification Escrow
Amount by such Distribution Date, the Disputed Indemnification Escrow Amount
shall be the amount claimed by NDC in its notice of Indemnification Claim.
Upon determination of the Disputed Indemnification Escrow Amount in accordance
with the preceding sentence, the Escrow Agent shall promptly deliver to the
Stockholders a distribution of cash, if any, in immediately available funds,
and shares of NDC Common Stock from the Indemnification Escrow Amount, equal
to the difference between the Aggregate Value as of the Distribution Date of
the Indemnification Escrow Amount and the Disputed Indemnification Escrow
Amount (the "Undisputed Indemnification Escrow Amount"), and such amount shall
be paid to the respective Stockholders in accordance with their respective
Percentage Interests. Any delivery of NDC Common Stock to Stockholders shall
be of full shares and any fractional portions shall be rounded to a whole
number by the Escrow Agent so that the number of shares remaining in escrow to
be delivered will be fully allocated among such Stockholders. Upon the final
resolution as agreed by NDC and the Stockholder Representative in writing of
the amount of the Losses under Indemnification Claims pending as of the
Distribution Date with respect to the Indemnification Escrow Amount (the
"Final Indemnification Claim") for which a Disputed Indemnification Escrow
Amount was retained in escrow, the Escrow Agent shall promptly distribute to
NDC an amount in cash, if any, in immediately available funds, and shares of
NDC Common Stock from the Indemnification Escrow Amount with an Aggregate
Value as of the date of final resolution equal to the Final Indemnification
Claim and shall deliver any remaining Disputed Indemnification Escrow Amount
to the Stockholders in accordance with their respective Percentage Interests.
3.6 Effect of Final Delivery. This Agreement shall continue in full force
and effect until the Escrow Agent has distributed all of the Escrow Amount
pursuant to the terms hereof. After all of the Escrow Amount has been
distributed, all rights, duties and obligations of the respective parties
hereunder shall terminate.
ARTICLE 4
Sale Of Escrow Shares;
Escrow Stock Certificates
4.1 Sale of Escrow Shares. The Stockholder Representative, or the
Stockholders with respect to their individual Stockholder Accounts and acting
through the Stockholder Representative, may direct the Escrow Agent to sell,
from time to time, any or all of the Escrow Shares at such prices as are
commercially reasonable at the time of sale. On a monthly basis, the Escrow
Agent shall provide the Stockholder Representative and NDC with a sales report
detailing the number of Escrow Shares sold, the date of sale, the aggregate
sales price, any associated brokerage fees or expenses, any and all other
expenses, and such other information as the Stockholder Representative or NDC
shall reasonably request, and shall provide the Stockholder Representative and
NDC with a revised schedule as provided in Section 1.2 hereof. The proceeds of
such sale or sales, net of any underwriting commissions or brokers fees and
all other expenses of sale, shall be applied as follows:
(i) Any and all cash proceeds from the sale of Working Capital Shares
shall remain in escrow as part of the Working Capital Escrow Amount and
subject to the provisions of this Agreement, except that at the end of each
calendar month, if the Aggregate Value of the Working Capital Escrow Amount
exceeds 133% of the Aggregate Value of the Escrow Shares as of the date of
this Agreement (the "Surplus Working Capital Escrow Amount"), the Escrow
Agent shall distribute to the Stockholders that amount in cash or shares of
NDC Common Stock equal to their respective Percentage Interest in the
Surplus Working Capital Escrow Amount; and
(ii) Any and all cash proceeds from a sale of Indemnification Shares
shall remain in escrow as part of the Indemnification Escrow Amount and
subject to the provisions of this Agreement, except that at the end of each
calendar month, if the Aggregate Value of the Indemnification Escrow Amount
exceeds $20,000,000 (the "Surplus Indemnification Escrow Amount"), the
Escrow Agent shall distribute to the Stockholders that amount in cash or
shares of NDC Common Stock equal to their respective Percentage Interests
in the Surplus Indemnification Escrow Amount.
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4.2 Method of Distribution of Shares. If a registration statement is
required by applicable law, the Escrow Shares may be distributed by the Escrow
Agent pursuant to a registration statement filed pursuant to the Securities
Act of 1933, as amended (the "Act") or any state securities laws, or in the
alternative, the Escrow Shares may be distributed under any applicable
exemption from the Act or such laws, in the sole discretion of the Escrow
Agent, but in all instances the Escrow Shares shall be distributed in
compliance with the Act and applicable state securities laws. NDC hereby
agrees, if requested by the Escrow Agent, to file or prepare such statements,
forms or registrations to satisfy any exemption from the Act or any state
securities laws.
4.3 New Certificates. The Escrow Agent may at any time request NDC to issue
new certificates representing the Stock Escrow in such denominations as may be
necessary or appropriate in carrying out the Escrow Agent's obligations under
this Agreement.
ARTICLE 5
Dividends; Voting Rights;
Investment of Cash Amounts
5.1 Cash Dividends; Voting Rights. Any and all cash dividends or other cash
income with respect to Escrow Amount shall be paid into and remain in the
Escrow Amount and shall be available for purposes of adjustments or
distributions pursuant to Section 3 hereof. Each Stockholder shall have the
right to direct the Escrow Agent in writing as to the exercise of voting
rights with respect to shares in the Stock Escrow held by the Escrow Agent on
behalf of such Stockholder, and the Escrow Agent shall comply with any such
directions if received in a timely manner. In the absence of such directions,
the Escrow Agent shall not vote any such shares in the Stock Escrow.
5.2 Stock Splits; Stock Dividends. In the event of any stock split or stock
dividend with respect to NDC Common Stock that becomes effective during the
term of this Agreement, the additional shares so issued with respect to the
Stock Escrow shall be added to the Stock Escrow and any other references
herein to a specific number of shares of NDC Common Stock or references herein
to prices for or the fair market value of NDC Common Stock shall be adjusted
accordingly.
5.3 Investment of Escrow Funds. The Escrow Agent shall invest the cash
amount, if any, included in the Escrow Amount as directed by the Stockholder
Representative or the Stockholders, provided that should the Stockholder
Representative or the Stockholders fail to so direct the Escrow Agent, NDC
shall be authorized to so direct the Escrow Agent, and, provided further that
such investments shall be limited to (i) direct obligations of the United
States of America, (ii) obligations for which the full faith and credit of the
United States of America is pledged to provide for the payment of principal
and interest, (iii) commercial paper rates of the highest qualify by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group, a
division of McGraw-Hill Inc. ("S&P"), and (iv) certificates of deposit issued
by a commercial bank (which may be the Escrow Agent or any affiliate of the
Escrow Agent) whose long-term debt obligations are rated at least A2 by
Moody's or at least A by S&P, in each case having a maturity not in excess of
90 days, or a money market fund that invests exclusively in said investments.
The Escrow Agent shall have no liability or responsibility for loss of
interest or any penalties which are imposed because of early withdrawal of the
securities or certificates in which any cash portion of the Escrow Amount may
be invested and the Escrow Agent is hereby authorized to make such early
withdrawal if necessary to make a distribution from the Escrow Amount in
accordance with this Agreement.
ARTICLE 6
The Escrow Agent
6.1 Liability. The Escrow Agent, in its capacity as Escrow Agent, or any
successor Escrow Agent, shall be liable only to hold the Escrow Amount and to
deliver the same to the persons named herein in accordance with the provisions
of this Agreement. By acceptance of this Escrow Agreement, the Escrow Agent,
in its capacity as Escrow Agent, or any successor Escrow Agent, is acting in
the capacity of a depository only, and
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shall not be liable or responsible for any damages, losses or expenses unless
such damages, losses or expenses shall be caused by the gross negligence or
malfeasance of the Escrow Agent or any successor Escrow Agent. Neither the
Escrow Agent, in its capacity as Escrow Agent, nor any successor Escrow Agent,
shall incur any liability with respect to (i) any action taken or omitted in
good faith upon the advice of its counsel with respect to any questions
relating to the duties and responsibilities of the Escrow Agent under this
Agreement; or (ii) any action taken or omitted in reliance upon any
instrument, including the written instructions provided for herein, not only
as to the due execution of such instrument, or the identity, or authority of
any person executing such instrument, or the validity and effectiveness of
such instrument, but also as to the truth and accuracy of any information
contained therein, provided that the Escrow Agent shall in good faith believe
such instrument to be genuine, to have been signed by a proper person or
persons, and to conform to the provisions of this Agreement. In the event of
any disagreement or the presentation of adverse claims or demands in
connection with or for any item affected hereby, the Escrow Agent shall, at
its option, be entitled to refuse to comply with any such claims or demands
during the continuance of such disagreement and may refrain from delivering
any item affected hereby, and in so doing the Escrow Agent shall not become
liable to the parties, or to any other person, due to its failure to comply
with any such adverse claim or demand. The Escrow Agent shall be entitled to
continue, without liability, to refrain and refuse to act until all of the
rights of the adverse claimants have been either fully resolved among
themselves, arbitrated to a final award, or finally adjudicated by a court
having jurisdiction over the dispute. The Escrow Agent shall be held harmless
and indemnified by the parties hereto in connection with any claims against it
in connection with its service as escrow agent hereunder. Any action requested
to be taken by the Escrow Agent hereunder and not otherwise specifically set
forth herein shall require the agreement in writing of the Stockholder
Representative, NDC and any successor Escrow Agent.
6.3 Successor. The Escrow Agent, with the prior written consent of the
Stockholder Representative, may by written instrument designate a bank or
trust company to act as successor Escrow Agent. Any such successor Escrow
Agent must agree to be and shall be bound by, and shall have all the rights,
duties and responsibilities of the Escrow Agent under, this Agreement.
6.4 Expenses. Compensation for the normal services of the Escrow Agent or
any successor Escrow Agent, if any, shall be borne by the Stockholders and NDC
equally and, with regard to the Stockholders obligations, shall be deducted
from the Escrow Amount. The Escrow Agent and any successor Escrow Agent shall
be reimbursed for any reasonable expenses, including the actual out-of-pocket
cost of outside legal services should the Escrow Agent deem it necessary in
its reasonable discretion to retain an outside attorney, and NDC and the
Stockholders shall share equally the reimbursement of such expenses of such
Escrow Agent, except that (a) if NDC is unsuccessful in any litigation
relating to such Escrow Agent, then the fees and expenses of such Escrow Agent
in connection therewith shall be paid by NDC, or (b) should the Stockholders
be the unsuccessful party in any such litigation, then the Stockholders will
bear the fees and expenses of such Escrow Agent in connection therewith. The
Escrow Agent and any successor Escrow Agent shall not be liable for any action
taken in good faith in accordance with the advice of an attorney.
ARTICLE 7
Stockholder Representative
7.1 Power and Authority. The adoption of the Merger Agreement by the
Stockholders shall constitute ratification of this Escrow Agreement, and the
Stockholder Representative shall have full power and authority to represent
the Stockholders and their successors with respect to all matters arising
under this Agreement, and all action taken by the Stockholder Representative
hereunder shall be binding upon such Stockholders and their successors as if
expressly ratified and confirmed in writing by each of them. Without limiting
the generality of the foregoing, the Stockholder Representative shall have
full power and authority, on behalf of all the Stockholders and their
successors, to interpret all the terms and provisions of this Agreement, to
dispute or fail to dispute any Adjustment Claim or Indemnification Claim, to
negotiate and compromise any dispute which may arise under this Agreement, to
sign any releases or other documents with respect to any such dispute, and to
authorize payments to be made with respect thereto.
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7.2 Resignation; Successors. The Stockholder Representative, or any
successor hereafter appointed, may resign and shall be discharged of his
duties hereunder upon the appointment of a successor Stockholder
Representative as hereinafter provided. In case of such resignation, or in the
event of the death or inability to act of the Stockholder Representative, a
successor shall be named from among the Stockholders by a majority of the
members of the Board of Directors of Source who served on such board prior to
the Merger. Each such successor Stockholder Representative shall have all the
power, authority, rights and privileges hereby conferred upon the original
Stockholder Representative, and the term "Stockholder Representative" as used
herein shall be deemed to include such successor Stockholder Representative.
7.3 Indemnification Of Stockholder Representative. NDC shall indemnify and
hold harmless the Stockholder Representative from and against any loss,
expense or liability incurred in connection with the performance of his duties
hereunder, including the advancement of expenses incurred in connection with
investigating or defending any claim or action.
ARTICLE 8
Miscellaneous
8.1 Transferability. A Stockholder may not transfer any interest in the
Escrow Amount or any other right under this Escrow Agreement to any other
party, except that upon written notice from the legal representative of the
estate of a deceased Stockholder to the Escrow Agent, the rights of such
Stockholder under this Escrow Agreement shall be transferred to the estate of
such Stockholder, and subsequently to any beneficiary thereof, in the event of
the Stockholder's death; provided, however, that any such beneficiary or the
legal representative of any such estate shall be bound by the provisions of
this Escrow Agreement without taking any further action. The Escrow Agent
shall be entitled to treat the legal representative of the estate of such
Stockholder, and subsequently any beneficiary thereof, as the absolute owner
of the rights of such Stockholder under this Escrow Agreement in all respects
and shall incur no liability for distributions made in good faith to the legal
representatives of such Stockholder or such beneficiary in accordance with the
terms of this Escrow Agreement. The contingent right to receive Escrow Amount
shall not be transferable by the Stockholders otherwise than by will or by the
laws of descent and distribution.
8.2 Notices. Each party shall keep each of the other parties hereto advised
in writing of all transactions pursuant to this Agreement. Any notices or
other communications required or permitted under this Agreement shall be in
writing and shall be sufficiently given if sent by registered or certified
mail, postage prepaid, addressed as follows, or if sent by facsimile to the
facsimile numbers identified below:
If to NDC:
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attn: E. Michael Ingram
Telecopy: (404) 728-2990
with a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: B. Harvey Hill, Jr.
Telecopy: (404) 881-7777
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If to the Stockholders or the Stockholder Representative:
__________________
__________________
__________________
Telecopy: ( ) -
with a copy to:
__________________
__________________
__________________
__________________
Attn: ____________
Telecopy: ( ) -
If to the Escrow Agent:
Escrow Agent
__________________
________ ,
Attn: ____________
Telecopy: ( ) -
or such other person or address as shall be furnished in writing by any of the
parties and any such notice or communication shall be deemed to have been
given as of the date so mailed.
8.3 Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of laws.
8.4 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the respective heirs, executors, administrators, successors and
assigns of the parties hereto.
8.5 Separability. If any provision or section of this Agreement is
determined to be void or otherwise unenforceable, it shall not affect the
validity or enforceability of any other provisions of this Agreement which
shall remain unenforceable in accordance with their terms.
8.6 Headings. The headings and subheadings contained in this Agreement are
for reference only and for the benefit of the parties and shall not be
considered in the interpretation or construction of this Agreement.
8.7 Execution In Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
8.8 Amendments. This Agreement may be amended from time to time but only by
written agreement signed by all of the parties hereto.
8.9 Third Party Beneficiaries. Each Subsidiary of NDC and each of the
directors, officers and employees of NDC and each of its Subsidiaries are
expressly intended to be third party beneficiaries of the indemnities and
obligations of the Stockholders as if they were parties to this Agreement.
C-9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the day and year first above written.
National Data Corporation
By: _________________________________
Escrow Agent
By: _________________________________
Stockholder Representative
______________________________ (SEAL)
C-10
<PAGE>
ANNEX D
FINANCIAL STATEMENTS OF SOURCE INFORMATICS INC.
D-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. D-3
Financial Statements
Balance Sheets as of June 30, 1997 (Audited) and 1996 (Unaudited)....... D-4
Statements of Operations for the Years Ended June 30, 1997 (Audited),
1996 (Unaudited), and 1995 (Unaudited)................................. D-5
Statements of Accumulated Deficit for the Years Ended June 30, 1997
(Audited), 1996 (Unaudited), and 1995 (Unaudited)...................... D-6
Statements of Cash Flows for the Years Ended June 30, 1997 (Audited),
1996 (Unaudited), and 1995 (Unaudited)................................. D-7
Notes to Financial Statements............................................. D-8
Supplemental Quarterly Financial Information
Schedule I - Unaudited Statements of Operations for the Three Months
Ended September 30, 1997 and 1996...................................... D-14
Schedule II - Unaudited Balance Sheet as of September 30, 1997.......... D-15
</TABLE>
D-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Source Informatics Inc.:
We have audited the accompanying balance sheet of SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS as of June 30, 1997 and the related statements of
operations, accumulated deficit, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Source Informatics Inc.'s
United States Operations as of June 30, 1997 and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
September 5, 1997
D-3
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
BALANCE SHEETS
JUNE 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 2,108 $ 7,774
Short-term investment.................................. 680 1,167
Accounts receivable, less allowance for doubtful
accounts of $200 and $200 in 1997 and 1996,
respectively.......................................... 11,426 7,031
Deferred data costs.................................... 1,300 1,194
Prepaid expenses....................................... 619 652
Due from Walsh......................................... 383 253
-------- --------
Total current assets................................. 16,516 18,071
Property And Equipment, Net.............................. 10,761 9,143
Other Assets............................................. 364 352
-------- --------
Total assets......................................... $ 27,641 $ 27,566
======== ========
LIABILITIES AND ACCUMULATED DEFICIT
Current Liabilities:
Accounts payable....................................... $ 1,425 $ 1,110
Accrued liabilities.................................... 7,980 7,856
Unearned revenue....................................... 11,056 11,577
Notes payable.......................................... 96 235
Current portion of capital lease obligations........... 4,533 3,021
Due to PMSI............................................ 1,208 377
Due to parent company.................................. 38,904 48,395
-------- --------
Total current liabilities............................ 65,202 72,571
-------- --------
Long Term Liabilities:
Capital lease obligations.............................. 5,510 4,601
Deferred rent.......................................... 1,980 1,924
-------- --------
Total long-term liabilities.......................... 7,490 6,525
-------- --------
Commitments And Contingencies (Note 8)
Accumulated Deficit...................................... (45,051) (51,530)
-------- --------
Total liabilities and accumulated deficit............ $ 27,641 $ 27,566
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
D-4
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Revenues............................................. $59,885 $51,812 $48,710
------- ------- -------
Operating Expenses:
Production costs................................... 14,836 14,686 15,494
Selling, general, and administrative............... 33,200 29,690 27,673
Depreciation and amortization...................... 5,169 3,121 1,933
------- ------- -------
Total operating expenses......................... 53,205 47,497 45,100
------- ------- -------
Operating Income..................................... 6,680 4,315 3,610
======= ======= =======
Other Income (Expense):
Interest income.................................... 780 315 0
Interest expense................................... (912) (671) (861)
Other expense...................................... (69) (193) (139)
------- ------- -------
(201) (549) (1,000)
------- ------- -------
Income before Income Tax............................. 6,479 3,766 2,610
Income Tax Provision................................. 0 0 0
------- ------- -------
Net Income........................................... $ 6,479 $ 3,766 $ 2,610
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
D-5
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
STATEMENTS OF ACCUMULATED DEFICIT
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
<TABLE>
<S> <C>
BALANCE, June 30, 1994 (unaudited)................................... $(57,906)
Net income......................................................... 2,610
--------
BALANCE, June 30, 1995 (unaudited)................................... (55,296)
Net income......................................................... 3,766
--------
BALANCE, June 30, 1996 (unaudited)................................... (51,530)
Net income......................................................... 6,479
--------
BALANCE, June 30, 1997............................................... $(45,051)
========
</TABLE>
The accompanying notes are an integral part of these statements.
D-6
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 6,479 $ 3,766 $ 2,610
-------- ------- -------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.................... 5,169 3,121 1,933
Rent payments less than (in excess of) rent
expense......................................... 56 (146) (344)
Changes in operating assets and liabilities:
Accounts receivable............................. (4,395) 755 6,083
Deferred data costs............................. (106) (39) 46
Prepaid expenses................................ 33 (337) 34
Due from Walsh.................................. (130) (253) 0
Other assets.................................... (12) 867 (71)
Accounts payable................................ 315 (3,827) 2,527
Accrued liabilities............................. 124 (1,230) (8,062)
Unearned revenue................................ (521) (3,553) 1,997
Due to PMSI..................................... 831 (402) (1,414)
-------- ------- -------
Total adjustments.............................. 1,364 (5,044) 2,729
-------- ------- -------
Net cash (used in) provided by operating
activities.................................... 7,843 (1,278) 5,339
-------- ------- -------
Cash flows from investing activities:
Capital expenditures.............................. (137) (840) (441)
Sale of investment................................ 487 349 189
-------- ------- -------
Net cash (used in) provided by investing
activities.................................... 350 (491) (252)
-------- ------- -------
Cash flows from financing activities:
Proceeds from note payable........................ 0 235 0
Repayments of note payable........................ (139) 0 0
Principal payments on capital leases.............. (4,229) (2,736) (6,599)
Change in due to parent........................... (9,491) 4,188 8,877
-------- ------- -------
Net cash provided by (used in) financing
activities.................................... (13,859) 1,687 2,278
-------- ------- -------
Net (decrease) increase in cash and cash
equivalents....................................... (5,666) (82) 7,365
Cash and cash equivalents, beginning of year....... 7,774 7,856 491
-------- ------- -------
Cash and cash equivalents, end if year............. $ 2,108 $ 7,774 $ 7,856
======== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for interest............ $ 910 $ 671 $ 861
======== ======= =======
Supplemental disclosures of noncash investing and
financing activities:
Assets purchased under capital leases............. $ 6,650 $ 4,851 $ 2,954
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
D-7
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (AUDITED), 1996 (UNAUDITED), AND 1995 (UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Walsh International Inc. ("Walsh") acquired a division of PCS Inc. in
February 1990 that provided a range of data services, primarily based on a
proprietary database of prescriptions dispensed, which are used by
pharmaceutical companies in sales force compensation, territory realignment
and focused promotion. On April 16, 1996, Walsh formed Source Informatics Inc.
("Source"), a Delaware corporation, for the purpose of creating the holding
company for the entities engaged in such businesses (the "Source Business").
Effective as of that same date, Walsh transferred all of the assets and
liabilities of the Source Business, together with cash, marketable securities,
convertible preferred stock obligations, and other corporate assets to Source.
In conjunction with the transfer of such assets and liabilities, all of the
issued and outstanding capital stock of Source was spun off to the then
current stockholders of Walsh.
The financial statements and related footnotes contained herein reflect the
operations of Source's United States Operations ("Source U.S."). As discussed
in Note 9, Source entered into a stock purchase agreement with National Data
Corporation ("NDC") in August 1997 to sell the stock of Source to NDC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation
The financial statements of Source U.S. have been derived from the
consolidated financial statements of Source and have been prepared to present
its financial position, results of operations, and cash flows on a standalone
basis. Accordingly, the accompanying financial statements include certain
costs and expenses that have been allocated on a pro rata basis, primarily on
distribution of management's time. In management's opinion, this allocation
reflects the best estimate of the costs and expenses incurred by Source U.S.
Such allocated expenses may not be indicative of what such expenses would have
been had the United States operations been operated as a separate entity.
The balance sheet as of June 30, 1996 and the related statements of
operations, accumulated deficit, and cash flows for the two years ended June
30, 1996 are unaudited and, in the opinion of management, contain all
adjustments (consisting of only normal recurring items) necessary for the fair
presentation of the financial position and results of operations for such
periods.
Use Of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash And Cash Equivalents
Source U.S. considers all highly liquid investments with maturity dates of
three months or less from the date of acquisition by Source U.S. to be cash
equivalents.
Investments
Source U.S. holds an investment in a one-year Treasury bill that is
classified as a held-to-maturity security. The amount is restricted as the
investment secures certain assets under capital lease.
D-8
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Revenue is recognized on the delivery of a product or as the service is
rendered. Prebillings for products that have not yet been delivered or for
services not yet rendered are classified as unearned revenue until the
earnings process is complete.
Credit Risk
Financial instruments which potentially subject Source U.S. to
concentrations of credit risk consist principally of cash balances and trade
receivables. Source U.S. invests its excess cash with major banks. Source
U.S.'s customer base principally comprises companies within the pharmaceutical
industry. Source U.S. maintains reserves for potential credit losses, and such
losses have been within management's expectations, given the generally strong
credit ratings of the customers. Source U.S. does not require collateral from
its customers.
Property And Equipment
Property and equipment are recorded at cost. All maintenance and repairs are
expensed as incurred. Depreciation is provided using the straight-line method.
Furniture, office equipment, and computer equipment are depreciated over five
years. Leasehold improvements are amortized over the estimated lives of the
assets or the lease terms, whichever are shorter.
Upon disposal, cost and accumulated depreciation are removed from the
accounts and gains (losses) are recognized in the statement of operations.
Databases and Software Costs
Costs associated with maintenance and updating of databases and all costs
associated with internally developed software are expensed as incurred.
Deferred Data Costs
Deferred data costs consist of costs incurred by Source U.S. to obtain
prescription data information used in Source U.S.'s products. Source U.S.
purchases data monthly and delivers products based on this information in the
following month. In order to match the cost of these products with the
associated revenue, Source U.S. defers approximately one month's cost of
prescription data.
Income Taxes
The income tax returns of Source include the operations of the United States
business. For purposes of these financial statements, income taxes related to
Source U.S. have been computed and recorded on a separate return basis based
on the statutory rates in effect.
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for items when there is a temporary difference in recording such
items for financial reporting and income tax reporting.
Long-Lived Assets
Source U.S. periodically reviews the values assigned to long-lived assets
such as property and equipment to determine whether any impairments are other
than temporary. Management believes that the long-lived assets in the
accompanying balance sheets are appropriately valued.
D-9
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Due to Parent Company
"Due to parent company" represents the amount of net funds advanced to
Source U.S. by Source.
Advertising
Source U.S. expenses all advertising costs as they are incurred.
Concentration of Revenues
Source U.S. derived approximately 49%, 47%, and 41% of its revenues from
three customers in 1997, 1996, and 1995, respectively.
3. RELATED PARTY TRANSACTIONS
Transactions With PMSI
Source U.S. has a licensing agreement with Pharmaceutical Marketing
Services, Inc. ("PMSI"), a company that shares certain management with Source,
to market certain services. Additionally, Source U.S. provides certain
services to PMSI and its subsidiaries. The principal agreements and terms are
as follows:
Alpha Database (Prescription) License Agreement
The Alpha Database License Agreement, as amended and restated July 1, 1994,
grants PMSI the sharing of revenue and expenses for a period of three years
through June 30, 1997. Thereafter, the agreement will be automatically renewed
for three additional five-year periods unless PMSI or Source U.S., for cause,
terminates the agreement. The database license fee amounts received by Source
U.S. were approximately $3,126,000, $3,094,000, and $2,663,000 for the years
ended June 30, 1997, 1996, and 1995, respectively. Revenues earned under these
agreements are allocated to both parties based upon historical percentages of
revenue derived from Alpha Database.
Data Processing Agreement
Source provides specific data processing services to PMSI. Costs charged to
PMSI totaled approximately $711,000, $1,191,000, and $1,883,000 for the years
ended June 30, 1997, 1996, and 1995, respectively.
Facilities Agreement
PMSI sublets space from Source U.S. The revenue from PMSI under this sublet
agreement was approximately $367,000, $492,000, and $259,000 for AND the years
ended June 30, 1997, 1996, and 1995, respectively.
Management Executive Services Agreement
Source U.S. provides administrative, management, and executive services to
PMSI. The costs charged by Source U.S. for these services are treated as a
reduction of the related expenses. The amounts charged under this agreement
were $1,384,000, $2,240,000, and $1,299,000 for the years ended June 30, 1997,
1996, and 1995.
At June 30, 1997 and 1996, Source U.S. had a net current payable to PMSI of
$1,208,000 and $377,000 respectively. Prior to the closing of the Acquisition
(Note 9), all intercompany balances between PMSI and Source U.S. are expected
to be paid in full.
D-10
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
OTHER RELATED-PARTY TRANSACTIONS
Transactions With Source Europe
Source operates certain businesses in Europe to which the U.S. operations of
Source provide certain services such as data processing, human resources,
facilities, and finance. At June 30, 1997 and 1996, Source U.S. has a
receivable from the Source Europe business of $11,299,000 and $3,566,000,
respectively, included net within due from parent in the accompanying balance
sheets.
Transactions With Walsh
Source U.S. provides facility space and telecommunications infrastructure to
Walsh, a company which has certain common management personnel with Source.
The amounts charged under this agreement were approximately $746,000, and
$788,000 for the years ended June 30, 1997 and 1996. Prior to April 1996,
Source was a division of Walsh (Note 1).
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- -----------
(UNAUDITED)
<S> <C> <C>
Assets under capital lease............................. $ 16,863 $11,277
Furniture and office equipment......................... 453 447
Computer equipment..................................... 4,528 4,248
Leasehold improvements................................. 73 49
-------- -------
21,917 16,021
Less accumulated depreciation and amortization......... (11,156) (6,878)
-------- -------
$ 10,761 $ 9,143
======== =======
</TABLE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ -----------
(UNAUDITED)
<S> <C> <C>
Data costs................................................ $3,706 $3,623
Compensation.............................................. 2,159 1,657
Other liabilities......................................... 2,115 2,576
------ ------
$7,980 $7,856
====== ======
</TABLE>
D-11
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
Deferred tax assets (liabilities) consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax liabilities................................ $ (120) $ (264)
------- -------
Deferred tax assets:
Net operating loss carryforwards...................... 2,875 4,438
Accrued expenses...................................... 930 1,140
Accounts receivable................................... 82 80
------- -------
Gross deferred tax assets............................... 3,887 5,658
------- -------
Net deferred tax asset.................................. 3,767 5,394
Valuation allowance..................................... (3,767) (5,394)
------- -------
Deferred taxes, net..................................... $ 0 $ 0
======= =======
</TABLE>
The effective tax rates differ from the federal statutory rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ----- -----
(UNAUDITED)
<S> <C> <C> <C>
U.S. statutory rate.................................... 34% 34% 34%
State taxes, net of federal benefit.................... 6 6 6
Reversal of valuation allowance........................ (40) (40) (40)
--- ----- -----
Provision for income taxes............................. 0% 0% 0%
=== ===== =====
</TABLE>
At June 30, 1997, approximately $7 million in U.S. federal income tax
operating loss carryforwards, which may provide future tax benefits for U.S.
federal income tax purposes, was available. These carryforwards expire in the
years from 2008 to 2011. At June 30, 1997, approximately $500,000 in state net
operating loss carryforwards, which expire in 1998 and 1999, was available.
7. EMPLOYEE BENEFIT PLANS
Source U.S. operates a defined contribution profit-sharing plan. The
employers' contribution is a discretionary amount to match employee
contributions. The total cost associated with these plans for the years ended
June 30, 1997, 1996, and 1995 was approximately $337,000, $229,000, and
$181,000, respectively.
8. COMMITMENTS AND CONTINGENCIES
Leases
Source U.S. leases certain equipment and facilities under agreements that
are classified as capital leases and operating leases.
D-12
<PAGE>
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Obligations under long-term and noncancelable lease agreements at June 30,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998...................................................... $ 5,145 $ 3,113
1999...................................................... 4,057 2,824
2000...................................................... 1,616 2,676
2001...................................................... 373 2,660
2002...................................................... 0 2,789
Thereafter................................................ 0 1,712
------- -------
Total minimum lease payments............................ 11,191 $15,744
=======
Less amount representing interest......................... (1,148)
-------
Present value of minimum lease payments................... 10,043
Less current portion...................................... (4,533)
-------
$5,510
=======
</TABLE>
Rent expense for the years ended June 30, 1997, 1996, and 1995 was
approximately $4,140,000, $4,650,000, and $5,732,000, respectively.
Legal Proceedings
Source U.S. is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
outcome of any pending matters will not have a material adverse effect on the
results of operations or financial position of Source U.S.
9. RESEARCH AND DEVELOPMENT COSTS
Costs incurred by Source U.S. related to the development of potential new
products and services are expensed as incurred. Costs charged to operations
related to research and development activities were $1,557,000, $1,350,000,
and $1,269,000 for the years ended June 30, 1997, 1996, and 1995,
respectively.
10. SUBSEQUENT EVENT
In August 1997, Source entered into a stock purchase agreement with NDC to
sell the stock of Source to NDC in exchange for a combination of cash and NDC
common stock. Prior to closing of the purchase, all non-U.S. operations of
Source will be transferred to other entities. The transaction is expected to
close in November 1997.
D-13
<PAGE>
SCHEDULE I
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues................. $15,300 $13,484
Cost of service.......... 3,747 3,583
Sales, general and
administrative.......... 11,215 8,860
------- -------
14,962 12,443
------- -------
OPERATING INCOME 338 1,041
Other income (expense):
Interest and other
income................. 86 118
Interest and other
expense................ (221) (180)
------- -------
Total other income
(expense)............... (135) (62)
------- -------
Income from continuing
operations before income
taxes................... 203 979
Provision for income
taxes................... 0 0
------- -------
Income from continuing
operations.............. $ 203 $ 979
======= =======
</TABLE>
D-14
<PAGE>
SCHEDULE II
SOURCE INFORMATICS INC.'S
UNITED STATES OPERATIONS
UNAUDITED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C>
ASSETS
Cash and cash equivalents......................................... $ 4,322
Accounts receivable, net of allowance............................. 7,692
Other current assets.............................................. 2,023
--------
Total current assets............................................. 14,037
Property, plant and equipment, net................................ 10,483
Other............................................................. 329
--------
Total assets..................................................... $ 24,849
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities.......................... $ 9,771
Due to Parent..................................................... 36,556
Notes and earn-out payable........................................ 61
Obligations under capital leases.................................. 4,947
Deferred income................................................... 11,906
--------
Total current liabilities........................................ 63,241
Obligations under capital leases.................................. 4,929
Other long-term liabilities....................................... 1,977
--------
Total long-term liabilities...................................... 6,906
--------
Total liabilities................................................ 70,147
Accumulated deficit............................................... (45,298)
--------
Total stockholders' equity....................................... (45,298)
--------
Total liabilities and stockholders' equity....................... $ 24,849
========
</TABLE>
D-15
<PAGE>
ANNEX E
PRO FORMA FINANCIAL INFORMATION
E-1
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table sets forth selected pro forma condensed consolidated
financial information as of August 31, 1997 and for the year ended May 31,
1997 and the three months ended August 31, 1997, giving effect to the Merger
and the consummation of the Stock Purchase using the purchase method of
accounting. The pro forma condensed consolidated financial information
represents the historical operations of NDC, Source and PMSI Database adjusted
for the effects of the Stock Purchase and the Merger as well as the effects of
the acquisition of Health EDI completed in October 1997. This information has
also been adjusted to conform to the presentation format and accounting
policies of NDC. For comparability purposes, Source and PMSI Database's twelve
months ended June 30, 1997 and three months ended September 30, 1997 are used
in conjunction with the NDC twelve months ended May 31, 1997 and three months
ended August 31, 1997.
The pro forma financial information is provided for informational purposes
only and is not necessarily indicative of actual results that would have been
achieved had the Merger and the Stock Purchase been consummated at the
beginning of the period presented or of future results.
Historically, the financial results of Source US (the principal business of
Source and PMSI Database, operated as a joint venture) have varied from
quarter to quarter. These fluctuations are principally due to the timing of
customer commitments to new products and services and the timing of delivery
of Source US services. For example, many of the pharmaceutical manufacturing
customers of Source US report results on a calendar year basis. Commitments
are made by Source US's customers in the summer and fall for delivery in the
first part of the next calendar year. Source US's fiscal year begins July 1.
Source typically incurs expenses during the first half of its fiscal year (the
last half of the calendar year) in preparation for roll-out of the products
and services to meet customer requirements. Consequently, during Source US's
first quarter, significant expense is incurred to generate revenues which
should be recognized in future quarters.
Unaudited pro forma financial information should be reviewed in conjunction
with "Source Informatics Inc.--Management's Discussion and Analysis of
Financial Condition and Results of Operations" located on pages 49 through 51
of this document.
E-2
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PMSI
NDC SOURCE DATABASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash
equivalents........... $ 18,224 $ 4,322 $ 219 $ (219)(a) $ 9,321
(13,225)(b)
Accounts receivable,
net of allowance...... 81,484 7,692 7,622 0 96,798
Other current assets... 12,367 2,023 242 0 14,632
-------- ------- ------- -------- --------
Total current assets.. 112,075 14,037 8,083 (13,444) 120,751
PROPERTY, PLANT, AND
EQUIPMENT, NET......... 50,829 10,483 4,378 0 65,690
INTANGIBLE ASSETS, NET.. 352,102 0 0 73,816 (d) 425,918
OTHER................... 14,397 329 4 0 14,730
-------- ------- ------- -------- --------
Total assets.......... $529,403 $24,849 $12,465 $ 60,372 $627,089
======== ======= ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Accounts payable and
accrued liabilities... $ 49,768 $ 9,771 $ 1,214 $ (3,479)(c) $ 57,274
Due to Parent.......... 0 36,556 0 (36,556)(c) 0
Line of credit
payable............... 0 0 0 29,026 (b) 29,026
Notes and earn-out
payable............... 298 61 0 0 359
Income taxes payable... 6,904 0 0 0 6,904
Obligations under
capital leases........ 2,484 4,947 553 0 7,984
Deferred income........ 6,090 11,906 4,920 0 22,916
-------- ------- ------- -------- --------
Total current
liabilities.......... 65,544 63,241 6,687 (11,009) 124,463
Long-Term Debt.......... 150,048 0 0 0 150,048
Obligations under
capital leases......... 2,890 4,929 1,046 0 8,865
Other long-term
liabilities............ 3,469 1,977 0 0 5,446
-------- ------- ------- -------- --------
Total liabilities..... 221,951 70,147 7,733 (11,009) 288,822
-------- ------- ------- -------- --------
MINORITY INTEREST....... 20,540 0 0 0 20,540
STOCKHOLDERS' EQUITY:
Common and preferred
stock................. 3,329 0 0 327 (e) 3,656
Additional paid-in
capital............... 183,813 0 0 97,488 (e) 281,301
Retained earnings
(accumulated
deficit).............. 101,759 (45,298) 4,732 (67,000)(d) 34,759
40,566 (f)
Equity adjustments...... (1,989) 0 0 0 (1,989)
-------- ------- ------- -------- --------
Total stockholders'
equity............... 286,912 (45,298) 4,732 71,381 317,727
-------- ------- ------- -------- --------
Total liabilities and
stockholders'
equity............... $529,403 $24,849 $12,465 $ 60,372 $627,089
======== ======= ======= ======== ========
</TABLE>
- --------
Adjustments:
(a) Reflects the PMSI Database cash, after the effects of settling all
intercompany and affiliate accounts in (c), that is not being acquired by
NDC under the terms of the Merger and Stock Purchase Agreements.
(b) Reflects borrowings on NDC's line of credit to fund the cash portion of
the purchase price ($38.25 million) and the payment of estimated
acquisition costs of $4 million less the portion paid out of operating
cash of $13.2 million.
(c) Reflects the repayment and/or forgiveness of all intercompany and
affiliate accounts.
(d) Reflects the excess of the purchase price over the net assets
(liabilities) acquired in the acquisitions, net of a projected non-
recurring charge based on preliminary results of a valuation study of
approximately $67 million ($60.6 million after-tax) related to purchased
in-process research and development. This charge relates entirely to the
operations of Source U.S. Based on the allocation model of Source U.S.
operations (76% to Source and 24% to PMSI), approximately $51 million of
the charge can be attributable to Source and $16 million to PMSI. The
purchase price equals $92 million and $48 million for Source and PMSI
Database, respectively, based on 1,555,556 shares for Source and 1,059,829
shares for PMSI Database at $37.40 per share stock price plus $31.8
million and $6.5 million of cash for Source and PMSI Database,
respectively, and $4 million in acquisition related expenses.
Approximately $5.5 million in net liabilities are assumed to be acquired
in the purchase of Source. Approximately $4.7 million of assets are
assumed to be acquired in the purchase of PMSI Database. The intangibles
and the related lives based on the preliminary results of the valuation
study are as follows:
<TABLE>
<S> <C> <C>
Product technology................................. $17.3 million 5 years
Assembled work force............................... 3.0 7
Customer relations/Goodwill........................ 53.5 20
</TABLE>
The respective breakdown of the above identified components of the
intangible asset can be attributed 76% to Source and 24% to PMSI based upon
the aforementioned allocation model.
(e) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC stock to Source and PMSI Database, respectively,
under the terms of the Merger Agreement and the Stock Purchase Agreement.
(f) Reflects the elimination of Source and PMSI Database's historical equity
balances.
