EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NATIONAL DATA CORPORATION,
DUNKIRK, INC.,
AND
SOURCE INFORMATICS INC.
DATED AS OF AUGUST 20, 1997
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 20, 1997, by and among NATIONAL DATA CORPORATION ("NDC"), a
Delaware corporation; DUNKIRK, INC. ("Sub"), a Delaware corporation; and SOURCE
INFORMATICS INC. ("Source"), a Delaware corporation.
PREAMBLE
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The respective Boards of Directors of Source, Sub and NDC are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective stockholders. This Agreement
provides for the acquisition of Source by NDC pursuant to the merger of Sub with
and into Source. At the effective time of such merger, the outstanding shares of
the capital stock of Source shall be converted (except as provided herein) into
the right to receive cash or shares of the common stock of NDC. As a result,
common stockholders of Source shall become stockholders of NDC and Source shall
continue to conduct the business and operations of Source as a wholly-owned
subsidiary of NDC. The transactions described in this Agreement are subject to
the approvals of the stockholders of Source, expiration of the required waiting
period under the HSR Act, the consummation of the Stock Purchase Agreement dated
as of even date herewith by and among PMSI Database Holdings, Inc. ("Newco"),
Pharmaceutical Marketing Services Inc. ("PMSI") and NDC (the "PMSI Agreement,"
together with the related agreements in connection therewith) and the
satisfaction of certain other conditions described in this Agreement. It is the
intention of the parties to this Agreement that the Merger for federal income
tax purposes shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 12.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
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1.1 MERGER. Subject to the terms and conditions of this Agreement, at
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the Effective Time, Sub shall be merged with and into Source in accordance with
the provisions of Section 251 of the DGCL and with the effect provided in
Sections 259 and 261 of the DGCL (the "Merger"). Source shall be the Surviving
Corporation resulting from the Merger and shall become a wholly-owned Subsidiary
of NDC and shall continue to be governed by the Laws of the State of Delaware.
The Merger shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the respective Boards of Directors of Source,
Sub and NDC and by NDC, as the sole stockholder of Sub.
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1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
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contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree (the "Closing
Date"). The Closing shall be held at such location as may be mutually agreed
upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by
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this Agreement shall become effective on the date and at the time the
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Delaware (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the authorized officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on the first business
day following the last to occur of (i) the effective date (including expiration
of any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, (ii) the
date on which the stockholders of Source approve this Agreement to the extent
such approval is required by applicable Law and (iii) the date on which the
stockholders of PMSI approve the PMSI Agreement.
ARTICLE 2
TERMS OF MERGER
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2.1 CHARTER. The Certificate of Incorporation of Source in effect
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immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of Source in effect immediately prior to the
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Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Sub in office
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immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Source in office immediately prior
to the Effective Time, together with such additional persons as may thereafter
be elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
2.4 EFFECT OF STOCKHOLDER APPROVAL.
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(a) The adoption of this Agreement by the Stockholders shall
constitute ratification of this Agreement, the appointment of the Stockholder
Representative in accordance with Section 10.10 and authorization for the
Stockholder Representative to execute and deliver the Escrow Agreement on behalf
of the Stockholders. Upon such adoption, this Agreement shall
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constitute the legal, valid and binding obligations of each Stockholder. In
addition, upon such adoption and upon execution and delivery of the Escrow
Agreement by the Stockholder Representative, the Escrow Agreement shall
constitute the legal, valid and binding obligations of each Stockholder.
(b) The adoption of this Agreement by the holders of Source Preferred
Stock shall constitute ratification of this Agreement. Upon such adoption, this
Agreement shall constitute the legal, valid and binding obligation of each
holder of Source Preferred Stock.
ARTICLE 3
MANNER OF CONVERTING SHARES
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3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
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the Effective Time, by virtue of the Merger and without any action on the part
of NDC, Source, Sub or the stockholders of any of the foregoing:
(a) Each share of capital stock of NDC issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Sub Common Stock issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall be
converted into one share of Source Common Stock.
