<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
---------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NO. 001-12392
NATIONAL DATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C>
DELAWARE 58-0977458
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 728-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<C> <S>
Common Stock, Par Value $.125 Per Share New York Stock Exchange, Inc.
Junior Preferred Stock Purchase Rights New York Stock Exchange, Inc.
5% Convertible Subordinated Notes due
2003 New York Stock Exchange, Inc.
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filer pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $1,274,723,172 based upon the last reported sale price on The
New York Stock Exchange on August 25, 1998 using beneficial ownership of stock
rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934 to
exclude voting stock owned by all directors and officers of the registrant,
some of whom may not be held to be affiliates upon judicial determination.
The number of shares of the registrant's common stock, par value $.125,
outstanding as of August 25, 1998 was 33,754,570 shares.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
DOCUMENT FORM 10-K
-------- ---------
<S> <C>
Portions of the Company's Definitive Proxy Part III
Statement relating to the 1998 Annual Meeting of
Stockholders to be held on October 22, 1998
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
NATIONAL DATA CORPORATION
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
-----------------
PART I
- ------
Item 1. BUSINESS............................................. 3
Item 2. PROPERTIES........................................... 15
Item 3. LEGAL PROCEEDINGS.................................... 16
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.......................................... 16
EXECUTIVE OFFICERS OF THE REGISTRANT.......................... 16
PART II
- -------
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS...................... 18
Item 6. SELECTED FINANCIAL DATA.............................. 18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.... 18
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK................................ 18
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......... 18
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........... 18
Part III
- --------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT....................................... 19
Item 11. EXECUTIVE COMPENSATION.............................. 19
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................... 19
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...... 19
PART IV
- -------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.............................. 20
SIGNATURES.................................................... 26
APPENDIX A.................................................... 28
<PAGE>
SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD LOOKING STATEMENTS
When used in this Annual Report on Form 10-K, in documents incorporated herein
and elsewhere by management or National Data Corporation ("NDC" or the
"Company") from time to time, the words "believes," "anticipates," "expects" and
similar expressions are intended to identify forward-looking statements
concerning the Company's business operations, economic performance and financial
condition, including in particular, the Company's business strategy and means to
implement the strategy, the Company's objectives, the amount of future capital
expenditures, the likelihood of the Company's success in developing and
introducing new products and expanding its business, and the timing of the
introduction of new and modified products or services. For those statements, the
Company claims the protection of the safe harbor for forward looking statements
contained in the Private Securities Litigation Reform Act of 1995. These
statements are based on a number of assumptions and estimates which are
inherently subject to significant risks and uncertainties, many of which are
beyond the control of the Company 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 the Company's forward-looking statements,
including the following factors: (a) those set forth in Exhibit 99.1 to this
Annual Report on Form 10-K and elsewhere herein; and (b) those set forth from
time to time in the Company's press releases and reports and other filings made
with the Securities and Exchange Commission. The Company cautions that such
factors are not exclusive. Consequently, all of the forward-looking statements
made herein are qualified by these cautionary statements and readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revisions of 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.
2
<PAGE>
PART I
------
Item 1. BUSINESS
- -----------------
GENERAL
National Data Corporation (together with its subsidiaries, herein referred to
as the "Company" or "NDC") is a Delaware corporation that was incorporated in
1967. The Company is a leading provider of high volume information services and
systems to the health care and electronic commerce markets. The Company serves a
diverse customer base comprised of almost 120,000 health care providers, 1,000
health care payers, 3,600 payer plans, 1,250,000 merchant terminals, 13,000
corporations and more than 700 financial institutions, as well as numerous
federal and state government agencies. The Company markets its services directly
to retailers and health care providers, payers, pharmaceutical manufacturers and
others, and indirectly through business alliances with a wide range of banks,
insurance companies and distributors. The Company is one of the largest
independent providers of health care information and electronic commerce
services in the United States.
NDC's Health Information Services offers a broad scope of products and
services that serve a diverse range of health care markets. The primary
products and services include electronic claims processing and adjudication
services, practice management systems, electronic data interchange ("EDI")
services, billing services, business office management services and data
warehousing/analysis. The primary markets include pharmacists, dentists,
physicians, hospitals, health maintenance organizations, managed care companies,
pharmaceutical manufacturers and distributors, as well as other health care
providers. Management believes that NDC's Health Information Services business
unit is the broadest collector, processor and distributor of information to more
segments of the health care industry than any other single health information
services provider. For fiscal 1998, approximately 55% of the Company's total
revenue was derived from the Company's health care information systems and
services, which represent the fastest growing portion of the Company's business.
The Company's Electronic Commerce business unit offers a complete range of
services to assist customers with the movement of electronic payment and
financial information. These services primarily include merchant and cardholder
processing, credit and debit transaction processing, check guarantee and
verification, electronic authorization and capture, terminal management
services, portfolio risk management, purchase card services and financial
electronic data interchange ("FEDI"). The primary markets include global and
domestic financial institutions, corporations, alliance partners, federal and
state governmental agencies, universities, lodging, restaurants, retail
businesses and health care providers. The Company's Electronic Commerce
business represented approximately 45% of the Company's total revenue for fiscal
1998.
3
<PAGE>
The Company's products and services offer a wide range of value-added
information with greater convenience to purchasers and providers of goods and
services. These products and services reduce processing costs, settlement
delays and losses from fraudulent transactions. NDC's advanced high speed
computer and telecommunications network enables the Company to electronically
process, capture and transmit a high volume of point-of-service transactions 24
hours a day, seven days a week. While the transition from paper-based to
electronic transaction processing continues, the earliest and most significant
penetration has occurred in the areas of credit card authorization and
settlement and pharmacy transaction processing. NDC believes that the rapid
transition to electronic transaction processing in these areas demonstrates the
potential for automation of other market segments, requiring timely information,
which are still dominated by paper-based processing, such as additional health
care applications, check and cash transactions and the transfer of information
between businesses.
The Company's business strategy is to be an end-to-end solutions provider of
value-added systems and services in the markets it serves. NDC believes that
both the health care and electronic commerce markets present attractive
opportunities for continued growth. In pursuing its strategy, the Company seeks
both to increase its penetration of existing applications and to continue to
identify and create new markets for its services. The Company will also continue
to seek to enhance existing products and develop, as well as acquire, new
systems and services; such as services relating to credit card issuing services,
financial electronic data interchange and health care information management
services.
To support its business strategy, the Company has expanded its focus on
acquisition opportunities and alliances with other companies that allow NDC to
increase its market penetration, technological capabilities, product offerings
and distribution capabilities. In fiscal year 1998, six (6) purchase
acquisitions (one (1) of which was closed by Physician Support Systems, Inc.
("PHSS") prior to December 19, 1997) were completed which gave NDC expanded
capabilities and customer bases in the informational services, pharmacy systems,
physician, and electronic commerce markets. The most significant of these
acquisitions was on December 15, 1997, when the Company acquired two related
healthcare information management businesses based in Phoenix, Arizona. In this
transaction the Company acquired the stock of Source Informatics Inc., a
privately held company, and the stock of a subsidiary of Pharmaceutical
Marketing Services Inc. ("PMSI"), which holds its Over-The-Counter Physician
Survey business unit as well as PMSI's interest in a joint venture it formed
with Source Informatics Inc (collectively "Source"). In addition, on December
19, 1997, the Company merged with PHSS in a pooling-of-interests transaction, to
expand geographic presence and market share in physician and hospital management
services. During fiscal year 1997, the Company completed ten (10) acquisitions
(four (4) of which were closed by PHSS prior to December 19, 1997).
4
<PAGE>
INDUSTRY BACKGROUND
Advances in computer software, hardware and telecommunications technology have
aided the development of on-line, real-time information processing systems that
electronically capture and transmit high volumes of information. These advances
in technology allow information processors to offer greater convenience to
purchasers and providers of goods and services and reduce processing costs,
settlement delays and losses from fraudulent transactions.
HEALTH CARE MARKET
The health care sector of the market for information services and systems is
growing rapidly due to the need of employers, health care payers and providers
to control costs and to improve quality of care. A high percentage of health
care transactions are still processed using manual, paper-based methods. Third
party payers, managed care companies and health care providers continue to seek
methods to automate processing and obtain information in order to reduce costs
and improve the quality of health care services. The Company believes the health
care industry is one of the largest untapped markets for electronic information
processing services, including the electronic transmission and capture of data
for on-line eligibility verification and reimbursement for services. The
application of technology to improve the flow of information to address the
quality of patient care is expanding as well.
Since the late 1980s, electronic processing technology has been applied to the
transmission and capture of data for pharmacy claims and transaction processing.
This technology has been adapted to the processing of other health care data,
including a variety of transactions for dentists, physicians and hospitals.
The Company believes that the ability to offer total end-to-end solutions is
an important competitive advantage as automated transaction processing and the
availability of information in the health care market continues to grow. As
electronic processing of health care claims accelerates, the Company believes it
will be important for companies to be able to offer integrated, value-added
services and systems to industry participants who continue to automate. Included
in the market's requirements are practice management systems, contract
management, referrals, eligibility verification and outsourcing capabilities, as
well as new information processing services. The market includes, among others,
managed care companies, payers, pharmaceutical manufacturers, and providers in
the health care markets.
Consistent with this strategy, at the end of fiscal 1996 the Company acquired
Conceptual Systems and C.I.S. Technologies, Inc. ("CIS"). In fiscal 1997, the
Company acquired Equifax Health EDI Services, Inc. and Health Communication
Services, Inc. These acquisitions provided additional penetration of the
physician and hospital electronic transaction markets and expanded the scope of
the Company's health care product offerings to include managed care software and
services and accounts receivable and business office consulting and outsourcing
services. With the CIS merger, the Company became the
5
<PAGE>
worldwide leader in hospital electronic claims processing services. That
position was strengthened by the acquisition of Health Communication Services,
Inc. The Company's position in the physician market was expanded by those as
well as the acquisition of the Equifax Health EDI business.
In the merger with C.I.S. Technologies, Inc. ("CIS") on May 31, 1996, the
Company gained presence and capability in the delivery of hospital billing and
accounts receivable management services. In fiscal 1998, the Company increased
its geographic presence and market share in hospital management services and
expanded into physician management services, with the merger with PHSS, to
position NDC as a leading provider of information services in both the hospital
business office and physician markets. In addition, the Company acquired Source
Informatics Inc., a major provider of information services to pharmaceutical
manufacturers and other segments of the health care industry. This strategic
acquisition expanded the Company's information management services capabilities,
introducing new data collection, database management and analytical modeling.
These acquisitions have been subsequently integrated with previous NDC internal
programs addressing complimentary products and services.
ELECTRONIC COMMERCE MARKET
Electronic transaction processing for the electronic commerce market involves
transaction authorization, data capture and settlement for credit and debit
cards, check verification and guarantee services, financial electronic data
interchange and electronic cash management. Most retail credit card
transactions are no longer processed through paper-based systems and are instead
electronically authorized, with an increasing number electronically settled as
well. The Company believes that the number of transactions will continue to
grow and that an increasing percentage of these transactions will be processed
electronically due to convenience, efficiency and a desire to reduce fraud and
other processing costs in a continually growing number of vertical markets in
the U.S. and internationally.
The Company believes that there are significant opportunities for continued
growth in the application of electronic transaction processing services to the
electronic commerce market. Utilization of debit cards as a general payment
mechanism for goods and services continues to increase. Smart cards are also
becoming more widely accepted. The Company is also seeing good growth in the
check verification/guarantee areas. There is also significant potential for
growth in the use of credit and debit cards in other traditional cash payment
markets such as fast-food restaurants, gaming establishments, cinemas and
convenience stores. The increased use of credit and debit cards for such
transactions is primarily driven by the convenience they provide as well as the
ability to efficiently track expenses and purchase activity. The continued
rapid expansion of the Internet also provides potential growth opportunities for
electronic payment applications. In addition, the Company believes the
proliferation of affinity or co-branded cards that provide consumers
6
<PAGE>
with added benefits should contribute to increased use of credit and debit cards
and the growth of the electronic commerce market.
Purchasing cards provide business-to-business credit card acceptance for
industries that have not traditionally utilized credit cards. Purchasing cards
replace the paper ordering, invoicing and payment processing with electronic
transactions. This market continues to grow and provide excellent opportunities.
Other service providers similar to the Company provide high volume electronic
transaction processing and support services directly to banking institutions and
other new entrants into the business. The shift in the industry from
traditional financial institution providers to independent providers is due in
large part to more efficient distribution channels as well as the increased
technological capabilities required for the rapid and efficient creation,
processing, handling, storage and retrieval of information. These technological
capabilities have become increasingly complex, requiring significant capital
commitments to develop, maintain and update the systems necessary to provide
these technologically advanced services at a competitive price. As a result,
several large merchant processors, including the Company, have expanded their
operations through the creation of alliances or joint ventures with banks and
acquisitions of new merchant accounts from banks who previously serviced those
accounts. In addition, many small information processing organizations are
consolidating with larger service providers.
In addition to services that enable merchants to accept credit and debit
cards, the market continues to expand to include increasing levels of check
verification and guarantee services. Demand for these services has been growing
in recent years as merchants seek to reduce losses related to bad checks and use
check acceptance to increase sales.
During fiscal 1996, the Company further expanded its presence and range of
services for the electronic commerce market. The Company formed Global Payment
Systems for the primary purpose of combining two of the industry's leading
electronic payment processing operations to create one of the largest such
operations in the world and to expand to a new class of back office services.
MasterCard's Merchant Automated Point-of-Sale Program ("MAPP") was acquired by
the Company and combined with NDC's card authorization network services, certain
of its merchant processing back office services and the Company's information
systems and services business. This combination resulted in a broadening of the
products and services available to the Company's customers. During fiscal 1997,
Global acquired Electronic Data Systems Corporation's ("EDS") service bureau-
based card processing business, adding credit card issuing as well as additional
merchant processing capabilities to its existing business line. The Company also
acquired Merchant Services USA, Inc., a terminal deployment and customer support
management business in fiscal 1997. With the product capabilities acquired in
these transactions, combined with the Company's extensive range of electronic
commerce, the Company is now positioned to provide a full range of end-to-end
systems and services to its target markets.
7
<PAGE>
BUSINESS STRATEGY
The Company's business strategy centers on providing end-to-end solutions,
value-added information processing services and application systems in the
markets it serves. NDC believes that both the health care and electronic
commerce markets present attractive opportunities for continued growth. In
pursuing its business strategy, the Company seeks both to increase its
penetration of existing information processing and application systems markets
and to continue to identify and create new markets through the:
. development of value-added applications, enhancement of existing
products and development of new systems and services;
. expansion of distribution channels; and
. acquisition of, or alliance with, companies that have desirable
products, market share and/or distribution capabilities.
PRODUCTS AND SERVICES
HEALTH INFORMATION SERVICES
The Company is a leading provider of a full range of products and services
that help its clients to:
. Increase efficiency;
. Enhance the quality of patient care;
. Optimize revenue and profitability;
. Increase cash flow;
. Reduce overhead costs;
. React quickly to changing market conditions;
. Improve business operations;
. Streamline administrative processes; and
. Maintain compliance.
The Company's products include electronic claims processing, claims adjudication
and payment systems, funding capabilities, billing services, accounts receivable
resolution, business office management services, practice management systems and
clinical database information for pharmacies, dentists, physicians,
pharmaceutical manufacturers and distributors, managed care organizations,
hospitals, HMO's, clinics and nursing homes. Revenue for the Company's Health
Information Services consists of recurring transaction processing, monthly
maintenance and support fees, software license revenue and proceeds from the
sale of practice management systems, as well as upgrade charges for additional
applications. Fees for electronic claims processing services are based on a per
transaction
8
<PAGE>
rate, with the rate varying depending upon the volume and scope of services
provided. In addition, the Company realizes revenue based on a percentage of the
net collections related to the management of hospital and physician group
practice business offices.
NETWORK SERVICES
The Company's electronic processing services are offered to managed care
organizations, pharmacies, physicians, HMO's and preferred provider
organizations. These services include transaction submission, eligibility
verification, patient-specific benefit coverage, transaction data capture and
editing, claim adjudication and retrospective and prospective drug utilization
review. Electronic processing for health care transactions represents the
Company's fastest growing service. The Company expanded its presence in the
health care transaction processing market with two acquisitions in fiscal 1997,
Health Communication Services, Inc., specializing in hospital transaction
processing and Equifax Health EDI Services, Inc., further expanding NDC's
penetration of the market for transaction clearing and processing systems for
physicians' offices.
PRACTICE MANAGEMENT SYSTEMS
The Company's practice management systems are designed to provide the health
care market with application solutions that improve the efficiency of
operations, address cost containment concerns and enhance overall quality of
patient care. In addition, NDC's practice management systems are offered with
the Company's transaction processing services, check, credit and debit card
processing capabilities and other associated functions, such as inventory
reporting and ordering. These systems are offered through various practice
management systems vendors, payer organizations and health care product
distributors.
The Company's pharmacy practice management systems provide solutions for
independent and chain pharmacies, hospitals, mail order, HMO's, clinics and
nursing homes. These systems enable pharmacists to manage and perform patient
registration, drug record-keeping, private and third-party billing, inventory
control and ordering, price updates, management reporting and drug database
updates to detect potential clinical dispensing and prescribing problems. In
addition, the Company's systems provide value-added transaction processing
services. The Company's systems are sold and maintained by the Company and can
be tailored to the needs of users utilizing micro- and mini-computer platforms.
In fiscal years 1996 and 1997, the Company expanded the capabilities of its
pharmacy practice management systems through the development of sophisticated,
new order entry and inventory management capabilities and enhanced retail point-
of-sale capabilities. The Company also introduced products enhancing customers'
ability to order re-fill prescriptions via telephone and developed
physician/pharmacy connectivity products enabling physicians to electronically
transmit prescriptions directly to pharmacies utilizing NDC's pharmacy
management systems. In fiscal 1998, the Company expanded internationally, with
the acquisition of two pharmacy systems companies in the United Kingdom,
creating a significant presence in that country.
9
<PAGE>
The Company's dental management systems are designed to provide dentists with
patient record accounting, patient scheduling and recall, billing and
collection, insurance transaction information and electronic processing to
improve the efficiency of office management. The systems also incorporate
advanced clinical functionality with customary business automation functions.
The Company's physician management systems are designed to provide physicians
with patient scheduling, billing and collection, patient record accounting,
eligibility verification, coordination of multiple payers and payment plans,
insurance transaction information and electronic processing designed to improve
the efficiency of office management, as well as electronic communication with
pharmacies to reduce time spent on prescription requests and refill
authorizations.
MANAGEMENT SERVICES
The Company provides business office services designed to increase
profitability in hospital and physician group business offices. To assist with
managed care contract administration, the Company offers systems that provide
consistent interpretation of contract terms and improved revenue recovery rates.
Consultant audit services identify lost revenue, improve billing accuracy and
speed reimbursement. The Company also can provide comprehensive outsourcing
services ranging from accounts receivable management to financial,
administrative and strategic support, data management and information services.
INFORMATION SOLUTIONS
The Company is a leading provider of proprietary health care information,
technology and consulting services, primarily to the pharmaceutical and retail
pharmacy markets. The Information Solutions services enable its customers 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. The Company provides its services
through a broad array of information, including data mining and integrated
marketing decision-making tools. The Information Solution database is a
repository of intelligence on managed care organizations, prescribers,
retailers, prescriptions and non-personalized patient data. Using this database
and other tools, the Company is able to provide critical competitive
intelligence for its client companies. The Company 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.
10
<PAGE>
ELECTRONIC COMMERCE
The Company's Electronic Commerce products provide a wide range of end-to-end
transaction processing alternatives to the retail, hospitality, lodging, health
care and government markets. The Company offers credit and debit card services,
check verification and guarantee and other related services directly to
merchants and indirectly through financial institutions.
GLOBAL PAYMENT SYSTEMS
Global Payment Systems is a worldwide provider of electronic commerce products
and services that manage, support and speed the processing of funds in a cost-
effective manner.
The company's e-Global(TM) line provides a comprehensive range of financial
and information management applications and end-to-end payment processing
products and services enabling both issuers and acquirers to provide innovative
merchant services, operate more cost-effectively and to meet their profitability
goals.
Global has offices located in the United States, Canada, United Kingdom and
Japan serving hundreds of thousands of businesses and corporations, hundreds of
financial institutions, and numerous government agencies.
ACQUIRER SERVICES. The acquirer services provide a single source solution for
delivering merchant payment services. These services consist of:
. electronic storefront capabilities with secure payment processing;
. internet gateway services;
. comprehensive authorization network for credit cards, debit cards
and checks;
. electronic data capture (which incorporates the capabilities of the
Company's authorization system, combined with enhanced software)
enables an entire data transmission to be electronically captured
and transmitted to provide faster clearing through the banking
system;
. an advanced merchant accounting system allowing maximum flexibility
to record activity and fund merchants;
. exception processing, including sales draft retrieval and chargeback
resolution;
. point of sale terminal deployment and management;
. fraud monitoring; and
. customized, value-added applications for retailers, restaurants,
lodging and direct marketers.
11
<PAGE>
ISSUER SERVICES. Global's issuer services allow financial institutions to
create new card programs and monitor credit risk to enhance the profitability of
their portfolios by providing services such as:
. authorization;
. card production, fulfillment and inventory services;
. automated credit application processing systems;
. cardholder statements;
. exception processing; and
. cardholder analysis systems.
ELECTRONIC INFORMATION SOLUTIONS. Global's information systems and services
products include cash management, information reporting and electronic data
interchange ("EDI"). Global's cash management system is specifically designed
for use by large multi-national corporations and is marketed internationally.
The products and services provide multi-currency/multi-format financial,
management and operational data to corporate and government institutions
worldwide. Organizations use these services to collect, consolidate and report
financial, administrative and operating data from hundreds of thousands of
locations.
INTEGRATED PAYMENT SYSTEMS
NDC is a leader in partnering with banks and others to offer its merchant
processing support. Under the Company's Bank Alliance Program, the Company and
financial institutions jointly market and sell card acceptance services.
Integrated Payment Systems performs the financial settlement between the
merchant and the card association, offers risk management services and provides
merchant customer support in addition to all the authorization, terminal
deployment and back office services performed by Global Payment Systems. Fees
for the Company's merchant processing services are principally based on a
percentage of the dollar volume of transactions processed for merchants.
Integrated Payment Systems also offers merchants check guarantee services.
Check guarantee differs from check verification in that the Company not only
verifies the transaction but also guarantees payment. If a check is not paid,
the Company assumes the right to collect from the individual writing the check.
Fees for the Company's check services are based on a per transaction rate, while
fees for its check guarantee services are based on a percentage, or discount, of
the face value of each check guaranteed by the Company.
12
<PAGE>
SALES AND MARKETING
The Company's electronic transaction processing services are offered to the
health care markets directly through Company personnel and through alliances
with other organizations. The Company's practice management systems are marketed
primarily through alliances with other companies, value-added re-sellers, as
well as the Company's personnel. During 1998, the Company launched the NDC
Health Information Services branding program, to organize its business under a
single identity. The Company markets its electronic commerce products and
services through financial institutions, bank alliance programs, its own sales
personnel and also through independent contractors.
OPERATIONS AND SYSTEMS
The Company operates multiple data and customer support facilities. The
primary facilities are in Atlanta, Georgia; Tulsa, Oklahoma; Hanover, Maryland;
Phoenix, Arizona; and St. Louis, Missouri with others in Ohio, Pennsylvania,
North Carolina, Texas, California, Virginia, Canada and the United Kingdom.
Because of the large number and variety of NDC's products and services, the
Company does not rely on a single technology to satisfy its sophisticated
computer systems needs but instead employs the best available technology that is
suitable for each particular task. Given this approach, NDC utilizes (i) Tandem
fault-tolerant computers for high volume, fast response transaction processing;
(ii) client-server technology for end-user data base applications; (iii) the
latest Unisys mainframe class systems and the OS/2200 operating system for large
scale transaction and batch data base processing; and (iv) UNIX and Windows
based systems for specialized communication applications systems. These systems
are linked via high speed, fiber optic-based networked backbones for file
exchange and inter-system communication purposes. NDC also maintains storage
systems connected to the backbones, including a robotic tape library and optical
storage for archival purposes. All of the Company's systems are supported by an
experienced systems support, operations and production control staff with an
advanced network control center.
The Company's communications network is made up of several discrete networks,
each designed for a different purpose. NDC maintains three primary networks: a
high speed, short transaction network called FASTNET; a private line nationwide
high bandwidth backbone network; and a dial-up voice/data network for
interactive and voice traffic. The Company also maintains a number of support
services offering satellite, wireless, INTERNET and ISDN/DOV connectivity.
13
<PAGE>
COMPETITION
The markets for the application systems and services offered by the Company
are highly competitive. The Company has a number of actual and potential
competitors for all of the systems and services that it offers. Many of the
Company's services compete directly with computer manufacturers that encourage
businesses to purchase or lease the manufacturers' computers and establish in-
house systems. In addition to this competition, the Company believes that there
are several companies that have the capability to offer some of the Company's
services in competition with the Company, certain of which are substantially
larger than the Company. The Company believes that its knowledge of its
specific markets and its ability to offer market specific, integrated solutions
to its customers, including hardware, software, processing and network
facilities and its flexibility in packaging these products, is a positive factor
pertaining to the competitive position of the Company. The Company recognizes,
however, that its industry segment is increasingly competitive. The key
competitive factors for the Company are functionality of products, quality of
service and price.
RESEARCH AND DEVELOPMENT
During fiscal 1998, 1997, and 1996, the Company expensed approximately $77.6
million, $13.2 million, and $8.8 million, respectively, on activities relating
to the development and improvement of new and existing products, services and
techniques. Research and development costs for fiscal 1998 includes $67.0
million determined by an independent third party valuation representing in-
process research and development activities acquired through the Source
acquisition. These costs were not capitalizable and appropriately charged to
expense under generally accepted accounting principles (see Note 11 to the
Consolidated Financial Statements).
EMPLOYEES
As of May 31, 1998 the Company and its subsidiaries had approximately 6,100
employees.
14
<PAGE>
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENT
AND CLASSES OF SERVICES
In fiscal 1998, the Company operated in one reportable industry segment, Data
Processing Services. See Management's Discussion and Analysis of Financial
Condition and Results of Operations for a further discussion.
The following table sets forth the approximate contribution to consolidated
revenues of each class of service in the Data Processing Services segment during
the Company's last three fiscal years.
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
Revenue:
Health Information Services $357,498 $267,488 $210,164
Electronic Commerce:
Integrated Payment Systems 159,310 131,477 104,829
Global Payment Systems 159,456 149,797 79,650
Intercompany (27,220) (23,595) (3,555)
-------------------------------------------
291,546 257,679 180,924
-------------------------------------------
Total $649,044 $525,167 $391,088
===========================================
</TABLE>
ITEM 2. PROPERTIES
- -------------------
In January 1987, the Company took occupancy of a newly constructed six-story,
120,000 square foot corporate headquarters building at Two National Data Plaza
in Atlanta, Georgia. There is no outstanding debt on the facility.
In addition to the above facility, the Company leases or rents a total of 83
other facilities to serve as regional operating centers or sales offices. The
Company owns or leases a variety of computers and other computer equipment for
its operational needs. In recent years the Company has significantly upgraded
and expanded its computers and related equipment in order to increase
efficiency, enhance reliability, and provide the necessary base for business
expansion.
The Company believes that its facilities and equipment are suitable and
adequate for the business of the Company as presently conducted.
Information about leased properties is incorporated by reference from Note 13
of the Notes to the Consolidated Financial Statements on page A-40 of this
Report.
15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company is party to a number of claims and lawsuits incidental to its
business. In the opinion of management, the ultimate outcome of such matters, in
the aggregate, will not have a material adverse impact on the Company's
financial position, liquidity or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, titles, ages, and business experience of all present executive
officers of the Company are listed below. All officers hold office at the
pleasure of the Board of Directors, unless they earlier retire or resign.
<TABLE>
<CAPTION>
Name Business Experience Age
---- ------------------- ---
<S> <C> <C>
Robert A. Yellowlees Chairman of the Board of the Company since June 1992; 59
President, Chief Executive Officer and Chief Operating
Officer of the Company since May 1992; director of John
H. Harland Co. and Protective Life Corporation. Mr.
Yellowlees has been a director of the Company since
April 1985.
Steven L. Arnold General Manager, Network Services since May 1998; Chief 58
Administrative Officer of the Company from March 1997 to
May 1998; Lt. General, United States Army from July 1994
to March 1997; Major General, United States Army from
April 1991 to July 1994.
Robert R. Brown General Manager, Information Solutions since December 54
1997; President and Chief Operating Officer, Walsh
America from January 1995 to December 1997; Senior Vice
President, Information Services and Chief Information
Officer FoxMeyer Corporation from 1992 to January 1995
</TABLE>
16
<PAGE>
<TABLE>
Name Business Experience Age
---- ------------------- ---
<S> <C> <C>
J. Michael Drinkwater General Manager, Physician Management Services since 45
December 1997; President and Chief Operating Officer of
Physician Support Systems, Inc. from June 1997 to
December 1997; President of Medaphis Corporation's
physician services division from March 1996 to May 1997;
President of Gottlieb's Financial Services from August
1990 to March 1996.
Thomas M. Dunn General Manager, Integrated Payment Systems since June 41
1996; Group Vice President from August 1992 to June
1996; and Division Vice President from August 1988 to
August 1992.
Walter M. Hoff President and Chief Executive Officer, Health 46
Information Services since August 1998; Executive Vice
President of First Data Corporation from April 1992 to
July 1998.
David K. Hunt President, Chief Executive Officer and member of the 52
Board of Directors of Global Payments Systems LLC, a
subsidiary of the Company, since January 1997; President
and Chief Executive Officer of AT&T Universal Card
Services, Inc. from May 1993 to November 1996; Senior
Executive Vice President of Signet Banking Corporation
from October 1989 until May 1993.
E. Michael Ingram General Counsel and Secretary of the Company since 46
January 1985.
Kevin C. Shea Chief Financial Officer of the Company since May 1998; 48
Executive Vice President, Corporate Strategy & Business
Development from June 1996 to May 1998; General Manager,
Integrated Payment Systems, from September 1992 to May
1996 and Executive Vice President, National Data Payment
Systems, Inc. ("NDPS") from December 1990 through August
1992.
David H. Shenk Controller and Chief Accounting Officer of the Company 50
since January 1998; Corporate Controller, Rollins, Inc.,
1992-1997
</TABLE>
17
<PAGE>
PART II
-------
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
- ----------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
- ---------------------------
Market Price and Dividend Information appears on Page A-2 of this report.
Item 6. SELECTED FINANCIAL DATA
- --------------------------------
Selected Financial Data appears on Page A-1 of this report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages A-3 to A-11 of this report.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
Not applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
Financial statements and supplementary information appears on pages A-12 to A-43
of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
Not applicable.
18
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The Company hereby incorporates by reference the information contained under
the heading "Election of Directors - Certain Information Concerning Nominee and
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" from
its definitive Proxy Statement to be delivered to the stockholders of the
Company in connection with the 1998 Annual Meeting of Stockholders to be held on
October 22, 1998. Certain information relating to executive officers of the
Company appears at pages 16 to 17 of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The Company hereby incorporates by reference the information contained under
the heading "Election of Directors - Compensation and Other Benefits" from its
definitive proxy statement to be delivered to the stockholders of the Company in
connection with the 1998 Annual Meeting of Stockholders to be held on October
22, 1998. In no event shall the information contained in the proxy statement
under the sections entitled "Stockholder Return Analysis" and "Report of the
Compensation Committee" be included herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The Company hereby incorporates by reference the information contained under
the headings "Election of Directors - Common Stock Ownership of Management" and
" - Common Stock Ownership by Certain Other Persons" from its definitive Proxy
Statement to be delivered to the stockholders of the Company in connection with
the 1998 Annual Meeting of Stockholders to be held on October 22, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Neil Williams, a Director of the Company, is a partner of Alston & Bird LLP
(attorneys and counsel for the Company). The Company paid Alston & Bird LLP
approximately $830,700, $1,371,600 and $572,300 in fiscal 1998, 1997 and 1996,
respectively for legal services rendered in connection with numerous matters.
19
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a)(1) The following consolidated financial statements for the Registrant and
its subsidiaries appear in Appendix A to this report and are filed as a part
hereof:
Consolidated Statements of Income for the three fiscal years ended May 31, 1998.
Consolidated Balance Sheets at May 31, 1998 and 1997.
Consolidated Statements of Changes in Shareholders' Equity for the three fiscal
years ended May 31, 1998.
Consolidated Statements of Cash Flows for the three fiscal years ended
May 31, 1998.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants
(a)(2) Other than as described below, Financial Statement Schedules are not
filed with this Report because the Schedules are either inapplicable or the
required information is presented in the Financial Statements or Notes thereto.
The following Schedule is filed in Appendix A as a part hereof:
Consolidated Schedule II - Valuation and Qualifying Accounts.
Report of Independent Public Accountants as to Schedule
(a)(3) Exhibits
2(i) Stock Purchase Agreement dated September 3, 1996, as amended, September 24,
1996 between the Registrant and Equifax Healthcare Information Services, Inc.
(filed as Exhibit 2 to the Registrant's Current Report on Form 8-K dated October
1, 1996, File No. 001-12392, and incorporated herein by reference.)
(ii) Stock Purchase Agreement dated December 5, 1996 among the Registrant, Blue
Cross and Blue Shield of Virginia and Consolidated Healthcare, Inc. (filed as
Exhibit 2 to the Registrant's Current Report on Form 8-K dated December 31,
1996, File No. 001-12392, and incorporated herein by reference.)
20
<PAGE>
(iii) Stock Purchase Agreement dated as of August 20, 1997, by and among
Registrant, PMSI Database Holdings, Inc. and Pharmaceutical Marketing Services,
Inc. (included as Exhibit 2.1 to the Registrant's Registration Statement on Form
S-4 (Registration No. 333-35991), as amended, previously filed and incorporated
by reference herein).
(iv) Agreement and Plan of Merger dated as of August 20, 1997 by and among the
Registrant, Source Informatics Inc., and a wholly owned Subsidiary of the
Registrant (included as Exhibit 2.1 to the Registrant's Registration Statement
on Form S-4 (Registration No. 333-35995), as amended, previously filed with the
Commission and incorporated by reference herein).
(v) Agreement and Plan of Merger dated as of October 14, 1997 by and among the
Registrant, a Subsidiary of the Registrant and Physician Support Systems,
Inc.(filed as Annex A to the Proxy Statement/Prospectus previously filed as part
of the Registrant's Registration Statement on Form S-4 (Registration No. 333-
40153) and incorporated by reference herein).
(3)(i) Certificate of Incorporation of the Registrant, as amended (filed as
Exhibit 4(a) to the Registrant's Registration Statement on Form S-8
(Registration No. 333-05427) and incorporated herein by reference).
(ii) 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.)
(iii) 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.)
(iv) Bylaws of the Registrant, as amended (filed as Exhibit 3(ii) to the
Registrant's Annual Report on Form 10-K for the year ended May 31, 1991, File
No. 001-12392, and incorporated herein by reference.)
(v) Amendment to Bylaws of the Registrant, as previously amended (filed as
Exhibit 3(iii) to the Registrant's Annual Report on Form 10-K for the year ended
May 31, 1995, File No. 001-12392, and incorporated herein by reference.)
(4)(i) Rights Agreement, dated as of January 18, 1991, between the Registrant
and the Rights Agent, as amended (incorporated by reference from Exhibit 2 to
the Registrant's Registration Statement on Form 8-A, File No. 001-12392, as
filed on October 5, 1993.)
21
<PAGE>
(ii) Form of Indenture between the Registrant and The First National Bank of
Chicago, as Trustee, relating to Registrant's 5% Convertible Subordinated Notes
due 2003 (filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated
October 29, 1996, File No. 001-12392, and incorporated herein by reference.)
(iii) Form of the Registrant's 5% Convertible Subordinated Note due 2003 (filed
as Exhibit 4.2 to Registrant's Current Report on Form 8-K dated October 29,
1996, File No. 001-12392, and incorporated herein by reference.)
(10)(i) Operating Agreement of Global Payment Systems LLC dated March 31, 1996
between MasterCard International Incorporated, GPS Holding Limited Partnership,
National Data Corporation of Canada, Ltd., National Data Corporation, NDC
International, Ltd. and National Data Payment Systems, Inc. (filed as Exhibit
10(i) to the Registrant's Annual Report on Form 10-K for the year ended May 31,
1996, File No. 001-12392, and incorporated herein by reference).
(ii) Registration Rights Agreement dated April 1, 1996 between Global Payment
Systems LLC and MasterCard International Incorporated (filed as Exhibit 10(ii)
to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1996,
File No. 001-12392, and incorporated herein by reference).
(iii) Credit Agreement dated as of March 18, 1996 between the Registrant and
Wachovia Bank of Georgia, N.A., as Agent (filed as Exhibit 10(iii) to the
Registrant's Annual Report on Form 10-K for the year ended May 31, 1996, File
No. 001-12392, and incorporated herein by reference).
(iv) Credit Agreement dated as of July 16, 1996 between the Registrant and the
First National Bank of Chicago, as Agent (filed as Exhibit 10(iv) to the
Registrant's Annual Report on Form 10-K for the year ended May 31, 1996, File
No. 001-12392, and incorporated herein by reference).
(v) Amendment dated as of October 23, 1996 to the Credit Agreement between the
Registrant and Wachovia Bank of Georgia, N.A., as Agent, dated as of May 31,
1996 (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated
October 29, 1996, File No. 001-12392, and incorporated herein by reference).
(vi) Amendment dated as of October 23, 1996 to the Credit Agreement between the
Registrant and the First National Bank of Chicago, as Agent, dated as of May 31,
1996 (filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated
October 29, 1996, File No. 001-12392, and incorporated herein by reference).
(vii) Credit Agreement dated as of December 19, 1997, among the Registrant, The
First National Bank of Chicago, as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.
22
<PAGE>
(viii) First Amendment dated April 10, 1998 to the Credit Agreement dated as of
December 19, 1997, among the Registrant, The First National Bank of Chicago, as
Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the
Lenders named therein.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
(ix) Form of Executive Severance Compensation Agreement with certain executive
officers (filed as Exhibit 10(ii) to the Registrant's Annual Report on Form 10-K
for the year ended May 31, 1986, File No. 001-12392, and incorporated herein by
reference.)
(x) Non-Employee Directors Stock Option Plan (filed as Exhibit 10(iv) to the
Registrant's Annual Report on Form 10-K for the year ended May 31, 1987, File
No. 001-12392, and incorporated herein by reference.)
(xi) 1995 Non-Employee Director Compensation Plan (filed as Exhibit 10(vii) to
the Registrant's Annual Report on Form 10-K for the year ended May 31, 1996,
File No. 001-12392, and incorporated herein by reference).
(xii) Renewal Employment Agreement effective as of May 18, 1995 between Robert
A. Yellowlees and the Registrant (filed as Exhibit 10(x) to the Registrant's
Annual Report on Form 10-K for the year ended May 31, 1994, File No. 001-12392,
and incorporated herein by reference.)
(xiii) Amended and Restated Retirement Plan for Non-Employee Directors, dated as
of April 20, 1994 (filed as Exhibit 10(xii) to the Registrant's Annual Report on
Form 10-K for the year ended May 31, 1994, File No. 001-12392, and incorporated
herein by reference.)
(xiv) Amendment to Amended and Restated Retirement Plan for Non-Employee
Directors (filed as Exhibit 4(xi) to the Registrant's Annual Report on Form 10-K
for the year ended May 31, 1995, File No. 001-12392, and incorporated herein by
reference).
(xv) 1983 Restricted Stock Plan, as amended (incorporated by reference from
Exhibit 10 to the Registrant's Registration Statement on Form S-8, No. 333-
05451).
(xvi) 1987 Stock Option Plan, as amended (incorporated by reference from Exhibit
10 to the Registrant's Registration Statement on Form S-8, No. 333-05449).
(xvii) Amended and Restated C.I.S. Technologies, Inc. Stock Option Plan
(incorporated by reference from Exhibit 10(a) to the Registrant's Registration
Statement on Form S-8, No. 333-05427).
23
<PAGE>
(xviii) Amended and Restated C.I.S. Technologies, Inc. Employee Stock Option
Plan (incorporated by reference from Exhibit 10(b) to the Registrant's
Registration Statement on Form S-8, No. 333-05427).
(xix) C.I.S. Technologies, Inc. HCC Management Stock Option Plan (incorporated
by reference from Exhibit 10(c) to the Registrant's Registration Statement on
Form S-8, No. 333-05427).
(xx) C.I.S. Technologies, Inc. 1995 Directors' Stock Option Plan (incorporated
by reference from Exhibit 10(d) to the Registrant's Registration Statement on
Form S-8, No. 333-05427).
(xxi) C.I.S. Technologies, Inc. 1995 Stock Incentive Plan (incorporated by
reference from Exhibit 10(e) to the Registrant's Registration Statement on Form
S-8, No. 333-05427).
(xxii) Supplemental Executive Retirement Plan effective June 1, 1997
(incorporated by reference from Exhibit 10(xx) to the Registrant's Annual Report
on Form 10-K for the year ended May 31, 1997, File No. 001-12392).
(xxiii) Amendment to Registrant's 1987 Stock Option Plan effective September 28,
1996 (incorporated by reference from Exhibit 10(xxi) to the Registrant's Annual
Report on Form 10-K for the year ended May 31, 1997, File No. 001-12392).
(xxiv) Amendment to Registrant's 1983 Restricted Stock Plan effective December
17, 1996 (incorporated by reference from Exhibit 10(xxii) to the Registrant's
Annual Report on Form 10-K for the year ended May 31, 1997, File No. 001-12392).
(xxv) Global Payment Systems 1996 Option Plan effective September 13, 1996
(incorporated by reference from Exhibit 10(xxiii) to the Registrant's Annual
Report on Form 10-K for the year ended May 31, 1997, File No. 001-12392).
(xxvi) Employment Agreement effective June 1, 1997 between Robert A. Yellowlees
and the Registrant (incorporated by reference from Exhibit 10(xxiv) to the
Registrant's Annual Report on Form 10-K for the year ended May 31, 1997, File
No. 001-12392).
(xxvii) Synergistic Systems, Inc. 1996 Stock Option Plan (incorporated herein by
reference from Exhibit 4(a) to the Registrant's Registration Statement on Form
S-8 (Reg. No. 333-44823).
(xxviii) Physician Support Systems, Inc. 1996 Stock Option Plan (incorporated
herein by reference from Exhibit 4(b) to the Registrant's Registration Statement
on Form S-8 (Reg. No. 333-44823).
24
<PAGE>
(21) Subsidiaries of the Registrant (included in Appendix A, page A-47).
(23) Consent of Independent Public Accountants (included in Appendix A, page A-
45).
(27) Financial Data Schedule (for SEC use only).
(99.1) Private Securities Litigation Reform Act Of 1995 Safe Harbor Compliance
Statement For Forward-Looking Statements.
(b) None.
(c) The Exhibits to this Report are listed under Item 14(a)(3) above.
(d) The Financial Statement Schedule to this Report is listed under Item
14(a)(2) above.
25
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, National Data Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NATIONAL DATA CORPORATION
By: /s/ Robert A. Yellowlees
------------------------
Robert A. Yellowlees, Chairman of the
Board, President and Chief Executive
Officer
(Principal Executive Officer)
By: /s/ Kevin C. Shea
-----------------
Kevin C. Shea
Chief Financial Officer
(Principal Financial Officer)
By: /s/ David H. Shenk
------------------
David H. Shenk
Controller
(Chief Accounting Officer)
Date: August 28, 1998
26
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by a majority of the Board of Directors of the Registrant
on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Robert A. Yellowlees Chairman of the Board, August 28, 1998
- ------------------------ Chief Executive Officer
Robert A. Yellowlees
/s/ Edward L. Barlow Director August 28, 1998
- --------------------
Edward L. Barlow
/s/ J. Veronica Biggins Director August 28, 1998
- -----------------------
J. Veronica Biggins
/s/ James B. Edwards Director August 28, 1998
- --------------------
James B. Edwards
/s/ Don W. Sands Director August 28, 1998
- ----------------
Don W. Sands
/s/ Neil Williams Director August 28, 1998
- -----------------
Neil Williams
27
<PAGE>
APPENDIX A
to
ANNUAL REPORT ON FORM 10-K
NATIONAL DATA CORPORATION AND ITS SUBSIDIARIES
FINANCIAL STATEMENTS AND SCHEDULES
CONTENTS
Selected Financial Data............................................... A-1
Market Price and Dividend Information................................. A-2
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ A-3
Consolidated Statements of Income for the three years ended
May 31, 1998..................................................... A-12
Consolidated Statements of Cash Flows for the three years ended
May 31, 1998..................................................... A-13
Consolidated Balance Sheets at May 31, 1998 and 1997.................. A-14
Consolidated Statements of Changes in Shareholders' Equity for the
three years ended May 31, 1998................................... A-15
Notes to Consolidated Financial Statements............................ A-16
Report of Independent Public Accountants.............................. A-43
Consolidated Schedule II - Valuation and Qualifying Accounts.......... A-44
Report of Independent Public Accountants As to Schedule............... A-45
Index to Exhibits .................................................... A-46
Consent of Independent Public Accountants............................. A-47
28
<PAGE>
Selected Consolidated Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Health Information Services $357,498 $267,488 $210,164 $175,529 $136,361
Electronic Commerce:
Integrated Payment Systems 159,310 131,477 104,829 88,489 78,787
Global Payment Systems 159,456 149,797 79,650 69,889 64,002
Intercompany (27,220) (23,595) (3,555) -- --
-------------------------------------------------------------------------
291,546 257,679 180,924 158,378 142,789
-------------------------------------------------------------------------
Total $649,044 $525,167 $391,088 $333,907 $279,150
Operating Income (Loss) ($25,896) $60,852 ($14,830) $29,645 $20,210
Net Income (Loss) ($61,326) $29,398 ($11,845) $18,642 $13,035
Diluted Earnings (Loss) Per Share ($1.90) $.91 ($.40) $.67 $.49
Dividends Per Share $.30 $.30 $.30 $.30 $.29
Total Assets $731,215 $626,322 $442,351 $347,663 $257,166
Long-Term Obligations $180,541 $165,388 $23,329 $44,932 $47,499
Total Shareholders' Equity $347,935 $323,249 $283,735 $174,715 $137,755
</TABLE>
All years have been restated to include the results of C.I.S. Technologies, Inc.