E-3
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MAY 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
EQUIFAX
HEALTH EDI
FOUR MONTHS
PMSI ENDED
NDC SOURCE DATABASE SEPTEMBER 30, PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL 1996 ADJUSTMENTS (A) CONSOLIDATED (A)
---------- ---------- ---------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................ $433,860 $59,885 $25,009 $4,851 $ 0 $523,605
COST OF SERVICE......... 207,754 20,005 7,029 2,218 6,564 (b) 243,570
SALES, GENERAL AND
ADMINISTRATIVE......... 159,450 33,200 12,062 2,262 0 206,974
-------- ------- ------- ------ ------- --------
367,204 53,205 19,091 4,480 6,564 450,544
-------- ------- ------- ------ ------- --------
OPERATING INCOME........ 66,656 6,680 5,918 371 (6,564) 73,061
OTHER INCOME (EXPENSE):
Interest and other
income................ 2,403 780 91 0 (688)(c) 2,586
Interest and other
expense............... (6,814) (981) (147) 0 (1,191)(d) (9,133)
Minority interest...... (1,694) 0 0 0 0 (1,694)
-------- ------- ------- ------ ------- --------
Total other income
(expense)............. (6,105) (201) (56) 0 (1,879) (8,241)
-------- ------- ------- ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES........... 60,551 6,479 5,862 371 (8,443) 64,820
PROVISION FOR INCOME
TAXES.................. (21,798) -- (2,333) (141) 1,562(e) (22,710)
-------- ------- ------- ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS............. $ 38,753 $ 6,479 $ 3,529 $ 230 $(6,881) $ 42,110
======== ======= ======= ====== ======= ========
FULLY DILUTED WEIGHTED
AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING............ 28,039 0 0 0 2,615 (f) 30,654
INCOME FROM CONTINUING
OPERATIONS PER SHARE... $ 1.38 $ 1.37
</TABLE>
- --------
Adjustments:
(a) Excludes the impact of the non-recurring charge related to purchased in-
process research and development costs of $67.0 million, or $(2.19) per
share. This charge relates entirely to the operations of Source U.S. Based
on the allocation model of Source U.S. operations (76% to Source and 24%
to PMSI), approximately $51 million of the charge can be attributable to
Source and $16 million to PMSI.
(b) Reflects the amortization of intangibles resulting from the Stock Purchase
and Merger. See note (d) to the pro forma balance sheet for further
discussion.
(c) Represents reduction in interest income using NDC's weighted average rate
(5.2%) from reduced funds available for investment as a result of cash
used in association with the acquisition. See Note (b) to the pro forma
balance sheet for further discussion.
(d) Represents additional interest expense on the borrowings on NDC's line of
credit using NDC's weighted average interest rate of 5.75% for fiscal
1997, offset by the elimination of interest on Source and PMSI
intercompany borrowing of approximately $.5 million.
(e) Reflects the income tax effects of the pro forma adjustments above.
(f) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC stock to Source and PMSI Database, respectively,
under the terms of the Merger Agreement and Stock Purchase Agreement.
E-4
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED AUGUST 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PMSI
NDC SOURCE DATABASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS(A) CONSOLIDATED(A)
---------- ---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
REVENUES................ $120,102 $15,300 $6,235 $ 0 $141,637
COST OF SERVICE......... 58,970 3,747 1,551 1,641(b) 65,909
SALES, GENERAL AND
ADMINISTRATIVE......... 41,499 11,215 3,958 0 56,672
-------- ------- ------ ------- --------
100,469 14,962 5,509 1,641 122,581
-------- ------- ------ ------- --------
OPERATING INCOME........ 19,633 338 726 (1,641) 19,056
OTHER INCOME (EXPENSE):
Interest and other
income................ 485 86 12 (172)(c) 411
Interest and other
expense (2,314) (221) (45) (292)(d) (2,872)
Minority interest...... (701) 0 0 0 (701)
-------- ------- ------ ------- --------
Total other income
(expense)............. (2,530) (135) (33) (464) (3,162)
-------- ------- ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES........... 17,103 203 693 (2,105) 15,894
PROVISION FOR INCOME
TAXES.................. (6,499) 0 (277) 388(e) (6,388)
-------- ------- ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS............. $ 10,604 $ 203 $ 416 $(1,717) $ 9,506
======== ======= ====== ======= ========
FULLY DILUTED WEIGHTED
AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING............ 28,201 0 0 2,615(f) 30,816
INCOME FROM CONTINUING
OPERATIONS PER SHARE
(g).................... $ 0.38 $ 0.31
</TABLE>
- --------
Adjustments:
(a) Excludes the impact of the non-recurring charge related to purchased in-
process research and development costs of $67.0 million or $(2.17) per
share. This charge relates entirely to the operations of Source U.S. Based
on the allocation model of Source U.S. operations (76% to Source and 24%
to PMSI), approximately $51 million of the charge can be attributable to
Source and $16 million to PMSI.
(b) Reflects the additional amortization of intangibles resulting from the
Stock Purchase and Merger. See note (d) to the pro forma balance sheet for
further discussion.
(c) Represents reduction in interest income using NDC's weighted average rate
(5.2%) from reduced funds available for investment as a result of cash
used in association with the acquisition. See Note (b) to the pro forma
balance sheet for further discussion.
(d) Represents additional interest expense on the borrowings on NDC's line of
credit using an estimated interest rate of 5.75% for the quarter ended
August 31, 1997, offset by the elimination of interest on Source and PMSI
intercompany borrowing of approximately $.1 million.
(e) Reflects the income tax effects of the pro forma adjustments above.
(f) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC stock to Source and PMSI Database, respectively,
under the terms of the Merger Agreement and Stock Purchase Agreement.
(g) The dilution in earnings per share reflects the seasonality of the Source
US business. See "Source Informatics Inc.--Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 48-51
of this Proxy Statement/Prospectus.
E-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Bylaws provide for indemnification of directors and
officers of the Registrant to the full extent permitted by Delaware law.
Section 145 of the General Corporation Law of the State of Delaware provides
generally that a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at its request in
such capacity in another corporation or business association, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
In addition, pursuant to the authority of Delaware law, the Certificate of
Incorporation of the Registrant also eliminates the monetary liability of
directors to the fullest extent permitted by Delaware law. Although the
Certificate of Incorporation of the Registrant does not specifically address
indemnification of directors for liabilities arising under federal securities
laws, indemnification and any limitations or indemnification for such
liabilities would be determined based upon the authority of Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of August 20, 1997, by and
among NDC, Source, and Sub. Pursuant to the regulations (the
"Regulations") under the Securities Act of 1933, as amended, the
Registrant has omitted all schedules and similar attachments to the
Merger Agreement. The Registrant agrees to furnish upon the request of
the Commission and in accordance with the Regulations, copies of all
such schedules and similar attachments.) CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED FROM CERTAIN OF THE EXHIBITS TO THE
AGREEMENT AND PLAN OF MERGER. THIS CONFIDENTIAL INFORMATION HAS BEEN
FILED SEPARATELY WITH THE COMMISSION.
2.2 Amendment No. One to Agreement and Plan of Merger, dated as of
November 7, 1997, by and among NDC, Source and Sub.
3.1 Certificate of Incorporation, as amended (included as Exhibit 4(a) to
the Registrant's Registration Statement on Form S-8 (Registration No.
333-05427), previously filed with the Commission and incorporated by
reference herein)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant, dated October 28, 1996 (filed as Exhibit 3.1 to the
Registrant's Current Report on Form 8-K dated October 29, 1996, file
No. 001-12392, and incorporated herein by reference).
3.3 Amended Certificate of Designations of the Registrant, dated October
28, 1996 (filed as Exhibit 3.2 to the Registrant's Current Report on
Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated
herein by reference).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
3.4 Bylaws, as amended (included as Exhibit 3(ii) to the Registrant's Form
10-K for the fiscal year ended May 31, 1991, previously filed with the
Commission and incorporated by reference herein)
3.5 Amendment to Bylaws (included as Exhibit 3(iii) to the Registrant's
Form 10-K for the fiscal year ended May 31, 1996, previously filed with
the Commission and incorporated by reference herein)
4.1 See Exhibits 3.1 through 3.5 for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining rights of holders
of Common Stock of the Registrant
4.2 Rights Agreement (included as Exhibit 1 to the Registrant's Form 8-A
filed with the Commission on January 22, 1991, as amended on October 5,
1993 (file No. 001-12392) and incorporated by reference herein)
5.1* Opinion of Alston & Bird LLP
8.1 Tax Opinion of Alston & Bird LLP
10.1 Master Reorganization Agreement dated as of April 16, 1996 between
Walsh International Inc. and Source Informatics Inc.
11.1 Statement regarding computation of per share earnings (included as
Exhibit 11 to the Registrant's Form 10-Q for the fiscal quarter ended
August 31, 1997, previously filed with the Commission and incorporated
by reference herein)
21 Subsidiaries of the Registrant (included as Exhibit 21 to the
Registrant's Form 10-K for the fiscal year ended May 31, 1997,
previously filed with the Commission and incorporated by reference
herein).
23.1* Consent of Alston & Bird LLP (included in Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
24.1* Powers of Attorney (included on signature page hereof)
99.1* Form of Proxy for Source Common Stock
99.2* Form of Proxy for Source Series A Preferred Stock
</TABLE>
- --------
* Previously filed.
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
II-2
<PAGE>
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;"
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Registrant's Certificate of Incorporation or
Bylaws, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefor,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment for the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia, on November 10, 1997.
National Data Corporation
/s/ E. Michael Ingram
By: _________________________________
E. MICHAEL INGRAM
SENIOR VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in
the capacities indicated on November 10, 1997.
SIGNATURE TITLE
Chairman of the Board and
/s/ Robert A. Yellowlees* Chief Executive Officer
- ------------------------------------- (principal executive
ROBERT A. YELLOWLEES officer)
Chief Financial Officer
/s/ M. P. Stevenson* (principal financial and
- ------------------------------------- accounting officer)
M. P. STEVENSON
Director
/s/ Edward L. Barlow*
- -------------------------------------
EDWARD L. BARLOW
Director
/s/ J. Veronica Biggins*
- -------------------------------------
J. VERONICA BIGGINS
Director
/s/ James B. Edwards*
- -------------------------------------
JAMES B. EDWARDS
Director
/s/ Don W. Sands*
- -------------------------------------
DON W. SANDS
Director
/s/ Neil Williams*
- -------------------------------------
NEIL WILLIAMS
- --------
*Signed on behalf of such person by E. Michael Ingram as attorney-in-fact.
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of April 15, 1997, by and among
NDC, Source, and Sub. (Pursuant to the regulations (the "Regulations")
under the Securities Act of 1933, as amended, the Registrant has
omitted all schedules and similar attachments to the Merger Agreement.
The Registrant agrees to furnish upon the request of the Commission
and in accordance with the Regulations, copies of all such schedules
and similar attachments.) CERTAIN CONFIDENTIAL INFORMATION HAS BEEN
OMITTED FROM CERTAIN OF THE EXHIBITS TO THE AGREEMENT AND PLAN OF
MERGER. THIS CONFIDENTIAL INFORMATION HAS BEEN FILED SEPARATELY WITH
THE COMMISSION.
2.2 Amendment No. One to Agreement and Plan of Merger dated as of November
7, 1997, by and among NDC, Source and Sub.
3.1 Certificate of Incorporation, as amended (included as Exhibit 4(a) to
the Registrant's Registration Statement on Form S-8 (Registration No.
333-05427), previously filed with the Commission and incorporated by
reference herein)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant, dated October 28, 1996 (filed as Exhibit 3.1 to the
Registrant's Current Report on Form 8-K dated October 29, 1996, file
No. 001-12392, and incorporated herein by reference).
3.3 Amended Certificate of Designations of the Registrant, dated October
28, 1996 (filed as Exhibit 3.2 to the Registrant's Current Report on
Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated
herein by reference).
3.4 Bylaws, as amended (included as Exhibit 3(ii) to the Registrant's Form
10-K for the fiscal year ended May 31, 1991, previously filed with the
Commission and incorporated by reference herein)
3.5 Amendment to Bylaws (included as Exhibit 3(iii) to the Registrant's
Form 10-K for the fiscal year ended May 31, 1996, previously filed
with the Commission and incorporated by reference herein)
4.1 See Exhibits 3.1 through 3.5 for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining rights of holders
of Common Stock of the Registrant
4.2 Rights Agreement (included as Exhibit 1 to the Registrant's Form 8-A
filed with the Commission on January 22, 1991, as amended on October
5, 1993 (file No. 001-12392) and incorporated by reference herein)
5.1* Opinion of Alston & Bird LLP
8.1 Tax Opinion of Alston & Bird LLP
10.1 Master Reorganization Agreement dated as of April 16, 1996 between
Walsh International Inc. and Source Informatics Inc.
11.1 Statement regarding computation of per share earnings (included as
Exhibit 11 to the Registrant's Form 10-Q for the quarter ended August
31, 1997, previously filed with the Commission and incorporated by
reference herein)
21 Subsidiaries of the Registrant (included as Exhibit 21 to the
Registrant's Form 10-K for the fiscal year ended May 31, 1997,
previously filed with the Commission and incorporated by reference
herein).
23.1* Consent of Alston & Bird LLP (included in Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
24.1* Powers of Attorney (included on signature page hereof)
99.1* Form of Proxy for Source Common Stock
99.2* Form of Proxy for Source Series A Preferred Stock
</TABLE>
- --------
* Previously filed.
<PAGE>
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER*
BY AND AMONG
NATIONAL DATA CORPORATION,
DUNKIRK, INC.,
AND
SOURCE INFORMATICS INC.
DATED AS OF AUGUST 20, 1997
- -----------------------
*CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM CERTAIN OF THE EXHIBITS
TO THIS AGREEMENT AND PLAN OF MERGER. THIS CONFIDENTIAL INFORMATION HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 20, 1997, by and among NATIONAL DATA CORPORATION ("NDC"), a
Delaware corporation; DUNKIRK, INC. ("Sub"), a Delaware corporation; and SOURCE
INFORMATICS INC. ("Source"), a Delaware corporation.
PREAMBLE
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The respective Boards of Directors of Source, Sub and NDC are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective stockholders. This Agreement
provides for the acquisition of Source by NDC pursuant to the merger of Sub with
and into Source. At the effective time of such merger, the outstanding shares of
the capital stock of Source shall be converted (except as provided herein) into
the right to receive cash or shares of the common stock of NDC. As a result,
common stockholders of Source shall become stockholders of NDC and Source shall
continue to conduct the business and operations of Source as a wholly-owned
subsidiary of NDC. The transactions described in this Agreement are subject to
the approvals of the stockholders of Source, expiration of the required waiting
period under the HSR Act, the consummation of the Stock Purchase Agreement dated
as of even date herewith by and among PMSI Database Holdings, Inc. ("Newco"),
Pharmaceutical Marketing Services Inc. ("PMSI") and NDC (the "PMSI Agreement,"
together with the related agreements in connection therewith) and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger for federal income
tax purposes shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 12.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
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1.1 MERGER. Subject to the terms and conditions of this Agreement, at
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the Effective Time, Sub shall be merged with and into Source in accordance with
the provisions of Section 251 of the DGCL and with the effect provided in
Sections 259 and 261 of the DGCL (the "Merger"). Source shall be the Surviving
Corporation resulting from the Merger and shall become a wholly-owned Subsidiary
of NDC and shall continue to be governed by the Laws of the State of Delaware.
The Merger shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the respective Boards of Directors of Source,
Sub and NDC and by NDC, as the sole stockholder of Sub.
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1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
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contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree (the "Closing
Date"). The Closing shall be held at such location as may be mutually agreed
upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
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this Agreement shall become effective on the date and at the time the
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Delaware (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the authorized officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on the first business
day following the last to occur of (i) the effective date (including expiration
of any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, (ii) the
date on which the stockholders of Source approve this Agreement to the extent
such approval is required by applicable Law and (iii) the date on which the
stockholders of PMSI approve the PMSI Agreement.
ARTICLE 2
TERMS OF MERGER
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2.1 CHARTER. The Certificate of Incorporation of Source in effect
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immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of Source in effect immediately prior to the
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Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Sub in office
----------------------
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Source in office immediately prior
to the Effective Time, together with such additional persons as may thereafter
be elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
2.4 EFFECT OF STOCKHOLDER APPROVAL.
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(a) The adoption of this Agreement by the Stockholders shall
constitute ratification of this Agreement, the appointment of the Stockholder
Representative in accordance with Section 10.10 and authorization for the
Stockholder Representative to execute and deliver the Escrow Agreement on behalf
of the Stockholders. Upon such adoption, this Agreement shall
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constitute the legal, valid and binding obligations of each Stockholder. In
addition, upon such adoption and upon execution and delivery of the Escrow
Agreement by the Stockholder Representative, the Escrow Agreement shall
constitute the legal, valid and binding obligations of each Stockholder.
(b) The adoption of this Agreement by the holders of Source Preferred
Stock shall constitute ratification of this Agreement. Upon such adoption, this
Agreement shall constitute the legal, valid and binding obligation of each
holder of Source Preferred Stock.
ARTICLE 3
MANNER OF CONVERTING SHARES
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3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
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the Effective Time, by virtue of the Merger and without any action on the part
of NDC, Source, Sub or the stockholders of any of the foregoing:
(a) Each share of capital stock of NDC issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Sub Common Stock issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall be
converted into one share of Source Common Stock.
(c) Each share of Source Common Stock (excluding shares held by any
Source Entity or any NDC Entity, and excluding shares held by stockholders
who perfect their statutory dissenters' rights as provided in Section 3.7)
issued and outstanding immediately prior to the Effective Time shall cease to
be outstanding and shall be converted into and exchanged for the right to
receive (i) the Common Cash Amount, if any, and that fraction of a share of
NDC Common Stock equal to 1,099,716 shares (the "Payment Shares") divided by
the total number of shares of Source Common Stock outstanding at the Closing
Date (the "Common Base Exchange Ratio"); provided, however, that the Payment
Shares shall be first reduced by the Option Shares (as defined in Section
3.1(c)(4) below), and (ii) that fraction of a share of NDC Common Stock
equal to 455,840 shares (the "Stock Escrow") divided by the total number of
shares of Source Common Stock outstanding at the Closing Date, subject to the
provisions of Section 3.2, Article 10 and the Escrow Agreement (the "Common
Escrow Exchange Ratio");
(1) At the Closing Date, the "Common Cash Amount" shall be calculated
by dividing $ 31,750,000, the aggregate cash consideration payable by NDC
hereunder (the "Aggregate Cash Amount"), less the Preferred Stock Merger
Consideration (as defined in Section 3.1(d)) and the Transaction Expenses
(as defined in Section 3.1(c)(2) below), by the total number of shares of
Source Common Stock outstanding at the Closing Date.
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(2) At the Closing Date, Source shall prepare and deliver to NDC a
schedule substantially in the form of Schedule 1 attached hereto (the
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"Expense Schedule"), indicating the expenses incurred but unpaid as of
the Closing Date which are of the type disclosed on Schedule 1 and which
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are directly associated with the transaction contemplated by this
Agreement, including, without limitation, all expenses incurred in
connection with Source's termination of certain employment agreements and
an executive pension plan pursuant to Section 7.1(d) hereof (the
"Transaction Expenses") ; provided, however, if the sum of the Preferred
Stock Merger Consideration and the Transaction Expenses exceed the
Aggregate Cash Amount ("Excess Expense"), then the Payment Shares shall
be reduced by that number of shares of NDC Common Stock equal to the
quotient of (i) the Excess Expense divided by (ii) the Average Closing
Price as of the Closing Date.
(3) If, at the close of trading on the tenth trading day immediately
preceding the Closing Date (the "Determination Date"), the Average
Closing Price shall be greater than $50.50 (the "Upper Threshold Price"),
the "Common Exchange Ratios" (defined to include the Common Base Exchange
Ratio and the Common Escrow Exchange Ratio) shall each be adjusted to
equal that fraction of a share of NDC Common Stock (rounded to the
nearest ten thousandth of a share) obtained by dividing the product of
the Common Base Exchange Ratio or the Common Escrow Exchange Ratio, as
the case may be, and the Upper Threshold Price by the Average Closing
Price at the Determination Date; provided further, that, in the event
that the Average Closing Price on the Determination Date shall be less
than $37.25 (the "Lower Threshold Price" and, together with the Upper
Threshold Price, the "Threshold Prices"), the Common Exchange Ratios may,
at the sole discretion of NDC, and in accordance with the provisions of
Section 11.1(h), each be adjusted to equal that fraction of a share of
NDC Common Stock (rounded to the nearest ten thousandth of a share)
obtained by dividing the product of the Common Base Exchange Ratio or the
Common Escrow Exchange Ratio, as the case may be, and the Lower Threshold
Price by the Average Closing Price at the Determination Date.
(4) At the Closing Date, Source shall have secured the cancellation
of all outstanding options and warrants to purchase shares of Source
Common Stock and shall provide to NDC a schedule of the number of shares
of NDC Common Stock (the "Option Shares") payable to the holders of such
options and warrants in consideration of such cancellation.
(5) Pursuant to the NDC Rights Agreement, each share of NDC Common
Stock issued in connection with the Merger upon conversion of Source
Common Stock shall be accompanied by a NDC Right.
(d) Each share of Source Preferred Stock (excluding shares held by
any Source Entity or any NDC Entity, and excluding shares held by
stockholders who perfect their statutory dissenters' rights as provided in
Section 3.7) issued and outstanding
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immediately prior to the Effective Time shall cease to be outstanding and
shall be converted and exchanged for the right to receive an amount equal to
$11.33, subject to adjustment to equal that amount such holder's shares of
Source Preferred Stock would otherwise receive if such holder were redeemed
on the Closing Date pursuant to the Designation (such aggregate amount, as
adjusted, the "Preferred Stock Merger Consideration").
3.2 PRELIMINARY BALANCE SHEET.
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(a) Source will cause to be prepared and delivered to NDC a
balance sheet for Source, pro forma giving effect to the Divestiture, as of the
most recent month ending more than ten days prior to the Closing Date (the
"Preliminary Balance Sheet") and a certificate based on such Preliminary Balance
Sheet setting forth Source's calculation of Working Capital, Current Assets and
Current Liabilities as of such date ("Estimated Working Capital," "Estimated
Current Assets" and "Estimated Current Liabilities," respectively). The
Preliminary Balance Sheet shall (w) include the consolidated financial position
of Source and the Source Subsidiaries, (x) fairly present the financial position
of Source and the Source Subsidiaries as at the close of business on such date
in accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the balance sheet dated March
31, 1997 (the "Source Balance Sheet") previously delivered to NDC, (y) include
no material increase in long-term indebtedness, and include line items
substantially consistent with those in the Source Balance Sheet, and (z) be
prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the Source Balance Sheet. As used in this
Agreement, "Working Capital" shall mean the amount equal to Current Assets less
Current Liabilities; "Current Assets" shall mean the amount equal to the sum of
cash, accounts receivable (net of any reserves), inventories, prepaid expenses,
work-in-process, and any other current assets recognized by GAAP; and "Current
Liabilities" shall mean the amount equal to the sum of accounts payable, accrued
current liabilities of Source (other than the current portion of capitalized
lease obligations), accrued sales commissions (but only as to revenues realized
and included in the Source and Source Subsidiaries' statements of income prior
to such date), Accrued Bonuses, accrued vacation pay, current portion of long-
term indebtedness, pre-billed revenues and any other current liabilities
recognized by GAAP, but excluding all Transaction Expenses.
(b) NDC shall have five (5) business days from the receipt of the
Preliminary Balance Sheet and the calculation of Estimated Working Capital,
Estimated Current Assets and Estimated Current Liabilities delivered pursuant to
Section 3.2(a) to review such statement and calculations and following such
review such shall be final and binding upon the parties hereto.
(c) If Estimated Current Assets are less than the product of 0.9416
times Estimated Current Liabilities (such amount, the "Estimated Working Capital
Adjustment") as of the date of the Preliminary Balance Sheet, the Escrow Shares
payable by NDC pursuant to Section 3.1(c) shall be decreased by the number of
shares of NDC Common Stock equal to the Estimated Working Capital Adjustment
divided by the Average Closing Price as of the Closing Date; provided, however,
in the event this reduction of the Escrow Shares exceeds 113,960 shares, the
Payment Shares shall then be decreased similarly in an amount equal to such
excess.
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3.3 CLOSING BALANCE SHEET.
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(a) As promptly as practicable, but not later than 30 days after
the Closing Date, NDC will cause to be prepared and delivered to the Stockholder
Representative a balance sheet, giving effect to the Divestiture, for Source as
of the Closing Date (the "Closing Balance Sheet") setting forth NDC's
calculation of Working Capital, Current Assets and Current Liabilities as of the
Closing Date ("Closing Working Capital," "Closing Current Assets" and "Closing
Current Liabilities," respectively). The Closing Balance Sheet shall (w) include
the consolidated financial position of Source and the Source Subsidiaries (x)
fairly present the consolidated financial position of Source and the Source
Subsidiaries as at the close of business on the Closing Date in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the Source Balance Sheet, (y) include no
material increase in long term indebtedness, and include line items
substantially consistent with those in the Source Balance Sheet, and (z) be
prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the Source Balance Sheet.
(b) The Closing Balance Sheet and the calculation of Closing Working
Capital, Closing Current Assets and Closing Current Liabilities delivered
pursuant to Section 3.3(a) shall be deemed final upon the earliest of (i) the
date on which NDC and the Stockholder Representative jointly agree that such
documents are final, (ii) the 30th day after delivery of such documents pursuant
to Section 3.3(a), if the Stockholder Representative has not delivered a notice
to expressing disagreement with such calculations and setting forth its
calculation of such amount(s), and (iii) the date on which all disputes relating
to such statements and calculations between the parties are resolved in
accordance with Section 3.3(c). If the Stockholder Representative delivers a
notice of disagreement pursuant to this Section 3.3(b) it shall specify those
items or amounts as to which it disagrees, and it shall be deemed to have agreed
with all other items and amounts contained in the Closing Balance Sheet and the
calculation of Closing Working Capital delivered pursuant to Section 3.3(a)
(except to the extent resolution of the items or amounts to which it expresses
disagreement requires conforming changes to other items and amounts contained in
the Closing Balance Sheet or the calculation of Closing Working Capital).
(c) If the Stockholder Representative shall deliver a notice of
disagreement pursuant to Section 3.3(b), the Stockholder Representative and NDC
shall, during the 30 days following such delivery, use their reasonable efforts
to reach agreement on the disputed items or amounts (the "Disputed Amounts").
If, during such period, the Stockholder Representative and NDC are unable to
reach such agreement, they shall promptly thereafter cause Price Waterhouse LLP
(or if said firm shall be unwilling to act thereunder, such other independent
accountants of nationally recognized standing reasonably satisfactory to NDC and
the Stockholder Representative), promptly to review this Agreement, the
documents delivered pursuant to Section 3.3(a) and any other documents necessary
to calculate the Disputed Amounts (including all work papers of the parties used
in calculating the Disputed Amounts). In making such calculation, such
independent accountants shall act as experts and not arbitrators and shall
consider only the Disputed Amounts, solely in accordance with the terms of this
Agreement. Such independent accountants shall deliver to the Stockholder
Representative and NDC, as promptly as practicable,
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a report setting forth such calculation. Such report shall be final and binding
upon the Stockholders and NDC. The cost of such review and report shall be borne
by (i) the Stockholders if the difference between Final Working Capital (defined
in Section 3.4 below) shown in the independent accountant's calculation and the
Stockholder Representative's calculation of Closing Working Capital delivered
pursuant to Section 3.3(b) is greater than the difference between Final Working
Capital shown in the independent accountant's calculation and NDC's calculation
of Closing Working Capital delivered pursuant to Section 3.3(a), (ii) by NDC if
the difference between Final Working Capital shown in the independent
accountant's calculation and the NDC's calculation of Closing Working Capital
delivered pursuant to Section 3.3(a) is greater than the difference between the
Final Working Capital Ratio shown in the independent accountant's calculation
and the Stockholder Representative's calculation of the Closing Working Capital
Ratio delivered pursuant to Section 3.3(b), and (iii) otherwise equally by the
Stockholders and NDC.
(d) The Stockholder Representative and NDC agree that they will, and
will cause their respective independent accountants and Source and its
Subsidiaries to, cooperate and assist in the preparation of the Closing Balance
Sheet and the calculation of Closing Working Capital, Closing Current Assets and
Closing Current Liabilities and in the conduct of the reviews referred to in
this Section 3.3, including, without limitation, making available, to the extent
necessary, relevant books, records, working papers, analyses and schedules, and
permitting representatives of the parties to consult with the respective
employees, auditors, actuaries, attorneys and agents of Source and its
Subsidiaries.
3.4 ADJUSTMENT OF PURCHASE PRICE.
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(a) Subject to Section 3.4(c) below,
(i) If Final Current Assets are less than the product of
0.9416 times Final Current Liabilities (the amount of such shortfall referred to
as, the "Final Working Capital Deficit"), the Stockholders shall pay to NDC the
amount of the Final Working Capital Deficit as an adjustment to the Purchase
Price, out of the Stock Escrow in the manner provided in the Escrow Agreement.
(ii) If Final Current Assets are greater than the product of
0.9416 times Final Current Liabilities (the amount of such surplus referred to
as, the "Final Working Capital Surplus"), NDC shall pay to the escrow agent, to
be held in accordance with the Escrow Agreement, that number of shares of NDC
Common Stock equal to the quotient of the Final Working Capital Surplus divided
by the Average Closing Price as of the date Final Working Capital is determined.
(iii) "Final Working Capital" means Closing Working Capital (i)
as shown in NDC's calculation delivered pursuant to Section 3.3(a), if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
3.3(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed by
NDC and the Stockholder Representative pursuant to Section 3.3(b) or (B) in the
absence of such agreement, as shown in the independent accountant's calculation
delivered pursuant to Section 3.3(c); provided that, in no event shall Final
Working Capital be
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(i) more than the Stockholder Representative's calculation of Closing Working
Capital delivered pursuant to Section 3.3(b), if any, or (ii) less than the
lesser of NDC's calculation of Closing Working Capital delivered pursuant to
Section 3.3(a) or the Stockholder Representative's calculation of Closing
Working Capital delivered pursuant to Section 3.3(b), if any.
(b) Subject to Section 3.4(c) below,
(i) If Total Current Assets are less than the product of 0.9975
times Total Current Liabilities (the "Total Working Capital Deficit"), then the
Stockholders shall pay to NDC the Current Asset Allocation Amount as a further
adjustment to the Purchase Price, out of the Stock Escrow in the manner provided
in the Escrow Agreement.
(ii) If Total Current Assets are greater than the product of
0.9975 times Total Current Liabilities (the "Total Working Capital Surplus"),
then NDC shall pay to the Stockholders pursuant to the instructions of the
Stockholder Representative, as a further adjustment to the Purchase Price, that
number of shares of NDC Common Stock equal to the quotient of the Current Asset
Allocation Amount divided by the Average Closing Price as of the date Final
Working Capital is determined.
(iii) As used herein, "Total Current Assets" shall mean the
amount equal to the sum of Final Current Assets in this Agreement and Final
Current Assets calculated pursuant to the PMSI Agreement; "Total Current
Liabilities" shall mean the amount equal to the sum of Final Current Liabilities
in this Agreement and Final Current Liabilities calculated pursuant to the PMSI
Agreement; "Current Asset Allocation Amount" shall mean the amount equal to the
product of (A) the quotient of Final Current Assets in this Agreement divided by
Total Combined Assets multiplied by (B) the Total Working Capital Deficit or
Total Working Capital Surplus, as the case may be; and "Total Combined Assets"
shall mean the sum of Final Current Assets under this Agreement and Final
Current Assets calculated under the PMSI Agreement.
(c) For purposes of any adjustments to the Purchase Price made
pursuant to this Section, the parties shall take into account any adjustment
made to the Purchase Price at Closing pursuant to Section 3.2(c) hereof.
3.5 ANTI-DILUTION PROVISIONS. In the event NDC changes the number of
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shares of NDC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Common Exchange Ratios shall be proportionately
adjusted.
3.6 SHARES HELD BY SOURCE OR NDC. Each of the shares of Source Common
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Stock and Source Preferred Stock held by any Source Entity or by any NDC Entity
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
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3.7 DISSENTING STOCKHOLDERS. Any holder of shares of Source Common
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Stock or Source Preferred Stock who perfects his dissenters' rights in
accordance with and as contemplated by Section 262 of the DGCL shall be entitled
to receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, that no such payment shall be made to any dissenting
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of the DGCL and surrendered to Source the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting stockholder of Source fails to
perfect, or effectively withdraws or loses, his right to appraisal and of
payment for his shares, NDC shall issue and deliver the consideration to which
such holder of shares of Source Common Stock or Source Preferred Stock is
entitled under this Article 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of Source Common Stock or
Source Preferred Stock held by him. If and to the extent required by applicable
Law, Source will establish (or cause to be established) an escrow account with
an amount sufficient to satisfy the maximum aggregate payment that may be
required to be paid to dissenting stockholders. Upon satisfaction of all claims
of dissenting stockholders, the remaining escrowed amount, reduced by payment of
the fees and expenses of the escrow agent, will be returned to the Surviving
Corporation.
3.8 FRACTIONAL SHARES. Notwithstanding any other provision of this
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Agreement, each holder of shares of Source Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of NDC Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of NDC Common Stock multiplied
by the market value of one share of NDC Common Stock at the Effective Time. The
market value of one share of NDC Common Stock at the Effective Time shall be the
closing price of such common stock on the NYSE-Composite Transactions List (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by NDC) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a stockholder in respect of any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
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4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, NDC and
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Source shall cause the exchange agent selected by NDC (the "Exchange Agent") to
mail to each holder of record of a certificate or certificates which represented
shares of Source Common Stock and Source Preferred Stock immediately prior to
the Effective Time (the "Certificates") appropriate transmittal materials and
instructions (which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon proper delivery of
such Certificates to the Exchange Agent). The Certificate or Certificates of
Source Common Stock or Source Preferred Stock so delivered shall be duly
endorsed as the Exchange Agent may require. In the event of a transfer of
ownership of shares of Source Common Stock or Source Preferred Stock represented
by Certificates that are not registered in the transfer records of Source, the
consideration provided in Section 3.1 may be issued to a transferee if the
Certificates representing
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such shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been paid. If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(i) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as NDC
and the Exchange Agent may reasonably require and (iii) any other documents
necessary to evidence and effect the bona fide exchange thereof, the Exchange
Agent shall issue to such holder the consideration into which the shares
represented by such lost, stolen, mislaid or destroyed Certificate shall have
been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Source Common
Stock and Source Preferred Stock (other than shares to be canceled pursuant to
Section 3.6 or as to which statutory dissenters' rights have been perfected as
provided in Section 3.7) issued and outstanding at the Effective Time shall
surrender the Certificate or Certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2. To the extent required by Section
3.8, each holder of shares of Source Common Stock and Source Preferred Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the Certificate or Certificates, cash in lieu of any fractional share of NDC
Common Stock to which such holder may be otherwise entitled (without interest).
NDC shall not be obligated to deliver the consideration to which any former
holder of Source Common Stock or Source Preferred Stock is entitled as a result
of the Merger until such holder surrenders such holder's Certificate or
Certificates for exchange as provided in this Section 4.1. Any other provision
of this Agreement notwithstanding, neither NDC, the Surviving Corporation nor
the Exchange Agent shall be liable to a holder of Source Common Stock or Source
Preferred Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property, escheat or
similar Law. Adoption of this Agreement by the stockholders of Source shall
constitute ratification of the appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER SOURCE STOCKHOLDERS. At the Effective Time, the
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stock transfer books of Source shall be closed as to holders of Source Common
Stock and Source Preferred Stock immediately prior to the Effective Time and no
transfer of Source Common Stock or Source Preferred Stock by any such holder
shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 4.1, each Certificate theretofore
representing shares of Source Common Stock or Source Preferred Stock (other than
shares to be canceled pursuant to Section 3.6) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.8 in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by Source in respect of such shares of Source Common
Stock or Source Preferred Stock in accordance with the terms of this Agreement
and which remain unpaid at the Effective Time. Whenever a dividend or other
distribution is declared by NDC on the NDC Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include dividends
or other distributions on all shares of NDC Common Stock issuable
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pursuant to this Agreement, but no dividend or other distribution payable to the
holders of record of NDC Common Stock as of any time subsequent to the Effective
Time shall be delivered to the holder of any Certificate until such holder
surrenders such Certificate for exchange as provided in Section 4.1. However,
upon surrender of such Certificate, both the NDC Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such Certificate.
4.3 ESCROW AGREEMENT. In connection with the Closing, NDC and the
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Stockholder Representative shall have executed and delivered to the other an
escrow agreement (the "Escrow Agreement"), which shall be in the form of Exhibit
1. The Stock Escrow to be paid pursuant to Section 3.1(c) shall be paid to and
held by the escrow agent pursuant to the terms of the Escrow Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SOURCE
----------------------------------------
Source hereby represents and warrants to NDC as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Source is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Source is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Source Material Adverse Effect. The minute book and other
organizational documents for Source have been made available to NDC for its
review and, except as disclosed in Section 5.1 of the Source Disclosure
Memorandum, are true and complete in all material respects as in effect as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
stockholders thereof.
5.2 AUTHORITY OF SOURCE; NO BREACH BY AGREEMENT.
-------------------------------------------
(a) Source has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Source,
subject to the adoption of this Agreement by the holders of a majority of the
outstanding shares of Source Common Stock, and the adoption of this Agreement by
the holders of a majority of the outstanding shares of Source Preferred Stock,
which are the only stockholder votes required for approval of this Agreement and
consummation of the Merger by Source. Subject to such
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requisite stockholder approval, this Agreement represents a legal, valid, and
binding obligation of Source, enforceable against Source in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Source,
nor the consummation by Source of the transactions contemplated hereby, nor
compliance by Source with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Source's Certificate of Incorporation
or Bylaws or the certificate or articles of incorporation or bylaws of any
Source Subsidiary or any resolution adopted by the board of directors or the
stockholders of any Source Entity, or (ii) except as disclosed in Section 5.2 of
the Source Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any Source Entity under, any material Contract or Permit of any Source
Entity or, (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to any Source Entity or any of their
respective material Assets.
(c) Other than in connection or compliance with the provisions of
applicable state corporate and securities Laws and other than Consents required
from Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, no notice to,
filing with, or Consent of, any public body or authority is necessary for the
consummation by Source of the Merger and the other transactions contemplated in
this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of Source consists of (i) 12,000,000
shares of Source Common Stock, of which 5,800,193 shares are issued and
outstanding as of the date of this Agreement and not more than 7,010,187 shares,
excluding any shares of Source Common Stock issued upon conversion of Source
Preferred Stock, will be issued and outstanding at the Effective Time, and (ii)
2,000,000 shares of Source Preferred Stock, 1,041,667 shares of which are issued
and outstanding as of the date of this Agreement and not more than 1,041,667
shares will be issued and outstanding at the Effective Time. All of the issued
and outstanding shares of capital stock of Source are duly and validly issued
and outstanding and are fully paid and nonassessable under the DGCL. None of
the outstanding shares of capital stock of Source has been issued in violation
of any preemptive rights of the current or past stockholders of Source.
(b) Except as set forth in Section 5.3(a), or as disclosed in Section
5.3(b) of the Source Disclosure Memorandum, there are no shares of capital stock
or other equity securities of Source outstanding and no outstanding Equity
Rights relating to the capital stock of Source. Set forth in Section 5.3(b) of
the Source Disclosure Memorandum is the name of each of
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the holders of record of Source Common Stock and Source Preferred Stock and that
number of shares of Source Common Stock and Source Preferred Stock,
respectively, of which each holder is the owner (the "Scheduled Stockholders").
Except as specifically contemplated by this Agreement, no Person has any
Contract or any right or privilege (whether pre-emptive or contractual) capable
of becoming a Contract or Equity Right for the purchase, subscription or
issuance of any securities of Source from Source.
5.4 SOURCE SUBSIDIARIES. Source has disclosed in Section 5.4 of the
-------------------
Source Disclosure Memorandum all of the Source Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which it is qualified and/or licensed to transact business, and the number of
shares owned and percentage ownership interest represented by such share
ownership) and all of the Source Subsidiaries that are general or limited
partnerships, limited liability companies, or other non-corporate entities
(identifying the Law under which such entity is organized, each jurisdiction in
which it is qualified and/or licensed to transact business, and the amount and
nature of the ownership interest therein). Except as disclosed in Section 5.4
of the Source Disclosure Memorandum, Source or one of its wholly-owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each Source Subsidiary. No capital stock (or other
equity interest) of any Source Subsidiary is or may become required to be issued
(other than to another Source Entity) by reason of any Equity Rights, and there
are no Contracts by which any Source Subsidiary is bound to issue (other than to
another Source Entity) additional shares of its capital stock (or other equity
interests) or Equity Rights or by which any Source Entity is or may be bound to
transfer any shares of the capital stock (or other equity interests) of any
Source Subsidiary (other than to another Source Entity). There are no Contracts
relating to the rights of any Source Entity to vote or to dispose of any shares
of the capital stock (or other equity interests) of any Source Subsidiary. All
of the shares of capital stock (or other equity interests) of each Source
Subsidiary held by a Source Entity are fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Source Entity free and clear of
any Lien, except for the pledge by Source of the stock of one of its
Subsidiaries to PMSI pursuant to that certain Securities Transfer Agreement,
between PMSI and Source, (the "Source Divestiture Agreement"), which pledge will
be released at Closing. Except as disclosed in Section 5.4 of the Source
Disclosure Memorandum, each Source Subsidiary is duly organized, validly
existing, and (as to corporations) in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate or
other power and authority necessary for it to own, lease, and operate its Assets
and to carry on its business as now conducted. Each Source Subsidiary is duly
qualified or licensed to transact business as a foreign corporation or other
entity, and in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Source Material
Adverse Effect. The minute book and other organizational documents for each
Source Subsidiary have been made available to NDC for its review, and, except as
disclosed in Section 5.4 of the Source Disclosure Memorandum, are true and
complete in all material respects as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all
proceedings of the Board
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of Directors and stockholders thereof. Source has no Subsidiaries other than the
Source Subsidiaries and the Source Divestiture Subsidiaries.