(c) Each share of Source Common Stock (excluding shares held by any
Source Entity or any NDC Entity, and excluding shares held by stockholders
who perfect their statutory dissenters' rights as provided in Section 3.7)
issued and outstanding immediately prior to the Effective Time shall cease to
be outstanding and shall be converted into and exchanged for the right to
receive (i) the Common Cash Amount, if any, and that fraction of a share of
NDC Common Stock equal to 1,099,716 shares (the "Payment Shares") divided by
the total number of shares of Source Common Stock outstanding at the Closing
Date (the "Common Base Exchange Ratio"); provided, however, that the Payment
Shares shall be first reduced by the Option Shares (as defined in Section
3.1(c)(4) below), and (ii) that fraction of a share of NDC Common Stock
equal to 455,840 shares (the "Stock Escrow") divided by the total number of
shares of Source Common Stock outstanding at the Closing Date, subject to the
provisions of Section 3.2, Article 10 and the Escrow Agreement (the "Common
Escrow Exchange Ratio");
(1) At the Closing Date, the "Common Cash Amount" shall be calculated
by dividing $ 31,750,000, the aggregate cash consideration payable by NDC
hereunder (the "Aggregate Cash Amount"), less the Preferred Stock Merger
Consideration (as defined in Section 3.1(d)) and the Transaction Expenses
(as defined in Section 3.1(c)(2) below), by the total number of shares of
Source Common Stock outstanding at the Closing Date.
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(2) At the Closing Date, Source shall prepare and deliver to NDC a
schedule substantially in the form of Schedule 1 attached hereto (the
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"Expense Schedule"), indicating the expenses incurred but unpaid as of
the Closing Date which are of the type disclosed on Schedule 1 and which
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are directly associated with the transaction contemplated by this
Agreement, including, without limitation, all expenses incurred in
connection with Source's termination of certain employment agreements and
an executive pension plan pursuant to Section 7.1(d) hereof (the
"Transaction Expenses") ; provided, however, if the sum of the Preferred
Stock Merger Consideration and the Transaction Expenses exceed the
Aggregate Cash Amount ("Excess Expense"), then the Payment Shares shall
be reduced by that number of shares of NDC Common Stock equal to the
quotient of (i) the Excess Expense divided by (ii) the Average Closing
Price as of the Closing Date.
(3) If, at the close of trading on the tenth trading day immediately
preceding the Closing Date (the "Determination Date"), the Average
Closing Price shall be greater than $50.50 (the "Upper Threshold Price"),
the "Common Exchange Ratios" (defined to include the Common Base Exchange
Ratio and the Common Escrow Exchange Ratio) shall each be adjusted to
equal that fraction of a share of NDC Common Stock (rounded to the
nearest ten thousandth of a share) obtained by dividing the product of
the Common Base Exchange Ratio or the Common Escrow Exchange Ratio, as
the case may be, and the Upper Threshold Price by the Average Closing
Price at the Determination Date; provided further, that, in the event
that the Average Closing Price on the Determination Date shall be less
than $37.25 (the "Lower Threshold Price" and, together with the Upper
Threshold Price, the "Threshold Prices"), the Common Exchange Ratios may,
at the sole discretion of NDC, and in accordance with the provisions of
Section 11.1(h), each be adjusted to equal that fraction of a share of
NDC Common Stock (rounded to the nearest ten thousandth of a share)
obtained by dividing the product of the Common Base Exchange Ratio or the
Common Escrow Exchange Ratio, as the case may be, and the Lower Threshold
Price by the Average Closing Price at the Determination Date.
(4) At the Closing Date, Source shall have secured the cancellation
of all outstanding options and warrants to purchase shares of Source
Common Stock and shall provide to NDC a schedule of the number of shares
of NDC Common Stock (the "Option Shares") payable to the holders of such
options and warrants in consideration of such cancellation.
(5) Pursuant to the NDC Rights Agreement, each share of NDC Common
Stock issued in connection with the Merger upon conversion of Source
Common Stock shall be accompanied by a NDC Right.
(d) Each share of Source Preferred Stock (excluding shares held by
any Source Entity or any NDC Entity, and excluding shares held by
stockholders who perfect their statutory dissenters' rights as provided in
Section 3.7) issued and outstanding
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immediately prior to the Effective Time shall cease to be outstanding and
shall be converted and exchanged for the right to receive an amount equal to
$11.33, subject to adjustment to equal that amount such holder's shares of
Source Preferred Stock would otherwise receive if such holder were redeemed
on the Closing Date pursuant to the Designation (such aggregate amount, as
adjusted, the "Preferred Stock Merger Consideration").