("CIS"), acquired May 31, 1996 and Physician Support Systems, Inc. ("PHSS"),
acquired December 19, 1997, both in pooling-of-interests transactions.
The Company incurred non-recurring charges of $120.2 million, $9.5 million and
$47.7 million in fiscal 1998, 1997 and 1996, respectively. Operating income
excluding these charges was $94.3 million, $70.4 million and $32.9 million in
fiscal 1998, 1997 and 1996, respectively. Net income excluding these charges was
$49.9 million or $1.48 per share, $39.8 million or $1.23 per share, and $21.0
million or $0.67 per share in fiscal 1998, 1997 and 1996, respectively.
A-1
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
- -------------------------------------------------------------
National Data Corporation's common stock is traded on the New York Stock
Exchange under the ticker symbol "NDC." The high and low sales prices and
dividends paid per share of the Company's common stock for each quarter during
the last two fiscal years were as follows:
<TABLE>
<CAPTION>
Dividend Per
High Low Share
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fiscal Year 1998
First Quarter $46.50 $36.31 $.075
Second Quarter 44.25 33.75 .075
Third Quarter 44.63 32.13 .075
Fourth Quarter 46.00 35.50 .075
Fiscal Year 1997
First Quarter $44.50 $33.75 $.075
Second Quarter 46.63 37.88 .075
Third Quarter 47.50 35.00 .075
Fourth Quarter 44.00 33.75 .075
</TABLE>
The number of shareholders of record as of August 14, 1998 was 3,663.
A-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For an understanding of the significant factors that influenced the Company's
results during the past three years, the following discussion should be read in
conjunction with the consolidated financial statements of the Company and
related notes appearing elsewhere in this report. All prior periods presented
include the retroactive effect of all acquisitions accounted for under the
pooling-of-interests method. These mergers include Physician Support Systems,
Inc. ("PHSS") in fiscal 1998 and C.I.S. Technologies, Inc. ("CIS") in fiscal
1996.
RESULTS OF OPERATIONS
GENERAL
The following tables are a summary of the Company's results of
operations before and after effects of non-recurring charges (In millions,
except per share data):
<TABLE>
<CAPTION>
1998 vs. 1997 1997 vs. 1996
1998 1997 1996 Change Change
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AS REPORTED
Revenue $ 649.0 $ 525.2 $ 391.1 $ 123.8 24% $ 134.1 34%
Operating Income (Loss) (25.9) 60.9 (14.8) (86.8) * 75.7 *
Net Income (Loss) (61.3) 29.4 (11.9) (90.7) * 41.3 *
Diluted Earnings (Loss) Per Share (1.90) 0.91 (0.40) (2.81) * 1.31 *
* - percentage change deemed not meaningful
EXCLUDING NON-RECURRING
CHARGES
Revenue $ 649.0 $ 525.2 $ 391.1 $ 123.8 24% $ 134.1 34%
Operating Income 94.3 70.4 32.9 23.9 34% 37.5 114%
Net Income 49.9 39.8 21.0 10.1 25% 18.8 90%
Diluted Earnings Per Share 1.48 1.23 0.67 0.25 20% 0.56 84%
</TABLE>
The Company incurred non-recurring charges of $120.2 million, $9.5
million and $47.7 million in fiscal 1998, 1997 and 1996, respectively. After-
tax, these charges were $111.2 million or $3.38 per share, $10.4 million or
$0.32 per share and $32.9 million or $1.07 per share in fiscal 1998, 1997 and
1996, respectively. In general, these charges were incurred in connection with
mergers and related restatements that occurred during each of the fiscal years
presented. The components of the charges include merger transaction costs, asset
impairment losses, and restructuring activities. The 1998 charge also includes a
$67.0 million in-process research and development charge as a result of the
acquisition of
A-3
<PAGE>
Source Informatics Inc. Restructuring activities reflect charges for severance
and other related costs associated with plans to reduce staffing in areas of
redundant operations and activities. For more detailed discussion of the non-
recurring charges, refer to Note 11 to the Consolidated Financial Statements.
The remainder of the results of operations discussion will exclude the impacts
of non-recurring charges, as the Company believes that this will provide for
more meaningful comparisons.
FISCAL YEARS 1998 AND 1997
REVENUE
<TABLE>
<CAPTION>
(In millions)
1998 1997 Increase
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Health Information Services $ 357.5 55% $ 267.5 51% 34%
Electronic Commerce:
Integrated Payment Systems 159.3 24% 131.5 25% 21%
Global Payment Systems 159.5 25% 149.8 28% 6%
Intercompany Revenue (27.3) (4%) (23.6) (4%) 16%
----------------------------------------------------------------
291.5 45% 257.7 49% 13%
================================================================
Total Revenue $ 649.0 100% $ 525.2 100% 24%
================================================================
</TABLE>
Total revenue for fiscal 1998 was $649.0 million, an increase of $123.8
million (24%) from the same period in fiscal 1997. The increase resulted from
increased revenue in Health Information Services, $90.0 million (34%); and in
the Electronic Commerce business, specifically, Integrated Payment Systems,
$27.8 million (21%); and Global Payment Systems, $9.7 million (6%).
Health Information Services. Health Information Services revenue growth
---------------------------
(34%) in fiscal 1998 was a result of increases from internally developed
products and services, primarily electronic transaction processing and business
management services provided to hospitals and physicians. In addition, revenue
growth resulted from the impact of the third quarter fiscal 1998 acquisitions of
two related healthcare information management businesses, Source Informatics
Inc. ("Source") and a subsidiary of Pharmaceutical Marketing Services Inc.
("PMSI").
Integrated Payment Systems. The Integrated Payment Systems revenue
--------------------------
increase of $27.8 million (21%) reflects the impact of growth of the industry,
programs directed at new vertical industry offerings and new distribution
channels in addition to growth in basic market demand. This growth was reflected
in an increase in the volumes of merchant sales processed due to a larger
customer base and higher consumer credit card spending.
A-4
<PAGE>
Global Payment Systems. Global Payment Systems ("Global") revenue
----------------------
reflects an increase in the number of authorizations performed for the Company's
customers under the historic network services business. New back office services
are in the development and sales cycle and did not have a material impact on the
fiscal 1998 reported results.
Intercompany. A portion of Global's revenue is derived from
------------
intercompany sales of services primarily for processing services provided to the
Integrated Payment Systems business unit.
COSTS AND EXPENSES
Cost of service increased $61.1 million (23%) in fiscal 1998 from the
same period in fiscal 1997. The increases were primarily a result of increased
operating costs associated with revenue growth and higher cost of service
margins in new acquisitions. Total cost of service, as a percentage of revenue
remained constant at 50% for both fiscal 1998 and 1997. The Company continues to
leverage its computer operations, telecommunication infrastructure, and
investments in new market opportunities.
Sales, general and administrative expenses ("SG&A") increased $38.8
million (20%) from the same period last year. This increase was primarily due to
expenses associated with continuing investments in product development,
distribution channel expansion and the development of the Health Information
Services branding program for future revenue growth. In addition, the increases
were due to higher SG&A ratios in acquired businesses. However, as a percentage
of revenue, these expenses decreased to 35% for fiscal 1998 from 36% for fiscal
1997. SG&A expenses continue to decrease as a percentage of revenue since
revenues are growing at a faster rate than these expenses, including synergies
realized from the integration of acquisitions.
OPERATING INCOME
Operating income, excluding non-recurring charges, increased from $70.4
million in fiscal 1997 to $94.3 million (34%) in fiscal 1998. As a percentage of
revenue, the Company's operating income margin increased 8% to 14.5% in fiscal
1998 from 13.4% in fiscal 1997, excluding non-recurring charges. These
improvements reflect improved margins in operations and profitability through
execution of strategies to reposition the base business and investments in new
market opportunities. Earnings before interest, taxes, depreciation and
amortization ("EBITDA"), excluding non-recurring charges, was $142.7 million for
fiscal 1998 and $110.7 million for fiscal 1997 and as a percentage of revenue
was 22% and 21%, respectively.
A-5
<PAGE>
The Company's EBITDA formula and results as a percentage of revenue may
not be comparable to similarly titled measures reported by other companies.
However, management believes this statistic is a relevant measurement and
provides a comparable operating income measure, excluding the impact of the
amortization of acquired intangibles, potential timing differences associated
with capital expenditures and the related depreciation charges and non-recurring
charges.
OTHER EXPENSE
Total other expense increased $6.2 million for fiscal 1998 compared to
1997. This increase was primarily the result of lower interest earnings due to
lower average funds available for investment and increased interest expense. The
interest expense increase reflects the full-year impact of the interest expense
on the $143.8 million in convertible debt issued in fiscal 1997 (see Note 9 to
the Consolidated Financial Statements) and borrowings on the Company's line of
credit during fiscal 1998 to finance acquisition activities.
FISCAL YEARS 1997 AND 1996
REVENUE
<TABLE>
<CAPTION>
(In millions)
1997 1996 Increase
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Health Information Services $ 267.5 51% $ 210.2 54% 27%
Electronic Commerce:
Integrated Payment Systems 131.5 25% 104.8 27% 25%
Global Payment Systems 149.8 28% 79.7 20% 88%
Intercompany Revenue (23.6) (4%) (3.6) (1%) -
-----------------------------------------------------------------
257.7 49% 180.9 46% 42%
=================================================================
Total Revenue $ 525.2 100% $ 391.1 100% 34%
=================================================================
</TABLE>
Total revenue for fiscal 1997 was $525.2 million, an increase of $134.1
million (34%) from fiscal 1996. The increase was the result of increased revenue
in Health Information Services, $57.3 million (27%); and our Electronic Commerce
business, specifically, Integrated Payment Systems, $26.7 million (25%); and
Global Payment Systems, $70.1 million (88%).
A-6
<PAGE>
Health Information Services. Health Information Services revenue growth
---------------------------
(27%) in fiscal 1997 was a result of increases from existing products and
services, primarily electronic transaction processing, and the impact of
acquisition activity. The acquisitions of Equifax Healthcare EDI Services, Inc.
and Health Communication Services, Inc. were completed in fiscal 1997. The
increase also reflects the full-year impact of the pooling-of-interests
accounting for the PHSS merger, which had completed five purchase acquisitions
in the last half of fiscal 1996.
Integrated Payment Systems. The Integrated Payment Systems revenue
--------------------------
increase of $26.7 million (25%) was primarily due to higher volumes of merchant
sales processed, which resulted from increased sales productivity, and an
alliance established with a financial institution in April 1996.
Global Payment Systems. Global revenue reflects an increase in the
----------------------
number of authorizations performed for the Company's customers and the full-year
impact of the acquisition of MasterCard's Merchant Automated Point-of-Sale
Program ("MAPP") on April 1, 1996. In addition, during the third quarter of
fiscal 1997, Global completed the purchase of a portion of Electronic Data
System Corporation's ("EDS") card processing business and launched a joint
marketing and service alliance with EDS.
Intercompany. Commencing April 1, 1996, with the formation of Global
------------
Payment Systems, a portion of Global's revenue was derived from intercompany
sales of services primarily for processing services provided to the Integrated
Payment Systems business unit.
COSTS AND EXPENSES
Cost of service increased $59.0 million (29%) in fiscal 1997 from the
same period in fiscal 1996. These increases were primarily a result of increased
operating costs associated with revenue growth and cost of service margins in
new acquisitions. Total cost of service as a percentage of revenue decreased to
50% for fiscal 1997 from 52% for the same period in fiscal 1996. The decrease as
a percentage of revenue is attributable to the Company's ability to leverage its
computer operations and synergies realized from the integration of acquisitions.
SG&A increased $37.6 million (25%) from the same period last year. This
increase was primarily due to expenses associated with investments made in
product development and sales personnel for future revenue growth. In addition,
the increases in expenses were due to higher SG&A ratios in acquired businesses.
However, as a percentage of revenue, these expenses decreased to 36% for fiscal
1997 from 39% for fiscal 1996. The Company attributes the improvement in this
expense margin to synergies realized from acquisitions, principally CIS.
A-7
<PAGE>
OPERATING INCOME
Operating income, excluding non-recurring charges, increased from $32.9
million in fiscal 1996 to $70.4 million (114%) in fiscal 1997. As a percentage
of revenue, operating income increased to 13% in fiscal 1997 from 8% in fiscal
1996, excluding the non-recurring charges, reflecting improved margins in
operations and profitability from CIS and PHSS. EBITDA, excluding non-recurring
charges was $110.7 million for fiscal 1997 and $66.2 million for fiscal 1996 and
as a percentage of revenue was 21% and 17%, respectively.
OTHER EXPENSE
Total other expense increased $6.6 million for fiscal 1997 compared to
1996. This increase was primarily the result of lower interest earnings due to
lower average funds available for investment. In addition, in fiscal 1997, the
Company issued $143.8 million in convertible debt (see Note 9 to the
Consolidated Financial Statements) increasing interest expense. The decrease in
cash available and issuance of debt in 1997 reflects the Company's acquisition
activity.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from operations provides the Company with a
significant source of liquidity to meet its needs. Net cash provided by
operating activities decreased 16% to $49.0 million for fiscal 1998, from $58.6
million in fiscal 1997. Cash provided by operations before changes in working
capital was $96.4 million for fiscal 1998, an increase of $15.8 million (20%)
compared to the prior year. This difference is primarily driven by the $10.0
million increase in amortization of acquired intangibles and goodwill resulting
from acquisition activities. Cash was required in fiscal 1998 to fund net
changes in working capital of $47.4 million, compared to $22.0 million for
fiscal 1997. The changes in working capital resulted primarily from increases in
accounts receivable due to acquisitions, changes in net merchant processing
funds, and the timing and payments on accounts payable and accrued liabilities,
including income taxes. The changes in net merchant processing funds reflect
normal fluctuations in the timing of credit card sales processed. The changes
due to accounts payable and accrued liabilities primarily relate to the timing
of payroll and related liabilities, and an increase in deferred revenue
resulting from acquisitions. As a result of the non-recurring charges and PHSS
merger, the company is expecting a net income tax refund of approximately $0.6
million for fiscal 1998 compared to the net liability of $1.8 million that
existed for fiscal 1997.
A-8
<PAGE>
For fiscal 1998, cash used in investing activities decreased to $85.9
million, compared to $180.3 million in fiscal 1997. The Company continues to
invest in capital expenditures related to growth in the business and
acceleration of certain strategic initiatives. Additionally, in fiscal 1998, the
Company completed six acquisitions for an aggregate cash consideration of
approximately $63.1 million, net of cash acquired and the issuance of the
Company's Common Stock valued at approximately $92.7 million. During fiscal
1997, the Company completed ten acquisitions (four of which were closed by PHSS
prior to December 19, 1997) for an aggregate cash purchase price of
approximately $161.3 million, net of cash acquired, with additional funding
provided by the issuance of Common Stock valued at approximately $17.8 million.
The Company has financed its acquisition program through cash flows from
operations, equity, borrowings on its line of credit and debt offerings.
Net cash provided by financing activities decreased to $21.2 million
for fiscal 1998 from $117.3 in the prior year. The Company borrowed $75.0
million to finance portions of its fiscal 1998 acquisitions, merger costs and to
eliminate PHSS' outstanding line of credit balance ($32.6 million). In addition,
the Company purchased 170,000 shares of its own Common Stock valued at $6.4
million. During fiscal 1997, the Company completed an issuance of long-term
public debt, providing net proceeds of $139.7 million. The cash provided by the
debt issuance was partially offset by repayments of long-term debt of $24.3
million (including $10.9 million to pay off the mortgage on the Company's
headquarters building). Dividends of $9.0 million and $9.1 million were paid
during fiscal 1998 and 1997, respectively. The fiscal 1997 dividends include
$1.2 million in distributions to PHSS shareholders, prior to its merger with the
Company.
The Company has a committed, unsecured $125.0 million revolving line of
credit that expires in December 2002. At May 31, 1998, there was $75.0 million
outstanding under the facility. The Company also has a $15.0 million uncommitted
line of credit to fund working capital requirements, under which there were no
amounts outstanding at May 31, 1998. Management believes that its current level
of cash and borrowing capacity, along with future cash flows from operations are
sufficient to meet the needs of its existing operations and its planned
requirements for the foreseeable future. The Company regularly evaluates cash
requirements for current operations, commitments, development activities and
strategic acquisitions. The Company may elect to raise additional funds for
these purposes, either through the issuance of additional debt or equity or
otherwise, as appropriate.
A-9
<PAGE>
YEAR 2000 COMPLIANCE
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the "Year 2000" issue
and has developed an implementation plan to resolve the issue. The Year 2000
issue is the result of computer programs being written using two digits rather
than four to define the applicable year. Any of the Company's computer programs
that have time/date-sensitive software and hardware may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a major
system failure or miscalculation. The Company presently believes that, with
modification to existing software and hardware and the purchase of new software,
the Year 2000 issue will not pose significant operations problems for the
Company's systems as so modified and converted. As it relates to internal
computer systems, the Company expects to incur internal staff costs as well as
consulting and other expenses related to infrastructure and facilities
enhancements necessary to prepare the systems for the year 2000. Given the
nature of the Company's perpetual system development activities throughout its
businesses, it is difficult to quantify, with specificity, the costs being
incurred to address this issue. A significant portion of these costs is not
likely to be incremental costs to the Company, but will represent the
redeployment of existing information technology resources. The Company's
resource commitment towards these issues is estimated to range between $10-$15
million for 1998 and 1999. Less significant amounts will likely be required in
fiscal 2000 to finalize these activities.
The Year 2000 issue creates risk for the Company from unforeseen
problems in its own computer systems and from third parties on which the Company
relies. Accordingly, the Company is requesting assurances from all software
vendors from which it has purchased or from which it may purchase software that
the software sold to the Company will correctly process all date information at
all times. In addition, the Company is querying its customers and suppliers as
to their progress in identifying and addressing problems that their computer
systems will face in correctly processing date information as the year 2000
approaches and is reached. However, there are no assurances that the Company
will identify all date-handling problems in its business systems or that the
Company will be able to successfully remedy Year 2000 compliance issues that are
discovered. To the extent that the Company is unable to resolve its Year 2000
issues prior to January 1, 2000, operating results could be adversely affected.
In addition, the Company could be adversely affected if other entities (e.g.,
vendors or customers) not affiliated with the Company do not appropriately
address their own year 2000 compliance issues in advance of their occurrence.
A-10
<PAGE>
FORWARD-LOOKING INFORMATION
While past performance does not guarantee future results, the Company
is committed to continuing to sustain quality earnings growth. The Company's
strategy to attain growth is to position the Company for continued future
success through ongoing investment in new market opportunities as well as
through strategic alliances and acquisitions. The Company also intends to
continue expansion into additional market segments related to its two primary
markets. The Company will continue to make investments in new technology
infrastructure and productivity tools to ensure long-term competitiveness and
maximize operating capacity and efficiency.
This document may contain forward-looking statements concerning the
Company's operations, current and future performance and financial condition.
These items involve risks and uncertainties such as product demand, market and
customer acceptance, the effect of economic conditions, competition, pricing,
development difficulties, the ability to consummate and integrate acquisitions,
and other risks detailed in the Company's SEC filings. The Company undertakes
no obligation to revise any of these statements to reflect future circumstances
or the occurrence of unanticipated events.
A-11
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
NATIONAL DATA CORPORATION
<TABLE>
<CAPTION>
(In thousands, except per share data)
- ------------------------------------------------------------------------------------------
Year Ended May 31,
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Revenue $649,044 $525,167 $391,088
- -------------------------------------------------------------------------------------------
Operating expenses:
Cost of service 325,397 264,253 205,275
Sales, general and administrative 229,380 190,559 152,925
Non-recurring charges 120,163 9,503 47,718
- -------------------------------------------------------------------------------------------
674,940 464,315 405,918
- -------------------------------------------------------------------------------------------
Operating income (loss) (25,896) 60,852 (14,830)
- -------------------------------------------------------------------------------------------
Other income (expense):
Interest and other income 1,685 2,686 4,947
Interest and other expense (12,870) (8,614) (5,326)
Minority interest (2,626) (1,694) (628)
- -------------------------------------------------------------------------------------------
(13,811) (7,622) (1,007)
- -------------------------------------------------------------------------------------------
Income (loss) before income taxes (39,707) 53,230 (15,837)
Provision (benefit) for income taxes 21,619 23,832 (3,992)
- -------------------------------------------------------------------------------------------
Net income (loss) $(61,326) $ 29,398 $(11,845)
======================================
Earnings (loss) per common and common
equivalent share:
Basic $ (1.90) $ 0.96 $ (0.40)
======================================
Diluted $ (1.90) $ 0.91 $ (0.40)
======================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
A-12
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
NATIONAL DATA CORPORATION
(In thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Year Ended May 31,
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(61,326) $ 29,398 $ (11,845)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 23,890 25,800 22,641
Amortization of acquired intangibles and goodwill 24,469 14,514 10,739
Non-recurring charges 110,340 6,578 35,116
Deferred income taxes (9,353) 517 (15,169)
Minority interest in earnings 2,626 1,694 628
Provision for bad debts 4,353 1,540 5,694
Other, net 1,446 570 299
Changes in current assets and liabilities which provided (used) cash,
net of the effects of acquisitions:
Accounts receivable, net (26,967) (16,916) (19,584)
Merchant processing working capital (2,386) 3,913 (4,076)
Inventory (2,597) (300) 1,060
Prepaid expenses and other assets (2,200) (3,192) 8,582
Accounts payable and accrued liabilities (10,773) (13,297) 19,241
Income taxes payable (2,491) 7,829 (4,937)
------------ ------------ -----------
Net cash provided by operating activities 49,031 58,648 48,389
------------ ------------ -----------
Cash flows from investing activities:
Capital expenditures (22,816) (19,009) (17,842)
Business acquisitions, net of cash acquired (63,113) (161,299) (146,124)
Other, net - 25 275
------------ ------------ -----------
Net cash used in investing activities (85,929) (180,283) (163,691)
------------ ------------ -----------
Cash flows from financing activities:
Net borrowings under lines of credit 42,417 8,303 29,306
Payments on notes and earn-out payable (2,762) (1,250) (5,552)
Net principal payments under mortgage, capital lease
arrangements and other long-term debt (7,434) (24,292) (25,884)
Net proceeds from the issuance of long-term debt - 139,682 -
Net proceeds from sale of common stock - - 107,143
Net proceeds from the issuance of stock under various stock plans 9,143 6,110 9,057
Common stock purchased for treasury (5,980) - -
Distributions to minority interests (5,118) (2,068) -
Dividends paid (9,036) (9,143) (7,498)
------------ ------------ -----------
Net cash provided by financing activities 21,230 117,342 106,572
------------ ------------ -----------
Decrease in cash and cash equivalents (15,668) (4,293) (8,730)
Cash and cash equivalents, beginning of period 18,909 23,888 32,618
------------ ------------ -----------
Cash and cash equivalents, end of period $ 3,241 $ 19,595 $ 23,888
============ =========== ============
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
A-13
<PAGE>
CONSOLIDATED BALANCE SHEETS
NATIONAL DATA CORPORATION
<TABLE>
<CAPTION>
(In thousands, except share data)
- -----------------------------------------------------------------------------------------------------------
May 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,241 $ 19,595
Billed accounts receivable 135,223 95,023
Unbilled accounts receivable 18,835 18,913
Allowance for doubtful accounts (7,394) (4,903)
-------- --------
Accounts receivable, net 146,664 109,033
Income tax receivable 635 -
Deferred income taxes - 1,308
Inventory 5,253 2,260
Prepaid expenses and other current assets 16,333 8,620
-------- --------
Total current assets 172,126 140,816
-------- --------
Property and equipment, net 74,234 58,960
Intangible assets, net 458,223 407,484
Deferred income taxes 20,145 9,392
Other 6,487 9,670
-------- --------
Total Assets $731,215 $626,322
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $ 75,000 $ 34,298
Current portion of long-term debt 1,621 1,973
Obligations under capital leases 11,053 3,628
Accounts payable and accrued liabilities 73,115 67,843
Income taxes - 1,794
Deferred income taxes 92 -
Deferred income 25,216 7,389
-------- --------
Total current liabilities 186,097 116,925
-------- --------
Long-term debt 155,477 155,962
Obligations under capital leases 12,390 3,825
Other long-term liabilities 10,313 5,223
-------- --------
Total liabilities 364,277 281,935
-------- --------
Minority interest in equity of subsidiaries 19,003 21,138
Commitments and contingencies (Notes 13 and 14)
Shareholders' equity:
Preferred stock, par value $1.00 per share; 1,000,000 shares authorized, none issue - -
Common stock, par value $.125 per share; 100,000,000 shares authorized, 33,791,534
and 30,802,452 shares issued, respectively. 4,224 3,850
Capital in excess of par value 344,019 240,917
Treasury stock, at cost, 159,200 shares (5,980) -
Retained earnings 9,537 80,127
Cumulative translation adjustment (2,011) (727)
-------- --------
349,789 324,167
Less: Deferred compensation (1,854) (918)
-------- --------
Total Shareholders' Equity 347,935 323,249
-------- --------
Total Liabilities and Shareholders' Equity $731,215 $626,322
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
A-14
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
NATIONAL DATA CORPORATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Common Stock
------------------ Capital in Cumulative Deferred
Number Excess of Treasury Retained Translation Compen-
of Shares Amount Par Value Stock Earnings Adjustment sation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1995 24,115 $3,015 $ 84,822 $ - $ 79,215 $ (550) $ (274)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss (11,845)
Cash dividends ($.30 per share) (7,498)
Secondary stock offering 4,914 614 106,594
Foreign currency translation adjustment (203)
Stock issued under employee stock plans 610 76 4,946
Stock issued under non- employee stock plans 49 6 500
Stock issued under restricted stock plans 4 64 (100)
Tax benefit from exercise of stock options 3,330
Increase in capital due to issuance of
subsidiary ownership interest 12,052
Stock issued for acquisitions 5 1 249
Amortization of deferred compensation 232
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1996 29,697 3,712 212,557 - 59,872 (753) (142)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 29,398
Cash dividends ($.30 per share) (9,143)
Foreign currency translation adjustment 26
Stock issued under employee stock plans 407 51 4,644
Stock issued under non-employee stock plans 14 2 201
Stock issued under restricted stock plans 34 4 1,188 (1,229)
Tax benefit from exercise of stock options 1,955
Stock issued for acquisitions 593 74 17,756
Stock issued in exchange for shareholders note 57 7 2,616
Amortization of deferred compensation 453
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1997 30,802 3,850 240,917 - 80,127 (727) (918)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss (61,326)
Cash dividends ($.30 per share) (9,036)
PHSS year-end restatement (Note 1) (228)
Foreign currency translation adjustment (1,284)
Treasury shares purchased (6,383)
Stock issued under employee stock plans 256 32 6,102 403
Stock issued under non-employee stock plans 27 3 375
Stock issued under restricted stock plans 44 6 1,732 (1,738)
Tax benefit from exercise of stock options 2,478
Stock issued for acquisitions 2,663 333 92,415
Amortization of deferred compensation 802
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1998 33,792 $4,224 $344,019 $(5,980) $ 9,537 $(2,011) $(1,854)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
A-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations - The Company is primarily a provider of information
- --------------------
processing services and systems to the health care and electronic commerce
markets. In addition, the Company provides business management services to
hospitals and physicians. The principal markets for the Company's products and
services are retailers, banks and financial institutions, health care providers,
insurance companies, managed care organizations, pharmaceutical manufacturers
and distributors.
Basis of presentation - The consolidated financial statements include the
- ---------------------
accounts of the Company and its majority-owned subsidiaries including the
retroactive effect of all mergers which have been accounted for under the
pooling-of-interests method of accounting. For fiscal 1997 and 1996, the
consolidated financial statements reflect Physician Support Systems, Inc.'s
("PHSS") financial position at June 30 and the results of its operations and
cash flows for the years then ended. Consequently, PHSS' results of operations
for the month of June 1997 have been included in both fiscal 1998 and 1997.
Significant intercompany transactions have been eliminated in consolidation.
Certain reclassifications have been made to the fiscal 1997 and 1996
consolidated financial statements to conform with the fiscal 1998 presentation.
Use of estimates - The preparation of financial statements in conformity with
- ----------------
generally accepted accounting principles requires management to make certain
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from these estimates.
Revenue - Revenue related to services provided, including the Company's
- -------
government cost-plus contracts, is recognized as services are performed. Revenue
related to software sales, software license agreements and hardware sales is
recognized upon shipment. Revenue related to hardware and software maintenance
contracts is recognized ratably over the terms of the contracts.
Portions of the Company's revenues are earned as a percentage of amounts
collected on behalf of its customers from patients and third-party payers. For
customers where the amount and timing of collection of their accounts receivable
can be reasonably estimated, the Company estimates the fees that it will invoice
those customers upon collection of their accounts receivable and recognizes such
revenues when substantially all services to be performed by the Company have
been completed.
As a result of the fiscal 1998 merger with PHSS, all prior periods have been
restated to reflect the adjustments necessary to conform one of the Company's
subsidiaries' revenue
A-16
<PAGE>
recognition method for contingent billings, related to certain revenue streams,
to the method utilized by PHSS for certain of its similar clients. The
conformity adjustment is reflected as a reduction of unbilled receivables and
revenues previously recognized in the accompanying consolidated financial
statements.
Cash and cash equivalents - For purposes of reporting cash flows, cash and cash
- -------------------------
equivalents include cash on hand and all liquid investments with a maturity of
three months or less when purchased.
Inventory - Inventory, which is composed primarily of microcomputer hardware and
- ---------
peripheral equipment and electronic point-of-sale terminals, is stated at the
lower of cost or market. Cost is determined by using the average cost method.
Property and equipment - Property and equipment, including equipment under
- ----------------------
capital leases, is stated at cost. Depreciation and amortization are calculated
using the straight-line method. Equipment is depreciated over 2 to 5 year lives,
and buildings are depreciated over a 40 year life. Leasehold improvements and
property acquired under capital leases are amortized over the shorter of the
useful life of the asset or the term of the lease. The costs of purchased and
internally developed software used to provide services to customers or internal
administrative services are capitalized and amortized on a straight-line basis
over their estimated useful lives, not to exceed five years. Maintenance and
repairs are charged to operations as incurred.
Intangible assets - Intangible assets primarily represent customer contracts,
- -----------------
trademarks and covenants-not-to-compete associated with the Company's
acquisitions. Acquired intangibles are amortized using the straight-line method
over their estimated useful lives of 4 to 25 years. Goodwill represents the
excess of the cost of acquired businesses over the fair market value of their
identifiable net assets. Goodwill is being amortized on a straight-line basis
over periods ranging from 10 to 40 years.
Impairment of Long-Lived Assets - The Company regularly evaluates whether events
- -------------------------------
and circumstances have occurred that indicate the carrying amount of property
and equipment or goodwill and other intangibles may warrant revision or may not
be recoverable. When factors indicate that long-lived assets should be evaluated
for possible impairment, the Company uses an estimate of the future undiscounted
net cash flows associated with the asset over the remaining life of the asset in
measuring whether the long-lived asset is recoverable (see Notes 2 and 11). In
management's opinion, the long-lived assets, including property and equipment
and intangible assets, are appropriately valued at May 31, 1998 and 1997.
Income taxes - Deferred income taxes are determined based on the difference
- ------------
between the financial statement and tax bases of assets and liabilities using
enacted tax laws and rates (see Note 8).
A-17
<PAGE>
Fair value of financial instruments - Management considers that the carrying
- -----------------------------------
amounts of financial instruments, including cash, receivables, accounts payable
and accrued expenses, and current maturities of long-term obligations,
approximates fair value. Interest on long-term debt is primarily payable at
fixed rates, which approximate market rates at May 31, 1998 and 1997 (see
Note 9).
Foreign currency translation - The assets and liabilities of foreign
- ----------------------------
subsidiaries are translated at the year-end rate of exchange, and income
statement items are translated at the average rates prevailing during the year.
The resulting translation adjustment is recorded as a component of shareholders'
equity. Exchange gains and losses on intercompany balances of a long-term
investment nature are also recorded as a component of shareholders' equity.
Earnings per common share - During 1998, and retroactive for all prior periods,
- -------------------------
the Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS
No. 128"), "Earnings per Share".
Basic earnings per share is computed by dividing reported earnings available to
common shareholders by weighted average shares outstanding during the period.
Diluted earnings per share is computed by dividing reported earnings available
to common shareholders by weighted average shares outstanding during the period
and the impact of securities that, if exercised, would have a dilutive effect on
earnings per share using the treasury stock method. All options with an exercise
price less than the higher of (1) the ending market share price for the period
or, (2) the average market share price for the period, generally are assumed to
have a dilutive effect on earnings per share. The convertible notes issued in
fiscal 1997 have an antidilutive effect on diluted earnings per share;
accordingly, the notes are excluded from earnings per share calculations.
The basic and diluted number of shares outstanding are as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
------------------
(In thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Basic 32,200 30,571 29,971
Stock Options -- 1,691 --
------------------------------------------
Diluted 32,200 32,262 29,971
==========================================
</TABLE>
Net income available to common shareholders is the same for basic and diluted
earnings per share, as the dilutive nature of the stock options, if exercised,
do not have an impact on net income. In 1998 and 1996, where there was a net
loss generated by the non-recurring charges, basic and diluted earnings per
share are the same, as the effect of any potentially dilutive securities is
antidilutive.
A-18
<PAGE>
Recent accounting pronouncements - In June 1997, the Financial Accounting
- --------------------------------
Standards Board ("FASB") issued Statement No. 130 ("SFAS 130"), "Reporting
Comprehensive Income". SFAS 130 requires companies to disclose, with the same
prominence as other financial statement items, the components of comprehensive
income. Comprehensive income includes not only net earnings, but also revenues,
expenses, gains and losses that are excluded from net earnings under generally
accepted accounting principles. Examples include foreign currency translation
adjustments and unrealized gains and losses on investments. SFAS 130 is
effective annual periods and subsequent interim periods beginning after December
15, 1997. Adoption of SFAS 130 is not expected to materially impact the
Company's reported results, since each component of comprehensive income is
currently reported separately in both Shareholders' Equity on the Consolidated
Balance Sheets and in the Consolidated Statements of Shareholders' Equity. The
Company will include disclosure of comprehensive income in accordance with the
provisions of SFAS 130 beginning in the financial statements for the first
quarter of fiscal 1999.
In June 1997, the FASB issued Statement No. 131 ("SFAS 131"), "Disclosures About
Segments of an Enterprise and Related Information". SFAS 131 establishes new
standards for the way public business enterprises are to report information
about operating segments in annual financial statements and requires those
enterprises to report selected financial information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. SFAS 131 is effective for annual periods beginning after December 15,
1997. Adoption of SFAS 131 will have no impact on the Company's consolidated
results of operations, financial condition or cash flows.
A-19
<PAGE>
NOTE 2 - BUSINESS ACQUISITIONS
During fiscal 1998, 1997, and 1996, the Company completed the following
acquisitions:
Date Ownership
Business Acquired Percentage
- -------------------------------------------------------------------------------
1998
- ----
Chemtec Systems Limited July 1997 100%
Hadley Hutt Computing Limited July 1997 100%
Physi-Bill, Inc. * October 1997 100%
Source Informatics Inc. a subsidiary
of Pharmaceutical Marketing Services
Inc. ("PMSI"), and a PMSI joint venture
formed with Source Informatics Inc. December 1997 100%
CheckRite International, Inc. May 1998 100%
1997
- ----
Medical Intercept Systems Group * September 1996 100%
Equifax Healthcare EDI Services, Inc. October 1996 100%
MARS Group * December 1996 100%
Health Communication Services, Inc. January 1997 100%
Electronic Data Systems Corporation's
multi-client bank card
processing business January 1997 100%
Comerica Bank merchant portfolio January 1997 51%
Physician Accounts Management &
Billing, Inc. * January 1997 100%
Physerv Solutions, Inc. * February 1997 100%
Merchant Services U.S.A., Inc. March 1997 100%
HealthTec April 1997 100%
1996
- ----
Hospital Cost Consultants, Inc. ** June 1995 100%
Conceptual Systems Corp., Inc. January 1996 100%
North Coast Health Care Management
Group * February 1996 100%
Medical Management Support, Inc. * February 1996 100%
Data Processing Systems, Inc. * February 1996 100%
Merchant Automated
Point of Sale Program ("MAPP") April 1996 92.5%
Comerica Bank merchant portfolio April 1996 51%
PBS Northwest, Inc. * May 1996 100%
ALM, Inc. * May 1996 100%
A-20
<PAGE>
* Acquired by PHSS prior to its merger with the Company on December 19,
1997.
** Acquired by CIS prior to its merger with the Company on May 31,
1996.
Each of the foregoing acquisitions has been recorded using the purchase method
of accounting, and accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed based on their estimated fair value as
of the date of acquisition. The allocation of the purchase price of the 1998
acquisitions is in some instances preliminary and will be adjusted when the
necessary information is available. The operating results of the acquired
businesses are included in the Company's consolidated statements of income
(loss) from the respective dates of acquisition.
On December 15, 1997, the Company acquired two related healthcare information
management businesses based in Phoenix, Arizona. In this transaction the Company
acquired the stock of Source Informatics Inc., a privately held company, and the
stock of a subsidiary of Pharmaceutical Marketing Services Inc. ("PMSI"), which
holds its Over-The-Counter Physician Survey business unit as well as PMSI's
interest in a joint venture it formed with Source Informatics Inc. (collectively
"Source"). The total consideration paid for the Source acquisition was $131.1
million, which consists of $38.6 million in cash and 2,658,468 shares of the
Company's common stock valued at $92.5 million. The net value of the tangible
assets acquired was approximately a deficit (liabilities assumed exceeded
tangible assets acquired) of $7.2 million, creating an excess of cost over
tangible assets of $138.3 million. It was determined $67.0 million of the excess
cost over tangible assets represented in-process research and development costs
which were appropriately expensed under SFAS 86 as a component of the 1998
non-recurring charges (see Note 11). The remainder of the intangible assets
acquired was allocated to goodwill and customer relationships, assembled
workforce, and developed technology and will be amortized over periods ranging
from 7 to 20 years.
The total aggregate price paid for the 1998 purchase acquisitions was $159.4
million, consisting of cash of $65.1 million, common stock of $92.7 million and
notes of $1.6 million. The excess of cost over tangible assets acquired of
$165.5 million was allocated to goodwill and other intangible assets and the
in-process research and development charge. The goodwill and other intangible
assets will be amortized over periods ranging from 5 to 20 years.
The aggregate price paid for the 1997 acquisitions was $185.7 million,
consisting of cash of $161.7 million, common stock of $17.8 million and notes of
$6.2 million. The net value of the tangible assets acquired was approximately
$0.8 million, creating an excess of cost over tangible assets of $184.9 million.
The intangible assets will be amortized over periods ranging from 5 to 25 years.
A-21
<PAGE>
In order to effect the 1996 MAPP acquisition, the Company organized a Georgia
limited liability company, Global Payment Systems LLC ("Global"), to which it
transferred its Payment Services business unit, its Information Systems and
Services business unit and certain back office support functions from the
Company's Payment Systems business unit. Global then acquired MAPP from
MasterCard International Incorporated ("MasterCard"). The net assets of MAPP
consisted primarily of tangible personal property, leased personal and real
property, customer contracts, assembled workforce and the goodwill of the
business. The consideration paid for MAPP was $110 million plus the granting of
a 7.5% minority interest in Global to MasterCard. The gain from the issuance of
the 7.5% minority interest in Global has been reflected as a capital transaction
in the Consolidated Statements of Changes in Shareholders' Equity.
The total consideration paid for the MAPP business was $131.6 million, which
consists of $112.8 million in cash and the 7.5% minority interest with an
estimated value of $18.8 million. The net value of the tangible assets acquired
was approximately $5.0 million, creating excess cost over tangible assets of
$126.6 million. The aggregated estimated life of the intangible assets is 34
years.
The aggregate price paid for the other purchase acquisitions completed in 1996
was $55.8 million, consisting of cash of $43.9 million, notes payable of $11.7
million and common stock of $0.2 million. The excess cost over net tangible
assets acquired of $58.1 million was allocated to goodwill and intangible assets
and will be amortized over periods ranging from 10 to 20 years.
The following unaudited pro forma information for the fiscal 1998 and 1997
purchase acquisitions discussed above has been prepared as if these acquisitions
had occurred on June 1, 1996. The information is based on historical results of
the separate companies and may not necessarily be indicative of the results that
would have been achieved or of results that may occur in the future. The pro
forma information includes the expense for amortization of goodwill and other
intangible assets resulting from these transactions and interest expense related
to financing costs but does not reflect any synergies or operating cost
reductions that may be achieved from the combined operations. In addition, the
pro forma information excludes the impact of non-recurring charges.
(In thousands, except per share data) 1998 1997
-------- --------
Revenue $716,773 $676,876
Net income $50,092 $43,577
Diluted earnings per share $1.42 $1.24
A-22
<PAGE>
In addition to the purchase acquisitions, the Company merged with Physician
Support Systems, Inc. ("PHSS") on December 19, 1997 and C.I.S. Technologies,
Inc. ("CIS") on May 31, 1996. These acquisitions were accounted for using the
pooling-of-interests method. In accordance with the pooling-of-interests method,
the consolidated financial statements of the Company include the financial
statements of these companies for all periods presented.
PHSS is engaged in the business of providing business management services to
hospitals and physicians. In this merger, each share of PHSS Common Stock was
converted into the right to receive .435 shares of the Company's Common Stock.
The Company issued approximately 4,237,784 shares of its Common Stock valued at
approximately $140 million, in exchange for the outstanding PHSS Common Stock.
CIS provides transaction processing, consulting and outsourcing services to the
health care market, primarily hospitals and physicians. In the merger, each
share of CIS Common Stock and Series A Preferred Stock was converted into the
right to receive .08682 shares of the Company's Common Stock. The Company issued
approximately 2,829,746 shares of its Common Stock, valued at approximately $107
million, in exchange for the outstanding CIS Common Stock and Series A Preferred
Stock.
Prior to its 1998 merger with the Company, PHSS consummated three transactions
accounted for as a pooling-of-interests, as follows:
On June 28, 1996, PHSS merged with Synergistic Systems, Inc. ("SSI") by
exchanging 944,992 shares of PHSS' Common Stock for all the outstanding
shares of SSI's Common Stock.
On August 31, 1996, PHSS merged with EE&C Financial Services ("EE&C")
by exchanging 1,026,852 shares of PHSS' Common Stock for all the
outstanding shares of EE&C's Common Stock. In addition, PHSS repaid all
outstanding indebtedness of EE&C in an aggregate amount of $2.6 million
by issuing an additional 131,148 shares of PHSS' Common Stock.
On December 31, 1996, PHSS merged with Revenue Production Management,
Inc. ("RPM") by exchanging 315,048 shares of PHSS' Common Stock for all
the outstanding shares of RPM's Common Stock.
In accordance with the pooling-of-interests method of accounting, the
consolidated financial statements of these entities were reflected in the
financial statements of PHSS.
A-23
<PAGE>
A reconciliation of revenue, net income and diluted earnings per share of the
Company, as previously reported and restated for the revenue recognition
conformity adjustment (see Note 1), PHSS and combined is as follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
NDC, as previously reported and restated $ 431,500 $ 326,472
PHSS 93,667 64,616
=========================================
Combined $ 525,167 $ 391,088
=========================================
Net income (loss):
NDC, as previously reported and restated $ 37,219 $ (8,023)
PHSS (7,821) (3,822)
=========================================
Combined $ 29,398 $ (11,845)
=========================================
Diluted earnings (loss) per share:
NDC, as previously reported and restated $ 1.33 $ (0.31)
=========================================
Combined $ 0.91 $ (0.40)
=========================================
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT
As of May 31, 1998 and 1997, property and equipment consisted of the following:
(In thousands) 1998 1997
- ------------------------------------------------------------------------------
Land $ 402 $ 402
Buildings 7,474 6,503
Property under capital leases 29,134 14,296
Equipment 62,959 58,473
Software 32,405 35,079
Leasehold improvements 16,354 17,354
Furniture and fixtures 11,550 12,008
Work in progress 12,359 7,228
------------------------------
172,637 151,343
Less: accumulated depreciation and amortization 98,403 92,383
------------------------------
$74,234 $58,960
==============================
A-24
<PAGE>
NOTE 4 - SOFTWARE COSTS
The following table sets forth information regarding the Company's costs
associated with software development for the years ended May 31, 1998, 1997 and
1996
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Total costs associated with software
development $15,576 $18,015 $15,706
In-process research and development charge
(see Note 11) 67,000 - -
Less: capitalization of internally
developed software 5,013 4,805 6,872
------------------------------------------
Net research and development costs $77,563 $13,210 $8,834
==========================================
</TABLE>
The Company capitalizes costs related to the development of certain software
products. In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed", capitalization of costs begins when technological feasibility has
been established and ends when the product is available for general release to
customers. Amortization is computed on an individual product basis and has been
recognized for those products available for market based on the products'
estimated economic lives, not to exceed five years.
Total unamortized capitalized software costs (purchased and internally
developed) were approximately $15,882,000 and $17,590,000 as of May 31, 1998 and
1997, respectively. Total software amortization expense was approximately
$5,792,000, $4,928,000 and $6,445,000 in fiscal 1998, 1997 and 1996,
respectively.
NOTE 5 - INTANGIBLE ASSETS
As of May 31, 1998 and 1997, intangible assets consisted of the following:
(In thousands) 1998 1997
- -----------------------------------------------------------------
Customer base $164,753 $165,047
Trademarks 28,273 28,273
Goodwill and other intangibles 360,487 292,003
------------------------------
553,513 485,323
Less: accumulated amortization 95,290 77,839
------------------------------
$458,223 $407,484
==============================
The increase in intangible assets during fiscal 1998 is primarily due to
acquisitions (see Note 2).
A-25
<PAGE>
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of May 31, 1998 and 1997, accounts payable and accrued liabilities consisted
of the following:
(In thousands) 1998 1997
-------------------------------------
Trade accounts payable $ 9,018 $16,501
Accrued compensation and benefits 15,562 11,471
Accrued merger related expenses 5,655 4,444
Accrued pensions 4,031 2,826
Merchant processing payable 306 2,009
Other accrued liabilities 38,543 30,592
=====================================
$73,115 $67,843
=====================================
A-26
<PAGE>
NOTE 7 - RETIREMENT BENEFITS
The Company has a noncontributory defined benefit pension plan (the "Plan")
covering substantially all of its United States employees who have met the
eligibility provisions of the plan. Benefits are based on years of service and
the employee's compensation during the highest five consecutive years of
earnings of the last ten years of service. Plan provisions and funding meet the
requirements of the Employee Retirement Income Security Act of 1974, as amended.