5.5 FINANCIAL STATEMENTS AND PROJECTIONS.
------------------------------------
(a) Each of the Source Financial Statements (including, in each case,
any related notes) was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements), and fairly presented in all material respects the
consolidated financial position of Source and its Subsidiaries, or Source and
the Source Subsidiaries, as the case may be, as at the respective dates and the
consolidated results of operations and cash flows for the periods indicated,
except that the unaudited interim financial statements do not contain certain
financial statement footnotes otherwise required by GAAP in full fiscal year
financial statements and were or are subject to normal and recurring year-end
adjustments, which were not or are not expected to be material in amount or
effect.
(b) Each of the Joint Venture Financial Statements (including, in
each case, any related notes) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements), and fairly presented in all material
respects the pro forma financial position of the Joint Venture as at the
respective dates and the combined results of operations and cash flows for the
periods indicated, except that the unaudited interim financial statements,
except that the unaudited interim financial statements do not contain certain
financial statement footnotes otherwise required by GAAP in full fiscal year
financial statements and were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount or
effect.
(c) Set forth in Section 5.5 of the Source Disclosure Memorandum is a
true and correct copy of the financial projections prepared by Source with
respect to its results of operations, cash flows and capital expenditures
through June 30, 1998, including a list of the principal assumptions underlying
such projections. Source has prepared the projections in good faith and does
not have any reason to believe that the assumptions used in preparing the
projections are unrealistic under the circumstances. NDC acknowledges that the
assumptions are subject to significant business and competitive uncertainties
and are dependent upon future business decisions. Accordingly, the projections
cannot be viewed as a guarantee of future performance by Source and no assurance
can be given that the actual results of operations of Source will be comparable
to those reflected in the projections.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Joint Venture nor
----------------------------------
any Source Entity has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Source Material Adverse Effect, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Source as of March 31, 1997, included in the Source Financial
Statements delivered prior to the date of this Agreement, or reflected in the
notes thereto or in the Joint Venture Financial Statements or reflected in the
notes thereto. No Source Entity has incurred or paid any Liability since March
31, 1997, except for such Liabilities incurred or paid
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<PAGE>
(i) in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate, a
Source Material Adverse Effect or (ii) in connection with the transactions
contemplated by this Agreement. Except as disclosed in Section 5.6 of the Source
Disclosure Memorandum, no Source Entity is directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any Liability of any Person
(other than a Source Entity) for any amount in excess of $100,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1997, except
------------------------------------
as disclosed in the Source Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 5.7 of the Source Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Source Material Adverse Effect, and (ii) the Source Entities have not taken any
action, or failed to take any action, prior to the date of this Agreement, which
action or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of the covenants and agreements
of Source provided in Article 7.
5.8 TAX MATTERS.
-----------
(a) All Tax Returns required to be filed by or on behalf of any of
the Source Entities for periods ended on or before June 30, 1996, have been
timely filed or requests for extensions have been timely filed, granted, and
have not expired, and all Tax Returns filed are complete and accurate in all
material respects. All Taxes shown on filed Tax Returns have been paid. There is
no audit examination or deficiency or refund Litigation current or pending with
respect to any Taxes, except as reserved against in the Source Financial
Statements or as disclosed in Section 5.8 of the Source Disclosure Memorandum.
All Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the Source Entities, except for any
such Liens which are not reasonably likely to have a Source Material Adverse
Effect.
(b) None of the Source Entities has executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
Source Entities for the period or periods through and including the date of the
respective Source Financial Statements that has been made and is reflected on
such Source Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the Source Entities have been provided for in
accordance with GAAP.
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(e) Except as disclosed in Section 5.8(e) of the Source Disclosure
Memorandum, none of the Source Entities is a party to any Tax allocation or
sharing agreement and none of the Source Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Source) or has any Liability for Taxes of
any Person (other than Source and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the Source Entities is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply, in all material respects, with all applicable
information reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the Source Disclosure
Memorandum, none of the Source Entities has made any payments, is obligated to
make any payments, or is a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(h) The income tax basis of (i) all of the issued and outstanding
shares of the Source Divestiture Subsidiaries, in the aggregate, which are being
transferred from Source to PMSI pursuant to the Source Divestiture Agreement,
and (ii) the shares of capital stock of PMSI which are being transferred from
Source to PMSI pursuant to the Source Divestiture Agreement, are disclosed in
Section 5.8 of the Source Disclosure Memorandum.
(i) The distribution of Source from Walsh International Inc. through
a series of transactions described in that certain Master Reorganization
Agreement between Walsh International Inc. and Source dated as of April 16, 1996
and effected on or about such date ("spin-off") qualified as a tax free
distribution described in Section 355 of the Internal Revenue Code. Without
limiting the generality of the foregoing, Source did not at the time of the
spin-off have any plans or intentions of further transferring, exchanging or
otherwise selling all or any part of the capital stock of Source or the Assets
of Source. Source has supplied to NDC accurate and complete copies of all
opinions, correspondence, rulings, memoranda and other information regarding the
tax consequences of such spin-off.
5.9 ASSETS.
------
(a) Except as disclosed in Section 5.9 of the Source Disclosure
Memorandum or as disclosed or reserved against in the Source Financial
Statements delivered prior to the date of this Agreement, and except for the
pledge by Source of the stock of one of its Subsidiaries to PMSI pursuant to
that certain Source Divestiture Agreement, which pledge will be released at
Closing and the pledge by Source of shares of PMSI Common Stock held by Source
pursuant to the Source Divestiture Agreement, the Source Entities have good and
marketable title, free and clear of all Liens, to all of their respective
Assets. All tangible properties that are material to the
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Joint Venture are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with Source's past
practices.
(b) All Assets material to the Joint Venture, that are held under
leases or subleases by any of the Source Entities are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and effect.
(c) None of the Source Entities has received notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $100,000
pending under such policies of insurance and no notices of claims in excess of
such amounts have been given by any Source Entity under such policies.
(d) The Assets of the Joint Venture include, in the aggregate, all
Assets required to operate the business of the Joint Venture as presently
conducted.
5.10 INTELLECTUAL PROPERTY. Section 5.10 of the Source Disclosure
---------------------
Memorandum sets forth a complete and accurate list of, and a brief description
of all governmental registrations or applications for governmental registrations
of, all Intellectual Property owned, used or licensed by or to Source or any
Source Entity, which are used in or necessary for the conduct of the Joint
Venture's business, except as to which the absence thereof would not have a
Source Material Adverse Effect ("Source Intellectual Property"). No Source
Entity is in Default under any of its Source Intellectual Property licenses. No
proceedings have been instituted, or are pending or to the Knowledge of Source
threatened, which challenge the rights of any Source Entity with respect to
Source Intellectual Property used, sold or licensed by such Source Entity in the
course of its business, nor has any person claimed or alleged any rights to such
Source Intellectual Property. The conduct of the business of the Joint Venture
does not infringe any Intellectual Property of any other person. Except as
disclosed in Section 5.10 of the Source Disclosure Memorandum, the Joint Venture
is not obligated to pay any recurring royalties to any Person with respect to
any such Source Intellectual Property. Except as disclosed in Section 5.10 of
the Source Disclosure Memorandum, every officer, director, or employee of any
Source Entity is a party to a Contract which requires such officer, director or
employee to assign any interest in any Intellectual Property developed while in
the employ of Source to a Source Entity and to keep confidential any trade
secrets, proprietary data, customer information, or other business information
of the Joint Venture, and, to the Knowledge of Source, no such officer, director
or employee is party to any Contract with any Person other than a Source Entity
which requires such officer, director or employee to assign any interest in any
Intellectual Property to any Person other than a Source Entity or to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of any Person other than a Source Entity. Except as
disclosed in Section 5.10 of the Source Disclosure Memorandum, to the Knowledge
of Source, no officer, director or
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employee of any Source Entity is party to any Contract which restricts or
prohibits such officer, director or employee from engaging in activities
competitive with any Person, including any Source Entity. Except as disclosed in
Section 5.10 of the Source Disclosure Memorandum, Source has plans to modify its
software systems to include calendar year 2000 date conversion and compatibility
capabilities, including, but not limited to, date data century recognition, same
century and multiple century formula and date value calculations, and user
interface date data values that reflect the century.
5.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Each Source Entity, its Participation Facilities, and its
Operating Properties are, and have been, in compliance in all material respects
with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of Source,
threatened before any court, governmental agency, or authority or other forum in
which any Source Entity or any of its Operating Properties or Participation
Facilities (or Source in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by any Source Entity or any of its Operating
Properties or Participation Facilities, nor is there any reasonable basis for
any Litigation of a type described in this sentence.
(c) During the period of (i) any Source Entity's ownership or
operation of any of their respective current properties, (ii) any Source
Entity's participation in the management of any Participation Facility, or (iii)
any Source Entity's holding of a security interest in a Operating Property,
there have been no material releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Source Entity's
ownership or operation of any of their respective current properties, (ii) any
Source Entity's participation in the management of any Participation Facility,
or (iii) any Source Entity's holding of a security interest in a Operating
Property, to the Knowledge of Source, there were no material releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property.
5.12 COMPLIANCE WITH LAWS. The Joint Venture has in effect all Permits
--------------------
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any such
Permit. Except as disclosed in Section 5.12 of the Source Disclosure
Memorandum, none of the Source Entities nor the Joint Venture:
(a) is in Default under any of the provisions of its Certificate of
Incorporation or Bylaws (or other governing instruments);
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(b) is in Default under any Laws, Orders, or Permits applicable to
its business or employees conducting its business; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Source Entity or the Joint Venture is not in compliance in any
material respect with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, (ii) threatening to revoke any
Permits, or (iii) requiring any Source Entity or the Joint Venture to enter
into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, or to adopt
any Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to NDC.
5.13 LABOR RELATIONS. No Source Entity is the subject of any Litigation
---------------
asserting that it or any other Source Entity has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Source Entity to bargain with
any labor organization as to wages or conditions of employment, nor is any
Source Entity party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Source Entity, pending or
threatened, or to the Knowledge of Source, is there any activity involving any
Source Entity's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Source has disclosed in Section 5.14 of the Source Disclosure
Memorandum, and has delivered or made available to NDC prior to the execution of
this Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, which is currently, or within the six (6) years preceding the
Closing Date has been, adopted, maintained by, sponsored in whole or in part by,
or contributed to by any Source Entity or ERISA Affiliate (including any entity
which was an ERISA Affiliate during such six (6) year period) thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "Source Benefit Plans"). Any of
the Source Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a "Source
ERISA Plan." Each Source ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code) is referred to herein as
a "Source Pension Plan." No Source Pension Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
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(b) All Source Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Source Material Adverse Effect. Each Source ERISA Plan which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal Revenue Service,
and Source is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. No Source Entity has engaged in a
transaction with respect to any Source Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any
Source Entity to a Tax imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA.
(c) No Source Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Source Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Source Pension Plan, and (iii) no increase in
benefits under any Source Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect or materially adversely affect the
funding status of any such plan. Neither any Source Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Source Entity, or the single-employer
plan of any entity which is considered one employer with Source under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. No Source Entity has provided, or is required to provide,
security to a Source Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any Source Entity with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Source Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Source Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the Source Disclosure
Memorandum, no Source Entity has any Liability for retiree health and life
benefits under any of the Source Benefit Plans and there are no restrictions on
the rights of such Source Entity to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
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(f) Except as disclosed in Section 5.14 of the Source Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Source Entity
from any Source Entity under any Source Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any Source Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Source Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Source Financial Statements to the extent
required by and in accordance with GAAP.
(h) Neither NDC nor any ERISA Affiliate of NDC shall have any
liability or obligation with respect to (i) employment-related liabilities,
whether contingent or otherwise, arising out of any individual's employment or
working relationship with any ERISA Affiliate of Source or any other entity
which participated in or contributed to any Source ERISA Plan other than Source
or any Source Subsidiary; or (ii) any benefit plan, program, arrangement or
policy maintained or contributed to by any ERISA Affiliate of Source other than
Source or any Source Subsidiary.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the
------------------
Source Disclosure Memorandum or otherwise reflected in the Source Financial
Statements or the Joint Venture Financial Statements, none of the Source
Entities, the Joint Venture nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, or retirement Contract, (ii)
any Contract relating to the borrowing of money by any Source Entity or the
guarantee by any Source Entity or the Joint Venture of any such obligation
(other than Contracts evidencing trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Source Entity or the Joint Venture
from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, (iv) any Contract
between or among Source Entities, or other Affiliates of Source, (v) any
Contract involving Intellectual Property (other than Contracts entered into in
the ordinary course with customers and "shrink-wrap" software licenses), (vi)
any Contract relating to the provision of data processing, network
communication, or other technical services to or by any Source Entity or the
Joint Venture, (vii) any Contract relating to the purchase or sale of any goods
or services, including customer contracts, (viii) consulting Contracts, (ix) and
all Contracts referred to in Sections 5.9 and 5.14(a) (other than Contracts in
the case of (iv), (v), (vi), (vii), (viii) and (ix), entered into in the
ordinary course of business and involving payments under any individual Contract
not in excess of $100,000), as of the date of this Agreement (collectively, the
"Source Contracts"). With respect to each Source Contract and except as
disclosed in Section 5.15 of the Source Disclosure Memorandum: (i) the Contract
is in
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full force and effect; (ii) no Source Entity nor the Joint Venture is in Default
thereunder; (iii) no Source Entity has repudiated or waived any material
provision of any such Contract; (iv) no other party to any such Contract is, to
the Knowledge of Source, in Default in any respect or has repudiated or waived
any material provision thereunder; (v) there exists no actual, or to the
Knowledge of Source, threatened, cancellation, termination, or limitation of, or
any amendment, modification, or change to any Contract; (vi) no Source Entity
has received formal notice that any party to a Contract will not renew such
Contract at the end of its existing term; and (vi) no Source Contract requires
consent for assignment in connection with the transactions contemplated by this
Agreement. All of the indebtedness of any Source Entity for money borrowed is
prepayable at any time by such Source Entity without penalty or premium.
5.16 LEGAL PROCEEDINGS. There is no Litigation instituted or pending,
-----------------
or, to the Knowledge of Source, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any Source Entity, or against any
director, employee or employee benefit plan of any Source Entity, or against any
Asset, interest, or right of any of them or the Joint Venture, that is
reasonably likely to have, individually or in the aggregate, a Source Material
Adverse Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Source Entity
or the Joint Venture, that are reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect. Section 5.16 of the Source
Disclosure Memorandum contains a summary of all Litigation as of the date of
this Agreement to which any Source Entity is a party and which names a Source
Entity as a defendant or cross-defendant or for which any Source Entity or the
Joint Venture has any potential Liability.
5.17 STATEMENTS TRUE AND CORRECT. None of the information supplied or
---------------------------
to be supplied by any Source Entity or any Affiliate thereof for inclusion in
the Registration Statement to be filed by NDC with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Source Entity or any Affiliate thereof for inclusion in any
documents to be filed by a Source Entity or any Affiliate thereof with any
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. All documents that any Source Entity or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.18 REGULATORY MATTERS. No Source Entity or any Affiliate thereof has
------------------
taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 9.1(b) or result
in the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
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<PAGE>
5.19 STATE TAKEOVER LAWS. Each Source Entity has taken all necessary
-------------------
action to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws"), including Section 203 of the
DGCL.
5.20 CHARTER PROVISIONS. Each Source Entity has taken all action so
------------------
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Certificate of Incorporation,
Bylaws or other governing instruments of any Source Entity or restrict or impair
the ability of NDC or any of its Subsidiaries to vote, or otherwise to exercise
the rights of a stockholder with respect to, shares of any Source Entity that
may be directly or indirectly acquired or controlled by them.
5.21 STOCKHOLDERS' VOTING AGREEMENTS. The holders of 51% or more of
-------------------------------
Source Preferred Stock have executed and delivered to NDC, as of the date
hereof, an agreement in substantially the form of Exhibit 2 (the "Voting
Agreements").
5.22 BOARD RECOMMENDATION. The Board of Directors of Source, at a
--------------------
meeting duly called and held, has by unanimous vote of the directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger and the
Voting Agreements and the transactions contemplated thereby, taken together, are
fair to and in the best interests of the stockholders and (ii) resolved to
recommend that the holders of the shares of Source Common Stock and the holders
of Source Preferred Stock adopt this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF NDC
-------------------------------------
NDC hereby represents and warrants to Source and the Stockholders as
follows:
6.1 ORGANIZATION, STANDING, AND POWER. NDC is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. NDC is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a NDC Material Adverse Effect.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) NDC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions
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<PAGE>
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of NDC. This Agreement represents a legal, valid,
and binding obligation of NDC, enforceable against NDC in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by NDC, nor
the consummation by NDC of the transactions contemplated hereby, nor compliance
by NDC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of NDC's Certificate of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any NDC Entity under, any
Contract or Permit of any NDC Entity, or, (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any NDC Entity or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, no notice to, filing with, or Consent of, any public body
or authority is necessary for the consummation by NDC of the Merger and the
other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of NDC consists of (i) 100,000,000
shares of NDC Common Stock, of which 26,629,947 shares are issued and
outstanding as of August 18, 1997, and (ii) 1,000,000 shares of NDC Preferred
Stock, of which no shares are issued and outstanding. All of the issued and
outstanding shares of NDC Capital Stock are, and all of the shares of NDC Common
Stock to be issued in exchange for shares of Source Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the DGCL. None of the outstanding shares of NDC Capital
Stock has been, and none of the shares of NDC Common Stock to be issued in
exchange for shares of Source Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
stockholders of NDC.
(b) Except as set forth in Section 6.3(a), or as provided pursuant to
the NDC Rights Agreement, or as disclosed in Section 6.3 of the NDC Disclosure
Memorandum, there are
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<PAGE>
no shares of capital stock or other equity securities of
NDC outstanding and no outstanding Equity Rights relating to the capital stock
of NDC.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
---------------------------------
(a) NDC has timely filed and made available to Source all SEC
Documents required to be filed by NDC since May 31, 1993 (the "NDC SEC
Reports"). The NDC SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such NDC SEC Reports or necessary in
order to make the statements in such NDC SEC Reports, in light of the
circumstances under which they were made, not misleading. No NDC Subsidiary is
required to file any SEC Documents.
(b) Each of the NDC Financial Statements (including, in each case,
any related notes) contained in the NDC SEC Reports, including any NDC SEC
Reports filed after the date of this Agreement until the Effective Time,
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of NDC
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount or
effect.
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No NDC Entity has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a NDC Material Adverse Effect, except Liabilities which are accrued
or reserved against in the consolidated balance sheets of NDC as of May 31, 1996
and February 28, 1997, included in the NDC Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. No NDC Entity
has incurred or paid any Liability since February 28, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since May 31, 1996, except as
------------------------------------
disclosed in the NDC Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 6.6 of the NDC Disclosure Memorandum, (i)
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a NDC Material
Adverse Effect, and (ii) the NDC Entities have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of NDC
provided in Article 7.
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<PAGE>
6.7 COMPLIANCE WITH LAWS. Each NDC Entity has in effect all Permits
--------------------
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any such
Permit. Except as disclosed in Section 6.7 of the NDC Disclosure Memorandum,
none of the NDC Entities:
(a) is in Default under its Certificate of Incorporation or Bylaws
(or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business; or
(c) since May 31, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any NDC Entity is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, or (iii)
requiring any NDC Entity to enter into or consent to the issuance of a cease
and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business.
6.8 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
-----------------
to the Knowledge of NDC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any NDC Entity, or against any director,
employee or employee benefit plan of any NDC Entity, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any NDC Entity, that are reasonably likely to
have, individually or in the aggregate, a NDC Material Adverse Effect.
6.9 STATEMENTS TRUE AND CORRECT. None of the information supplied or to
---------------------------
be supplied by any NDC Entity or any Affiliate thereof for inclusion in the
Registration Statement to be filed by NDC with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any NDC Entity or any Affiliate thereof for inclusion in any
documents to be filed by any NDC Entity or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All documents that any NDC Entity or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
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<PAGE>
6.10 AUTHORITY OF SUB. Sub is a corporation duly organized, validly
----------------
existing and in good standing under the Laws of the State of Delaware as a
wholly owned Subsidiary of NDC. The authorized capital stock of Sub shall
consist of 1,000 shares of Sub Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by NDC free and clear of
any Lien. Sub has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Sub. This Agreement
represents a legal, valid, and binding obligation of Sub, enforceable against
Sub in accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought). NDC, as the sole stockholder of Sub, has voted
prior to the Effective Time the shares of Sub Common Stock in favor of adoption
of this Agreement, as and to the extent required by applicable Law.
6.11 TAX AND REGULATORY MATTERS. No NDC Entity or any Affiliate thereof
--------------------------
has taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.12 RIGHTS AGREEMENT. Execution of this Agreement and consummation of
----------------
the Merger and the other transactions contemplated by this Agreement will not
result in the grant of any rights to any Person under the NDC Rights Agreement
(other than as contemplated by Section 3.1) or enable or require the NDC Rights
to be exercised, distributed or triggered.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 AFFIRMATIVE COVENANTS OF SOURCE.
-------------------------------
(a) From the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, except as provided in
Section 7.1(b) below, unless the prior written consent of NDC shall have been
obtained, and except as otherwise expressly contemplated herein, Source shall
and shall cause each of its Subsidiaries to (a) operate its business only in
the usual, regular, and ordinary course, (b) preserve intact its business
organization and Assets and maintain its rights and franchises, and (c) take
no action which would (i) materially adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred
to in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially
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<PAGE>
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement.
(b) Prior to the Effective Time, Source shall, pursuant to the
Source Divestiture Agreement between Source and PMSI the terms and conditions
of which will have been approved by NDC, complete the divestiture (the
"Divestiture") of (i) its business operated in Europe as of the date of this
Agreement (the "European Business"), (ii) all of the shares of PMSI held by
Source or any Subsidiary of Source, and (iii) all of the stock of those
subsidiaries listed in Section 7.1(b) of the Source Disclosure Memorandum
(the "Source Divestiture Subsidiaries"). In connection with the Divestiture,
Source shall assign all of its interest in and obligations under any and all
Contracts related to the European Business, including but not limited to
those listed in Section 7.1(b) of the Source Disclosure Memorandum (the
"European Contracts"), to the purchaser of the European Business, and shall
obtain a release of all obligations of Source under the European Contracts
from the parties thereto. Other than as required under the terms of the
Target Divestiture Agreement or in connection with the operation of the
European Business in the ordinary course, any matters regarding the conduct,
ownership or divestiture of the European Business shall be undertaken only
with the advance written consent of NDC, which consent will not be
unreasonably withheld.
(c) Prior to the Effective Time, Source shall amend the designation
contained in the Source Certificate of Incorporation relating to the Source
Preferred Stock (such designation, as amended, the "Designation") to provide
that the holders of Source Preferred Stock shall receive the Preferred Stock
Merger Consideration upon consummation of the Merger.
(d) Prior to Closing, Source shall terminate the employment
agreements set forth in Section 5.15(Nos. 1-14) of the Source Disclosure
Memorandum and the executive pension plan set forth in Section 5.14(9) of the
Source Disclosure Memorandum and shall satisfy any liabilities or obligations
arising out of the termination of such. In addition, prior to Closing Source
agrees to cause the trademark registrations set forth in Section 5.10 of the
Source Disclosure Memorandum, to the extent not already accomplished, to be
transferred into the name of Source.
(e) Prior to Closing, all indebtedness or other obligations or
accounts of any kind between a Source Divestiture Subsidiary or PMSI or its
Subsidiaries, on the one hand and Source or a Source Subsidiary on the other
hand will have satisfied in accordance with Schedule 2 hereto.
7.2 NEGATIVE COVENANTS OF SOURCE. From the date of this Agreement until
----------------------------
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of NDC shall have been obtained, and except as
otherwise expressly contemplated herein, Source covenants and agrees that it
will not do or agree or commit to do, or permit any of its Subsidiaries to do or
agree or commit to do, any of the following:
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<PAGE>
(a) amend the Certificate of Incorporation, Bylaws or other
governing instruments of any Source Entity, including the Certificate of
Designation for the Source Preferred Stock except for the amendment of the
Source Preferred Stock designation provided in Section 7.1(c) above, which
may include a provision to postpone any mandatory redemption provisions, or
(b) except as provided in Section 5.5 of the Source Disclosure
Memorandum and the Source Divestiture Agreement for the purposes set forth
therein, incur any additional debt obligation, capital lease obligation or
other obligation for borrowed money, or make any capital expenditures or
impose, or suffer the imposition, on any Asset of any Source Entity or the
Joint Venture of any Lien or permit any such Lien to exist (other than in
connection with Liens in effect as of the date hereof that are disclosed in
the Source Disclosure Memorandum, the pledge by Source of the stock of one of
its Subsidiaries to PMSI pursuant to the Source Divestiture Agreement, which
pledge will be released at Closing, and the pledge by Source of shares of
PMSI Common Stock held by Source pursuant to the Source Divestiture
Agreement); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any Source Entity, or declare or pay any dividend or make
any other distribution in respect of Source's capital stock, excluding for
purposes of this Section 7.2(c) the redemption of Source Preferred Stock
pursuant to Section 3.1(d); or
(d) except as provided for in this Agreement and in the Source
Divestiture Agreement, or pursuant to the exercise of stock options or
warrants outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or as disclosed in Section 7.2(d) of the
Source Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of Source Common Stock or Source Preferred Stock or any
other capital stock of any Source Entity, or any stock appreciation rights,
or any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any
Source Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Source Common Stock or Source
Preferred Stock, or sell, lease, mortgage or otherwise dispose of or
otherwise encumber (x) any shares of capital stock of any Source Subsidiary
(unless any such shares of stock are sold or otherwise transferred to another
Source Entity and except for the pledge by Source of the stock of one of its
Subsidiaries to PMSI pursuant to the Source Divestiture Agreement, which
pledge will be released at Closing) or (y) any Asset other than in the
ordinary course of business for reasonable and adequate consideration (except
for the pledge by Source of shares of PMSI Common Stock
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<PAGE>
held by Source pursuant to the Source Divestiture Agreement), excluding for
purposes of this Section 7.2(e) the Divestiture; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock of securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a wholly owned
Source Subsidiary, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary course
of business, or (ii) the creation of new wholly owned Subsidiaries organized
to conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees
or officers of any Source Entity, except in accordance with past practice
disclosed in Section 7.2(g) of the Source Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of
this Agreement and disclosed in Section 7.2(g) of the Source Disclosure
Memorandum; enter into or amend any severance agreements with officers of any
Source Entity; or grant any material increase in fees or other increases in
compensation or other benefits to directors of any Source Entity except in
accordance with past practice disclosed in Section 7.2(g) of the Source
Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any Source
Entity and any Person that the Source Entity does not have the unconditional
right to terminate without Liability (other than Liability for services
already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Source Entity or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Source Entity other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such plan,
or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP;
or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Source Entity
or the Joint Venture for material money damages or restrictions upon the
operations of any Source Entity or the Joint Venture;
(l) without the prior written consent of NDC, which consent shall
not be unreasonably withheld, enter into, modify, amend or terminate any
Source Contract and any
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<PAGE>
other material Contract or waive, release, compromise or assign any material
rights or claims; or
(m) amend the Source Divestiture Agreement or, without the prior
written consent of NDC, waive any conditions to the closing of the
transactions contemplated by the Source Divestiture Agreement.
7.3 COVENANTS OF NDC. From the date of this Agreement until the earlier
----------------
of the Effective Time or the termination of this Agreement, unless the prior
written consent of Source shall have been obtained, and except as otherwise
expressly contemplated herein, NDC covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed, in its reasonable judgment, to enhance the long-term value of
the NDC Common Stock and the business prospects of the NDC Entities and to the
extent consistent therewith use all reasonable efforts to preserve intact the
NDC Entities' core businesses and goodwill with their respective employees and
the communities they serve, and (b) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c), or (ii) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement; provided, that the foregoing
shall not prevent any NDC Entity from acquiring any Assets or other businesses
or from discontinuing or disposing of any of its Assets or business if such
action is, in the judgment of NDC, desirable in the conduct of the business of
NDC and its Subsidiaries, provided that such actions shall not materially delay
the Effective Time or materially hinder consummation of the Merger. NDC further
covenants and agrees that it will not, without the prior written consent of
Source, which consent shall not be unreasonably withheld, amend the Certificate
of Incorporation or Bylaws of NDC or, except as expressly contemplated by this
Agreement, the NDC Rights Agreement, in each case, in any manner adverse to the
holders of Source Common Stock as compared to rights of holders of NDC Common
Stock generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect or a NDC Material Adverse Effect, as
applicable, or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows for the periods then ended in
accordance with GAAP consistently applied (subject in
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the case of interim financial statements to normal recurring year-end
adjustments that are not material). As of their respective dates, such reports
filed with the SEC will comply in all material respects with the Securities Laws
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any financial statements contained in any other reports to
another Regulatory Authority shall be prepared in accordance with Laws
applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 REGISTRATION STATEMENT; STOCKHOLDER APPROVAL. As soon as reasonably
--------------------------------------------
practicable after execution of this Agreement, NDC shall prepare and file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of NDC Common
Stock upon consummation of the Merger. Source shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as NDC may
reasonably request in connection with such action. Source shall call
Stockholders' Meetings for the holders of Source Common Stock and Source
Preferred Stock, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon adoption of this Agreement and such other related matters as it
deems appropriate. In connection with such Stockholders' Meetings, (i) Source
shall prepare and mail a notice of meeting to its stockholders, (ii) Newco and
NDC shall furnish to Source all information that Source may reasonably request
in preparation of such notice of meeting, (iii) the Board of Directors of Source
shall recommend to its stockholders the approval of the matters submitted for
approval, subject only to the Board of Directors' legal obligations (if any) as
directors of Source, and (iv) the Board of Directors and officers of Source
shall use their reasonable efforts to obtain such stockholders' approval. NDC
and Source shall make all necessary filings with respect to the Merger under the
Securities Laws.
8.2 EXCHANGE LISTING. NDC shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of NDC Common Stock to be issued to the holders of Source
Common Stock pursuant to the Merger, and NDC shall give all notices and make all
filings with the NYSE required in connection with the transactions contemplated
herein.
8.3 APPLICATIONS; ANTITRUST NOTIFICATION. NDC shall promptly prepare and
------------------------------------
file, and Source shall cooperate in the preparation and, where appropriate,
filing of, applications with all Regulatory Authorities having jurisdiction over
the transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. To the
extent required by the HSR Act, each of the Parties will promptly file with the
United States Federal Trade Commission and the United States Department of
Justice the notification and report form required for the transactions
contemplated hereby and
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any supplemental or additional information which may reasonably be requested in
connection therewith pursuant to the HSR Act and will comply in all material
respects with the requirements of the HSR Act. The Parties shall deliver to each
other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated hereby.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, Source shall execute and file the Certificate of
Merger with the Secretary of State of the State of Delaware in connection with
the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use,
and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party shall keep the other
Party advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Source shall use its reasonable efforts to exercise its rights
under confidentiality agreements entered into with Persons which were
considering an Acquisition Proposal with respect to Source to preserve the
confidentiality of the information relating to the Source Entities provided to
such Persons and their Affiliates and Representatives.
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(d) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Source Material Adverse
Effect or a NDC Material Adverse Effect, as applicable.
8.7 PRESS RELEASES. Prior to the Effective Time, Source and NDC shall
--------------
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the
---------------
transactions contemplated hereby, no Source Entity nor any Stockholder nor any
Affiliate thereof nor any Representatives thereof retained by any Source Entity
shall directly or indirectly solicit any Acquisition Proposal by any Person.
Except to the extent the Board of Directors of Source, after having consulted
with and considered the advice of outside counsel, reasonably determines in good
faith that the failure to take such actions would constitute a breach of
fiduciary duties of the members of such Board of Directors to Source's
stockholders under applicable law, no Source Entity, any Stockholder or any
Affiliate or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, but Source may
communicate information about such an Acquisition Proposal to its stockholders
if and to the extent that it is required to do so in order to comply with its
legal obligations as advised by outside counsel. Each Stockholder and Source
shall promptly advise NDC following the receipt of any Acquisition Proposal and
the details thereof, and advise NDC of any developments with respect to such
Acquisition Proposal promptly upon the occurrence thereof. Each Stockholder and
Source shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its Affiliates and Representatives not to engage in any
of the foregoing.
8.9 TAX TREATMENT. NDC undertakes and agrees to use its reasonable
-------------
efforts to cause the Merger, and to take no action which would cause the Merger
not, to qualify for or as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. Each Source Entity shall take all necessary
-------------------
steps to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable Takeover
Law, including Section 203 of the DGCL.
8.11 CHARTER PROVISIONS. Each Source Entity shall take all necessary
------------------
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any
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Person under the Certificate of Incorporation, Bylaws or other governing
instruments of any Source Entity or restrict or impair the ability of NDC or any
of its Subsidiaries to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of any Source Entity that may be directly or
indirectly acquired or controlled by them.
8.12 AGREEMENT OF AFFILIATES. Source has disclosed in Section 8.12 of
-----------------------
the Source Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of Source for purposes of Rule 145 under the 1933 Act. Source shall
use its reasonable efforts to cause each such Person to deliver to NDC not later
than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 3, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Source Common
Stock or Source Preferred Stock held by such Person except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of NDC Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder. NDC shall
be entitled to place restrictive legends upon certificates for shares of NDC
Common Stock issued to affiliates of Source pursuant to this Agreement to
enforce applicable provisions of Law. NDC shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of NDC Common Stock by such affiliates.
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time, NDC
-------------------------------
shall provide generally to officers and employees of the Source Entities
employee benefits under employee benefit and welfare plans on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the NDC Entities to their similarly situated officers and
employees. For purposes of participation, vesting and (except in the case of
NDC retirement plans) benefit accrual under NDC's employee benefit plans, the
service of the employees of the Source Entities prior to the Effective Time
shall be treated as service with a NDC Entity participating in such employee
benefit plans. NDC also shall cause the Surviving Corporation and its
Subsidiaries to honor in accordance with their terms all employment, severance,
consulting and other compensation Contracts disclosed in Section 8.13 of the
Source Disclosure Memorandum to NDC between any Source Entity and any current or
former director, officer, or employee thereof, and all provisions for vested
benefits or other vested amounts earned or accrued through the Effective Time
under the Source Benefit Plans. If so advised by NDC at least 30 days prior to
the Effective Time, Source, on behalf of itself and each Source Entity, shall
terminate its participation in the Source Informatics America, PMSI Scott-Levin,
and Walsh America Retirement Plan (the "401(k) Plan"), effective no later than
the day preceding the Effective Time. The amendment to the 401(k) Plan which
effects such termination shall be adopted no later than ten (10) days prior to
the Effective Time. Immediately following its adoption, Source shall provide
NDC with a copy of such amendment which (i) terminates Source's participation in
the plan, (ii) fully vests employees of each Source Entity in their account
balances under the 401(k) Plan as of the effective date of the termination; and
(iii) provides for lump sum distributions (which shall be "eligible rollover
distributions," within the meaning of Section 402(c)(4) of the Internal Revenue
Code) of the participants' accrued benefits as soon as practicable following
Source's or its successor's receipt of a letter from the Internal Revenue
Service to the effect that the Source Entities' termination of participation in
the 401(k) Plan and
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the subsequent distribution of the participants' accounts thereunder does not
adversely affect the 401(k) Plan's qualified status under Section 401(a) of the
Internal Revenue Code. The effectiveness of Source's termination of its
participation in the 401(k) Plan may be contingent upon the receipt of such a
letter from the IRS. Under no circumstances may an employee of any Source
Entity, prior to the receipt of such a determination letter, receive a
distribution from the 401(k) Plan on account of Source's termination of its
participation in the plan.
8.14 INDEMNIFICATION.
---------------
(a) Except as set forth in the Waivers, for a period of six years
after the Effective Time, NDC shall, and shall cause the Surviving Corporation
to, indemnify, defend and hold harmless the present and former directors,
officers, employees and agents of the Source Entities (each, an "Indemnified
Party") against all Liabilities arising out of actions or omissions arising out
of the Indemnified Party's service or services as directors, officers, employees
or agents of Source or, at Source's request, of another corporation,
partnership, joint venture, trust or other enterprise occurring at or prior to
the Effective Time to the fullest extent permitted under Delaware Law and by
Source's Certificate of Incorporation and Bylaws as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any Litigation and whether or not any NDC Entity is insured against
any such matter. Without limiting the foregoing, in any case in which approval
by the Surviving Corporation is required to effectuate any indemnification, the
Surviving Corporation shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent counsel
mutually agreed upon between NDC and the Indemnified Party.
(b) NDC shall, or shall cause the Surviving Corporation to, use its
reasonable efforts (and Source shall cooperate prior to the Effective Time in
these efforts) to maintain in effect for a period of three years after the
Effective Time Source's existing directors' and officers' liability insurance
policy (provided that NDC may substitute therefor (i) policies of at least the
same coverage and amounts containing terms and conditions which are
substantially no less advantageous or (ii) with the consent of Source given
prior to the Effective Time, any other policy) with respect to claims arising
from facts or events which occurred prior to the Effective Time and covering
persons who are currently covered by such insurance; provided, that neither NDC
nor the Surviving Corporation shall be obligated to make aggregate premium
payments for such three-year period in respect of such policy (or coverage
replacing such policy) which exceed, for the portion related to Source's
directors and officers, 150% of the annual premium payments on Source's current
policy in effect as of the date of this Agreement (the "Maximum Amount"). If
the amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, NDC shall use its reasonable efforts to
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount. Prior to the
Closing Date, NDC shall provide Source with an estimate of the costs associated
with maintaining a directors' and officers' liability insurance policy as
discussed above, which estimate shall have been prepared by an independent third
party and which amount shall be listed as a Transaction Expense on Schedule 1
----------
hereof.
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<PAGE>
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.14, upon learning of any such Liability or
Litigation, shall promptly notify NDC thereof. In the event of any such
Litigation (whether arising before or after the Effective Time), (i) NDC or the
Surviving Corporation shall have the right to assume the defense thereof and
neither NDC nor the Surviving Corporation shall be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if NDC or the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between NDC or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and NDC or the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that NDC and the
Surviving Corporation shall be obligated pursuant to this paragraph (c) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction,
(ii) the Indemnified Parties will cooperate in the defense of any such
Litigation, and (iii) neither NDC nor the Surviving Corporation shall be liable
for any settlement effected without its prior written consent; and provided
further that neither NDC nor the Surviving Corporation shall have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(d) If NDC or the Surviving Corporation or any successors or
assigns shall consolidate with or merge into any other Person and shall not be
the continuing or surviving Person of such consolidation or merger or shall
transfer all or substantially all of its assets to any Person, then and in each
case, proper provision shall be made so that the successors and assigns of NDC
or the Surviving Corporation shall assume the obligations set forth in this
Section 8.14.
(e) The provisions of this Section 8.14 are intended to be for the
benefit of and shall be enforceable by, each Indemnified Party and its
respective heirs and representatives.
8.15 TRANSACTION EXPENSES. NDC agrees that it will cause Source to pay
--------------------
the Transaction Expenses when due and payable.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 12.6:
(A) STOCKHOLDER APPROVAL. The stockholders of Source shall have
--------------------
adopted this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law or by the provisions of any governing
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instruments. The stockholders of Source shall have agreed to terminate, without
recourse, the Source Common Stockholders Agreement and the Source Preferred
Stockholders Agreement, as applicable, as of the Effective Time.
(B) REGULATORY APPROVALS. All Consents of, filings and registrations
--------------------
with, and notifications to, all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of NDC would so materially adversely impact the economic or business
assumptions of the transactions contemplated by this Agreement that, had such
condition or requirement been known, such Party would not, in its reasonable
judgment, have entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b)) or for the preventing of any Default under any Contract or
Permit of such Party which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a Source Material Adverse Effect or a
NDC Material Adverse Effect, as applicable. No Consent so obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
Board of Directors of NDC would so materially adversely impact the economic or
business assumptions of the transactions contemplated by this Agreement that,
had such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(D) LEGAL PROCEEDINGS. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of NDC Common Stock issuable pursuant to the Merger shall have been
received.
(F) EXCHANGE LISTING. The shares of NDC Common Stock issuable pursuant
----------------
to the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
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9.2 CONDITIONS TO OBLIGATIONS OF NDC. The obligations of NDC to perform
--------------------------------
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by NDC pursuant to Section 12.6(a):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
------------------------------
9.2(a), the accuracy of the representations and warranties of Source set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties set forth in Section 5.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties set forth in Sections 5.18, 5.19, and 5.20 shall be true and
correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of Source set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3,
5.18, 5.19, and 5.20) such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Source Material Adverse Effect;
provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to
include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of Source to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(C) CERTIFICATES. Source shall have delivered to NDC (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to Source and in Section 9.2(a)
and 9.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by Source's Board of Directors and stockholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as NDC and its counsel shall
request.
(D) OPINION OF COUNSEL. NDC shall have received an opinion of
------------------
Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel to Source, dated as of the
Closing, in form reasonably satisfactory to NDC, as to the matters set forth in
Exhibit 4.