3.2 PRELIMINARY BALANCE SHEET.
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(a) Source will cause to be prepared and delivered to NDC a
balance sheet for Source, pro forma giving effect to the Divestiture, as of the
most recent month ending more than ten days prior to the Closing Date (the
"Preliminary Balance Sheet") and a certificate based on such Preliminary Balance
Sheet setting forth Source's calculation of Working Capital, Current Assets and
Current Liabilities as of such date ("Estimated Working Capital," "Estimated
Current Assets" and "Estimated Current Liabilities," respectively). The
Preliminary Balance Sheet shall (w) include the consolidated financial position
of Source and the Source Subsidiaries, (x) fairly present the financial position
of Source and the Source Subsidiaries as at the close of business on such date
in accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the balance sheet dated March
31, 1997 (the "Source Balance Sheet") previously delivered to NDC, (y) include
no material increase in long-term indebtedness, and include line items
substantially consistent with those in the Source Balance Sheet, and (z) be
prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the Source Balance Sheet. As used in this
Agreement, "Working Capital" shall mean the amount equal to Current Assets less
Current Liabilities; "Current Assets" shall mean the amount equal to the sum of
cash, accounts receivable (net of any reserves), inventories, prepaid expenses,
work-in-process, and any other current assets recognized by GAAP; and "Current
Liabilities" shall mean the amount equal to the sum of accounts payable, accrued
current liabilities of Source (other than the current portion of capitalized
lease obligations), accrued sales commissions (but only as to revenues realized
and included in the Source and Source Subsidiaries' statements of income prior
to such date), Accrued Bonuses, accrued vacation pay, current portion of long-
term indebtedness, pre-billed revenues and any other current liabilities
recognized by GAAP, but excluding all Transaction Expenses.
(b) NDC shall have five (5) business days from the receipt of the
Preliminary Balance Sheet and the calculation of Estimated Working Capital,
Estimated Current Assets and Estimated Current Liabilities delivered pursuant to
Section 3.2(a) to review such statement and calculations and following such
review such shall be final and binding upon the parties hereto.
(c) If Estimated Current Assets are less than the product of 0.9416
times Estimated Current Liabilities (such amount, the "Estimated Working Capital
Adjustment") as of the date of the Preliminary Balance Sheet, the Escrow Shares
payable by NDC pursuant to Section 3.1(c) shall be decreased by the number of
shares of NDC Common Stock equal to the Estimated Working Capital Adjustment
divided by the Average Closing Price as of the Closing Date; provided, however,
in the event this reduction of the Escrow Shares exceeds 113,960 shares, the
Payment Shares shall then be decreased similarly in an amount equal to such
excess.
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3.3 CLOSING BALANCE SHEET.
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(a) As promptly as practicable, but not later than 30 days after
the Closing Date, NDC will cause to be prepared and delivered to the Stockholder
Representative a balance sheet, giving effect to the Divestiture, for Source as
of the Closing Date (the "Closing Balance Sheet") setting forth NDC's
calculation of Working Capital, Current Assets and Current Liabilities as of the
Closing Date ("Closing Working Capital," "Closing Current Assets" and "Closing
Current Liabilities," respectively). The Closing Balance Sheet shall (w) include
the consolidated financial position of Source and the Source Subsidiaries (x)
fairly present the consolidated financial position of Source and the Source
Subsidiaries as at the close of business on the Closing Date in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the Source Balance Sheet, (y) include no
material increase in long term indebtedness, and include line items
substantially consistent with those in the Source Balance Sheet, and (z) be
prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the Source Balance Sheet.
(b) The Closing Balance Sheet and the calculation of Closing Working
Capital, Closing Current Assets and Closing Current Liabilities delivered
pursuant to Section 3.3(a) shall be deemed final upon the earliest of (i) the
date on which NDC and the Stockholder Representative jointly agree that such
documents are final, (ii) the 30th day after delivery of such documents pursuant
to Section 3.3(a), if the Stockholder Representative has not delivered a notice
to expressing disagreement with such calculations and setting forth its
calculation of such amount(s), and (iii) the date on which all disputes relating
to such statements and calculations between the parties are resolved in
accordance with Section 3.3(c). If the Stockholder Representative delivers a
notice of disagreement pursuant to this Section 3.3(b) it shall specify those
items or amounts as to which it disagrees, and it shall be deemed to have agreed
with all other items and amounts contained in the Closing Balance Sheet and the
calculation of Closing Working Capital delivered pursuant to Section 3.3(a)
(except to the extent resolution of the items or amounts to which it expresses
disagreement requires conforming changes to other items and amounts contained in
the Closing Balance Sheet or the calculation of Closing Working Capital).