The following table sets forth the Plan's funded status and amounts recognized
in the Company's consolidated financial statements at May 31, 1998 and 1997:
(In thousands) 1998 1997
--------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $23,491 and $18,138,
respectively $24,863 $19,126
Projected compensation increases 6,747 6,318
-------------------------------
Projected benefit obligation for services
rendered to date 31,610 25,444
Plan assets at fair market value,
primarily stocks and bonds 25,841 21,582
-------------------------------
Projected benefit obligation
in excess of plan assets (5,769) (3,862)
Unrecognized net loss 2,670 2,099
Unrecognized prior service cost 378 467
Unrecognized net asset at June 1, 1985, being
amortized over 17 years (912) (1,149)
-------------------------------
Accrued pension cost ($3,633) ($2,445)
===============================
Net pension expense included the following components for the fiscal years
ending May 31:
(In thousands) 1998 1997 1996
--------------------------------------
Service cost-benefits earned during the
period $2,146 $1,672 $1,272
Interest cost on projected benefit
obligation 2,106 1,855 1,603
Actual return on plan assets (4,244) (2,846) (2,858)
Net amortization and deferral 1,929 910 1,242
--------------------------------------
Net pension expense $1,937 $1,591 $1,259
======================================
A-27
<PAGE>
Significant assumptions used in determining net pension expense and related
obligations were as follows:
1998 1997
------------------------------------
Discount rate 7.25% 7.75%
Rate of increase in compensation levels 4.33% 4.33%
Expected long-term rate of return on assets 10.00% 10.00%
The Company has a retirement plan for non-employee directors of the Company with
five or more years of service ("the Directors' Plan"). The Directors' Plan
benefits are based on 50% of the annual director retainer amount in effect on
the date of a director's retirement plus 10% for each year of service up to 100%
of the base amount for ten years' service. The benefits are payable upon
retirement, at or after age 70, for a period equal to the number of years of
service as a director, but not more than 15 years for participants with 15 or
more years of board service as of the effective date of the Directors' Plan and
not more than 10 years for all other participants. The Directors' Plan
eligibility is limited to members of the board of directors of the Company
elected prior to January 1, 1995. The expense related to the Directors' Plan was
immaterial in fiscal 1998, 1997 and 1996.
On June 1, 1997, the Company adopted a Supplemental Executive Retirement Plan
("SERP") for certain key executives. Benefits payable under this plan are based
upon the participant's highest three consecutive years of earnings of the last
ten years of service. Retirement benefits are reduced by a portion of the
participant's annual social security benefits and any retirement benefits under
the company's tax-qualified or non-qualified defined benefit plans. Benefits
earned under the SERP are fully vested after five years of service. Expense
related to the plan was $904,000 in fiscal 1998.
The Company sponsors a deferred compensation 401(k) plan that is available to
substantially all employees with three months of service. The charges to expense
for the Company match were $2,127,000 in fiscal 1998, $1,348,000 in fiscal 1997
and $1,248,000 in fiscal 1996.
A-28
<PAGE>
NOTE 8 - INCOME TAXES
The provision for income taxes includes:
(In thousands) 1998 1997 1996
Current tax expense: ---- ---- ----
Federal $ 27,888 $ 21,946 $ 10,832
State 3,084 1,369 345
--------------------------------------------
30,972 23,315 11,177
--------------------------------------------
Deferred (prepaid) tax expense:
Federal (8,615) 399 (14,367)
State (738) 118 (802)
--------------------------------------------
(9,353) 517 (15,169)
--------------------------------------------
Total $ 21,619 $ 23,832 $ (3,992)
============================================
The Company's effective tax rates differ from federal statutory rates as
follows:
1998 1997 1996
---- ---- ----
Federal statutory rate (35.0%) 35.0% (35.0%)
State income taxes, net of federal
income tax benefit 4.0% 1.8% (1.8%)
Non-taxable interest income (0.1%) - (2.3%)
Non-deductible amortization and
write-off of intangible assets 77.4% 6.3% 18.1%
Utilization of tax loss carry forwards - - (2.2%)
Tax credits (1.0%) (0.7%) (2.3%)
Merger costs 12.2% 1.4% 2.5%
Recognition of tax assets - 0.1% (7.8%)
Other (3.1%) 0.9% 5.6%
---------------------------------------
Total 54.4% 44.8% (25.2%)
=======================================
A-29
<PAGE>
Deferred income taxes as of May 31, 1998 and 1997 reflect the impact of
temporary differences between the amounts of assets and liabilities for
financial accounting and income tax purposes. Net deferred taxes at May 31, 1998
and 1997 consisted of net current deferred tax liabilities of $92,000 and net
current deferred tax assets of $1,308,000, respectively, and net non-current
deferred tax assets of $20,145,000 and $9,392,000, respectively. As of May 31,
1998 and 1997, principal components of deferred tax items were as follows:
(In thousands) 1998 1997
---- ----
Deferred tax liabilities:
Property and equipment $ 6,287 $ 5,758
Prepaid expenses 539 477
Unbilled accounts receivable 4,476 3,906
Other 576 1,599
-----------------------------------------
11,878 11,740
-----------------------------------------
Deferred tax assets:
Net operating loss and credit
carryforwards 11,737 11,851
Accrued expenses 5,741 6,044
Acquired intangibles 7,252 3,968
Accrued non-recurring charges 8,836 1,130
Employee benefit plans 1,076 334
Valuation allowance (2,362) (2,362)
Other (349) 1,475
-----------------------------------------
31,931 22,440
-----------------------------------------
Net deferred tax asset $ 20,053 $ 10,700
=========================================
A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Realization of a
portion of the operating loss and credit carryforwards are considered by
management to be uncertain. The Company has established valuation allowances for
a portion of these tax assets. Net operating loss and credit carryforwards
expire between the years 2001 and 2011.
A-30
<PAGE>
NOTE 9 - LONG-TERM DEBT
As of May 31, 1998 and 1997, long-term debt consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1998 1997
-------- --------
<S> <C> <C>
Convertible notes $143,750 $143,750
Promissory notes issued in consideration for acquisitions:
Electronic Data Systems Corporation 6,000 6,000
Mercantile Systems, Inc. - 3.5% due September 1997 - 1,026
Hadley Hutt Computing Ltd. - 7% due October 1998 1,301 -
Hadley Hutt Computing Ltd. - 6.97% due June 2003 227 -
Spring Anesthesia Group, Inc. - 7.6% due August 2003 5,500 5,500
Other notes payable:
Non-interest bearing - note due May 1999 164 346
Payable to a shareholder due in monthly installments
with interest at 7.5% due December 2004 156 712
Other - 601
--------------- ----------------
$157,098 $157,935
Less: current maturities 1,621 1,973
--------------- ----------------
Long-term debt $155,477 $155,962
=============== ================
</TABLE>
On November 6, 1996, the Company issued convertible notes ("the Notes"),
providing $139,682,000 in proceeds, net of $4,068,000 in debt issuance costs.
The issuance costs are included in other assets and are being amortized over the
life of the Notes. The Notes are unsecured subordinated obligations of the
Company, $143,750,000 aggregate principal amount, and will mature on November 1,
2003. The Notes bear interest at 5% per annum and are convertible into
approximately 2,750,000 shares of common stock at $52.23 per share at any time
prior to maturity. Subsequent to November 1, 1999, the Notes are redeemable at
the option of the Company, in whole or in part, initially at 102.857% and
thereafter at prices declining to 100% at maturity, together with accrued
interest.
The note payable to Electronic Data Systems Corporation was issued in connection
with the Company's acquisition of its multi-client bank card processing business
(See Note 2). The note accrues interest monthly at a rate equal to 7.32% per
annum. The principal balance and accrued interest are payable in full on the
earlier of June 30, 1999 or the occurrence of any one of certain key events
specified in the note. The note may be prepaid at anytime without penalty.
A-31
<PAGE>
NOTE 10 - SHAREHOLDERS' EQUITY
Stock Option Plans - On October 23, 1997, the Company adopted a new employee
- ------------------
stock option plan, the 1997 Stock Option Plan ("the 1997 Plan"), that provides
for the granting of options to certain officers and key employees to purchase
the Company's common stock. A total of 1,228,000 authorized but unissued shares
of common stock are reserved under the 1997 Plan. Options may be issued at,
below, or above the fair market value of the common stock at the time of grant.
Options granted become exercisable in various annual increments and terminate
over a period not to exceed ten years.
The Company has an employee stock option plan, the 1987 Stock Option Plan ("the
1987 Plan"), that provides for the granting of options to certain officers and
key employees to purchase the Company's common stock. No additional options will
be granted under the 1987 Plan. Options granted become exercisable in various
annual increments and terminate over a period not to exceed ten years.
The Company also has a Non-Employee Directors Stock Option Plan which provides
for grants of options, consisting of 5,000 shares of the Company's Common Stock
for each completed year of service, to directors who are not employees of the
Company. A maximum of five options may be granted to each such director, and the
maximum number of shares for which options may be granted is 345,000. Options
granted prior to October 26, 1995 are exercisable immediately at the current
market value on the date of grant. Options granted on or after October 26, 1995
vest 20% two years after the date of grant, an additional 25% after three years,
another 25% after four years, and the remaining 30% after five years.
Additionally, as a result of the merger with PHSS on December 19, 1997 the
Company has the Physician Support Systems, Inc. Stock Option Plan and the
Synergistic Systems, Inc. Stock Option Plan ("the PHSS Plans"). However, no
additional options will be granted under the PHSS Plans. All options issued
under the PHSS Plans have an exercise price of not less than 100% of the fair
market value of a share of the Company's common stock on the date of the grant,
vest over five years and must be exercised within ten years from the date of the
grant. Each PHSS option outstanding on December 19, 1997 was converted to .435
options to receive the Company's Common Stock.
Other Stock Plans - The Company has an Employee Stock Purchase Plan under which
- -----------------
the sale of 1,350,000 shares of its Common Stock has been authorized. Employees
may designate up to the lesser of $25,000 or 20% of their annual compensation
for the purchase of stock. The price for shares purchased under the plan is the
lower of 85% of market value on the first day or the last day of the purchase
period. At May 31, 1998, 1,071,974 shares have been issued under this plan, with
278,026 shares reserved for future issuance.
A-32
<PAGE>
The Company's 1983 Restricted Stock Plan ("the Restricted Plan") authorizes
750,000 shares of the Company's Common Stock to be awarded to key employees.
Shares awarded under the Restricted Plan are held in escrow and released to the
grantee upon the grantee's satisfaction of conditions of the grantee's
restricted stock agreement. Awards are recorded as deferred compensation, a
reduction of shareholders' equity based on the quoted fair market value of the
Company's Common Stock at the award date. Compensation expense is recognized
ratably during the escrow period of the award.
There were 44,111, 34,132 and 3,864 shares of the Company's Common Stock awarded
under the Restricted Plan during fiscal years 1998, 1997 and 1996, respectively.
These awards have restriction periods of one to three years. As of May 31, 1998,
64,865 shares remained in escrow. There were 407,641 shares reserved for future
issuance under this plan. The Company expensed $649,000, $327,000 and $232,000
for the years ended May 31, 1998, 1997 and 1996, respectively, in connection
with the Restricted Plan.
A-33
<PAGE>
Transactions under the Stock Option Plans are summarized as follows:
<TABLE>
<CAPTION>
1987 Plan Non-Employee Directors Plan
------------------------------------------------------------------------------------
Weighted Average Weighted Average
Shares Under Option Price Per Shares Under Option Price Per
Option Share Option Share
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at May 31, 1995 2,816,685 $ 13.11 259,500 $ 11.66
Granted 682,875 22.96 25,000 25.13
Exercised (566,411) 7.98 (51,000) 10.24
Expired or terminated (244,984) 13.33 - -
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at May 31, 1996 2,688,165 15.54 233,500 13.41
Granted 214,050 36.11 25,000 41.00
Exercised (220,807) 15.48 (13,500) 15.03
Expired or terminated (211,576) 17.26 - -
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at May 31, 1997 2,469,832 17.21 245,000 16.14
Granted 212,950 37.56 25,000 36.94
Exercised (279,417) 11.16 (25,500) 12.48
Expired or terminated (131,382) 28.36 - -
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at May 31, 1998 2,271,983 19.21 244,500 18.65
- --------------------------------------------------------------------------------------------------------------------------
Exercisable at May 31, 1998 1,134,336 13.25 174,500 12.08
- --------------------------------------------------------------------------------------------------------------------------
Available for future grants - -
- --------------------------------------------------------------------------------------------------------------------------
1997 Plan PHSS Plans
-------------------------------------------------------------------------------
Weighted Average Weighted Average
Shares Under Option Price Per Shares Under Option Price Per
Option Share Option Share
-------------------------------------------------------------------------------
Outstanding at May 31, 1995 - $ - - $ -
Granted - - 92,325 34.52
Exercised - - - -
Expired or terminated - - - -
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at May 31, 1996 - - 92,325 34.52
Granted - - 262,486 35.44
Exercised - - - -
Expired or terminated - - (43,494) 40.34
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at May 31, 1997 - - 311,317 34.48
Granted 142,800 33.81 20,515 36.77
Exercised - - (84,517) 25.71
Expired or terminated (28,000) 35.50 (5,544) 32.20
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at May 31, 1998 114,800 33.40 241,771 37.79
- --------------------------------------------------------------------------------------------------------------------------
Exercisable at May 31, 1998 - - 217,846 38.94
- --------------------------------------------------------------------------------------------------------------------------
Available for future grants 1,113,200 -
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-34
<PAGE>
The following table sets forth the exercise price range, number of shares,
weighted average exercise price and remaining contractual lives by groups of
similar price and grant dates:
<TABLE>
<CAPTION>
1987 Plan Non-Employee Director Plan
---------------------------------------------------------------------------------------------------
Number of Weighted Weighted Average Number of Weighted Weighted Average
Exercise Price Range Shares Average Contractual Life Shares Average Contractual Life
Price Price
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 6.17 - $ 9.17 456,949 $ 6.69 4.0 years 97,500 $ 7.87 3.5 years
$ 9.67 - $14.33 659,519 10.54 5.6 years 30,000 10.83 5.5 years
$15.25 - $22.54 488,722 21.04 6.9 years 42,000 21.20 1.3 years
$23.38 - $34.38 356,416 29.20 7.3 years 25,000 25.13 7.5 years
$35.99 - $53.27 279,780 39.14 8.4 years 50,000 38.97 8.9 years
$56.15 - $78.47 30,597 65.40 4.5 years - - -
1997 Plan PHSS Plans
---------------------------------------------------------------------------------------------------
Number of Weighted Weighted Average Number of Weighted Weighted Average
Exercise Price Range Shares Average Contractual Life Shares Average Contractual Life
Price Price
- ---------------------------------------------------------------------------------------------------------------------------
$15.25 - $22.54 - - - 35,661 $ 18.58 8.9 years
$23.04 - $32.56 89,600 32.56 9.5 years 41,411 25.33 8.4 years
$35.20 - $50.00 25,200 36.38 9.6 years 164,699 45.09 8.4 years
</TABLE>
The Company has chosen the disclosure option under SFAS No. 123 and continues to
apply APB Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for options granted under the plans. Had
compensation cost for these plans been recognized based on the fair value of the
options at the grant dates for awards under the plans consistent with the method
of SFAS No. 123, the Company's net income and earnings per share would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
Net Income:
As reported $ (61,326) $ 29,398 $ (11,845)
Pro forma (63,796) 27,741 (12,578)
Basic earnings (loss) per share:
As reported (1.90) 0.96 (0.40)
Pro forma (1.98) 0.91 (0.42)
Diluted earnings (loss) per share:
As reported (1.90) 0.91 (0.40)
Pro forma (1.98) 0.87 (0.42)
</TABLE>
A-35
<PAGE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for the grants during the respective fiscal year:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
1987 Plan
Risk-free interest rates 6.3% 6.6% 6.1%
Expected dividend yields 0.8% 0.8% 1.4%
Expected lives 7 years 7 years 7 years
Non-employee Directors Plan
Risk-free interest rates 4.2% 6.5% 6.2%
Expected dividend yields 0.6% 0.7% 1.2%
Expected lives 10 years 10 years 10 years
1997 Plan
Risk-free interest rates 5.8% - -
Expected dividend yields 0.9% - -
Expected lives 7 years - -
PHSS Plans
Risk-free interest rates 6.0% 6.7% 6.1%
Expected dividend yields 0.8% 1.1% 0.8%
Expected lives 7 years 7 years 5 years
Employee Stock Purchase Plan
Risk-free interest rates 5.5% 5.7% 5.6%
Expected dividend yields 0.8% 0.7% 1.1%
Expected lives 1 year 1 year 1 year
</TABLE>
The expected volatility assumption is 40% for all plans and all years presented.
A-36
<PAGE>
NOTE 11 - NON-RECURRING CHARGES
Non-recurring charges include the following components for the fiscal years
ending May 31:
(In thousands) 1998 1997 1996
---- ---- ----
Asset impairment $32,353 $6,578 $35,116
In-process research & development 67,000 -- --
Merger related expenses 20,810 2,925 12,602
=========================================
Total $120,163 $9,503 $47,718
=========================================
In connection with the December 1997 mergers with PHSS and Source, the Company
incurred a non-recurring, pre-tax charge of $120.2 million. Included in this
charge was $67.0 million for in-process research and development, $32.4 million
for asset impairment, and $20.8 million for merger related expenses ($14.3
million of cash items and $6.5 million, non-cash). The in-process research and
development charge, asset impairment and portions of the merger related expenses
were considered non-cash items, totaling $110.3 million. The cash merger related
expenses were either paid at the time of the merger or accrued at the time the
expenses were incurred. Assets impaired included intangible assets and
capitalized software.
As a result of the Source and PMSI acquisition, the Company obtained an
independent third party valuation of the research and development activities of
the acquired companies. The valuation determined that $67.0 million of the
acquired companies' projects represented in-process research and development
that was not capitalizable under generally accepted accounting principles.
The merger related expenses consisted of transaction costs of $7.0 million,
anticipated severance benefits and other related costs of $7.3 million arising
from the Company's plans to realign redundant operations and activities, and
restructuring charges of $6.5 million. Merger transaction costs primarily
consisted of investment banking and professional fees. Restructuring charges
included the write-off of PHSS prepaid expenses from which the Company will not
realize future economic value and a provision for additional PHSS integration
costs.
As of May 31, 1998, $9.0 million have been expended toward the 1998
restructuring activities and merger transaction cost accruals, leaving $4.9
million accrued primarily for future severance costs.
A-37
<PAGE>
In connection with PHSS' fiscal 1997 mergers with EE&C and RPM and operating
inefficiencies at PHSS' subsidiary, Spring Anesthesia Group, Inc. ("Spring"), a
total charge of $9.5 million was incurred. Included in this charge was $2.2
million for the merger transaction costs (cash items), $6.6 million for Spring
intangible impaired assets (primarily customer contracts and goodwill) and $0.7
million to exit Spring processing facilities (cash item). The Spring operating
inefficiencies led to client dissatisfaction. PHSS' efforts to improve operating
conditions were unsuccessful and led to the loss of clients and related
revenues. As a result, it was determined an impairment loss should be recognized
under SFAS 121.
As of May 31, 1998, all amounts accrued for the cash items under the 1997
non-recurring charges have been expended. As of May 31, 1997, $2.1 million had
been expended toward the 1997 merger transaction cost accruals, leaving $0.1
million.
In connection with the fiscal 1996 creation of Global and the merger with CIS,
the Company incurred a total charge of $44.1 million. Included in this charge
was $35.1 million for intangibles and capitalized software asset impairment
(non-cash charge), $5.2 million for restructuring, and $3.8 million for merger
transaction costs. The restructuring and merger transaction costs that were
considered cash items were accrued at the time the charges were incurred.
The restructuring charge reflects the anticipated severance benefits and other
related costs arising from the Company's plans to downsize personnel in areas of
redundant operations and activities. Merger transaction costs primarily
consisted of investment banking and professional fees related to the CIS merger.
In connection with PHSS' fiscal 1996 merger with SSI, a total charge of $3.6
million was incurred, primarily for transaction and other merger related costs,
including severance activities.
As of May 31, 1998, $0.7 million remains accrued under the 1996 restructuring
activities, expending $4.0 million during the fiscal year. During the period
ended May 31, 1997, $3.1 million and $3.5 million had been expended toward the
1996 restructuring activities and merger transaction cost accruals, leaving $4.3
million accrued at the end of this period.
A-38
<PAGE>
NOTE 12 - RELATED PARTY TRANSACTIONS
During fiscal 1996, Global Payment Systems, a subsidiary of the Company,
purchased MAPP from MasterCard International Incorporated (see Note 2). In
addition, MasterCard holds a 7.5% minority interest in Global. There are
agreements in place for MasterCard to provide certain services for the MAPP
business unit during a defined transition period. There were accounts payable of
$363,000 at May 31, 1998 and $2,348,000 at May 31, 1997.
Also during fiscal 1996, National Data Payment Systems, Inc., a subsidiary of
the Company, formed an alliance with Comerica Bank and purchased a 51% ownership
interest in a merchant portfolio (see Note 2). There are agreements in place for
the Company to reimburse Comerica Bank for any expenses incurred on behalf of
the alliance. The Company had $99,000 at May 31, 1998 and $162,000 at May 31,
1997 payable to Comerica Bank for such expenses included in its accounts payable
balance.
Legal services provided by related parties were $3,243,000, $3,397,000, and
$4,338,000 for the years ended May 31, 1998, 1997 and 1996, respectively.
A-39
<PAGE>
NOTE 13 - LEASE OBLIGATIONS
The Company conducts a major part of its operations using leased facilities and
equipment. Many of these leases have renewal and purchase options and provide
that the Company pay the cost of property taxes, insurance and maintenance.
Rent expense on all operating leases for fiscal 1998, 1997 and 1996 was
approximately $19,372,000, $14,524,000 and $10,713,000, respectively.
Future minimum lease payments for all noncancelable leases at May 31, 1998 were
as follows:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C> <C>
(In thousands)
1999 $12,501 $13,229
2000 8,144 10,083
2001 3,664 7,743
2002 1,328 6,073
2003 430 3,255
Thereafter - 4,328
-----------------------------------
Total future minimum lease payments 26,067 $44,711
=================
Less: amount representing interest 2,624
-----------------
Present value of net minimum lease payments 23,443
Less: current portion 11,053
-----------------
Long-term obligations under capital leases at
May 31, 1998 $12,390
=================
</TABLE>
NOTE 14 - COMMITMENTS AND CONTINGENCIES
The Company is party to a number of claims and lawsuits incidental to its
business. In the opinion of management, the ultimate outcome of such matters, in
the aggregate, will not have a material adverse impact on the Company's
financial position, liquidity or results of operations.
In fiscal 1998, the Company entered into a $125,000,000 committed line of credit
primarily to fund the Company's acquisition requirements and a $15,000,000
uncommitted line of credit to fund working capital requirements. The lines of
credit are not secured. These agreements require the Company to maintain certain
financial ratios and contain other restrictive covenants. As of May 31, 1998,
there was $75,000,000 outstanding under the committed line of credit and the
Company was in compliance with all restrictive covenants. The committed line of
credit expires in 2002.
A-40
<PAGE>
As of May 31, 1998, the Company processed credit card transactions for
approximately 126,000 direct merchant locations. The Company's merchant
customers have liability for charges disputed by cardholders. However, in the
case of merchant fraud or insolvency or bankruptcy of the merchant, the Company
may be liable for any of such charges disputed by cardholders. The Company
requires cash deposits and other types of collateral by certain merchants to
minimize any such contingent liability. In addition, the Company believes that
the diversification of its merchant portfolio among industries and geographic
regions minimizes its risk of loss. The Company recognizes revenue based on a
percentage of the gross amount charged and has a potential liability for the
full amount of the charge. The Company establishes reserves for operational
losses based on historical and projected experiences concerning such charges. In
the opinion of management, such reserves for losses are adequate.
The Company also has a check guarantee business. Similar to the credit card
business, the Company charges its merchants a percentage of the gross amount of
the check and guarantees payment of the check to the merchant in the event the
check is not honored by the checkwriter's bank. As a result, the Company incurs
operational charges in this line of business. The Company has the right to
collect the full amount of the check from the checkwriter but has not
historically recovered 100% of the guaranteed checks. The Company establishes
reserves for this activity based on historical and projected loss experiences.
Expenses of $8,844,000, $8,061,000 and $7,120,000 were recorded for fiscal 1998,
1997 and 1996, respectively, for these reserves.
In connection with the Company's acquisition of merchant credit card operations
of banks, the Company has also entered into depository and processing agreements
("the Agreements") with certain of the banks. The Agreements allow the Company
to use the banks' "Bank Identification Number" ("BIN") to clear credit card
transactions through VISA and MasterCard. Certain Agreements contain financial
covenants, and the Company was in compliance with all such covenants as of May
31, 1998 or had obtained a verbal waiver of such covenants. In the event of the
termination of these Agreements, the Company would be able to obtain alternative
BIN agreements without material harm to the Company.
A-41
<PAGE>
NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures and non-cash investing and financing
activities for the years ended May 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Income taxes paid, net of refunds $32,023 $19,103 $9,623
Interest paid 11,424 9,743 3,983
Supplemental non-cash investing and financing activities:
Capital leases entered into in exchange
for property and equipment 10,426 2,195 1,412
</TABLE>
In fiscal 1998, 1997 and 1996, the Company acquired various businesses that were
accounted for as purchases (see Note 2). In conjunction with these transactions,
liabilities were assumed as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Fair value of assets acquired $209,128 $206,008 $201,452
Notes and deferred payments (1,528) (6,195) (11,654)
Stock issued (92,748) (17,830) (250)
Cash acquired (1,982) (419) (10,554)
Liabilities assumed (49,757) (20,265) (32,870)
==============================================
Cash paid for acquisitions $63,113 $161,299 $146,124
==============================================
</TABLE>
NOTE 16 - QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data) Quarter Ended
Aug. 31 Nov. 30 Feb. 28 May 31
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal Year 1998
Revenue $147,904 $144,325 $171,541 $185,274
Operating income 21,799 14,870 (92,271) 29,706
Net income 11,590 7,062 (96,227) 16,249
Basic earnings per share .38 .23 (2.89) .48
Diluted earnings per share .36 .22 (2.89) .47
Fiscal Year 1997
Revenue $120,237 $123,243 $136,783 $144,904
Operating income 13,950 7,894 17,562 21,446
Net income 5,489 2,595 9,725 11,589
Basic earnings per share .18 .09 .32 .38
Diluted earnings per share .17 .08 .30 .36
</TABLE>
A-42
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To National Data Corporation:
We have audited the accompanying consolidated balance sheets of National Data
Corporation (a Delaware corporation) and subsidiaries as of May 31, 1998 and
1997 and the related consolidated statements of income (loss), changes in
shareholders' equity, and cash flows for each of the three years in the period
ended May 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with 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 audits provide 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 National Data Corporation and
subsidiaries as of May 31, 1998 and 1997 and the results of their operations and
their cash flows for each of the three years in the period ended May 31, 1998,
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
July 15, 1998
A-43
<PAGE>
NATIONAL DATA CORPORATION
CONSOLIDATED SCHEDULE II
VALUATION & QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
1 2
Balance at Charged to Uncollectible Balance at
Beginning Cost and Acquired Accounts End
Description of Period Expenses Balances Write-Off of Period
Trade Receivable Allowances:
May 31, 1996 2,004 5,632 11 4,018 $3,629
May 31, 1997 3,629 5,216 1,764 5,706 $4,903
May 31, 1998 4,903 8,006 619 6,134 $7,394
</TABLE>
A-44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
We have audited in accordance with generally accepted auditing standards, the
financial statements included in National Data Corporation's annual report to
shareholders in this Form 10-K, and have issued our report thereon dated July
15, 1998. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in the index on page 28 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Atlanta, Georgia
July 15, 1998
A-45
<PAGE>
NATIONAL DATA CORPORATION
FORM 10-K
INDEX TO EXHIBITS
Exhibit
Numbers Description
10(vii) Credit Agreement dated as of December 19, 1997, among the Registrant,
The First National Bank of Chicago, as Administrative Agent,
Wachovia Bank, N.A., as Documentation Agent, and the Lenders named
therein.
10(viii) First Amendment dated April 10, 1998 to the Credit Agreement dated as
of December 19, 1997, among the Registrant, The First National Bank
of Chicago, as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.
(21) Subsidiaries of the Registrant.
(included in Appendix A).
(23) Consent of Independent Public Accountants
(included in Appendix A).
(27) Financial Data Schedule (for SEC use only).
(99.1) Private Securities Litigation Reform Act Of 1995 Safe Harbor
Compliance Statement For Forward-Looking Statements.
A-46
<PAGE>
EXHIBIT 10.7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of December 19, 1997, among NATIONAL DATA
CORPORATION, as Borrower, the banks and other financial institutions listed on
the signature pages hereof, as Lenders, THE FIRST NATIONAL BANK OF CHICAGO, as
Administrative Agent for such Lenders, and WACHOVIA BANK, N.A., as Documentation
Agent for such lenders.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01
-----------
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Absolute Rate" means, with respect to an Absolute Rate Loan made by a
-------------
Lender for the relevant Absolute Rate Interest Period, the rate of interest per
annum (rounded to the nearest 1/10,000 of 1%) offered by such Lender and
accepted by the Borrower pursuant to Section 2.04(f).
"Absolute Rate Advance" means a Borrowing hereunder consisting of the
---------------------
aggregate amount of the several Absolute Rate Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Absolute Rate Interest
Period.
"Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
---------------------
setting forth Absolute Rates pursuant to Section 2.04.
"Absolute Rate Interest Period" means, with respect to an Absolute Rate
-----------------------------
Advance or Absolute Rate Loan, a period of not less than 7 and not more than 180
days commencing on a Business Day selected by the Borrower pursuant to this
Agreement, but in no event extending beyond the Facility Termination Date. If an
Absolute Rate Interest Period would end on a day that is not a Business Day,
such Absolute Rate Interest Period shall end on the next succeeding Business
Day.
"Absolute Rate Loan" means a Loan which bears interest at the Absolute
------------------
Rate.
"Acquisition" means any transaction, or any series of related transactions,
-----------
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (i)
<PAGE>
acquires any going business or all or substantially all of the assets of any
firm, corporation, limited liability company or division thereof, whether
through purchase of assets, merger or otherwise or (ii) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
ownership interests of a partnership or limited liability company.
"Administrative Agent" means The First National Bank of Chicago, a national
--------------------
banking association organized under the laws of the United States of America, in
its capacity as administrative agent for the Lenders hereunder, its successors
and permitted assigns in such capacity, and any other Person appointed as
Administrative Agent in accordance with Section 8.09.
"Administrative Agent/Arranger Letter Agreement" means that certain letter
----------------------------------------------
agreement dated as of July 8, 1997, among the Borrower, GPS, the Administrative
Agent, and the Arranger relating to certain fees from time to time payable to
the Administrative Agent and the Arranger, together with all amendments and
supplements thereto.
"Advance" means a Borrowing hereunder (or, in the case of a Syndicated
-------
Advance, the conversion or continuation thereof) consisting of the aggregate
amount of the several Loans made by one or more of the Lenders to the Borrower
on the same Borrowing Date (or date of conversion or continuation), of the same
Type (or, in the case of a Competitive Bid Advance, on the same interest basis)
and, in the case of a Fixed Rate Advance, for the same Interest Period, and
includes a Syndicated Advance, a Competitive Bid Advance, and a Swing Line
Advance.
"Affiliate" means (i) any Person that directly, or indirectly through one
---------
or more intermediaries, controls the Borrower (a "Controlling Person"), (ii) any
Person (other than the Borrower) which is controlled by or is under common
control with a Controlling Person, or (iii) any Person of which the Borrower
owns, directly or indirectly, 20% or more of the common stock or equivalent
equity interests. As used herein, the term "control" means possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Aggregate Commitment" means the aggregate of the Commitments of all the
--------------------
Lenders, being $125,000,000 as of the date of this Agreement, as the same may be
reduced from time to time pursuant to the terms hereof.
"Aggregate Subsidiary Threshold" means an amount equal to eighty percent
------------------------------
(80%) of (i) the total consolidated revenue of the Borrower and its Subsidiaries
(which includes the GPS Group), less (ii) the total consolidated revenue of the
GPS Group, in each case for the most recent Fiscal Quarter as shown on the
Financial Statements (Annual) or Financial Statements
-2-
<PAGE>
(Quarterly), as the case may be, as most recently delivered or required to be
delivered pursuant to Section 5.01.
"Agreement" means this Credit Agreement, together with all amendments and
---------
supplements hereto and all restatements hereof.
"Alternate Base Rate" means, for any day, a rate of interest per annum
-------------------
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 2%.
"Applicable Margin" means, at any date of determination thereof with
-----------------
respect to any Syndicated Advance, the respective rates per annum for such
Syndicated Advance calculated in accordance with Section 2.06(c).
"Approved Investment Policy" means, with respect to the Borrower or any of
--------------------------
its Subsidiaries, the cash investments policy formally approved by its Board of
Directors from time to time, a copy of which policy as in effect on the Closing
Date has been delivered to the Administrative Agent, together with any
subsequent amendment, exception or supplement thereto, to the extent a copy of
such amendment, exception or supplement has previously been delivered to the
Administrative Agent.
"Arranger" means First Chicago Capital Markets, Inc., a Delaware
--------
corporation, and its successors, in its capacity as arranger of the credit
facilities provided to the Borrower by this Agreement.
"Asset Purchase and Contribution Agreement" means the Asset Purchase and
-----------------------------------------
Contribution Agreement dated as of February 22, 1996, among Mastercard
International Incorporated, the Borrower, and POS Acquisition Company LLC, as
amended by Amendment No. 1 to Asset Purchase and Contribution Agreement dated as
of February 22, 1996, among the Borrower, Mastercard International Incorporated,
GPS, GPS Holding Limited Partnership, National Data Corporation of Canada, Ltd.,
National Data Payment Systems, Inc., and NDC International, Ltd.
"Assignee" has the meaning set forth in Section 9.08(c)
--------
"Assignment Agreement" means an Assignment Agreement executed in accordance
--------------------
with Section 9.08(c) in the form attached hereto as Exhibit F.
---------
"ATT" means collectively, both (i) AT&T Capital Leasing Services, Inc., a
---
Massachusetts corporation, and (ii) Eaton Financial Corporation, a Massachusetts
corporation, a subsidiary of AT&T Capital Corporation.
-3-
<PAGE>
"ATT Agreements" means both (i) that certain lease program agreement dated
--------------
as of March 7, 1994 with Eaton Financial Corporation, and (ii) that certain
purchase agreement dated as of December 30, 1994 with AT&T Capital Leasing
Services, Inc., together with all amendments and supplements thereto.
"Authorized Officer" means any of the President, Chief Financial Officer,
------------------
Treasurer, or Secretary of the Borrower, acting singly.
"Borrower" means National Data Corporation and its successors and permitted
--------
assigns.
"Borrowing" means a borrowing hereunder consisting of a Loan or Loans made
---------
to the Borrower pursuant to Article II.
"Borrowing Date" means a date on which an Advance is made hereunder.
--------------
"Business Day" means (i) with respect to any borrowing, payment or rate
------------
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market, and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Capital Expenditures" means, without duplication, any expenditures for any
--------------------
purchase or other acquisition of any asset that would be classified as a fixed
or capital asset on a consolidated balance sheet of the Borrower and its
Subsidiaries prepared in accordance with GAAP.
"Capital Stock" means any nonredeemable capital stock (or in the case of a
-------------
limited liability company, the members' equivalent equity interest) of the
Borrower or any of its Consolidated Subsidiaries (to the extent issued to a
Person other than the Borrower), whether common or preferred.
"Capitalized Lease" of a Person means any lease of Property by such Person
-----------------
as lessee that would be capitalized on a balance sheet of such Person prepared
in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response Compensation and
------
Liability Act, 42 U.S.C. ' 9601 et. seq. and its implementing regulations and
amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation and
-------
Liability Inventory System established pursuant to CERCLA.
"Closing Date" means the date on which all conditions set forth in Section
------------
3.01 are fulfilled.
-4-
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
successor Federal tax code.
"Comerica" means, collectively, (i) NDPS Comerica Alliance, LLC, a Georgia
--------
limited liability company, (ii) the subsidiaries of such company, and (iii) the
successors of the Persons described in the foregoing clauses (i) and (ii)
resulting from a conversion of such Person to a corporation or a limited
liability company.
"Commitment" means (i) for each Lender, the obligation of such Lender to
----------
make Syndicated Loans not exceeding the applicable amount set forth opposite its
signature below or as set forth in any Notice of Assignment relating to any
assignment thereof that has become effective pursuant to Section 9.08(c), as
such amount may be reduced from time to time pursuant to the terms hereof, and
(ii) for the Swing Line Lender, the obligation of the Swing Line Lender to make
Swing Line Loans not exceeding $15,000,000 or as set forth in any Notice of
Assignment relating to any assignment thereof that has become effective pursuant
to Section 9.08(c), as such amount may be reduced from time to time pursuant to
the terms hereof.
"Competitive Bid Advance" means a borrowing hereunder consisting of the
-----------------------
aggregate amount of the several Competitive Bid Loans made by some or all of the
Lenders to the Borrower on the same Borrowing Date, at the same interest basis,
and for the same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.04(f).
--------------------------------
"Competitive Bid Loan" means, with respect of a Lender, a Loan made by such
--------------------
Lender pursuant to Section 2.04.
"Competitive Bid Margin" means the margin above or below the applicable
----------------------
Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a
percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from
such Eurodollar Base Rate.
"Competitive Bid Note" means a promissory note, substantially in the form
--------------------
of Exhibit "A-2" with appropriate insertions, duly executed and delivered to the
-------------
Administrative Agent by the Borrower for the account of a Lender and payable to
the order of such Lender, including any amendment, modification, renewal or
replacement of such promissory note.
"Competitive Bid Quote" means a Competitive Bid Quote, substantially in the
---------------------
form of Exhibit "D" hereto, completed and delivered by a Lender to the
-----------
Administrative Agent in accordance with Section 2.04(d).
"Competitive Bid Quote Request" means a Competitive Bid Quote Request,
-----------------------------
substantially in the form of Exhibit "B" hereto, completed and delivered by the
-----------
Borrower to the Administrative Agent in accordance with Section 2.04(b).
-5-
<PAGE>
"Compliance Certificate" means a compliance certificate, substantially in
----------------------
the form of Exhibit "E" hereto, signed by the chief financial officer or chief
-----------
accounting officer of the Borrower, showing the calculations necessary to
determine compliance with this Agreement and stating that no Default or Event of
Default exists, or if any Default or Event of Default exists, stating the nature
and status thereof.
"Consolidated Cash Flow" means, as at any date of determination for any
----------------------
period, with respect to the Borrower and its Consolidated Subsidiaries on a
consolidated basis for such period and in accordance with GAAP, Consolidated Net
Income, plus (to the extent deducted in calculating such Consolidated Net
----
Income) the sum of (i) depreciation and amortization, and (ii) all other non-
cash charges (less non-cash gains).
"Consolidated Debt" means at any date the Debt of the Borrower and its
-----------------
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Fixed Charges" means, without duplication, as at any date of
--------------------------
determination for any period, with respect to the Borrower and its Consolidated
Subsidiaries on a consolidated basis for such period and in accordance with
GAAP, the sum of (i) Consolidated Interest Expense, and (ii) all payment
obligations of the Borrower and its Consolidated Subsidiaries under all
Operating Leases and rental agreements.
"Consolidated Funded Debt" means at any date, with respect to the Borrower
------------------------
and its Consolidated Subsidiaries on a consolidated basis as of such date and in
accordance with GAAP, Consolidated Debt (excluding therefrom, however,
Guarantees of Debt of the Borrower or any of its Consolidated Subsidiaries,
respectively, by the Borrower or any such Consolidated Subsidiary).
"Consolidated Interest Expense" means, as at any date of determination for
-----------------------------
any period, without duplication, interest, whether expensed or capitalized, in
respect of outstanding Consolidated Debt of the Borrower and its Consolidated
Subsidiaries during such period; provided, that, in determining Consolidated
-------- ----
Interest Expense, interest on Debt referred to in clauses (viii) and (ix) of the
definition of Debt shall only be included to the extent that the Borrower's or
any Consolidated Subsidiary's obligation to pay such Debt is not contingent in
nature, as of any date of determination.
"Consolidated Net Income" means, as at any date of determination for any
-----------------------
period, the Net Income of the Borrower and its Consolidated Subsidiaries
determined on a consolidated basis for such period, but excluding (i)
extraordinary items, and (ii) any equity interests of the Borrower or any
Consolidated Subsidiary in the unremitted earnings of any Person that is not a
Consolidated Subsidiary.
"Consolidated Net Worth" means, at any date, the shareholders' (or in the
----------------------
case of a limited liability company, the members') equity of the Borrower and
its Consolidated
-6-
<PAGE>
Subsidiaries, as set forth or reflected on the most recent consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance
with GAAP, but excluding any Redeemable Preferred Stock of the Borrower or any
--- ---------
of its Consolidated Subsidiaries. Shareholders' equity generally would include,
but not be limited to (i) the par or stated value of all outstanding Capital
Stock, (ii) capital surplus, (iii) retained earnings, and (iv) various
deductions such as (A) purchases of treasury stock, (B) valuation allowances,
(C) receivables due from an employee stock ownership plan, (D) employee stock
ownership plan debt guarantees, and (E) translation adjustments for foreign
currency transactions.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
-----------------------
the accounts of which, in accordance with GAAP, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date;
provided, however, that Comerica shall be treated as a Consolidated Subsidiary
- -------- -------
only for purposes of (i) determining the Borrower's Status pursuant to Section
2.06(c) and (ii) Sections 6.01, 6.02 and 6.03.
"Contribution Agreement" means the Contribution Agreement, substantially in
----------------------
the form of Exhibit "J" executed and delivered by the Borrower and those
-----------
Consolidated Subsidiaries of the Borrower that are parties to the Subsidiary
Guarantee, in favor of the Administrative Agent for the ratable benefit of the
Lenders, as the same may be amended, supplemented and restated from time to
time.
"Contribution Agreement Supplement" means the Supplement substantially in
---------------------------------
the form of Annex I to the Contribution Agreement executed and delivered by an
-------
Operating Subsidiary of the Borrower pursuant to Section 5.03.
"Controlled Group" means all members of a controlled group of corporations
----------------
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.03(g).
------------------------------
"Corporate Base Rate" means a rate per annum equal to the corporate base
-------------------
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.
"Debt" of any Person means at any date, without duplication, (i) all
----
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under Capitalized Leases
and leases (so-called "synthetic leases") that are treated as finance leases for
tax purposes but that do not constitute Capitalized Leases under generally
accepted accounting principles, (v) all obligations of such Person to reimburse
any bank or other Person in respect of amounts payable
-7-
<PAGE>
under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person,
(vii) all obligations (regardless of whether contingent or absolute) of such
Person to reimburse any bank or other Person in respect of amounts paid under a
letter of credit or similar instrument, (viii) all Debt of others secured by a
Lien on any asset of such Person, whether or not such Debt is assumed by such
Person, (ix) all Debt of others Guaranteed by such Person, and (x) the present
value of estimated future payments payable in connection with earn-out
agreements executed in connection with Acquisitions by such Person, all as
determined in accordance with GAAP; provided, however, "Debt" of the Borrower or
-------- -------
any Subsidiary of the Borrower shall not be deemed to include any
non-recourse obligations under any Equipment Lease Agreements.
"Default" means any condition or event which constitutes an Event of
-------
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Documentation Agent" means Wachovia Bank, N.A., a national banking
-------------------
association organized under the laws of the United States of America, in its
capacity as documentation agent for the Lenders, its successors and permitted
assigns in such capacity, and any other Person appointed as Documentation Agent
hereunder.
"Dollars" or "$" means dollars in lawful currency of the United States of
------- -
America.
"Environmental Authorizations" means all licenses, permits, orders,
----------------------------
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower and its Subsidiaries required by any Environmental
Requirement.
"Environmental Authority" means any foreign, federal, state, local or
-----------------------
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or orders
----------------------------------
arising from or in any way associated with any Environmental Requirements,
whether or not entered upon consent or written agreements with an Environmental
Authority or other entity arising from or in any way associated with any
Environmental Requirement, whether or not incorporated in a judgment, decree or
order.
"Environmental Liabilities" means any liabilities, whether accrued,
-------------------------
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority or by
---------------------
any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of
-8-
<PAGE>
any, violation of any Environmental Requirement or any investigations concerning
any violation of any Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
-------------------------
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under any
----------------------
applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
--------------------------
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"Equipment Lease Agreements" means the ATT Agreement, the Sanwa Agreement
--------------------------
and any other similar agreements (whether relating to software and/or hardware)
entered into by the Borrower or any of the Subsidiary Guarantors from time to
time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Eurodollar Advance" means a Eurodollar Syndicated Advance or a Eurodollar
------------------
Bid Rate Advance, as applicable.
"Eurodollar Auction" means a solicitation of Competitive Bid Quotes setting
------------------
forth Competitive Bid Margins pursuant to Section 2.04 .
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
--------------------
relevant Eurodollar Interest Period, the rate determined by the Administrative
Agent to be the rate at which First Chicago offers to place deposits in U.S.
dollars with first-class banks in the London interbank market at approximately
11 a.m. (London time) two Business Days prior to the first day of such
Eurodollar Interest Period, in the approximate amount of First Chicago's
relevant Eurodollar Loan, or, in the case of a Eurodollar Bid Rate Advance, the
amount of the Eurodollar Bid Rate Advance requested by the Borrower, and having
a maturity approximately equal to such Eurodollar Interest Period.
"Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate Loan
-------------------
made by a Lender for the relevant Eurodollar Interest Period, the sum of (i) the
Eurodollar Base Rate and (ii) the Competitive Bid Margin offered by such Lender
and accepted by the Borrower pursuant to Section 2.04(f).
-9-
<PAGE>
"Eurodollar Bid Rate Advance" means a Competitive Bid Advance which bears
---------------------------
interest at a Eurodollar Bid Rate.
"Eurodollar Bid Rate Loan" means a Competitive Bid Loan which bears
------------------------
interest at a Eurodollar Bid Rate.