(E) EMPLOYMENT AGREEMENTS. Each of the persons identified in
---------------------
Section 9.2(e) of the Source Disclosure Memorandum shall have executed and
delivered to NDC an employment agreement on terms substantially consistent with
those set forth on Exhibit 5 (collectively, the "Employment Agreements").
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(F) NONCOMPETITION AGREEMENTS. Each of the persons identified in
-------------------------
Section 9.2(f) of the Source Disclosure Memorandum shall have executed and
delivered to NDC a noncompetition agreement in substantially the form of
Exhibit 6 (collectively, the "Noncompetition Agreements").
(G) PMSI AGREEMENT. Each and all of the agreements and covenants of
--------------
the parties to the PMSI Agreement to be performed and complied with shall be
duly performed and complied with, or duly waived by the appropriate party
thereto, prior to or substantially simultaneously with the Effective Time. All
conditions to the closing of the transactions contemplated under the PMSI
Agreement shall have been satisfied or waived and the consummation of such
transactions shall have occurred concurrently with the Closing.
(H) ADDITIONAL AGREEMENTS. Each of the following agreements, in the
---------------------
form attached hereto as an Exhibit, with such additions and changes as may be
approved by NDC and all parties thereto, shall have been executed and
delivered to NDC:
<TABLE>
<S> <C> <C>
(i) Source Europe License Agreement - Exhibit 7.
(ii) East Asia License Agreement Exhibit 8
(ii) Source Europe Transition Services
Agreement - Exhibit 9.
(iii) Assignment of Lease for Source
property in Newtown, PA - Exhibit 10.
(iv) Sublease for use of
property in Newtown, PA - Exhibit 11.
(v) Sublease for use of
property in Phoenix, AZ - Exhibit 12.
(vi) SL Services Agreement - Exhibit 13.
</TABLE>
(I) STOCKHOLDER DISSENT. Less than 10% of the holders of Source
-------------------
Preferred Stock or Source Common Stock shall have perfected his dissenters'
rights pursuant to Section 3.6 hereof and Section 262 of the DGCL.
(J) INDEMNIFICATION WAIVERS. Each director and officer of Source
-----------------------
shall have executed and delivered to NDC Waivers in substantially the form of
Exhibit 14 which will provide that such director or officer release their
rights of indemnification under the bylaws of Source or Sub or the DGCL or
otherwise with respect to claims arising from their acting or failing to act
in connection with the Divestiture or with the allocation of consideration to
be paid by NDC pursuant to the transactions contemplated by this Agreement and
the PMSI Agreement, except and to the extent such is covered by directors' and
officers' insurance.
(K) EUROPEAN CONTRACT RELEASES. Source shall have been released from
--------------------------
any and all obligations under the European Contracts to the reasonable
satisfaction of NDC.
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(L) SOURCE DIVESTITURE AGREEMENT. Each and all of the agreements and
----------------------------
covenants of the parties to the Source Divestiture Agreement to be performed
and complied with shall be duly performed and complied with in all material
respects prior to or substantially simultaneous with the Closing. All
conditions to the closing of the transactions contemplated under the Source
Divestiture Agreement shall have been satisfied or waived and the consummation
of such transactions shall have occurred concurrently with the Closing.
(M) SOURCE OPTIONS AND WARRANTS. Source shall have secured the
---------------------------
cancellation of all outstanding options and warrants to purchase shares of
Source Common Stock and shall provide to NDC a schedule of the number of
Option Shares payable to the holders of such options and warrants in
consideration of such cancellation.
9.3 CONDITIONS TO OBLIGATIONS OF SOURCE. The obligations of Source to
-----------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Source pursuant to Section 12.6(b):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
------------------------------
9.3(a), the accuracy of the representations and warranties of NDC set forth in
this Agreement shall be assessed as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of NDC set
forth in Sections 6.3, 6.4 and 6.11 shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of NDC set forth in this Agreement (including the representations
and warranties set forth in Sections 6.3, 6.4 and 6.11) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
NDC Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references
to "material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of NDC to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(C) CERTIFICATES. NDC shall have delivered to Source (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Section 9.1 as relates to NDC and in Section
9.3(a) and 9.3(b) have been satisfied, and (ii) certified copies of
resolutions duly adopted by NDC's Board of Directors and Sub's Board of
Directors and sole stockholder evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the
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transactions contemplated hereby, all in such reasonable detail as Source and
its counsel shall request.
(D) OPINION OF COUNSEL. Source shall have received an opinion of
------------------
either the General Counsel of NDC or Alston & Bird LLP, counsel to NDC, dated
as of the Effective Time, in form reasonably acceptable to Source, as to the
matters set forth in Exhibit 15.
ARTICLE 10
INDEMNIFICATION
---------------
10.1 AGREEMENT OF INDEMNITORS TO INDEMNIFY. Subject to the terms and
-------------------------------------
conditions of this Article 10, Indemnitors jointly and severally agree to
indemnify, defend, and hold harmless Indemnitees, and each of them, from,
against, for and in respect of any and all Losses asserted against, or paid,
suffered or incurred by, an Indemnitee and resulting from, based upon, or
arising out of:
(a) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any Indemnitor or Source contained in or made
pursuant to this Agreement or in any certificate, Schedule, or Exhibit
furnished by Indemnitors or Source in connection herewith (except that Source
shall not be obligated to indemnify NDC for Losses arising out of the
termination or cancellation of a Source Contract by a third party prior to
Closing; provided that such termination or cancellation was not due to any
breach of such Contract by Source), and for purposes of this Section 10.1(a)
any qualification of such representations and warranties by reference to the
materiality of matters stated therein or as to matters having or not having a
"Material Adverse Effect,", and any limitation of such representations and
warranties as being "to the knowledge of," or "known to" or words of similar
effect, shall be disregarded, in determining any inaccuracy, untruth,
incompleteness or breach thereof;
(b) a breach of or failure to perform any covenant or agreement of
Indemnitors or Source made in this Agreement;
(c) any and all Taxes arising out of or associated with the
Divestiture, as provided in Section 7.1(b) and determined as provided in
Section 10.12;
(d) any and all Taxes arising out of or associated with the matters
set forth on Section 5.8(a)(ii) of the Source Disclosure Memorandum to the
extent that, after using commercially reasonable efforts, NDC has been unable
to collect such amounts from Walsh International Inc. or the customers
involved in the transactions resulting in such Taxes; provided that NDC shall
not pay such amounts to the applicable governmental authorities without direct
assessment, or similar notice, from such authority directing payment thereof;
or
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(e) any and all Losses relating to the matter set forth in Section
5.16(2) of the Source Disclosure Memorandum.
10.2 PROCEDURES FOR INDEMNIFICATION.
------------------------------
(a) An Indemnification Claim shall be made by an Indemnitee by
delivery of a written notice to the Stockholder Representative requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim,
containing (by attachment or otherwise) such other information as such
Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 10.3 shall be observed by the Indemnitee and the
Stockholder Representative.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Stockholder Representative shall have 30 days to object to such
Indemnification Claim by delivery of a written notice of such objection to such
Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute a final and binding acceptance of
the Indemnification Claim by the Stockholder Representative on behalf of all
Indemnitors, and the Indemnification Claim shall be paid in accordance with
subsection (d) hereof. If an objection is timely interposed by the Stockholder
Representative and the dispute is not resolved by such Indemnitee and the
Stockholder Representative within 15 days from the date the Indemnitee receives
such objection, such dispute shall be resolved by arbitration as provided in
Section 10.11.
(d) Upon determination of the amount of an Indemnification Claim,
whether by agreement between the Stockholder Representative and the Indemnitee
or by an arbitration award or by any other final adjudication, such
Indemnification Claim shall be paid out of the Stock Escrow pursuant to the
provisions of the Escrow Agreement.
10.3 THIRD PARTY CLAIMS. The obligations and liabilities of the parties
------------------
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Stockholder Representative written
notice of a Third Party Claim promptly after receipt by the Indemnitee of
notice thereof, and the Stockholder Representative, on behalf of the
Indemnitors, may undertake the defense, compromise and settlement thereof by
representatives of its own choosing reasonably acceptable to the Indemnitee.
The failure of the Indemnitee to notify the Stockholder Representative of such
claim shall not relieve the Indemnitors of any liability that they may have
with respect to such claim except to the extent the Stockholder Representative
demonstrates that the defense of such claim is prejudiced by such failure. The
assumption of the defense, compromise and settlement of any such Third Party
Claim by the Stockholder Representative shall be an acknowledgment of the
obligation of the Indemnitors to indemnify the Indemnitee with respect to such
claim hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at
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its sole cost and expense. If, however, the Stockholder Representative fails
or refuses to undertake the defense of such Third Party Claim within ten (10)
days after written notice of such claim has been given to the Stockholder
Representative by the Indemnitee, the Indemnitee shall have the right to
undertake the defense, compromise and settlement of such claim with counsel of
its own choosing. In the circumstances described in the preceding sentence,
the Indemnitee shall, promptly upon its assumption of the defense of such
claim, make an Indemnification Claim as specified in Section 10.2 which shall
be deemed an Indemnification Claim that is not a Third Party Claim for the
purposes of the procedures set forth herein. For purposes of this paragraph,
the Stockholder Representative shall be deemed to have received notice of the
claim specified in Section 5.16(2) of the Source Disclosure Memorandum and to
have agreed to assume the defense thereof following the Closing; provided,
however, that such claim is still subject to the provisions of Section 10.7
hereof.
(b) If, in the reasonable opinion of the Indemnitee, any Third Party
Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations,
assets, properties or prospects of the Indemnitee (including, without
limitation, the administration of the tax returns and responsibilities under
the tax laws of the Indemnitee), the Indemnitee shall have the right to
control the defense, compromise and settlement of such Third Party Claim
undertaken by the Stockholder Representative, and the costs and expenses of
the Indemnitee in connection therewith shall be included as part of the
indemnification obligations of the Indemnitors hereunder. If the Indemnitee
shall elect to exercise such right, the Stockholder Representative shall have
the right to participate in, but not control, the defense, compromise and
settlement of such Third Party Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of the Indemnitors under this Article shall be made without the
prior written consent by or on behalf of the Stockholder Representative, which
consent shall not be unreasonably withheld or delayed. Consent shall be
presumed in the case of settlements of $20,000 or less where the Stockholder
Representative has not responded within five business days of notice of a
proposed settlement. If the Stockholder Representative assumes the defense of
such a Third Party Claim, (a) no compromise or settlement thereof may be
effected by the Stockholder Representative without the Indemnitee's consent
unless (i) there is no finding or admission of any violation of law or any
violation of the rights of any person and no effect on any other claim that
may be made against the Indemnitee, (ii) the sole relief provided is monetary
damages that are paid in full by the Indemnitors, and (iii) the compromise or
settlement includes, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the Indemnitee of a release, in form and
substance satisfactory to the Indemnitee, from all liability in respect of
such Third Party Claim, and (b) the Indemnitee shall have no liability with
respect to any compromise or settlement thereof effected without its consent.
(d) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit participation
of counsel selected by any
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party hereto and, as may reasonably be related to any such claim or action,
shall provide access to the counsel, accountants and other representatives of
each party during normal business hours to all properties, personnel, books,
tax records, contracts, commitments and all other business records of such
other party and will furnish to such other party copies of all such documents
as may reasonably be requested (certified, if requested).
10.4 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The rights of the Indemnitees
--------------------------------------
under this Article 10 are independent of and in addition to such rights and
remedies as the Indemnitees may have at law or in equity or otherwise based upon
any inaccuracy, untruth, incompleteness or breach of any representation or
warranty of any Indemnitor contained herein or in any certificate, schedule or
exhibit furnished by such party in connection herewith, or based upon the
failure of an Indemnitor to perform any covenant, agreement or undertaking
required by the terms hereof to be performed by such Indemnitor, including
without limitation the right to seek specific performance, recession or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
10.5 SURVIVAL. Subject to the time limitations set forth in Section 10.6
--------
below, all representations, warranties and agreements contained in this
Agreement or in any certificate delivered pursuant to this Agreement shall
survive the Closing notwithstanding any investigation conducted with respect
thereto or any knowledge acquired as to the accuracy or inaccuracy of any such
representation or warranty.
10.6 TIME LIMITATIONS. The Indemnitors will have no liability to the
----------------
Indemnitees under or in connection with a breach of any of the representations,
warranties, covenants or agreements made or to be performed by the Indemnitors
or Source contained in this Agreement unless written notice asserting an
Indemnification Claim based thereon is given to the Stockholder Representative
prior to August 31, 1999.
10.7 LIMITATIONS AS TO AMOUNT.
------------------------
(a) Indemnitors shall have no liability with respect to the matters
described in Section 10.1 (other than the agreements in Sections 3.2 and 3.4)
until the total of all Losses with respect thereto exceeds $200,000 in which
event Indemnitors shall be obligated to indemnify the Indemnitees as provided in
this Article 10 for all such Losses; provided, however, that each individual
claim of $10,000 or less shall not be indemnifiable, and shall not be includable
in determining whether the $200,000 threshold has been reached.
(b) In no event shall the aggregate liability of the Indemnitors under
this Article 10 exceed the lesser of (i) the Aggregate Value (as defined in the
Escrow Agreement) of the Indemnification Escrow Amount (as defined in the Escrow
Agreement), and (ii) $20,000,000.
10.8 TAX EFFECT AND INSURANCE. The liability of the Indemnitors with
------------------------
respect to any Indemnification Claim shall be reduced by the tax benefit
actually realized and any insurance proceeds received by the Indemnitees as a
result of any Losses upon which such Indemnification Claim is based, and shall
include any tax detriment actually suffered by the Indemnitees as a result
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of such Losses or the claims hereunder. The amount of any such tax benefit or
detriment shall be determined by taking into account the effect, if any and to
the extent determinable, of timing differences resulting from the acceleration
or deferral of items of gain or loss resulting from such Losses and shall
otherwise be determined so that payment by the Indemnitors of the
Indemnification Claim, as adjusted to give effect to any such tax benefit or
detriment, will make the Indemnitee as economically whole as is reasonably
practical with respect to the Losses upon which the Indemnification Claim is
based. Any dispute as to the amount of such tax benefit or detriment shall be
resolved by arbitration as provided in Section 10.11 of this Agreement.
10.9 SUBROGATION. Upon payment in full of any Indemnification Claim,
-----------
whether such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitors
shall be subrogated to the extent of such payment to the rights of the
Indemnitee against any person or entity with respect to the subject matter of
such Indemnification Claim or Third Party Claim.
10.10 APPOINTMENT OF STOCKHOLDER REPRESENTATIVE. Each Indemnitor
-----------------------------------------
constitutes and appoints the Stockholder Representative as his or her true and
lawful attorney-in-fact to act for and on behalf of such Indemnitor in all
matters relating to or arising out of this Article 10 and the liability or
asserted liability of such Indemnitor hereunder, including specifically, but
without limitation, accepting and agreeing to the liability of such Indemnitor
with respect to any Indemnification Claim, objecting to any Indemnification
Claim, disputing the liability of such Indemnitor, or the amount of such
liability, with respect to any Indemnification Claim and prosecuting and
resolving such dispute as herein provided, accepting the defense, compromise and
settlement of any Third Party Claim on behalf of such Indemnitor or refusing to
accept the same, settling and compromising the liability of such Indemnitor
hereunder, instituting and prosecuting such actions (including arbitration
proceedings) as the Stockholder Representative shall deem appropriate in
connection with any of the foregoing, retaining counsel, accountants, appraisers
and other advisers in connection with any of the foregoing, all for the account
of the Indemnitor, such Indemnitor agreeing to be fully bound by the acts,
decisions and agreements of the Stockholder Representative taken and done
pursuant to the authority herein granted. Each Indemnitor hereby agrees to
indemnify and to save and hold harmless the Stockholder Representative from any
liability incurred by the Stockholder Representative based upon or arising out
of any act, whether of omission or commission, of the Stockholder Representative
pursuant to the authority herein granted, other than acts, whether of omission
or commission, of the Stockholder Representative that constitute gross
negligence or willful misconduct in the exercise by the Stockholder
Representative of the authority herein granted.
10.11 ARBITRATION. All disputes arising under this Article 10 (other than
-----------
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at issue
and selected by the Stockholder Representative and NDC in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in such place in Washington, D.C. as may be specified
by the arbitrator (or any place agreed to by the Stockholder Representative, NDC
and the arbitrator). The decision of the arbitrator shall be final and binding
as to any matters submitted under this Article 10; provided,
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however, if necessary, such decision and satisfaction procedure may be enforced
by either the Stockholder Representative or NDC in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. All costs and expenses incurred in connection with any such
arbitration proceeding (including reasonable attorneys fees) shall be borne by
the party against which the decision is rendered, or, if no decision is
rendered, such costs and expenses shall be borne equally by the Indemnitors as
one party and the Indemnitees as the other party. If the arbitrator's decision
is a compromise, the determination of which party or parties bears the costs and
expenses incurred in connection with any such arbitration proceeding shall be
made by the arbitrator on the basis of the arbitrator's assessment of the
relative merits of the parties' positions.
10.12 DIVESTITURE TAXES.
-----------------
(a) For purposes of 10.1(c) above, a "Tax" shall mean any federal,
state, local or foreign Tax and shall be determined by assuming (i) that the
only net operating loss available to offset income or gain related to the
Divestiture is equal to 30% of the combined net operating loss of the Source
Entities computed as of the Closing Date (determined by assuming that Tax
Returns would have been filed for a period ending on the Closing Date and
exclusive of any loss related to the Divestiture), and (ii) that such Tax
attributable to the Divestiture is represented by the difference between (x) the
Tax liability of Source for a hypothetical reporting period ending on the
Closing Date and including the Divestiture computed based on the assumption
contained in paragraph (i), and (y) the Tax liability of Source for such a
period computed assuming that no taxable income or gain had resulted from the
Divestiture.
(b) Tax Returns for any period including the Divestiture shall be
prepared by NDC and subject to review and approval of the Stockholder
Representative with respect to the treatment of the Divestiture in the Tax
Returns and the determination of the combined net operating loss of the Source
Entities.
(c) The Stockholder Representative and NDC agree to cooperate in a
commercially reasonable manner in the preparation and filing of the Tax Returns
for Source for any period including the Divestiture such that such Tax Returns
shall be filed within the applicable filing deadlines.
ARTICLE 11
TERMINATION
-----------
11.1 TERMINATION. Notwithstanding any other provision of this
-----------
Agreement, and notwithstanding the approval of this Agreement by the
stockholders of Source, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of NDC and Source; or
(b) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this
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Agreement) in the event of a material breach by the other Party of any
representation or warranty contained in this Agreement which cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching Party of such breach and which breach is reasonably likely, in the
opinion of the non-breaching Party, to have, individually or in the
aggregate, a Source Material Adverse Effect or a NDC Material Adverse Effect,
as applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Source fail to vote their approval of the matters relating to
this Agreement and the transactions contemplated hereby at the Stockholders'
Meeting where such matters were presented to such stockholders for approval
and voted upon; or
(e) By either Party in the event that the Merger shall not have been
consummated by January 31, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
Section 11.1(e); or
(f) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
11.1(e); or
(g) By NDC, in the event that the Board of Directors of Source shall
have failed to reaffirm its approval of the Merger and the transactions
contemplated by this Agreement (to the exclusion of any other Acquisition
Proposal), or shall have resolved not to reaffirm the Merger, or shall have
affirmed, recommended or authorized entering into any other Acquisition
Proposal or other transaction involving a merger, share exchange,
consolidation or transfer of substantially all of the Assets of Source; or
(h) By Source if the Average Closing Price on the Determination Date
of shares of NDC Common Stock shall be less than the Lower Threshold Amount;
subject, however, to the following three sentences. If Source elects to
refuse to consummate the Merger pursuant to this Section 11.1(h), it shall
give written notice thereof to NDC not later
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than two trading days following the Determination Date. During the five-day
period commencing with its receipt of such notice, NDC shall have the option,
in its sole discretion, to elect to revise the Common Exchange Ratios to
equal that fraction of a share of NDC Common Stock (rounded to the nearest
ten thousandth of a share) obtained by dividing the product of the Common
Base Exchange Ratio or the Common Escrow Exchange Ratio, as the case may be,
and the Lower Threshold Price by the Average Closing Price at the
Determination Date. If NDC makes an election contemplated by the preceding
sentence, within such five-day period, it shall give prompt written notice to
Source of such election and the revised Common Exchange Ratios, whereupon the
condition to consummation provided in this Section 11.1(h) shall be deemed to
be satisfied and this Agreement shall remain in effect in accordance with its
terms (except as the Common Exchange Ratios shall have been so modified), and
any references in this Agreement to "Common Exchange Ratios" shall thereafter
be deemed to refer to the Common Exchange Ratios as adjusted pursuant to this
Section 11.1(h); or
(i) By Source in the event that Source has entered into negotiations
with a third party in accordance with Sections 8.1 and 8.8 of this Agreement,
and pursuant to the continuing fiduciary duties of the Source's Board of
Directors as required by applicable Law, Source has entered into a binding
Acquisition Proposal with a third party.
11.2 EFFECT OF TERMINATION. In the event of the termination and abandonment
---------------------
of this Agreement pursuant to Section 11.1, this Agreement shall become void and
have no effect, except that (i) the provisions of this Section 11.2 and Article
12 and Section 8.6(b) shall survive any such termination and abandonment, and
(ii) a termination pursuant to Sections 11.1(b), 11.1(c) or 11.1(f) shall not
relieve the breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 DEFINITIONS.
-----------
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACCRUED BONUSES" shall mean the amount equal to that percentage of
budgeted annual bonuses for Source's fiscal year 1998 equal to the ratio of
the earnings of Source through the date of calculation to budgeted earnings
for the full fiscal year. All budgeted amounts used herein to be as set
forth in Schedule 5.5 of the Source Disclosure Memorandum.
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"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of,
such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person; or (iii) any other Person for which a
Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by reference.
"AMENDED AND RESTATED ALPHA DATABASE LICENSE AGREEMENT" shall mean
that certain Amended and Restated Alpha Database License Agreement dated July
1, 1994 by and among Walsh International Holdings Limited and Walsh America
Limited and PMSI and all customer, data provider and service contracts,
agreements or understandings relating thereto.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not carried
on the books and records of such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and wherever located.
"AVERAGE CLOSING PRICE" shall mean the average of the daily closing
sales prices of NDC Common Stock as reported on the NYSE Composite
Transactions reporting system (as reported by The Wall Street Journal or, if
not reported thereby, another authoritative source as chosen by NDC) for the
ten consecutive full trading days in which such shares are traded on the NYSE
ending at the close of trading on the date specified.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by Source and filed with the Secretary of State of the State of
Delaware relating to the Merger as contemplated by Section 1.1.
"CLOSING BALANCE SHEET" shall mean the balance sheet which includes
the consolidated financial position of Source and the Source Subsidiaries as
of the Closing Date delivered to the Stockholder Representative.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CLOSING WORKING CAPITAL" shall mean the Working Capital determined
based on the Closing Balance Sheet.
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"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that
is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Source
Material Adverse Effect or a NDC Material Adverse Effect, as applicable.
"DETERMINATION DATE" shall mean the close of trading on the tenth
trading day immediately preceding the Closing Date.
"DGCL" shall mean the Delaware General Corporation Law.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the
environment, including the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.
("RCRA"), and other Laws relating to emissions, discharges, releases, or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Material.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXHIBITS" 1 through 15, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred
to in this Agreement and any other related instrument or document without
being attached hereto.
"FINAL WORKING CAPITAL" shall mean Closing Working Capital (i) as
shown in NDC's calculation delivered pursuant to Section 3.3(a), if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
3.3(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed
by NDC and the Stockholder Representative pursuant to Section 3.3(b) or (B)
in the absence of such agreement, as shown in the independent accountant's
calculation delivered pursuant to Section 3.3(c); provided that, in no event
shall Final Working Capital be (i) more than the Stockholder Representative's
calculation of Closing Working Capital delivered pursuant to Section 3.3(b),
if any, or (ii) less than the lesser of NDC's calculation of Closing Working
Capital delivered pursuant to Section 3.3(a) or the Stockholder
Representatives calculation of Closing Working Capital delivered pursuant to
Section 3.3(b), if any.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INDEMNIFICATION CLAIM" shall mean a claim for indemnification under
Article 10.
"INDEMNITEES" shall mean NDC, Source and their respective officers,
directors, controlling persons, Affiliates and Representatives.
"INDEMNITORS" shall mean the Stockholders.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating
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thereto), trade secrets, franchises, know-how, inventions, and other
intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"JOINT VENTURE FINANCIAL STATEMENTS" shall mean a balance sheet of the
Joint Venture (including related notes and schedules, if any), and the
related statements of income and cash flows for the Joint Venture
(including related notes and schedules, if any) for the period ended March
31,1997.
"JOINT VENTURE" shall mean the combination of the business conducted
in the United States by Source and its subsidiaries as of the date of this
Agreement and the PMSI Joint Venture Interest.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known after due inquiry by the
chairman, president, chief financial officer, chief accounting officer,
chief operating officer, general counsel, any assistant or deputy general
counsel, or any senior, executive or other vice president or general
manager of such Person and the knowledge of any such persons obtained or
which would have been obtained from a reasonable investigation.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination
or investigation, hearing,
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administrative or other proceeding relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement.
"LOSSES" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including
special and consequential damages), liabilities, costs, and expenses,
including interest, penalties, cost of investigation and defense, and
reasonable attorneys' and other professional fees and expenses.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the Nasdaq National Market, a
district tier of The Nasdaq Stock Market operated by The Nasdaq Stock
Market, Inc., a wholly-owned subsidiary of the National Association of
Securities Dealers Automated Quotations System.
"NDC CAPITAL STOCK" shall mean, collectively, the NDC Common Stock,
the NDC Preferred Stock and any other class or series of capital stock of
NDC.
"NDC COMMON STOCK" shall mean the $0.125 par value common stock of
NDC.
"NDC DISCLOSURE MEMORANDUM" shall mean the written information
entitled "National Data Corporation Disclosure Memorandum" delivered prior
to the date of this Agreement to Source describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made unless such disclosure is reasonably
adequate to inform the other party that each matter disclosed would be
responsive to another section of disclosure in the Disclosure Memorandum.
"NDC ENTITIES" shall mean, collectively, NDC and all NDC Subsidiaries.
"NDC FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of NDC as of
February 28, 1997, and as of May 31, 1996 and 1995, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
February 28, 1997, and for each of the three fiscal years ended May 31,
1996, 1995 and 1994, as filed by NDC in SEC Documents, and (ii) the
consolidated balance sheets of NDC (including related notes and schedules,
if any) and related statements of income, changes in stockholders' equity,
and cash flows (including related notes and schedules, if any) included in
SEC Documents filed with respect to periods ended subsequent to February
28, 1997.
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"NDC MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of NDC and its Subsidiaries, taken as a
whole, or (ii) the ability of NDC to perform its obligations under this
Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "Material Adverse Effect"
shall not be deemed to include the impact of (a) actions and omissions of
NDC (or any of its Subsidiaries) taken with the prior informed written
Consent of Source in contemplation of the transactions contemplated hereby,
and (b) the direct effects of compliance with this Agreement on the
operating performance of NDC, including expenses incurred by NDC in
consummating the transactions contemplated by this Agreement.
"NDC PREFERRED STOCK" shall mean the $1.00 par value preferred stock
of NDC.
"NDC RIGHTS AGREEMENT" shall mean that certain Rights Agreement, dated
January 18, 1991, between NDC and Wachovia Bank of North Carolina, N.A., as
Rights Agent.
"NDC RIGHTS" shall mean the preferred stock purchase rights issued
pursuant to the NDC Rights Agreement.
"NDC SUBSIDIARIES" shall mean the Subsidiaries of NDC and any
corporation or other organization acquired as a Subsidiary of NDC in the
future and held as a Subsidiary by NDC at the Effective Time.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest
(including an interest in a fiduciary capacity), and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either Source or NDC, and "PARTIES" shall mean both
Source and NDC.
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"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PMSI JOINT VENTURE INTEREST" shall mean all of the rights, benefits,
obligations and interests of PMSI under the Amended and Restated Alpha
Database License Agreement.
"PRELIMINARY BALANCE SHEET" shall mean the balance sheet which
includes the consolidated financial position of Source and the Source
Subsidiaries as of the most recent month ending more than ten days prior to
the Closing Date delivered to NDC.
"PURCHASE PRICE" shall mean the total consideration to be paid to the
Stockholders by NDC for the purchase of the Source Common Stock and the
Source Preferred Stock, pursuant to Section 3.1 of this Agreement.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-
effective amendments or supplements thereto, filed with the SEC by NDC
under the 1933 Act with respect to the shares of NDC Common Stock to be
issued to the stockholders of Source in connection with the transactions
contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the NYSE,
the NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other governmental
or regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, commissions, boards or bodies having
jurisdiction over the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a
Person.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
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"SIGNIFICANT SUBSIDIARY" shall mean any present or future consolidated
Subsidiary of the Party in question, the assets of which constitute ten
percent (10%) or more of the consolidated assets of such Party as reflected
on such Party's consolidated statement of condition prepared in accordance
with GAAP.
"SOURCE BALANCE SHEET" shall mean the balance sheet which includes the
consolidated financial position of Source and the Source Subsidiaries at
March 31, 1997.
"SOURCE COMMON STOCK" shall mean the $0.01 par value common stock of
Source.
"SOURCE DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Source Informatics Inc. Disclosure Memorandum" delivered prior to
the date of this Agreement to NDC describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made unless such disclosure is reasonably
adequate to inform the other party that each matter disclosed would be
responsive to another section of disclosure in the Disclosure Memorandum.
"SOURCE ENTITIES" shall mean, collectively, Source and all Source
Subsidiaries.
"SOURCE FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheet (including related notes and schedules, if any) of Source and its
Subsidiaries as of June 30, 1996, and the related statement of income,
changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for the fiscal year ended June 30, 1996, and (ii)
the consolidated balance sheet of Source and the Source Subsidiaries
(including related notes and schedules, if any) as of March 31, 1997, and
related statement of income and cash flows (including related notes and
schedules, if any) with respect to the nine month period ended March 31,
1997.
"SOURCE MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of the Joint Venture, or (ii) the
ability of Source to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this
Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) actions and omissions of Source (or any of its
Subsidiaries) taken with the prior informed written Consent of NDC in
contemplation of the transactions contemplated hereby, and (b) the direct
effects of compliance with this Agreement on the operating performance of
Source, including expenses incurred by Source in consummating the
transactions contemplated by this Agreement.
"SOURCE PREFERRED STOCK" shall mean the $1.00 par value preferred
stock of Source.
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"SOURCE SUBSIDIARIES" shall mean the Subsidiaries of Source, which
shall include the Source Subsidiaries described in Section 5.4 and any
corporation or other organization acquired as a Subsidiary of Source in the
future and held as a Subsidiary by Source at the Effective Time but which
exclude the Source Divestiture Subsidiaries.
"STOCKHOLDER REPRESENTATIVE" shall mean a committee comprised of
Messrs. Dennis Turner, Handel Evans and Patrick Welsh.
"STOCKHOLDERS" shall mean the holders of Source Common Stock.
"STOCKHOLDERS' MEETINGS" shall mean either or both, as indicated, of
the meeting of the holders of Source Common Stock and Source Preferred
Stock to be held pursuant to Section 8.1, including any adjournment or
adjournments thereof.
"SUB COMMON STOCK" shall mean the $0.01 par value common stock of Sub.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii)
in the case of partnerships, serves as a general partner, (iii) in the case
of a limited liability company, serves as a managing member, or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof.
"SURVIVING CORPORATION" shall mean Source as the surviving corporation
resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposes or required to be withheld by the United
States or any state, county, local or foreign government or subdivision or
agency thereof, including any interest, penalties, and additions imposed
thereon or with respect thereto.
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"THIRD PARTY CLAIM" shall mean any Litigation (including, without
limitation, a binding arbitration or an audit by any taxing authority) that
is instituted against an Indemnitee by a Person other than an Indemnitor
and which, if prosecuted successfully, would result in a Loss for which
such Indemnitee is entitled to indemnification hereunder.
(b) The terms set forth below shall have the meanings ascribed thereto
in the referenced sections:
Aggregate Cash Amount Section 3.1(c)
Certificates Section 4.1
Closing Section 1.2
Closing Current Assets Section 3.3(a)
Closing Current Liabilities Section 3.3(a)
Closing Date Section 1.2
Common Base Exchange Ratio Section 3.1(c)
Common Cash Amount Section 3.1(c)
Common Escrow Exchange Ratio Section 3.1(c)
Common Exchange Ratio Section 3.1(c)
Current Asset Allocation Section 3.4(b)
Current Assets Section 3.2(a)
Current Liabilities Section 3.2(a)
Disputed Amounts Section 3.3(c)
Divestiture Section 7.1(b)
Effective Time Section 1.3
Employment Agreements Section 9.1(k)
ERISA Affiliate Section 5.14(b)
Escrow Agreement Section 4.3
Estimated Current Assets Section 3.2(a)
Estimated Current Liabilities Section 3.2(a)
Estimated Working Capital Section 3.2(a)
Estimated Working Capital Adjustment Section 3.2(c)
European Business Section 7.1(b)
European Contracts Section 7.1(b)
Excess Expense Section 3.1(c)
Exchange Agent Section 4.1
Expense Schedule Section 3.1(c)
Final Working Capital Deficit Section 3.4(a)
Final Working Capital Surplus Section 3.4(a)
Indemnified Party Section 8.14(a)
Lower Threshold Amount Section 3.1(c)
Maximum Amount Section 8.14
Merger Section 1.1
NDC SEC Reports Section 6.4(a)
Noncompetition Agreements Section 9.2(k)
Option Shares Section 3.1(c)
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Payment Shares Section 3.1(c)
Preferred Stock Merger Consideration Section 3.1(d)
PMSI Agreement Section 3.1(c)
Scheduled Stockholders Section 5.3
Source Benefit Plans Section 5.14
Source Contracts Section 5.15
Source Divestiture Agreement Section 5.4
Source Divestiture Subsidiaries Section 7.1(b)
Source ERISA Plan Section 5.14
Source Intellectual Property Section 5.10
Source Pension Plan Section 5.14
Stock Escrow Section 3.1(c)
Takeover Laws Section 5.19
Threshold Prices Section 3.1(c)
Total Combined Assets Section 3.4(b)
Total Current Assets Section 3.4(b)
Total Current Liabilities Section 3.4(b)
Total Working Capital Deficit Section 3.4(b)
Total Working Capital Surplus Section 3.4(b)
Transaction Expenses Section 3.1(c)
Upper Threshold Amount Section 3.1(c)
Voting Agreements Section 5.21
Working Capital Section 3.2(a)
(c) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
12.2 EXPENSES.
--------
(a) Excluding the Transaction Expenses and except as otherwise
provided in this Section 12.2, each of the Parties shall bear and pay all direct
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel, except that
each of the Parties shall bear and pay one-half of the filing fees payable in
connection with the HSR Act.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated pursuant to any of Sections
11.1(c) (but only on the basis of failure of the agreement provided in
Section 8.1 that Source shall call meetings of the Stockholders of Source for
the purpose of voting on the adoption of this Agreement), 11.1(d)(ii) (but
only as it relates to approval of Source's stockholders), or
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(ii) if this Agreement is terminated by NDC pursuant to Section
11.1(g), or
(iii) if this Agreement is terminated by Source pursuant to
Section 11.1(i),
and the conditions to the obligations of Source hereunder pursuant to Section
9.1, except for the provisions of Section 9.1(a), and Section 9.3(a) and 9.3(b),
have been satisfied, then Source shall promptly pay NDC all documented out-of-
pocket costs and expenses of NDC, including costs of counsel, investment
bankers, actuaries and accountants up to a maximum amount of $750,000.
(c) In addition to the foregoing, if, this Agreement is terminated
pursuant to Section 11.1 (c) (but only on the basis of failure of the agreement
provided in Section 8.1 that Source shall call meetings of the Stockholders of
Source for the purpose of voting on the adoption of this Agreement) or Section
11.1(d)(ii) (but only with respect to approval of the stockholders of Source),
Source shall pay to NDC an amount in cash equal to the sum of $3,000,000, which
sum represents compensation for NDC's loss as the result of the transactions
contemplated by this Agreement not being consummated.
(d) In addition to the foregoing, if, after the date of this Agreement
and within twelve (12) months following any termination of this Agreement by NDC
pursuant to Section 10.1(g) or any termination of this Agreement by Source
pursuant to Section 10.1(i) of this Agreement, any third-party shall acquire,
merge with, combine with, purchase substantially all of the Assets of, or engage
in any other business combination with, or purchase any equity securities
involving an acquisition of 50% or more of the voting stock of Source, or enter
into any binding agreement to do any of the foregoing (collectively, a "Business
Combination"), such third-party that is a party to the business combination
shall pay to NDC, as a condition consummation of the Business Combination, an
amount in cash equal to $3,000,000, which sum represents additional combination
for NDC's loss as a result of the transactions contemplated by this Agreement
not being consummated. In the event such third-party shall refuse to pay such
amounts within ten days of demand therefore by NDC, the amount shall be an
obligation of Source and shall be paid by Source promptly upon notice to Source
by NDC. Notwithstanding the foregoing, the payment required by this Section
12.2(d) will only come due if a third party that was involved in discussions or
negotiations with Source on or before the termination of this agreement
consummates the Business Combination.
(e) Nothing contained in this Section 12.2 shall constitute or shall
be deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
12.3 BROKERS AND FINDERS. Except for Montgomery Securities Corporation
-------------------
as to Source and except for Lazard Freres & Co. LLC as to NDC, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the
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transactions contemplated hereby. In the event of a claim by any broker or
finder based upon his or its representing or being retained by or allegedly
representing or being retained by Source or any Stockholder or by NDC, each of
Source and the Stockholders and NDC, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
12.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Sections 8.13 and 8.14.
12.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after stockholder approval of this
Agreement has been obtained; provided, that after any such approval by the
holders of Source Common Stock, there shall be made no amendment that pursuant
to Section 251 of the DGCL requires further approval by such stockholders.
12.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, NDC, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by Source or the Stockholders, to waive or extend the time for the compliance or
fulfillment by Source or the Stockholders of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to the
obligations of NDC under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of NDC.
(b) Prior to or at the Effective Time, Source, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by NDC, to waive or extend the time for the compliance or fulfillment
by NDC of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Source and the
Stockholders under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Source.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed
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as a further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
12.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
12.8 NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Source or
any Stockholder: Source Informatics Inc.
Suite 912
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5760
Attention: Mr. Warren Hauser, Esq.
Copy to Counsel: Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: Mr. Robert A. Schwed, Esq.
NDC: National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Telecopy Number: (404) 728-2990
Attention: E. Michael Ingram, Esq.
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: B. Harvey Hill, Jr., Esq.
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12.9 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
12.10 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
-------------------------------
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
12.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
---------------
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
12.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
12.14 SEVERABILITY. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
-64-
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
NATIONAL DATA CORPORATION
By: /s/ E. Michael Ingram
Name: E. Michael Ingram
Title: Senior Vice President
DUNKIRK, INC.
By: /s/ E. Michael Ingram
Name: E. Michael Ingram
Title: Senior Vice President
SOURCE INFORMATICS INC.
By: /s/ Warren Hauser
Name: Warren Hauser
Title: Vice President
-65-
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1. Form of Escrow Agreement. ((S) 4.3).
2. Form of Stockholders' Voting Agreement. ((S) 5.21).
3. Form of agreement of affiliates of Source. ((S) 8.12).
4. Matters as to which Reboul, MacMurray, Hewitt, Maynard & Kristol
will opine. ((S) 9.2(d)).
*5. Terms of Employment Agreements. ((S) 9.2(f)).
6. Form of Noncompetition Agreement. ((S) 9.2(g)).
*7. Form of Source Europe License Agreement.
**8. Form of East Asia License Agreement.
9. Form of Source Europe Transition Services Agreement.
10. Form of Assignment of Lease for Source property in Newtown, PA.
11. Form of Sublease for use of property in Newtown, PA.
12. Form of Sublease for use of property in Phoenix, AZ.
*13. Form of SL Services Agreement.
14. Form of Waiver. ((S) 9.2(k)).
15. Matters as to which Alston & Bird LLP will opine. ((S) 9.3(d)).
- -------------------------
*CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THESE EXHIBITS AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION").
**EXHIBIT 8 WAS DELETED IN AMENDMENT NO. ONE TO THE AGREEMENT AND PLAN OF
MERGER.
<PAGE>
EXHIBIT 1
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
_______, 1997, by and among National Data Corporation, a Delaware corporation
("NDC") and _______________, the representative (the "Stockholder
Representative") of the common stockholders of Source Informatics Inc., a
Delaware corporation ("Source"), identified on Schedule I hereto (each a
"Stockholder" and collectively the "Stockholders").
W I T N E S S E T H
- - - - - - - - - -
Dunkirk, Inc. ("Sub") is a wholly owned subsidiary of NDC and each of NDC and
Sub is a party to an Agreement and Plan of Merger (the "Merger Agreement") with
Source, dated as of August __, 1997, pursuant to which Sub has on this date
merged (the "Merger") with and into Source with Source surviving the Merger and
becoming a wholly owned subsidiary of NDC. Pursuant to Section 3.1(c) of the
Merger Agreement, the Stockholders each received in exchange for each share of
Source Common Stock, (i) the Common Cash Amount, if any, and the Payment Shares,
and (ii) the contingent right to receive shares of NDC Common Stock.