(c) If the Stockholder Representative shall deliver a notice of
disagreement pursuant to Section 3.3(b), the Stockholder Representative and NDC
shall, during the 30 days following such delivery, use their reasonable efforts
to reach agreement on the disputed items or amounts (the "Disputed Amounts").
If, during such period, the Stockholder Representative and NDC are unable to
reach such agreement, they shall promptly thereafter cause Price Waterhouse LLP
(or if said firm shall be unwilling to act thereunder, such other independent
accountants of nationally recognized standing reasonably satisfactory to NDC and
the Stockholder Representative), promptly to review this Agreement, the
documents delivered pursuant to Section 3.3(a) and any other documents necessary
to calculate the Disputed Amounts (including all work papers of the parties used
in calculating the Disputed Amounts). In making such calculation, such
independent accountants shall act as experts and not arbitrators and shall
consider only the Disputed Amounts, solely in accordance with the terms of this
Agreement. Such independent accountants shall deliver to the Stockholder
Representative and NDC, as promptly as practicable,
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a report setting forth such calculation. Such report shall be final and binding
upon the Stockholders and NDC. The cost of such review and report shall be borne
by (i) the Stockholders if the difference between Final Working Capital (defined
in Section 3.4 below) shown in the independent accountant's calculation and the
Stockholder Representative's calculation of Closing Working Capital delivered
pursuant to Section 3.3(b) is greater than the difference between Final Working
Capital shown in the independent accountant's calculation and NDC's calculation
of Closing Working Capital delivered pursuant to Section 3.3(a), (ii) by NDC if
the difference between Final Working Capital shown in the independent
accountant's calculation and the NDC's calculation of Closing Working Capital
delivered pursuant to Section 3.3(a) is greater than the difference between the
Final Working Capital Ratio shown in the independent accountant's calculation
and the Stockholder Representative's calculation of the Closing Working Capital
Ratio delivered pursuant to Section 3.3(b), and (iii) otherwise equally by the
Stockholders and NDC.
(d) The Stockholder Representative and NDC agree that they will, and
will cause their respective independent accountants and Source and its
Subsidiaries to, cooperate and assist in the preparation of the Closing Balance
Sheet and the calculation of Closing Working Capital, Closing Current Assets and
Closing Current Liabilities and in the conduct of the reviews referred to in
this Section 3.3, including, without limitation, making available, to the extent
necessary, relevant books, records, working papers, analyses and schedules, and
permitting representatives of the parties to consult with the respective
employees, auditors, actuaries, attorneys and agents of Source and its
Subsidiaries.
3.4 ADJUSTMENT OF PURCHASE PRICE.
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(a) Subject to Section 3.4(c) below,
(i) If Final Current Assets are less than the product of
0.9416 times Final Current Liabilities (the amount of such shortfall referred to
as, the "Final Working Capital Deficit"), the Stockholders shall pay to NDC the
amount of the Final Working Capital Deficit as an adjustment to the Purchase
Price, out of the Stock Escrow in the manner provided in the Escrow Agreement.
(ii) If Final Current Assets are greater than the product of
0.9416 times Final Current Liabilities (the amount of such surplus referred to
as, the "Final Working Capital Surplus"), NDC shall pay to the escrow agent, to
be held in accordance with the Escrow Agreement, that number of shares of NDC
Common Stock equal to the quotient of the Final Working Capital Surplus divided
by the Average Closing Price as of the date Final Working Capital is determined.
(iii) "Final Working Capital" means Closing Working Capital (i)
as shown in NDC's calculation delivered pursuant to Section 3.3(a), if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
3.3(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed by
NDC and the Stockholder Representative pursuant to Section 3.3(b) or (B) in the
absence of such agreement, as shown in the independent accountant's calculation
delivered pursuant to Section 3.3(c); provided that, in no event shall Final
Working Capital be
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(i) more than the Stockholder Representative's calculation of Closing Working
Capital delivered pursuant to Section 3.3(b), if any, or (ii) less than the
lesser of NDC's calculation of Closing Working Capital delivered pursuant to
Section 3.3(a) or the Stockholder Representative's calculation of Closing
Working Capital delivered pursuant to Section 3.3(b), if any.
(b) Subject to Section 3.4(c) below,
(i) If Total Current Assets are less than the product of 0.9975
times Total Current Liabilities (the "Total Working Capital Deficit"), then the
Stockholders shall pay to NDC the Current Asset Allocation Amount as a further
adjustment to the Purchase Price, out of the Stock Escrow in the manner provided
in the Escrow Agreement.