"Eurodollar Interest Period" means, with respect to a Eurodollar Advance, a
--------------------------
period of one, two, three or six months commencing on a Business Day selected by
the Borrower pursuant to this Agreement. Such Eurodollar Interest Period shall
end on the day which corresponds numerically to such date one, two, three or six
months thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Eurodollar Interest Period shall end on the last Business Day of such next,
second, third or sixth succeeding month. If a Eurodollar Interest Period would
otherwise end on a day which is not a Business Day, such Eurodollar Interest
Period shall end on the next succeeding Business Day, provided, however, that if
said next succeeding Business Day falls in a new calendar month, such Eurodollar
Interest Period shall end on the immediately preceding Business Day.
"Eurodollar Loan" means a Eurodollar Syndicated Loan or a Eurodollar Bid
---------------
Rate Loan, as applicable.
"Eurodollar Rate" means, with respect to a Eurodollar Syndicated Advance
---------------
for the relevant Eurodollar Interest Period, the sum of (i) the quotient of (a)
the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided
by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin. The
Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1% if
the rate is not such a multiple.
"Eurodollar Syndicated Advance" means a Syndicated Advance which bears
-----------------------------
interest at a Eurodollar Rate.
"Eurodollar Syndicated Loan" means a Syndicated Loan which bears interest
--------------------------
at a Eurodollar Rate.
"Event of Default" has the meaning set forth in Section 7.01.
----------------
"Facility Termination Date" means December 19, 2002 or any earlier date on
-------------------------
which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.
"Federal Funds Effective Rate" means, for any day, an interest rate per
----------------------------
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
-10-
<PAGE>
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Financial Institution" has the meaning ascribed thereto in O.C.G.A. (S) 7-
---------------------
1-4(21) as of the date hereof.
"Financial Statements (Annual)" means the balance sheet of such Person as
-----------------------------
of the end of such Fiscal Year and the related consolidated statements of
income, shareholders' equity and cash flows for such Fiscal Year, setting forth
in each case in comparative form the figures for the previous Fiscal Year.
"Financial Statements (Quarterly)" means the balance sheet of such Person
--------------------------------
as of the end of such quarter and the related statement of income and statement
of cash flows for such quarter and for the portion of the Fiscal Year ended at
the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of the
previous Fiscal Year.
"First Chicago" means The First National Bank of Chicago in its individual
-------------
capacity, and its successors.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
--------------
"Fiscal Year" means any fiscal year of the Borrower.
-----------
"Fixed Rate" means an Absolute Rate, Eurodollar Rate, Eurodollar Bid Rate,
----------
or Quoted Fixed Rate, as the case may be.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed Rate.
------------------
"Fixed Rate Swing Line Advance" means a Swing Line Advance which bears
-----------------------------
interest at a Quoted Fixed Rate.
"Fixed Rate Syndicated Advance" means a Syndicated Advance which bears
-----------------------------
interest at a Eurodollar Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
---------------
"Floating Rate" means, for any day, a rate per annum equal to the Alternate
-------------
Base Rate for such day, in each case changing when and as the Alternate Base
Rate changes.
"Floating Rate Advance" means a Syndicated Advance or Swing Line Advance
---------------------
which bears interest at the Floating Rate.
-11-
<PAGE>
"Floating Rate Loan" means a Syndicated Loan or Swing Line Loan which bears
------------------
interest at the Floating Rate.
"Funded Debt to Cash Flow Ratio" means, as of the end of any Fiscal
------------------------------
Quarter, the ratio of Consolidated Funded Debt as of such date to Consolidated
Cash Flow for the period indicated.
"GAAP" means generally accepted accounting principles applied on a basis
----
consistent with those which, in accordance with Section 1.02, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.
"GPS" means Global Payment Systems LLC, a limited liability company
---
organized under the laws of Georgia, its successors and permitted assigns.
"GPS Credit Agreement" means the Credit Agreement dated as of July 16,
--------------------
1996, among GPS, the lenders that are parties thereto, and The First National
Bank of Chicago, as administrative agent for such lenders, as the same has been
amended and is in effect as of the date of the Agreement.
"GPS Group" means GPS and each of its Consolidated Subsidiaries.
---------
"Guarantee" by any Person means any obligation, contingent or otherwise, of
---------
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
secure, purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to provide collateral security, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
--------
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or hazardous
-------------------
waste, as defined in the Resource Conservation and Recovery Act of 1980, 42
U.S.C. ' 6901 et. seq. and its implementing regulations and amendments, or in
any applicable state or local law or regulation, (b) "hazardous substance",
"pollutant", or "contaminant" as defined in CERCLA, or in any applicable state
or local law or regulation, (c) gasoline, or any other petroleum product or by-
product, including, crude oil or any fraction thereof (d) toxic substances, as
defined in the Toxic Substances Control Act of 1976, or in any applicable state
or local law or regulation or (e) insecticides, fungicides, or rodenticides, as
defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or
in any applicable state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
-12-
<PAGE>
"Income Available for Fixed Charges" means, as at any date of determination
----------------------------------
for any period, without duplication, Consolidated Net Income plus the sum of the
----
following items (to the extent deducted in calculating such Consolidated Net
Income): (i) Consolidated Interest Expense, (ii) all payment obligations of the
Borrower and its Consolidated Subsidiaries for such period under all Operating
Leases and rental agreements, and (iii) taxes on income, all determined with
respect to the Borrower and its Consolidated Subsidiaries for such period on a
consolidated basis and in accordance with GAAP.
"Indenture" means the trust indenture dated as of November 6, 1996, between
---------
the Borrower and The First National Bank of Chicago, as trustee, pursuant to
which the Borrower issued its Convertible Subordinated Notes Due 2003 in an
aggregate principal amount of $143,750,000.
"Interest Period" means (i) an Absolute Rate Interest Period, (ii) a
---------------
Eurodollar Interest Period, or (iii) a Quoted Fixed Rate Interest Period.
"Investment" means any investment in any Person, whether by means of
----------
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Invitation for Competitive Bid Quotes" means an Invitation for Competitive
-------------------------------------
Bid Quotes, substantially in the form of Exhibit "C" hereto, completed and
-----------
delivered by the Administrative Agent to the Lenders in accordance with Section
2.04(c).
"Lender" means each bank or other financial institution or lender listed on
------
the signature pages hereof as having a Commitment, and its successors and
permitted assigns.
"Lending Installation" means, with respect to a Lender or the
--------------------
Administrative Agent, any office, branch, subsidiary or affiliate of such Lender
or the Administrative Agent.
"Lending Office" means, as to each Lender, its office located at its
--------------
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as such Lender may
hereafter designate as its Lending Office by written notice to the Borrower and
the Administrative Agent.
"Level I Status" exists at any date if the Funded Debt to Cash Flow Ratio
--------------
in effect as of such date is less than 1.0 to 1.0.
"Level II Status" exists at any date if the Funded Debt to Cash Flow Ratio
---------------
in effect as of such date is greater than or equal to 1.0 to 1.0, but less than
1.5 to 1.0.
-13-
<PAGE>
"Level III Status" exists at any date if the Funded Debt to Cash Flow Ratio
----------------
in effect as of such date is greater than or equal to 1.5 to 1.0, but less than
2.5 to 1.0.
"Level IV Status" exists at any date if the Funded Debt to Cash Flow Ratio
---------------
in effect as of such date is greater than or equal to 2.5 to 1.0, but less than
3.5 to 1.0.
"Level V Status" exists at any date if the Funded Debt to Cash Flow Ratio
--------------
in effect as of such date is greater than or equal to 3.5 to 1.0.
"Lien" means, with respect to any asset, any mortgage, deed to secure debt,
----
deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement, which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law. For
the purposes of this Agreement, the Borrower and each of its Subsidiaries shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"LLC Conversion" means the transaction or series of related transactions
--------------
(including, without limitation, a merger, reorganization, liquidation, or
transfer of members' interests or assets) pursuant to which a business
corporation organized under the laws of a state of the United States, the shares
of which are owned by the members of GPS immediately prior to such
transaction(s) in the same proportion as their respective members' interests in
GPS immediately following such transaction(s), succeeds to all assets and
businesses of GPS as in existence immediately prior to such transaction(s).
"LLC Conversion Date" means the date on which a Permitted LLC Conversion is
-------------------
consummated and effective.
"LLC Operating Agreement" means the Operating Agreement of Global Payment
-----------------------
Systems LLC Limited Liability Company dated as of March 31, 1996, among
Mastercard International Incorporated, GPS Holding Limited Partnership, National
Data Corporation of Canada, Ltd., the Borrower, NDC International, Ltd., and
National Data Payment Systems, Inc., as amended and in effect from time to time.
"Loan" means, with respect to a Lender, a loan made by such Lender pursuant
----
to Article II (or, in the case of a Syndicated Loan, any conversion or
continuation thereof).
"Loan Documents" means this Agreement, the Notes, the Subsidiary Guarantee,
--------------
the Contribution Agreement, and all other documents and agreements contemplated
hereby and executed by the Borrower or any Consolidated Subsidiary of the
Borrower in favor of the Administrative Agent or any Lender.
-14-
<PAGE>
"Long-Term Debt" means at any date any Consolidated Debt which matures (or
--------------
the maturity of which may at the option of the Borrower or any Consolidated
Subsidiary be extended such that it matures) more than one year after such date.
"Margin Stock" means "margin stock" as defined in Regulations G, T, U or X.
------------
"Material Adverse Effect" means, with respect to any event, act, condition
-----------------------
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (a) the financial
condition, operations, business, properties or prospects of the Borrower and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Administrative Agent or the Lenders under the Loan Documents, or the ability of
the Borrower or any of its Subsidiaries to perform its obligations under the
Loan Documents to which it is a party (such obligations to include, without
limitation, payment of the Obligations and observance and performance of the
covenants set forth in Articles V and VI hereof), as applicable, or (c) the
legality, validity or enforceability of any Loan Document.
"Multiemployer Plan" shall have the meaning set forth in Section 4001(a)
------------------
(3) of ERISA.
"NDC Credit Agreement" means the Credit Agreement dated as of May 31, 1996
--------------------
among the Borrower, the lenders that are parties thereto, and Wachovia Bank of
Georgia, N.A. (now Wachovia Bank, N.A.), as Administrative Agent, as the same
has been amended and is in effect as of the date of this Agreement.
"NDC Group" means the Borrower and each of its Consolidated Subsidiaries
---------
other than the GPS Group.
"NDPS" means National Data Payment Systems, Inc., a New York corporation,
----
and its successors and permitted assigns.
"Net Income" means, as applied to any Person for any period, the aggregate
----------
amount of net income of such Person, after taxes, for such period, as determined
in accordance with GAAP.
"Net Proceeds of Capital Stock" means any proceeds received or deemed
-----------------------------
received by the Borrower or its Consolidated Subsidiary in respect of the
issuance or sale of Capital Stock or conversion of any Debt to Capital Stock,
after deducting therefrom all reasonable and customary costs and expenses
incurred by the Borrower or such Consolidated Subsidiary directly in connection
with such issuance or sale of such Capital Stock or conversion of such Debt.
"Notes" means, collectively, the Syndicated Notes, the Competitive Bid
-----
Notes, and the Swing Line Note; and "Note" means any one of the Notes.
-15-
<PAGE>
"Notice of Assignment" means a Notice of Assignment to be delivered
--------------------
pursuant to the provisions of the Assignment Agreement.
"Obligations" means all unpaid principal of and accrued and unpaid interest
-----------
on the Notes, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Swing Line Lender, the Administrative Agent or any indemnified party
hereunder arising under the Loan Documents.
"Operating Lease" of a Person means any lease of Property (other than a
---------------
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"Operating Subsidiary" means any Subsidiary of the Borrower which owns or
--------------------
acquires assets.
"Participant" has the meaning set forth in Section 9.08(b).
-----------
"Payment Date" means the first Business Day of each calendar quarter,
------------
beginning with the calendar quarter commencing January 1, 1998, except that with
respect only to such calendar quarter commencing January 1, 1998, the Payment
Date shall be January 5, 1998.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted LLC Conversion" means an LLC Conversion effected and implemented
------------------------
in accordance with the conditions and requirements of Section 6.09(b).
"Person" means an individual, a corporation, a limited liability company, a
------
partnership, an unincorporated association, a trust or any other entity or
organization, including, but not limited to, a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is covered
----
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of any member of the Controlled Group or (ii) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which a member of the Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
"Properties" means, as of the date of any determination, all real property
----------
currently owned, leased or otherwise used or occupied by the Borrower or any of
its Subsidiaries, wherever located.
-16-
<PAGE>
"Quoted Fixed Rate" means a fixed rate of interest quoted by the Swing Line
-----------------
Lender to the Borrower, and accepted by the Borrower, pursuant to Section
2.05(e) to be applicable to a Swing Line Loan as specified by the Borrower for a
Quoted Fixed Rate Interest Period.
"Quoted Fixed Rate Interest Period" means a period not to exceed seven (7)
---------------------------------
calendar days specified by the Borrower as being applicable to a Swing Line Loan
being requested by the Borrower to bear interest at a Quoted Fixed Rate.
"Redeemable Preferred Stock" of any Person means any preferred stock (or in
--------------------------
the case of a limited liability company, the members' equivalent equity
interest) issued by such Person which is at any time prior to the Facility
Termination Date either (i) mandatorily redeemable (by sinking fund or similar
payments or otherwise) or (ii) redeemable at the option of the holder thereof.
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Regulation G" means Regulation G of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the Federal
------------
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Reportable Event" means a reportable event as defined in Section 4043 of
----------------
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
-17-
<PAGE>
"Required Lenders" means at any time Lenders having at least 51% of the
----------------
Aggregate Commitment or, if the Aggregate Commitment is no longer in effect,
Lenders holding at least 51% of the aggregate outstanding principal amount of
the sum of the Loans.
"Reserve Requirement" means, with respect to a Eurodollar Interest Period,
-------------------
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on new non-
personal time deposits of $100,000 or more with a maturity equal to that of such
Eurocurrency liabilities (in the case of Eurodollar Advances).
"Restricted Investments" means cash investments in U.S. dollars in (i) U.S.
----------------------
Government securities and United States agency securities, including repurchase
agreements with a short-term rating of A1 by Standard & Poor's Corporation
("S&P") or P1 by Moody's Investors Services, Inc. ("Moody's"), (ii) municipal
securities rated AAA by S&P or AA by Moody's, (iii) certificates of deposit
issued by a bank rated A1 by S&P or P1 by Moody's, (iv) commercial paper rated
A1 by S&P or P1 by Moody's, (v) tender bonds or variable rate demand bonds
supported by a letter of credit issued by a United States bank whose long-term
certificates of deposit are rated AA by S&P or Aa by Moody's, and (vi) auction
rate municipal securities (35-day auction cycle) with long-term debt ratings of
AAA by S&P or Aaa by Moody's, provided that all such cash investments shall be
--------
made in accordance with the guidelines and other requirements of the Approved
Investment Policy, including without limitation, the requirement that an amount
estimated to meet a minimum seven day cash requirement of the Borrower be held
in overnight funds, and without giving effect to any exceptions to any such
guidelines or requirements.
"Restricted Payment" means (i) any dividend or other distribution on any
------------------
Capital Stock of the Borrower (except dividends payable solely in its Capital
Stock) or (ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any Capital Stock of the Borrower (except as acquired upon
the conversion thereof into additional Capital Stock) or (b) any option, warrant
or other right to acquire any Capital Stock of the Borrower.
"Sanwa" means Sanwa Business Credit Corporation.
-----
"Sanwa Letter Agreement" means that certain Letter Agreement, dated October
----------------------
30, 1992, between Technology Sales and Leasing Co., Inc. and Sanwa, together
with all amendments and supplements thereto.
"Single Employer Plan" means a Plan maintained by the Borrower or any
--------------------
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Single Subsidiary Threshold" means an amount equal to ten percent (10%) of
---------------------------
(i) the total consolidated revenue of the Borrower and its Subsidiaries (which
includes the GPS Group), less (ii) the total consolidated revenue of the GPS
Group, in each case for the most recent Fiscal
-18-
<PAGE>
Quarter as shown on the Financial (Annual) or Financial Statements (Quarterly),
as the case may be, as most recently delivered or required to be delivered
pursuant to Section 5.01.
"Special Charges" means any restructuring charges, asset impairment
---------------
charges, in-process research and development charges, and transaction expense
charges required to be taken by the Borrower and its Subsidiaries, in each case
net of taxes, in an aggregate amount not to exceed $75,000,000 as a result of
the acquisition of (i) Source Informatics Inc. and its subsidiaries and (ii)
Physician Support Systems, Inc. and its subsidiaries.
"Status" means, at any date of determination, whichever of Level I Status,
------
Level II Status, Level III Status, Level IV Status, or Level V Status exists at
such time.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
----------
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower (including GPS and each Subsidiary of
GPS).
"Subsidiary Guarantee" means the Subsidiary Guarantee substantially in the
--------------------
form of Exhibit "I" executed and delivered by the Subsidiary Guarantors, in
-----------
favor of the Administrative Agent for the ratable benefit of the Lenders, as the
same may be amended, supplemented and restated from time to time.
"Subsidiary Guarantee Supplement" means each Supplement substantially in
-------------------------------
the form of Annex I to the Subsidiary Guarantee executed and delivered by an
-------
Operating Subsidiary of NDC pursuant to Section 5.03.
"Subsidiary Guarantors" means, collectively, the Subsidiaries of the
---------------------
Borrower that are parties to the Subsidiary Guarantee and each additional
Operating Subsidiary of the Borrower that executes and delivers a Subsidiary
Guarantee Supplement pursuant to Section 5.03.
"Swing Line Advance" means a Borrowing pursuant to Section 2.05 consisting
------------------
of a Swing Line Loan (which may be made either as a Floating Rate Advance or as
a Quoted Fixed Rate Advance) made by the Swing Line Lender to the Borrower on
the same date and interest rate basis and, if made as a Quoted Fixed Rate
Advance, for the same Interest Period.
"Swing Line Borrowing Notice" means the notice given by the Borrower to the
---------------------------
Administrative Agent requesting a Swing Line Advance as provided in Section
2.05(e).
-19-
<PAGE>
"Swing Line Commitment" means the commitment of the Swing Line Lender to
---------------------
make Swing Line Loans to the Borrower in an aggregate principal amount at any
time outstanding not to exceed $15,000,000.
"Swing Line Lender" means The First National Bank of Chicago or any
-----------------
subsequent Lender extending to the Borrower the Swing Line Commitment hereunder.
"Swing Line Loans" means, collectively, the loans made to the Borrower by
----------------
the Swing Line Lender pursuant to Section 2.05.
"Swing Line Note" means the promissory notes evidencing the Swing Line
---------------
Loans substantially in the form of Exhibit "A-3" and duly completed in
-------------
accordance with the terms hereof, including any amendment, modification, renewal
or replacement of such promissory note.
"Syndicated Advance" means a borrowing hereunder (or conversion or
------------------
continuation thereof) consisting of the aggregate amount of the several
Syndicated Loans made by the Lenders to the Borrower, on the same Borrowing Date
(or date of conversion or continuation), of the same Type and, in the case of a
Fixed Rate Syndicated Advance, for the same Interest Period.
"Syndicated Borrowing Notice" is defined in Section 2.03(f).
---------------------------
"Syndicated Loan" means, with respect of a Lender, a Loan made by such
---------------
Lender pursuant to Section 2.03.
"Syndicated Note" means a promissory note, substantially in the form of
---------------
Exhibit "A-1" with appropriate insertions, duly executed and delivered to the
- -------------
Administrative Agent by the Borrower for the account of a Lender and payable to
the order of such Lender in the amount of its Commitment, including any
amendment, modification, renewal or replacement of such promissory note.
"Syndication Agent" means First Chicago Capital Markets, Inc., a Delaware
-----------------
corporation, and its successors, in its capacity as syndication agent for the
credit facilities provided to the Borrower by this Agreement.
"Third Parties" means all lessees, sublessees, licensees and other users of
-------------
the Properties, excluding those users of the Properties in the ordinary course
of the Borrower's business and on a temporary basis.
"Transferee" has the meaning set forth in Section 9.08(d)
----------
"Type" means (i) with respect to any Advance, its nature as an Absolute
----
Rate Advance, a Eurodollar Bid Rate Advance, a Eurodollar Syndicated Advance, a
Swing Line Quoted Rate
-20-
<PAGE>
Advance, or a Floating Rate Advance, (ii) with respect to any Syndicated
Advance, its nature as a Eurodollar Syndicated Advance or a Floating Rate
Advance, and (iii) with respect to any Swing Line Advance, its nature as a
Quoted Fixed Rate Advance or a Floating Rate Advance.
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
---------------------------
the amount (if any) by which (i) the present value of all vested nonforfeitable
benefits under such Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Wholly Owned Subsidiary" means any Subsidiary all of the Capital Stock or
-----------------------
other ownership interests of which (except directors' qualifying shares) are at
the time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
-----------------------------------
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Lenders unless with respect to any such change concurred in by the
Borrower's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of any of the Loan Documents: (i) the
Borrower shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements, or (ii) the Required Lenders
shall so object in writing within 30 days after the delivery of such financial
statements, in either of which events such calculations shall be made on a basis
consistent with those used in the preparation of the latest financial statements
as to which such objection shall not have been made (which, if objection is made
in respect of the first financial statements delivered under Section 5.01, shall
mean the financial statements referred to in Section 4.04).
SECTION 1.03. References. Unless otherwise indicated, references in this
----------
Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other
Subdivisions are references to Articles, exhibits, schedules, sections and other
subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this Agreement
--------------------
shall have the same defined meanings when used in any of the other Loan
Documents, unless otherwise defined therein or unless the context shall require
otherwise.
SECTION 1.05. Terminology.
-----------
-21-
<PAGE>
(a) General. All personal pronouns used in this Agreement, whether
-------
used in the masculine, feminine or neuter gender, shall include all other
genders; the singular shall include the plural, and the plural shall
include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of
this Agreement.
(b) Special Corporate Terminology. All references to corporate
-----------------------------
nature, the capital stock, stockholders, directors, articles or certificate
of incorporation and by-laws, or such similar terms, of any Person shall,
if such Person is a limited liability company, refer respectively to the
limited liability company nature, the equity interest, members, managing
member, articles of organization and operating agreement of such Person.
In addition, after a Permitted LLC Conversion, all references to GPS's
limited liability status, equity interest, members, managing member,
articles of organization and operating agreement shall be deemed to refer
respectively to GPS's corporate nature, the capital stock, stockholders,
directors, articles or certificate of incorporation and by-laws.
ARTICLE II
THE CREDITS
SECTION 2.01. Description of Facility. Upon the terms and subject to the
-----------------------
conditions set forth in this Agreement, the Lenders hereby grant to the Borrower
a revolving credit facility pursuant to which: (i) each Lender severally agrees
to make Syndicated Loans to the Borrower in accordance with Section 2.03; (ii)
each Lender may, in its sole discretion, make bids to make Competitive Bid Loans
to the Borrower in accordance with Section 2.04; and (iii) the Swing Line Lender
agrees to make Swing Line Loans to the Borrower in accordance with Section 2.05;
provided that in no event may the aggregate principal amount of all outstanding
- --------
Advances to the Borrower (including Syndicated Advances, Competitive Bid
Advances, and Swing Line Advances) exceed the Aggregate Commitment.
SECTION 2.02. Availability of Facility. Subject to the terms and
------------------------
conditions of this Agreement, the revolving credit facility is available from
the date of this Agreement to the Facility Termination Date, and the Borrower
may borrow, repay and reborrow at any time prior to the Facility Termination
Date.
SECTION 2.03. Syndicated Advances.
--------------------
(a) Commitment. From and including the date of this Agreement and
----------
prior to the Facility Termination Date, each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make Syndicated
Loans to the Borrower from time to time in amounts not to exceed in the
aggregate at any one time outstanding the amount of its Commitment then in
effect. The Commitment by each Lender to lend hereunder shall expire on
the Facility Termination Date.
-22-
<PAGE>
(b) Required Payments; Termination. Any outstanding Syndicated
------------------------------
Advances and all other unpaid Obligations shall be paid in full by the
Borrower on the Facility Termination Date.
(c) Ratable Loans. Each Syndicated Advance hereunder shall consist of
-------------
Syndicated Loans made from the several Lenders ratably in proportion to the
ratio that their respective Commitments bear to the Aggregate Commitment.
(d) Types of Syndicated Advances. The Syndicated Advances may be
----------------------------
Eurodollar Syndicated Advances, Floating Rate Advances or a combination
thereof, selected by the Borrower in accordance with Sections 2.03(f) and
2.03(g). The Syndicated Advances shall be evidenced by the Syndicated
Notes.
(e) Minimum Amount of Each Syndicated Advance; Maximum Number of
------------------------------------------------------------
Advances. Each Eurodollar Syndicated Advance shall be in the minimum
--------
amount of $1,000,000 (and in multiples of $500,000 if in excess thereof),
and each Floating Rate Advance shall be in the minimum amount of $500,000
(and in multiples of $100,000 if in excess thereof); provided, however,
-------- -------
that any Floating Rate Advance may be in the amount of the unused Aggregate
Commitment, and any Eurodollar Syndicated Advance may be in the amount of
the unused Aggregate Commitment so long as such Advance is not less than
$1,000,000; and provided, further, that the total combined number of
-------- -------
Syndicated Advances and Competitive Bid Advances outstanding at any time
shall not exceed nine (9) (with all Floating Rate Advances for purposes of
the foregoing limitation being deemed to constitute a single Advance).
(f) Method of Selecting Types and Interest Periods for New Syndicated
-----------------------------------------------------------------
Advances. The Borrower shall select the Type of Syndicated Advance and, in
--------
the case of each Eurodollar Syndicated Advance, the Interest Period
applicable to each such Eurodollar Syndicated Advance from time to time.
The Borrower shall give the Administrative Agent irrevocable notice (a
"Syndicated Borrowing Notice") not later than 10:00 a.m. (Chicago time) at
least one Business Day before the Borrowing Date of each Floating Rate
Advance and three Business Days before the Borrowing Date for each
Eurodollar Syndicated Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such Syndicated
Advance,
(ii) the aggregate amount of such Syndicated Advance,
(iii) the Type of Syndicated Advance selected, and
(iv) in the case of each Eurodollar Syndicated Advance, the Interest
Period applicable thereto.
-23-
<PAGE>
Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Syndicated Loan or Loans, in funds immediately available in
Chicago to the Administrative Agent at its address specified pursuant to Article
IX. The Administrative Agent will make the funds so received from the Lenders
available to the Borrower at the Administrative Agent's aforesaid address not
later than 2:00 p.m. (Chicago time) on such date.
(g) Conversion and Continuation of Outstanding Syndicated Advances.
--------------------------------------------------------------
Floating Rate Advances shall continue as Floating Rate Advances unless and
until such Floating Rate Advances are converted into Eurodollar Syndicated
Advances. Each Eurodollar Syndicated Advance of any Type shall continue
as a Eurodollar Syndicated Advance of such Type until the end of the then
applicable Interest Period therefor, at which time such Eurodollar
Syndicated Advance shall be automatically converted into a Floating Rate
Advance unless the Borrower shall have given the Administrative Agent a
Conversion/Continuation Notice requesting that, at the end of such Interest
Period, such Eurodollar Syndicated Advance either continue as a Eurodollar
Syndicated Advance of such Type for the same or another Interest Period or
be converted into a Syndicated Advance of another Type. Subject to the
terms of Section 2.03(e), the Borrower may elect from time to time to
convert all or any part of a Syndicated Advance of any Type into any other
Type or Types of Syndicated Advances; provided that any conversion of any
Eurodollar Syndicated Advance shall be made on, and only on, the last day
of the Interest Period applicable thereto. The Borrower shall give the
Administrative Agent irrevocable notice (a "Conversion/Continuation
Notice") of each conversion of a Syndicated Advance or continuation of a
Eurodollar Syndicated Advance not later than 10:00 a.m. (Chicago time) at
least one Business Day, in the case of a conversion into a Floating Rate
Advance, or three Business Days, in the case of a conversion into or
continuation of a Eurodollar Syndicated Advance, prior to the date of the
requested conversion or continuation, specifying:
(i) the requested date which shall be a Business Day, of such conversion
or continuation;
(ii) the aggregate amount and Type of Syndicated Advance(s) which is [are]
to be converted or continued; and
(iii) the amount and Type(s) of Syndicated Advance(s) into which such
Syndicated Advance is to be converted or continued and, in the case
of a conversion into or continuation of a Eurodollar Syndicated
Advance, the duration of the Interest Period applicable thereto.
SECTION 2.04. Competitive Bid Advances.
------------------------
-24-
<PAGE>
(a) Competitive Bid Option; Repayment of Competitive Bid Advances. In
-------------------------------------------------------------
addition to Syndicated Advances pursuant to Section 2.03, but subject to
the terms and conditions of this Agreement (including, without limitation,
the limitations set forth in Section 2.01 as to the maximum aggregate
principal amount of all outstanding Advances hereunder and as to the
maximum combined number of Syndicated Advances and Competitive Bid Advances
that may be outstanding at any time hereunder), the Borrower may, as set
forth in this Section 2.04, request the Lenders, prior to the Facility
Termination Date, to make offers to make Competitive Bid Advances to the
Borrower. Each Lender may, but shall have no obligation to, make such
offers and the Borrower may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section 2.04. Competitive Bid
Advances shall be evidenced by the Competitive Bid Notes. Each Competitive
Bid Advance shall be repaid in full by the Borrower on the last day of the
Interest Period applicable thereto.
(b) Competitive Bid Quote Request. When the Borrower wishes to
-----------------------------
request offers to make Competitive Bid Loans under this Section 2.04, the
Borrower shall transmit to the Administrative Agent by telex or facsimile
transmission a Competitive Bid Quote Request so as to be received not later
than (x) 10:00 a.m. (Chicago time) at least five Business Days prior to the
Borrowing Date proposed therein, in the case of a Eurodollar Auction, or
(y) 10:00 a.m. (Chicago time) at least one Business Day prior to the
Borrowing Date proposed therein, in the case of an Absolute Rate Auction
(or, in either case, such other time or date as the Borrower and the
Administrative Agent shall have mutually agreed upon and shall have
notified to the Lenders not later than the date of the Competitive Bid
Quote Request for the first Eurodollar Auction or Absolute Rate Auction for
which such change is to be effective), specifying:
(i) the proposed Borrowing Date for the proposed Competitive Bid Advance;
(ii) the aggregate principal amount of such Competitive Bid Advance, which
shall be in the minimum amount of $5,000,000 and in multiples of
$1,000,000 if in excess thereof);
(iii) whether the Competitive Bid Quotes requested are to set forth a
Competitive Bid Margin or an Absolute Rate, or both; and
(iv) the Interest Period applicable thereto.
The Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period and for a Eurodollar Auction and an Absolute Rate Auction in a
single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be
given within five Business Days (or, upon reasonable prior notice to the
Lenders, such other number of days as the Borrower and the Administrative Agent
may agree upon) of any other Competitive Bid Quote Request. A Competitive Bid
Quote Request that does not conform substantially to the format of Exhibit "B"
-----------
-25-
<PAGE>
hereto shall be rejected, and the Administrative Agent shall promptly notify the
Borrower of such rejection by telex or facsimile transmission.
(c) Invitation for Competitive Bid Quotes. Promptly upon receipt of a
-------------------------------------
Competitive Bid Quote Request that is not rejected pursuant to Section
2.04(b), the Administrative Agent shall send to each of the Lenders by
telex or facsimile transmission an Invitation for Competitive Bid Quotes,
which shall constitute an invitation by the Borrower to each Lender to
submit Competitive Bid Quotes offering to make the Competitive Bid Loans to
which such Competitive Bid Quote Request relates in accordance with this
Section 2.04.
(d) Submission and Contents of Competitive Bid Quotes.
-------------------------------------------------
(i) Each Lender may, in its sole discretion, submit a Competitive Bid
Quote containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bid Quotes. Each
Competitive Bid Quote must comply with the requirements of this
Section 2.04(d) and must be submitted to the Administrative Agent by
telex or facsimile transmission at its offices specified in or
pursuant to Article IX not later than (i) 1:00 p.m. (Chicago time) at
least four Business Days prior to the proposed Borrowing Date in the
case of a Eurodollar Auction, or (ii) 9:00 a.m. (Chicago time) on the
proposed Borrowing Date in the case of an Absolute Rate Auction (or,
in either case, such other time or date as the Borrower and the
Administrative Agent shall have mutually agreed up and shall have
notified to the Lenders not later than the date of the first
Eurodollar Auction or Absolute Rate Auction for which such change is
to be effective); provided that Competitive Bid Quotes submitted by
--------
the Administrative Agent (or any Affiliate of the Administrative
Agent) in the capacity of a Lender may be submitted, and may only be
submitted, if the Administrative Agent or such Affiliate notifies the
Borrower of the terms of the offer or offers contained therein not
later than (x) 15 minutes prior to the deadline for the other Lenders,
in the case of a Eurodollar Auction, or (y) 15 minutes prior to the
deadline for the other Lenders, in the case of an Absolute Rate
Auction. Subject to Articles III and VII, any Competitive Bid Quote
so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(ii) Each Competitive Bid Quote shall in any case specify:
(A) the proposed Borrowing Date, which shall be the same as that set
forth in the applicable Invitation for Competitive Bid Quotes;
(B) the principal amount of the Competitive Bid Loan for which each
such offer is being made, which principal amount (1) may be
greater than, less than or equal to the Commitment of the quoting
Lender, but in no case greater than the unutilized Aggregate
Commitment, (2) must be at least
-26-
<PAGE>
$2,500,000 (and an integral multiple of $500,000 if in excess
thereof), and (3) may not exceed the principal amount of
Competitive Bid Loans for which offers were requested;
(C) in the case of a Eurodollar Auction, the Competitive Bid Margin
offered for each such Competitive Bid Loan;
(D) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Loan;
(E) the minimum or maximum amount, if any, of the Competitive Bid
Loan which may be accepted by the Borrower;
(F) the applicable Interest Period; and
(G) the identity of the quoting Lender.
(iii) The Administrative Agent shall reject any Competitive Bid Quote
that:
(A) is not substantially in the form of Exhibit "D" hereto or does
-----------
not specify all of the information required by Section
2.04(d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Competitive Bid Quotes; or
(D) arrives after the time set forth in Section 2.04(d)(i).
(iv) If any Competitive Bid Quote shall be rejected pursuant to Section
2.04(d)(iii), then the Administrative Agent shall notify the affected
Lender of such rejection as soon as practicable.
(e) Notice to the Borrower. The Administrative Agent shall, as soon
----------------------
as practicable but in any event prior to 10:00 a.m. (Chicago time) on the
date specified in Section 2.04(f) for the Borrower's acceptance or
rejection of offers, notify the Borrower of the terms (i) of any
Competitive Bid Quote submitted by a Lender that is in accordance with
Section 2.04(d) and (ii) of any Competitive Bid Quote that is in accordance
with Section 2.04(d) and amends, modifies or is otherwise inconsistent with
a previous Competitive Bid Quote submitted by such Lender with respect to
the same Competitive Bid Quote Request. Any such subsequent Competitive
Bid Quote shall be disregarded by the Administrative Agent unless such
subsequent Competitive Bid Quote specifically states that it is submitted
solely to correct a manifest error in such former Competitive
-27-
<PAGE>
Bid Quote. The Administrative Agent's notice to the Borrower shall specify
the aggregate principal amount of Competitive Bid Loans for which offers
have been received for each Interest Period specified in the related
Competitive Bid Quote Request and the respective principal amounts and
Competitive Bid Margins or Absolute Rates, as the case may be, so offered.
(f) Acceptance and Notice by the Borrower. Subject to the receipt of
-------------------------------------
the notice from the Administrative Agent referred to in Section 2.04(e),
not later than (i) 10:00 a.m. (Chicago time) at least three Business Days
prior to the proposed Borrowing Date, in the case of a Eurodollar Auction,
or (ii) 10:00 a.m. (Chicago time) on the proposed Borrowing Date, in the
case of an Absolute Rate Auction (or in either case, such other time or
date as the Borrower and the Administrative Agent shall have mutually
agreed upon and shall have notified to the Lenders not later than the date
of the Competitive Bid Quote Request for the first Eurodollar Auction or
Absolute Rate Auction for which such change is to be effective), the
Borrower shall notify the Administrative Agent of the Borrower's acceptance
or rejection of the offers so notified to it pursuant to Section 2.04(e);
provided, however, that the failure by the Borrower to give such notice to
-------- -------
the Administrative Agent shall be deemed to be a rejection by the Borrower
of all such offers. In the case of acceptance, such notice (a "Competitive
Bid Borrowing Notice") shall specify the aggregate principal amount of
offers for each Interest Period that are accepted. The Borrower may accept
or reject any Competitive Bid Quote in whole or in part (subject to the
terms of Section 2.04(d)(ii)(E)); provided that:
(i) the aggregate principal amount of each Competitive Bid Advance may
not exceed the applicable amount set forth in the related Competitive
Bid Quote Request;
(ii) the principal amount of each Competitive Bid Advance must be at least
$5,000,000 (and an integral multiple of $1,000,000 if in excess
thereof);
(iii) acceptance of offers may only be made on the basis of ascending
Competitive Bid Margins or Absolute Rates, as the case may be; and
(iv) the Borrower may not accept any offer of the type described in
Section 2.04(d)(iii) or that otherwise fails to comply with the
requirements of this Agreement in respect of obtaining a Competitive
Bid Loan under this Agreement.
(g) Allocation by the Administrative Agent. If offers are made by two
--------------------------------------
or more Lenders with the same Competitive Bid Margins or Absolute Rates, as
the case may be, for a greater aggregate principal amount than the amount
in respect of which offers are permitted to be accepted for the related
Interest Period, the principal amount of Competitive Bid Loans in respect
of which such offers are accepted shall be allocated by the Administrative
Agent among such Lenders as nearly as possible (in such multiples as the
-28-
<PAGE>
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amount of such offers; provided, however, that no Lender shall be
-------- -------
allocated a portion of any Competitive Bid Advance which is less than the
minimum amount which such Lender has indicated that it is willing to
accept. Allocations by the Administrative Agent of the amounts of
Competitive Bid Loans shall be conclusive in the absence of manifest error.
The Administrative Agent shall promptly, but in any event on the same
Business Day, in the case of Eurodollar Bid Rate Advances, and by 11:00
a.m. (Chicago time) on the same Business Day, in the case of Absolute Rate
Advances, notify each Lender of its receipt of a Competitive Bid Borrowing
Notice and the aggregate principal amount of each Competitive Bid Advance
allocated to each participating Lender.
(h) Funding of Competitive Bid Advances. Not later than noon (Chicago
-----------------------------------
time) on each Borrowing Date for a Competitive Bid Advance, each Lender
participating in such Advance shall make available its Competitive Bid Loan
or Loans, in funds immediately available in Chicago to the Administrative
Agent at its address specified pursuant to Article IX. The Administrative
Agent will make the funds so received from such Lenders available to the
Borrower at the Administrative Agent's aforesaid address not later than
2:00 p.m. (Chicago time) on such date.
SECTION 2.05. Swing Line Advances.
-------------------
(a) Commitment. From and including the date of this Agreement and
----------
prior to the Facility Termination Date, the Swing Line Lender agrees, on
the terms and conditions set forth in this Agreement, to make Swing Line
Loans to the Borrower from time to time in amounts not to exceed in the
aggregate at any one time outstanding the amount of the Swing Line
Commitment then in effect. The Borrower shall be entitled to repay and
reborrow Swing Line Loans in accordance with the provisions, and subject to
the limitations, set forth herein (including the limitations set forth in
Section 2.01 as to the maximum aggregate principal amount of all
outstanding Advances hereunder). The Commitment of the Swing Line Lender
to lend hereunder shall expire on the Facility Termination Date.
(b) Required Payments; Termination. Each Swing Line Advance shall be
------------------------------
repaid in full within seven (7) days from the date such Advance is made to
the Borrower. All outstanding Swing Line Advances shall be paid in full by
the Borrower on the Facility Termination Date.
(c) Types of Swing Line Advances. The Swing Line Advances may be
----------------------------
Floating Rate Advances or Quoted Fixed Rate Advances, or a combination
thereof, selected by the Borrower in accordance with Section 2.05(e). The
Swing Line Advances shall be evidenced by the Swing Line Note.
-29-
<PAGE>
(d) Minimum Amount of Each Swing Line Advance. Each Swing Line
-----------------------------------------
Advance shall be in the minimum amount of $500,000 and in multiples of
$100,000 if in excess thereof; provided, however, that any Swing Line
-------- -------
Advance may be in the amount of the unused portion of the Swing Line
Commitment so long as such Advance is not less than $100,000.
Notwithstanding the foregoing, the Borrower shall not be entitled to have
outstanding at any time more than three Swing Line Advances.
(e) Method of Selecting Types of Swing Line Advances. Whenever the
------------------------------------------------
Borrower desires to obtain a Swing Line Advance, the Borrower shall give
the Swing Line Lender (with a copy to the Administrative Agent) prior
written notice (or telephonic notice promptly confirmed in writing) of such
Swing Line Advance (each a "Swing Line Borrowing Notice." Each Swing Line
---------------------------
Borrowing Notice requesting a Floating Rate Advance shall be given prior to
2:00 p.m. (Chicago time) on the Borrowing Date for such Advance and shall
specify the aggregate principal amount of such Advance and the date such
Advance is to be made (which shall be a Business Day). Each Swing Line
Borrowing Notice requesting a Quoted Fixed Rate Advance shall be given
prior to 12:00 noon (Chicago time) on the Borrowing Date and shall specify
the aggregate principal amount of such Advance, the date such Advance is to
be made (which shall be a Business Day), and the Interest Period to be
applicable to such Advance. The Swing Line Lender shall promptly furnish
the Borrower (with a copy to the Administrative Agent) with a quotation of
the Quoted Fixed Rate being offered with respect to such Swing Line Advance
by telephone (promptly confirmed in writing, if requested) or by facsimile
transmission. The Borrower shall immediately inform the Swing Line Lender
(with a copy to the Administrative Agent) of its decision as to whether to
accept the Quoted Fixed Rate and to confirm the borrowing of the Swing Line
Advance (which may be done by telephone, promptly confirmed in writing, and
which decision shall be irrevocable). If the Borrower has so informed the
Swing Line Lender and confirmed the terms of the Swing Line Advance, then
no later than 4:00 p.m. (Chicago time) on such date, the Swing Line Lender
shall make the principal amount of the Swing Line Advance available to the
Administrative Agent in immediately available funds at the Payment Office
of the Administrative Agent, and the Administrative Agent will make
available to the Borrower such amount by crediting such amount to the
Borrower's demand deposit account maintained with the Administrative Agent.
In the event the Swing Line Lender does not make such amount available to
the Administrative Agent at the time prescribed above, but such amount is
received later that day, such amount may be credited to the Borrower in the
manner described in the preceding sentence on the next Business Day (with
interest on such amount to begin accruing hereunder on such next Business
Day).
(f) Purchase by Lenders of Swing Line Advances. If the Borrower fails
------------------------------------------
to repay a Swing Line Advance when required by Section 2.05(b), then upon
request of the Swing Line Lender, each Lender other than the Swing Line
Lender shall purchase a participating interest in such Swing Line Advance
in an amount equal to its pro rata share (based on its respective
Commitment) of such Swing Line Advance, and the Swing Line
-30-
<PAGE>
Lender shall furnish each Lender with confirmation evidencing such
participating interest. Such purchase shall be made on the next Business
Day following such request. On the date of such required purchase, each
Lender will immediately transfer to the Swing Line Lender, in immediately
available funds, the amount of its participation. If such Swing Line
Advance is not outstanding as a Floating Rate Advance at the time of such
purchase, such Swing Line Advance shall automatically be converted to, and
thereafter bear interest, as a Floating Rate Advance. Whenever, at any time
after the Swing Line Lender has received from any such Lender the funds for
its participating interest in a Swing Line Advance, the Administrative
Agent receives any payment on account thereof, the Administrative Agent
will distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender's participating interest was
outstanding and funded); provided, however, that if such payment received
-------- -------
by the Administrative Agent is required to be returned, such Lender will
return to the Administrative Agent any portion thereof previously
distributed by the Administrative Agent to it. Each Lender's obligation to
purchase such participating interest shall be absolute and unconditional
and shall not be affected by any circumstance, including without limitation
(i) any setoff, counterclaim, recoupment, defense or other right that such
Lender or any other Person may have against the Swing Line Lender or any
other Person for any reason whatsoever, (ii) the occurrence or continuation
of a Default or an Event of Default or the termination of any of the
Commitments, (iii) any adverse change in the condition (financial or
otherwise) of the Borrower or any of its Consolidated Subsidiaries, or any
other Person, (iv) any breach of this Agreement by the Borrower or by any
other Lender, or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
SECTION 2.06. General Facility Terms.
----------------------
(a) Fees; Reductions in Aggregate Commitment.
----------------------------------------
(i) Fees. The Borrower agrees to pay to the Administrative Agent the
----
following fees:
(A) For the account of each Lender, a facility fee equal to the total
Commitment of such Lender in effect from time to time (whether or
not used by the Borrower) multiplied by the applicable per annum
---------- --
facility fee rate set forth in Section 2.06(c), payable quarterly
in arrears on the first Business Day of each Fiscal Quarter,
commencing March 1, 1998, and on the Facility Termination Date.
(B) For the account of the Administrative Agent and the Arranger, the
fees due under the Administrative Agent/Arranger Letter Agreement
payable as provided therein.
-31-
<PAGE>
(ii) Voluntary Reductions in Aggregate Commitment. The Borrower may
--------------------------------------------
permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Lenders in a minimum amount of $1,000,000 and in
integral multiples of $500,000, upon at least three Business Days'
written notice to the Administrative Agent, which notice shall specify
the amount of any such reduction; provided, however, that the amount
-------- -------
of the Aggregate Commitment may not be reduced below the aggregate
principal amount of the outstanding Advances.
(b) Optional Principal Payments. The Borrower may from time to time
---------------------------
pay, without penalty or premium, any outstanding Floating Rate Advance in
full, or in part in a minimum aggregate amount of $500,000 or any integral
multiple of $100,000 in excess thereof, upon one Business Day's prior
notice to the Administrative Agent. Any Fixed Rate Advance may be paid in
full, or in part in a minimum aggregate amount of $1,000,000 (or $500,000,
in the case of a Swing Line Advance) or any integral multiple of $500,000
(or $100,000, in the case of a Swing Line Advance) in excess thereof, upon
three Business Days' prior notice to the Administrative Agent (i) without
penalty or premium if paid on the last day of an applicable Interest
Period, and (ii) with payment of all applicable amounts specified in
Section 2.10 if paid on any other day.