Pursuant to the terms of the Merger Agreement, 455,840 shares of NDC Common
Stock, decreased by the number of shares of NDC Common Stock equal to the
Estimated Working Capital Adjustment divided by the Average Closing Price as of
the Closing Date (the "Stock Escrow"), have been distributed to and will be held
by the Escrow Agent pursuant to the terms of this Agreement until termination of
this Agreement as provided herein.
The Stockholders have agreed to adjust the purchase price of their shares of
Source Common Stock pursuant to Section 3.4 of the Merger Agreement, and to
indemnify NDC pursuant to Article 10 of the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
ESTABLISHMENT OF ESCROW
1.1 ESCROW AMOUNT. On this date, NDC has delivered an executed stock
-------------
certificate in negotiable form representing the Stock Escrow to the Escrow Agent
and hereby names the Stockholder Representative the representative of the pro
rata interests of the Stockholders in the Stock Escrow. The Escrow Agent
acknowledges receipt of the Stock Escrow and agrees to hold and disburse the
Stock Escrow for the benefit of NDC and the Stockholders, as the case may be, in
accordance with the provisions of this Agreement with the same force and effect
as if the Stock Escrow had been delivered by NDC to each Stockholder and
subsequently delivered by such Stockholder to the Escrow Agent.
<PAGE>
1.2 STOCKHOLDER PERCENTAGE INTERESTS. As soon as practicable after receipt
--------------------------------
of executed transmittal materials from all record holders of Source Common Stock
as of the Effective Time, the Escrow Agent shall prepare and deliver to the
Stockholder Representative and NDC a schedule, substantially in the form of
Schedule I hereto, showing for each Stockholder (i) the respective percentage
interest (the "Percentage Interest") of each such Stockholder in the Stock
Escrow, and (ii) the corresponding interest of each Stockholder in the Working
Capital Escrow Amount and the Indemnification Escrow Amount (hereinafter the
"Stockholder Accounts"), initially expressed in shares of NDC Common Stock, and
thereafter, expressed in cash, if any, and shares of NDC Common Stock. Such
schedule shall be revised and re-distributed after any sale of Escrow Shares or
any distribution of any portion of the Escrow Amount pursuant to this Agreement.
ARTICLE 2
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
2.1 "AGGREGATE VALUE" with respect to either the Working Capital Escrow
Amount or the Indemnification Escrow Amount, as indicated, shall mean the cash
amount, if any, in such escrow and the shares of NDC Common Stock in such
escrow, valued at the Average Closing Price as of the date specified.
2.2 "DISTRIBUTION DATE" shall mean with regard to the Working Capital Escrow
Amount, the date that is ninety (90) calendar days from the date of the
Effective Time, and with regard to the Indemnification Escrow Amount, August 31,
1999.
2.3 "ESCROW AMOUNT" shall mean the Indemnification Escrow Amount and the
Working Capital Escrow Amount.
2.4 "ESCROW SHARES" shall mean the Indemnification Shares and the Working
Capital Shares.
2.5 "INDEMNIFICATION ESCROW AMOUNT" shall mean, as of the date of this
Agreement, the Indemnification Shares, and from and after the date of this
Agreement, in accordance with Article 4 hereof, the cash, if any, from the sale
of Indemnification Shares and any remaining Indemnification Shares.
2.6 "INDEMNIFICATION SHARES" shall mean, as of the date of this Agreement,
341,880 shares of NDC Common Stock included in the Stock Escrow, and from and
after the date hereof, in accordance with Article 4 hereof, any Indemnification
Shares remaining in escrow.
2.7 "STOCKHOLDER REPRESENTATIVE" shall mean a committee comprised of Messrs.
Dennis Turner, Handel Evans and Patrick Welsh.
-2-
<PAGE>
2.8 "WORKING CAPITAL ESCROW AMOUNT" shall mean, as of the date of this
Agreement, the Working Capital Shares, and from and after the date of this
Agreement, in accordance with Article 4 hereof, the cash, if any, from the sale
of Working Capital Shares and any remaining Working Capital Shares.
2.9 "WORKING CAPITAL SHARES" shall mean, as of the date of this Agreement,
113,960 shares of NDC Common Stock, less any shares paid to NDC as an Estimated
Working Capital Adjustment, included in the Stock Escrow, and from and after the
date hereof, in accordance with Article 4 hereof, any Working Capital Shares
remaining in escrow.
2.10 Any other capitalized term used herein but not defined herein shall
have the same meaning as provided in the Merger Agreement.
ARTICLE 3
TERM; DISTRIBUTION OF ESCROW AMOUNT; LIMITS
3.1 TERM. The term of this Agreement shall commence at the Effective Time
----
and shall terminate at such time as all of the Escrow Amount has been
distributed to the Stockholders or NDC pursuant to the terms of this Agreement.
3.2 ADJUSTMENT OF ESCROW AMOUNT. The Escrow Amount subject to this Agreement
---------------------------
shall be adjusted as follows: If, between the date of this Agreement and the
Distribution Date with respect to the Working Capital Escrow Amount, NDC shall
be entitled to an adjustment pursuant to Section 3.4 of the Merger Agreement (an
"Adjustment Claim"), then NDC shall deliver to the Escrow Agent a notice thereof
(a "Notice of Obligation") setting forth the Adjustment Claim amount, and upon
receipt of such Notice of Obligation by the Escrow Agent,
(i) the Escrow Agent shall distribute to NDC from the Escrow Amount an
amount in cash, in immediately available funds, equal to such Adjustment Claim,
and, if the Escrow Amount does not contain any cash, or contains an amount of
cash insufficient to satisfy the Adjustment Claim, then
(ii) the Escrow Agent shall distribute to NDC from the Escrow Amount that
number of shares of NDC Common Stock equal to the quotient (rounded to the next
highest whole number) obtained by dividing the amount of the Adjustment Claim
not paid in cash pursuant to Section 3.2(i) above, by the Average Closing Price
as of the date Final Working Capital is determined pursuant to Section 3.3(b) of
the Merger Agreement.
3.3 DISTRIBUTION OF WORKING CAPITAL ESCROW AMOUNT. If the adjustment
---------------------------------------------
provided for in Section 3.4 of the Merger Agreement is pending as of the
Distribution Date with respect to the Working Capital Escrow Amount, the
disputed Adjustment Claim (the "Disputed Working Capital Escrow Amount") for
purposes of the calculations in the following sentence of this Section 3.3 shall
be based on the Closing Balance Sheets prepared by NDC pursuant to Section
3.3(a) of the Merger Agreement and Section 1.3(a) of the PMSI Agreement, and
equal to the sum
-3-
<PAGE>
of (i) the Final Working Capital Deficit, and (ii) the Current Asset Allocation
Amount. Upon determination of the Disputed Working Capital Escrow Amount in
accordance with the preceding sentence, the Escrow Agent shall promptly deliver
to the Stockholders a distribution of cash, if any, in immediately available
funds, and shares of NDC Common Stock from the Working Capital Escrow Amount,
equal to the difference between the Aggregate Value as of the Distribution Date
of the Working Capital Escrow Amount and the aggregate Disputed Working Capital
Escrow Amount with respect to the pending Adjustment Claim (the "Undisputed
Working Capital Escrow Amount"), and such amount shall be paid to the respective
Stockholders in accordance with their respective Percentage Interests. Any
delivery of NDC Common Stock to Stockholders shall be of full shares and any
fractional portions shall be rounded to a whole number by the Escrow Agent so
that the number of shares remaining in escrow to be delivered will be fully
allocated among such Stockholders. Upon the final resolution as agreed by NDC
and the Stockholder Representative in writing of the amount of the Adjustment
Claim (the "Final Claim Amount") for which a Disputed Working Capital Escrow
Amount was retained in escrow after the Distribution Date, the Escrow Agent
shall promptly distribute to NDC an amount in cash, if any, in immediately
available funds, and shares of NDC Common Stock from the Escrow Amount with an
Aggregate Value as of the date of final resolution equal to the Final Claim
Amount and shall deliver any remaining Disputed Working Capital Escrow Amount to
the Stockholders in accordance with their respective Percentage Interests.
3.4 ADJUSTMENT OF INDEMNIFICATION ESCROW AMOUNT. The Indemnification
-------------------------------------------
Escrow Amount subject to this Agreement shall be adjusted from time to time, as
follows: If, between the date of this Agreement and the Distribution Date with
respect to the Indemnification Escrow Amount, NDC shall be entitled to be
indemnified pursuant to an Indemnification Claim under Article 10 of the Merger
Agreement, then NDC shall deliver to the Escrow Agent a Notice of Obligation
setting forth the amount of the Indemnification Claim, and upon receipt of such
Notice of Obligation by the Escrow Agent,
(i) the Escrow Agent shall distribute to NDC from the Indemnification
Escrow Amount an amount in cash, in immediately available funds, equal to such
Indemnification Claim; provided that such distribution of cash from the
Indemnification Escrow Amount shall be distributed in equal proportions from
each Stockholder Account, and provided further that the Escrow Agent shall have
the authority to sell shares of NDC Common Stock in any Stockholder Account in
order to satisfy such proportional distribution requirement; and, if the
Indemnification Escrow Amount does not contain any cash, or contains an amount
of cash insufficient to satisfy the Indemnification Claim, then
(ii) the Escrow Agent shall distribute to NDC from the Indemnification
Escrow Amount that number of shares of NDC Common Stock equal to the quotient
(rounded to the next highest whole number) obtained by dividing the amount of
the Losses asserted in the Indemnification Claim and not paid in cash pursuant
to Section 3.4(i) above, by the Average Closing Price as of the date of the
Notice of Obligation.
3.5 DISTRIBUTION OF INDEMNIFICATION ESCROW AMOUNT. If there are
---------------------------------------------
Indemnification Claims pending as of the Distribution Date with respect to the
Indemnification Escrow Amount,
-4-
<PAGE>
the amount of Losses under such disputed Indemnification Claims (the "Disputed
Indemnification Escrow Amount") for purposes of the calculations in the
following sentence of this Section 3.5 shall be as decided in writing by NDC and
the Stockholder Representative; provided, that if NDC and the Stockholder
Representative are not able to agree on the Disputed Indemnification Escrow
Amount by such Distribution Date, the Disputed Indemnification Escrow Amount
shall be the amount claimed by NDC in its notice of Indemnification Claim. Upon
determination of the Disputed Indemnification Escrow Amount in accordance with
the preceding sentence, the Escrow Agent shall promptly deliver to the
Stockholders a distribution of cash, if any, in immediately available funds, and
shares of NDC Common Stock from the Indemnification Escrow Amount, equal to the
difference between the Aggregate Value as of the Distribution Date of the
Indemnification Escrow Amount and the Disputed Indemnification Escrow Amount
(the "Undisputed Indemnification Escrow Amount"), and such amount shall be paid
to the respective Stockholders in accordance with their respective Percentage
Interests. Any delivery of NDC Common Stock to Stockholders shall be of full
shares and any fractional portions shall be rounded to a whole number by the
Escrow Agent so that the number of shares remaining in escrow to be delivered
will be fully allocated among such Stockholders. Upon the final resolution as
agreed by NDC and the Stockholder Representative in writing of the amount of the
Losses under Indemnification Claims pending as of the Distribution Date with
respect to the Indemnification Escrow Amount (the "Final Indemnification Claim")
for which a Disputed Indemnification Escrow Amount was retained in escrow, the
Escrow Agent shall promptly distribute to NDC an amount in cash, if any, in
immediately available funds, and shares of NDC Common Stock from the
Indemnification Escrow Amount with an Aggregate Value as of the date of final
resolution equal to the Final Indemnification Claim and shall deliver any
remaining Disputed Indemnification Escrow Amount to the Stockholders in
accordance with their respective Percentage Interests.
3.6 EFFECT OF FINAL DELIVERY. This Agreement shall continue in full force
------------------------
and effect until the Escrow Agent has distributed all of the Escrow Amount
pursuant to the terms hereof. After all of the Escrow Amount has been
distributed, all rights, duties and obligations of the respective parties
hereunder shall terminate.
ARTICLE 4
SALE OF ESCROW SHARES;
ESCROW STOCK CERTIFICATES
4.1 SALE OF ESCROW SHARES. The Stockholder Representative, or the
---------------------
Stockholders with respect to their individual Stockholder Accounts and acting
through the Stockholder Representative, may direct the Escrow Agent to sell,
from time to time, any or all of the Escrow Shares at such prices as are
commercially reasonable at the time of sale. On a monthly basis, the Escrow
Agent shall provide the Stockholder Representative and NDC with a sales report
detailing the number of Escrow Shares sold, the date of sale, the aggregate
sales price, any associated brokerage fees or expenses, any and all other
expenses, and such other information as the Stockholder Representative or NDC
shall reasonably request, and shall provide the Stockholder Representative and
NDC with a revised schedule as provided in Section 1.2 hereof. The proceeds of
such sale or sales, net of any underwriting commissions or brokers fees and all
other expenses of sale, shall be applied as follows:
-5-
<PAGE>
(i) Any and all cash proceeds from the sale of Working Capital Shares
shall remain in escrow as part of the Working Capital Escrow Amount and subject
to the provisions of this Agreement, except that at the end of each calendar
month, if the Aggregate Value of the Working Capital Escrow Amount exceeds 133%
of the Aggregate Value of the Escrow Shares as of the date of this Agreement
(the "Surplus Working Capital Escrow Amount"), the Escrow Agent shall distribute
to the Stockholders that amount in cash or shares of NDC Common Stock equal to
their respective Percentage Interest in the Surplus Working Capital Escrow
Amount; and
(ii) Any and all cash proceeds from a sale of Indemnification Shares
shall remain in escrow as part of the Indemnification Escrow Amount and subject
to the provisions of this Agreement, except that at the end of each calendar
month, if the Aggregate Value of the Indemnification Escrow Amount exceeds
$20,000,000 (the "Surplus Indemnification Escrow Amount"), the Escrow Agent
shall distribute to the Stockholders that amount in cash or shares of NDC Common
Stock equal to their respective Percentage Interests in the Surplus
Indemnification Escrow Amount.
4.2 METHOD OF DISTRIBUTION OF SHARES. If a registration statement is
--------------------------------
required by applicable law, the Escrow Shares may be distributed by the Escrow
Agent pursuant to a registration statement filed pursuant to the Securities Act
of 1933, as amended (the "Act") or any state securities laws, or in the
alternative, the Escrow Shares may be distributed under any applicable exemption
from the Act or such laws, in the sole discretion of the Escrow Agent, but in
all instances the Escrow Shares shall be distributed in compliance with the Act
and applicable state securities laws. NDC hereby agrees, if requested by the
Escrow Agent, to file or prepare such statements, forms or registrations to
satisfy any exemption from the Act or any state securities laws.
4.3 NEW CERTIFICATES. The Escrow Agent may at any time request NDC to
----------------
issue new certificates representing the Stock Escrow in such denominations as
may be necessary or appropriate in carrying out the Escrow Agent's obligations
under this Agreement.
ARTICLE 5
DIVIDENDS; VOTING RIGHTS;
INVESTMENT OF CASH AMOUNTS
5.1 CASH DIVIDENDS; VOTING RIGHTS. Any and all cash dividends or other
-----------------------------
cash income with respect to Escrow Amount shall be paid into and remain in the
Escrow Amount and shall be available for purposes of adjustments or
distributions pursuant to Section 3 hereof. Each Stockholder shall have the
right to direct the Escrow Agent in writing as to the exercise of voting rights
with respect to shares in the Stock Escrow held by the Escrow Agent on behalf of
such Stockholder, and the Escrow Agent shall comply with any such directions if
received in a timely manner. In the absence of such directions, the Escrow Agent
shall not vote any such shares in the Stock Escrow.
-6-
<PAGE>
5.2 STOCK SPLITS; STOCK DIVIDENDS. In the event of any stock split or
-----------------------------
stock dividend with respect to NDC Common Stock that becomes effective during
the term of this Agreement, the additional shares so issued with respect to the
Stock Escrow shall be added to the Stock Escrow and any other references herein
to a specific number of shares of NDC Common Stock or references herein to
prices for or the fair market value of NDC Common Stock shall be adjusted
accordingly.
5.3 INVESTMENT OF ESCROW FUNDS. The Escrow Agent shall invest the cash
--------------------------
amount, if any, included in the Escrow Amount as directed by the Stockholder
Representative or the Stockholders, provided that should the Stockholder
Representative or the Stockholders fail to so direct the Escrow Agent, NDC shall
be authorized to so direct the Escrow Agent, and, provided further that such
investments shall be limited to (i) direct obligations of the United States of
America, (ii) obligations for which the full faith and credit of the United
States of America is pledged to provide for the payment of principal and
interest, (iii) commercial paper rates of the highest qualify by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group, a
division of McGraw-Hill Inc. ("S&P"), and (iv) certificates of deposit issued by
a commercial bank (which may be the Escrow Agent or any affiliate of the Escrow
Agent) whose long-term debt obligations are rated at least A2 by Moody's or at
least A by S&P, in each case having a maturity not in excess of 90 days, or a
money market fund that invests exclusively in said investments. The Escrow Agent
shall have no liability or responsibility for loss of interest or any penalties
which are imposed because of early withdrawal of the securities or certificates
in which any cash portion of the Escrow Amount may be invested and the Escrow
Agent is hereby authorized to make such early withdrawal if necessary to make a
distribution from the Escrow Amount in accordance with this Agreement.
ARTICLE 6
THE ESCROW AGENT
6.1 LIABILITY. The Escrow Agent, in its capacity as Escrow Agent, or any
---------
successor Escrow Agent, shall be liable only to hold the Escrow Amount and to
deliver the same to the persons named herein in accordance with the provisions
of this Agreement. By acceptance of this Escrow Agreement, the Escrow Agent, in
its capacity as Escrow Agent, or any successor Escrow Agent, is acting in the
capacity of a depository only, and shall not be liable or responsible for any
damages, losses or expenses unless such damages, losses or expenses shall be
caused by the gross negligence or malfeasance of the Escrow Agent or any
successor Escrow Agent. Neither the Escrow Agent, in its capacity as Escrow
Agent, nor any successor Escrow Agent, shall incur any liability with respect to
(i) any action taken or omitted in good faith upon the advice of its counsel
with respect to any questions relating to the duties and responsibilities of the
Escrow Agent under this Agreement; or (ii) any action taken or omitted in
reliance upon any instrument, including the written instructions provided for
herein, not only as to the due execution of such instrument, or the identity, or
authority of any person executing such instrument, or the validity and
effectiveness of such instrument, but also as to the truth and accuracy of any
information contained therein, provided that the Escrow Agent shall in good
faith believe such instrument to be genuine, to have been signed by a proper
person or persons, and to conform to the provisions of this Agreement. In the
event of any disagreement or the presentation of adverse claims or demands in
connection
-7-
<PAGE>
with or for any item affected hereby, the Escrow Agent shall, at its option, be
entitled to refuse to comply with any such claims or demands during the
continuance of such disagreement and may refrain from delivering any item
affected hereby, and in so doing the Escrow Agent shall not become liable to the
parties, or to any other person, due to its failure to comply with any such
adverse claim or demand. The Escrow Agent shall be entitled to continue, without
liability, to refrain and refuse to act until all of the rights of the adverse
claimants have been either fully resolved among themselves, arbitrated to a
final award, or finally adjudicated by a court having jurisdiction over the
dispute. The Escrow Agent shall be held harmless and indemnified by the parties
hereto in connection with any claims against it in connection with its service
as escrow agent hereunder. Any action requested to be taken by the Escrow Agent
hereunder and not otherwise specifically set forth herein shall require the
agreement in writing of the Stockholder Representative, NDC and any successor
Escrow Agent.
6.3 SUCCESSOR. The Escrow Agent, with the prior written consent of the
---------
Stockholder Representative, may by written instrument designate a bank or trust
company to act as successor Escrow Agent. Any such successor Escrow Agent must
agree to be and shall be bound by, and shall have all the rights, duties and
responsibilities of the Escrow Agent under, this Agreement.
6.4 EXPENSES. Compensation for the normal services of the Escrow Agent or
--------
any successor Escrow Agent, if any, shall be borne by the Stockholders and NDC
equally and, with regard to the Stockholders obligations, shall be deducted from
the Escrow Amount. The Escrow Agent and any successor Escrow Agent shall be
reimbursed for any reasonable expenses, including the actual out-of-pocket cost
of outside legal services should the Escrow Agent deem it necessary in its
reasonable discretion to retain an outside attorney, and NDC and the
Stockholders shall share equally the reimbursement of such expenses of such
Escrow Agent, except that (a) if NDC is unsuccessful in any litigation relating
to such Escrow Agent, then the fees and expenses of such Escrow Agent in
connection therewith shall be paid by NDC, or (b) should the Stockholders be the
unsuccessful party in any such litigation, then the Stockholders will bear the
fees and expenses of such Escrow Agent in connection therewith. The Escrow Agent
and any successor Escrow Agent shall not be liable for any action taken in good
faith in accordance with the advice of an attorney.
ARTICLE 7
STOCKHOLDER REPRESENTATIVE
7.1 POWER AND AUTHORITY. The adoption of the Merger Agreement by the
-------------------
Stockholders shall constitute ratification of this Escrow Agreement, and the
Stockholder Representative shall have full power and authority to represent the
Stockholders and their successors with respect to all matters arising under this
Agreement, and all action taken by the Stockholder Representative hereunder
shall be binding upon such Stockholders and their successors as if expressly
ratified and confirmed in writing by each of them. Without limiting the
generality of the foregoing, the Stockholder Representative shall have full
power and authority, on behalf of all the Stockholders and their successors, to
interpret all the terms and provisions of this Agreement, to dispute or fail to
dispute any Adjustment Claim or Indemnification Claim, to negotiate and
compromise any
-8-
<PAGE>
dispute which may arise under this Agreement, to sign any releases or other
documents with respect to any such dispute, and to authorize payments to be made
with respect thereto.
7.2 RESIGNATION; SUCCESSORS. The Stockholder Representative, or any
-----------------------
successor hereafter appointed, may resign and shall be discharged of his duties
hereunder upon the appointment of a successor Stockholder Representative as
hereinafter provided. In case of such resignation, or in the event of the death
or inability to act of the Stockholder Representative, a successor shall be
named from among the Stockholders by a majority of the members of the Board of
Directors of Source who served on such board prior to the Merger. Each such
successor Stockholder Representative shall have all the power, authority, rights
and privileges hereby conferred upon the original Stockholder Representative,
and the term "Stockholder Representative" as used herein shall be deemed to
include such successor Stockholder Representative.
7.3 INDEMNIFICATION OF STOCKHOLDER REPRESENTATIVE. NDC shall indemnify
---------------------------------------------
and hold harmless the Stockholder Representative from and against any loss,
expense or liability incurred in connection with the performance of his duties
hereunder, including the advancement of expenses incurred in connection with
investigating or defending any claim or action.
ARTICLE 8
MISCELLANEOUS
8.1 TRANSFERABILITY. A Stockholder may not transfer any interest in the
---------------
Escrow Amount or any other right under this Escrow Agreement to any other party,
except that upon written notice from the legal representative of the estate of a
deceased Stockholder to the Escrow Agent, the rights of such Stockholder under
this Escrow Agreement shall be transferred to the estate of such Stockholder,
and subsequently to any beneficiary thereof, in the event of the Stockholder's
death; provided, however, that any such beneficiary or the legal representative
of any such estate shall be bound by the provisions of this Escrow Agreement
without taking any further action. The Escrow Agent shall be entitled to treat
the legal representative of the estate of such Stockholder, and subsequently any
beneficiary thereof, as the absolute owner of the rights of such Stockholder
under this Escrow Agreement in all respects and shall incur no liability for
distributions made in good faith to the legal representatives of such
Stockholder or such beneficiary in accordance with the terms of this Escrow
Agreement. The contingent right to receive Escrow Amount shall not be
transferable by the Stockholders otherwise than by will or by the laws of
descent and distribution.
8.2 NOTICES. Each party shall keep each of the other parties hereto
-------
advised in writing of all transactions pursuant to this Agreement. Any notices
or other communications required or permitted under this Agreement shall be in
writing and shall be sufficiently given if sent by registered or certified mail,
postage prepaid, addressed as follows, or if sent by facsimile to the facsimile
numbers identified below:
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<PAGE>
If to NDC:
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attn: E. Michael Ingram
Telecopy: (404) 728-2990
with a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: B. Harvey Hill, Jr.
Telecopy: (404) 881-7777
If to the Stockholders or the Stockholder Representative:
________________
________________
________________
Telecopy: (___) ___-____
with a copy to:
________________
________________
________________
________________
Attn: ___________
Telecopy: (___) ___-____
If to the Escrow Agent:
Escrow Agent
______________
________, ______ ____
Attn: ___________
Telecopy: (___) ___-____
or such other person or address as shall be furnished in writing by any of the
parties and any such notice or communication shall be deemed to have been given
as of the date so mailed.
-10-
<PAGE>
8.3 CONSTRUCTION. This Agreement shall be governed by and construed in
------------
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of laws.
8.4 BINDING EFFECT. This Agreement shall inure to the benefit of and be
--------------
binding upon the respective heirs, executors, administrators, successors and
assigns of the parties hereto.
8.5 SEPARABILITY. If any provision or section of this Agreement is
------------
determined to be void or otherwise unenforceable, it shall not affect the
validity or enforceability of any other provisions of this Agreement which shall
remain unenforceable in accordance with their terms.
8.6 HEADINGS. The headings and subheadings contained in this Agreement
--------
are for reference only and for the benefit of the parties and shall not be
considered in the interpretation or construction of this Agreement.
8.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
-------------------------
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
8.8 AMENDMENTS. This Agreement may be amended from time to time but only
----------
by written agreement signed by all of the parties hereto.
8.9 THIRD PARTY BENEFICIARIES. Each Subsidiary of NDC and each of the
-------------------------
directors, officers and employees of NDC and each of its Subsidiaries are
expressly intended to be third party beneficiaries of the indemnities and
obligations of the Stockholders as if they were parties to this Agreement.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the day and year first above written.
NATIONAL DATA CORPORATION
By:____________________
ESCROW AGENT
By:____________________
STOCKHOLDER REPRESENTATIVE
_____________________(SEAL)
-12-
<PAGE>
SCHEDULE I
TO ESCROW AGREEMENT
COMMON STOCKHOLDERS
<TABLE>
<CAPTION>
STOCKHOLDER ACCOUNTS
--------------------
SHARES OF WORKING CAPITAL INDEMNIFICATION
SOURCE ESCROW ESCROW
------ ------
COMMON STOCK PERCENTAGE
NAME OWNED INTEREST CASH SHARES CASH SHARES
- ---- ----- -------- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
-1-
<PAGE>
EXHIBIT 2
<PAGE>
STOCKHOLDER VOTING AGREEMENT
----------------------------
THIS STOCKHOLDER VOTING AGREEMENT (this "Agreement") is made and entered
into as of August 20, 1997, by and among National Data Corporation, a Delaware
corporation ("NDC"), Source Informatics Inc., a Delaware corporation ("Source"),
and the undersigned (the "Stockholders").
WHEREAS, the Stockholders desire that NDC, Dunkirk, Inc., a wholly owned
subsidiary of NDC ("Sub"), and Source enter into an Agreement and Plan of Merger
dated the date hereof (as the same may be amended or supplemented, the "Merger
Agreement") with respect to the merger of Sub with and into Source (the
"Merger"); and
WHEREAS, the Stockholders and Source are executing this Agreement as an
inducement to NDC to enter into and execute, and to cause Sub to enter into and
execute, the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by NDC and
Sub of the Merger Agreement and the mutual covenants, conditions and agreements
contained herein and therein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder represents and
warrants to NDC as follows:
(a) The Stockholder is the record and beneficial owner of the number
of shares (such "Stockholder's Shares") of preferred stock, $1.00 par
value, of Source ("Source Preferred Stock") set forth below such
Stockholder's name on the signature page hereof. This Agreement has been
duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, the Stockholder, enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
application respecting creditors' rights and by general equitable
principles.
(b) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Stockholder is a party or bound or
to which the Stockholder's Shares are subject. If the Stockholder is
married and the Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, the Stockholder's spouse,
enforceable against such person in accordance with its terms.
Consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Stockholder's shares.
<PAGE>
(c) The Stockholder's Shares and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by
the Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, free and clear of all liens, security interests, proxies,
voting trusts or voting agreements or any other encumbrances whatsoever,
except for any such encumbrances or proxies arising hereunder.
(d) No broker, investment banker, financial adviser or other person
is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(e) The Stockholder understands and acknowledges that NDC is entering
into, and causing Sub to enter into, the Merger Agreement in reliance
upon the Stockholder's execution and delivery of this Agreement. The
Stockholder acknowledges that the irrevocable proxy set forth in Section
4 is granted in consideration for the execution and delivery of the
Merger Agreement by NDC and Sub.
2. Voting Agreements. Each Stockholder agrees with, and covenants to, NDC
as follows:
(a) At any meeting of stockholders of Source called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought (the
"Stockholders' Meeting"), the Stockholder shall vote (or cause to be
voted) the Stockholder's Shares in favor of the Merger, the execution and
delivery by Source of the Merger Agreement, and the approval of the terms
thereof and each of the other transactions contemplated by the Merger
Agreement, provided that the terms of the Merger Agreement shall not have
been amended or waived to in any manner (A) affect the rights of the
Stockholders or their representatives or increase the Stockholders'
obligations thereunder, or (B) increase the consideration payable to the
holders of Source Common Stock, without the prior written consent of the
Stockholders.
(b) At any meeting of stockholders of Source or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, the Stockholder shall vote (or cause to be
voted) such Stockholder's Shares against (i) any merger agreement or
merger (other than the Merger Agreement and the Merger), consolidation,
combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by Source
or (ii) any amendment of Source's Certificate of Incorporation or Bylaws
or other proposal or transaction involving Source or any of its
subsidiaries which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement (each of the foregoing in clause (i) or (ii) above, a
"Competing Transaction").
-2-
<PAGE>
3. Covenants. Each Stockholder agrees with, and covenants to, NDC
that such Stockholder shall not (i) transfer (which term shall include,
without limitation, for the purposes of this Agreement, any sale, gift,
pledge or other disposition), or consent to any transfer of, any or all of
the Stockholder's shares or any interest therein, except pursuant to the
Merger; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such shares or
any interest therein, (iii) grant any proxy, power of attorney or other
authorization in or with respect to such shares, except for this Agreement,
or (iv) deposit such shares into a voting trust or enter into a voting
agreement or arrangement with respect to such shares; provided, that the
Stockholder may transfer (as defined above) any of the Stockholder's Shares
to any other person who is on the date hereof, or to any family member of a
person or charitable institution which prior to the Stockholders Meeting
and prior to such transfer becomes, a party to this Agreement bound by all
the obligations of the "Stockholder" hereunder.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each Stockholder hereby irrevocably grants to, and appoints, NDC
and Robert A. Yellowlees, President of NDC, and M. P. Stephenson, Chief
Financial Officer of NDC, in their respective capacities as officers of NDC, and
any individual who shall hereafter succeed to any such office of NDC, and each
of them individually, the Stockholder's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of the Stockholder,
to vote the Stockholder's Shares, or grant a consent or approval in respect of
such Shares (i) in favor of the Merger, the execution and delivery of the Merger
Agreement and approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement, provided that the terms of the Merger
Agreement shall not have been amended or waived to in any manner (i) affect the
rights of the Stockholders or their representatives or increase the
Stockholders' obligations thereunder, or (ii) increase the consideration payable
to the holders of Source Common Stock, without the prior written consent of the
Stockholders, and (ii) against any Competing Transaction.
(b) Each Stockholder represents that any proxies heretofore given in
respect of the Stockholder's shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Each Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Stockholder under this Agreement. Each Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. Each Stockholder hereby ratifies and confirms
all that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
5. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity
-3-
<PAGE>
to which legal or beneficial ownership of such shares shall pass, whether by
operation of law or otherwise, including without limitation the Stockholder's
successors or assigns. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of
Source affecting the Source Preferred Stock, or the acquisition of additional
shares of Source Preferred Stock or other voting securities of Source by any
Stockholder, the number of Shares subject to the terms of this Agreement shall
be adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of Source Preferred Stock or other voting
securities of Source issued to or acquired by the Stockholder, excluding any
shares of Source Common Stock that may be issued to or acquired by the
Stockholder.
6. Stop Transfer; Legends. Source agrees with, and covenants to, NDC that
Source shall not register the transfer of any certificate representing any of
the Stockholder's Shares, unless such transfer is made to NDC or Sub or
otherwise in compliance with this Agreement.
7. Regulatory Approvals. Each of the provisions of this Agreement is
subject to compliance with applicable regulatory conditions and receipt of any
required regulatory approvals.
8. Further Assurances. Each Stockholder shall, upon request of NDC,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by NDC to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote such Stockholder's Shares as
contemplated by Section 4 in NDC and the other irrevocable proxies described
therein at the expense of NDC.
9. Termination. This Agreement, and all rights and obligations of the
parties hereunder; shall terminate, and the proxy granted under paragraph 4
shall expire, upon the first to occur of (x) the Effective Time of the Merger,
(y) the date upon which the Merger Agreement is terminated in accordance with
its terms, (z) the termination of an agreement, if any, similar to this
Agreement entered into by the holders of the Source Common Stock, or (aa)
December 15, 1997.
10. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to them in the Merger
Agreement.
(b) All notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice): (i) if to NDC, to the address provided in
the Merger Agreement; and (ii) if to a Stockholder; to its address shown below
its signature on the last page hereof.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
-4-
<PAGE>
(d) This Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement.
(e) This Agreement (including the documents and instruments referred
to herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties, except as expressly contemplated by Section 3(a).
Any assignment in violation of the foregoing shall be void.
(h) Each Stockholder agrees that irreparable damage would occur and
that NDC would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that NDC
shall be entitled to an injunction or injunctions to prevent breaches by any
Stockholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located in the
State of Delaware or in Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (iii) agrees that such party will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in the State
of Delaware or a Delaware state court.
(i) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
-5-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement as of the day and year first above written.
NATIONAL DATA CORPORATION
By: /s/ E. Michael Ingram
Senior Vice President
SOURCE INFORMATICS INC.
By: /s/ Warren Hauser
Vice President
STOCKHOLDER:
_____________________________________
Name:________________________________
Address:_____________________________
_____________________________
Number of Shares
Beneficially Owned:__________________
-6-
<PAGE>
EXHIBIT 3
<PAGE>
AFFILIATE AGREEMENT
-------------------
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attention: E. Michael Ingram
General Counsel
Gentlemen:
The undersigned is a stockholder of Source Informatics Inc. ("Source"), a
corporation organized and existing under the laws of the State of Delaware, and
will become a stockholder of National Data Corporation ("NDC"), a corporation
organized and existing under the laws of the State of Delaware, pursuant to the
transactions described in the Agreement and Plan of Merger, dated as of August
19, 1997 (the "Agreement"), by and among NDC, Dunkirk, Inc. ("Sub") and Source.
Under the terms of the Agreement, Sub will be merged into and with Source (the
"Merger"), and the shares of the $0.01 par value common stock of Source ("Source
Common Stock") will be converted into and exchanged for cash and shares of the
$0.125 par value common stock of NDC ("NDC Common Stock"). This Affiliate
Agreement represents an agreement between the undersigned and NDC regarding
certain rights and obligations of the undersigned in connection with the shares
of NDC to be received by the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and NDC hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
----------------
Source he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Covenants and Warranties of Undersigned. The undersigned represents,
---------------------------------------
warrants and agrees that:
(a) The NDC Common Stock received by the undersigned as a result of
the Merger will be taken for his own account and not for others, directly
or indirectly, in whole or in part.
(b) NDC has informed the undersigned that any distribution by the
undersigned of NDC Common Stock has not been registered under the 1933 Act
and that shares of NDC Common Stock received pursuant to the Merger can
only be sold by the undersigned (1) following registration under the 1933
Act, or (2) in conformity with the volume and other requirements of Rule
145(d) promulgated by the SEC as the same now exist or may
-1-
<PAGE>
hereafter be amended, or (3) to the extent some other exemption from
registration under the 1933 Act might be available. The undersigned
---------------
understands that NDC is under no obligation to file a registration
------------------------------------------------------------------
statement with the SEC covering the disposition of the undersigned's shares
---------------------------------------------------------------------------
of NDC Common Stock or to take any other action necessary to make
-----------------------------------------------------------------
compliance with an exemption from such registration available.
-------------------------------------------------------------
(c) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 7 hereof to, have all shares of Source Common Stock
beneficially owned by the undersigned registered in the name of the
undersigned or such parties, as applicable, prior to the effective date of
the Merger and not in the name of any bank, broker-dealer, nominee or
clearinghouse.
3. Restrictions on Transfer. The undersigned understands and agrees that
------------------------
stop transfer instructions with respect to the shares of NDC Common Stock
received by the undersigned pursuant to the Merger will be given to NDC's
transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate may not be sold,
transferred or otherwise disposed of except or unless (1) covered by
an effective registration statement under the Securities Act of 1933,
as amended, (2) in accordance with (i) Rule 145(d) (in the case of
shares issued to an individual who is not an affiliate of NDC) or (ii)
---
Rule 144 (in the case of shares issued to an individual who is an
affiliate of NDC) of the Rules and Regulations of such Act, or (3) in
accordance with a legal opinion satisfactory to counsel for NDC that
such sale or transfer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate representing NDC securities
issued subsequent to the original issuance of the NDC Common Stock pursuant to
the Merger as a result of any transfer of such shares or any stock dividend,
stock split, or other recapitalization as long as the NDC Common Stock issued to
the undersigned pursuant to the Merger has not been transferred in such manner
to justify the removal of the legend therefrom. Upon the request of the
undersigned, if the provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the NDC Common Stock received by the undersigned
pursuant to the Merger, or at the expiration of the restrictive period set forth
in Rule 145(d), NDC will cause the certificates representing the shares of NDC
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to the restrictions set forth in Rules 144
and 145(d) upon receipt by NDC of an opinion of its counsel to the effect that
such legend may be removed.
4. Understanding of Restrictions on Dispositions. The undersigned has
---------------------------------------------
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of NDC Common Stock received by the undersigned, to the extent he
believes necessary, with his counsel or counsel for Source.
-2-
<PAGE>
5. Filing of Reports by NDC. NDC agrees, for a period of three years
------------------------
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended, so that the public information provisions of Rule 145(d)
promulgated by the SEC as the same are presently in effect will be available to
the undersigned in the event the undersigned desires to transfer any shares of
NDC Common Stock issued to the undersigned pursuant to the Merger.
6. Transfer Under Rule 145(d). If the undersigned desires to sell or
--------------------------
otherwise transfer the shares of NDC Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for NDC Common Stock together with such additional information as
the transfer agent may reasonably request. If NDC's counsel concludes that such
proposed sale or transfer complies with the requirements of Rule 145(d), NDC
shall cause such counsel to provide such opinions as may be necessary to NDC's
transfer agent so that the undersigned may complete the proposed sale or
transfer.
7. Acknowledgments. The undersigned recognizes and agrees that the
---------------
foregoing provisions also apply to all shares of the capital stock of Source and
NDC that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own at
least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity securities or of
the equity interest. The undersigned further recognizes that, in the event that
the undersigned is a director or officer of NDC or becomes a director or officer
of NDC upon consummation of the Merger, among other things, any sale of NDC
Common Stock by the undersigned within a period of less than six months
following the effective time of the Merger may subject the undersigned to
liability pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended.
8. Miscellaneous. This Affiliate Agreement is the complete agreement
-------------
between NDC and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Delaware.
-3-
<PAGE>
This Affiliate Agreement is executed as of the ____ day of _________, 1997.
Very truly yours,
___________________________
Signature
___________________________
Print Name
___________________________
___________________________
___________________________
Address
[add below the signatures of all registered owners
of shares deemed beneficially owned by the
affiliate]
___________________________
Name:
___________________________
Name:
___________________________
Name:
AGREED TO AND ACCEPTED as of
_______________, 1997
NATIONAL DATA CORPORATION
By:_________________________
-4-
<PAGE>
EXHIBIT 4
<PAGE>
MATTERS AS TO WHICH REBOUL, MACMURRAY, HEWITT, MAYNARD &
KRISTOL WILL OPINE
1. Source is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is engaged, and to own and use
its Assets.
2. The authorized capital stock of Source consists of 12,000,000 shares
of common stock, $ 0.01 par value per share ("Source Common Stock") of which
______ shares were issued and outstanding as of __________, 1997, and 2,000,000
shares of preferred stock, $1.00 par value per share ("Source Preferred Stock"),
of Source, of which ______ shares were issued and outstanding as of _________,
1997. The shares of Source Common Stock and Source Preferred Stock that are
issued and outstanding were not issued in violation of any statutory preemptive
rights of stockholders were duly issued and are fully paid and nonassessable
under the Delaware General Corporation Law. To our knowledge, except as set
forth above, or as disclosed in Section 5.3 of the Source Disclosure Memorandum,
as of __________, 1997, there were no shares of capital stock or other equity
securities of Source outstanding and no outstanding Equity Rights relating to
the capital stock of Source.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Certificate
of Incorporation or Bylaws of Source or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default or
acceleration under any Contract, Law, Order or Permit to which Source is a party
or by which Source is bound.