(ii) If Total Current Assets are greater than the product of
0.9975 times Total Current Liabilities (the "Total Working Capital Surplus"),
then NDC shall pay to the Stockholders pursuant to the instructions of the
Stockholder Representative, as a further adjustment to the Purchase Price, that
number of shares of NDC Common Stock equal to the quotient of the Current Asset
Allocation Amount divided by the Average Closing Price as of the date Final
Working Capital is determined.
(iii) As used herein, "Total Current Assets" shall mean the
amount equal to the sum of Final Current Assets in this Agreement and Final
Current Assets calculated pursuant to the PMSI Agreement; "Total Current
Liabilities" shall mean the amount equal to the sum of Final Current Liabilities
in this Agreement and Final Current Liabilities calculated pursuant to the PMSI
Agreement; "Current Asset Allocation Amount" shall mean the amount equal to the
product of (A) the quotient of Final Current Assets in this Agreement divided by
Total Combined Assets multiplied by (B) the Total Working Capital Deficit or
Total Working Capital Surplus, as the case may be; and "Total Combined Assets"
shall mean the sum of Final Current Assets under this Agreement and Final
Current Assets calculated under the PMSI Agreement.
(c) For purposes of any adjustments to the Purchase Price made
pursuant to this Section, the parties shall take into account any adjustment
made to the Purchase Price at Closing pursuant to Section 3.2(c) hereof.
3.5 ANTI-DILUTION PROVISIONS. In the event NDC changes the number of
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shares of NDC Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Common Exchange Ratios shall be proportionately
adjusted.
3.6 SHARES HELD BY SOURCE OR NDC. Each of the shares of Source Common
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Stock and Source Preferred Stock held by any Source Entity or by any NDC Entity
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
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3.7 DISSENTING STOCKHOLDERS. Any holder of shares of Source Common
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Stock or Source Preferred Stock who perfects his dissenters' rights in
accordance with and as contemplated by Section 262 of the DGCL shall be entitled
to receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, that no such payment shall be made to any dissenting
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of the DGCL and surrendered to Source the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting stockholder of Source fails to
perfect, or effectively withdraws or loses, his right to appraisal and of
payment for his shares, NDC shall issue and deliver the consideration to which
such holder of shares of Source Common Stock or Source Preferred Stock is
entitled under this Article 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of Source Common Stock or
Source Preferred Stock held by him. If and to the extent required by applicable
Law, Source will establish (or cause to be established) an escrow account with
an amount sufficient to satisfy the maximum aggregate payment that may be
required to be paid to dissenting stockholders. Upon satisfaction of all claims
of dissenting stockholders, the remaining escrowed amount, reduced by payment of
the fees and expenses of the escrow agent, will be returned to the Surviving
Corporation.
3.8 FRACTIONAL SHARES. Notwithstanding any other provision of this
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Agreement, each holder of shares of Source Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of NDC Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of NDC Common Stock multiplied
by the market value of one share of NDC Common Stock at the Effective Time. The
market value of one share of NDC Common Stock at the Effective Time shall be the
closing price of such common stock on the NYSE-Composite Transactions List (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by NDC) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a stockholder in respect of any fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
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4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, NDC and
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Source shall cause the exchange agent selected by NDC (the "Exchange Agent") to
mail to each holder of record of a certificate or certificates which represented
shares of Source Common Stock and Source Preferred Stock immediately prior to
the Effective Time (the "Certificates") appropriate transmittal materials and
instructions (which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon proper delivery of
such Certificates to the Exchange Agent). The Certificate or Certificates of
Source Common Stock or Source Preferred Stock so delivered shall be duly
endorsed as the Exchange Agent may require. In the event of a transfer of
ownership of shares of Source Common Stock or Source Preferred Stock represented
by Certificates that are not registered in the transfer records of Source, the
consideration provided in Section 3.1 may be issued to a transferee if the
Certificates representing
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such shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been paid. If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(i) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as NDC
and the Exchange Agent may reasonably require and (iii) any other documents
necessary to evidence and effect the bona fide exchange thereof, the Exchange
Agent shall issue to such holder the consideration into which the shares
represented by such lost, stolen, mislaid or destroyed Certificate shall have
been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Source Common
Stock and Source Preferred Stock (other than shares to be canceled pursuant to
Section 3.6 or as to which statutory dissenters' rights have been perfected as
provided in Section 3.7) issued and outstanding at the Effective Time shall
surrender the Certificate or Certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2. To the extent required by Section
3.8, each holder of shares of Source Common Stock and Source Preferred Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the Certificate or Certificates, cash in lieu of any fractional share of NDC
Common Stock to which such holder may be otherwise entitled (without interest).