(c) Applicable Margin and Facility Fee Rates. The Applicable Margin
----------------------------------------
set forth below with respect to each Eurodollar Syndicated Advance and the
applicable rates set forth below for the facility fees payable pursuant to
Section 2.06(a) shall be subject to adjustment (upwards or downwards, as
appropriate) based on the Borrower's Status as at the end of each fiscal
quarter in accordance with the table set forth below. The Borrower's
Status as at the last day of each fiscal quarter shall be determined from
the then most recent annual or quarterly financial statements of the
Borrower delivered by the Borrower pursuant to Section 5.01(a) or 5.01(b)
and the Compliance Certificate delivered by the Borrower pursuant to
Section 5.01(c). The adjustment, if any, to the Applicable Margin shall be
effective with respect to all Eurodollar Syndicated Advances made, and all
conversions to and continuations of Eurodollar Syndicated Advances
occurring, on and after the next Business Day following the delivery to the
Administrative Agent of such financial statements and Compliance
Certificate (the "Adjustment Effective Date"); the adjustment, if any, to
the facility fee rates shall be effective on the Adjustment Effective Date.
No adjustment in Applicable Margin shall be effective with respect to
Eurodollar Syndicated Advances outstanding on and prior to the Adjustment
Effective Date until such Advances are subsequently continued or converted
as Eurodollar Syndicated Advances with a new Interest Period. In the event
that the Borrower shall at any time fail to furnish to the Lenders such
financial statements and Compliance Certificate within the applicable time
limitations specified by Section 5.01, then the maximum Applicable Margin
and facility fee rates shall apply from the date of such failure until the
next Business Day after such financial statements and Compliance
Certificate are so delivered. Notwithstanding anything to the contrary
contained herein,
-32-
<PAGE>
the Borrower's Status as of the date of this Agreement shall be deemed to
be Level III Status and shall be adjusted hereafter as set forth above.
Applicable
Margin for
Eurodollar
Committed Facility
Status Advances Fee Rates
------ ---------- ---------
Level I .210% .090%
Level II .250% .125%
Level III .275% .150%
Level IV .350% .200%
Level V .500% .250%
(d) Changes in Interest Rate, etc. Each Floating Rate Advance shall
------------------------------
bear interest on the outstanding principal amount thereof, for each day
from and including the date such Floating Rate Advance is made or is
converted from a Fixed Rate Syndicated Advance into a Floating Rate Advance
pursuant to Section 2.03(f) to but excluding the date it becomes due or is
converted into a Fixed Rate Syndicated Advance pursuant to Section 2.03(f)
hereof, at a rate per annum equal to the Floating Rate for such day.
Changes in the rate of interest on any Floating Rate Advance will take
effect simultaneously with each change in the Alternate Base Rate. Each
Fixed Rate Advance shall bear interest on the outstanding principal amount
thereof from and including the first day of the Interest Period applicable
thereto to (but not including) the last day of such Interest Period at the
interest rate determined as applicable to such Fixed Rate Advance. No
Interest Period may end after the Facility Termination Date.
(e) Rates Applicable After Default. Notwithstanding anything to the
-------------------------------
contrary contained in Section 2.03(e) or 2.03(f), during the continuance of
a Default or Event of Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 9.06(a) requiring
unanimous consent of the Lenders to changes in interest rates), declare
that no Syndicated Advance may be made as, converted into or continued as a
Fixed Rate Syndicated Advance. During the continuance of an Event of
Default, (i) the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 9.06(a) requiring unanimous
consent of the Lenders to changes in interest rates), declare that (x) each
Fixed Rate Advance shall bear interest for the remainder of the applicable
Interest Period at the rate otherwise applicable to such Interest Period
plus 2% per annum and (y) each Floating Rate Advance shall bear interest at
a rate per annum equal to the Alternate Base Rate plus 2% per annum, and
(ii) the Swing Line Lender may, at its option, by notice to the Borrower
(which notice may be revoked at the option of the Swing Line Lender
notwithstanding any provision of Section 9.06(a) requiring unanimous
consent for the Lenders to changes in
-33-
<PAGE>
interest rates), declare that each Swing Line Advance shall bear interest
at a rate per annum equal to the Alternate Base Rate plus two percent
(2.0%) per annum.
(f) Method of Payment. All payments of the Obligations hereunder
-----------------
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Administrative Agent at the Administrative Agent's
address specified pursuant to Article IX, or at any other Lending
Installation of the Administrative Agent specified in writing by the
Administrative Agent to the Borrower, by noon (local time at the Lending
Installation) on the date when due and the Administrative Agent will
promptly distribute to each Lender its ratable share of each such payment
received by the Administrative Agent for the account of the Lenders;
provided, however, that if on any date the Borrower shall pay less than the
-------- -------
full amount of its Obligations owing on such date, such payment shall be
distributed to the Lenders ratably based upon the ratio that the aggregate
amount of such Obligations owing to each such Lender on such date bears to
the aggregate amount of such Obligations owing to all the Lenders on such
date. Each payment delivered to the Administrative Agent for the account of
any Lender shall be delivered promptly by the Administrative Agent to such
Lender in the same type of funds that the Administrative Agent received at
its address specified pursuant to Article IX or at any Lending Installation
specified in a notice received by the Administrative Agent from such
Lender. The Administrative Agent is hereby authorized to charge the
respective accounts of the Borrower maintained with First Chicago for each
payment of principal, interest, fees and other Obligations as it becomes
due hereunder.
(g) Notes; Telephonic Notices. Each Lender is hereby authorized to
-------------------------
record the principal amount of each of its Loans and each repayment on the
schedule attached to its applicable Notes, provided, however, that neither
-------- -------
the failure to so record nor any error in such recordation shall affect the
Borrower's obligations under any such Note. The Borrower hereby authorizes
the Lenders, the Swing Line Lender, and the Administrative Agent to extend,
convert or continue Advances, effect selections of Types of Advances and to
transfer funds based on telephonic notices made by any person or persons
the Administrative Agent, the Swing Line Lender, or any Lender in good
faith believes to be acting on behalf of the Borrower. The Borrower agrees
to deliver promptly to the Administrative Agent a written confirmation, if
such confirmation is requested by the Administrative Agent, any Lender or
the Swing Line Lender of each telephonic notice signed by an Authorized
Officer. If the written confirmation differs in any material respect from
the action taken by the Administrative Agent, the Lenders, or the Swing
-34-
<PAGE>
Line Lender, the records of the Administrative Agent, the Lenders, and the
Swing Line Lender shall govern absent manifest error.
(h) Interest Payment Dates; Interest and Fee Basis. Interest accrued
----------------------------------------------
on each Floating Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any
date on which the Floating Rate Advance is paid, whether due to
acceleration or otherwise, and at maturity. Interest accrued on that
portion of the outstanding principal amount of any Floating Rate Advance
converted into a Fixed Rate Syndicated Advance on a day other than a
Payment Date shall be payable on the date of conversion. Interest accrued
on each Fixed Rate Advance shall be payable on the last day of its
applicable Interest Period, on any date on which the Fixed Rate Advance is
paid, whether by acceleration or otherwise, and at maturity. Interest
accrued on each Fixed Rate Advance having an Interest Period longer than
three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest on Advances and facility
fees shall be calculated for actual days elapsed on the basis of a 360-day
year. Interest shall be payable for the day an Advance is made but not for
the day of any payment on the amount paid if payment is received prior to
noon (local time) at the place of payment. If any payment of principal of
or interest on an Advance shall become due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and, in
the case of a principal payment, such extension of time shall be included
in computing interest in connection with such payment.
(i) Notification of Advances, Interest Rates, Prepayments and
---------------------------------------------------------
Commitment Reductions. Promptly after receipt thereof, the Administrative
---------------------
Agent will notify each Lender of the contents of each Aggregate Commitment
reduction notice, Syndicated Borrowing Notice, Competitive Bid Borrowing
Notice, Conversion/Continuation Notice and repayment notice received by it
hereunder. The Administrative Agent will notify each Lender of the
interest rate applicable to each Fixed Rate Advance promptly upon
determination of such interest rate and will give each Lender prompt notice
of each change in the Alternate Base Rate.
(j) Lending Installations. Subject to Section 2.11, each of the
---------------------
Lenders and Swing Line Lender may book its Loans at any Lending
Installation selected by it and may change its Lending Installation from
time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender and Swing
Line Lender for the benefit of such Lending Installation. Each Lender and
Swing Line Lender may, by written or telex notice to the Administrative
Agent and the Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be
made.
(k) Non-Receipt of Funds by the Administrative Agent. Unless the
------------------------------------------------
Borrower or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on
-35-
<PAGE>
which it is scheduled to make payment to the Administrative Agent of (i) in
the case of a Lender, the proceeds of a Loan or (ii) in the case of the
Borrower, a payment of principal, interest or fees to the Administrative
Agent for the account of the Lenders or the Swing Line Lender, that it does
not intend to make such payment, the Administrative Agent may assume that
such payment has been made. The Administrative Agent may, but shall not be
obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Lender or the Borrower,
as the case may be, has not in fact made such payment to the Administrative
Agent, the recipient of such payment shall, on demand by the Administrative
Agent, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (i) in the case of repayment by a
Lender or the Swing Line Lender, the Federal Funds Effective Rate for such
day or (ii) in the case of repayment by the Borrower, the interest rate
applicable to the relevant Loan.
SECTION 2.07. Yield Protection. If any law or any governmental or quasi-
----------------
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation thereof, or the compliance of
any Lender or the Swing Line Lender therewith,
(i) subjects any Lender or the Swing Line Lender or any applicable
Lending Installation to any tax, duty, charge or withholding on or
from payments due from the Borrower (excluding taxation of the
overall net income of such Lender or the Swing Line Lender or
applicable Lending Installation imposed by the jurisdiction or taxing
authority in which its principal executive office or Lending
Installation is located), or changes the basis of taxation of
payments to any Lender or the Swing Line Lender in respect of its
Loans or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended
by, any Lender or the Swing Line Lender or any applicable Lending
Installation (other than reserves and assessments taken into account
in determining the interest rate applicable to Fixed Rate Advances),
or
(iii) imposes any other condition the result of which is to increase the
cost to any Lender or the Swing Line Lender or any applicable Lending
Installation of making, funding or maintaining its Loans or reduces
any amount receivable by any Lender or the Swing Line Lender or any
applicable Lending Installation in connection with its Loans, or
requires any Lender or the Swing Line Lender or any applicable
Lending Installation to make any payment calculated by reference to
the amount of Loans held or interest received by it, by an amount
deemed material by it,
-36-
<PAGE>
then, within 15 days of demand by such Lender or the Swing Line Lender, the
Borrower shall pay that portion of such increased expense incurred or reduction
in an amount received which such Lender or the Swing Line Lender determines is
attributable to making, funding and maintaining its Loans and its Commitment.
SECTION 2.08. Changes in Capital Adequacy Regulations. If a Lender or the
---------------------------------------
Swing Line Lender determines the amount of capital required or expected to be
maintained by it, its Lending Installation or any corporation controlling it is
increased as a result of a Change, then, within 15 days of demand by such Lender
or the Swing Line Lender, the Borrower shall pay such Lender or the Swing Line
Lender the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital which such Lender or the Swing
Line Lender determines is attributable to this Agreement, its Loans or its
obligation to make Loans hereunder (after taking into account its then-existing
policies as to capital adequacy applicable to comparable credit facilities
generally). "Change" means (i) any change after the date of this Agreement in
the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Lender or the Swing Line Lender or any Lending
Installation or any corporation controlling it. "Risk-Based Capital Guidelines"
means (i) the risk-based capital guidelines in effect in the United States on
the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices Entitled "International Convergence
of Capital Measurements and Capital Standards," including transition rules, and
any amendments to such regulations adopted prior to the date of this Agreement.
SECTION 2.09. Availability of Types of Advances. If any Lender determines
---------------------------------
that maintenance of its Eurodollar Syndicated Loans or Eurodollar Bid Rate Loans
at a suitable Lending Installation would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or if the
Required Lenders determine that (i) deposits of a type and maturity appropriate
to match fund Fixed Rate Advances (other than Absolute Rate Advances) are not
available or (ii) the interest rate applicable to a Type of Syndicated Advance
does not accurately reflect the cost of making or maintaining such Syndicated
Advance, then the Administrative Agent shall suspend the availability of the
affected Type of Advance or Syndicated Advance, as the case may be, and require
any Fixed Rate Advances of the affected Type to be repaid or, in the case of a
Fixed Rate Syndicated Advance, promptly converted into an unaffected Type of
Syndicated Advance.
SECTION 2.10. Funding Indemnification. If any payment of a Fixed Rate
-----------------------
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a Fixed
Rate Advance is not made on the date specified
-37-
<PAGE>
by the Borrower for any reason other than default by the Lenders, the Borrower
will indemnify each Lender for any loss or cost incurred by it resulting
therefrom, including, without limitation, any lost profits and any loss or cost
in liquidating or employing deposits acquired to fund or maintain the Fixed Rate
Advance.
SECTION 2.11. Lending Installation; Lender Statements; Survival of
----------------------------------------------------
Indemnity. To the extent reasonably possible, each Lender and the Swing Line
- ---------
Lender shall designate an alternate Lending Installation with respect to its
Fixed Rate Loans to reduce any liability of the Borrower to it under Sections
2.07 and 2.08 or to avoid the unavailability of a Type of Advance under Section
2.09, so long as such designation is not disadvantageous to it in its reasonable
judgment. Each Lender and the Swing Line Lender shall deliver a written
statement to the Borrower (with a copy to the Administrative Agent) as to the
amount due, if any, under Section 2.07, 2.08, or 2.10. Such written statement
shall set forth in reasonable detail the calculations upon which it determined
such amount and shall be conclusive in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a Fixed
Rate Loan shall be calculated as though such Lender or the Swing Line Lender
funded its Fixed Rate Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Fixed Rate applicable to such Loan, whether in fact that is the case or not.
Unless otherwise provided herein, the amount specified in the written statement
of any such Lender or the Swing Line Lender shall be payable on demand after
receipt by the Borrower of such written statement. The obligations of the
Borrower under Sections 2.07, 2.08, and 2.10 shall survive payment of the
Obligations and termination of this Agreement.
SECTION 2.12. Withholding Tax Exemption.
-------------------------
(a) Prior to or simultaneously with becoming a "Lender" or a "Swing
Line Lender" for purposes of this Agreement, each Lender or Swing Line
Lender that is not incorporated under the laws of the United States of
America, or a state thereof, agrees that it will deliver to each of the
Borrower and the Administrative Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Lender or the Swing Line Lender is entitled to receive
payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each such Lender or
the Swing Line Lender which so delivers a Form 1001 or 4224 further
undertakes to deliver to each of the Borrower and the Administrative Agent
two additional copies of such form (or a successor form) on or before the
date that such form expires (currently, three successive calendar years for
Form 1001 and one calendar year for Form 4224) or becomes obsolete or after
the occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the
Administrative Agent, in each case certifying that such Lender or the Swing
Line Lender is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty,
law or regulation) has occurred
-38-
<PAGE>
prior to the date on which any such delivery would otherwise be required
which renders all such forms inapplicable or which would prevent it from
duly completing and delivering any such form with respect to it and such
Lender or the Swing Line Lender advises the Borrower and the Administrative
Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
(b) If any Lender organized in a jurisdiction outside the United
States of America issues a public announcement with respect to the closing
of its lending offices in the United States such that any withholdings or
deductions and additional payments with respect to Taxes may be required to
be made by the Borrower thereafter pursuant to the terms of this Agreement,
such Lender shall furnish to the Borrower notice thereof as soon as
practicable thereafter.
SECTION 2.13. Designated Senior Indebtedness. All Obligations of the
------------------------------
Borrower to the Administrative Agent, the Lenders, and the Swing Line Lender
under this Agreement, the Notes, and the other Loan Documents are hereby
designated by the Borrower as, and shall constitute, "Designated Senior
Indebtedness" as defined in and for all purposes under the Indenture.
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing. The obligation of each
-----------------------------
Lender and the Swing Line Lender to make a Loan on the occasion of the first
Borrowing is subject to the satisfaction of the conditions set forth in Section
3.02 and receipt by the Administrative Agent and the Documentation Agent of the
following (in sufficient number of counterparts (except as to the Notes)) for
delivery of a counterpart to each Lender and the Swing Line Lender and retention
of one counterpart by each of the Administrative Agent and the Documentation
Agent):
(a) from each of the Lenders of either (i) a duly executed counterpart
of each of the Loan Documents signed by such party or (ii) a facsimile
transmission of the duly executed counterpart of each such Loan Document
together with a confirmation that such original counterpart is being sent
to the Administrative Agent;
(b) a duly executed Syndicated Note and Competitive Bid Note for the
account of each Lender, and a duly executed Swing Line Note for the account
of the Swing Line Lender;
(c) the duly executed Subsidiary Guarantee;
(d) the duly executed Contribution Agreement;
-39-
<PAGE>
(e) the opinions of (i) Michael Ingram, general counsel of the
Borrower and the Subsidiary Guarantors, and (ii) Alston & Bird, special
counsel for the Borrower and the Subsidiary Guarantors, in each case dated
as of the date hereof, substantially in the forms of Exhibit "H-1" and "H-
------------- --
2", respectively, and covering such additional matters relating to the
--
transactions contemplated hereby as the Administrative Agent or any Lender
may reasonably request;
(f) a certificate, dated as of the date hereof, signed on behalf of
the Borrower by its principal financial officer, to the effect that (i) no
Default or Event of Default has occurred and is continuing on such date and
(ii) the representations and warranties of the Borrower contained in
Article IV are true on and as of such date;
(g) all documents which the Administrative Agent or any Lender may
reasonably request relating to the existence of the Borrower and each
Subsidiary Guarantor, the authority for and the validity of this Agreement,
the Notes, the Guaranty, and any other matters relevant hereto, all in form
and substance satisfactory to the Administrative Agent, including, without
limitation, a certificate of the Borrower and each Subsidiary Guarantor
signed by the Secretary or an Assistant Secretary of such Person,
certifying as to the names, true signatures and incumbency of the officer
or officers of such Person authorized to execute and deliver the Loan
Documents, and certified copies of the following items: (i) the certificate
of incorporation of the Borrower and the certificate or articles of
incorporation of each of the Subsidiary Guarantors that is a corporation,
(ii) the articles of organization of GPS and each of the Subsidiary
Guarantors that is a limited liability company, (iii) the partnership
agreement of each of the Subsidiary Guarantors that is a partnership, (iv)
the by-laws of the Borrower and each of the Subsidiary Guarantors that is a
corporation, (v) the LLC Operating Agreement and each operating or
management agreement of a Subsidiary Guarantor that is a limited liability
company, (vi) a certificate of the Secretary of State of the jurisdiction
of organization of the Borrower and the Subsidiary Guarantors as to the
good standing of the Borrower and Subsidiary Guarantors in such
jurisdiction and, as to the Borrower and each of the Subsidiary Guarantors
doing business in Georgia, a certificate of the Secretary of State of
Georgia as to its good standing in such jurisdiction, and (vii) the action
taken by the respective boards of directors of the Borrower and the
Subsidiary Guarantors authorizing the execution, delivery and performance
of this Agreement, the Notes and the other Loan Documents to which they are
parties;
(h) the written agreements of the parties to the NDC Credit Agreement
and GPS Credit Agreement confirming the termination of such Credit
Agreements and all commitments thereunder, and the payment by the Borrower
and GPS of all amounts owing thereunder;
-40-
<PAGE>
(i) written money transfer instructions, in substantially the form of
Exhibit "G" hereto, addressed to the Administrative Agent and signed by an
-----------
Authorized Officer of the Borrower, together with such other related money
transfer authorizations as the Administrative Agent may have reasonably
requested;
(j) a copy of the Borrower's and each of its Subsidiaries' cash
investments policy as formally approved by its Board of Directors as in
effect on the Closing Date;
(k) an opinion of King & Spalding, special counsel for the
Administrative Agent, addressed to the Administrative Agent and the Lenders
and dated the date hereof, as to the enforceability of the Loan Documents
and covering such additional matters relating to the Loan Documents as the
Administrative Agent or any Lender may reasonably request; and
(l) a Notice of Borrowing.
SECTION 3.02. Conditions to All Borrowings. The obligation of each
----------------------------
Lender and the Swing Line Lender to make a Loan on the occasion of each
Borrowing is subject to the satisfaction of the following conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing;
(b) the fact that, immediately after such Borrowing, no Default or
Event of Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the Borrower
contained in Article IV of this Agreement shall be true on and as of the
date of such Borrowing except for changes expressly permitted herein and
except to the extent that such representations and warranties relate solely
to an earlier date; and
(d) the fact that, immediately after such Borrowing (i) the aggregate
outstanding principal amount of the Loans of each Lender and the Swing Line
Lender will not exceed the amount of its Commitment, except where such
excess amount results from such Lender's having made one or more
Competitive Bid Loans, and (ii) the aggregate outstanding principal amount
of all Loans of all Lenders and the Swing Line Lender will not exceed the
amount of the Aggregate Commitment.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in
paragraphs (b), (c) and (d) of this Section.
-41-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
On the Closing Date, and at such other times as specified in Section 3.02,
the Borrower represents and warrants that:
SECTION 4.01. Existence and Power. The Borrower (i) is duly organized,
-------------------
validly existing and in good standing under the laws of its jurisdiction of
organization, (ii) is duly qualified to transact business in every jurisdiction
set forth on Schedule 4.01, and the failure of the Borrower to be so qualified
-------------
in any other jurisdiction could not reasonably be expected to have or cause a
Material Adverse Effect, and (iii) has all powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have any such licenses, authorizations,
consents and approvals could not reasonably be expected to have or cause a
Material Adverse Effect.
SECTION 4.02. Organizational and Governmental Authorization; No
-------------------------------------------------
Contravention. The execution, delivery and performance by the Borrower of
- -------------
this Agreement, the Notes and the other Loan Documents (i) are within the
Borrower's powers as a corporation or limited liability company, as the case may
be, (ii) have been duly authorized by all necessary organizational action, (iii)
require no action by or in respect of or filing with, any governmental body,
agency or official, (iv) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the Borrower's organizational
documents or of any material agreement, judgment, injunction, order, decree or
other instrument binding upon the Borrower or any of its Subsidiaries, and (v)
do not result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
--------------
binding agreement of the Borrower enforceable in accordance with its terms, and
the Notes and the other Loan Documents to which the Borrower or any Subsidiary
is a party, when executed and delivered in accordance with this Agreement, will
constitute valid and binding obligations of the Borrower or such Subsidiary, as
the case may be, enforceable in accordance with their respective terms, provided
--------
that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency, fraudulent transfer, and
similar laws affecting the enforcement of creditors' rights generally.
SECTION 4.04. Financial Information.
---------------------
(a) The Borrower has heretofore furnished to the Lenders true and
correct copies of the financial statements and related documents described
in Section 5.01(a) for the Fiscal Year ending May 31, 1997 (collectively,
the "1997 Annual Financial Statements"). The 1997 Annual Financial
--------------------------------
Statements fairly present in all material
-42-
<PAGE>
respects and in accordance with GAAP the financial position of the
respective entities covered by such 1997 Annual Financial Statements and
the results of operations and cash flows for such entities for the Fiscal
Year then ended.
(b) The Borrower has heretofore furnished to the Lenders true and
correct copies of the financial statements and related documents described
in Section 5.01(b) for the Fiscal Quarter ending August 31, 1997
(collectively, the "1998 First Quarter Financial Statements"). The 1998
---------------------------------------
First Quarter Financial Statements fairly present in all material respects
and in accordance with GAAP (subject to normal year-end adjustments) the
financial position of the respective entities covered by such 1998 First
Quarter Financial Statements and the results of operations and cash flows
for such entities for the Fiscal Quarter then ended.
(c) Since August 31, 1997, there have been no events, acts, conditions
or occurrences, singly or in the aggregate, having or reasonably expected
to have or cause a Material Adverse Effect, other than the Special Charges,
which the Lenders agree shall not be deemed to constitute a Material
Adverse Effect.
SECTION 4.05. No Litigation, Contingent Liabilities. There is no
-------------------------------------
action, suit or proceeding pending, or to the knowledge of the Borrower
threatened, against or affecting the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official which could
reasonably be expected to have or cause a Material Adverse Effect. Neither the
Borrower nor any of its Subsidiaries has any material Contingent Obligations not
provided for or disclosed in the financial statements referred to in Section
4.04(a) or delivered to the Lenders pursuant to Section 5.01.
SECTION 4.06. Compliance with ERISA.
---------------------
(a) The Borrower and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA
and the Code with respect to each Plan and are in compliance in all
material respects with the presently applicable provisions of ERISA and the
Code, and have not incurred any liability to the PBGC under Title IV of
ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is or
ever has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. Compliance with Laws; Taxes. The Borrower and its
---------------------------
Subsidiaries are in compliance with all applicable laws, regulations and similar
requirements of governmental authorities, except where such compliance is being
contested in good faith through appropriate proceedings. There have been filed
on behalf of the Borrower and its Subsidiaries all Federal, state and local
income, excise, property and other tax returns which are required to be filed by
them and all taxes due pursuant to such returns or pursuant to any assessment
received by or on
-43-
<PAGE>
behalf of the Borrower or any Subsidiary have been paid or contested as
permitted by Section 5.06. The charges, accruals and reserves on the books of
the Borrower and its Subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate.
SECTION 4.08. Subsidiaries. Each of the Subsidiaries, if any, listed on
------------
Schedule 4.08 is a corporation (or a limited liability company or partnership)
- -------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction where it was created and organized, is qualified to transact
business in every jurisdiction where the failure of any such Subsidiary to be so
qualified in any other jurisdictions could reasonably be expected to have or
cause a Material Adverse Effect, and has all powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except where the failure to have any such licenses,
authorizations, consents and approvals could not reasonably be expected to have
or cause a Material Adverse Effect. The Borrower has no Subsidiaries except for
those Subsidiaries listed on Schedule 4.08, as the same may be supplemented from
-------------
time to time in writing by the Borrower, which accurately sets forth their
respective jurisdictions of creation.
SECTION 4.09. Not an Investment Company. Neither the Borrower nor any
-------------------------
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4.10. Ownership of Property; Liens. The Borrower and its
----------------------------
Subsidiaries have title to its properties sufficient for the conduct of its
business, and none of such property is subject to any Lien except as permitted
in Section 6.08.
SECTION 4.11. No Default. Neither the Borrower nor any of its
----------
Subsidiaries is in default under or with respect to any agreement, instrument or
undertaking to which it is a party (including, without limitation, the
Subsidiary Guarantee) or by which it or any of its property is bound which could
reasonably be expected to have or cause a Material Adverse Effect. No Default
or Event of Default has occurred and is continuing.
SECTION 4.12. Full Disclosure. All (i) information, whether written or
---------------
oral, heretofore furnished by any officer of the Borrower, and (ii) written
information heretofore furnished by any of the other employees of the Borrower,
to the Administrative Agent or any Lender for purposes of or in connection with
this Agreement or any transaction contemplated hereby (excluding any superseded
information corrected or updated by delivery to the Administrative Agent, prior
to the Closing Date, of corrected, updated or restated information) is, and all
such information hereafter furnished by such representatives of the Borrower to
the Administrative Agent or any Lender will be, true, accurate and complete in
every material respect or based on reasonable estimates on the date as of which
such information is stated or certified. The Borrower has disclosed to the
Lenders in writing any and all facts known to the Borrower, after due inquiry,
which could reasonably be expected to have or cause a Material Adverse Effect.
-44-
<PAGE>
SECTION 4.13. Environmental Matters.
---------------------
(a) Neither the Borrower nor any of its Subsidiaries is subject to any
Environmental Liability which could reasonably be expected to have or cause
a Material Adverse Effect and, to the best of the Borrower's knowledge,
neither the Borrower nor any of its Subsidiaries has been designated as a
potentially responsible party under CERCLA or under any state statute
similar to CERCLA. To the best of the Borrower's knowledge, none of the
Properties has been identified on any current or proposed (i) National
Priorities List under 40 C.F.R. (S) 300, (ii) CERCLIS list or (iii) any
list arising from a state statute similar to CERCLA.
(b) No Hazardous Materials are being, and, to the best of the
Borrower's knowledge, have been, used, produced, manufactured, processed,
treated, recycled, generated, stored, disposed of, managed or otherwise
handled at, or shipped or transported to or from the Properties or are
otherwise present at, on, in or under the Properties, or, to the best of
the knowledge of the Borrower, without independent inquiry, at or from any
adjacent site or facility, except for Hazardous Materials used, produced,
manufactured, processed, treated, recycled, generated, stored, disposed of,
managed, or otherwise handled in minimal amounts in the ordinary course of
business in compliance in all material respects with all applicable
Environmental Requirements.
(c) The Borrower and its Subsidiaries are in compliance in all
material respects with all Environmental Requirements in connection with
the operation of the Properties and the Borrower's and its Subsidiary's
respective businesses.
SECTION 4.14. Capital Stock. All Capital Stock, debentures, bonds,
-------------
notes and all other securities and equity interests of the Borrower and its
Subsidiaries presently issued and outstanding are validly and properly issued in
accordance with all applicable laws, including but not limited to, the "Blue
Sky" laws of all applicable states and the federal securities laws. The Capital
Stock of the Borrower's Wholly Owned Subsidiaries is owned by the Borrower free
and clear of any Lien or adverse claim. At least a majority of the Capital
Stock of the Borrower's other Subsidiaries (other than Wholly Owned
Subsidiaries) is owned by the Borrower free and clear of any Lien or adverse
claim.
SECTION 4.15. Margin Stock. Neither the Borrower nor any of its
------------
Subsidiaries is engaged principally, or as one of its important activities, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation U or Regulation X.
SECTION 4.16. Insolvency. After giving effect to the execution and
----------
delivery of the Loan Documents and the making of the Loans under this Agreement,
the Borrower will not be
-45-
<PAGE>
"insolvent," within the meaning of such term as used in O.C.G.A. (S) 18-2-22 or
as defined in (S) 101 of Title 11 of the United States Code, as amended from
time to time, or be unable to pay its debts generally as such debts become due,
or have an unreasonably small capital to engage in any business or transaction,
whether current or contemplated.
SECTION 4.17. LLC Status. At all times prior to the LLC Conversion Date,
----------
(i) GPS is and will be a validly existing limited liability company not subject
to federal income tax at the entity level, (ii) no event described in Section
23.1 ("Dissolving Events") of the LLC Operating Agreement has occurred, and
(iii) no action has been taken by GPS or its members that would render
inaccurate the matters stated in the preceding clauses (i) and (ii).
SECTION 4.18. Senior Debt. All of the Obligations of the Borrower
-----------
constitute "Designated Senior Indebtedness" for purposes of the Indenture, and
the Administrative Agent, the Lenders and the Swing Line Lender will have all
rights and benefits of holders of senior indebtedness as provided therein.
SECTION 4.19. Asset Purchase and Contribution Agreement. All material
-----------------------------------------
assets required to be contributed or sold to GPS by the Borrower or Mastercard
International Incorporated pursuant to the terms of the Asset Purchase and
Contribution Agreement have been received or purchased by GPS, and the
conveyances and other transactions contemplated by the terms of the Asset
Purchase and Contribution Agreement have been made and consummated in all
material respects in accordance with the terms thereof. As of the Closing Date,
there is no Indemnification Claim (as defined in the Asset Purchase and
Contribution Agreement) pending against any party thereunder, and the Borrower
has no knowledge of any such claim or potential claim that, if not promptly
satisfied, could reasonably be expected to have or cause a Material Adverse
Effect.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower agrees that, from and after the Closing Date and for so long
as any Lender has any Commitment hereunder or any amount payable hereunder or
under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
-----------
Lenders:
(a) as soon as available and in any event within 95 days after the end
of each Fiscal Year, Financial Statements (Annual) of (i) the Borrower and
its Consolidated Subsidiaries on a consolidated basis, and (ii) GPS and its
Consolidated Subsidiaries on a consolidated basis, all certified by Arthur
Andersen LLP or other independent public accountants of nationally
recognized standing, with such certification to be free of
-46-
<PAGE>
exceptions and qualifications not acceptable to the Required Lenders
(provided, that delivery pursuant to paragraph (g) below of copies of the
Annual Report on Form 10-K of the Borrower for such Fiscal Year filed with
the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 5.01(a) with respect to the Borrower);
(b) as soon as available and in any event within 50 days after the end
of each of the first three quarters of each Fiscal Year, Financial
Statements (Quarterly) of (i) the Borrower and its Consolidated
Subsidiaries on a consolidated basis, and (ii) GPS and its Consolidated
Subsidiaries on a consolidated basis, all certified as to fairness of
presentation in all material respects, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower or GPS, as the case may be, (provided,
that delivery pursuant to clause (g) below of copies of the Quarterly
Report on Form 10-Q of the Borrower for such Fiscal Quarter filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 5.01(b) with respect to the Borrower);
(c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate,
substantially in the form of Exhibit F (a "Compliance Certificate"), of the
---------
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
compliance with the requirements of Sections 5.03 and 6.01 through 6.09
inclusive, on the date of such financial statements and (ii) stating
whether any Default exists on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the action which
the Borrower is taking or proposes to take with respect thereto;
(d) within five Business Days after the delivery of each set of annual
financial statements referred to in paragraph (a) above, a statement of the
firm of independent public accountants which reported on such statements to
the effect that nothing has come to their attention in the course of their
audit to cause them to believe that any Default existed on the date of such
financial statements;
(e) within five Business Days after the chief executive officer, chief
financial officer, chief accounting officer, controller or chief legal
officer of the Borrower (or any other individual having similar duties and
responsibilities as any of the foregoing although not having the same
title) becomes aware of the occurrence of any Default (including, without
limitation, the occurrence of a "Change in Control" or "Event of Default"
as defined in and under the Indenture), a certificate of the chief
financial officer or the chief accounting officer or such other Person of
the Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
-47-
<PAGE>
(f) promptly upon the mailing thereof to the shareholders of the
Borrower or the members or shareholders of GPS generally, copies of all
financial statements, reports and proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly reports
which the Borrower shall have filed with the Securities and Exchange
Commission;
(h) if and when the Borrower or any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any Reportable Event
with respect to any Plan which might reasonably be expected to constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such Reportable Event, a copy of the notice of such
Reportable Event given or required to be given to the PBGC, (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA,
a copy of such notice, or (iii) receives notice from the PBGC under Title
IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice, in each case where such Reportable Event,
withdrawal liability, termination or appointment could reasonably be
expected to have or cause a Material Adverse Effect,
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Lender, may reasonably request;
(j) copies of the Borrower's and each of its Operating Subsidiaries'
investment policy formally approved by its respective Board of Directors as
of the Closing Date and within 14 Business Days of any subsequent change
therein;
(k) promptly upon the receipt thereof, a copy of any management
letter or management report prepared by the Borrower's independent
certified public accountants in conjunction with the financial statements
described in Section 5.01(a); and
(l) within five Business Days after the chief executive officer,
chief financial officer, chief accounting officer, controller or chief
legal officer of the Borrower (or any other individual having similar
duties and responsibilities as any of the foregoing although not having the
same title) becomes aware of any pending or overtly threatened litigation
or other legal proceedings, or any cancellation or termination of any
material agreement or receipt or sending of written notice of default or
intended cancellation or termination in respect thereof, or the occurrence
of any other event or condition that, in any such case, could reasonably be
expected to have a Material Adverse Effect.
-48-
<PAGE>
SECTION 5.02. Inspection of Property, Books and Records. The Borrower
-----------------------------------------
will (i) keep, and cause each of its Subsidiaries to keep, proper books of
record and account in which full, true and correct entries in conformity with
GAAP shall be made of all dealings and transactions in relation to its business
and activities; and (ii) permit, and cause each of its Subsidiaries to permit,
representatives of any Lender, after notice to an officer of the Borrower or
Subsidiary, at such Lender's expense during any period in which a Default or
Event of Default is not in existence and at the Borrower's expense during any
period in which a Default or Event of Default is in existence, to visit (which
date of visit shall be two (2) Business Days after the date such request is made
or any earlier date as may be mutually agreed by the Borrower and such Lender)
and inspect any of their respective properties, to examine and make abstracts
from any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants. The Borrower agrees to cooperate and assist in
such visits and inspections, in each case at such reasonable times and as often
as may reasonably be desired. Notwithstanding the foregoing, during any period
in which a Default or Event of Default is not in existence, no Lender may engage
in (i) more than two inspections per Fiscal Year or (ii) discussions with the
Borrower's independent public accountants, unless the Borrower shall have
otherwise consented to same.
SECTION 5.03. Additional Subsidiary Guarantors.
--------------------------------
(a) If any Operating Subsidiary of the Borrower (but excluding any
Operating Subsidiary that is a member of the GPS Group), whether now
existing or hereafter organized or acquired, has consolidated revenue in
any Fiscal Quarter that exceeds the Single Subsidiary Threshold, then the
Borrower shall cause such Operating Subsidiary to become an additional
Subsidiary Guarantor, as provided in this Section 5.03, within 30 days
after delivery of the Financial Statements (Annual) or Financial Statements
(Quarterly), as the case may be, with respect to such Fiscal Quarter;
provided, however, that in those instances where as a result of an
--------- -------
Acquisition, or as a result of the sale, contribution, or other transfer of
assets to a Subsidiary of the Borrower (other than a member of the GPS
Group), the consolidated revenue of the resulting Operating Subsidiary is
projected (on a pro forma basis) by the Borrower to exceed the Single
Subsidiary Threshold during the current or the immediately succeeding
Fiscal Quarter of the Borrower, and such Operating Subsidiary is not then a
Subsidiary Guarantor, the Borrower shall cause such Operating Subsidiary to
become an additional Subsidiary Guarantor, as provided in this Section
5.03, within thirty (30) days after the date of such Acquisition, sale,
contribution or other transfer of assets.
(b) If for any Fiscal Quarter of the Borrower, the aggregate revenue
(on a non-consolidated basis) of the Borrower and those Operating
Subsidiaries that are then Subsidiary Guarantors are less than the
Aggregate Subsidiary Threshold, then the Borrower shall cause one or more
other Operating Subsidiaries to become additional Subsidiary Guarantors, as
provided in this Section 5.03, within 30 days after delivery of the
Financial Statements (Annual) or Financial Statements (Quarterly), as the
case may
-49-
<PAGE>
be, with respect to such Fiscal Quarter, so that after including
the revenue of such additional Subsidiary Guarantor(s), the aggregate
revenue (on a non-consolidated basis) of the Borrower and all Subsidiary
Guarantors would equal or exceed the Aggregate Subsidiary Threshold for
such Fiscal Quarter; provided, however, that in those instances where as a
--------- -------
result of an Acquisition, or as a result of the sale, contribution, or
other transfer of assets to a Subsidiary of the Borrower (other than a
member of the GPS Group), or as a result of the sale or other disposition
of assets by the Borrower or any Subsidiary (including the sale or other
disposition of the capital stock of any Subsidiary, other than a Subsidiary
of the GPS Group), the aggregate revenue (on a non-consolidated basis) of
the Borrower and those Operating Subsidiaries that are then Subsidiary
Guarantors are projected (on a pro forma basis) by the Borrower to be less
than the Aggregate Subsidiary Threshold during the current or the
immediately succeeding Fiscal Quarter of the Borrower, then the Borrower
shall cause one or more other Operating Subsidiaries to become additional
Subsidiary Guarantors, as provided in this Section 5.03, within thirty (30)
days after the date of such Acquisition, sale, contribution or other
transfer or disposition, so that after including the revenue of such
additional Subsidiary Guarantor(s), the aggregate revenue (on a non-
consolidated basis) of the Borrower and all Subsidiary Guarantors for such
Fiscal Quarter would equal or exceed the Aggregate Subsidiary Threshold.
(c) The Borrower may elect at any time to have an Operating Subsidiary
become an additional Subsidiary Guarantor as provided in this Section 5.03.
(d) Upon the occurrence and during the continuation of any Event of
Default, if the Required Lenders so direct, the Borrower shall cause all of
its Operating Subsidiaries (excluding Operating Subsidiaries that are
members of the GPS Group) to become additional Subsidiary Guarantors, as
provided in this Section 5.03, within 30 days after the Borrower's receipt
of written confirmation of such direction from the Administrative Agent.
(e) An Operating Subsidiary shall become an additional Subsidiary
Guarantor by executing and delivering to the Administrative Agent a
Subsidiary Guarantee Supplement and a Contribution Agreement Supplement,
accompanied by (i) all other Loan Documents related thereto, and (ii) such
other documents as the Administrative Agent may reasonably request
(including, without limitation, certified copies of certificates or
articles of incorporation or organization, by-laws, membership operating
agreements, and other organizational documents, appropriate authorizing
resolutions of the board of directors of such Operating Subsidiaries, and
opinions of counsel comparable to those delivered pursuant to Section
3.01(e)). No Operating Subsidiary that becomes a Subsidiary Guarantor
shall thereafter cease to be a Subsidiary Guarantor or be entitled to be
released or discharged from its obligations under the Subsidiary Guarantee
or Contribution Agreement.
-50-
<PAGE>
SECTION 5.04. Maintenance of Existence. The Borrower shall at all times
------------------------
maintain its existence as a corporation in the jurisdiction of its
incorporation. At all times prior to the LLC Conversion Date, the Borrower
shall cause GPS to maintain its existence as a limited liability company not
subject to federal income tax, and at all times thereafter as a corporation in
the jurisdiction of its incorporation. The Borrower shall cause each of its
Operating Subsidiaries to maintain its legal existence, and carry on its
business in substantially the same industry as such business shall be carried on
the date of the first Borrowing hereunder; provided, that (i) the Borrower may
--------
dissolve Subsidiaries from time to time if (x) the Board of Directors of the
Borrower has determined that such dissolution is desirable, and (y) such
dissolution could not reasonably be expected to have or cause a Material Adverse
Effect, (ii) the Borrower or any Subsidiary may eliminate or discontinue a
business line pursuant to Section 6.09(a), and (iii) the Borrower or any
Subsidiary may carry on additional lines of business of an immaterial nature in
an industry different from the industry in which their respective business shall
be carried on the date of the first Borrowing hereunder.
SECTION 5.05. Use of Proceeds. The proceeds of the Loans may be used for
---------------
working capital and other general corporate purposes, in each case to the extent
not otherwise prohibited herein (including, without limitation, pursuant to
Section 6.06(b)). No portion of the proceeds of the Loans will be used by the
Borrower (i) in connection with any hostile tender offer for, or other hostile
acquisition of, stock (or in the case of a limited liability company, the
members' equivalent equity interest) of any corporation or limited liability
company with a view towards obtaining control of such other corporation or
limited liability company, (ii) directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any Margin Stock,
or (iii) for any purpose in violation of any applicable law or regulation.
SECTION 5.06. Compliance with Laws; Payment of Taxes. The Borrower will,
--------------------------------------
and will cause each of its Subsidiaries and each member of the Controlled Group
to, comply in all material respects with applicable laws (including but not
limited to ERISA), regulations and similar requirements of governmental
authorities (including but not limited to PBGC), except where the necessity of
such compliance is being contested in good faith through appropriate
proceedings. The Borrower will, and will cause each of its Subsidiaries to,
pay, prior to the accrual of any penalty in respect thereof, all taxes,
assessments, governmental charges, claims for labor, supplies, rent and other
obligations which, if unpaid, might become a Lien against the property of the
Borrower or any Subsidiary, except liabilities being contested in good faith and
against which, if reasonably requested by the Administrative Agent, the Borrower
will set up reserves in accordance with GAAP.
SECTION 5.07. Insurance. The Borrower will maintain, and will cause each
---------
of its Subsidiaries to maintain (either in the name of the Borrower or in such
Subsidiary's own name), with financially sound and reputable insurance
companies, insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar business.
-51-
<PAGE>
SECTION 5.08. Maintenance of Property. The Borrower shall, and shall
-----------------------
cause each of its Subsidiaries to, maintain all of its properties and assets in
good condition, repair and working order, ordinary wear and tear excepted.
SECTION 5.09. Environmental Notices. Upon obtaining knowledge thereof,
---------------------
the Borrower shall furnish to the Lenders and the Administrative Agent prompt
written notice of all Environmental Liabilities, pending, threatened or
anticipated Environmental Proceedings, Environmental Notices, Environmental
Judgments and Orders, and Environmental Releases at, on, in, under or in any way
affecting the Properties or any adjacent property, and all facts, events, or
conditions that could lead to any of the foregoing if any of the foregoing could
reasonably be expected to have or cause a Material Adverse Effect; provided,
that should the Borrower or any of its Subsidiaries receive any written notice
with respect to any of the foregoing, then the Borrower shall provide the
Lenders and the Administrative Agent with a copy of same, regardless of whether
the facts, events or conditions described therein might have or cause a Material
Adverse Effect.
SECTION 5.10. Environmental Release. The Borrower agrees that upon the
---------------------
occurrence of an Environmental Release it will act promptly to investigate the
extent of, and to take appropriate remedial action to remedy, such Environmental
Release, to the extent required by any applicable Environmental Requirement or
any Environmental Judgment and Order, unless the Borrower is contesting such
action in good faith through appropriate proceedings.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower agrees that, from and after the date of this Agreement and for
so long as any Lender has any Commitment hereunder or any amount payable
hereunder or under any Note remains unpaid:
SECTION 6.01. Ratio of Consolidated Funded Debt to Consolidated Cash Flow.
-----------------------------------------------------------
The Funded Debt to Cash Flow Ratio at the end of each Fiscal Quarter shall not
be greater than 4.0 to 1.0 for the Fiscal Quarter just ended and the immediately
preceding three Fiscal Quarters.
SECTION 6.02. Minimum Consolidated Net Worth. Consolidated Net Worth, as
------------------------------
at the end of each Fiscal Quarter, will not be less than the sum of (i)
$250,000,000 less the Special Charges, plus (ii) 50% of cumulative Consolidated
----
Net Income after May 31, 1997 (taken as one accounting period), calculated
quarterly at the end of each Fiscal Quarter, but excluding from such
calculations of Consolidated Net Income for purposes of this clause (i), any
Fiscal Quarter in which the Consolidated Net Income of the Borrower and its
Consolidated Subsidiaries is negative, plus (iii) 100% of the cumulative Net
----
Proceeds of Capital Stock received or deemed received during any period after
the Closing Date, calculated quarterly at the end of each Fiscal
-52-
<PAGE>
Quarter, plus (iv) 100% of the increase to Consolidated Net Worth resulting from
----
the conversion of Debt into equity interests.