4. The Agreement has been duly and validly executed and delivered by
Source and, assuming valid authorization, execution and delivery by NDC and Sub,
constitutes a valid and binding agreement of Source enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, provided, however, that we express no opinion as to the availability
of the equitable remedy of specific performance.
5. The Securities Transfer Agreement, dated __________, 1997, by and
between Source and PMSI has been duly and validly executed and delivered by
Source and, assuming valid authorization, execution and delivery by PMSI,
constitutes a valid and binding agreement of Source enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, provided, however, that we express no opinion as to the availability
of the equitable remedy of specific performance.
6. The distribution by certain stockholders of Source who are limited
partnerships and Affiliates of Source (the "LP Stockholders") of shares of NDC
Common Stock (the "Shares") received in the Merger to their limited partners
(each such person receiving Shares hereinafter a "Limited Partner"), and the
subsequent re-sale of such Shares by the Limited Partners without
-1-
<PAGE>
aggregation of such sales, as provided by Rule 144 under the 1933 Act, as
between themselves, any LP Stockholder or any other Limited Partner, does not
violate any of the applicable provisions of the 1933 Act and the rules and
regulations thereunder.
-2-
<PAGE>
*EXHIBIT 5
- --------------------------------
*CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT AND FILED
SEPARATELY WITH THE COMMISSION.
<PAGE>
TERMS OF EMPLOYMENT
1. Salaries shall be at or above existing salaries in every instance.
2. Bonus opportunity shall be at or above existing bonus opportunity in
every instance, and in addition may be considerably above existing opportunity
for new synergistic business results.
3. Long-term incentive opportunity - stock options will be granted after
closing per NDC's grant guidelines (this should represent significantly greater
opportunities than Source).
4. [***************] provision shall be on terms substantially similar to
the existing Source employment agreements and provide a level of protection
similar to current NDC plan, [*************************************************
*******************************************************************************
*******].
[*********] Provisions
----------------------
The [*********] provisions shall be those contained in the NDC Form of
Employment Agreement (other than [***************]) as provided as of the date
hereof, provided that the following terms shall modify such Form:
Term of agreement - [**] months
First [**] months:
Salaries and benefits continue for [**] months for [*********] other than
[*********].
Bonus paid equal to average of [***************].
Second [**] months:
Salary and benefits continue for [***] months; [******] continuance.
Other [*******] provisions will be the same as provided for NDC employees at
comparable levels.
Exclusion - in all instances if [*******************] is found within the
[*******] period covered, 1/2 of the [*******] balance remaining would be
payable.
[*******]:
[*************************************************************].
[***********************************************************].
The final Employment Agreements shall be completed prior to Closing.
- --------------------
[*] THE BRACKETS AND ASTERISKS INDICATE SECTIONS WHERE CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
-1-
<PAGE>
EXHIBIT 6
<PAGE>
NON COMPETITION AND NON SOLICITATION AGREEMENT
THIS AGREEMENT is made and effective on this ___ day of ________, 1997 (the
"Effective Date"), between National Data Corporation, a Delaware corporation
("NDC"), and ________________, an individual who at the time of execution of
this Agreement is a resident of _____________ (the "Undersigned").
W I T N E S S E T H:
--------------------
WHEREAS, the Undersigned is a stockholder ,officer and director of Source,
a corporation organized and existing under the laws of the State of Delaware,
and will become a stockholder of NDC pursuant to transactions described in the
Agreement and Plan of Merger, dated as of August 20, 1997 (the "Merger
Agreement"), by and among NDC, Dunkirk, Inc. and Source.
WHEREAS, the parties hereto have agreed to execute and deliver this
Agreement contemporaneously with the consummation of the transactions
contemplated by the Merger Agreement.
WHEREAS, Source and its Subsidiaries are engaged in and throughout the
United States and other countries in the Business.
AGREEMENT
---------
In consideration of the consummation of the transactions contemplated by
the Merger Agreement, and the consideration to be paid to the Undersigned under
the Merger Agreement, and the above premises and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have the meanings assigned to those terms in the Merger Agreement. Other
capitalized terms shall be defined as follows:
(a) "Area" shall mean the following States and/or territories:
----
Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware,
District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New
Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming
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<PAGE>
(b) "Competing Business" shall mean any business organization of
------------------
whatever form engaged, either directly or indirectly, in any business or
enterprise which is the same as, or substantially the same as, any of the
Business.
(c) "Business" means the business of developing, maintaining or
--------
providing pharmaceutical prescription databases for one or more of the following
activities: (i) management of sales forces; (ii) measurement of sales force
performance or product performance; and (iii) creation of physician profiles for
targeting purposes. The parties hereto acknowledge that the use by Scott-Levin,
Inc. ("SLA") of databases obtained from Source pursuant to that certain Services
Agreement, dated as of the Effective Date, by and between SLA and Source (the
"SLA Agreement") or from any third party, in accordance with the parameters set
forth in the SLA Agreement, shall not constitute Business within the meaning of
this Agreement.
(d) "Proprietary Information" shall mean information related to
-----------------------
Source or any Subsidiary of Source (i) which derives economic value, actual or
potential, from not being generally known to, or readily ascertainable by, other
Persons who can obtain economic value from its disclosure or use, and (ii) which
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. Assuming the foregoing criteria are met, Proprietary
Information includes, but is not limited to, the financial affairs, processes,
services, customers, employees, employees' compensation, research, development,
inventions, existing and future products and services, product and service plans
and designs, manufacturing, purchasing, accounting, engineering, distribution
systems, marketing, formulae, patterns, compilations, programs, methods,
techniques, drawings, and suppliers of Source and its Subsidiaries.
(f) Restricted Period" shall mean the period commencing with the
-----------------
Effective Time and ending on the third (3rd) anniversary thereof.
2. Agreement Not to Compete.
------------------------
Unless otherwise consented to in writing by NDC, the Undersigned agrees
that during the Restricted Period it will not, within the Area, either directly
or indirectly, on its own behalf or in the service or on behalf of others,
engage in any Competing Business, provide managerial, supervisory,
administrative, financial or consulting services or assistance relating to the
Business to any Competing Business, or own a beneficial interest in any
Competing Business (other than ownership of less than 1% of the voting
securities of a company with publicly-traded equity securities); provided,
however, that the foregoing restriction shall not apply to activities or
business in which PMSI Scott-Levin, Inc. ("SLA") is engaged as of the Effective
Date.
3. Agreement Not to Solicit Customers.
----------------------------------
The Undersigned agrees that during the Restricted Period, it will not,
without the prior written consent of NDC, either directly or indirectly, on its
own behalf or in the service or on behalf of others, (i) solicit, divert or
appropriate to or for a Competing Business any Person or entity which is a
customer of the Business at the Effective Time or was such a customer during the
two (2) year period preceding the Effective Time, for the purpose of providing
products or
-2-
<PAGE>
services relating to the Business or (ii) attempt to solicit, divert or
appropriate to or for a Competing Business, any such Person or entity for the
purpose of providing products or services relating to the Business.
4. Agreement Not to Solicit Employees.
----------------------------------
The Undersigned agrees that during the Restricted Period, it will not,
without the prior written consent of NDC, either directly or indirectly, on its
own behalf or in the service or on behalf of others, solicit, divert, or hire
away, or attempt to solicit, divert, or hire away, from the employment of a
Source Entity conducting the Business, any Person employed by such Source
Entity, whether or not such employee is a full-time employee or temporary
employee of such Source Entity, and whether or not such employment is pursuant
to written agreement and whether or not such employment is for determined period
or is at will.
5. Confidentiality.
---------------
The Undersigned (i) will hold the Proprietary Information in strictest
confidence, and (ii) will not use, duplicate, reproduce, distribute, disclose or
otherwise disseminate the Proprietary Information for a period of five (5) years
immediately following the Effective Date. In the event that the Undersigned is
required by law to disclose any Proprietary Information during that period, the
Undersigned will make such disclosure only after prior written notice is given
to NDC when the Undersigned becomes aware that such disclosure has been
requested and is required by law.
6. Remedies.
--------
(a) The Undersigned acknowledges and agrees that, by virtue of its
relationship with NDC, great loss and irreparable damage would be suffered by
NDC and its Affiliates, including, without limitation, damage to the goodwill
and proprietary interests of NDC and its Affiliates, if the Undersigned should
breach or violate any of the terms or provisions of the covenants and agreements
set forth in Sections 2, 3, 4, and 5 hereof. The Undersigned further
acknowledges and agrees that each such covenant and agreement is reasonable and
necessary to protect and preserve the interests of NDC.
(b) The parties acknowledge and agree that any breach of Sections 2,
3, 4, or 5 of this agreement by the Undersigned would result in irreparable
injury to NDC, and therefore the Undersigned agrees and consents that NDC shall
be entitled to a temporary restraining order and a permanent injunction to
prevent a breach or contemplated breach of any of the covenants or agreements of
the Undersigned contained herein.
(c) In addition, NDC shall be entitled, upon any breach of Sections
2, 3, 4, or 5 of this agreement by the Undersigned, to demand an accounting and
repayment of all profits, compensation and other benefits realized by the
Undersigned or any Competing Business controlled by the Undersigned as a result
of any such breach.
-3-
<PAGE>
7. Severability.
------------
The Undersigned agrees that the covenants and agreements contained in
Sections 2, 3, 4, 5 and 6 of this Agreement are of the essence of this
Agreement; that each such covenant was agreed to by NDC and the Undersigned as
part of the transactions contemplated by the Merger Agreement; that the
Undersigned has received good, adequate and valuable consideration for each of
such covenants; that each of such covenants is reasonable and necessary to
protect and preserve the interests and properties of NDC; that Source and its
Subsidiaries are engaged in the Business throughout the Area; that irreparable
loss and damage will be suffered by NDC should the Undersigned breach any of
such covenants and agreements; that each of such covenants and agreements is
separate, distinct and severable not only from the other of such covenants and
agreements but also from other and remaining provisions of this Agreement; and,
that the invalidity or unenforceability of any such covenant or agreement shall
not effect the validity or enforceability of any other such covenants or
agreements or any other provision or provisions of this Agreement. Further, if
any provision of this Agreement is ruled invalid or unenforceable by a court of
competent jurisdiction because of a conflict between such provision and any
applicable law or public policy, such provision shall be redrawn by such court
to the extent required to make such provision consistent with, and valid and
enforceable under, such law or public policy, and as redrawn may be enforced
against the Undersigned.
8. Consideration.
-------------
In consideration for the execution of this Agreement, and as part of the
transactions contemplated by the Merger Agreement, the Undersigned shall receive
from NDC those securities which are described in Article 3 of the Merger
Agreement. Further, the Undersigned acknowledges and agrees that the terms of
this Agreement contained herein are reasonable in light of the good, adequate
and valuable consideration which the Undersigned shall receive pursuant to the
Merger Agreement.
9. Assignment.
----------
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement and
the rights and obligations of the parties hereunder may not be assigned by any
party, except that NDC may assign this Agreement (or any portion thereof) to NDC
or any successor to any of the Business.
10. Waiver.
------
The waiver by NDC of any breach of this Agreement by the Undersigned shall
not be effective unless in writing, and no such waiver shall operate or be
construed as the waiver of the same or another breach on a subsequent occasion.
-4-
<PAGE>
11. Governing Law.
-------------
This Agreement and the rights of the parties hereunder shall be governed
by, and construed in accordance with, the laws of the state of _____________.
12. Amendment.
---------
No amendment or modification of this Agreement shall be valid or binding
upon NDC or The Undersigned unless made in writing and signed by the parties
hereto.
13. Captions and Section Headings.
-----------------------------
Captions and section headings used herein are for convenience only and are
not a part of this Agreement and shall not be used in construing it.
14. Notices.
-------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have duly been given if delivered or if
mailed, by United States certified or registered mail, prepaid to the parties or
their assignees at the following addresses (or at such other addresses as shall
be given in writing by the parties to one another):
If to NDC, to:
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attn: Don Howard
With a copy to:
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attn: E. Michael Ingram
If to the Undersigned, to:
_____________________________
_____________________________
_____________________________
_____________________________
With a copy to:
-5-
<PAGE>
_____________________________
_____________________________
_____________________________
_____________________________
15. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which
will be deemed original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, NDC and the UNDERSIGNED have each executed and
delivered this Agreement as of the date first written above.
NATIONAL DATA CORPORATION
By:___________________________________
Title:________________________________
[NAME]
By:___________________________________
Title:________________________________
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<PAGE>
*EXHIBIT 7
- --------------------------------
*CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT AND FILED
SEPARATELY WITH THE COMMISSION.
<PAGE>
SOFTWARE LICENSE AGREEMENT
--------------------------
This Software License Agreement ("Agreement") is made this ___ day of
___, 1997 ("Effective Date"), by and between Source Informatics Inc., a Delaware
corporation, with its principal place of business at 2394 E. Camelback Road,
Phoenix, AZ 85016 ("Licensor") and [each SE Operating Subsidiary], with its
principal place of business at ____________ ("Licensee").
WHEREAS Licensor owns all right, title, and interest in and to those
certain computer programs and documentation identified as Database Loads,
Projection, On-line Job Submission, Source Prescription Audit, Source Traveling
Prescription, Multilingual Report Littorals, Client Support Process, Rx Data
Groupings, Products and Markets, Delivery Options, Salesforce Alignments,
Reporting Markets, Source Prescriber and Source Territory Manager [N.B. we will
need to add to Appendix A any applications developed for Licensee between now
and closing of the Dunkirk transaction], the specifications for which are set
forth in Appendix A hereto;
-------- -
WHEREAS, Licensor has entered into that certain Securities Transfer
Agreement (the "Securities Transfer Agreement"), dated as of August 20, 1997
with Pharmaceutical Marketing Services Inc., a Delaware corporation ("PMSI")
pursuant to which Licensor has agreed to transfer to PMSI, among other things,
the membership interests of Source Informatics European Holdings, L.L.C. then
held by Licensor and Licensor desires, in connection therewith, to license the
Applications to Licensee, and Licensee desires to take a license to the
Applications, in accordance with the terms and conditions of this Agreement;
WHEREAS, the closing of the transactions contemplated under the
Securities Transfer Agreement shall occur on the date hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Licensor and Licensee agree as
follows:
1. DEFINITIONS
-----------
1.1. "Applications" means, collectively, the full version of the
applications, as specified in Appendix A hereto, delivered to Licensee in source
----------
code, plus all System Documentation and User Documentation, if any.
1.2. "System Documentation" means all documentation used in the
development and updating of the Applications, including but not limited to,
design or development specifications, error reports, and related correspondence
and memoranda.
1.3. "User Documentation" means the end-user instruction manual in
both printed and electronic form instructing end users in the use of the
Applications.
1.4 "Business" means the development, use or exploitation of
prescription databases for one or more of the following activities: (i)
management of sales force, (ii)
-1-
<PAGE>
measurement of sales force performance or product performance or (iii) creation
of physician profiles for targeting purposes.
1.5 "Licensed Territory" means continental Europe (excluding Russia),
the United Kingdom and Ireland.
1.6 "Territory" means the following countries: Belgium, Germany,
France, Italy, Luxembourg, the Netherlands, Denmark, the Republic of Ireland,
the United Kingdom, Greece, Portugal, Spain, Austria, Finland, and Sweden.
1.7 "Marks" means the trademarks, trade names and service marks
listed on Appendix B.
----------
1.8 "Works" means any original design, artwork or compilation or
derivative.
1.9 "Competitor" means any Person engaged in either (i) the Business
or (ii) the healthcare information network business.
2. GRANT OF LICENSE
----------------
2.1 Subject to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee a non-exclusive royalty-free license to use the
Applications for any purpose in the Licensed Territory.
2.2 Subject to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee an exclusive license to use the Marks for the Business
or a business related thereto in the Licensed Territory.
3. DELIVERY OF PHYSICAL OBJECTS
----------------------------
To the extent necessary for Licensee to have the most current versions
and updates of the Applications as of the Effective Date, Licensor shall deliver
to Licensee within ten (10) days after the Effective Date: (1) a master copy of
the Applications (in source code format), which shall be in a form suitable for
copying; and (2) all System Documentation and User Documentation pertaining to
the Applications, if any.
4. ROYALTY FOR THE LICENSE OF THE MARKS
------------------------------------
4.1 In consideration for the license of the Marks granted herein,
Licensee shall pay Licensor a royalty fee in respect of gross sales of Licensee
of products bearing the Marks (the "Licensed Products") in the Licensed
Territory for each calendar year in accordance with Schedule I hereto.
Notwithstanding the foregoing, if Licensee shall have informed Licensor in
writing on the Effective Date that it elects not to use the Marks, then the
provisions of this Article 4 and all other provisions contained herein relating
to the Marks shall be of no force and effect.
4.2 Royalties shall be payable to Licensor on a quarterly basis, in
U.S. dollars, within 30 days of the end of each quarter. With each quarterly
payment of royalties, Licensee
-2-
<PAGE>
shall deliver to Licensor a statement setting forth the gross sales of Licensed
Products for the period, which statement shall be based on the consolidated
unaudited financial statements of Source Europe and its Subsidiaries for such
period, and the accuracy and completeness of such statement shall be certified
by the chief financial officer of the Licensee. At the end of each fiscal year
in connection with Licensee's preparation of its audited financial statements,
Licensee shall deliver to Licensor, no later than 90 days after the end of such
fiscal year, a statement setting forth the gross sales of Licensed Products for
the period, which statement shall be based on the consolidated audited financial
statements of Source Europe and its Subsidiaries for such period, and the
accuracy and completeness of such statement shall be certified by the chief
financial officer of the Licensee. In the event the aggregate amount of
royalties paid by Licensee to Licensor for the period exceeds the applicable
royalties due to Licensor, calculated based on the statement provided to
Licensor, Licensor shall either (x) credit Licensee for future royalties due to
Licensor and shall apply such credit to the next immediately payable royalty
amount or (y) at the request of Licensee, pay to Licensee in cash the amount of
any such excess within 15 days from the date of such request. For purposes of
the calculation of royalties hereunder, "gross sales" shall not include sales,
freight or local taxes invoiced as a separate item to Licensee's clients, paid
by such clients to Licensee and remitted by Licensee to the relevant government
authority.
4.3 Licensee shall keep complete and accurate books and records in
sufficient detail so that the royalties payable hereunder can be properly
calculated. Licensee shall provide to Licensor's representatives, who shall be
reasonably acceptable to Licensee, access to Licensee's books and records at all
reasonable times upon 30 days' notice to Licensee for the purpose of verifying
the accuracy of the royalties paid or payable.
4.4 Upon no less than 180 days prior notice to the Licensor,
Licensee may terminate the license arrangement with respect to the Marks as set
forth herein, and following the termination date no royalty fee under Section
4.1 shall be payable by Licensee and all provisions contained herein relating to
the Marks shall be of no further force and effect; provided however, that on the
-------- -------
termination date, Licensee shall pay to Licensor a termination fee equal to
[******] less the amount of any monies paid by Licensee to Licensor pursuant to
Section 4.1 through and including such termination date.
5. OWNERSHIP OF THE MARKS AND PROTECTION OF RIGHTS
-----------------------------------------------
5.1 Registration. Licensee shall not at any time, file any
------------
trademark application with the United States Patent and Trademark Office, or
with any other governmental entity for the Marks. Except as set forth in this
Agreement, Licensee shall not use any of the Marks or any similar mark as, or as
part of, a trademark, service mark, trade name, fictitious name, company or
corporate name anywhere in the world. Any trademark or service mark registration
obtained or applied for by Licensee that contains the Marks or any similar mark
shall be transferred to Licensor without compensation. Licensor agrees that it
will (x) maintain adequate and proper trademark registration protection for the
Marks in Belgium, Netherlands, Luxembourg, France, Germany, Italyand Spain and
(y) use its commercially reasonable efforts to secure such trademark
registration protection in additional countries in the Licensed Territory as
Licensee may request provided that the expenses of securing such registration
shall be borne by Licensee.
- --------------------
[*] THE BRACKETS AND ASTERISKS INDICATE SECTIONS WHERE CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
-3-
<PAGE>
5.2 Challenge or Objection. Licensee shall not oppose or seek to
----------------------
cancel or challenge, in any forum, including, but not limited to, the United
States Patent and Trademark Office, any application or registration of Licensor
for the Marks. Except for claims under this Agreement, Licensee shall not object
to, or file any action or lawsuit challenging the validity of any Marks.
5.3 Goodwill. Licensee recognizes the great value of the goodwill
--------
associated with the Marks and acknowledges that such goodwill belongs to
Licensor. Licensee shall not, during the term of this Agreement or thereafter,
attack the property rights of Licensor, or use the Marks or any similar mark in
any manner other than as licensed hereunder.
5.4 Notice of Claim. Licensee agrees to assist Licensor in the
---------------
protection of the Marks and shall provide, at reasonable cost to be borne by
Licensor, any evidence or documents in Licensee's possession and testimony
concerning the use by Licensee of any one or more of the Marks, which Licensor
may request for use in obtaining, defending, or enforcing rights in any Marks or
related application or registration. Licensee shall notify Licensor in writing
of any infringements or imitations by others of the Marks of which it is aware.
Licensor shall have the sole right to determine whether or not any action shall
be taken on account of any such infringements or imitations. Licensee shall not
institute any suit or take any action on account of any such infringements or
imitations without first obtaining the written consent of Licensor to do so
(which consent shall not be unreasonably withheld); provided that Licensee shall
--------
have the right, at its sole expense, to institute a suit or take other action if
Licensor shall have failed, within 7 days following notice by Licensee to
Licensor of any such infringement or imitation, to take any action in respect of
such infringement or imitation. Licensee agrees that it is not entitled to
share in any proceeds received by Licensor (by settlement, or otherwise) in
connection with any formal or informal action brought by Licensor, or other
entity provided that nothing herein shall be deemed to prevent Licensee from
receiving any proceeds in respect of actions taken by Licensee in connection
with the proviso set forth in the preceding sentence.
5.5 Licensees' Rights. Nothing in this Agreement gives Licensee any
-----------------
right, title, or interest in any Marks except the right to use in accordance
with the terms of this Agreement. Licensee's use of any Marks inures to the
benefit of Licensor.
6. DISPLAY AND APPROVAL OF THE MARKS
---------------------------------
6.1 Display. Any use of any Marks shall conform to the requirements
-------
published from time to time by Licensor and any requirements of law. The proper
symbol to identify the Marks shall be placed adjacent to each mark.
6.2 Guidelines. Licensor will provide to Licensee guidance on the
----------
proper use of the Marks. Licensee agrees that it shall follow such guidelines
in connection with its use of the Marks in all material respects.
7. TERM OF LICENSES; TERMINATION
-----------------------------
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<PAGE>
7.1 Applications. The term of the license for the Applications
------------
hereunder shall be perpetual.
7.2 Marks. The term for the license for the Marks shall be for a
-----
period of 5 years,subject to renewal upon mutual agreement for an additional
term of five years on such terms as the parties may agree.
7.3 Events of Default. Licensor shall have the right to immediately
-----------------
terminate the license for the Marks granted hereunder (subject to the limitation
set forth in Clause (3)), without prejudice to any other rights it may have,
whether under the provisions of this Agreement, in law, in equity or otherwise,
upon written notice to Licensee at any time should any of the following defaults
occur:
(1) Sums Due. Licensee fails to make any payment due or fails to deliver
--------
any required statement, and fails to cure this default within thirty (30) days
from receipt of notice from Licensor.
(2) Sublicense or Assignment of Marks. Licensee attempts to grant or
---------------------------------
grants a sublicense or attempts to assign or assigns its rights under this
Agreement with respect to the Marks to any person or entity without the prior
written consent of Licensor.
(3) Withdrawal from Country. Licensee publicly announces that it is
-----------------------
terminating operations, or actually terminates operations, in any country in
the Licensed Territory, in which event the license for the Marks in such country
shall terminate.
Notwithstanding the provisions described in this Section 7.3, if any valid,
applicable law or regulation of a governmental authority having jurisdiction
over this Agreement, Licensor and/or Licensee limits Licensor's rights of
termination or requires different or longer periods than those set forth herein,
this Section 7.3 shall be deemed amended solely to conform to such laws and
regulations. Termination of Licensee's rights with respect to the Marks
pursuant to this Section shall be effective immediately upon Licensor's giving
to Licensee written notice of termination in accordance with provisions of
Section 10. Upon the occurrence of an event of default under this Section 7.3,
Licensor may in its sole discretion independently exercise or not exercise any
or all rights which it may have under this Agreement or any other agreements by
and between Licensee and Licensor, and the exercise of the Licensor's rights
under this Agreement shall not exclude any of the remedies which Licensor may
have at law or in equity. All such remedies of Licensor are cumulative.
8. PERFORMANCE WARRANTIES
----------------------
8.1 Disclaimer of all Warranties and Representations. LICENSOR
------------------------------------------------
DISCLAIMS, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS (EXPRESS OR
IMPLIED, ORAL OR WRITTEN), WITH RESPECT TO THE APPLICATIONS OR ANY PART THEREOF,
INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE,
NONINFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PURPOSE
(WHETHER
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<PAGE>
OR NOT LICENSOR KNOWS, HAS REASONS TO KNOW, HAS BEEN ADVISED OR IS OTHERWISE IN
FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF
CUSTOM OR USAGE IN THE TRADE OR BY COURSE OF DEALING. IN ADDITION, LICENSOR
EXPRESSLY DISCLAIMS ANY WARRANTY OR REPRESENTATION TO ANY PERSON OTHER THAN
LICENSEE WITH RESPECT TO THE APPLICATIONS, THE MARKS OR ANY PART THEREOF. THE
FOREGOING DISCLAIMER OF WARRANTIES AND REPRESENTATION DOES NOT EFFECT IN ANY
MANNER THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THE SECURITIES TRANSFER
AGREEMENT.
8.2 Exclusion of Incidental and Consequential Damages. Independent
-------------------------------------------------
of, severable from, and to be enforced independently of any other enforceable or
unenforceable provision of this Agreement, OTHER THAN FOR INFRINGEMENT OF ONE
PARTY'S INTELLECTUAL PROPERTY RIGHTS BY ANOTHER PARTY (INCLUDING ANY ENGAGEMENT
IN LICENSABLE ACTIVITIES BY LICENSEE BEYOND THE SCOPE OF THE LICENSE), NEITHER
PARTY WILL BE LIABLE TO THE OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS
DERIVED FROM THE OTHER PARTY'S RIGHTS) FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES OF ANY KIND - including lost profits, loss of
business, or other economic damage, and further including injury to property -
AS A RESULT OF BREACH OF ANY WARRANTY OR OTHER TERM OF THIS AGREEMENT,
REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS ADVISED, HAD
OTHER REASON TO KNOW OR IN FACT KNEW OF THE POSSIBILITY THEREOF.
8.3 Maintenance of Standards and Inspection.
---------------------------------------
(a) Licensee agrees that during the term of the license for the Marks,
the operation of Licensee's business, including but not limited to, its
development of products and performance of services, shall be of high quality
and in compliance with the present standards of quality exercised by Licensor in
the operation of its business. Licensee's agreement to comply with such
standards shall constitute a material element of this Agreement.
(b) Licensee hereby agrees to furnish to Licensor such documents,
materials and records as Licensor may reasonably request in order for Licensor
to determine whether Licensee's use of the Marks is in accordance with the
guidelines established pursuant to Section 6.2.
8.4 Maintenance of Applications. Except as provided by Section 3
---------------------------
hereof, Licensor is not in any manner obligated hereunder, and specifically
disclaims any warranty, written or implied, to the contrary, to maintain,
improve or modify the Applications and any System Documentation or User
Documentation, from and after the Effective Date.
9. NON-COMPETE
-----------
9.1 Licensee agrees that it will not, directly or indirectly, during
the period of five (5) years from the Effective Date, engage in the Business, or
aid or endeavor to assist any third party to engage in the Business, within the
United States of America; provided, however,
-------- -------
-6-
<PAGE>
that the foregoing restriction shall not apply to activities or business in
which PMSI Scott-Levin, Inc. ("SLA") is engaged as of the Effective Date. The
parties hereto agree that the use by SLA of databases obtained from Licensor
pursuant to that certain Services Agreement, dated as of the Effective Date, by
and between SLA and Licensor (the "SLA Agreement") or from any third party, in
accordance with the parameters set forth in the SLA Agreement, shall not
constitute Business within the meaning of this Agreement. Licensee acknowledges
the reasonableness of this covenant not to compete and the reasonableness of the
geographic area and duration of time which are a part of this covenant.
9.2 Licensor agrees that it will not, directly or indirectly, during
the period of five (5) years from the Effective Date, engage in the Business, or
aid or endeavor to assist any third party to engage in any Business within the
Territory; provided, however, that the provision of prescription data to a
-------- -------
Person engaged in the Business shall not violate the provisions of this Section
9.2 and provided, further, that any and all restrictions under this Section 9.2
-------- -------
shall terminate and Licensor shall be allowed to engage in the Business in the
Territory (subject to the limitation set forth in clause (i) below) upon the
occurrence of any of the following events:
(i) public announcement by Licensee that it is terminating
operations, or actually terminates operations, in any country in the
Territory, in which event the restrictions set forth in this Section 9.2
shall be removed, but only with respect to such country; or
(ii) the sale, lease, transfer, conveyance or other
disposition, in one or a series of related transactions, of all or
substantially all of the assets of the Licensee to any Competitor; or
(iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
Competitor becomes the "Beneficial Owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of
more than 50% of the voting stock of the Licensee; or
(iv) Licensee makes any assignment for the benefit of
creditors, or files any petition under any federal or state bankruptcy
statute, or is adjudicated bankrupt or insolvent, or if any receiver is
appointed for its business or property, or if any trustee in bankruptcy
shall be appointed.
Licensor acknowledges the reasonableness of this covenant not to compete and the
reasonableness of the geographic area and duration of time which are a part of
this covenant.
10. MISCELLANEOUS
-------------
10.1 Notices. All communications under this Agreement shall be in
-------
writing and delivered by facsimile, by hand or mailed by overnight courier:
-7-
<PAGE>
if to Source Informatics Inc.
2394 E. Camelback Road,
Phoenix, AZ 85016
Attn: Robert Brown
Fax: (602) 381-9700
with a copy to:
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attn: E. Michael Ingram, Esq.
Fax: (404) 728-2990
-8-
<PAGE>
with a copy to:
Reboul, MacMurray, Hewitt,
Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attn: Robert Schwed, Esq.
Fax: (212) 841-5725
if to Source Informatics European Holdings, Inc.
Craven House
Hampton Court Road
Hampton Court
Surrey KT8 9BX
England
Attn:
Fax: 44-181-977-9977
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 E. 53rd Street
New York, NY 10022
Attn: William J. Grant, Esq.
Fax: (212) 821-8111
Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; and if mailed by
reputable courier, on the second Business Day following the date of such
mailing.
10.2 ASSIGNMENT. Except as set forth in Section 7.3(2), the
----------
rights of Licensee under this Agreement may be freely assigned by Licensee to
any Person, including by means of a sub-license. This Agreement shall inure to
the benefit of the parties, their respective successors and assigns.
10.3 CONFIDENTIALITY. The parties agree that the terms and
---------------
conditions of this Agreement shall be kept confidential and shall not be
disclosed to any third person or entity unless authorized by the parties or
required by law.
10.4 GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the Laws of the State of Delaware, without regard
to any applicable conflicts of Laws.
10.5 ARBITRATION. All disputes arising under this Agreement
-----------
(other than claims in equity) shall be resolved by arbitration in accordance
with the Commercial Arbitration
-9-
<PAGE>
Rules of the American Arbitration Association. Arbitration shall be by a single
arbitrator experienced in the matters at issue and selected by the Licensor and
Licensee in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be held in such place in
Washington, D.C. as may be specified by the arbitrator (or any place agreed to
by the Licensor, the Licensee and the arbitrator). The decision of the
arbitrator shall be final and binding as to any matters submitted under this
Agreement; provided, however, if necessary, such decision and satisfaction
procedure may be enforced by either the Licensor and Licensee in any court of
record having jurisdiction over the subject matter or over any of the parties to
this Agreement. All costs and expenses incurred in connection with any such
arbitration proceeding (including reasonable attorneys fees) shall be borne by
the party against which the decision is rendered, or, if no decision is
rendered, such costs and expenses shall be borne equally by the Licensor and
Licensee. If the arbitrator's decision is a compromise, the determination of
which party or parties bears the costs and expenses incurred in connection with
any such arbitration proceeding shall be made by the arbitrator on the basis of
the arbitrator's assessment of the relative merits of the parties' positions.
10.6 Entire Agreement; Amendment and Waiver. This Agreement and the
--------------------------------------
terms of the Securities Transfer Agreement constitutes the entire understanding
of the parties hereto relating to the subject matter hereof and supersedes all
prior understandings among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, only with the written
consent of the parties hereto. The waiver of either party of a breach of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of this Agreement.
10.7 Specific Performance. The parties hereto acknowledge and agree
--------------------
that their respective remedies at law for a breach or threatened breach of any
of the provisions of this Agreement would be inadequate and, in recognition of
this fact, agree that, in the event of a breach or threatened breach by either
party of the provisions of this Agreement, in addition to any remedies at law,
the other party shall, without posting any bond, be entitled to obtain equitable
relief in the form of specific performance, a temporary restraining order, a
preliminary or permanent injunction or any other equitable remedy which may then
be available.
10.8 Severability. In the event any part of this Agreement shall be
------------
held illegal or unenforceable by any court or administrative body of competent
jurisdiction, such determination shall not effect the remaining provisions of
this Agreement, which shall remain in full force and effect.
10.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SOURCE INFORMATICS INC.
By: ___________________________
Name:
Title:
[SE Operating Subsidiary]
By: ___________________________
Name:
Title:
-11-
<PAGE>
EXHIBIT 9
<PAGE>
TRANSITION SERVICES AND
-----------------------
INTERCOMPANY ARRANGEMENT AGREEMENT
----------------------------------
TRANSITION SERVICES AND INTERCOMPANY ARRANGEMENT AGREEMENT, dated as of
________, 1997, by and between Source European Holdings L.L.C., a Delaware
limited liability company ('Source Europe") Source Informatics Inc., a Delaware
corporation ('Source") and Pharmaceutical Marketing Services Inc., a Delaware
corporation ("PMSI").
WHEREAS, Source has entered into that certain Agreement and Plan of
Merger dated as of August ___, 1997 with Dunkirk, Inc., a Delaware corporation
("Dunkirk"), and National Data Corporation, a Delaware corporation and the
parent of Dunkirk ("NDC") pursuant to which Source will merge with Dunkirk (the
"Merger");
WHEREAS, Source and PMSI have entered into that certain Securities
Transfer Agreement, dated as of August, 1997 pursuant to which Source agrees
to transfer to PMSI all outstanding membership interests of Source Europe (the
"Securities Transfer Agreement");
WHEREAS, Source and Source Europe wish to enter into certain agreements
with respect to the provision of transition services, including the provision of
Transition Services using the Applications specified and defined in that certain
Software License Agreement dated as of even date hereof, between the parties
hereto, and to provide for the termination of certain intercompany arrangements
effective as of the effective time of the Merger (the "Closing Date");
NOW, THEREFORE, in consideration of the foregoing and the agreements,
provisions and covenants contained herein, the parties hereto agree as follows:
1. Transition Services. Following the Closing Date and ending on June
-------------------
30, 1998 (the "Transition Services Period"), in accordance with the terms and
conditions of this Agreement, Source and its Subsidiaries shall provide to
Source Europe the processing of certain products, the use of certain facilities
and personnel, all of whom shall continue as employees of Source and its
Subsidiaries throughout the term of this Agreement, and those LAN and data
center services as more specifically set forth on Appendix A hereto
----------
(collectively the "Transition Services").
2. Cost of Transition Services. (a) Except as set forth in the last
---------------------------
sentence of this Section 2(a), the Transition Services shall be provided at a
cost equal to the greater of Actual Cost (as hereinafter defined) or the pre-
agreed amounts included in Source's budget for the period of July 1, 1997
through September 30, 1997 as shown in Appendix B (the "Budget"). For purposes
--------
of this Agreement, "Actual Cost" shall mean (i) a proration of the salary,
taxes, benefit plan compensation, medical and other insurance and other similar
employment expenses of the persons providing the relevant Transition Services,
plus (ii) a proration of overhead costs,
<PAGE>
including, without limitation, corporate office use and utilities related to
such persons, plus (iii) directly related out-of-pocket expenses, including,
without limitation, travel, meals, couriers and third party consultants and
experts. Except as set forth in the last sentence of this Section 2(a), the
Transition Services for the period of October 1, 1997 through January 31, 1998
shall also be provided at the greater of Actual Cost or Budget, provided that
Source Europe may notify Source a minimum of 60 days in advance of each new
month (i.e., August 1 for October services, September 1 for November services
etc.) that it wishes to modify the level of services included in the Transition
Services, and also modify the Budget accordingly using the form included as
Appendix D and signed by an officer of Source Europe. Source has 15 days
- ----------
following receipt of such notice to notify Source Europe regarding whether it
consents to deliver the modified Transition Services and their associated costs,
which consent will not be unreasonably withheld. Source Europe has seven days
thereafter to confirm its response. If Source and Source Europe do not reach
agreement in the seven days following the confirmation of response by Source
Europe with respect to the budgeted amounts for such modified Transition
Services, Source will continue to provide the Transition Services as they were
defined prior to any such modification proposal. Regardless of any
modifications, however, Source Europe will pay Source a minimum, of $37,500 per
month, excluding any "Pass Through Costs", for services rendered during the
October 1, 1997 - January 31, 1998 period. The parties hereto agree that their
best estimate of the amounts of "Pass Through Costs" for the period from July
1997 to January 1998 is as set forth in Appendix B hereto. The "Pass Through
----------
Costs" set forth in Appendix B shall be provided at a cost equal to the Actual
----------
Cost of the pass through services requested by Source Europe, plus early
termination charges, if any.
(b) If Source Europe chooses to extend Source's support beyond January
31, 1998, ut in no event beyond June 30, 1998, it will notify Source by November
15, 1997 using the Services Extension Form included as Appendix E and signed by
----------
an officer of Source Europe. If the level of services requested for such period
shall be the same as that in effect on January 31, 1998, then Source shall
continue to provide the Transition Services at such costs as then in effect. If
the level of services requested is not the same, then Source has 15 days
following receipt of such notice to notify Source Europe regarding whether it
consents to deliver the Transition Services as so requested, and if so, the
associated costs, which consent will not be unreasonably withheld. If such
consent is granted by Source, Source Europe will provide Source with a final
schedule of the Transition Services requested and the budgeted costs associated
therewith, and such schedule shall become the Budget for purposes of this
Agreement. Except for Pass Through Costs, these Transition Services shall be
provided at a cost equal to the greater of Actual Cost or the Budget.
(c) Following the end of the calendar month in which any such Transition
Services are performed, Source shall provide to Source Europe an invoice (the
"Transition Services Invoice") setting forth in summary detail the Transition
Services which were provided during such calendar month and the amount to be
charged therefor. Source Europe shall pay to Source in cash in immediately
available funds, within 30 days following the delivery by Source of a Transition
Services Invoice, the amounts due with respect to the Transition Services
reflected on such Transition Services Invoice. Source and Source Europe agree
to work cooperatively to resolve any billing disputes hereunder.
-2-
<PAGE>
3. Termination of Intercompany Arrangements. Each of the parties
----------------------------------------
hereto agrees that, except for this Agreement and except as otherwise expressly
set forth in Appendix C hereto, all Existing Intercompany Agreements shall be
----------
terminated on the Closing Date. For purposes of this Agreement, "Existing
Intercompany Agreements" means any agreements , or any regular, established
accounting practice, consistently applied, which is in existence prior to June
30, 1997, between any entities (the "Source Europe Entities") included within
the business (the "European Business") of Source, including without limitation
Source Europe, that is being sold to PMSI, on the one hand, and any entities
(the "Source US Entities") included within the business (the "US Business") of
Source, including without limitation source, that is being sold to NDC, on the
other hand. Notwithstanding the foregoing, agreements ("Third Party
Agreements") with third parties relating to the European Business or the US
Business, as the case may be, shall not be deemed to be Existing Intercompany
Agreements, notwithstanding that a Source Europe Entity and a Source US Entity
are also parties thereto and shall not be deemed altered, amended or terminated
as a result of this Agreement or the consummation of the Merger and shall
otherwise remain in full force and effect (provided that nothing in this
Agreement shall be deemed to limit any party's ability to terminate any such
agreement in accordance with its terms).
4. Settlement of Intercompany Accounts. Except as expressly provided
-----------------------------------
for in this Agreement, all intercompany and interdivisional receivables,
payables, loans, cash overdrafts and other accounts in existence as of the
Closing Date between the Source Europe Entities, on the one hand, and the Source
US Entities, on the other hand, under Source's cash management program or
otherwise shall be forgiven and deemed fully discharged and no party shall have
any further obligation or liability with respect thereto.