NDC shall not be obligated to deliver the consideration to which any former
holder of Source Common Stock or Source Preferred Stock is entitled as a result
of the Merger until such holder surrenders such holder's Certificate or
Certificates for exchange as provided in this Section 4.1. Any other provision
of this Agreement notwithstanding, neither NDC, the Surviving Corporation nor
the Exchange Agent shall be liable to a holder of Source Common Stock or Source
Preferred Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property, escheat or
similar Law. Adoption of this Agreement by the stockholders of Source shall
constitute ratification of the appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER SOURCE STOCKHOLDERS. At the Effective Time, the
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stock transfer books of Source shall be closed as to holders of Source Common
Stock and Source Preferred Stock immediately prior to the Effective Time and no
transfer of Source Common Stock or Source Preferred Stock by any such holder
shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 4.1, each Certificate theretofore
representing shares of Source Common Stock or Source Preferred Stock (other than
shares to be canceled pursuant to Section 3.6) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.8 in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by Source in respect of such shares of Source Common
Stock or Source Preferred Stock in accordance with the terms of this Agreement
and which remain unpaid at the Effective Time. Whenever a dividend or other
distribution is declared by NDC on the NDC Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include dividends
or other distributions on all shares of NDC Common Stock issuable
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pursuant to this Agreement, but no dividend or other distribution payable to the
holders of record of NDC Common Stock as of any time subsequent to the Effective
Time shall be delivered to the holder of any Certificate until such holder
surrenders such Certificate for exchange as provided in Section 4.1. However,
upon surrender of such Certificate, both the NDC Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such Certificate.
4.3 ESCROW AGREEMENT. In connection with the Closing, NDC and the
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Stockholder Representative shall have executed and delivered to the other an
escrow agreement (the "Escrow Agreement"), which shall be in the form of Exhibit
1. The Stock Escrow to be paid pursuant to Section 3.1(c) shall be paid to and
held by the escrow agent pursuant to the terms of the Escrow Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SOURCE
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Source hereby represents and warrants to NDC as follows:
5.1 ORGANIZATION, STANDING, AND POWER. Source is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Source is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Source Material Adverse Effect. The minute book and other
organizational documents for Source have been made available to NDC for its
review and, except as disclosed in Section 5.1 of the Source Disclosure
Memorandum, are true and complete in all material respects as in effect as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
stockholders thereof.
5.2 AUTHORITY OF SOURCE; NO BREACH BY AGREEMENT.
-------------------------------------------
(a) Source has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Source,
subject to the adoption of this Agreement by the holders of a majority of the
outstanding shares of Source Common Stock, and the adoption of this Agreement by
the holders of a majority of the outstanding shares of Source Preferred Stock,
which are the only stockholder votes required for approval of this Agreement and
consummation of the Merger by Source. Subject to such
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requisite stockholder approval, this Agreement represents a legal, valid, and
binding obligation of Source, enforceable against Source in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Source,
nor the consummation by Source of the transactions contemplated hereby, nor
compliance by Source with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Source's Certificate of Incorporation
or Bylaws or the certificate or articles of incorporation or bylaws of any
Source Subsidiary or any resolution adopted by the board of directors or the
stockholders of any Source Entity, or (ii) except as disclosed in Section 5.2 of
the Source Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any Source Entity under, any material Contract or Permit of any Source
Entity or, (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to any Source Entity or any of their
respective material Assets.
(c) Other than in connection or compliance with the provisions of
applicable state corporate and securities Laws and other than Consents required
from Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, no notice to,
filing with, or Consent of, any public body or authority is necessary for the
consummation by Source of the Merger and the other transactions contemplated in
this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of Source consists of (i) 12,000,000
shares of Source Common Stock, of which 5,800,193 shares are issued and
outstanding as of the date of this Agreement and not more than 7,010,187 shares,
excluding any shares of Source Common Stock issued upon conversion of Source
Preferred Stock, will be issued and outstanding at the Effective Time, and (ii)
2,000,000 shares of Source Preferred Stock, 1,041,667 shares of which are issued
and outstanding as of the date of this Agreement and not more than 1,041,667
shares will be issued and outstanding at the Effective Time. All of the issued
and outstanding shares of capital stock of Source are duly and validly issued
and outstanding and are fully paid and nonassessable under the DGCL. None of
the outstanding shares of capital stock of Source has been issued in violation
of any preemptive rights of the current or past stockholders of Source.