SECTION 6.03. Fixed Charge Coverage. The ratio of (A) Income Available
---------------------
for Fixed Charges to (B) Consolidated Fixed Charges as at the end of each Fiscal
Quarter shall not be less than or equal to 3.0 to 1.0 for the Fiscal Quarter
just ended and the immediately preceding three Fiscal Quarters.
SECTION 6.04. Restricted Payments. The Borrower will not declare or make
-------------------
any Restricted Payment if, after giving effect thereto, (i) the aggregate of all
Restricted Payments declared or made during any Fiscal Year exceeds $20,000,000,
or (ii) any Default shall be in existence (which has not been specifically
waived in writing pursuant to Section 9.06) either immediately preceding or
succeeding the making or declaration of any such Restricted Payment.
SECTION 6.05. Loans or Advances. Neither the Borrower nor any of its
-----------------
Subsidiaries shall make loans or advances to any Person except: (i) loans or
advances (other than travel advances described in clause (v) below) to employees
not exceeding $1,000,000 in aggregate principal amount (in the case of the NDC
Group) or $500,000 in aggregate principal amount (in the case of the GPS Group),
in each case made in the ordinary course of business and consistent with
practices existing on the Closing Date, (ii) deposits required by government
agencies or public utilities, (iii) loans or advances by the Borrower to its
Operating Subsidiaries (which shall not include GPS or Subsidiaries of GPS) or
by such Operating Subsidiaries to the Borrower, (iv) loans or advances by GPS to
its Operating Subsidiaries or by such Operating Subsidiaries to GPS, (v) travel
advances to employees not exceeding $500,000 in the aggregate principal amount
outstanding at any time for each of the NDC Group and the GPS Group, in each
case made in the ordinary course of business and consistent with practices
existing on the Closing Date, (vi) loans or advances by the Borrower to GPS as
permitted by Section 6.07, and/or (vii) loans or advances by the Borrower to
Comerica not exceeding the aggregate outstanding sum of (x) $18,000,000 minus
-----
(y) Investments made under Section 6.06 (viii); provided that after giving
--------
effect to the making of any loans, advances or deposits permitted by clause (i),
(ii), (iii), (iv), (v), (vi), and (vii) of this Section, no Default shall be in
existence (which has not been specifically waived in writing pursuant to Section
9.06).
SECTION 6.06. Investments; Acquisitions.
-------------------------
(a) Neither the Borrower nor any of its Subsidiaries shall make
Investments in any Person except as permitted by Section 6.05 and except
the following Investments (provided such Investments do not violate Section
6.06(b)):
(i) absent the existence of a Default, Investments made in accordance
with the Borrower's or Subsidiary's Approved Investment Policy and
otherwise in accordance with the terms set forth herein;
-53-
<PAGE>
(ii) Investments in Subsidiaries other than members of the GPS Group;
(iii) Absent the existence of a Default, Investments (other than (i)
equity contributed before October 1, 1997, and (ii) Guarantees) in GPS by
the Borrower and the Subsidiaries not exceeding in the aggregate (A)
$65,000,000 minus (B) all outstanding Indebtedness as permitted by Section
-----
6.07(b);
(iv) Guarantees (A) by the Borrower for the benefit of GPS or Comerica
in existence as of August 31, 1997, of obligations in amounts not greater
than the amounts guaranteed thereunder as of August 31, 1997, (B) by the
Borrower for certain obligations of Technology Sales and Leasing Co., Inc.,
or any other Subsidiary (other than a Subsidiary that is a member of the
GPS Group) in connection with the Equipment Lease Agreements, but solely to
the extent that such Guarantees and the Debt Guaranteed pursuant thereto
are not prohibited by any other terms of this Agreement, (C) by the
Borrower for the benefit of GPS in favor of Electronic Data Systems
Corporation in accordance with the terms of that certain Guarantee dated as
of December 30, 1996 and for a guaranteed obligation which matures on or
before June 30, 1999 and is for a guaranteed amount not greater than
$6,000,000, (D) by the Borrower and its Subsidiaries of obligations of
other Subsidiaries of the Borrower (other than Subsidiaries that are
members of the GPS Group) of Debt that is not of the types described in
clauses (i) through (iv) of the definition of the term "Debt", provided
that the obligations that are being Guaranteed are not prohibited by the
terms of this Agreement, (E) by GPS of obligations of other members of the
GPS Group, and (F) by the Borrower and the Subsidiary Guarantors in respect
of the Obligations hereunder; provided that (1) with respect to clauses (A)
--------
and (C), the Borrower shall be obligated to obtain a release of such
Guarantees without any further liability thereunder upon the Borrower and
its Subsidiaries ceasing to be the Majority in Interest members of GPS, and
(2) with respect to the preceding clauses (B), (D), and (E) no Default or
Event of Default is in existence before or upon or after giving effect
thereto;
(v) an Investment by the Borrower and its Subsidiaries in Comerica not
exceeding in the aggregate (A) $18,000,000 minus (B) loans or advances made
-----
under Section 6.05 (vi),
(vi) capital contributions of assets as permitted by Section 6.09(a),
and
(vii) Investments made in Subsidiaries of GPS by GPS or by other
Subsidiaries of GPS.
(b) Without the prior written consent of the Required Lenders, the
Borrower will not, nor will it permit any of its Subsidiaries to, acquire,
whether directly or through the purchase of stock, convertible notes or
otherwise, any assets other than the acquisition of the loans, advances and
investments permitted by Section 6.05 or 6.06(a), the assets of
-54-
<PAGE>
one of its Subsidiaries, or of fixed assets (which fixed assets do not
constitute all or substantially all of the assets of the Person from whom
such assets are acquired) unless (x) such acquisition is of a business
which is similar (as to product sold or service rendered) to the Borrower's
or any relevant Subsidiary's, (y) such acquisition is to be made upon a
negotiated basis with the approval of the board of directors of the Person
to be acquired, or of the percentage of ownership interests required by the
charter documents of such Person to approve any such acquisition, and (z)
no Default shall be in existence or be caused thereby (which has not been
specifically waived in writing pursuant to Section 9.06).
SECTION 6.07. Indebtedness. The Borrower will not, nor will it permit any
------------
of its Subsidiaries to, create, incur or suffer to exist any Debt, other than:
(a) the Loans;
(b) Debt of GPS owing to the Borrower in an aggregate principal amount
outstanding at any time not exceeding (A) $65,000,000 minus (B) the
-----
aggregate amount of all Investments made by the Borrower and its
Subsidiaries in GPS after September 30, 1997 pursuant to Section
6.06(a)(iv) (but without duplication of any such amounts);
(c) Debt secured by Liens permitted pursuant to Section 6.08;
(d) Debt owing to the Borrower by any of its Subsidiaries (other than
Subsidiaries that are members of the GPS Group), and Debt owing to GPS by
any other members of the GPS Group, in any such case payable on demand on a
non-subordinated basis;
(e) Debt arising from the renewal or extension of any Debt described
in clauses (b) and (c) above, provided that the amount of such Debt is not
increased;
(f) Debt owing to any Person as a portion of the consideration payable
to the seller(s) in an Acquisition permitted by Section 6.06;
(g) Debt owing by a Subsidiary of the Borrower that was in existence
at the time such Person became a Subsidiary of the Borrower and not created
or incurred in contemplation of such event, and that cannot be prepaid
without penalty or premium or assumed by the Borrower, in an aggregate
principal amount not to exceed $5,000,000;
(h) Debt of the Borrower evidenced by its Convertible Subordinated
Notes Due 2003; and
(i) Debt of the Borrower not described in clauses (a) through (h)
above in an aggregate principal amount outstanding at any time not to
exceed $50,000,000.
-55-
<PAGE>
Notwithstanding the foregoing, no Subsidiary of the Borrower that is not a
Subsidiary Guarantor (excluding GPS and the other members of the GPS Group)
shall in any event create, incur or suffer to exist any Debt of the types
described in clause (i) or (ii) of the definition of the term "Debt", other than
Debt owing to the Borrower or any Subsidiary Guarantor and payable on demand on
a non-subordinated basis.
SECTION 6.08. Negative Pledge. Neither the Borrower nor any of its
---------------
Subsidiaries will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except for the following.
(a) Liens existing on the date of this Agreement and described on
Schedule 6.08 securing Debt outstanding on the date of this Agreement in an
-------------
aggregate principal amount not exceeding $28,000,000 for the NDC Group and
$6,500,000 for the GPS Group;
(b) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt (including, without
limitation, a Capitalized Lease) incurred or assumed for the purpose of
financing all or any part of the cost of acquiring or constructing such
asset, provided that such Lien (A) attaches to such asset (and no other
--------
asset) concurrently with or within 18 months after the acquisition or
completion of construction thereof, and (B) secures solely such Debt
incurred or assumed for the purpose of financing all or any part of the
cost of acquiring or constructing such asset;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a
Consolidated Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) Liens securing Debt owing by any Subsidiary of the Borrower (other
than a Subsidiary that is a member of the GPS Group) to the Borrower or to
any other Subsidiary of the Borrower (other than a Subsidiary that is a
member of the GPS Group);
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses (a) through (f) of this Section, provided that (i) such Debt is not
--------
secured by any additional assets, and (ii) the amount of such Debt secured
by any such Lien is not increased;
-56-
<PAGE>
(h) Liens incidental to the conduct of its business or the ownership
of its assets, including, without limitation, Liens of materialmen and
landlords, which (i) do not secure Debt and (ii) do not in the aggregate
materially detract from the value of its assets or materially impair the
use thereof in the operation of its business;
(i) any Lien in respect of any taxes which are either (x) not, as at
any date of determination, due and payable or (y) being contested in good
faith as permitted by Section 5.06;
(j) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay
of execution upon any such appeal or proceeding for review shall have been
secured, provided that such Person shall have established reserves which
are adequate under GAAP for such judgments or awards;
(k) Liens existing on the date of this Agreement created by NDPS on
certain of its assets, and securing certain indemnity obligations of NDPS
to the sellers of the merchant credit card processing contracts;
(l) Liens securing the Borrower's or any Subsidiary's recourse
obligations under any Equipment Lease Agreements as the same may be
Guaranteed by the Borrower from time to time; provided, that such Liens
--------
shall only attach to property which has been sold to the respective
Equipment Lease Party; and
(m) Liens not otherwise permitted by the foregoing paragraphs of this
Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed $5,000,000 for the NDC Group or $5,000,000 for
the GPS Group,
Provided Liens permitted by the foregoing paragraphs (a) through (m) (but
- --------
excluding paragraph (l)) shall at no time secure Debt in an aggregate amount
greater than $55,000,000.
SECTION 6.09. Consolidations, Mergers and Sales of Assets.
-------------------------------------------
(a) The Borrower will not, nor will it permit any of its Subsidiaries
to, consolidate or merge with or into, or sell, lease or otherwise transfer
all or any substantial part of its assets to, any other Person, or
discontinue or eliminate any Operating Subsidiary or business segment,
provided that (a) the Borrower may merge with another Person if (i) such
--------
Person was organized under the laws of the United States of America or one
of its states, (ii) the Borrower is the corporation surviving such merger
and (iii) immediately after giving effect to such merger, no Default shall
have occurred and be continuing, (b) Subsidiaries may merge with, and sell
assets to, one another and the Borrower, except that no Subsidiary of the
Borrower, other than a member of the GPS Group, shall merge with or sell
assets to a member of the GPS Group, (c) the Borrower and its Subsidiaries
may eliminate or discontinue business lines and segments from time
-57-
<PAGE>
to time if (i) such action has been approved by the Board of Directors of
the Borrower, and (ii) such elimination or discontinuance will not
jeopardize the Borrower's or any Subsidiary Guarantor's ability to perform
under any of the Loan Documents, (d) so long as no Default shall be in
existence either immediately prior to or following any asset disposition,
the Borrower and its respective Subsidiaries may sell or otherwise dispose
of (x) any Equipment Lease Agreements and (y) any other assets in an
aggregate amount of up to $10,000,000 in fair market value during each
consecutive 12 month period, (e) during the existence of a Default which
does not constitute an Event of Default, the Borrower may continue to enter
into Equipment Lease Agreements on the same terms on which such sales
customarily were consummated prior to such Default, (f) Subsidiaries which
are formed for the sole purpose of (1) merging into Persons that will
become Subsidiaries, or (2) acquiring the assets or stock (or in the case
of a limited liability company, the members' equivalent equity interests)
of Persons and thereafter becoming Subsidiaries, may merge with such
Persons or consolidate those Persons' assets with the assets of those
Subsidiaries and (g) GPS may effect an LLC Conversion as set forth in
Section 6.09(b).
(b) GPS will not effect an LLC Conversion except upon compliance with
and satisfaction of the following requirements and conditions:
(1) GPS will give the Administrative Agent not less than 30
days' prior written notice of its intent to effect an LLC
Conversion, such notice to include the earliest date of the LLC
Conversion and a description in reasonable detail of the
transactions that will be consummated in order to effect the LLC
Conversion;
(2) GPS will submit to the Administrative Agent not less than 15
days prior to the LLC Conversion Date the proposed forms of
transaction documents (e.g., merger agreement, asset contribution or
transfer agreements, assignments, and assumption agreements) to be
used by GPS to effect the LLC Conversion (collectively, the "LLC
Conversion Documents");
(3) There will be executed and delivered to the Administrative
Agent, at or before the LLC Conversion the following documents, all
in form and substance satisfactory to the Required Lenders:
(A) a tax sharing agreement between Newco and the Borrower
(or other entity with whom Newco's tax returns may be
consolidated for federal and state income tax
purposes);
(B) a certificate, dated as of the LLC Conversion Date,
signed on behalf of each of GPS and Newco by a
principal financial officer of each of GPS and Newco,
to the effect
-58-
<PAGE>
that (i) no Default or Event of Default has occurred
and is continuing on such date, and (ii) the
representations and warranties contained in Article IV
are true on and as of such date;
(C) a certified copy of the LLC Conversion Documents as the
same are being executed and delivered in connection
with the LLC Conversion; and
(D) all documents which the Administrative Agent or any
Lender may reasonably request relating to the existence
of Newco, the authority for and the validity of the LLC
Conversion Documents and the documents to be delivered
pursuant to this Section 6.09(b)(3) (collectively, the
"Newco Documents"), and any other matters relevant
thereto, including without limitation, a certificate of
Newco signed by the Secretary or an Assistant Secretary
of Newco, certifying as to the names, true signatures
and incumbency of the officer or officers of Newco
authorized to execute and deliver the LLC Conversion
Documents and the Newco Documents, and certified copies
of the certificate or articles of incorporation and by-
laws of Newco, the action taken by the Board of
Directors of Newco authorizing the execution, delivery
and performance of the LLC Conversion Documents and the
Newco Documents, and a certificate of the Secretary of
State of Georgia (and, if different, the Secretary of
State of the state of incorporation of Newco) as to the
good standing of Newco.
SECTION 6.10. Limitation on Payment Restrictions Affecting Subsidiaries.
---------------------------------------------------------
The Borrower will not, nor will it permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective, any consensual
encumbrance or restriction (excluding any such encumbrance or restriction under
this Agreement) on the ability of any such Subsidiary to (i) pay dividends or
make any other distributions on any of its Capital Stock, or (ii) pay any
indebtedness owed to the Borrower or any of its Subsidiaries, or (iii) transfer
any of its property or assets to the Borrower or any of its Subsidiaries, except
any such encumbrance or restriction imposed by a lender extending purchase money
financing in respect of any asset or assets of the Borrower or any Subsidiary so
long as such encumbrance or restriction does not so encumber or restrict any
other assets or property of the Borrower or any Subsidiary.
SECTION 6.11. Change in Fiscal Year. The Borrower will not change its
---------------------
Fiscal Year without the consent of the Required Lenders, which consent shall not
be unreasonably withheld.
-59-
<PAGE>
SECTION 6.12. Environmental Matters. The Borrower will not, and will not
---------------------
permit any Third Party to, use, produce, manufacture, process, treat, recycle,
generate, store, dispose of, manage at, or otherwise handle, or ship or
transport to or from the Properties any Hazardous Materials except for Hazardous
Materials used, produced, manufactured, processed, treated, recycled, generated,
stored, disposed, managed, or otherwise handled in the ordinary course of
business in compliance in all material respects with all applicable
Environmental Requirements.
SECTION 6.13. Transactions with Affiliates. Neither the Borrower nor any
----------------------------
of its Subsidiaries shall enter into, or be a party to, any transaction with any
Affiliate of the Borrower or such Subsidiary (which Affiliate is not the
Borrower or its Wholly Owned Subsidiary), except as permitted by law and in the
ordinary course of business and pursuant to reasonable terms which are no less
favorable to the Borrower or such Subsidiary than would be obtained in a
comparable arm's length transaction with a Person which is not an Affiliate.
SECTION 6.14. GPS Membership Interest Voting; GPS Restrictive Agreements.
----------------------------------------------------------
(a) The Borrower shall cause its Subsidiaries to vote their respective
equity shares to cause GPS to make distributions and then distribute the
same to the Borrower to the maximum extent permitted under the Operating
Agreement in order for the Borrower to meet its obligations with respect to
fees, interest and principal payments on the Loans and other Obligations
payable by the Borrower hereunder.
(b) The Borrower shall not permit, without the prior written consent
of the Administrative Agent and all of the Lenders, (i) any amendment of
the definition of "Majority in Interest" contained in the Operating
Agreement, (ii) any amendment or other modification to the Operating
Agreement which (1) limits distributions or other payments payable by GPS
to the Borrower through its Subsidiaries, or (2) reduce the percentage of
voting control held by the Borrower through its Subsidiaries in GPS, or
(iii) otherwise restricts distributions from GPS through its Subsidiaries
to the Borrower.
SECTION 6.15. Amendments to Indenture. Without the prior written consent
-----------------------
of the Administrative Agent and all of the Lenders, the Borrower will not permit
any amendment of or other modification to the subordination provisions of the
Indenture in favor of "Senior Indebtedness" as defined in the Indenture.
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default. If one more of the following events
-----------------
("Events of Default") shall have occurred and be continuing at any time:
-60-
<PAGE>
(a) the Borrower shall fail to pay when due any principal of any Loan,
or shall fail to pay any interest on any Loan within three Business Days
after such interest shall become due, or shall fail to pay any fee or other
amount payable hereunder within five Business Days after such fee or other
amount becomes due; or
(b) the Borrower shall fail to observe or perform any covenant
contained in Section 5.01(e), Section 5.02(ii), Sections 6.01 through 6.09
inclusive, Section 6.14, or Section 6.15;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained or incorporated by reference in this Agreement (other
than those covered by paragraph (a) or (b) above) and such failure shall
not have been cured within 30 days after the earlier to occur of (i)
written notice thereof has been given to the Borrower by the Administrative
Agent at the request of any Lender or (ii) the Borrower otherwise becomes
aware of any such failure; or
(d) any representation, warranty, certification or statement made or
incorporated by reference in Article IV hereof, in any other Loan Document,
or in any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect or misleading
in any material respect when made (or deemed made); or
(e) the Borrower or any of its Subsidiaries shall fail to make any
payment in respect of Debt outstanding in the aggregate principal amount of
$5,000,000 or greater (other than (i) the Notes and (ii) Debt held by the
Borrower owed by a Consolidated Subsidiary or Debt held by a Consolidated
Subsidiary owed by the Borrower) when due or within any applicable grace
period; or
(f) an "Event of Default" shall occur under any of the other Loan
Documents; provided, that, should any such "Event of Default" be waived by
-------- ----
the Required Lenders (or, if required by Section 9.06(a) or the terms of
such other Loan Document, all Lenders), then, such waiver shall operate as
a waiver of an Event of Default arising under this Section 7.01(f) as a
result of same; or
(g) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Borrower or any of
its Subsidiaries (other than (i) the Notes and (ii) Debt held by the
Borrower owed by a Consolidated Subsidiary or Debt held by a Consolidated
Subsidiary owed by the Borrower) in the aggregate principal amount of
$5,000,000 or greater (including, without limitation, any "put" of such
Debt to the Borrower or any of its Subsidiaries) or enables (or, with the
giving of notice or lapse of time or both, would enable) the holders of
such Debt or any Person acting on such
-61-
<PAGE>
holders' behalf to accelerate the maturity thereof (including, without
limitation, any "put" of such Debt to the Borrower or any of its
Subsidiaries); or
(h) the Borrower or any of its Subsidiaries shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any action to
authorize any of the foregoing; or
(i) an involuntary case or other proceeding shall be commenced against
the Borrower or any of its Subsidiaries seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
the Borrower or any of its Subsidiaries under the federal bankruptcy laws
as now or hereafter in effect; or
(j) the Borrower or any member of its Controlled Group shall fail to
pay when due any material amount which it shall have become liable to pay
to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans shall be filed under Title IV of ERISA by the
Borrower, any member of its Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c) (5)
of ERISA and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must
be terminated; or the Borrower or any other member of its Controlled Group
shall enter into, contribute or be obligated to contribute to, terminate or
incur any withdrawal liability with respect to, a Multiemployer Plan;
provided, that no Default or Event of Default shall arise under this
paragraph (j) so long as the maximum potential liability to the Borrower or
any member of its Controlled Group shall be not greater than $1,000,000; or
(k) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $5,000,000, shall be rendered against the
Borrower or any of its Subsidiaries and such judgment or order shall
continue unsatisfied and unstayed for a period of 30 days; or
-62-
<PAGE>
(l) a federal tax lien shall be filed against the Borrower under
Section 6323 of the Code or a lien of the PBGC shall be filed against the
Borrower under Section 4068 of ERISA and in either case such lien shall (i)
secure an obligation, or asserted obligation, in excess of $1,000,000 and
(ii) remain undischarged or unstayed for a period of 30 days after the date
of filing; or
(m) (i) any Person or two or more Persons acting in concert shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) of 30% or more of the outstanding shares of the voting stock of the
Borrower, or (ii) as of any date a majority of the Board of Directors of
the Borrower consists of individuals who were not either (A) directors of
the Borrower as of the corresponding date of the previous year, (B)
selected or nominated to become directors by the Board of Directors of the
Borrower of which a majority consisted of individuals described in clause
(A), or (C) selected or nominated to become directors by the Board of
Directors of the Borrower of which a majority consisted of individuals
described in clause (A) and individuals described in clause (B); or
(n) (i) prior to the LLC Conversion Date, the Borrower and its
Subsidiaries shall cease to be the "Majority in Interest" (as defined in
the LLC Operating Agreement on the Closing Date) of GPS or its successor,
or shall cease to have the right under the LLC Operating Agreement to
designate a majority of the Board of Directors of GPS; or (ii) as of any
date on or after the LLC Conversion Date, (A) any Person or two or more
Persons acting in concert (other than the Borrower and its Subsidiaries)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
of the Securities and Exchange Commission under the Securities Exchange Act
of 1934) of 20% or more of the outstanding shares of the voting stock of
GPS; or (B) a majority of the Board of Directors of GPS consists of
individuals who were not either (x) directors of GPS as of the
corresponding date of the previous year, (y) selected or nominated to
become directors by the Board of Directors of GPS of which a majority
consisted of individuals described in clause (x), or (z) selected or
nominated to become directors by the Board of Directors of GPS of which a
majority consisted of individuals described in clause (x) and individuals
described in clause (y); or
(o) the dissolution or liquidation of GPS under the LLC Operating
Agreement or under applicable law, or the consummation of any LLC
Conversion, other than a Permitted LLC conversion; or
(p) a "Change of Control" or an "Event of Default" shall occur under
the Indenture, as such terms are defined therein, and, except in the event
that either the Commitments have been terminated or the Loans have been
accelerated, such occurrence
-63-
<PAGE>
shall be continuing without cure by the Borrower or waiver by the holders
of the Convertible Subordinated Notes issued under the Indenture; or
(q) (i) the Subsidiary Guarantee shall cease to be enforceable or
(ii) the Borrower or any Subsidiary Guarantor shall assert that any Loan
Document is not enforceable;
then, and in every such event, (i) the Administrative Agent shall, if requested
by the Required Lenders, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, (ii) any Lender may terminate its obligation to
fund a Competitive Bid Loan; (iii) the Swing Line Lender may terminate the Swing
Line Commitment by notice to the Borrower and it shall thereupon terminate, and
(iv) the Administrative Agent shall, if requested by the Required Lenders, by
notice to the Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower, together with interest at the rate
specified in Section 2.06(e) accruing on the principal amount thereof from and
after the date of such Event of Default; provided that if any Event of Default
--------
specified in paragraph (h) or (i) above occurs with respect to the Borrower,
without any notice to the Borrower or any other act by the Administrative Agent
or the Lenders, the Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower, together with interest thereon at the
rate specified in Section 2.06(e) accruing on the principal amount thereof from
and after the date of such Event of Default. Notwithstanding the foregoing, the
Administrative Agent shall have available to it all other remedies at law or
equity, and shall exercise any one or all of them at the request of the Required
Lenders.
SECTION 7.02. Notice of Default. The Administrative Agent shall give
-----------------
notice to the Borrower of any Default under Section 7.01(c) promptly upon being
requested to do so by any Lender and shall thereupon notify all the Lenders
thereof.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
SECTION 8.01. Appointment; Powers and Immunities. Each Lender hereby
----------------------------------
irrevocably appoints and authorizes the Administrative Agent to act as its
Administrative Agent hereunder and under the other Loan Documents with such
powers as are specifically delegated to the Administrative Agent by the terms
hereof and thereof, together with such other powers as are reasonably incidental
thereto. The Administrative Agent: (a) shall have no duties or responsibilities
except as expressly set forth in this Agreement and the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be a
trustee for any
-64-
<PAGE>
Lender; (b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or any
other Loan Document, or in any certificate or other document referred to or
provided for in, or received by any Lender under, this Agreement or any other
Loan Document, or for the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or for any failure by the
Borrower to perform any of its obligations hereunder or thereunder; (c) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Required Lenders, and then only on terms and conditions satisfactory to the
Administrative Agent, and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other Loan Document or any
other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or wilful
misconduct. The Administrative Agent may employ Administrative Agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such Administrative Agents or attorneys-in-fact selected by it with
reasonable care. The provisions of this Article VIII are solely for the benefit
of the Administrative Agent and the Lenders, and the Borrower shall not have any
rights as a third party beneficiary of any of the provisions hereof, other than
the right of the Borrower to consent to the appointment of a successor
Administrative Agent as set forth in the second sentence of Section 8.09. In
performing its functions and duties under this Agreement and under the other
Loan Documents, the Administrative Agent shall act solely as Administrative
Agent of the Lenders and does not assume and shall not be deemed to have assumed
any obligation towards or relationship of agency or trust with or for the
Borrower. The duties of the Administrative Agent shall be ministerial and
administrative in nature, and the Administrative Agent shall not have by reason
of this Agreement or any other Loan Document a fiduciary relationship in respect
of any Lender.
SECTION 8.02. Reliance by Administrative Agent. The Administrative
--------------------------------
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telefax, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants or other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement or any other Loan Document, the Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions signed by the Required Lenders, and
such instructions of the Required Lenders in any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.
SECTION 8.03. Defaults. The Administrative Agent shall not be deemed
--------
to have knowledge of the occurrence of a Default or an Event of Default (other
than the nonpayment of principal of or interest on the Loans) unless the
Administrative Agent has received notice from a Lender or the Borrower
specifying such Default or Event of Default and stating that such notice is a
"Notice of Default." In the event that the Administrative Agent receives such a
notice of the occurrence of a Default or an Event of Default, the Administrative
Agent shall give prompt
-65-
<PAGE>
notice thereof to the Lenders. The Administrative Agent shall give each Lender
prompt notice of each nonpayment of principal of or interest on the Loans
whether or not it has received any notice of the occurrence of such nonpayment.
The Administrative Agent shall (subject to Section 8.08 and Section 9.06) take
such action hereunder with respect to such Default or Event of Default as shall
be directed by the Required Lenders, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
SECTION 8.04. Rights of Administrative Agent as a Lender. With
------------------------------------------
respect to the Loans made by it, First Chicago in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Administrative
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include First Chicago in its individual capacity. The Administrative
Agent may (without having to account therefor to any Lender) accept deposits
from, lend money to and generally engage in any kind of banking, trust or other
business with the Borrower and any of its Affiliates) as if it were not acting
as the Administrative Agent, and the Administrative Agent may accept fees and
other consideration from the Borrower (in addition to any agency fees and
arrangement fees heretofore agreed to between the Borrower and the
Administrative Agent) for services in connection with this Agreement or any
other Loan Document or otherwise without having to account for the same to the
Lenders.
SECTION 8.05. Indemnification. Each Lender severally agrees to
---------------
indemnify the Administrative Agent, to the extent the Administrative Agent shall
not have been reimbursed by the Borrower, ratably in accordance with its
Syndicated Commitment, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, counsel fees and disbursements) or disbursements of any kind
and nature whatsoever which may be imposed on, incurred by or asserted against
the Administrative Agent in any way relating to or arising out of this Agreement
or any other Loan Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby (excluding,
unless an Event of Default has occurred and is continuing, the normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or
any such other documents; provided, however that no Lender shall be liable for
-------- -------
any of the foregoing to the extent they arise from the gross negligence or
wilful misconduct of the Administrative Agent. If any indemnity furnished to
the Administrative Agent for any purpose shall, in the opinion of the
Administrative Agent, be insufficient or become impaired, the Administrative
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
SECTION 8.06. Payee of Note Treated as Owner. The Administrative
------------------------------
Agent may deem and treat the payee of any Note as the owner thereof for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Administrative
-66-
<PAGE>
Agent and the provisions of Section 9.08(c) have been satisfied. Any requests,
authority or consent of any Person who at the time of making such request or
giving such authority or consent is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee or assignee of that Note or of
any Note or Notes issued in exchange therefor or replacement thereof.
SECTION 8.07. Nonreliance on Administrative Agent and Other Lenders.
-----------------------------------------------------
Each Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Loan Documents. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or any of the other
Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Borrower or any other
Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or under the other Loan Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any other Person (or any of their Affiliates) which may come into
the possession of the Administrative Agent.
SECTION 8.08. Failure to Act. Except for action expressly required of
--------------
the Administrative Agent hereunder or under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction by the Lenders of their indemnification
obligations under Section 8.05 against any and all liability and expense which
may be incurred by the Administrative Agent by reason of taking, continuing to
take, or failing to take any such action.
SECTION 8.09. Resignation or Removal of Administrative Agent. Subject
----------------------------------------------
to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the Lenders and the Borrower and the Administrative Agent may be
removed at any time with or without cause by the Required Lenders. Upon any
such resignation or removal, the Required Lenders shall have the right to
appoint a successor Administrative Agent, provided that so long as no Event of
--------
Default shall have occurred and be continuing, such appointment shall be subject
to the prior written consent of the Borrower, which consent shall not be
unreasonably withheld or delayed. If no successor Administrative Agent shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's notice of
resignation or the Required Lenders' removal of the retiring Administrative
Agent, then the retiring Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent. Any successor Administrative Agent
shall be a bank which has a
-67-
<PAGE>
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the provisions
of this Article VIII shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the
Administrative Agent hereunder.
SECTION 8.10. LIMITATION OF DAMAGES. THE ADMINISTRATIVE AGENT SHALL
---------------------
NOT BE RESPONSIBLE OR LIABLE TO ANY PERSON OR ENTITY FOR ANY PUNITIVE OR
EXEMPLARY DAMAGES WHICH MAY BE ALLEGED AGAINST THE ADMINISTRATIVE AGENT IN ITS
AGENCY CAPACITY AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including bank wire, telex,
telecopier or similar writing) and shall be given to such party at its address
or telecopier or telex number set forth on the signature pages hereof or such
other address or telecopier or telex number as such party may hereafter specify
for the purpose by notice to each other party. Each such notice, request or
other communication shall be effective (i) if given by telecopier or telex, when
such telecopier or telex is transmitted to the telecopier or telex number
specified in this Section and the appropriate confirmation or answerback is
received, (ii) if given by certified mail return-receipt requested, on the date
set forth on the receipt (provided, that any refusal to accept any such notice
shall be deemed to be notice thereof as of the time of any such refusal),
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the
--------
Administrative Agent under Article II shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Administrative
----------
Agent, any Lender or the Borrower in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall pay (i)
---------------------------
all reasonable out-of-pocket costs and expenses of the Administrative Agent,
including the fees and
-68-
<PAGE>
disbursements of Administrative Agent's counsel (including King & Spalding), in
connection with the preparation of this Agreement and the other Loan Documents,
any waiver or consent hereunder or thereunder or any amendment hereto or
thereto, and (ii) if a Default occurs, all reasonable out-of-pocket expenses
incurred by the Administrative Agent and any Lender, including reasonable fees
and disbursements of counsel, in connection with such Default and collection and
other enforcement proceedings resulting therefrom, including reasonable out-of-
pocket expenses incurred in enforcing this Agreement and the other Loan
Documents. The Borrower shall indemnify the Administrative Agent and each Lender
against any transfer taxes, documentary taxes, assessments or charges made by
any Authority by reason of the execution and delivery of this Agreement or the
other Loan Documents.
SECTION 9.04. Indemnification.
---------------
(a) The Borrower shall indemnify the Administrative Agent, the Lenders
and each affiliate thereof and their respective directors, officers,
employees and Administrative Agents (each an "Indemnified Party") from, and
hold each of them harmless against, any and all losses, liabilities, claims
or damages to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from any actual or
proposed use by the Borrower of the proceeds of any extension of credit by
any Lender hereunder or breach by the Borrower of this Agreement or any
other Loan Document or from any investigation, litigation or other
proceeding (including any threatened investigation or proceeding) relating
to the foregoing (an "Indemnity Proceeding"), and the Borrower shall
reimburse each Indemnified Party, upon demand (but no more frequently than
every Fiscal Quarter) for any reasonable expenses (including, without
limitation, reasonable legal fees) incurred in connection with any such
investigation or proceeding ("Claims and Expenses"); but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the
gross negligence or wilful misconduct of the Indemnified Party; provided,
that should the Borrower pay any amounts to the Administrative Agent or the
Lenders due to this Section, and it shall be determined that the harm being
indemnified against resulted from the Administrative Agent's or any
Lender's gross negligence or wilful misconduct, then such party receiving
such payment shall rebate such payment to the Borrower, together with
interest thereon accruing at the Federal Funds Rate from the date such
payment was made until the date such rebate is received by the Borrower
(calculated for the actual number of days elapsed on the basis of a 365 day
year).
(b) If the Borrower is required to indemnify an Indemnified Party
pursuant hereto and have provided evidence reasonably satisfactory to such
Indemnified Party that the Borrower has the financial wherewithal to
reimburse such Indemnified Party for any amount paid by such Indemnified
Party with respect to such Indemnity Proceeding, such Indemnified Party
shall not settle or compromise any such Indemnity Proceeding without the
prior written consent of the Borrower (which consent shall not be
unreasonably withheld or delayed).
-69-
<PAGE>
(c) If a claim is to be made by an Indemnified Party under this
Section, the Indemnified Party shall give written notice to the Borrower
promptly after the Indemnified Party receives actual notice of any Claims
and Expenses incurred or instituted for which the indemnification is
sought; provided, that, the failure to give such prompt notice shall not
-------- ----
decrease the Claims and Expenses payable by the Borrower, except to the
extent that such failure has caused the Borrower to forfeit any substantive
right of a material nature. If requested by the Borrower in writing, and so
long as (i) no Event of Default shall have occurred and be continuing and
(ii) the Borrower has acknowledged in writing to the Indemnified Party that
the Borrower shall be obligated under the terms of its indemnity hereunder
in connection with such Indemnity Proceeding (subject to the exclusion of
any losses, liabilities, claims, damages or expenses incurred by reason of
the gross negligence or willful misconduct of the Indemnified Party), the
Borrower may, at its election, conduct the defense of any such Indemnified
Proceeding to the extent such contest may be conducted in good faith on
legally supported grounds. If any lawsuit or enforcement action is filed
against any Indemnified Party entitled to the benefit of indemnity under
this Section, written notice thereof shall be given to the Borrower as soon
as practicable (and in any event within 15 days after the service of the
citation or summons). Notwithstanding the foregoing, the failure so to
notify the Borrower as provided in this Section will not relieve the
Borrower from liability hereunder. After such notice, the Borrower shall be
entitled, if they so elect, to take control of the defense and
investigation of such lawsuit or action and to employ and engage counsel of
their own choice reasonably acceptable to the Indemnified Party to handle
and defend the same, at the Borrower's cost, risk and expense; provided
--------
however, that the Borrower and its counsel shall proceed with diligence and
-------
in good faith with respect thereto. If (i) the engagement of such counsel
by the Borrower would present a conflict of interest which would prevent
such counsel from effectively defending such action on behalf of the
Indemnified Party, (ii) the defendants in, or targets of, any such lawsuit
or action include both the Indemnified Party and Borrower, and the
Indemnified Party reasonably concludes that there may be legal defenses
available to it that are different from or in addition to those available
to the Borrower, (iii) the Borrower fails to assume the defense of the
lawsuit or action or to employ counsel reasonably satisfactory to such
Indemnified Party, in either case in a timely manner, or (iv) an Event of
Default shall occur and be continuing, then such Indemnified Party may
employ separate counsel to represent or defend it in any such action or
proceeding and the Borrower will pay the fees and disbursements of such
counsel; provided, however that each Indemnified Party shall, in connection
-------- -------
with any matter covered by this Section which also involves other
Indemnified Parties, use reasonable efforts to avoid unnecessary
duplication of efforts by counsel for all indemnities. Should the Borrower
be entitled to conduct the defense of any Indemnity Proceeding pursuant to
the terms of this Section, the Indemnified Party shall cooperate (with all
Claims and Expenses associated therewith to be paid by the Borrower) in all
reasonable respects with the Borrower and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided,
--------
-70-
<PAGE>
however that the Indemnified Party may, at its own cost (except as set
-------
forth in, and in accordance with, the foregoing sentence), participate in
the investigation, trial and defense of such lawsuit or action and any
appeal arising therefrom.
(d) The Administrative Agent and each Lender agree that in the event
that any Indemnity Proceeding is asserted or threatened in writing or
instituted against it or any other party entitled to indemnification
hereunder, the Administrative Agent or such Lender shall promptly notify
the Borrower thereof in writing and agree, to the extent appropriate, to
consult with the Borrower with a view to minimizing the cost to the
Borrower of its obligations under this Section; provided, that, the failure
-------- ----
to so notify the Borrower will not relieve the Borrower from liability
hereunder except to the extent such failure has caused the Borrower to
forfeit any substantive right of a material nature.
SECTION 9.05. Sharing of Setoffs. Each Lender agrees that if it shall,
------------------
by exercising any right of setoff or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest owing with
respect to the Note held by it which is greater than the proportion received by
any other Lender in respect of the aggregate amount of all principal and
interest owing with respect to the Note held by such other Lender, the Lender
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Lenders owing to such other
Lenders, and such other adjustments shall be made, as may be required so that
all such payments of principal and interest with respect to the Notes held by
the Lenders owing to such other Lenders shall be shared by the Lenders pro rata;
provided that (i) nothing in this Section shall impair the right of any Lender
- --------
to exercise any right of setoff or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness under the Notes, and (ii) if all or any portion of
such payment received by the purchasing Lender is thereafter recovered from such
purchasing Lender, such purchase from each other Lender shall be rescinded and
such other Lender shall repay to the purchasing Lender the purchase price of
such participation to the extent of such recovery together with an amount equal
to such other Lender's ratable share (according to the proportion of (x) the
amount of such other Lender's required repayment to (y) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of setoff
or counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 9.06. Amendments and Waivers.
----------------------
(a) Except as otherwise specifically provided herein, any provision of
this Agreement, the Notes or any other Loan Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is
signed by the Borrower and the Required Lenders (and, if the rights or
duties of the Administrative Agent are affected
-71-
<PAGE>
thereby, by the Administrative Agent); provided that, except as provided in
--------
the next succeeding proviso, no such amendment or waiver shall, unless
signed by all Lenders, (i) change the Commitment of any Lender or subject
any Lender to any additional obligation, (ii) reduce the principal of or
rate of interest on any Loan or any fees hereunder (other than fees payable
under the Administrative Agent/Arranger Letter Agreement), (iii) extend the
date fixed for any payment of principal of or interest on any Loan or any
fees (other than fees payable under the Administrative Agent/Arranger
Letter Agreement) hereunder (including, without limitation, any payments
required to be made pursuant to Section 2.05(a)(iii)), (iv) reduce the
amount of principal, interest or fees due on any date fixed for the payment
thereof, (v) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Lenders, which shall
be required for the Lenders or any of them to take any action under this
Section or any other provision of this Agreement, (vi) change the manner of
application of any payments made under this Agreement or the Notes, or
(vii) reduce any obligation owed under or release any Guarantee (except as
permitted under Section 5.04 or 6.09 in connection with the dissolution,
sale or other disposition of a Subsidiary Guarantor) given to support
payment of the Loans.
(b) The Borrower will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of
this Agreement unless each Lender shall be informed thereof by the Borrower
and shall be afforded an opportunity of considering the same and shall be
supplied by the Borrower with both (i) reasonably sufficient information to
enable it to make an informed decision with respect thereto, and (ii)
substantially the same information as supplied by the Borrower to any other
Lender. Executed or true and correct copies of any waiver or consent
effected pursuant to the provisions of this Agreement shall be delivered by
the Borrower to each Lender within two Business Days following the date on
which the same shall have been executed and delivered by the requisite
percentage of Lenders. The Borrower will not, directly or indirectly, pay
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any Lender (in its capacity as
such) as consideration for or as an inducement to the entering into by such
Lender of any waiver or amendment of any of the terms and provisions of
this Agreement unless such remuneration is concurrently paid, on the same
terms, ratably to all such Lenders.
SECTION 9.07. No Margin Stock Collateral. Each of the Lenders
--------------------------
represents to the Administrative Agent, each of the other Lenders and the
Borrower that it in good faith is not, directly or indirectly (by negative
pledge or otherwise), relying upon any Margin Stock as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 9.08. Successors and Assigns.
----------------------
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided that the
--------
-72-
<PAGE>
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of the Administrative Agent and
the Lenders.
(b) Any Lender may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to such Lender,
any Note held by such Lender, any Commitment hereunder or any other
interest of such Lender hereunder, provided that such participations shall
--------
be in minimum amounts of $5,000,000. In the event of any such sale by a
Lender of a participating interest to a Participant, such Lender's
obligations under this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall
remain the holder of any such Note for all purposes under this Agreement,
and the Borrower and the Administrative Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. In no event shall a Lender that sells a
participation be obligated to the Participant to take or refrain from
taking any action hereunder except that such Lender may agree that it will
not (except as provided below), without the consent of the Participant,
agree to (i) the extension of any date fixed for the payment of principal
of or interest on the related loan or loans, (ii) the reduction of the
amount of any principal, interest or fees due on any date fixed for the
payment thereof with respect to the related loan or loans, (iii) the
reduction in the rate at which either interest is payable thereon or (if
the Participant is entitled to any part thereof) facility fee is payable
hereunder from the rate at which the Participant is entitled to receive
interest or facility fee (as the case may be) in respect of such
participation, or (iv) the reduction of any obligation owing under or the
release of any Guarantee (except as permitted under Section 5.04 or 6.09(a)
in connection with the dissolution, sale or other disposition of a
Subsidiary Guarantor) given to support payment of the Loans. Each Lender
selling a participating interest in any Loan, Note, Commitment or other
interest under this Agreement, other than a Competitive Bid Loan or
Competitive Bid Note, shall, within 10 Business Days of such sale, provide
the Borrower and the Administrative Agent with written notification stating
that such sale has occurred and identifying the Participant and the
interest purchased by such Participant. The Borrower acknowledges and
agrees that the benefits of Sections 2.07 through 2.10 shall continue in
effect with respect to the full amount of each Lender's Loans and
Commitment, notwithstanding its sale of participating interests therein as
contemplated hereby.
(c) Any Lender may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement, the Notes, and any
other Loan Documents, and such Assignee shall assume all such rights and
obligations, pursuant to an Assignment Agreement in the form attached
hereto as Exhibit "F", executed by such Assignee, such transferor Lender
-----------
and the Administrative Agent (and, in the case of an Assignee that is not
then a Lender, by the Borrower); provided that (i) no interest may be sold
--------
by a Lender pursuant to this paragraph (c) unless the Assignee shall agree
to assume ratably
-73-
<PAGE>
equivalent portions of the transferor Lender's Commitment, (ii) the amount
of the Commitment of the assigning Lender subject to such assignment
(determined as of the effective date of the assignment) shall be equal to
$5,000,000 (or any larger multiple of $1,000,000), and (iii) no interest
may be sold by a Lender pursuant to this paragraph (c) to any Assignee that
is not then a Lender, or an Affiliate of a Lender, without the prior
written consent of the Borrower and the Administrative Agent, which consent
of the Borrower and the Administrative Agent shall not be unreasonably
withheld or delayed. Upon (A) execution of the Assignment Agreement by such
transferor Lender, such Assignee, the Administrative Agent and (if
applicable) the Borrower, (B) delivery of a Notice of Assignment and an
executed copy of the Assignment Agreement to the Borrower and the
Administrative Agent, (C) payment by such Assignee to such transferor
Lender of an amount equal to the purchase price agreed between such
transferor Lender and such Assignee, and (D) payment of a processing and
recordation fee of $3,000 to the Administrative Agent, such Assignee shall,
on the "Effective Date" as provided in the Assignment Agreement, for all
purposes be a Lender party to this Agreement and shall have all the rights
and obligations of a Lender under this Agreement to the same extent as if
it were an original party hereto with a Commitment as set forth in such
instrument of assumption, and the transferor Lender shall be released from
its obligations hereunder to a corresponding extent, and no further consent
or action by the Borrower, the Lenders or the Administrative Agent shall be
required. Upon the consummation of any transfer to an Assignee pursuant to
this paragraph (c), the transferor Lender, the Administrative Agent and the
Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to such Assignee and, if necessary, a new Note shall be
issued to the transferor Lender.