5. Representations and Warranties. Each party hereto hereby represents
------------------------------
and warrants to the other that (i) it has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder;
(ii) the execution and delivery of this Agreement and the performance of its
obligations hereunder does not conflict with or constitute a default under, or
violate, its certificate of incorporation, bylaws or other similar
organizational documents, any agreements or instruments to which such party is a
party or by which such party is bound or to which any of the property or assets
of such party is subject, or any law, statute, regulation, judgment or order
binding on such party or any of its properties or assets; (iii) the execution
and delivery of this Agreement and the performance of its obligations hereunder
does not and will not require any approval of the stockholders or any
authorization of the board of directors other than such authorization as has
already been obtained and no action by, consent or approval of, or filing with,
any governmental authority or other Person is required for the execution,
delivery and performance of this Agreement; and (iv) this Agreement has been
duly executed and delivered by an authorized representative of such party and
constitutes a valid and binding obligation of such party.
6. Source Employees. The parties hereto agree that if Source Europe
----------------
shall not have delivered a Services Extension Form to Source by November 15,
1997, Source shall be free to terminate the employment of any person identified
on Appendix A hereto and Source shall have no further obligation to provide the
-----------
services of such person to Source Europe under this Agreement.
-3-
<PAGE>
7. Definitions. The following defined terms shall have the meanings
-----------
set forth in this Section 7:
"Person" shall mean and include any individual, corporation, company,
------
voluntary association, partnership (limited or general), joint venture,
association, trust, limited liability company, any other unincorporated
organization or entity, or any governmental entity or any department, political
subdivision or agency thereto.
"Subsidiary" shall mean with respect to any Person (i) any corporation of
----------
which the outstanding capital stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person, (ii) any
partnership (A) the sole general partner or managing general partner which is
such Person or a Subsidiary of such Person or (B) the only general partners of
which are such Person or one or more Subsidiaries of such Person or (iii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
8. Miscellaneous
-------------
(a) Notices.
-------
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered or
certified mail, postage prepaid:
if to Source European Holdings Inc.
Craven House
Hampton Court Road
Hawpton Court
Surrey KT8 9BX
England
Attn: Dennis Turner
Fax: 44-181-977-9977
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 E. 53rd Street
New York, NY 10022
Attn: William J. Grant, Jr., Esq.
Fax: (212) 821-8111
-4-
<PAGE>
if to Source Informatics, Inc.
2394 E. Camelback Road,
Phoenix, AZ 85016
Attn:
Fax: (602) 381-9700
with a copy to:
Reboul, MacMurray, Hewitt,
Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attn: Robert Schwed, Esq.
Fax: (212) 841-5725
if to Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
New York, NY 10111
Attn: Warren Hauser, Esq.
Fax: (212) 841-5760
with a copy to;
Willkie Farr & Gallagher
One Citicorp Center
153 E. 53rd Street
New York, NY 10022
Attn: William J. Grant, Jr., Esq.
Fax: (212) 821-8111
(ii) Any notice so addressed shall be deemed to be given: if delivered
by hand or facsimile, on the date of such delivery; and if mailed by reputable
courier, on the second Business Day following the date of such mailing.
-5-
<PAGE>
(b) Entire Agreement; Amendment and Waiver. This Agreement constitutes
--------------------------------------
the entire understanding of the parties hereto relating to the subject matter
hereof and supersede all prior understandings among such parties. This
Agreement may be amended, and the observance of any term of this Agreement may
be waived, with (and only with) the written consent of the parties hereto.
(c) Severability. In the event that any part or parts of this Agreement
------------
shall be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination shall not effect the remaining
provisions of this Agreement which shall remain in full force and effect.
(d) Counterparts. This Agreement may he executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and
the same agreement.
(e) Non-Assignability. Neither this Agreement nor any of Source Europe's
-----------------
rights hereunder shall be sold, transferred or assigned by Source Europe without
Source's prior written approval, and no rights shall devolve by operation of law
or otherwise upon any assignee, receiver, liquidator, trustee or other party.
Subject to the foregoing, this Agreement shall be binding upon any approved
assignee or successor of Source Europe and shall inure to the benefit of Source,
its successors and assigns.
(f) Confidentiality. The parties agree that the terms and conditions of
---------------
this Agreement shall be kept confidential and shall not be disclosed to any
third person or entity unless authorized by the parties or required by law.
(g) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of laws.
(h) Arbitration. All disputes arising under this agreement (other than
-----------
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at issue
and selected by Source and Source Europe in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
shall be held in such place in Washington, D.C. as may be specified by the
arbitrator (or any place agreed to by Source, Source Europe and the arbitrator).
The decision of the arbitrator shall be final and binding as to any matters
submitted under this Agreement; provided, however, if necessary, such decision
and satisfaction procedure may be enforced by either Source and Source Europe in
any court of record having jurisdiction over the subject matter or over any of
the parties to this Agreement. All costs and expenses incurred in connection
with any such arbitration proceeding (including reasonable attorneys fees) shall
be borne by the party against which the decision is rendered, or, if no decision
is rendered, such costs and expenses shall be borne equally by Source and Source
Europe. If the arbitrator's decision is a compromise, the determination of
which party or parties bears the costs and expenses incurred in connection with
any such arbitration proceeding shall be
-6-
<PAGE>
made by the arbitrator on the basis of the arbitrator's assessment of the
relative merits of the parties, positions.
(i) Force Majeure. Each party hereto shall be excused from performance
-------------
hereunder for any period and to the extent it is prevented from performing any
action pursuant hereto, in whole or in part, as a result of delays caused by the
other party or an act of God, war, civil disturbance, court order, labor
dispute, act, omission or failure to perform by a third party or other cause
beyond its reasonable control. Such nonperformance shall not be a default
hereunder or a ground for termination hereof, provided, however, that if any
nonperformance due to force majeure shall extend beyond 30 days, the other party
may, in its sole discretion, either (i) terminate this Agreement upon not less
than 15 days prior written notice, or (ii) suspend performance hereunder and
obtain substitute services until such time as the non-performance is remedied.
(j) Guarantee. In consideration for Source entering into this Agreement,
---------
PMSI hereby irrevocably and unconditionally guarantees that Source Europe will
duly perform all its obligations under this Agreement as from time to time
amended and revised in accordance with the term hereof with or without the
consent of PMSI provided, that PMSI makes the foregoing guarantees au a
guarantee of payment and performance, and not of collection, and a debt and
obligation of PMSI for its own account.
IN WITNESS WHEREOF, the parties hereto have executed this Transition
Agreement as of the date first above written.
SOURCE INFORMATICS INC.
By: ____________________________
Name:
Title:
SOURCE INFORMATICS EUROPEMAN
HOLDINGS, INC.
By: ___________________________
Name:
Title:
-7-
<PAGE>
PHARMACEUTICAL MARKETING SERVICES INC.
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT 10
<PAGE>
ASSIGNMENT OF LEASE
THIS ASSIGNMENT made this day of ,1997, by and between PMSI
Scott-Levin Inc., formerly Pharmaceutical Marketing Services, Inc., a New Jersey
corporation with an office at 105 Terry Drive, Newtown, Pennsylvania
("Assignor"), and National Data Corporation, a Delaware corporation having an
office at One National Data Plaza, Atlanta, Georgia ("Assignee").
W I T N E S S E T H :
In consideration of the sum of $10.00 and other good and valuable
consideration paid by Assignee to Assignor, the receipt whereof is hereby
acknowledged, Assignor hereby assigns and transfers unto Assignee its successors
and assigns all of the right, title and interest of Assignor in and to that
certain lease, dated as of August 27, 1992 (the "Lease") by and between Newt
Associates Ltd., a general partnership, as landlord (the "Landlord") and
Assignor, covering the premises consisting of 17,360 rentable square feet
located in the building located at 105 Terry Drive, Newtown Township, Bucks
County, Pennsylvania, as more particularly described in the Lease (the
"Premises"), together with all leasehold improvements thereon and the Sublease
Agreement (the "Sublease") dated as of ___ day of ___________, 1997, between
Assignor and Walsh America Limited;
TO HAVE AND TO HOLD the Premises, and the possession, use and occupancy
thereof, unto Assignee, and the successors and assigns, from the date hereof for
the remainder of the term of the Lease as the same may be from time to time
extended; subject, however, to the terms, covenants and conditions of the Lease.
Assignee hereby assumes the observance and performance of the terms,
covenants and conditions of the Lease and Sublease on the part of the tenant and
sublandlord, as applicable, to be observed and performed arising from and after
the date hereof, and agrees to (i) pay the rent reserved in the Lease in
accordance with the terms thereof, (ii) perform the terms, covenants and
conditions of the Lease and Sublease arising from and after the date hereof; all
with the same force and effect as if Assignee was originally named as the tenant
in the Lease and sublandlord in the Sublease.
The provisions of this Assignment shall be binding upon and shall inure to
the benefit of Assignor, Assignee and the Landlord, and their respective
representatives, heirs, successors and assigns.
Assignee hereby agrees to indemnify and defend Assignor against, and to
hold Assignor harmless from, any and all claims, liability, damages, costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements) incurred, sustained by or sought against Assignor from and after
the date hereof in connection with all the terms, agreements, covenants and
conditions of the Lease and Sublease which, under the terms and conditions
-1-
<PAGE>
thereof, are to be paid, performed, discharged or observed by the tenant and
sublandlord, as applicable, thereunder from and after the date hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment this
day of , 1997.
Assignor:
PMSI Scott-Levin Inc.
By:__________________________
Assignee:
National Data Corporation
By:___________________________
-2-
<PAGE>
CONSENT OF LANDLORD
The undersigned, Newt Associates Ltd., the landlord ("Landlord") under that
certain lease dated August 27, 1992 (the "Lease"), by and between Landlord and
PMSI Scott-Levin Inc. (formerly Pharmaceutical Marketing Services, Inc.)
("Tenant"), covering the premises located at 105 Terry Drive, Newtown Township,
Bucks County, Pennsylvania, as more particularly described in the Lease, does
hereby consent, as of the date set forth below, to the assignment by Tenant to
National Data Corporation, a Delaware corporation, of the Lease and the Sublease
Agreement, dated as of the day of , 1997, between Tenant and Walsh
America Limited, by instrument of assignment in the form attached hereto as
Exhibit A, on the terms provided in said form of assignment.
Dated:
NEWT ASSOCIATES LTD., By GH Newt
Ltd., General Partner
By: ________________________
Name:
Title
-3-
<PAGE>
EXHIBIT 11
<PAGE>
SUBLEASE AGREEMENT
Sublease Agreement dated as of , 1997 between PMSI Scott-Levin
Inc., a New Jersey corporation ("PMSI"), as sublandlord, and Walsh America
Limited, a Delaware corporation ("WAL"), as subtenant.
WHEREAS PMSI is the lessee under that certain Lease between Newt Associates
Limited ("Master Landlord") and PMSI, dated August 27, 1992 (the "Master
Lease"), with respect to the facilities located at 105 Terry Drive, Newtown,
Pennsylvania currently occupied by WAL (the "Facility"); and
WHEREAS the parties hereto wish to set forth in writing the terms upon
which WAL shall continue to occupy the Facilities;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
SUBLEASE OF SPACE
SECTION 1.01. Facility to be Sublet. (a) PMSI shall sublet to WAL an
---------------------
aggregate 2,867 square feet of the Facility (including as increased from time
to time pursuant to subsection (b) below, the "Sublet Facility") such square
footage to be the same as occupied by WAL in the Facility as of July 31, 1997
and as set forth on the floor plan of the Sublet Facility attached hereto as
Exhibit A.
(b) The parties hereto agree to make good faith efforts to accommodate
each other in connection with their respective needs in connection with the
Facility, including, but not limited to, if WAL desires to sublet additional
space in the Facility. In such event, upon written request by WAL to PMSI, PMSI
will advise WAL within 15 days of receipt of such request whether additional
space is available for sublet to WAL and the aggregate square footage so
available, provided, that, subject to the first sentence of this Section
--------
1.01(b), nothing contained herein shall absolutely obligate PMSI to sublet
additional space to WAL, even if available. In the event additional space is
sublet to WAL, such additional space shall be deemed for all purposes hereunder
to be part of the Sublet Facility.
SECTION 1.02. Monthly Rent and Other Expenses. (a) Subject to Section 1.03
-------------------------------
below, the monthly rent payable by WAL to PMSI for the Sublet Facility shall be
$11,333.33 ("Monthly Rent"), which amount shall include (i) the pro rated share
of property taxes on the Sublet Facility, (ii) office furniture rental, office
equipment rental and maintenance and depreciation thereof, (iii) utilities
costs, (iv) custodial, recycling/refuse collection, coffee, water and snow
removal services
-1-
<PAGE>
costs, (v) outside storage costs, (vi) property maintenance and (vii) general
office supplies costs, but shall not include fees payable by WAL for
telecommunications services provided to WAL by Source Information Inc.
("Source") at the Sublet Facility, which services and fees are provided and paid
for pursuant to the Services Agreement, dated as of the date hereof, between
Source and WAL.
(b) Monthly Rent for the Sublet Facility shall be due and payable to PMSI
no later than the fifteenth day of every month, provided, that if the fifteenth
--------
day of a month shall fall on a Saturday, Sunday or federal holiday, the rent
shall be payable on the first business day immediately following the fifteenth
day of such month.
(c) In the event PMSI is responsible for the payment of any local levies,
including a landlord's provisions for repairs and Operating Expenses (as defined
in the Master Lease) (collectively, "Expenses"), under the Master Lease, WAL
shall pay without duplication a proportionate amount of such Expenses based on
the percentage of the total Facility represented by the relevant Sublet
Facility.
SECTION 1.03. Annual Calculation. Within 30 days of the end of the fiscal
------------------
year of PMSI, PMSI shall submit to WAL a statement setting forth the actual fees
(the "Actual Rental") for the Sublet Facility, calculated as the product of (i)
the total rental obligations and Expenses of PMSI for the Facility and (ii) (A)
the actual square footage comprising the Sublet Facility (as adjusted if
necessary pursuant to Section 1.01(b)) divided by (B) the total square footage
of the Facility. In the event the Actual Rental exceeds the aggregate Monthly
Rental and Expenses payments received by PMSI from WAL in respect of the fiscal
year, WAL shall remit to PMSI, within 30 days of receipt of the statement, the
difference between said amounts. In the event the Actual Rental is less than
the aggregate Monthly Rental and Expenses payments received by PMSI from WAL in
respect of the fiscal year, PMSI shall have no obligation to refund, rebate,
credit or offset such amounts for the benefit of WAL, provided, however, that in
-------- -------
the event the Actual Rental is less than the aggregate Monthly Rental and
Expenses payments received by PMSI from WAL in respect of the fiscal year as a
result of the square footage comprising the Sublet Facility having been reduced
at PMSI's request, PMSI shall credit (or, in the case of the last year of this
Agreement, refund) WAL with the difference.
SECTION 1.04. Master Lease. (a) PMSI shall use its reasonable efforts to
------------
procure the consent of the Master Landlord under the Master Lease, if necessary,
to the subleasing to WAL of the Sublet Facility and this Sublease shall not be
effective until such consent is obtained.
(b) WAL agrees to execute and deliver any documentation and/or furnish any
information reasonably requested by Master Landlord and otherwise cooperate
reasonably with PMSI and Master Landlord in connection with obtaining the Master
Landlord's consent to this Sublease.
(c) WAL has reviewed and hereby agrees to be bound by all the terms and
conditions of the Master Lease. WAL shall not engage in any activity, or fail
to take any necessary action if such action is required, that would put it
and/or PMSI in violation of any governmental regulation or authority or
otherwise put PMSI in breach of its obligations under the Master Lease. WAL
-2-
<PAGE>
agrees to indemnify and hold Mater Landlord and PMSI harmless from and against
any loss or damage, including reasonable attorney's fees, resulting from a
breach of the agreements and covenants by WAL in this Paragraph or otherwise
arising from the use or occupancy of the Sublet Facility or of any business
conducted therein, or from any work or thing whatsoever done or conditions
created by or any act or omission of WAL, its employees, agents, contractors,
invitees or licensees, in or about the Sublet Facility.
(d) This Sublease shall be expressly subject and subordinate to and does
hereby incorporate all the terms, covenants and conditions contained in the
Master Lease, except for the Minimum Annual Rent and such other terms, covenants
and conditions as are specifically inconsistent with the terms hereof (but only
to the extent that the same are inconsistent) or do not relate to subleasing of
the Sublet Facility pursuant to this Sublease. Notwithstanding the foregoing,
the following are not incorporated into this Sublease: Sections 1, 2, 3, 5(a),
6, 20, the portion of the first sentence of Section 22 up to and including the
words "or encumbrance," and the last sentence of said Section 22, 27 ("Broker"),
27 ("Lease Guaranty"), 29, 30, 31, 32, 33(b), 35, 36, and the last five words of
Section 40 ("the Building or the Property") of the Master Lease, and provided
that wherever the term "Tenant" occurs in the Master Lease the same shall be
deemed to refer to WAL herein, and the term "Landlord" as used therein shall
refer to PMSI herein, and provided that wherever the term "Premises" occurs in
the Master Lease the same shall be deemed to refer to the Sublet Facility
herein, except as otherwise provided in this document.
(e) Except as otherwise provided herein, PMSI does not assume any
obligation to perform the terms, covenants and conditions contained in the
Master Lease, or in the Master Lease as incorporated herein, on the part of
Master Landlord to be performed (including without limitation, covenants with
respect to maintaining insurance of Section 7 of the Master Lease, repairs,
maintenance and providing services of Sections 8 and 39 of the Master Lease,
restoration after fire or other casualty or condemnation of Sections 16 and 19
of the Master Lease), and in the event that the Master Landlord should fail to
perform any of the terms, covenants and conditions contained in the Master
Lease, PMSI shall, if so requested by WAL and at the expense of WAL, promptly
and diligently use its reasonable efforts to cause the Master Landlord to
perform its obligations under the Master Lease, provided that in no event shall
PMSI be required to commence a lawsuit against Master Landlord. In any event,
except as otherwise provided in the Master Lease (and then only to the extent
--------
that PMSI receives the same from Master Landlord), WAL shall not be allowed any
abatement or diminution of rent under this Sublease because of the failure of
Master Landlord to perform any of its obligations.
SECTION 1.05. Condition of the Sublet Facility. (a) WAL agrees to accept
--------------------------------
the Sublet Facility in "as is" condition and PMSI makes no representation of any
kind concerning said condition.
(b) At the expiration of this Agreement, WAL will deliver and surrender to
PMSI possession of the Sublet Facility in the same condition as the Sublet
Facility was in on the Effective Date, as hereinafter defined, ordinary wear and
tear excepted.
-3-
<PAGE>
SECTION 1.06. Repairs. Whenever repairs to the Sublet Facility are
-------
required to be made by the Master Landlord, PMSI shall take all reasonable steps
necessary to ensure that Master Landlord promptly fulfills its obligations to
repair as provided in the Master Lease, provided that in no event shall PMSI be
--------
required to commence a lawsuit against Master Landlord.
ARTICLE II
TERM AND TERMINATION
SECTION 2.01. Term. The term of this Agreement shall be for one year
----
commencing July 1, 1997 (the "Effective Date") and terminating on June 30, 1998
Thereafter, this Agreement shall be automatically renewed for successive one-
year periods unless either party notifies the other in writing, at least 90 days
prior to the expiration of the then fiscal year (it being understood that at the
time of execution hereof, the fiscal year ends June 30), of its intention not to
renew. The parties hereto agree that all the terms and conditions of this
Agreement shall be deemed to have retroactive effect to July 1, 1997.
SECTION 2.02. Termination. (a) Either party may terminate this Agreement
-----------
if the other has defaulted in any material obligation hereunder by giving at
least twenty (20) days' written notice to the breaching party; provided,
--------
however, that if the breaching party corrects such default within said twenty
- -------
(20) day period, this Agreement shall continue in full force and effect.
(b) Either party may terminate this Agreement 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.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Assignment; Successor by Merger. This Agreement may not be
-------------------------------
assigned by either party without the prior written consent of the other party
and the Master Landlord if necessary; provided, that any such assignment or a
--------
succession by merger of an entity to the rights and obligations of a party
hereto shall require the assignee or successor, as the case may be, to assume in
writing the obligations hereunder of the assigning or merging party, as the case
may be and provided further, however, that the consent of WAL to the assignment
-------- ------- -------
of this Agreement by PMSI to National Data Corporation or a subsidiary thereof
is hereby given and upon such assignment WAL shall release PMSI, but not PMSI's
successors and/or assigns, of any liabilities and obligations hereunder.
-4-
<PAGE>
SECTION 3.02. Entire Agreement. This Agreement embodies the entire
----------------
contractual relationship of the parties hereto in regard to the subject matter
hereof and no other agreement or understanding, verbal or otherwise, exists
between the parties in respect thereto.
SECTION 3.03. Amendment, Etc. No waiver, modification, alteration or
---------------
amendment of any of the provisions of this Agreement shall be binding unless
executed in writing by duly authorized representatives of the parties hereto.
SECTION 3.04. Notices. Notices in connection with this Agreement shall be
-------
sufficiently delivered if sent by registered mail, return receipt requested, or
telecopied or facsimiled to the parties hereto at the following addresses:
if to PMSI, to it at:
Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
9th Floor
New York, New York 10111
Attn: Warren Hauser
if to WAL, to, it at:
Walsh America Limited
105 Terry Drive
Newtown, Pennsylvania 18940
Attn: Leonard Benjamin
or such other address as either party hereto shall have designated by notice in
writing to the other party hereto.
SECTION 3.05. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of Delaware.
SECTION 3.06. Execution in Counterparts. 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 3.07. Miscellaneous.
-------------
(a) Time Limits. Except with respect to actions to be taken by WAL for
-----------
which shorter time limits are specifically set forth in this Sublease, which
time limits shall control for the purposes of this Sublease, the time limits
provided in those portions of the Master Lease that are incorporated herein for
the giving or making of any notice by the tenant thereunder to Master Landlord,
the holder of any leasehold mortgage or any other party, or for the performance
of any act, condition or covenant by the tenant thereunder or for the exercise
of any right or remedy by
-5-
<PAGE>
the tenant thereunder, are changed for the purpose of incorporation into this
Sublease, by shortening the same in each instance by (i) ten (10) days with
respect to all such periods of sixty (60) or more days, (ii) five (5) days with
respect to all such periods of thirty (30) or more days but less than sixty (60)
days, (iii) three (3) days with respect to all such periods of twenty (20) or
more but less than thirty (30) days and (iv) two (2) days with respect to all
such periods of less than twenty (20) days, provided, however, that in no event
-------- -------
shall any such period be shortened to less than five (5) days, so that any
notice may be given or made, or any act, condition or covenant performed
hereunder exercised, by PMSI within the time limit relating thereto contained in
the Master Lease.
Except with respect to actions to be taken by PMSI for which longer time
limits are specifically set forth in this Sublease, which time limits shall
control for the purposes of this Sublease, the time limits provided in the
Master Lease as incorporated herein for the giving or making of any notice by
Master Landlord or the performance of any act, covenant or condition by Master
Landlord for the exercise of any right or remedy by Master Landlord thereunder
are changed for the purposes of this Sublease, by lengthening the same in each
instance by (i) ten (10) days with respect to all such periods of sixty (60) or
more days (ii) five (5) days with respect to all such periods of thirty (30) or
more but less than sixty (60) days, (iii) three (3) days with respect to all
such periods of twenty (20) or more but less than thirty (30) days and (iv) two
(2) days with respect to all such periods of less than twenty (20) days so that
any notice may be given or made, or any act, condition or covenant performed
hereunder exercised by Master Landlord within the number of days respectively
set forth above, after the time limits relating thereto contained in the Master
Lease.
(b) Broker. Each of PMSI and WAL represents to the other that no brokers
------
are responsible for bringing about this transaction and that it has had no
dealings, either direct or indirect, with any other real estate agent or broker
in connection with this transaction. WAL indemnifies and holds PMSI harmless
from and against any loss or damage, including reasonable attorney's fees,
resulting from misrepresentations by WAL in this Paragraph. PMSI indemnifies and
holds harmless WAL from and against any loss or damage, including reasonable
attorney's fees, resulting from a misrepresentation by PMSI in this Paragraph.
(c) Termination of Master Lease. If, for any reason, the term of the
---------------------------
Master Lease shall terminate prior to the end of the Term of this Sublease, this
Sublease shall thereupon terminate, PMSI shall not be liable to WAL by reason
thereof unless such termination resulted from a default by PMSI under the Master
Lease and (i) such default by PMSI was not due to default by WAL of its
obligations hereunder, including, without limitation, the obligations under the
Master Lease incorporated by reference herein or (ii) WAL is not in default of
any of its monetary obligations hereunder beyond any notice and applicable grace
period.
(d) Landlord's Cooperation. PMSI agrees to use reasonable efforts at
----------------------
WAL's sole cost and expense to obtain from Master Landlord any approval or
consent reasonably requested by WAL and to forward, promptly, to Master Landlord
any requests of WAL for approval or consent of Master Landlord that may be
required under the Master Lease or the Master Lease as incorporated herein.
-6-
<PAGE>
(e) Quiet Enjoyment. PMSI covenants that upon WAL paying the Monthly Rent
---------------
and any other payments due hereunder and observing and performing all the terms,
covenants and provisions of this Sublease on WAL's part to be observed and
performed, WAL may peaceably and quietly enjoy the Sublet Facility, subject
nevertheless to the terms and conditions of this Sublease and of the Master
Lease as incorporated herein and the Master Lease.
(f) Successors and Assigns. All the terms and provisions of this Sublease
----------------------
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the respective parties hereto.
(g) Separability. In the event that any provisions of this Sublease shall
------------
be held to be invalid or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Sublease shall be unaffected
thereby.
(h) No Waiver. Acceptance of any payment of Monthly Rent by PMSI shall
---------
not be deemed to be a waiver of any default by WAL hereunder, whether or not
PMSI shall then have knowledge of such default.
(i) Entire Agreement. It is understood and agreed that all understandings
----------------
and agreements heretofore had between the parties hereto are merged in this
Sublease which alone fully and completely expresses their agreement, and that
the same is entered into after full investigation, neither party relying upon
any statement, representation or warranty made by the other not embodied in this
Sublease.
(j) Full Execution and Consent of Master Landlord. This Sublease is
---------------------------------------------
offered to WAL for signature with the understanding that it shall not be binding
upon either party unless and until both parties shall have executed this
Sublease and the Master Landlord has delivered its consent.
-7-
<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.
PMSI SCOTT-LEVIN INC.
By: __________________________________
Name:
Title:
WALSH AMERICA LIMITED
By: __________________________________
Name:
Title:
-8-
<PAGE>
CONSENT OF LANDLORD
The undersigned, Newt Associates Ltd., the landlord ("Landlord") under that
certain lease dated August 27, 1992 (the "Lease"), by and between Landlord and
PMSI Scott-Levin Inc. (formerly Pharmaceutical Marketing Services, Inc.)
("Tenant"), covering the premises located at 105 Terry Drive, Newtown Township,
Bucks County, Pennsylvania, as more particularly described in the Lease, does
hereby consent, as of the date set forth below, to the sublease by Tenant to
Walsh America Limited, a Delaware corporation ("Subtenant"), of the portion of
the Property (as defined in the Lease), more fully described in the Sublease
Agreement, between Tenant and Subtenant, in the form attached hereto as Exhibit
A (the "Sublease"), pursuant to and on the terms provided in said form of
Sublease.
Dated:
NEWT ASSOCIATES LTD., By GH Newt Ltd., General
Partner
By: ________________________
Name:
Title
-9-
<PAGE>
EXHIBIT 12
<PAGE>
SERVICES AGREEMENT
Services Agreement dated as of , 1997 between Source
Informatics Inc., a Delaware corporation ("Source"), as sublandlord, and Walsh
America Limited, a Delaware corporation ("WAL"), as subtenant.
WHEREAS Source is the lessee under that certain Lease dated [ ]
(the "Master Lease"), with respect to the facilities located at 2394 East
Camelback Road, Phoenix, Arizona currently occupied by Source and WAL (the
"Phoenix Facility"); and
WHEREAS each of Source and WAL conduct business at certain facilities
located at 105 Terry Drive, Newtown, Pennsylvania (the "Newtown Facility" and,
together with the Phoenix Facility, the "Facilities"); and
WHEREAS certain telecommunications services contracted for by Source at the
Facilities have been and continue to be made available to and utilized by WAL;
and
WHEREAS the parties hereto wish to set forth in writing the terms upon
which WAL shall continue to occupy the Phoenix Facility and to utilize the
telecommunications services at both Facilities;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
SUBLEASE OF SPACE
SECTION 1.01. Facility to be Sublet. (a) Source shall sublet to WAL an
---------------------
aggregate an aggregate 5,535 square feet of the Phoenix Facility (including as
increased from time to time pursuant to subsection (b) below, the "Sublet
Facility") such square footage to be the same as occupied by WAL in the Phoenix
Facility as of July 31, 1997 and as set forth on the floor plan of the Sublet
Facility attached hereto as Exhibit A.
(b) The parties hereto agree to make good faith efforts to accommodate
each other in connection with their respective needs with respect to the
Facility, including, but not limited to, if WAL desires to sublet additional
space in the Sublet Facility. In such event, upon written request by WAL to
Source, Source will advise WAL within 15 days of receipt of such request whether
additional space is available for sublet to WAL and the aggregate square footage
so available, provided, that, subject to the first sentence of this Section
--------
1.01(b), nothing contained herein shall absolutely obligate Source to sublet
additional space to WAL, even if available. In the event
-1-
<PAGE>
additional space is sublet to WAL, such additional space shall be deemed for all
purposes hereunder to be part of the Sublet Facility.
SECTION 1.02. Monthly Rent and Other Expenses. (a) Subject to Section 1.03
-------------------------------
below, the monthly rent payable by WAL to Source for the Sublet Facility shall
be $24,160 ("Monthly Rent"), which amount shall include (i) the pro rated share
of property taxes on the Sublet Facility, (ii) employment costs for facility
personnel, (iii) office furniture rental, office equipment rental and
maintenance and depreciation thereof, (iv) utilities costs, (v) custodial,
recycling/refuse collection, coffee, water and snow removal services costs, (vi)
outside storage costs, (vii) property maintenance and (viii) general office
supplies costs, but shall not include fees payable by WAL pursuant to Article II
hereof.
(b) Monthly Rent for the Sublet Facility shall be due and payable to
Source no later than the fifteenth day of every month, provided, that if the
--------
fifteenth day of a month shall fall on a Saturday, Sunday or federal holiday,
the rent shall be payable on the first business day immediately following the
fifteenth day of such month.
(c) In the event Source is responsible for the payment of any local
levies, including a landlord's provisions for repairs and Operating Expenses (as
defined in the Master Lease) (collectively, "Expenses"), under the Master Lease,
WAL shall pay without duplication a proportionate amount of such Expenses based
on the percentage of the total Phoenix Facility represented by the Sublet
Facility.
SECTION 1.03. Annual Calculation. Within 30 days of the end of the fiscal
------------------
year of Source, Source shall submit to WAL a statement setting forth the actual
fees (the "Actual Rental") for the Sublet Facility, calculated as the product of
(i) the total rental obligations and Expenses of Source for the Phoenix Facility
and (ii) (A) the actual square footage comprising the Sublet Facility (as
adjusted if necessary pursuant to Section 1.01(b)) divided by (B) the total
square footage of the Phoenix Facility. In the event the Actual Rental exceeds
the aggregate Monthly Rental and Expenses payments received by Source from WAL
in respect of the fiscal year, WAL shall remit to Source, within 30 days of
receipt of the statement, the difference between said amounts. In the event the
Actual Rental is less than the aggregate Monthly Rental and Expenses payments
received by Source from WAL in respect of the fiscal year, Source shall have no
obligation to refund, rebate, credit or offset such amounts for the benefit of
WAL, provided, however, that in the event the Actual Rental is less than the
-------- -------
aggregate Monthly Rental and Expenses payments received by Source from WAL in
respect of the fiscal year as a result of the square footage comprising the
Sublet Facility having been reduced at Source's request, Source shall credit
(or, in the case of the last year of this Agreement, refund) WAL with the
difference.
SECTION 1.04. Master Lease. (a) Source shall use its reasonable best
------------
efforts to procure the consent of the Master Landlord under the Master Lease, if
necessary, to the subleasing to WAL of the Sublet Facility and this Article
shall not be effective until such consent is obtained.
-2-
<PAGE>
(b) WAL agrees to execute and deliver any documentation and/or furnish any
information reasonably requested by Master Landlord and otherwise cooperate
reasonably with Source and Master Landlord in connection with obtaining Master
Landlord's consent to this Agreement.
(c) WAL has reviewed and hereby agrees to be bound by all the terms and
conditions of the Master Lease. WAL shall not engage in any activity, or fail
to take any necessary action if such action is required, that would put it
and/or Source in violation of any governmental regulation or authority or
otherwise put Source in breach of its obligations under the Master Lease. WAL
agrees to indemnify and hold Master Landlord and Source harmless from and
against any loss or damage, including reasonable attorney's fees, resulting from
a breach of the agreements and covenants by WAL in this Paragraph or otherwise
arising from the use or occupancy of the Sublet Facility or of any business
conducted therein, or from any work or thing whatsoever done or conditions
created by or any act or omission of WAL, its employees, agents, contractors,
invitees or licensees, in or about the Sublet Facility.
(d) This Agreement, as it relates to the subleasing of the Sublet
Facility, shall be expressly subject and subordinate to and does hereby
incorporate all the terms, covenants and conditions contained in the Master
Lease, except for the annual rent and such other terms, covenants and conditions
as are specifically inconsistent with the terms hereof (but only to the extent
that the same are inconsistent) or do not relate to subleasing of the Sublet
Facility pursuant to this Agreement.
(e) Except as otherwise provided herein, Source does not assume any
obligation to perform the terms, covenants and conditions contained in the
Master Lease, or in the Master Lease as incorporated herein, on the part of
Master Landlord to be performed, and in the event that Master Landlord should
fail to perform any of the terms, covenants and conditions contained in the
Master Lease, Source shall, if so requested by WAL and at the expense of WAL,
promptly and diligently use its reasonable efforts to cause Master Landlord to
perform its obligations under the Master Lease, provided that in no event shall
--------
Source be required to commence a lawsuit against Master Landlord. In any event,
except as otherwise provided in the Master Lease (and then only to the extent
that Source receives the same from Master Landlord), WAL shall not be allowed
any abatement or diminution of rent under this Agreement because of the failure
of Master Landlord to perform any of its obligations.
SECTION 1.05. Condition of the Sublet Facility. (a) WAL agrees to accept
--------------------------------
the Sublet Facility in "as is" condition and Source makes no representation of
any kind concerning said condition.
(b) At the expiration of this Agreement, WAL will deliver and surrender to
Source possession of the Sublet Facility in the same condition as the Sublet
Facility was in on the Effective Date, as hereinafter defined, ordinary wear and
tear excepted.
SECTION 1.06. Repairs. Whenever repairs to the Sublet Facility are
-------
required to be made by Master Landlord, Source shall take all reasonable steps
necessary to ensure that Master Land-
-3-
<PAGE>
lord promptly fulfills its obligations to repair as provided in the Master
Lease, provided that in no event shall Source be required to commence a lawsuit
against Master Landlord.
ARTICLE II
TELECOMMUNICATIONS SERVICES
SECTION 2.01. Services Provided. At each of the Facilities, Source shall
-----------------
provide to WAL access to the telecommunications infrastructure and services,
including phone [AND COMPUTER] lines, maintenance, depreciation and employment
costs relating to the infrastructure but excluding actual phone calls (including
long distance and toll free calls) and the charges therefor imposed by the third
party provider.
SECTION 2.02. Fees for Services. The aggregate annual fees for the
-----------------
services to be provided by Source to WAL under this Article II shall be
$123,000, payable in twelve monthly installments of $10,250, each in accordance
with Section 1.02(b) above.
ARTICLE III
TERM AND TERMINATION
SECTION 3.01. Term. The term of this Agreement shall be for one year
----
commencing July 1, 1997 (the "Effective Date") and terminating on June 30, 1998.
Thereafter, this Agreement shall be automatically renewed for successive one-
year periods unless either party notifies the other in writing, at least 90 days
prior to the expiration of the then fiscal year (it being understood that at the
time of execution hereof, the fiscal year ends June 30), of its intention not to
renew. The parties hereto agree that all the terms and conditions of this
Agreement shall be deemed to have retroactive effect to July 1, 1997.
SECTION 3.02. Termination. (a) Either party may terminate this Agreement
-----------
if the other has defaulted in any material obligation hereunder by giving at
least twenty (20) days' written notice to the breaching party; provided,
--------
however, that if the breaching party corrects such default within said twenty
- -------
(20) day period, this Agreement shall continue in full force and effect.
(b) Either party may terminate this Agreement 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.
ARTICLE IV
MISCELLANEOUS
-4-
<PAGE>
SECTION 4.01. Assignment; Successor by Merger. This Agreement may not be
-------------------------------
assigned by either party without the prior written consent of the other party
and Master Landlord if necessary; provided, that any such assignment or a
--------
succession by merger of an entity to the rights and obligations of a party
hereto shall require the assignee or successor, as the case may be, to assume in
writing the obligations hereunder of the assigning or merging party, as the case
may be and provided further, however, that the consent of WAL to the merger of
-------- ------- -------
Source with National Data Corporation or a subsidiary thereof is hereby given.
SECTION 4.02. Entire Agreement. This Agreement embodies the entire
----------------
contractual relationship of the parties hereto in regard to the subject matter
hereof and no other agreement or understanding, verbal or otherwise, exists
between the parties in respect thereto.
SECTION 4.03. Amendment, Etc. No waiver, modification, alteration or
--------------
amendment of any of the provisions of this Agreement shall be binding unless
executed in writing by duly authorized representatives of the parties hereto.
SECTION 4.04. Notices. Notices in connection with this Agreement shall be
-------
sufficiently delivered if sent by registered mail, return receipt requested, or
telecopied or facsimiled to the parties hereto at the following addresses:
if to Source, to it at:
Source Informatics Inc.
2394 East Camelback Road
Phoenix, Arizona 85016
Attn: Bob Brown
if to WAL, to, it at:
Walsh America Limited
105 Terry Drive
Newtown, Pennsylvania 18940
Attn: Leonard Benjamin
or such other address as either party hereto shall have designated by notice in
writing to the other party hereto.
SECTION 4.05. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of Delaware.
SECTION 4.06. Execution in Counterparts. 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.
-5-
<PAGE>
SECTION 4.07. Miscellaneous.
-------------
(a) Time Limits. With respect to the subleasing of the Sublet Facility,
-----------
except with respect to actions related thereto to be taken by WAL for which
shorter time limits are specifically set forth in this Agreement, which time
limits shall control for the purposes of this Agreement, the time limits
provided in those portions of the Master Lease that are incorporated herein for
the giving or making of any notice by the tenant thereunder to Master Landlord,
the holder of any leasehold mortgage or any other party, or for the performance
of any act, condition or covenant by the tenant thereunder or for the exercise
of any right or remedy by the tenant thereunder, are changed for the purpose of
incorporation into this Agreement, by shortening the same in each instance by
(i) ten (10) days with respect to all such periods of sixty (60) or more days,
(ii) five (5) days with respect to all such periods of thirty (30) or more days
but less than sixty (60) days, (iii) three (3) days with respect to all such
periods of twenty (20) or more but less than thirty (30) days and (iv) two (2)
days with respect to all such periods of less than twenty (20) days, provided,
---------
however, that in no event shall any such period be shortened to less than five
- -------
(5) days, so that any notice may be given or made, or any act, condition or
covenant performed hereunder exercised, by Source within the time limit relating
thereto contained in the Master Lease.
With respect to the subleasing of the Sublet Facility, except with
respect to actions to be taken by Source for which longer time limits are
specifically set forth in this Agreement, which time limits shall control for
the purposes of this Agreement, the time limits provided in the Master Lease as
incorporated herein for the giving or making of any notice by Master Landlord or
the performance of any act, covenant or condition by Master Landlord for the
exercise of any right or remedy by Master Landlord thereunder are changed for
the purposes of this Agreement, by lengthening the same in each instance by (i)
ten (10) days with respect to all such periods of sixty (60) or more days (ii)
five (5) days with respect to all such periods of thirty (30) or more but less
than sixty (60) days, (iii) three (3) days with respect to all such periods of
twenty (20) or more but less than thirty (30) days and (iv) two (2) days with
respect to all such periods of less than twenty (20) days so that any notice may
be given or made, or any act, condition or covenant performed hereunder
exercised by Master Landlord within the number of days respectively set forth
above, after the time limits relating thereto contained in the Master Lease.
(b) Broker. Each of Source and WAL represents to the other that no brokers
------
are responsible for bringing about this transaction and that it has had no
dealings, either direct or indirect, with any other real estate agent or broker
in connection with this transaction. WAL indemnifies and holds Source harmless
from and against any loss or damage, including reasonable attorney's fees,
resulting from misrepresentations by WAL in this Paragraph. Source indemnifies
and holds harmless WAL from and against any loss or damage, including reasonable
attorney's fees, resulting from a misrepresentation by Source in this Paragraph.
(c) Termination of Master Lease. If, for any reason, the term of the
---------------------------
Master Lease shall terminate prior to the end of the Term of this Agreement,
this Agreement shall thereupon terminate, Source shall not be liable to WAL by
reason thereof unless such termination resulted from a default by Source under
the Master Lease and (i) such default by Source was not due to default by WAL of
its obligations hereunder, including, without limitation, the obligations under
the
-6-
<PAGE>
Master Lease incorporated by reference herein or (ii) WAL is not in default of
any of its monetary obligations hereunder beyond any notice and applicable grace
period.