(b) Except as set forth in Section 5.3(a), or as disclosed in Section
5.3(b) of the Source Disclosure Memorandum, there are no shares of capital stock
or other equity securities of Source outstanding and no outstanding Equity
Rights relating to the capital stock of Source. Set forth in Section 5.3(b) of
the Source Disclosure Memorandum is the name of each of
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the holders of record of Source Common Stock and Source Preferred Stock and that
number of shares of Source Common Stock and Source Preferred Stock,
respectively, of which each holder is the owner (the "Scheduled Stockholders").
Except as specifically contemplated by this Agreement, no Person has any
Contract or any right or privilege (whether pre-emptive or contractual) capable
of becoming a Contract or Equity Right for the purchase, subscription or
issuance of any securities of Source from Source.
5.4 SOURCE SUBSIDIARIES. Source has disclosed in Section 5.4 of the
-------------------
Source Disclosure Memorandum all of the Source Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which it is qualified and/or licensed to transact business, and the number of
shares owned and percentage ownership interest represented by such share
ownership) and all of the Source Subsidiaries that are general or limited
partnerships, limited liability companies, or other non-corporate entities
(identifying the Law under which such entity is organized, each jurisdiction in
which it is qualified and/or licensed to transact business, and the amount and
nature of the ownership interest therein). Except as disclosed in Section 5.4
of the Source Disclosure Memorandum, Source or one of its wholly-owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each Source Subsidiary. No capital stock (or other
equity interest) of any Source Subsidiary is or may become required to be issued
(other than to another Source Entity) by reason of any Equity Rights, and there
are no Contracts by which any Source Subsidiary is bound to issue (other than to
another Source Entity) additional shares of its capital stock (or other equity
interests) or Equity Rights or by which any Source Entity is or may be bound to
transfer any shares of the capital stock (or other equity interests) of any
Source Subsidiary (other than to another Source Entity). There are no Contracts
relating to the rights of any Source Entity to vote or to dispose of any shares
of the capital stock (or other equity interests) of any Source Subsidiary. All
of the shares of capital stock (or other equity interests) of each Source
Subsidiary held by a Source Entity are fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Source Entity free and clear of
any Lien, except for the pledge by Source of the stock of one of its
Subsidiaries to PMSI pursuant to that certain Securities Transfer Agreement,
between PMSI and Source, (the "Source Divestiture Agreement"), which pledge will
be released at Closing. Except as disclosed in Section 5.4 of the Source
Disclosure Memorandum, each Source Subsidiary is duly organized, validly
existing, and (as to corporations) in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate or
other power and authority necessary for it to own, lease, and operate its Assets
and to carry on its business as now conducted. Each Source Subsidiary is duly
qualified or licensed to transact business as a foreign corporation or other
entity, and in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Source Material
Adverse Effect. The minute book and other organizational documents for each
Source Subsidiary have been made available to NDC for its review, and, except as
disclosed in Section 5.4 of the Source Disclosure Memorandum, are true and
complete in all material respects as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all
proceedings of the Board
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of Directors and stockholders thereof. Source has no Subsidiaries other than the
Source Subsidiaries and the Source Divestiture Subsidiaries.
5.5 FINANCIAL STATEMENTS AND PROJECTIONS.
------------------------------------
(a) Each of the Source Financial Statements (including, in each case,
any related notes) was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements), and fairly presented in all material respects the
consolidated financial position of Source and its Subsidiaries, or Source and
the Source Subsidiaries, as the case may be, as at the respective dates and the
consolidated results of operations and cash flows for the periods indicated,
except that the unaudited interim financial statements do not contain certain
financial statement footnotes otherwise required by GAAP in full fiscal year
financial statements and were or are subject to normal and recurring year-end
adjustments, which were not or are not expected to be material in amount or
effect.
(b) Each of the Joint Venture Financial Statements (including, in
each case, any related notes) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements), and fairly presented in all material
respects the pro forma financial position of the Joint Venture as at the
respective dates and the combined results of operations and cash flows for the
periods indicated, except that the unaudited interim financial statements,
except that the unaudited interim financial statements do not contain certain
financial statement footnotes otherwise required by GAAP in full fiscal year
financial statements and were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount or
effect.