(d) Subject to the provisions of Section 9.09, the Borrower authorizes
each Lender to disclose to any Participant, Assignee or other transferee
(each a "Transferee") and any prospective Transferee any and all financial
information in such Lender's possession concerning the Borrower which has
been delivered to such Lender by the Borrower pursuant to this Agreement or
which has been delivered to such Lender by the Borrower in connection with
such Lender's credit evaluation prior to entering into this Agreement.
(e) Transferees shall be entitled to receive a greater payment under
Section 2.07 or 2.08 than the transferor Lender would have been entitled to
receive with respect to the rights transferred, only if such transfer is
made with the Borrower's prior written consent or by reason of the
provisions of Section 2.11 requiring such Lender to designate a different
Lending Installation under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
(f) Anything in this Section 9.08 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of the Loans and/or
obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to
-74-
<PAGE>
Regulation A of the Board of Governors of the Federal Reserve System and
any Operating Circular issued by such Federal Reserve Bank, provided that
--------
any payment in respect of such assigned Loans and/or obligations
made by the Borrower to the assigning and/or pledging Lender in accordance
with the terms of this Agreement shall satisfy the Borrower's obligations
hereunder in respect of such assigned Loans and/or obligations to the
extent of such payment. No such assignment shall release the assigning
and/or pledging Lender from its obligations hereunder.
SECTION 9.09. Confidentiality. Each Lender agrees to exercise its
---------------
reasonable efforts and in any event not less than the same degree of care as it
uses to maintain its own confidential information in maintaining the
confidentiality of any information delivered or made available by the Borrower
to it which is clearly indicated to be confidential information from any one
other than persons employed or retained by such Lender who are or are expected
to become engaged in evaluating, approving, structuring or administering the
Loans; provided, however that nothing herein shall prevent any Lender from
-------- -------
disclosing such information (i) to any other Lender or an affiliate of any
Lender, (ii) upon the order of any court or administrative agency, (iii) upon
the request or demand of any regulatory agency or authority having jurisdiction
over such Lender, (iv) which has been publicly disclosed by means which are not
violative of this Section 9.09, (v) to the extent reasonably required in
connection with any litigation to which the Administrative Agent, any Lender or
their respective Affiliates may be a party, (vi) to the extent reasonably
required in connection with the exercise of any right, power of remedy hereunder
or under any of the other Loan Documents, (vii) to such Lender's legal counsel
and independent auditors and (viii) to any actual or proposed Participant,
Assignee or other Transferee of all or part of its rights hereunder which has
agreed in writing (aa) to be bound by the provisions of this Section 9.09 and
(bb) that the Borrower is a third party beneficiary of such agreement, and (cc)
to return all copies of the confidential information to the Administrative Agent
if the proposed assignment or participation is not consummated.
SECTION 9.10. Representation by Lenders. Each Lender hereby represents
-------------------------
that it is a commercial lender or financial institution which makes Loans in the
ordinary course of its business and that it will make its Loans hereunder for
its own account in the ordinary course of such business; provided, however that,
-------- -------
subject to Section 9.08, the disposition of the Note or Notes held by that
Lender shall at all times be within its exclusive control.
SECTION 9.11. Obligations Several. The obligations of each Lender
-------------------
hereunder are several, and no Lender shall be responsible for the obligations or
commitment of any other Lender hereunder. Nothing contained in this Agreement
and no action taken by Lenders pursuant hereto shall be deemed to constitute the
Lenders to be a partnership, an, association, a joint venture or any other kind
of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document and
it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
-75-
<PAGE>
SECTION 9.12. Georgia Law . This Agreement and each Note shall be
-----------
construed in accordance with and governed by the law of the State of Georgia
without regard to the effect of conflicts of laws.
SECTION 9.13. Interpretation. No provision of this Agreement or any of
--------------
the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 9.14. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. THE
---------------------------------------------
BORROWER (A) AND EACH OF THE LENDERS AND THE ADMINISTRATIVE AGENT IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, (B) SUBMITS TO THE NONEXCLUSIVE PERSONAL
JURISDICTION IN THE STATE OF GEORGIA, THE COURTS THEREOF AND THE UNITED STATES
DISTRICT COURTS SITTING THEREIN, FOR THE ENFORCEMENT OF THIS AGREEMENT, THE
NOTES AND THE OTHER LOAN DOCUMENTS, AND (C) WAIVES ANY AND ALL PERSONAL RIGHTS
UNDER THE LAW OF ANY JURISDICTION TO OBJECT ON ANY BASIS (INCLUDING, WITHOUT
LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN THE STATE OF
GEORGIA FOR THE PURPOSE OF LITIGATION TO ENFORCE THIS AGREEMENT, THE NOTES OR
THE OTHER LOAN DOCUMENTS. NOTHING HEREIN CONTAINED, HOWEVER, SHALL PREVENT THE
ADMINISTRATIVE AGENT OR THE BANKS FROM BRINGING ANY ACTION OR EXERCISING ANY
RIGHTS AGAINST THE BORROWER PERSONALLY, AND AGAINST ANY ASSETS OF THE BORROWER,
WITHIN ANY OTHER STATE OR JURISDICTION.
SECTION 9.15. Counterparts. This Agreement may be signed in any number
------------
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 9.16. Severability. In case any one or more of the provisions
------------
contained in this Agreement, the Notes or any of the other Loan Documents should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby and shall be enforced to the
greatest extent permitted by law.
SECTION 9.17. Interest. In no event shall the amount of interest, and
--------
all charges, amounts or fees contracted for, charged or collected pursuant to
this Agreement, the Notes or the other Loan Documents and deemed to be interest
under applicable law (collectively, "Interest") exceed the highest rate of
interest allowed by applicable law (the "Maximum Rate"), and in the event any
such payment is inadvertently received by any Lender, then the excess sum (the
-76-
<PAGE>
"Excess") shall be credited as a payment of principal, unless the Borrower shall
notify such Lender in writing that it elects to have the Excess returned
forthwith. It is the express intent hereof that the Borrower not pay and the
Lenders not receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may legally be paid by the Borrower under applicable
law. The right to accelerate maturity of any of the Loans does not include the
right to accelerate any interest that has not otherwise accrued on the date of
such acceleration, and the Administrative Agent and the Lenders do not intend to
collect any unearned interest in the event of any such acceleration. All monies
paid to the Administrative Agent or the Lenders hereunder or under any of the
Notes or the other Loan Documents, whether at maturity or by prepayment, shall
be subject to rebate of unearned interest as and to the extent required by
applicable law. By the execution of this Agreement, the Borrower covenants, to
the fullest extent permitted by law, that (i) the credit or return of any Excess
shall constitute the acceptance by the Borrower of such Excess, and (ii) the
Borrower shall not seek or pursue any other remedy, legal or equitable, against
the Administrative Agent or any Lender, based in whole or in part upon
contracting for charging or receiving any Interest in excess of the Maximum
Rate. For the purpose of determining whether or not any Excess has been
contracted for, charged or received by the Administrative Agent or any Lender,
all interest at any time contracted for, charged or received from the Borrower
in connection with this Agreement, the Notes or any of the other Loan Documents
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of the Commitments.
The Borrower, the Administrative Agent and each Lender shall, to the maximum
extent permitted under applicable law, (i) characterize any non-principal
payment as an expense, fee or premium rather than as Interest and (ii) exclude
voluntary prepayments and the effects thereof. The provisions of this Section
shall be deemed to be incorporated into each Note and each of the other Loan
Documents (whether or not any provision of this Section is referred to therein).
All such Loan Documents and communications relating to any Interest owed by the
Borrower and all figures set forth therein shall, for the sole purpose of
computing the extent of obligations hereunder and under the Notes and the other
Loan Documents be automatically recomputed by the Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
SECTION 9.18. Replacement of Lenders. If (i) any Lender or the Swing
----------------------
Line Lender demands payment of amounts pursuant to Section 2.07 or 2.08 that
exceed comparable amounts being demanded by the other Lenders in respect of the
circumstances described in either such Section, or (ii) any Lender sends the
Borrower a notice of violation of applicable law, rule, regulation, or directive
pursuant to Section 2.09 and such notice is not sent by the other Lenders, then
in any such case the Borrower may, in its sole discretion and at its sole
expense, on 10 Business Days' prior notice to the Administrative Agent and the
affected Lender, cause such Lender to (and such Lender shall) assign, pursuant
to Section 9.08(c), all of its rights and obligations under this Agreement to a
financial institution designated by the Borrower that is willing to become a
Lender, such assignment to be made upon payment to the assigning Lender of an
amount equal to the outstanding principal amount of the Loans payable to such
Lender plus all accrued but unpaid interest on such Loans, all accrued but
----
unpaid fees with respect to such Lender's Commitment, and all other amounts
payable to such Lender under this Agreement.
-77-
<PAGE>
Without limiting the foregoing, the Borrower may in lieu of finding a
replacement Lender for the affected Lender, elect to reduce the Aggregate
Commitment by the amount of the Commitment of such affected Lender.
-78-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers or member, as the case may
be, as of the day and year first above written.
NATIONAL DATA CORPORATION
Address for Notices:
- ------------------- By: /s/ Robert L. Walker
Name: -------------------------------------
Title: Chief Financial Officer
National Data Plaza
Atlanta, Georgia 30329-2010
Attention: E. Michael Ingram, Esq.
Telecopier No.: 404/728-2990
Attest: /s/ E. Michael Ingram
----------------------------------
Name: E. Michael Ingram
Title: Secretary
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and Lender
Address for Notices
- -------------------
By: /s/ A. R. Chicop
--------------------------------------
One First National Plaza Name: A. R. Chicop
Mail Suite 0324, Tenth Floor Title: Agent
Chicago, Illinois 60670
Attention: David McNeela
Telecopier No.: 312/732-2991
Lending Installation:
--------------------
One First National Plaza
Chicago, Illinois 60670
SYNDICATED LOAN COMMITMENT:
--------------------------
$40,000,000
<PAGE>
WACHOVIA BANK, N.A.,
as Documentation Agent and Lender
Address for Notices
- -------------------
By: /s/ William B. Nixon
--------------------------------------
191 Peachtree Street Name: William B. Nixon
29th Floor Title: Vice President
Atlanta, Georgia 30303
Attention: William B. Nixon
Telecopier No.: 404/332-5016
Lending Installation:
--------------------
191 Peachtree Street
Atlanta, Georgia
SYNDICATED LOAN COMMITMENT:
--------------------------
$40,000,000
<PAGE>
SUNTRUST BANK, ATLANTA,
as Lender
Address for Notices By: /s/ Christopher Deisley
- ------------------- --------------------------------------
Name: Christopher Deisley
Title: First Vice President
25 Park Place, N.E.
23rd Floor
Atlanta, Georgia 30303
Attention: Brian Peters
Telecopier No.: 404/588-8833 By: /s/ R. Michael Dunlap
-------------------------------------
Name: R. Michael Dunlap
Title: Vice President
Lending Installation:
--------------------
25 Park Place, N.E.
Atlanta, Georgia
SYNDICATED LOAN COMMITMENT:
--------------------------
$35,000,000
<PAGE>
FIRST AMERICAN NATIONAL BANK,
as Lender
Address for Notices
- -------------------
By: /s/ Mary E. Buckner
-----------------------
Name: Mary E. Buckner
Suite 100 Title: Vice President
One Union Square
Chattanooga, TN 37402
Attention: Mary Buckner
Telecopier No.: 423/755-6014
Lending Installation:
---------------------
Suite 100, One Union Square
---------------------------
Chattanooga, TN 37402
---------------------------
SYNDICATED LOAN COMMITMENT:
--------------------------
$10,000,000
<PAGE>
EXHIBIT "A-1"
SYNDICATED REVOLVING CREDIT NOTE
--------------------------------
U.S. $_____________ December __, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned NATIONAL DATA CORPORATION, a Delaware
corporation (herein called "the Borrower"), hereby promises to pay to the order
of [LENDER] (herein, together with any subsequent holder hereof, called the
"Lender"), for the account of its applicable Lending Installation, the lesser of
(i) the principal sum of _______ MILLION AND NO/100 DOLLARS ($__________.00),
and (ii) the outstanding principal amount of the Syndicated Loans made by Lender
to the Borrower pursuant to the terms of the Credit Agreement referred to below
on the earlier of (x) the Facility Termination Date, and (y) the date on which
all amounts outstanding under this Syndicated Revolving Credit Note have become
due and payable pursuant to the provisions of Article VII of the Credit
Agreement. The Borrower likewise promises to pay interest on the outstanding
principal amount of each such Loan, at such interest rates, payable at such
times, and computed in such manner, as are specified for such Loan in the Credit
Agreement in strict accordance with the terms thereof.
The Lender shall record all Syndicated Loans made pursuant to its
Commitment under the Credit Agreement and all payments of principal of such
Syndicated Loans and, prior to any transfer hereof, shall endorse such
Syndicated Loans and payments on the schedule annexed hereto and made a part
hereof, or on any continuation thereof which shall be attached hereto and made a
part hereof, which endorsement shall constitute prima facie evidence of the
-----------
accuracy of the information so endorsed; provided, however, that delay or
-------- -------
failure of the Lender to make any such endorsement or recordation shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement
with respect to the Syndicated Loans evidenced hereby.
Any principal or, to the extent not prohibited by applicable law, interest
due under this Syndicated Revolving Credit Note that is not paid on the due date
therefor, whether on the Facility Termination Date, or resulting from the
acceleration of maturity upon the occurrence of an Event of Default, shall bear
interest from the date due to payment in full at the rate as provided in Section
2.06(e) of the Credit Agreement.
-1-
<PAGE>
All payments of principal and interest shall be made in lawful money of the
United States of America in immediately available funds at the office of the
Administrative Agent specified in the Credit Agreement.
This Syndicated Revolving Credit Note is issued pursuant to, and is one of
the Syndicated Notes referred to in, the Credit Agreement dated as of December
__, 1997, among National Data Corporation, The First National Bank of Chicago,
as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the
banks and other lending institutions listed on the signature pages thereof (as
the same may be further amended, modified or supplemented from time to time, the
"Credit Agreement") and each assignee thereof becoming a "Lender" as provided
therein, and the Lender is and shall be entitled to all benefits thereof.
Except as otherwise expressly defined herein, capitalized terms defined in the
Credit Agreement are used herein with the same meanings. The Credit Agreement,
among other things, contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events and for mandatory prepayments upon
the occurrence of certain events.
The Borrower agrees to make payments of principal on the Syndicated Loans
outstanding hereunder on the dates and in the amounts specified in the Credit
Agreement for such Syndicated Loans in strict accordance with the terms thereof.
This Syndicated Revolving Credit Note may be prepaid in whole or in part,
without premium or penalty but with accrued interest on the principal amount
prepaid to the date of prepayment, and otherwise in accordance with the terms
and conditions of Section 2.06 of the Credit Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and all accrued interest on this Syndicated Revolving Credit Note may
automatically become, or be declared, due and payable in the manner and with the
effect provided in the Credit Agreement. The Borrower agrees to pay, and save
the Lender harmless against any liability for the payment of, all reasonable
out-of-pocket costs and expenses, including reasonable attorneys' fees actually
incurred by or on behalf of the Lender, arising in connection with the
enforcement by the Lender of any of its rights under this Syndicated Revolving
Credit Note or the Credit Agreement.
This Syndicated Revolving Credit Note has been executed and delivered in
Georgia and the rights and obligations of the Lender and the Borrower hereunder
shall be governed by and construed in accordance with the laws (without giving
effect to the conflict of law principles thereof) of the State of Georgia.
-2-
<PAGE>
The Borrower expressly waives any presentment, demand, protest or notice in
connection with this Syndicated Revolving Credit Note, now or hereafter
required by applicable law. TIME IS OF THE ESSENCE OF THIS SYNDICATED REVOLVING
CREDIT NOTE.
-3-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Syndicated Revolving
Credit Note to be executed and delivered by its duly authorized officers as of
the date first above written.
NATIONAL DATA CORPORATION
By:
----------------------
Name:
Title:
Attest:
-------------------
Name:
Title: Secretary
-4-
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
SYNDICATED REVOLVING CREDIT NOTE OF
[LENDER]
DATED DECEMBER __, 1997
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Syndicated Loan Period Paid Balance
- ----------- ---------------- ----------- --------- -------
-5-
<PAGE>
EXHIBIT "A-2"
COMPETITIVE BID NOTE
--------------------
December __, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned NATIONAL DATA CORPORATION, a Delaware
corporation (herein called "Borrower"), hereby promises to pay to the order of
[LENDER] (herein, together with any subsequent holder hereof, called the
"Lender"), for the account of its applicable Lending Installation, the
outstanding principal amount of each Competitive Bid Loan made by the Lender to
Borrower pursuant to the terms of the Credit Agreement referred to below on the
earlier of (x) the last day of the Interest Period applicable to each such
Competitive Bid Loan, and (y) the date on which all amounts outstanding under
this Competitive Bid Note have become due and payable pursuant to the provisions
of Article VII of the Credit Agreement. Borrower likewise promises to pay
interest on the outstanding principal amount of each such Competitive Bid Loan,
at such interest rate, payable at such times, and computed in such manner, as
are specified for such Competitive Bid Loan in the Credit Agreement in strict
accordance with the terms thereof.
The Lender shall record all Competitive Bid Loans made pursuant to the
Credit Agreement and all payments of principal of such Competitive Bid Loans
and, prior to any transfer hereof, shall endorse such Competitive Bid Loans and
payments on the schedule annexed hereto and made a part hereof, or on any
continuation thereof which shall be attached hereto and made a part hereof,
which endorsement shall constitute prima facie evidence of the accuracy of the
-----------
information so endorsed; provided, however, that delay or failure of the Lender
-------- -------
to make any such endorsement or recordation shall not affect the obligations of
Borrower hereunder or under the Credit Agreement with respect to the Competitive
Bid Loans evidenced hereby.
Any principal or, to the extent not prohibited by applicable law, interest
due under this Competitive Bid Note that is not paid on the due date therefor,
whether on the last day of any applicable Interest Period or any other date on
which interest is due and payable on any Competitive Bid Loan, or on the
Facility Termination Date, or resulting from the acceleration of maturity upon
the occurrence of an Event of Default, shall bear interest from the date due to
payment in full at the rate as provided in Section 2.06(e) of the Credit
Agreement.
This Competitive Bid Note is issued pursuant to the Credit Agreement dated
as of December __, 1997 among National Data Corporation, The First National Bank
of Chicago, as
-1-
<PAGE>
Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the banks
and other lending institutions listed on the signature pages thereof (as the
same may be amended, restated or supplemented from time to time, the "Credit
Agreement") and each assignee thereof becoming a "Lender" as provided therein,
and the Lender is and shall be entitled to all benefits thereof. Except as
otherwise expressly defined therein, terms defined in the Credit Agreement are
used herein with the same meanings. The Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and for mandatory prepayments upon the occurrence of
certain events.
Borrower agrees to make payments of principal on the Competitive Bid Loans
outstanding hereunder on the dates and in the amounts specified in the Credit
Agreement for such Competitive Bid Loans in strict accordance with the terms
thereof.
This Competitive Bid Note may be prepaid in whole or in part, without
premium or penalty but with accrued interest on the principal amount prepaid to
the date of prepayment, and otherwise in accordance with the terms and
conditions of Section 2.06 of the Credit Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and all accrued interest on this Competitive Bid Note may automatically become,
or be declared, due and payable in the manner and with the effect provided in
the Credit Agreement. Borrower agrees to pay, and save the Lender harmless
against, any liability for the payment of, all reasonable out-of-pocket costs
and expenses, including reasonable attorneys' fees actually incurred by or on
behalf of the Lender, arising in connection with the enforcement by the Lender
of any of its rights under this Competitive Bid Note or the Credit Agreement.
This Competitive Bid Note has been executed and delivered in the State of
Georgia, U.S.A., and the rights and obligations of the Lender and Borrower
hereunder shall be governed by and construed in accordance with the laws
(without giving effect to the conflict of law principles thereof) of the State
of Georgia.
Borrower expressly waives any presentment, demand, protest or notice in
connection with this Competitive Bid Note, now or hereafter required by
applicable law. TIME IS OF THE ESSENCE OF THIS COMPETITIVE BID NOTE.
-2-
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Competitive Bid Note to be
executed and delivered by its duly authorized officers as of the date first
above written.
NATIONAL DATA CORPORATION
By:
-----------------------
Name:
Title:
Attest:
-------------------
Name:
Title: Secretary
-3-
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
COMPETITIVE BID NOTE OF [LENDER],
DATED DECEMBER __, 1997
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Competitive Bid Loan Period Paid Balance
- ----------- -------------------- ----------- --------- -------
-4-
<PAGE>
EXHIBIT "A-3"
SWING LINE NOTE
---------------
U.S. $15,000,000.00 December 19, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned NATIONAL DATA CORPORATION, a Delaware
corporation (herein called "the Borrower"), hereby promises to pay to the order
of THE FIRST NATIONAL BANK OF CHICAGO (herein, together with any subsequent
holder hereof, called the "Lender"), for the account of its applicable Lending
Installation, the lesser of (i) the principal sum of FIFTEEN MILLION AND NO/100
DOLLARS ($15,000,000.00), and (ii) the outstanding principal amount of the
Swing Line Loans made by Lender to the Borrower pursuant to the terms of the
Credit Agreement referred to below on the earlier of (x) the Facility
Termination Date, and (y) the date on which all amounts outstanding under this
Swing Line Note have become due and payable pursuant to the provisions of
Article VII of the Credit Agreement. The Borrower likewise promises to pay
interest on the outstanding principal amount of each such Loan, at such interest
rates, payable at such times, and computed in such manner, as are specified for
such Loan in the Credit Agreement in strict accordance with the terms thereof.
The Lender shall record all Swing Line Loans made pursuant to its
Commitment under the Credit Agreement and all payments of principal of such
Swing Line Loans and, prior to any transfer hereof, shall endorse such Swing
Line Loans and payments on the schedule annexed hereto and made a part hereof,
or on any continuation thereof which shall be attached hereto and made a part
hereof, which endorsement shall constitute prima facie evidence of the accuracy
-----------
of the information so endorsed; provided, however, that delay or failure of the
-------- -------
Lender to make any such endorsement or recordation shall not affect the
obligations of the Borrower hereunder or under the Credit Agreement with respect
to the Swing Line Loans evidenced hereby.
Any principal or, to the extent not prohibited by applicable law, interest
due under this Swing Line Note that is not paid on the due date therefor,
whether on the Facility Termination Date, or resulting from the acceleration of
maturity upon the occurrence of an Event of Default, shall bear interest from
the date due to payment in full at the rate as provided in Section 2.06(e) of
the Credit Agreement.
-1-
<PAGE>
All payments of principal and interest shall be made in lawful money of the
United States of America in immediately available funds at the office of the
Administrative Agent specified in the Credit Agreement.
This Swing Line Note is issued pursuant to, and is one of the Swing Line
Notes referred to in, the Credit Agreement dated as of December 19, 1997, among
National Data Corporation, The First National Bank of Chicago, as Administrative
Agent, Wachovia Bank, N.A., as Documentation Agent, and the banks and other
lending institutions listed on the signature pages thereof (as the same may be
further amended, modified or supplemented from time to time, the "Credit
Agreement") and each assignee thereof becoming a "Lender" as provided therein,
and the Lender is and shall be entitled to all benefits thereof. Except as
otherwise expressly defined herein, capitalized terms defined in the Credit
Agreement are used herein with the same meanings. The Credit Agreement, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and for mandatory prepayments upon the
occurrence of certain events.
The Borrower agrees to make payments of principal on the Swing Line Loans
outstanding hereunder on the dates and in the amounts specified in the Credit
Agreement for such Swing Line Loans in strict accordance with the terms thereof.
This Swing Line Note may be prepaid in whole or in part, without premium or
penalty but with accrued interest on the principal amount prepaid to the date of
prepayment, and otherwise in accordance with the terms and conditions of Section
2.06 of the Credit Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and all accrued interest on this Swing Line Note may automatically become, or be
declared, due and payable in the manner and with the effect provided in the
Credit Agreement. The Borrower agrees to pay, and save the Lender harmless
against any liability for the payment of, all reasonable out-of-pocket costs and
expenses, including reasonable attorneys' fees actually incurred by or on behalf
of the Lender, arising in connection with the enforcement by the Lender of any
of its rights under this Swing Line Note or the Credit Agreement.
This Swing Line Note has been executed and delivered in Georgia and the
rights and obligations of the Lender and the Borrower hereunder shall be
governed by and construed in accordance with the laws (without giving effect to
the conflict of law principles thereof) of the State of Georgia.
-2-
<PAGE>
The Borrower expressly waives any presentment, demand, protest or notice in
connection with this Swing Line Note, now or hereafter required by applicable
law. TIME IS OF THE ESSENCE OF THIS SWING LINE NOTE.
-3-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Swing Line Note to be
executed and delivered by its duly authorized officers as of the date first
above written.
NATIONAL DATA CORPORATION
By:
----------------------------
Name:
Title:
Attest:
-------------------------
Name:
Title: Secretary
-4-
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
SWING LINE NOTE OF
THE FIRST NATIONAL BANK OF CHICAGO
DATED DECEMBER 19, 1997
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Swing Line Loan Period Paid Balance
- ----------- --------------- ----------- --------- -------
-5-
<PAGE>
EXHIBIT "B"
COMPETITIVE BID QUOTE REQUEST
-----------------------------
(Section 2.04(b))
To: The First National Bank of Chicago,
as Administrative Agent
From: [Borrower]
Re: Credit Agreement dated as of December __, 1997 (which, as it may be amended
or modified and in effect from time to time, is herein called the
"Agreement") among National Data Corporation, The First National Bank of
Chicago, as Administrative Agent, Wachovia Bank, N.A., as Documentation
Agent, and the Lenders that are parties thereto.
1. Capitalized terms used herein and not otherwise defined herein shall
have the meanings attributed to such terms in the Agreement.
2. We hereby give notice pursuant to Section 2.04(b) of the Agreement that
we request Competitive Bid Quotes for the following proposed Competitive Bid
Advance(s):
Borrowing Date: _________, ____
Principal Amount/1/ Interest Period/2/
------------------ -----------------
3. Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an
Absolute Rate].
4. Upon our acceptance of any or all of the Competitive Bid Advances
offered by the Lenders in response to this request, we shall be deemed to affirm
as of the Borrowing Date thereof the representations and warranties made in
Article IV of the Agreement.
NATIONAL DATA CORPORATION
By:
_________________________________________
Title:
_________________________________________
_______________________
/1/Amount must be at least $5,000,000 and an integral multiple of $1,000,000 if
in excess thereof.
/2/One, two, three or six months (Eurodollar Auction) or at least 7 and up to
180 days (Absolute Rate Auction), subject to the provisions of the definitions
of Eurodollar Interest Period and Absolute Rate Interest Period.
<PAGE>
EXHIBIT "C"
INVITATION FOR COMPETITIVE BID QUOTES
-------------------------------------
(Section 2.04 (c))
To: Each of the Lenders party to the Agreement
referred to below
Re: Invitation for Competitive Bid Quotes to National Data Corporation
Pursuant to Section 2.04(c) of the Credit Agreement dated as of December
__, 1997 (which, as it may be amended or modified and in effect from time to
time, is herein called, the "Agreement") among National Data Corporation, The
First National Bank of Chicago, as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders that are parties thereto, we are pleased,
on behalf of National Data Corporation, to invite you to submit Competitive Bid
Quotes to National Data Corporation for the following proposed Competitive Bid
Advance(s):
Borrowing Date: _________, _____
Principal Amount Interest Period
---------------- ---------------
Such Competitive Bid Quotes should offer [a Competitive Bid Margin] [an
Absolute Rate]. Your Competitive Bid Quote must comply with Section 2.04(d) of
the Agreement and the foregoing. Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to such terms in the
Agreement.
Please respond to this invitation by no later than [1:00 p.m.] [9:00 a.m.]
(Chicago time) on _________, ____.
THE FIRST NATIONAL BANK OF
CHICAGO, as Administrative Agent
By:
______________________________________________
Name:
Title:
<PAGE>
EXHIBIT "D"
COMPETITIVE BID QUOTE
---------------------
(Section 2.04(d))
To: The First National Bank of Chicago,
as Administrative Agent
Re: Competitive Bid Quote to National Data Corporation
In response to your Invitation for Competitive Bid Quotes dated
___________, made on behalf of National Data Corporation, we (herein sometimes
referred to as the "Quoting Lender") hereby make the following Competitive Bid
Quote pursuant to Section 2.04(d) of the Agreement (as hereinafter defined) and
on the following terms:
1. Quoting Lender:
------------------
2. Person to contact at Quoting Lender:
----------------
3. Borrowing Date: /1/
--------------
4. We hereby offer to make Competitive Bid Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest [Competitive [Absolute Minimum
Amount/2/ Period/3/ Bid Margin/4/] Rate/5/] Amount/6/
-------- -------- -------------- -------- --------
- ------------------------------------
/1/As specified in the related Invitation For Competitive Bid Quotes.
/2/Principal amount bid for each Interest Period may not exceed the principal
amount requested. Bids must be made for at least $2,500,000 and an integral
multiple of $500,000 if in excess thereof.
/3/One, two, three or six months or at least 7 and up to 180 days, as specified
in the related Invitation For Competitive Bid Quotes.
/4/Competitive Bid Margin over or under the Eurodollar Base Rate determined for
the applicable Interest Period. Specify percentage (rounded to the nearest
1/100 of 1%) and specify whether "PLUS" or "MINUS".
/5/Specify rate of interest per annum (rounded to the nearest 1/100 of 1%).
/6/Specify minimum or maximum amount, if any, which the Borrower may accept (see
Section 2.04(d)(ii)(E)).
<PAGE>
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of December __, 1997 (which, as it may be amended or modified and in
effect from time to time, is herein called the "Agreement") among National Data
Corporation, The First National Bank of Chicago, as Administrative Agent,
Wachovia Bank, N.A., as Documentation Agent, and the Lenders that are parties
thereto, irrevocably obligates us to make the Competitive Bid Loan(s) for which
any offer(s) are accepted, in whole or in part. Capitalized terms used herein
and not otherwise defined herein shall have the meanings attributed to such
terms in the Agreement.
Very truly yours,
[NAME OF LENDER]
By:
---------------------------
Title:
---------------------------
-2-
<PAGE>
EXHIBIT "E"
COMPLIANCE CERTIFICATE
----------------------
To: The Lenders parties to the
Credit Agreement described below
This Compliance Certificate is furnished pursuant to that certain Credit
Agreement dated as of December 19, 1997 (which, as it may be amended or modified
and in effect from time to time, is herein called the "Agreement") among
National Data Corporation, The First National Bank of Chicago, as Administrative
Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders that are
parties thereto. Capitalized terms used herein and not otherwise defined herein
shall have the meanings attributed to such terms in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Consolidated Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or an Event of Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
----------
evidencing compliance with Section 5.03 and Sections 6.01 through 6.09,
inclusive, of the Agreement, all of which data and computations are true,
complete and correct.
5. Schedule II attached hereto sets forth the determination of the
-----------
Applicable Margin to be paid for Syndicated Advances and facility fee rates to
be effective as provided in Section 2.06(c) of the Agreement.
6. Schedule III attached hereto sets forth the various financial
------------
statements, reports and deliveries which are required under the Agreement and
the other Loan Documents and the status of compliance.
7. The Single Subsidiary Threshold for the most recent fiscal quarter
covered by the attached financial statements is $_____________. No Operating
Subsidiaries of the Borrower are required to become additional Subsidiary
Guarantors under Section 5.03(a) of the Agreement, except as follows:
____________________________________________________.
<PAGE>
8. The Aggregate Subsidiary Threshold for the most recent fiscal quarter
covered by the attached financial statements is $__________. No Operating
Subsidiaries of the Borrower are required to become additional Subsidiary
Guarantors under Section 5.03(b) of the Agreement, other than the following
Operating Subsidiaries designated by the Borrower: _______________.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which has been taken, is being taking, or is being
proposed to be taken with respect to each such condition or event:
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
The foregoing certifications, together with the computations set forth in
Schedule I and Schedule II hereto, and the financial statements and reports
- ---------- -----------
delivered with this Certificate in support hereof, are made and delivered this
____ day of ____________.
_________________________________
Name: ___________________________
Title: _________________________
-2-
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of ___________ with
Sections 5.03 and 6.01 through 6.09 inclusive
of the Agreement
-3-
<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Applicable Margin and
Facility Fee Rate Determination
-4-
<PAGE>
SCHEDULE III TO COMPLIANCE CERTIFICATE
Financial Statements, Reports and Deliveries
-5-
<PAGE>
EXHIBIT "F"
ASSIGNMENT AGREEMENT
--------------------
This Assignment Agreement (this "Assignment Agreement") between
__________________________ (the "Assignor") and __________________ (the
"Assignee") is dated as of ________. The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
---------------------
(which, as it may be amended or modified and in effect from time to time, is
herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to such terms in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
-------------------------
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
----------
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
- ----------
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
----------
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
--------------
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
--------
1 or two Business Days (or such shorter period agreed to by the Administrative
- -
Agent) after a Notice of Assignment substantially in the form of Exhibit "I"
-----------
attached hereto has been delivered to the Administrative Agent. Such Notice of
Assignment must include any consents required to be delivered to the
Administrative Agent by Section 9.08(c) of the Credit Agreement. In no event
will the Effective Date occur if the payments required to be made by the
Assignee to the Assignor on the Effective Date under Sections 4 and 5 hereof are
not made on the proposed Effective Date. The Assignor will notify the Assignee
of the proposed Effective Date no later than the Business Day prior to the
proposed Effective Date. As of the Effective Date, (i) the Assignee shall have
the rights and obligations of a Lender under the Loan Documents with respect to
the rights and obligations assigned to the Assignee hereunder and (ii) the
Assignor shall relinquish its rights and be released from its corresponding
obligations under the Loan Documents with respect to the rights and obligations
assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
--------------------
shall be entitled to receive from the Administrative Agent all payments of
principal, interest and fees
<PAGE>
with respect to the interest assigned hereby. The Assignee shall advance funds
directly to the Administrative Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale and assignment of Loans
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal amount of the portion of all Floating Rate Loans
assigned to the Assignee hereunder and (ii) with respect to each Fixed Rate
[Syndicated] Loan made by the Assignor and assigned to the Assignee hereunder
which is outstanding on the Effective Date, (a) on the last day of the Interest
Period therefor or (b) on such earlier date agreed to by the Assignor and the
Assignee or (c) on the date on which any such Fixed Rate [Syndicated] Loan
either becomes due (by acceleration or otherwise) or is prepaid (the date as
described in the foregoing clauses (a), (b) or (c) being hereinafter referred to
as the "Payment Date"), the Assignee shall pay the Assignor an amount equal to
the principal amount of the portion of such Fixed Rate [Syndicated] Loan
assigned to the Assignee which is outstanding on the Payment Date. If the
Assignor and the Assignee agree that the Payment Date for such Fixed Rate
[Syndicated] Loan shall be the Effective Date, they shall agree to the interest
rate applicable to the portion of such Fixed Rate [Syndicated] Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such Fixed Rate [Syndicated] Loan (the "Agreed
Interest Rate") and any interest received by the Assignee in excess of the
Agreed Interest Rate shall be remitted to the Assignor. In the event interest
for the period from the Effective Date to but not including the Payment Date is
not paid with respect to any Fixed Rate [Syndicated] Loan sold by the Assignor
to the Assignee hereunder, the Assignee shall pay to the Assignor interest for
such period on the portion of such Fixed Rate [Syndicated] Loan sold by the
Assignor to the Assignee hereunder at the applicable rate provided by the Credit
Agreement. In the event a prepayment of any Fixed Rate [Syndicated] Loan which
is existing on the Payment Date and assigned by the Assignor to the Assignee
hereunder occurs after the Payment Date but before the end of the Interest
Period applicable to such Fixed Rate [Syndicated] Loan, the Assignee shall remit
to the Assignor the excess of the prepayment penalty paid with respect to the
portion of such Fixed Rate [Syndicated] Loan assigned to the Assignee hereunder
over the amount which would have been paid if such prepayment penalty was
calculated based on the Agreed Interest Rate. The Assignee will also promptly
remit to the Assignor (i) any principal payments received from the
Administrative Agent with respect to Fixed Rate [Syndicated] Loans prior to the
Payment Date and (ii) any amounts of interest on Loans and fees received from
the Administrative Agent which relate to the portion of the Loans assigned to
the Assignee hereunder for periods prior to the Effective Date, in the case of
Floating Rate Loans or fees, or the Payment Date, in the case of Fixed Rate
[Syndicated] Loans, and not previously paid by the Assignee to the Assignor.]*
In the event that either party hereto receives any payment to which the other
party hereto is entitled under this Assignment Agreement, then the party
receiving such amount shall promptly remit it to the other party hereto.
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
-2-
<PAGE>
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor a
----------------------------
fee on each day on which a payment of interest or facility fees is made under
the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or facility fees for the period
prior to the Effective Date or, in the case of Fixed Rate [Syndicated] Loans,
the Payment Date, which the Assignee is obligated to deliver to the Assignor
pursuant to Section 4 hereof). The amount of such fee shall be the difference
between (i) the interest or fee, as applicable, paid with respect to the amounts
assigned to the Assignee hereunder and (ii) the interest or fee, as applicable,
which would have been paid with respect to the amounts assigned to the Assignee
hereunder if each interest rate was ___ of 1% less than the interest rate paid
by the Borrower or if the facility fee was ___ of 1% less than the facility fee
paid by the Borrowers as the case may be. In addition, the Assignee agrees to
pay ___% of the recordation fee required to be paid to the Administrative Agent
in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
--------------------------------------------------------------
LIABILITY. The Assignor represents and warrants that it is the legal and
- ---------
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantors, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantors, (iv) the performance of or compliance with any of
the terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has
-------------------------------
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (ii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other Lender
and based on such documents and information at it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, (iii) appoints and authorizes the Administrative Agent
to take such action as agent on its behalf and to exercise such powers under the
Loan
-3-
<PAGE>
Documents as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are reasonably incidental thereto, (iv) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Loan Documents are required to be performed by it as a Lender,
(v) agrees that its payment instructions and notice instructions are as set
forth in the attachment to Schedule 1, [AND] (vi) confirms that none of the
----------
funds, monies, assets or other consideration being used to make the purchase and
assumption hereunder are "plan assets" as defined under ERISA and that its
rights, benefits and interests in and under the Loan Documents will not be "plan
assets" under ERISA[, AND (VII) ATTACHES THE FORMS PRESCRIBED BY THE INTERNAL
REVENUE SERVICE OF THE UNITED STATES CERTIFYING THAT THE ASSIGNEE IS ENTITLED TO
RECEIVE PAYMENTS UNDER THE LOAN DOCUMENTS WITHOUT DEDUCTION OR WITHHOLDING OF
ANY UNITED STATES FEDERAL INCOME TAXES].**
**to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
---------
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
----------------------
have the right pursuant to Section 9.08(c) of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under [Sections 4, 5 and 8] hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
----------------------------------
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
----------
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
----------------
of Assignment embody the entire agreement and understanding between the parties
hereto and
-4-
<PAGE>
supersede all prior agreements and understandings between the parties hereto
relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
-------------
internal law, and not the law of conflicts, of the State of Georgia.
13. NOTICES. Notices shall be given under this Assignment Agreement in
-------
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
----------
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
----------------------------
Title:
----------------------------
----------------------------
----------------------------
[NAME OF ASSIGNEE]
By:
----------------------------
Title:
----------------------------
----------------------------
----------------------------
-5-
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement: Credit Agreement dated December __,
1997, among National Data
Corporation, The First National
Bank of Chicago, as Administrative
Agent, Arranger and Syndication
Agent, Wachovia Bank, N.A., as
Documentation Agent, and the
Lenders that are parties thereto.
2. Date of Assignment Agreement:
------------------
3. Amounts (As of Date of Item 2 above):
Syndicated Revolving Competitive Bid
Credit Facility Facility
------------------------ --------------------
a. Total of Commitments
(Loans)** under
Credit Agreement $____ $____
b. Assignee's Percentage
of each Facility** purchased
under the Assignment
Agreement*** ____% ____%
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $____ $____
4. Assignee's Aggregate (Loan
Amount)* Commitment Amount
Purchased Hereunder: $____________
5. Proposed Effective Date: ____________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
------------------------- ------------------------
Title: Title:
------------------------- ------------------------
* Commitments and Loans to both Borrowers under each Facility must be
----
assigned together
** If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
*** Percentage taken to 10 decimal places
-6-
<PAGE>
ATTACHMENT TO SCHEDULE 1 TO ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
-7-
<PAGE>
EXHIBIT "G"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
----------------------------------------------
To: The First National Bank of Chicago,
as Administrative Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Credit Agreement, dated December 19, 1997 (as it may be amended or modified
and in effect from time to time, the "Credit Agreement"), among National
Data Corporation, The First National Bank of Chicago, as Administrative
Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders that
are parties thereto. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned thereto in the Credit
Agreement.
The Agent is specifically authorized and directed to act upon the following
standing money transfer instructions with respect to the proceeds of Advances or
other extensions of credit from time to time until receipt by the Agent of a
specific written revocation of such instructions by the undersigned Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the undersigned Borrower in accordance with Section 9.01
of the Credit Agreement or based on any telephonic notice made in accordance
with Section 2.06(g) of the Credit Agreement.
Facility Identification Number(s) 08596330
Customer/Account Name National Data Corporation
Transfer Funds To Wachovia Bank, Atlanta, GA
ABA #061000010
For Account No. 17618165 (National Data Corporation)
Reference/Attention To Proceeds of Loan
Authorized Officer (Customer Representative) for Date: December 19, 1997
NATIONAL DATA CORPORATION,
as Borrower
____________________________ ____________________________
(Please Print) Signature
Bank Officer Name Date: December 19, 1997
____________________________ ____________________________
(Please Print) Signature
<PAGE>
EXHIBIT "I"
TO ASSIGNMENT AGREEMENT
NOTICE
OF ASSIGNMENT
-------------
To: [BORROWER]*
[ADMINISTRATIVE AGENT]
From: [ASSIGNOR] (the "Assignor")
[ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
----------
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered
to ****[the Borrower and]**** the Administrative Agent pursuant to Section
9.08(c) of the Credit Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of _________ (the "Assignment"), pursuant to which, among
other things, the Assignor has sold, assigned, delegated and transferred to the
Assignee, and the Assignee has purchased, accepted and assumed from the Assignor
the percentage interest specified in Item 3 of Schedule 1 of all outstandings,
----------
rights and obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall be
----------
the later of the date specified in Item 5 of Schedule 1 or two Business Days (or
----------
such shorter period as agreed to by the Administrative Agent) after this Notice
of Assignment and any consents and fees required by Section 9.08(c) of the
Credit Agreement have been delivered to the Administrative Agent, provided that
the Effective Date shall not occur if any condition precedent agreed to by the
Assignor and the Assignee has not been satisfied.
*To be included only if consent must be obtained from the Borrower pursuant to
Section 9.08(c) of the Credit Agreement.
<PAGE>
4. The Assignor and the Assignee hereby give to the Borrower and the
Administrative Agent notice of the assignment and delegation referred to herein.
The Assignor will confer with the Administrative Agent before the date specified
in Item 5 of Schedule 1 to determine if the Assignment Agreement will become
----------
effective on such date pursuant to Section 3 hereof, and will confer with the
Administrative Agent to determine the Effective Date pursuant to Section 3
hereof if it occurs thereafter. The Assignor shall notify the Administrative
Agent if the Assignment Agreement does not become effective on any proposed
Effective Date as a result of the failure to satisfy the conditions precedent
agreed to by the Assignor and the Assignee. At the request of the
Administrative Agent, the Assignor will give the Administrative Agent written
confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Administrative Agent
on or before the Effective Date the processing fee of $3,000 required by Section
9.08(c) of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Administrative Agent prepare and cause
the Borrower to execute and deliver new Notes or, as appropriate, replacements
notes, to the Assignor and the Assignee. The Assignor and, if applicable, the
Assignee each agree to deliver to the Administrative Agent the original
[Syndicated] Note(s) received by it from the Borrower upon its receipt of [a]
new [Syndicated] Note(s) in the appropriate amount(s).
7. The Assignee advises the Administrative Agent that notice and
payment instructions are set forth in the attachment to Schedule 1.
----------
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights, benefits, and interests in and under the Loan Documents will not be
"plan assets" under ERISA.
9. The Assignee authorizes the Administrative Agent to act as its
agent under the Loan Documents in accordance with the terms thereof. The
Assignee acknowledges that the Administrative Agent has no duty to supply
information with respect to the Borrower or the Loan Documents to the Assignee
until the Assignee becomes a party to the Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
------------------------ -----------------------
Title: Title:
------------------------ -----------------------
-2-
<PAGE>
ACKNOWLEDGED [AND CONSENTED TO] ACKNOWLEDGED [AND CONSENTED TO]
BY: THE FIRST NATIONAL BANK BY: NATIONAL DATA
OF CHICAGO, As CORPORATION
Administrative Agent
By: By:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
[Attach photocopy of Schedule 1 to Assignment]
-3-
<PAGE>
EXHIBIT "J"
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
December 19, 1997, by and among NATIONAL DATA CORPORATION, a Delaware
corporation (the "Principal"), each subsidiary of the Principal listed on
Schedule I attached hereto (collectively, the "Guarantors"), and The First
- ----------
National Bank of Chicago, a national banking association, as Administrative
Agent (the "Administrative Agent") for the Lenders (as defined in the Credit
Agreement referred to below).
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to a certain Credit Agreement dated as of December 19,
1997, among the Principal, The First National Bank of Chicago, as Administrative
Agent, Wachovia Bank, N.A., as Documentation Agent, and the banks and other
lending institutions from time to time that are parties thereto (such Credit
Agreement, as the same may have been or may hereafter from time to time be
amended, modified, and restated, being herein referred to as the "Credit
Agreement"), the Lenders have agreed to make Loans and other extensions of
credit to the Principal;
WHEREAS, pursuant to the requirements of the Credit Agreement, the
Guarantors have executed and delivered a certain Subsidiary Guarantee dated as
of December 19, 1997 in favor of the Administrative Agent for the ratable
benefit of the Lenders (such Subsidiary Guarantee, as the same may have been or
may hereafter from time to time be amended, modified, and restated, being
hereinafter referred to as the "Guarantee Agreement");
WHEREAS, it is a further requirement and condition of the Credit Agreement
that the Guarantors execute and deliver an agreement in the form hereof;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce each Guarantor to enter into the Guarantee
Agreement, each Guarantor and the Administrative Agent agree as follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights
-------------------------
of indemnity and subrogation as the Guarantors may have under applicable law
(but subject to Section 3), the Principal agrees that in the event a payment
shall be made on behalf of the Principal by any Guarantor under the Guarantee
Agreement, the Principal shall indemnify such Guarantor for the full amount of
such payment and such Guarantor shall be subrogated to the rights of the person
to whom such payment shall have been made to the extent of such payment.