(d) Landlord's Cooperation. Source agrees to use reasonable efforts at
----------------------
WAL's sole cost and expense to obtain from Master Landlord any approval or
consent reasonably requested by WAL and to forward, promptly, to Master Landlord
any requests of WAL for approval or consent of Master Landlord that may be
required under the Master Lease or the Master Lease as incorporated herein.
(e) Quiet Enjoyment. Source covenants that upon WAL paying the Monthly
---------------
Rent and any other payments due hereunder including pursuant to Article II
hereof, and observing and performing all the terms, covenants and provisions of
this Agreement on WAL's part to be observed and performed, WAL may peaceably and
quietly enjoy the Sublet Facility, subject nevertheless to the terms and
conditions of this Agreement and of the Master Lease as incorporated herein and
the Master Lease.
(f) Successors and Assigns. All the terms and provisions of this Agreement
----------------------
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the respective parties hereto.
(g) Separability. In the event that any provisions of this Agreement
------------
shall be held to be invalid or unenforceable in any respect, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
be unaffected thereby.
(h) No Waiver. Acceptance by Source of any payment of Monthly Rent or fees
---------
payable pursuant to Article II hereof shall not be deemed to be a waiver of any
default by WAL hereunder, whether or not Source shall then have knowledge of
such default.
(i) Entire Agreement. It is understood and agreed that all understandings
----------------
and agreements heretofore had between the parties hereto are merged in this
Agreement which alone fully and completely expresses their agreement, and that
the same is entered into after full investigation, neither party relying upon
any statement, representation or warranty made by the other not embodied in this
Agreement.
(j) Full Execution and Consent of Master Landlord. This Agreement is
---------------------------------------------
offered to WAL for signature with the understanding that it shall not be binding
upon either party unless and until both parties shall have executed this
Agreement and, with respect to Article I hereof (and any other provisions of
this Agreement as they relate to Article I hereof), the Master Landlord has
delivered its consent.
-7-
<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.
SOURCE INFORMATICS INC.
By: _______________________
Name:
Title:
WALSH AMERICA LIMITED
By: _______________________
Name:
Title:
-8-
<PAGE>
CONSENT OF LANDLORD
The undersigned, , the landlord ("Landlord") under that
certain lease dated (the "Lease"), by and between Landlord and Source
Informatics Inc. ("Tenant"), covering the premises located at 2394 East
Camelback Road, Phoenix, Arizona, as more particularly described in the Lease,
does hereby consent, as of the date set forth below, to the sublease by Tenant
to Walsh America Limited, a Delaware corporation ("Subtenant"), of the portion
of the Property (as defined in the Lease), more fully described in the Services
Agreement, between Tenant and Subtenant, in the form attached hereto as Exhibit
A (the "Sublease"), pursuant to and on the terms provided in said form of
Sublease.
Dated:
By: ________________________
Name:
Title
-9-
<PAGE>
*EXHIBIT 13
- ---------------------------
*CERTAIN CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT AND FILED
SEPARATELY WITH THE COMMISSION.
<PAGE>
SERVICES AGREEMENT
This Agreement, dated as of ____________ ___, 1997, by and between SOURCE
INFORMATICS AMERICA INC., a Delaware corporation ("Source"), on the one hand,
and PMSI SCOTT-LEVIN INC., a New Jersey corporation ("S-L") and, for purposes of
Paragraph 5(i) hereunder, PHARMACEUTICAL MARKETING SERVICES INC, a Delaware
corporation and the parent company of S-L ("PMSI"), on the other.
RECITALS
WHEREAS each of Source and S-L provides a variety of informational
services and products to the pharmaceutical industry; and
WHEREAS each of Source and S-L desires to obtain one or more of these
services and/or products from the other, all under the terms and conditions
provided hereinbelow.
NOW THEREFORE, and in consideration of the mutual promises contained
herein, the parties agree as follows:
1. SERVICES PROVIDED BY SOURCE
---------------------------
(a) Under the terms and subject to the conditions of this Agreement, Source
shall provide S-L with the products and services set forth on Schedule A-1
attached hereto (collectively, the "Source Products"), with the frequency
set forth on said Schedule.
(b) In consideration for the Source Products provided by Source hereunder,
S-L shall (i) pay to Source the fees set forth on Schedule A-1 in monthly
installments no later than [**] days after receipt from Source of a monthly
invoice relating to such Source Products and (ii) shall comply in all
respects with the terms set forth in Schedule A-2 hereto; provided that
--------
fees will be subject to proration in the event this Agreement is terminated
other than at month's end or in accordance with Paragraph 3(d).
(c) In addition to any other limitations set forth herein and subject to
the terms and conditions of this subparagraph (c), S-L shall be permitted
to use the [**************] data Source Products set forth under Part 3 of
Schedule A-1 ("[**************] Data Products") solely for S-L's [*******
****] and [*****************************] products. The development by S-L
of additional products utilizing [***************] Data Products shall be
permitted only upon prior written consent
----------------
[*] THE BRACKETS AND ASTERISKS INDICATE SECTIONS WHERE CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
-1-
<PAGE>
from at least one of the Chief Executive Officer, President and Chief
Financial Officer of Source.
(d) In the event S-L develops any additional products based on [*********
*****] Data Products, S-L shall pay to Source an additional amount as
agreed to for each additional newly-developed product.
(e) Notwithstanding subparagraph (c) above and Paragraph 4(c) below, in no
event shall S-L be permitted to release any data, including by means of
inclusion in any of its products, with respect to [************************
*************] or any data the use of which would enable a third party to
derive information with respect to any [***********************
************]. In furtherance of this limitation, S-L shall be required to
aggregate any [***************] data to no less than [*************] within
any category comprising such products.
(f) The [******************************************************] Data may
only be used by S-L on an aggregated basis and solely in its product known
as [**********************************] unless prior written consent from
at least one of the Chief Executive Officer, President or Chief Financial
Officer of Source has been obtained.
2. SERVICES PROVIDED BY S-L
------------------------
(a) Under the terms and subject to the conditions of this Agreement, S-L
shall provide Source with the products and services set forth on Schedule B
attached hereto (collectively the "S-L Products") with the frequency set
forth on said Schedule B. If Source elects from time to time to receive
additional S-L products and S-L agrees to provide Source with such products
("Additional S-L Products"), Schedule B hereto shall be amended to include
such products at such fees as Source and S-L shall agree from time to time
and such Additional S-L Products shall be considered "S-L Products" for all
purposes hereunder.
(b) In consideration for the S-L Products provided by S-L hereunder, Source
shall pay to S-L the fees set forth on Schedule B in equal monthly
installments no later than [**] days after receipt from S-L of a monthly
invoice relating to such S-L Products, provided that the fees will be
--------
subject to proration, as referred to in Paragraph 3(d) hereto. For internal
use, S-L will supply S-L Products to Source at [***] of the then list price
for such products, as set forth in writing by S-L. Additional copies of
these S-L Products may be purchased by Source at [***] of the then list
price for such S-L Product. For
[**********************************************
************************************************************] S-L will
supply S-L Products to Source at [***] of the then list price for such
products, as set forth in writing by S-L. Additional copies of these S-L
Products may be purchased by Source at [***] of the then list price for
such S-L Product. The value of the S-L
---------------
[*] THE BRACKETS AND ASTERISKS INDICATE SECTIONS WHERE CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
-2-
<PAGE>
Products supplied to Source by S-L for [*****************] at the reduced
price specified in this Paragraph shall not exceed, without the prior
written consent of S-L, [******] for Source's fiscal 1999, [******] for
Source's fiscal 2000, [******] for Source's fiscal 2001 and [******] for
Source's fiscal 2002.
3. TERM AND TERMINATION; ARBITRATION
(a) Subject to Paragraphs 3(b), (c) and (d) below, the initial term of this
Agreement shall run through [***********] (the "Initial Term"). Upon no
less than 90 days' written notice from one party to the other, the term of
this Agreement may be renewed by mutual consent of both parties hereto and
on terms and subject to conditions agreed to by both parties. (The Initial
Term and each such renewal term are referred to herein as a "Term.")
(b) Either party, upon 30 days' written notice to the breaching party, may
terminate this Agreement if the other party hereto defaults in its
performance of any of its material obligations hereunder (including, but
not limited to, a breach of Paragraph 5(b) hereof, but excluding a breach
of Paragraph 5(d) hereof); provided, however, that, except as otherwise
-------- -------
provided herein, if the breaching party cures such default within said 30-
day period (the "Cure Period"), this Agreement shall continue in full force
and effect. Notwithstanding the above, if any of the following defaults
(each a "Terminating Default") occurs once during the course of this
Agreement (including any renewal Terms), no Cure Period shall be required
with respect to the second and any subsequent occurrences of such
Terminating Default and the non-breaching party shall have the right to
proceed to arbitration in accordance with Paragraph 3(e) below. The
Terminating Defaults shall consist of (i) the obtaining by either party, or
any of their respective subsidiaries, divisions, employees or agents, of
data from the other party hereto without such other party's consent, which
data is not included in a Product specifically set forth on Schedule A-1 or
B, as the case may be; (ii) the use by either party of the Products and
data comprising the Products received by it from the other party hereto in
violation of this Agreement; and (iii) the violation by S-L of the terms of
Paragraph 1(e) hereto.
(c) Either party may terminate this Agreement by written notice to the
other party, effective immediately upon its sending, if the other party
shall file a petition in bankruptcy, shall be adjudicated as bankrupt,
shall take advantage of the insolvency laws of any jurisdiction to which it
is subject, shall make an assignment for the benefit of creditors, shall be
voluntarily or involuntarily dissolved, shall admit in writing its
inability to pay debts as they come due, or shall have a receiver, trustee
or other court officer appointed for its property.
(d) At any time during a Term, either party (for purposes of this Paragraph
such party is referred to as a "Terminating Party"), upon no less than 90
days' written
- -------------------
[*] THE BRACKETS AND ASTERISKS INDICATE SECTIONS WHERE CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
-3-
<PAGE>
notice (a "Notice of Termination") to the other party hereto
setting forth in reasonable detail the Products to be terminated and the
date of termination, may terminate any or all of the Products being
provided to such Terminating Party by the other party hereto. In the event
of such termination, the fees payable by the Terminating Party as set forth
on the relevant Schedule hereto, shall be prorated for the period for which
the Products were actually provided. Nothing in this subparagraph shall
confer on a party hereto any right (in addition to any right otherwise
created by this Agreement) to terminate its obligations to continue to
provide its Products pursuant to this Agreement.
(e) All disputes arising under this Agreement (other than claims in equity)
shall be resolved by arbitration in accordance with the Commercial
Arbitration Rules (the "Rules") of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at
issue and selected by Source and S-L in accordance with the Rules. The
arbitration shall be held in such place in Washington, D.C. as may be
specified by the arbitrator (or any place agreed to by Source, S-L and the
arbitrator). The decision of the arbitrator shall be final and binding as
to any matters submitted under this Agreement, provided, however, if
-------- -------
necessary, such decision and satisfaction procedure may be enforced by
either Source or S-L in any court of record having jurisdiction over the
subject matter or over any of the parties to this Agreement. All costs and
expenses incurred in connection with any such arbitration proceeding
(including reasonable attorneys' fees) shall be borne by the party against
which the decision is rendered, or, if no decision is rendered, such costs
and expenses shall be borne equally by Source and S-L. If the arbitrator's
decision is a compromise, the determination of which party or parties bears
the costs and expenses incurred in connection with any such arbitration
proceeding shall be made by the arbitrator on the basis of the arbitrator's
assessment of the relative merits of the parties' positions. The parties
further agree that, in addition to any damages awarded by the arbitration
panel, upon the finding by the arbitration panel that a Terminating Default
has occurred, this Agreement shall be deemed terminated for all purposes of
this Agreement, including subparagraph (f) below.
(f) Upon any termination or breach of this Agreement (including termination
with respect to only certain products pursuant to subparagraph (d) above),
each of S-L and Source shall promptly return to the other all copies of all
Source Products or S-L Products, as the case may be, in the case of
termination pursuant to subparagraph (b) above, and all copies of those
Source Products or S-L Products, as the case may be, to which such
termination applies in the case of termination pursuant to subparagraph
(e).
4. DATA ACCURACY, RIGHTS TO CONFIDENTIALITY
----------------------------------------
-4-
<PAGE>
(a) Each of Source and S-L warrants to the other that it has the right to
provide the Source Products or S-L Products, as the case may be, and that
all such products shall meet professional standards generally applicable in
its industry. Each of Source on the one hand, and S-L on the other, will
indemnify (in such capacity, each an "Indemnifying Party") and hold
harmless the other (in such capacity, each an "Indemnified Party"), its
subsidiaries and divisions, their agents, servants and employees against
all losses, claims or suits, based upon an Indemnified Party's use of the
Source Products or S-L Products, as the case may be, in accordance with the
terms of this Agreement, including but not limited to any infringement of
patent, trademark, copyright or infringement of any other intellectual
property rights and including reasonable costs and other expenses incurred
by or for an Indemnified Party in defending and preparing the defense of
such claims or suits; provided, however, that in no event shall an
-------- -------
Indemnifying Party have any liability for loss or damage, direct, indirect
or consequential, by reason of errors or omissions in the compilation of
information; provided, further, that either parties' liability under this
-------- -------
Agreement for any cause(s) whatsoever, except to the extent that any
liability relates to any infringement of a patent, trademark, copyright or
any other intellectual property, shall not exceed in the aggregate the
total fees paid during the preceding 12 months by the Indemnified Party
under this Agreement for the Product giving rise to the liability.
Notwithstanding the above, no party shall be deemed an Indemnified Party
with respect to any Product it has provided hereunder to the extent such
Product has either been improperly used or used in a manner or product not
approved by the supplying party.
(b) Except as otherwise permitted hereunder, each party hereto shall hold
the terms and conditions of this Agreement and all information supplied to
it by the other party hereto in strict confidence, unless such information
(i) is already known to the non-supplying party at time of disclosure, (ii)
is already publicly available or becomes so through no fault of the non-
supplying party, (iii) release of such information is consented to by the
supplying party or (iv) is independently developed by the nonsupplying
party.
(c) Each party hereto acknowledges that any information, data or software
supplied to it by the other party hereto hereunder is proprietary and
confidential to the party supplying said information, data or software and
that the non-supplying party has the right only to use such information,
data and software in accordance with the terms of this Agreement. All such
information, data and software shall be used solely for the benefit of the
non-supplying party or its wholly-owned and majority owned subsidiaries and
shall not be sold, transferred, disclosed in whole or in part or given to
any third party, without prior written consent of the supplying party,
provided that, subject to Paragraph 1(e) above, nothing contained herein
--------
shall prohibit the inclusion, as necessary, of information, data or
software in services provided to clients of the non-supplying party hereto,
provided further, however, that (i) in any such event, the non-supplying
party insures that its clients
-5-
<PAGE>
have undertaken similar obligations of confidentiality and (ii) nothing
contained herein shall be construed to confer on any such client of the
non-supplying party any rights to resell the Source Products or the S-L
Products, as the case may be. No information supplied to a non-supplying
party hereunder (or a client thereof) shall be copied, reproduced, printed,
quoted or attributed to the supplying party without such party's prior
written consent. Such information or software shall only be disclosed to
agents or contractors of the non-supplying party to the extent necessary
for them to perform their duties for the non-supplying party and then only
if they have undertaken similar obligations of confidentiality, including,
if so reasonably requested by the supplying party, by formally executing a
confidentiality agreement with terms similar to the terms set forth herein.
(d) Each party hereto agrees that under no circumstances will any
representative or agent of said party share or discuss, directly or
indirectly, any Products provided under this Agreement with any pharmacies
or prescribers, or with any person employed by the aforementioned parties.
(e) Each party hereto shall be deemed an Indemnifying Party and shall
defend and indemnify the other party hereto (which shall be deemed an
Indemnified Party) with respect to any claim, suit, loss, cost, or expense
of any third party arising out of breach of Paragraphs 4 (c) and 4 (d)
above.
5. MISCELLANEOUS PROVISIONS
------------------------
(a) No waiver, modification or alteration of any of the provisions of this
Agreement shall be binding unless approved in writing by a duly authorized
representative of each of the parties hereto.
(b) This Agreement, including the Schedules attached hereto, set forth the
entire agreement of the parties hereto with respect to the subject matter
hereof and no other agreement or understanding, verbal or otherwise, exists
between the parties hereto at the time of execution hereof with respect to
such subject matter and this Agreement shall be binding on the parties
hereto, their successors, assigns, subsidiaries, directors, officers,
employees and agents. This Agreement shall not be assignable by either
party hereto without the prior written consent of the other party hereto.
In addition, the consent of the other party hereto shall be required in the
event of a change of control of a party hereto, whether by way of merger,
sale of all or substantially all the assets thereof or an entity other than
an affiliate as of the date hereof of either party hereto owning more than
50% of the outstanding capital stock of such party, provided that the
--------
consent of S-L to the merger of Source with National Data Corporation or a
subsidiary thereof is hereby given.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to any applicable
conflicts of laws.
-6-
<PAGE>
(d) The Products covered by this Agreement are to be delivered in
conformance with the specifications and timing listed on Schedules C and D.
Failure to meet the requirement of Schedules C and D will result in
penalties of 5% of the fee payable for that Product, prorated to the period
for which delivery failed to meet such requirements. As examples of such
proration, (1) if a Product, that is scheduled to be delivered on an annual
basis, fails to meet the requirements of Schedules C and D, then the
applicable penalty for the year shall be 5% of the annual fee thereof; (2)
if a Product, that is scheduled to be delivered on a quarterly basis, fails
to meet the requirements of Schedules C and D for one quarter, then the
applicable penalty for such quarter shall be calculated as 5% of 25% of the
annual fee thereof; and (3) if a Product, that is scheduled to be delivered
on a monthly basis, fails to met the requirements of Schedules C and D for
one month, then the applicable penalty for such month shall be calculated
as 5% of 8.33 % of the annual fee thereof.
(e) Source agrees to use its best efforts to promote and protect S-L's
interests in the S-L Products and S-L agrees to use its best efforts to
promote and protect Source's interest in the Source Products.
(f) All notices required by this Agreement shall be given by certified or
registered mail, return receipt requested, or by any type of express mail
or express delivery service for which a receipt will be obtained.
If to Source, such notices shall be address to:
Source Informatics America Limited
2394 East Camelback Road
Phoenix, Arizona 85016
Attn: Bob Brown
-7-
<PAGE>
with a copy to:
National Data Corporation
One National Data Plaza
Atlanta, Georgia 30329
Attn: E. Michael Ingram, Esq.
If to S-L, such notices shall be addressed to:
PMSI Scott-Levin Inc.
Scott-Levin Corporate Centre
60 Blacksmith Road
Newtown, Pennsylvania 18940
Attn: Joy Scott
(g) The parties' rights and obligations under Paragraphs 4 and 5(i) shall
survive any termination of this Agreement. The parties' rights and
obligations under paragraph 1(e) shall survive any termination of this
Agreement only with respect to, and for so long as S-L utilizes, the Source
Products.
(h) Each party hereto shall be excused from performance hereunder for any
period and to the extent it is prevented from performing any action
pursuant hereto, in whole or in part, as a result of delays caused by the
other party or an act of God, war, civil disturbance, court order, labor
dispute, act omission or failure to perform by a third party or other cause
beyond its reasonable control, including without limitation failures or
fluctuations in electrical power, heat, light air conditioning or
telecommunications equipment. Such nonperformance shall not be a default
hereunder or a ground for termination hereof; provided, however, that if
-------- -------
any nonperformance due to a force majeure shall extend beyond 30 days, the
other party may, in its sole discretion, either (i) terminate this
Agreement upon not less than 15 days' prior written notice or (ii) suspend
performance hereunder and obtain substitute services until such time as the
nonperformance is remedied.
(i) In consideration for Source entering into this Agreement, PMSI hereby
irrevocably and unconditionally guarantees that S-L will duly perform all
its obligations under this Agreement as from time to time amended and
revised in accordance with the terms hereof with or without the consent of
PMSI and agrees to indemnify Source against all liabilities, losses,
proceedings, claims, costs and expenses of whatever nature arising out of
any failure of S-L so to do to the extent that S-L would have been liable
for such liabilities, losses, proceedings, claims, costs and expenses under
this Agreement; provided, that PMSI makes the foregoing guarantees as a
--------
guarantee of payment and performance, and not of collection, and a debt and
obligation of PMSI for its own account.
-8-
<PAGE>
(j) It is expressly agreed by the parties hereto that each is at all times
acting and performing hereunder as an independent contractor and not as an
agent for the other, and that no act of commission or omission of either
party hereto shall be construed to make or render the other party its
principal, agent, joint venturer or associate, except to the extent
specified herein.
(k) Neither party shall have the authority to act in the other party's name
except as is expressly provided in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
SOURCE INFORMATICS AMERICA LIMITED
By:_______________________________
Name: Bob Brown
Title:
PMSI SCOTT-LEVIN INC.
By:______________________________
Name: Warren J. Hauser
Title:
PHARMACEUTICAL MARKETING SERVICES INC.
By:______________________________
Name: Warren J. Hauser
Title:
-9-
<PAGE>
EXHIBIT 14
<PAGE>
_________, 1997
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Gentlemen:
This letter is delivered pursuant to Section 9.2(k) of the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of August, ___, 1997, by and
among National Data Corporation ("NDC"), Dunkirk, Inc. ("Sub") and Source
Informatics Inc. ("Source").
In connection with the proposed acquisition of Source by NDC by means of
the merger of Sub into Source (the "Merger") and concerning claims which I may
have against Source or Sub in my capacity as an officer or director, I hereby
affirm the following:
(a) Except as provided in (d) below, Source shall retain all liability
(to the extent Source was so liable) for claims for indemnification arising
under Source's Certificate of Incorporation or Bylaws as existing on _______,
___, 1997, or as may be afforded by the laws of the State of Delaware or the
United States, including, but not limited to, all liability for claims I may
have as an officer or director of Source that are unrelated to the
Divestiture (as defined in the Merger Agreement);
(b) Except as provided in (d) below, Sub shall retain all liability
(to the extent it was so liable) for claims for indemnification arising under
its Certificate of Incorporation or Bylaws as existing on _______, ___, 1997,
or as may be afforded by the laws of the State of Delaware or the United
States;
(c) In my capacity as an officer or a director, I do not have, and am
not aware of, any claims I might have (other than those referred to in
paragraphs (a) or (b) above) against Source or Sub; and
(d) I hereby release Source and Sub from any and all claims which I
may now or hereafter possess against Source or Sub in my capacity as an
officer or a director, arising from or in connection with the Divestiture or
with the allocation of the consideration to be paid by NDC pursuant to the
transactions contemplated by the Merger Agreement and the PMSI Agreement (as
defined in the Merger Agreement) except and to the extent such is covered by
directors' and officers' insurance.
-1-
<PAGE>
By executing this letter on behalf of NDC, you shall acknowledge the
retention by Source of the liabilities described in paragraphs (a) and (b)
above.
Sincerely,
___________________________________
Signature of Officer or Director
___________________________________
Name of Officer or Director
On behalf of NDC, I hereby acknowledge and accept this letter as of
this ____ day of ______, 1997.
NATIONAL DATA CORPORATION
By:___________________________
-2-
<PAGE>
EXHIBIT 15
<PAGE>
MATTERS AS TO WHICH ALSTON & BIRD LLP OR GENERAL COUNSEL TO NDC WILL OPINE
1. NDC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is engaged, and to own and use
its Assets.
2. Sub is a corporation duly organized and validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is engaged, and to own and use
its Assets.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Certificate
of Incorporation or Bylaws of NDC or, to our knowledge but without any
independent investigation, any Law or Order to which NDC is a party or by which
NDC is bound. The adoption of the Agreement and compliance with its terms do not
and will not violate or contravene any provision of the Certificate of
Incorporation or Bylaws of Sub or, to our knowledge but without any independent
investigation, any Law or Order to which Sub is a party or by which Sub is
bound.
4. The Agreement has been duly and validly executed and delivered by NDC
and Sub.
5. The shares of NDC Common Stock to be issued to the stockholders of
Source as contemplated by the Agreement have been registered under the
Securities Act of 1933, as amended, and when properly issued and delivered
following consummation of the Merger will be fully paid and nonassessable under
the Delaware General Corporation Law.
-1-
<PAGE>
AMENDMENT NO. ONE TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. ONE (this "Amendment") is made and entered into as of
November 7, 1997, by and among NATIONAL DATA CORPORATION ("NDC"), a Delaware
corporation; DUNKIRK, INC. ("Sub"), a Delaware corporation; and SOURCE
INFORMATICS INC. ("Source"), a Delaware corporation.
Preamble
WHEREAS, NDC, Sub and Source entered into an Agreement and Plan of Merger
dated as of August 20, 1997 (the "Agreement"), which, among other things,
provided that NDC would acquire Source pursuant to the merger of Sub with and
into Source (the "Merger"); and
WHEREAS, pursuant to Section 9.2 (h)(ii) of the Agreement, it is a condition
to NDC's obligation to consummate the Merger that Source and Walsh
International Inc. ("Walsh") execute and deliver to NDC a licensing arrangement
between Source and Walsh relating to operations of Walsh in Asia (the "East
Asia License Agreement"); and
WHEREAS, NDC, Source and Walsh have agreed to terminate negotiations with
respect to the East Asia License Agreement and NDC, Sub and Source have agreed
to remove the consummation of such agreement from the conditions precedent to
consummation of the Merger; and
WHEREAS, NDC, Sub and Source desire to amend the Agreement to reflect the
elimination of such condition; and
WHEREAS, NDC, Sub and Source are of the opinion that the foregoing is in the
best interests of the parties and their respective stockholders.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
A. Section 9.2(h) of Article 9 of the Agreement shall be deleted in its
entirety and replaced with the following:
(h) Additional Agreements. Each of the following agreements, in the form
attached hereto as an Exhibit, with such additions and changes as may be
approved by NDC and all parties thereto, shall have been executed and delivered
to NDC:
(i) Source Europe License Agreement-Exhibit 7.
(ii) Source Europe Transition Services Agreement-Exhibit 8.
(iii) Assignment of Lease for Source property in Newtown, PA-Exhibit 9.
(iv) Sublease for use of property in Newtown, PA-Exhibit 10.
(v) Sublease for use of property in Phoenix, AZ-Exhibit 11.
(vi) SL Services Agreement-Exhibit 12.
B. Section 9.2(j) of Article 9 of the Agreement shall be deleted in its
entirety and replaced with the following:
(j) Indemnification Waivers. Each director and officer of Source shall have
executed and delivered to NDC Waivers in substantially the form of Exhibit 13
which will provide that such director or officer release their rights of
indemnification under the bylaws of Source or Sub or the DGCL or otherwise with
respect to claims arising from their acting or failing to act in connection
with the Divestiture or with the allocation of consideration to be paid by NDC
pursuant to the transactions contemplated by this Agreement and the PMSI
Agreement, except and to the extent such is covered by directors' and officers'
insurance.
C. Section 9.3(d) of Article 9 of the Agreement shall be deleted in its
entirety and replaced with the following:
(d) Opinion of Counsel. Source shall have received an opinion of either the
General Counsel of NDC or Alston & Bird LLP, counsel to NDC, dated as of the
Effective Time, in form reasonably acceptable to Source, as to the matters set
forth in Exhibit 14.
<PAGE>
D. The definition of "Exhibits" in Section 12.1 of Article 12 of the
Agreement shall be deleted in its entirety and replaced with the following:
"Exhibits" 1 through 14, inclusive, shall mean the Exhibits so marked, copies
of which are attached to this Agreement. Such Exhibits are hereby incorporated
by reference herein and made a part hereof, and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto.
E. The "List of Exhibits" shall be deleted in its entirety and replaced with
the following:
LIST OF EXHIBITS
Exhibit
Number Description
- ------- ------------------------------------------------------------------
1. Form of Escrow Agreement. ((S) 4.3).
2. Form of Stockholders' Voting Agreement. ((S) 5.21).
3. Form of agreement of affiliates of Source. ((S) 8.12).
4. Matters as to which Reboul, MacMurray, Hewitt,
Maynard & Kristol will opine. ((S) 9.2(d)).
5. Terms of Employment Agreements. ((S) 9.2(f)).
6. Form of Noncompetition Agreement. ((S) 9.2(g)).
7. Form of Source Europe License Agreement.
8. Form of Source Europe Transition Services Agreement.
9. Form of Assignment of Lease for Source property in Newtown, PA.
10. Form of Sublease for use of property in Newtown, PA.
11. Form of Sublease for use of property in Phoenix, AZ.
12. Form of SL Services Agreement.
13. Form of Waiver. ((S) 9.2(k)).
14. Matters as to which Alston & Bird LLP will opine. ((S) 9.3(d)).
All capitalized terms contained in this Amendment and no otherwise defined
shall have the meaning ascribed to them in the Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
National Data Corporation
By: /s/ E. Michael Ingram
-------------------------------------
Name: E. Michael Ingram
Title: Senior Vice President
Dunkirk, Inc.
By: /s/ E. Michael Ingram
-------------------------------------
Name: E. Michael Ingram
Title: Senior Vice President
Source Informatics Inc.
By: /s/ Warren J. Hauser
-------------------------------------
Name: Warren J. Hauser
Title: Vice President
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF ALSTON & BIRD LLP APPEARS HERE]
November 13, 1997
National Data Corporation
National Data Corporation Plaza
1564 N.E. Expressway
Atlanta, Georgia 30329-2010
Re: Agreement and Plan of Merger by and Between National Data
---------------------------------------------------------
Corporation, Dunkirk, Inc., and Source Informatics Inc.
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to National Data Corporation ("NDC"), a
corporation organized and existing under the laws of the State of Delaware, in
connection with the proposed merger of Dunkirk, Inc., a wholly-owned subsidiary
of NDC ("Sub"), with and into Source Informatics Inc. ("Source"), a corporation
organized and existing under the laws of the State of Delaware, with Source as
the surviving corporation (the "Merger"). The Merger will be effected pursuant
to the Agreement and Plan of Merger by and between NDC, Sub, and Source dated as
of August 20, 1997, as amended as of November 7, 1997 (the "Agreement"). In our
capacity as counsel to NDC, our opinion has been requested with respect to the
accuracy of the material under the heading "Certain Federal Income Tax
Consequences" in the registration statement on Form S-4 filed by NDC with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
on September 19, 1997, amended on October 29, 1997, and further amended as of
the date hereof (the "Registration Statement").
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
examined such documents as we have deemed appropriate, including the Agreement
and the Registration Statement. In our examination of such documents, we have
assumed, with your consent, that all documents submitted to us as photocopies
faithfully reproduce the originals thereof, that such originals are authentic,
that all such documents have been or will be duly executed to the extent
required, and that all statements set forth in such documents are accurate.
<PAGE>
We have participated in the preparation of the material under the
heading "Certain Federal Income Tax Consequences" of the Registration Statement
and, assuming the Merger will be consummated in accordance with the terms of the
Agreement and will be valid under applicable Delaware law, we are of the opinion
that the federal income tax treatment described under such heading of the
Registration Statement is accurate in all material respects.
The opinion expressed herein is based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined. Our opinion cannot be relied upon if any of the facts
contained in such documents or if such additional information is, or later
becomes, inaccurate, or if any of the statements set out herein is, or later
becomes, inaccurate. Finally, this opinion is furnished only to you, is solely
for your use in connection with the Registration Statement, and is limited to
the specific matters covered hereby.
We hereby consent to the use of this opinion and to the references
made to the firm under the heading "Certain Federal Income Tax Consequences" and
"Legal Matters" in the Proxy Statement/Prospectus constituting part of the
Registration Statement.
Very truly yours,
ALSTON & BIRD
By: /s/ Pinney L. Allen
--------------------------
Pinney L. Allen
PLA:mmh
<PAGE>
EXECUTION COPY
MASTER REORGANIZATION AGREEMENT
Between
WALSH INTERNATIONAL INC.
and
SOURCE INFORMATICS INC.
Dated as of April 16, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
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
<PAGE>
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
<PAGE>
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 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 Business, and
2
<PAGE>
(iii) distribute the shares of Walsh Delaware to Walsh
International Holdings Limited, the corporate parent of Walsh
America ("Walsh Holdings");
(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 services;
(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 Holdings;
(f) Walsh shall:
(i) contribute its ownership rights in all trademarks associated with
the Source Business to Walsh Holdings,
(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 Services Inc. (collectively, the
"PMSI Shares") held by it to SI PMSI;
3
<PAGE>
(j) Walsh shall:
(i) contribute the outstanding capital stock of its wholly-owned
subsidiary Walsh International Domestic Finance Ltd. ("WIDF") to
Walsh Holdings; and
(ii) contribute the outstanding capital stock of its wholly-owned
subsidiary Walsh International Foreign Finance Ltd. ("WIFF") to
Walsh Holdings;
(k) Walsh Holdings shall, in turn, contribute the outstanding 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
4
<PAGE>
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.
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
5
<PAGE>
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 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
6
<PAGE>
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.
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 [(i)] 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 [and (ii) in accordance with the Restated Certificate of
Incorporation of Walsh, exchange with each Preferred Stockholder as of the
Record Date, certificates representing two shares of Source Preferred Stock for
each share of Walsh Preferred 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.
7
<PAGE>
(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 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, substantially 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
8
<PAGE>
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 Agreements 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
9
<PAGE>
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 Contract 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.
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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.
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
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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 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.
12
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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 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.
13
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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;
(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;
14
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(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 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
15
<PAGE>
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.
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
16
<PAGE>
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 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
17
<PAGE>
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 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
18
<PAGE>
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 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
19
<PAGE>
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 subject, 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
20
<PAGE>
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 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,
21
<PAGE>
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
adversely 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.
22
<PAGE>
(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 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
23
<PAGE>
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 Agreement 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
24
<PAGE>
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 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.
25
<PAGE>
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 writing and delivered by hand or by a
national overnight courier service or mailed by registered or certified mail,
postage prepaid, as follows:
26
<PAGE>
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.
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.
27
<PAGE>
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.
28
<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
-----------------------------------
SOURCE INFORMATICS INC.
By
-----------------------------------
29
<PAGE>
SCHEDULE 1.01
WALSH CORPORATE REORGANIZATION
[Graphic depiction of steps of reorganization transaction]
<PAGE>
SCHEDULE 2.01
TRANSFER OF SOURCE BUSINESS
<TABLE>
<CAPTION>
Special
Walsh Source Transferred Source
Entity Entity Subsidiaries Assets
- -------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
Walsh International Source Informatics Walsh America Ltd. 480,000 shares of
Holdings Limited Inc. SI Software Ltd. common stock of
SI PMSI Ltd. Pharmaceutical
Walsh International Marketing Services Inc.
Domestic Finance
Limited
Walsh International Source Informatics __________________ Notes payable from
Inc. Inc. employees in the
aggregate principle
amount of $936,023.50
Withholding tax
receivable of
$338,358.90
Walsh Ltd. (U.K.) Source Informatics __________________ __________________
Ltd. (U.K.)
Walsh France S.A. [Source French __________________ __________________
Subsidiary]
Walsh Belgium N.V. Source Informatics __________________ __________________
Belgium N.V.
Walsh Italy Srl Source Informatics __________________ __________________
Italia Srl
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Walsh International Source Informatics __________________ __________________
Holdings GmbH Deutschland GmbH
Pharm Info Advisors Source Informatics ___________________ _________________
Ltd. Inc.
</TABLE>
<PAGE>
SCHEDULE 4.05
GOVERNMENTAL APPROVALS (WALSH)
[NONE]
<PAGE>
SCHEDULE 5.04
STOCK OPTIONS, WARRANTS, ETC. (SOURCE)
[NONE]
<PAGE>
SCHEDULE 5.05
GOVERNMENTAL APPROVALS (SOURCE)
[NONE]
<PAGE>
EXHIBIT A
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 transactions
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 functional support services specified
below:
1
<PAGE>
(i) General Management Services -- Michael A. Hauck
(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 activities 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.
2
<PAGE>
(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 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 liquidation 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.
3
<PAGE>
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
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 services required
of it hereunder in a diligent and professional 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.
4
<PAGE>
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.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WALSH INTERNATIONAL INC.
By:________________________________
SOURCE INFORMATICS INC.
By:________________________________
<PAGE>
EXHIBIT B
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.
42
<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 to Source a fee
43
<PAGE>
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.
44
<PAGE>
(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
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 liquidation 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
45
<PAGE>
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, 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.
46
<PAGE>
(b) Source shall use its best efforts to render the services required of
it hereunder in a diligent and professional manner.
(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
47
<PAGE>
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:
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.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WALSH INTERNATIONAL INC.
By:__________________________
SOURCE INFORMATICS INC.
By:__________________________
49
<PAGE>
EXHIBIT C
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
50
<PAGE>
directly to its client through Walsh technology services, minimizing the need
for reprocessing.
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.
51
<PAGE>
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.
(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 Agreement, 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.
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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.
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
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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.
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-existing
materials, other than program code or microcode, of one party are contained in
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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 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.
55
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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. Thereafter, 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 termination, however, Walsh or Source, as the case
may be, shall return to the other all promotional material and other
confidential information in its possession regarding the other company's
business.
56
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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 alteration 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 unenforceability shall only apply as to such party in the specific
jurisdiction where such judgment shall be made.
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
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delivery service, or registered or certified mail, return receipt requested, or
telegraphed, telecopied 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 construed in
-------------
accordance with and governed by the laws of the State of Delaware.
58
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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:
-------------------------------
SOURCE INFORMATICS INC.
By:
-------------------------------
59
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EXHIBIT D
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");
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WHEREAS, the SOURCE Group intends to provide physician-linked
prescription database services to pharmaceutical and 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 internal use in the development and
maintenance of the SOURCE Group's SOURCE products and related services;
(ii) use the Pharbase Databases for the purposes of collecting,
verifying and disseminating physician linked prescribing information; and
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(iii) use the information derived from the Pharbase Databases that
becomes part of the SOURCE physician-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,
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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 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
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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 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.
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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 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.
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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 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
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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 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.
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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.
(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 appointing 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.
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(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,
telecopied, or teletyped to the following addresses:
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
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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.
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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:____________________________________
SOURCE INFORMATICS INC.
By:___________________________________
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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).
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EXHIBIT E
FACILITIES AGREEMENT
--------------------
THIS AGREEMENT, entered into as of April , 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
__________________ (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.
73
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
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 Leases. WALSH hereby
represents that each WALSH Company is in compliance with the material terms
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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 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 particular 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
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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 hereinabove, 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 WALSH 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
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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 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 commencing 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
----------
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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
automatically 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 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
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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 sublessee based upon their respective square footage
allocation.
(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.
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(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
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.
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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 sub-lease. WALSH shall name SOURCE or the appropriate SOURCE Company
as an additional insured under each policy of insurance pertaining thereto.
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(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 reimburse 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, cost or expense, including
reasonable attorneys' fees, arising out of the use and occupancy by SOURCE
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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:
(i) warehouse, storage and retrieval of records;
(ii) all mailroom functions, including overnight pickup and
deliveries of mail, outbound general business mailings, including
staffing and labor consistent with prior business practice;
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(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 presentation of an invoice stating the amount due together
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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.
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(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 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 sub-lease from the applicable WALSH
Company to the applicable SOURCE Company.
14. ADDITIONAL AGREEMENTS OF THE PARTIES
------------------------------------
The SOURCE Company conducting the SOURCE business in the U.S.
(formerly Walsh America Limited) 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.
Unless otherwise mutually agreed, the monthly rental charge 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
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greater of the square footage occupied prorata by the SOURCE Company
(including square footage occupied by its other lessee) and the WALSH
Company at that location.
This lease shall be under the same terms and conditions as provided
herein, except that the WALSH Company may also terminate such sublease at
any time upon at least 90 days notice to the appropriate SOURCE Company.
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.
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(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
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(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-
leases, by the laws of the countries in which the premises are located.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
WALSH INTERNATIONAL INC.
By: ________________________________
SOURCE INFORMATICS INC.
By: ________________________________
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APPENDIX A
----------
<TABLE>
<CAPTION>
WALSH COMPANY SOURCE COMPANY LOCATION OF RENTAL
(LESSOR) (LESSEE) SPACE LEASED CHARGES
- --------------- --------------- -------------- -------------------
<S> <C> <C> <C>
Walsh U.K. Source Coltex House Unless otherwise
Limited 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 and other facilities
Road related costs at
Hampton Court that location. The
Surrey KT8 9BX basis for allocation
will be the square
Source Rue de Stalle 63 footage occupied
Walsh Belgium Informatics 1180 Brussels prorata by the SOURCE
S.A. Belgium S.A. Company and the WALSH
Company at that
Source Burospace 9 location.
Informatics 91571 Bievres
Walsh France S.A. France S.A. Cedex
Source Centro Uffici
Informatics S. Siro
Walsh Italia Italia S.A. Via Caldera 21
S.r.l. 20153 Milan
</TABLE>
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included herein and to the incorporation by reference of our reports dated July
16, 1997 (except with respect to Note 18, for which the date is August 20, 1997)
included in National Data Corporation's Annual Report on Form 10-K for the year
ending May 31, 1997 and to all references to our firm included in or made a part
of this registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
November 10, 1997