SECTION 2. Contribution and Subrogation. Each Guarantor (a
----------------------------
"Contributing Guarantor") agrees (subject to Section 3) that, in the event a
payment shall be made by any other Guarantor under the Guarantee Agreement and
such other Guarantor (the "Claiming Guarantor") shall not have been fully
indemnified by the Principal as provided in Section 1, each Contributing
Guarantor shall indemnify each Claiming Guarantor in an amount equal to the
amount of such
<PAGE>
payment, in each case multiplied by a fraction of which the numerator shall be
the net worth of such Contributing Guarantor on the date hereof and the
denominator shall be the aggregate net worth of the Principal and all Guarantors
on the date hereof (or, in the case of any Guarantor becoming a party hereto
pursuant to Section 12, the date of the Supplement hereto executed and delivered
by such Guarantor). Any Contributing Guarantor making any payment to a Claiming
Guarantor pursuant to this Section 2 shall be subrogated to the rights of such
Claiming Guarantor under Section 1 to the extent of such payment. As used
herein, the term "net worth" shall mean, as at any date of determination, the
consolidated members' capital, partners' capital, and stockholders' equity of
the Principal and the Guarantors, as determined on a consolidated basis in
accordance with GAAP.
SECTION 3. Subordination. Notwithstanding any provision of this
-------------
Agreement to the contrary, all rights of the Principal and the Guarantors under
Sections 1 and 2 and all other rights of indemnity, contribution or subrogation
under applicable law or otherwise shall be fully subordinated to the
indefeasible payment in full in cash of the Obligations owing by the Principal.
No failure on the part of the Principal or any Guarantor to make the payments
required by Sections 1 and 2 (or any other payments required under applicable
law or otherwise) shall in any respect limit the obligations and liabilities of
the Principal or any Guarantor with respect to its obligations hereunder, and
the Principal and each Guarantor shall remain liable for the full amount of the
obligations of the Principal and each Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full
-----------
force and effect so long as any Obligation owing by the Principal is outstanding
and has not been indefeasibly paid in full in cash, and so long as the
Commitments in favor of the Principal under the Credit Agreement have not been
terminated, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of any such Obligation is
rescinded or must otherwise be restored by any Lender or any Guarantor upon the
bankruptcy or reorganization of the Principal or any Guarantor or otherwise.
SECTION 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of the
--------------------
Administrative Agent, the Principal, or any Guarantor to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Administrative Agent, the Principal or any Guarantor preclude any
other or further exercise thereof or the exercise of any other right power or
remedy. All remedies hereunder are cumulative and are not exclusive of any
other remedies provided by law. None of the Administrative Agent, the Principal
and the Guarantors shall be deemed to have waived any rights hereunder unless
such waiver shall be in writing and signed by such parties.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into among
the Principal, the Guarantors
-2-
<PAGE>
and the Administrative Agent, with the prior written consent of the Required
Lenders (except as otherwise provided in the Credit Agreement).
SECTION 7. Notices. All communications and notices hereunder shall
-------
be in writing and given as provided in the Guarantee Agreement and addressed as
specified therein.
SECTION 8. Binding Agreement; Assignments. Whenever in this
------------------------------
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the parties that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns. Neither the Principal nor any Guarantor may assign or
transfer any of its rights or obligations hereunder (and any such attempted
assignment or transfer shall be void) without the prior written consent of the
Required Lenders.
SECTION 9. Survival of Agreement; Severability. (a) All covenants
-----------------------------------
and agreements made by the Principal and each Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement or the other Loan Documents shall be considered to have been relied
upon by the Administrative Agent, the Lenders, the Principal, and each Guarantor
and shall survive the making by the Lenders of the Loans, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loans or any other fee or amount payable by the Principal under the Credit
Agreement or this Agreement or under any of the other Loan Documents is
outstanding and unpaid or as long as any Commitments in favor of the Principal
under the Credit Agreement have not been terminated.
(b) In case any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, no
party hereto shall be required to comply with such provision for so long as such
provision is held to be invalid, illegal or unenforceable, but the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 10. Counterparts. This Agreement may be executed in
------------
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement shall be effective with
respect to the Principal or Guarantor when a counterpart bearing the signature
of the Principal or such Guarantor shall have been delivered to the
Administrative Agent. Delivery of an executed signature page to this Agreement
by facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.
SECTION 11. Effect of Contribution Agreement. This Agreement is
--------------------------------
intended only to define the relative rights of the Principal and the Guarantors,
and nothing set forth in this Agreement is intended to or shall impair the
obligations of the Guarantors, jointly and severally, to
-3-
<PAGE>
pay any amounts, as and when the same shall become due and payable in accordance
with the terms of the Guarantee Agreement. The parties hereto acknowledge that
the rights of indemnification, subrogation, and contribution hereunder shall
constitute assets in favor of each Guarantor to which such right of
indemnification, subrogation, or indemnification is owing.
SECTION 12. Additional Guarantors. Pursuant to Section 5.03 of the
---------------------
Credit Agreement, certain Subsidiaries of the Principal are required to enter
into the Guarantee Agreement as a Guarantor. Upon execution and delivery, after
the date hereof, by the Administrative Agent and such a Subsidiary of an
instrument in the form of Annex 1 hereto, such Subsidiary shall become a
-------
Guarantor hereunder with the same force and effect as if originally named as a
Guarantor hereunder. The execution and delivery of any instrument adding an
additional Guarantor as a party to this Agreement shall not require the consent
of any Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized offices as of the date first appearing above.
NATIONAL DATA CORPORATION,
as the Principal
By:
-----------------------------------
Name:
Title
EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I
----------
HERETO, as a Guarantor
By:
-----------------------------------
Name
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By:
-----------------------------------
Name:
Title:
-5-
<PAGE>
SCHEDULE I
GUARANTORS
----------
NATIONAL DATA PAYMENT SYSTEMS, INC.
A New York Corporation
NDC/YES CHECK, INC.
A Georgia Corporation
C.I.S. TECHNOLOGIES, INC.
A Delaware Corporation
HEALTH COMMUNICATION SERVICES, INC.
A Virginia Corporation
SOURCE INFORMATICS INC.
A Delaware Corporation
-6-
<PAGE>
ANNEX I
SUPPLEMENT TO NDC CONTRIBUTION AGREEMENT
----------------------------------------
THIS SUPPLEMENT TO NDC CONTRIBUTION AGREEMENT (this "Supplement")
dated as of ________________________, made by _________________, a __________
(the "New Guarantor"), in favor of the Administrative Agent, for the ratable
benefit of the Lenders, under the Credit Agreement referred to below.
A. Reference is made to (a) the Credit Agreement dated as of December
19, 1997 (as amended, supplemented and restated from time to time, the "Credit
Agreement"), among National Data Corporation (the "Principal"), The First
National Bank of Chicago, as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the banks and other lending institutions from time to
time that are parties thereto, (b) the Subsidiary Guarantee dated as of December
19, 1997, among the Guarantors that are parties thereto and the Administrative
Agent (as amended, supplemented and restated from time to time, the "Guarantee
Agreement"), and (c) the Contribution Agreement dated as of December 19, 1997,
among the Principal, the Guarantors that are parties thereto, and the
Administrative Agent (as amended, supplemented and restated from time to time,
the "Contribution Agreement").
B. Capitalized terms used herein and not otherwise defined herein
shall have the meaning assigned to such terms in the Contribution Agreement or
the Credit Agreement, as the case may be.
C. The Principal and the Guarantors have entered into the Contribution
Agreement in order to induce the Lenders to make Loans and other extensions of
credit to the Principal. Pursuant to Section 5.03 of the Credit Agreement,
certain Subsidiaries of the Principal are required to enter into the Guarantee
Agreement as a Guarantor. Section 12 of the Contribution Agreement provides that
additional Subsidiaries of the Principal may become Guarantors under the
Contribution Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of the Principal (the "New
Guarantor") is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Guarantor under the Contribution Agreement in
order to induce the Lenders to make additional Loans and other extensions of
credit to the Principal and as consideration for Loans and other extensions of
credit previously made.
Accordingly, the Administrative Agent and the New Guarantor agree as
follows:
SECTION 13. In accordance with Section 12 of the Contribution
Agreement, the New Guarantor by its signature below becomes a Guarantor under
the Contribution Agreement with the same force and effect as if originally named
therein as a Guarantor, and the New Guarantor hereby agrees to all the terms and
provisions of the Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Contribution Agreement shall
<PAGE>
deemed to include the New Guarantor. The Contribution Agreement is hereby
incorporated herein by reference.
SECTION 14. The New Guarantor represents and warrants to the
Administrative Agent and the Lenders that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 15. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 16. Except as expressly supplemented hereby, the Contribution
Agreement shall remain in full force and effect.
SECTION 17. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 18. In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Contribution Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 19. All communications and notices hereunder shall be in
writing and given as provided in Section 7 of the Contribution Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address of the Principal.
SECTION 20. The New Guarantor agrees to reimburse the Administrative
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, other charges and disbursements of
counsel for the Administrative Agent.
<PAGE>
IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent
have duly executed this Supplement to the Contribution Agreement as of the day
and year first above written.
[NAME OF NEW GUARANTOR]
By:
-----------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT "I"
SUBSIDIARY GUARANTEE
--------------------
THIS SUBSIDIARY GUARANTEE (this "Guarantee") is made as of the 19th
day of December, 1997, by each of the subsidiaries of National Data Corporation,
a Delaware corporation (the "Principal"), listed on Schedule I attached hereto
----------
(each a "Subsidiary Guarantor" and collectively the "Subsidiary Guarantors") in
favor of the Administrative Agent, for the ratable benefit of the Lenders, under
the Credit Agreement referred to below;
W I T N E S S E T H:
-------------------
WHEREAS, the Principal, The First National Bank of Chicago, as
Administrative Agent (the "Administrative Agent"), Wachovia Bank, N.A., as
Documentation Agent, and the banks and lending institutions from time to time
that are lenders thereunder ("Lenders") have entered into a certain Credit
Agreement dated as of December 19, 1997 (as the same may have been or may
hereafter be amended or supplemented from time to time, the "Credit Agreement")
providing, subject to the terms and conditions thereof, for Loans and other
extensions of credit to be made by the Lenders to the Principal;
WHEREAS, it is a requirement of the Credit Agreement that the
Subsidiary Guarantors execute and deliver this Guarantee whereby the Subsidiary
Guarantors shall guarantee the payment when due of all principal, interest and
all other amounts that shall be at any time payable by the Principal under the
Credit Agreement, the Notes, and the other Loan Documents;
WHEREAS, in consideration of the financial and other support that the
Principal has provided, and such financial and other support as the Principal
may in the future provide, to the Subsidiary Guarantors, and in order to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
extend credit to the Principal thereunder, the Subsidiary Guarantors are willing
to guarantee the obligations of the Principal under the Credit Agreement, the
Notes, and the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
------------
(a) Terms defined in the Credit Agreement and not otherwise defined
herein have, as used herein, the respective meanings provided for therein.
<PAGE>
(b) As used herein, "Material Adverse Effect" shall mean, with respect
to any event, act, condition or occurrence of whatever nature (including any
adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a material
adverse effect upon, any of (i) the financial condition, operations, business,
properties or prospects of the Principal and its Consolidated Subsidiaries (as
defined in the Credit Agreement and including, for purposes hereof, GPS and its
Consolidated Subsidiaries) taken as a whole, (ii) the rights and remedies of the
Administrative Agent or the Lenders under the Loan Documents, or the ability of
the Principal or any Subsidiary Guarantor hereunder to perform its obligations
under the Loan Documents to which it is a party, as applicable, or (iii) the
legality, validity or enforceability of any Loan Document.
SECTION 2.01 Representations and Warranties. Each Subsidiary
-------------------------------
Guarantor represents and warrants (which representations and warranties shall be
deemed to have been renewed upon each Borrowing by the Principal under the
Credit Agreement) that:
(a) It (i) is a corporation, limited liability company, or
partnership, as the case may be, duly organized or formed, validly existing and
in good standing under the laws of its jurisdiction of organization or
formation; (ii) has all requisite power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being or as proposed to be conducted; and (iii) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure so
to qualify would have a Material Adverse Effect.
(b) It has all necessary power and authority to execute, deliver and
perform its obligations under this Guarantee; the execution, delivery and
performance of this Guarantee have been duly authorized by all necessary
organizational action; and this Guarantee has been duly and validly executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, or moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general equitable principles.
(c) Neither the execution and delivery by it of this Guarantee nor
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, organizational documents or any
material applicable law or regulation, or any order, writ, injunction or decree
of any court or governmental authority or agency, or any material agreement or
instrument to which it is a party or by which it is bound or to which it is
subject, or constitute a default under any such material agreement or
instrument, or result in the creation or imposition of any Lien upon any of its
revenues or assets pursuant to the terms of any such material agreement or
instrument.
SECTION 2.02 Covenants. Each Subsidiary Guarantor covenants that, so
----------
long as any Lender has any Commitment to the Principal outstanding under the
Credit Agreement or any
-2-
<PAGE>
amount payable by the Principal under the Credit Agreement or any Note shall
remain unpaid, that it will, and, if necessary, will enable the Principal, to
fully comply with those covenants and agreements set forth in Articles V and VI
of the Credit Agreement.
SECTION 3. The Guarantee. Each Subsidiary Guarantor hereby
--------------
unconditionally guarantees, jointly and severally, the full and punctual payment
(whether at stated maturity, upon acceleration or otherwise) of the principal of
and interest on each Note issued by the Principal pursuant to the Credit
Agreement, and the full and punctual payment of all other amounts payable by the
Principal under the Credit Agreement and the other Loan Documents including,
without limitation, all Obligations owing by the Principal (all of the
foregoing, including without limitation, interest accruing or that would have
accrued after the filing of a petition in bankruptcy or other insolvency
proceeding, being referred to collectively as the "Guaranteed Obligations").
Upon failure by the Principal to pay punctually any such amount, each Subsidiary
Guarantor agrees that it shall forthwith on demand pay the amount not so paid at
the place and in the manner specified in the Credit Agreement, each Note and the
relevant Loan Documents, as the case may be. Each Subsidiary Guarantor
acknowledges and agrees that this is a guarantee of payment when due, and not of
collection, and that this Guarantee may be enforced up to the full amount of the
Guaranteed Obligations without proceeding against the Principal, any security
for the Guaranteed Obligations, or against any other party that may have
liability on all or any portion of the Guaranteed Obligations.
SECTION 4. Guarantee Unconditional. The obligations of each
------------------------
Subsidiary Guarantor hereunder shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Principal under the Credit
Agreement, any Note, or any other Loan Document, by operation of law
or otherwise or any obligation of any other guarantor of any of the
Obligations;
(ii) any modification or amendment of or supplement to the Credit
Agreement, any Note, or any other Loan Document;
(iii) any release, nonperfection or invalidity of any direct or
indirect security for any obligation of the Principal under the Credit
Agreement, any Note, any Loan Document, or any obligations of any
other guarantor of any of the Obligations;
(iv) any change in the existence, structure or ownership of the
Principal or any other guarantor of any of the Obligations, or any
insolvency, bankruptcy, reorganization or other similar proceeding
affecting the Principal, or any other guarantor of the Obligations, or
its assets or any resulting release or discharge of any obligation of
the Principal, or any other guarantor of any of the Obligations;
-3-
<PAGE>
(v) the existence of any claim, setoff or other rights which any
Subsidiary Guarantor may have at any time against the Principal, any
other guarantor of any of the Obligations, the Agent, any Lender or
any other Person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
the Principal, or any other guarantor of any of the Obligations, for
any reason related to the Credit Agreement, any other Loan Document,
or any provision of applicable law or regulation purporting to
prohibit the payment by the Principal, or any other guarantor of the
Obligations, of the principal of or interest on any Note or any other
amount payable by the Principal under the Credit Agreement, the Notes,
or any other Loan Document; or
(vii) any other act or omission to act or delay of any kind by
the Principal, any other guarantor of the Obligations, the
Administrative Agent, any Lender or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of any Subsidiary
Guarantor's obligations hereunder.
SECTION 5. Discharge Only Upon Payment In Full; Reinstatement In
-----------------------------------------------------
Certain Circumstances. Each Subsidiary Guarantor's obligations hereunder shall
- ----------------------
remain in full force and effect until all Guaranteed Obligations shall have been
paid in full and the Commitments under the Credit Agreement in favor of the
Principal shall have terminated or expired. If at any time any payment of the
principal of or interest on any Note or any other amount payable by the
Principal under the Credit Agreement or any other Loan Document is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Principal or otherwise, each Subsidiary Guarantor's
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.
SECTION 6. Waiver of Notice. Each Subsidiary Guarantor irrevocably
-----------------
waives acceptance hereof, presentment, demand, protest and, to the fullest
extent permitted by law, any notice not provided for herein, as well as any
requirement that at any time any action be taken by any Person against the
Principal, any other guarantor of the Obligations, or any other Person.
SECTION 7. Judgment Currency.
------------------
-4-
<PAGE>
(a) Each Subsidiary Guarantor shall pay all amounts due hereunder in
U.S. dollars, and such obligations hereunder to make payments in U.S. dollars
shall not be discharged or satisfied by any tender or recovery pursuant to any
judgment expressed in or converted into any currency other than U.S. dollars,
except to the extent that such tender or recovery results in the effective
receipt by the Lenders and the Administrative Agent of the full amount of U.S.
dollars expressed to be payable under this Guarantee or the Credit Agreement.
If for the purpose of obtaining or enforcing judgment against a Subsidiary
Guarantor in any court or in any jurisdiction, it becomes necessary to convert
into or from any currency other than U.S. dollars (such other currency being
hereinafter referred to as the "Judgment Currency") an amount due in U.S.
dollars, the conversion shall be made, and the currency equivalent determined,
in each case, as on the day immediately preceding the day on which the judgment
is given (such Business Day being hereinafter referred to as the "Judgment
Currency Conversion Date").
(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual payment of the
amounts due, the applicable Subsidiary Guarantor covenants and agrees to pay, or
cause to be paid, such additional amounts, if any (but in any event not a lesser
amount), as may be necessary to insure that the amount paid in the Judgment
Currency, when converted at the rate of exchange prevailing on the date of
payment, will produce the amount of U.S. dollars which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or judicial
award at the rate of exchange prevailing on the Judgment Currency Conversion
Date.
(c) For purposes of determining the currency equivalent for this
Section, such amounts shall include any premium and costs payable in connection
with the purchase of U.S. dollars.
(d) The currency equivalent of U.S. dollars shall mean, with respect
to any monetary amount in a currency other than U.S. dollars, at any time for
the determination thereof, the amount of U.S. dollars obtained by converting
such foreign currency involved in such computation into U.S. dollars at the spot
rate for the purchase of U.S. dollars with the applicable foreign currency as
quoted by the Administrative Agent at approximately 11:00 a.m. (Chicago,
Illinois time) on the date of determination thereof specified herein or, if the
date of determination thereof is not otherwise specified herein, on the date two
(2) Business Days prior to such determination.
SECTION 8. Stay of Acceleration. If acceleration of the time for
---------------------
payment of any amount payable by the Principal under the Credit Agreement, any
Note or any other Loan Document is stayed upon the insolvency, bankruptcy or
reorganization of the Principal, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note or any other Loan
Document shall nonetheless be payable by each Subsidiary Guarantor hereunder
forthwith on demand by the Administrative Agent made at the request of the
Required Lenders.
-5-
<PAGE>
SECTION 9. Right of Set Off. If an Event of Default shall have
-----------------
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of any Subsidiary Guarantor against any or all the
obligations of such Subsidiary Guarantor now or hereafter existing under this
Guarantee, and the other Loan Documents held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Guarantee or
any other Loan Document and although such obligations may be unmatured. The
rights of each Lender under this Section 9 are in addition to other rights and
remedies (including other rights of set off) which such Lender may have.
SECTION 10. Notices. All notices, requests and other communications
--------
to any party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at the following
address or telecopier number:
c/o National Data Corporation
4 Corporate Square
Atlanta, Georgia 30329-2010
Attention: Office of Corporate Secretary
Telecopier No.: 404/728-2990
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the Administrative Agent in accordance with the
provisions of Section 9.01 of the Credit Agreement. Except as otherwise
provided in this Guarantee, all such communications shall be deemed to have been
duly given when transmitted by telecopier, or personally delivered or, in the
case of a mailed notice sent by certified mail return-receipt requested, on the
date set forth on the receipt (provided, that any refusal to accept any such
notice shall be deemed to be notice thereof as of the time of any such refusal),
in each case given or addressed as aforesaid.
SECTION 11. No Waivers. No failure or delay by the Administrative
-----------
Agent or any Lenders in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in this Guarantee,
the Credit Agreement, the Notes, and the other Loan Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 12. Successors and Assigns. This Guarantee is for the
-----------------------
benefit of the Administrative Agent and the Lenders and their respective
successors and permitted assigns and in the event of an assignment of any
amounts payable under the Credit Agreement, the Notes, or the other Loan
Documents, the rights hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Guarantee shall be
binding upon each Subsidiary Guarantor and its successors and permitted assigns.
-6-
<PAGE>
SECTION 13. Changes in Writing. Neither this Guarantee nor any
-------------------
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by each Subsidiary Guarantor and the Administrative
Agent with the consent of the Required Lenders or, if required pursuant to
Section 9.06(a) of the Credit Agreement, all of the Lenders.
SECTION 14. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
---------------------------------------------------------
TRIAL. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
- ------
LAW OF THE STATE OF GEORGIA. EACH SUBSIDIARY GUARANTOR HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA
AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
GUARANTEE (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN DOCUMENTS) OR
THE TRANSACTIONS CONTEMPLATED HEREBY. EACH SUBSIDIARY GUARANTOR IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH SUBSIDIARY GUARANTOR, AND THE
ADMINISTRATIVE AGENT AND THE LENDERS ACCEPTING THIS GUARANTEE, HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTEE OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 15. Taxes. etc. All payments required to be made by each
-----------
Subsidiary Guarantor hereunder shall be made without set off or counterclaim and
free and clear of and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or other charges of whatsoever
nature imposed by any government or any political or taxing authority thereof;
provided, however, that if a Subsidiary Guarantor is required by law to make
- -------- -------
such deduction or withholding, such Subsidiary Guarantor shall forthwith pay to
the Administrative Agent or any Lender, as applicable, such additional amount as
results in the net amount received by the Administrative Agent or any Lender, as
applicable, equaling the full amount which would have been received by the
Administrative Agent or any Lender, as applicable, had no such deduction or
withholding been made.
SECTION 16. Additional Subsidiary Guarantors. Upon execution and
---------------------------------
delivery by any subsidiary of the Principal of an instrument in the form of
Annex 1 attached hereto, such subsidiary shall become a Subsidiary Guarantor
- -------
hereunder with the same force and effect as if originally named a Subsidiary
Guarantor herein (each an "Additional Subsidiary Guarantor"). The execution and
delivery of any such instrument shall not require the consent of any other
Subsidiary Guarantor hereunder. The rights and obligations of each Subsidiary
Guarantor hereunder shall remain in full
-7-
<PAGE>
force and effect notwithstanding the addition of any Additional Subsidiary
Guarantor as a party to this Guarantee.
SECTION 17. Other Guarantees. This Guarantee is in addition to, and
-----------------
does not supersede or otherwise replace or affect, any other Guarantee that may
previously have been executed, or may in the future be executed, in respect of
any of the Guaranteed Obligations.
SECTION 18. Counterparts. This Guarantee may be executed in
-------------
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. Delivery of an executed
signature page to this Guarantee by facsimile transmission shall be an effective
as delivery of a manually executed counterpart of this Guarantee.
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this
Guarantee to be duly executed by its authorized officer as of the day and year
first above written.
EACH OF THE SUBSIDIARIES OF NDC LISTED
ON SCHEDULE I ATTACHED HERETO:
----------
By:
-----------------------------------
Name:
------------------------------
Title
------------------------------
-8-
<PAGE>
SCHEDULE I
SUBSIDIARY GUARANTORS
---------------------
NATIONAL DATA PAYMENT SYSTEMS, INC.
A New York Corporation
NDC/YES CHECK, INC.
A Georgia Corporation
C.I.S. TECHNOLOGIES, INC.
A Delaware Corporation
HEALTH COMMUNICATION SERVICES, INC.
A Virginia Corporation
SOURCE INFORMATICS INC.
A Delaware Corporation
-9-
<PAGE>
ANNEX 1
SUPPLEMENT TO SUBSIDIARY GUARANTEE
----------------------------------
THIS SUPPLEMENT TO SUBSIDIARY GUARANTEE (this "Supplement") dated as of
_______, made by ____________________________, a _________________ (the
"Additional Subsidiary Guarantor"), in favor of the Administrative Agent, for
the ratable benefit of the Lenders, under the Credit Agreement referred to
below.
A. Reference is made to the Credit Agreement dated as of December 19,
1997 (as the same may have been or may hereafter be amended,
supplemented, and restated from time to time, the "Credit Agreement"),
among National Data Corporation, a Delaware corporation (the
"Principal"), The First National Bank of Chicago, as Administrative
Agent (the "Administrative Agent"), Wachovia Bank, N.A., as
Documentation Agent, and the banks and lending institutions from time
to time that are lenders thereunder (the "Lenders").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement and
the NDC Guarantee.
C. The Subsidiary Guarantors have entered into the Subsidiary Guarantee
in order to induce the Lenders to make Loans and other extensions of
credit to the Principal under the Credit Agreement. Pursuant to
Section 5.03 of the Credit Agreement, certain subsidiaries of the
Borrower are required to enter into the Subsidiary Guarantee and
become a Subsidiary Guarantor thereunder. The undersigned (the
"Additional Subsidiary Guarantor") is executing this Supplement in
accordance with the requirements of the Subsidiary Guarantee to become
a Subsidiary Guarantor under the Subsidiary Guarantee in order to
induce the Lenders to make Loans and other extensions of credit to the
Principal and as consideration for Loans and other extensions of
credit previously made.
Accordingly, the Administrative Agent and the Additional Subsidiary
Guarantor agree as follows:
SECTION 1.
(a) By its signature below, the Additional Subsidiary Guarantor
becomes a Subsidiary Guarantor under the Subsidiary Guarantee with the same
force and effect as if originally named therein as a Subsidiary Guarantor
therein, and the Additional Subsidiary Guarantor hereby (a) agrees to all
the terms and provisions of the Subsidiary Guarantee applicable to it as a
Subsidiary Guarantor thereunder, and (b) represents and warrants that the
representations and warranties made by it as a Subsidiary Guarantor
thereunder are true and correct on and as of the date hereof. Each
reference to a "Subsidiary Guarantor" in the Subsidiary Guarantee shall be
deemed to include the Additional Subsidiary Guarantor. The Subsidiary
Guarantee is hereby incorporated herein by reference.
<PAGE>
(b) Without limiting the foregoing, the Additional Subsidiary
Guarantor hereby jointly and severally (with respect to the obligations of
the Subsidiary Guarantors under the Subsidiary Guarantee) irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all principal of, and interest
on, each Note issued by the Principal pursuant to the Credit Agreement, and
the full and punctual payment of all other Obligations payable by the
Principal under the Credit Agreement and the other Loan Documents
(including, without limitation, interest accruing or that would have
accrued after the filing of a petition in bankruptcy or other insolvency
proceeding). Upon failure by the Principal to pay punctually any such
amount, the Additional Subsidiary Guarantor agrees that it shall forthwith
on demand pay the amount not so paid at the place and in the manner
specified in the Credit Agreement, the Notes or the relevant Loan
Documents, as the case may be. The Additional Subsidiary Guarantor
acknowledges and agrees that this is a guarantee of payment when due, and
not of collection, and that the obligations of the Additional Subsidiary
Guarantor hereunder may be enforced up to the full amount hereof without
proceeding against the Principal, any security held by the Administrative
Agent or the Lenders, or against any other Subsidiary Guarantor, the
Principal, or any other party that may have liability on all or any portion
of the obligations guaranteed hereby.
SECTION 2. The Additional Subsidiary Guarantor represents and warrants to
the Administrative Agent and the Lenders that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single agreement. This Supplement shall become effective when the
Administrative Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the Additional Subsidiary Guarantor
and the Administrative Agent. Delivery of an executed signature page to this
Supplement by facsimile transmission shall be effective as delivery of a
manually counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Subsidiary
Guarantee shall remain in full force and effect.
SECTION 5. This Supplement shall be governed by, and construed in
accordance with, the laws of the State of Georgia, without giving effect to the
principles of conflict of laws thereof.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Subsidiary Guarantee shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction.) The parties hereto
shall endeavor in good faith negotiations to replace the invalid,
-2-
<PAGE>
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in the Subsidiary Guarantee. All communications and
notices hereunder to the Additional Subsidiary Guarantor shall be given to it at
the address of the Borrower.
IN WITNESS WHEREOF, the Additional Subsidiary Guarantor and the
Administrative Agent have duly executed this Supplement to the Subsidiary
Guarantee as of the day and year first above written.
[NAME OF ADDITIONAL SUBSIDIARY GUARANTOR]
By:
------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
AS ADMINISTRATIVE AGENT
By:
------------------------------
Name:
Title:
-3-
<PAGE>
EXHIBIT 10.8
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") dated as
of April 10, 1998, among NATIONAL DATA CORPORATION, as Borrower, the banks and
other financial institutions listed on the signature pages hereof, as Lenders,
THE FIRST NATIONAL BANK OF CHICAGO, as Administrative Agent for such Lenders,
and WACHOVIA BANK, N.A., as Documentation Agent for such Lenders.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower, the Lenders, the Administrative Agent, and the
Documentation Agent are parties to a certain Credit Agreement dated as of
December 19, 1997 (the "Credit Agreement");
WHEREAS, the parties hereto desire to amend the Credit Agreement in certain
respects as more particularly set forth in this First Amendment;
NOW, THEREFORE, in consideration of the premises and for Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. Except as otherwise expressly defined herein, all
-------------
capitalized terms used in this First Amendment that are used in the Credit
Agreement shall have the same meanings herein as are specified for such
capitalized terms in the Credit Agreement.
2. AMENDMENTS TO SECTION 1.01 ("DEFINITIONS"). Each of the defined terms "Net
------------------------------------------
Proceeds of Capital Stock" and "Special Charges" and the definitions
accompanying such terms as set forth in Section 1.01 of the Credit Agreement are
hereby deleted in their entirety and the following defined terms and
accompanying definitions are hereby substituted in lieu thereof:
"Net Proceeds of Capital Stock" means any proceeds received or deemed
-----------------------------
received by the Borrower or its Consolidated Subsidiary in respect of the
issuance or sale of Capital Stock or conversion of any Debt to Capital
Stock, after deducting therefrom all reasonable and customary costs and
expenses incurred by the Borrower or such Consolidated Subsidiary directly
in connection with such issuance or sale of such Capital Stock or
conversion of such Debt. In the case of an Acquisition where some or all
of the consideration for the Acquisition is Capital Stock, the amount of
proceeds received or deemed received in respect of such Capital Stock shall
be equal to the shareholders' (or in the case of a limited liability
company or partnership, the members' or partners') equity of the Person
being so acquired immediately following the Acquisition, as determined in
accordance with GAAP, less all non-cash, non-recurring charges required or
appropriate under GAAP to be taken by the Borrower
<PAGE>
and its Consolidated Subsidiaries for any period after February 28, 1998 as
a result of the Acquisition, provided that in no instance shall "Net
--------
Proceeds of Capital Stock" as so calculated be less than zero.
"Special Charges" means any restructuring charges, asset impairment
---------------
charges, in-process research and development charges, and transaction
expense charges required or appropriate under GAAP to be taken by the
Borrower and its Subsidiaries, in each case net of taxes, in an aggregate
amount not to exceed $111,200,000 as a result of (a) the acquisition of (i)
Source Informatics Inc. and its subsidiaries and (ii) Physician Support
Systems, Inc. and its subsidiaries, and (b) other such charges required or
appropriate under GAAP to be taken by Borrower and its Consolidated
Subsidiaries in the Fiscal Quarter ending February 28, 1998.
3. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the
------------------------------
Lenders as follows:
(a) All representations and warranties set forth in the Credit Agreement
and the other Loan Documents are true and correct on and as of the date of this
First Amendment except for changes expressly permitted therein and except to the
extent that such representations and warranties relate solely to an earlier
date; and
(b) After giving effect to this First Amendment, no Default or Event of
Default has occurred and is continuing.
4. EFFECT OF FIRST AMENDMENT. On and after the date this First Amendment
-------------------------
becomes effective as provided herein (i) each and every reference in the Credit
Agreement to "hereof," "hereunder," "herein," "hereby" and each other similar
reference, and each and every reference to "this Agreement" and each other
similar reference, shall refer to the Credit Agreement as amended hereby, and as
the same may be further amended, restated or supplemented from time to time, and
(ii) each and every reference in the Loan Documents to the Credit Agreement
shall be deemed to refer to and mean the Credit Agreement as amended by this
First Amendment, and as the same may be further amended, supplemented or
restated from time to time. The Borrower confirms and agrees that (i) except as
expressly amended herein, the Credit Agreement remains in full force and effect
in accordance with its terms, and (ii) all other Loan Documents remain in full
force and effect in accordance with their respective terms.
5. RATIFICATION. The Borrower hereby restates, ratifies and reaffirms each and
------------
every term, covenant and condition set forth in the Credit Agreement and the
other Loan Documents effective as of the date hereof. To induce the Lenders to
enter into this First Amendment and to continue to make advances pursuant to the
Credit Agreement, the Borrower acknowledges and agrees that, as of the date
hereof and after giving effect to the terms hereof, there exists no right of
offset, defense, counterclaim, claim or objection in favor of the Borrower
arising out of or with respect to any of the obligations arising under the
Credit Agreement or the other Loan Documents.
-2-
<PAGE>
6. COUNTERPARTS. This First Amendment may be executed in any number of
------------
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which counterparts, taken together, shall constitute but one and the same
instrument.
7. CONDITION TO EFFECTIVENESS OF FIRST AMENDMENT. This First Amendment shall
---------------------------------------------
not become effective or have any force or effect until counterparts of this
First Amendment have been executed on behalf of the Borrower and those Lenders
constituting the Required Lenders under the terms of the Credit Agreement, and
all such executed counterparts shall have been delivered to the Administrative
Agent.
8. MISCELLANEOUS. This First Amendment shall be construed in accordance with
-------------
and governed by the laws of the State of Georgia, without regard to the effect
of conflicts of laws. This First Amendment shall be binding on, and shall inure
to the benefit of and be enforceable by, the respective successors and permitted
assigns of the parties hereto.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed by their duly authorized officers or representatives as of the date
first above written.
NATIONAL DATA CORPORATION
By: /s/ Robert L. Walker
--------------------------------
Name: Robert L. Walker
Title: Chief Financial Officer
THE FIRST NATIONAL BANK
OF CHICAGO, AS ADMINISTRATIVE
AGENT AND LENDER
By: /s/ David T. McNeela
--------------------------------
Name: David T. McNeela
Title: Authorized Agent
WACHOVIA BANK, N.A., AS
DOCUMENTATION AGENT AND LENDER
By: /s/ John C. Cantry
---------------------------------
Name: John C. Cantry
Title: Banking Officer
-4-
<PAGE>
SUNTRUST BANK, ATLANTA, AS
LENDER
By: /s/ Brian K. Peters
--------------------------------
Name: Brian K. Peters
Title: Vice President
FIRST AMERICAN NATIONAL BANK,
AS LENDER
By: /s/ Suzanne T. Schriver
---------------------------------
Name: Suzanne T. Schriver
Title: Executive Vice President
-5-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The Registrant had the following subsidiaries at May 31, 1998, each of
which was wholly-owned by the Registrant, except as noted below:
Jurisdiction of
Name Incorporation
- --------------------------------------------------------------------------------
National Data Payment Systems, Inc. New York
Modular Data, Inc. Delaware
NDC Federal Systems, Inc. Delaware
NDC International, Ltd. United Kingdom
National Data Corporation of Canada, Inc. Canada
NDC Yes Check, Inc. Georgia
NDC Check Services, Inc. Illinois
Zadall Systems Group, Inc. Texas
NDPS Comerica Alliance, LLC (Note 1) Delaware
Global Payment Systems LLC (Note 2) Georgia
Global Payment Holding Company Delaware
GPS Holding Limited Partnership Georgia
Global Payment Systems of Canada, Ltd. Canada
C.I.S. Technologies, Inc. Delaware
C.I.S., Inc. Oklahoma
AMSC, Inc. Florida
AMSC Midwest, Inc. Florida
ClinLab, Inc. (Note 3) Florida
Health Communication Services, Inc. Virginia
Health Communication Services (Bermuda) Ltd. Bermuda
Merchant Services U.S.A., Inc. North Carolina
MKA Software (Holdings) Ltd. United Kingdom
Hadley Hutt Computing Limited United Kingdom
Chemtec Systems Limited United Kingdom
NDC Holdings (UK) Ltd. Georgia
Source Informatics Inc. Delaware
Source Informatics Holdings Inc. Delaware
International Health Systems Ltd. Delaware
NDC Health Information Services (Arizona) Inc. Delaware
SI Software Ltd. Delaware
SI PMSI Ltd. Delaware
Walsh International Domestic Finance, Ltd. Delaware
PMSI Database Holdings Inc. Delaware
Physician Support Systems, Inc. Delaware
PSS ALM, Inc. Delaware
Data Processing Systems, Inc. Delaware
EE&C Financial Services, Inc. New York
PSS EE&C Health Services, Inc. Delaware
A-47
<PAGE>
Jurisdiction of
Name Incorporation
- --------------------------------------------------------------------------------
Medical Management Support Delaware
North Coast Health Care Management, Inc. Ohio
North Coast Account Systems, Inc. Delaware
PSS PBS Northwest, Inc. Delaware
PSS Pambi, Inc. Delaware
Anesthesia Billing Consultants, Inc. Michigan
Synergistic Systems, Inc. California
Spring Anesthesia Group, Inc. California
Independent Anesthesia IPA of California, Inc. California
Independent Anesthesia IPA of Arizona, Inc. Arizona
Revenue Production Management, Inc. Illinois
PSS C-Care, Inc. Delaware
C-Care, Inc. New Jersey
H.O.P.E. Enterprises Group, Inc. New Jersey
Professional Medical Recovery Service, Inc. New Jersey
Medical Intercept Systems, LLC Texas
Med-Data Interface Systems, LLC Texas
CheckRite Recovery Services, Inc. Georgia
Note 1. NDPS Comerica Alliance, LLC is 51% owned by the Registrant.
Note 2. Global Payment Systems LLC is 92.5% owned by the Registrant.
Note 3. ClinLab, Inc. is 80% owned by the Registrant.
A-48
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Registrant's previously
filed Registration Statements, File Numbers 2-81717, 2-86961, 2-92193, 33-25635,
33-43005, 33-44858, 33-58622, 33-58624, 33-59717, 33-55057, 333-05449,
333-05451, 333-05427, 333-40153, 333-41553, 333-44803, and 333-44823.
/s/ Arthur Andersen LLP
- -----------------------
Atlanta, Georgia
August 28, 1998
A-49
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 3,241
<SECURITIES> 0
<RECEIVABLES> 154,058
<ALLOWANCES> 7,394
<INVENTORY> 5,253
<CURRENT-ASSETS> 172,126
<PP&E> 172,637
<DEPRECIATION> 98,403
<TOTAL-ASSETS> 731,215
<CURRENT-LIABILITIES> 186,097
<BONDS> 155,477
0
0
<COMMON> 4,224
<OTHER-SE> 343,711
<TOTAL-LIABILITY-AND-EQUITY> 731,215
<SALES> 0
<TOTAL-REVENUES> 649,044
<CGS> 0
<TOTAL-COSTS> 325,397
<OTHER-EXPENSES> 349,543<F1>
<LOSS-PROVISION> 4,353
<INTEREST-EXPENSE> 12,870
<INCOME-PRETAX> (39,707)
<INCOME-TAX> 21,619
<INCOME-CONTINUING> (61,326)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,326)
<EPS-PRIMARY> (1.90)
<EPS-DILUTED> (1.90)
<FN>
<F1>The Company incurred non-recurring charges of $120.2 million ($111.2 million
or $3.38 per share net-of-tax).
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 19,595
<SECURITIES> 0
<RECEIVABLES> 113,936
<ALLOWANCES> 4,903
<INVENTORY> 2,260
<CURRENT-ASSETS> 140,816
<PP&E> 151,343
<DEPRECIATION> 92,383
<TOTAL-ASSETS> 626,322
<CURRENT-LIABILITIES> 116,925
<BONDS> 155,962
0
0
<COMMON> 3,850
<OTHER-SE> 319,399
<TOTAL-LIABILITY-AND-EQUITY> 626,322
<SALES> 0
<TOTAL-REVENUES> 525,167
<CGS> 0
<TOTAL-COSTS> 264,253
<OTHER-EXPENSES> 200,062<F1>
<LOSS-PROVISION> 1,540
<INTEREST-EXPENSE> 8,614
<INCOME-PRETAX> 53,230
<INCOME-TAX> 23,832
<INCOME-CONTINUING> 29,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,398
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.91
<FN>
<F1>INCLUDES $9.5 MILLION OF NON-RECURRING CHARGES ($10.4 MILLION OR $0.32 PER
SHARE AFTER-TAX)
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 23,888
<SECURITIES> 0
<RECEIVABLES> 94,674
<ALLOWANCES> 3,629
<INVENTORY> 1,869
<CURRENT-ASSETS> 115,833
<PP&E> 138,523
<DEPRECIATION> 76,583
<TOTAL-ASSETS> 459,944
<CURRENT-LIABILITIES> 122,095
<BONDS> 23,136
0
0
<COMMON> 3,712
<OTHER-SE> 271,534
<TOTAL-LIABILITY-AND-EQUITY> 459,944
<SALES> 0
<TOTAL-REVENUES> 391,088
<CGS> 0
<TOTAL-COSTS> 205,275
<OTHER-EXPENSES> 200,643<F1>
<LOSS-PROVISION> 5,694
<INTEREST-EXPENSE> 5,326
<INCOME-PRETAX> (15,837)
<INCOME-TAX> (3,992)
<INCOME-CONTINUING> (11,845)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,845)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
<FN>
<F1>INCLUDES $47.7 MILLION OF NON-RECURRING CHARGES ($32.9 MILLION OR $1.07 PER
SHARE AFTER-TAX)
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. National Data Corporation ("NDC" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
Provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All forward-
looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of NDC. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, NDC undertakes no obligation to update
or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
NDC provides the following risk factor disclosure in connection with its
continuing effort to qualify its written and oral forward-looking statements for
the safe harbor protection of the Reform Act and any other similar safe harbor
provisions. Important factors currently known to management that could cause
actual results to differ materially from those in forward-looking statements
include the disclosures contained in the Annual Report on Form 10-K to which
this statement is appended as an exhibit and also include the following:
COMPETITION AND CONSOLIDATION
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. Some 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.
In addition, there has been and continues to be significant consolidation
in the banking and health care provider industries. The Company markets its
credit, charge and debit card transaction services through several marketing
channels, including banks. As a result of consolidation, banks that market the
Company's financial services may be acquired by banks that compete with the
Company or by banks that have a relationship with one or more of the Company's
<PAGE>
competitors, thereby potentially depriving the Company of a distribution
channel. The consolidation of health care providers reduces the number of
potential customers for the Company's health care related services and the
increased bargaining power of these larger consolidated organizations could lead
to reductions in the amounts paid for such services. The overall impact of such
consolidation in the banking and health care industries is difficult to predict
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
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.
HEALTH 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 laboratory billing
review projects in certain states and are expected to extend such projects to
additional states, including states in which NDC operates. These projects
increase the likelihood of governmental investigations of hospitals,
laboratories and other institutions for which NDC perform services. Although
NDC currently monitors 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, including NDC's practices.
ELECTRONIC COMMERCE BUSINESS
NDC's direct 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, which management
believes are adequate, for estimated losses on transactions processed. There can
<PAGE>
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.
ACQUISITION RISKS
NDC completed six acquisitions in fiscal 1998 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 or expand into new markets. As a result of the
acquisitions of each of Source Informatics Inc. ("Source"), PMSI Database
Holdings Inc. ("PMSI Database") and Physician Support Systems, Inc. ("PHSS"),
NDC is currently devoting significant management and other resources toward the
assimilation of these businesses with NDC, particularly PHSS. There can be no
assurance that NDC will be able to successfully integrate the operations of
acquired businesses into NDC's operations. In addition, 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 revenue growth, 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. 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 serve 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 the
<PAGE>
stockholders of NDC, 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 (the "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, PMSI Database and PHSS, 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 current or new products and services of Source and PHSS will adequately
meet the quickly changing demands of their customers. In addition, in order to
meet its customers' demands, Source and PHSS are continually involved in a
number of development projects, including Source's 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 its newly acquired
businesses will depend in large part 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.
<PAGE>
YEAR 2000 COMPLIANCE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 issue is
the result of computer programs being written using two digits rather than four
to define the applicable year. Any of the Company's computer programs that have
time/date-sensitive software and hardware may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a major system
failure or miscalculation. The Company presently believes that, with
modification to existing software and hardware and the purchase of new software,
the Year 2000 issue will not pose significant operations problems for the
Company's systems as so modified and converted.
The Year 2000 issue creates risk for the Company from unforeseen problems
in its own computer systems and from third parties on which the Company relies.
Accordingly, the Company is requesting assurances from all software vendors from
which it has purchased or from which it may purchase software that the software
sold to the Company will correctly process all date information at all times.
In addition, the Company is querying its customers and suppliers as to their
progress in identifying and addressing problems that their computer systems will
face in correctly processing date information as the year 2000 approaches and is
reached. However, there are no assurances that the Company will identify all
date-handling problems in its business systems or that the Company will be able
to successfully remedy Year 2000 compliance issues that are discovered. To the
extent that the Company is unable to resolve its Year 2000 issues prior to
January 1, 2000, operating results could be adversely affected. In addition,
the Company could be adversely affected if other entities (e.g., vendors or
customers) not affiliated with the Company do not appropriately address their
own year 2000 compliance issues in advance of their occurrence.