(c) Set forth in Section 5.5 of the Source Disclosure Memorandum is a
true and correct copy of the financial projections prepared by Source with
respect to its results of operations, cash flows and capital expenditures
through June 30, 1998, including a list of the principal assumptions underlying
such projections. Source has prepared the projections in good faith and does
not have any reason to believe that the assumptions used in preparing the
projections are unrealistic under the circumstances. NDC acknowledges that the
assumptions are subject to significant business and competitive uncertainties
and are dependent upon future business decisions. Accordingly, the projections
cannot be viewed as a guarantee of future performance by Source and no assurance
can be given that the actual results of operations of Source will be comparable
to those reflected in the projections.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Joint Venture nor
----------------------------------
any Source Entity has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a Source Material Adverse Effect, except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Source as of March 31, 1997, included in the Source Financial
Statements delivered prior to the date of this Agreement, or reflected in the
notes thereto or in the Joint Venture Financial Statements or reflected in the
notes thereto. No Source Entity has incurred or paid any Liability since March
31, 1997, except for such Liabilities incurred or paid
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(i) in the ordinary course of business consistent with past business practice
and which are not reasonably likely to have, individually or in the aggregate, a
Source Material Adverse Effect or (ii) in connection with the transactions
contemplated by this Agreement. Except as disclosed in Section 5.6 of the Source
Disclosure Memorandum, no Source Entity is directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any Liability of any Person
(other than a Source Entity) for any amount in excess of $100,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1997, except
------------------------------------
as disclosed in the Source Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 5.7 of the Source Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Source Material Adverse Effect, and (ii) the Source Entities have not taken any
action, or failed to take any action, prior to the date of this Agreement, which
action or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of the covenants and agreements
of Source provided in Article 7.
5.8 TAX MATTERS.
-----------
(a) All Tax Returns required to be filed by or on behalf of any of
the Source Entities for periods ended on or before June 30, 1996, have been
timely filed or requests for extensions have been timely filed, granted, and
have not expired, and all Tax Returns filed are complete and accurate in all
material respects. All Taxes shown on filed Tax Returns have been paid. There is
no audit examination or deficiency or refund Litigation current or pending with
respect to any Taxes, except as reserved against in the Source Financial
Statements or as disclosed in Section 5.8 of the Source Disclosure Memorandum.
All Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the Source Entities, except for any
such Liens which are not reasonably likely to have a Source Material Adverse
Effect.
(b) None of the Source Entities has executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
Source Entities for the period or periods through and including the date of the
respective Source Financial Statements that has been made and is reflected on
such Source Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the Source Entities have been provided for in
accordance with GAAP.
-15-
(e) Except as disclosed in Section 5.8(e) of the Source Disclosure
Memorandum, none of the Source Entities is a party to any Tax allocation or
sharing agreement and none of the Source Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Source) or has any Liability for Taxes of
any Person (other than Source and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the Source Entities is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply, in all material respects, with all applicable
information reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the Source Disclosure
Memorandum, none of the Source Entities has made any payments, is obligated to
make any payments, or is a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(h) The income tax basis of (i) all of the issued and outstanding
shares of the Source Divestiture Subsidiaries, in the aggregate, which are being
transferred from Source to PMSI pursuant to the Source Divestiture Agreement,
and (ii) the shares of capital stock of PMSI which are being transferred from
Source to PMSI pursuant to the Source Divestiture Agreement, are disclosed in
Section 5.8 of the Source Disclosure Memorandum.
(i) The distribution of Source from Xxxxx International Inc. through
a series of transactions described in that certain Master Reorganization
Agreement between Xxxxx International Inc. and Source dated as of April 16, 1996
and effected on or about such date ("spin-off") qualified as a tax free
distribution described in Section 355 of the Internal Revenue Code. Without
limiting the generality of the foregoing, Source did not at the time of the
spin-off have any plans or intentions of further transferring, exchanging or
otherwise selling all or any part of the capital stock of Source or the Assets
of Source. Source has supplied to NDC accurate and complete copies of all
opinions, correspondence, rulings, memoranda and other information regarding the
tax consequences of such spin-off.
5.9 ASSETS.
------
(a) Except as disclosed in Section 5.9 of the Source Disclosure
Memorandum or as disclosed or reserved against in the Source Financial
Statements delivered prior to the date of this Agreement, and except for the
pledge by Source of the stock of one of its Subsidiaries to PMSI pursuant to
that certain Source Divestiture Agreement, which pledge will be released at
Closing and the pledge by Source of shares of PMSI Common Stock held by Source
pursuant to the Source Divestiture Agreement, the Source Entities have good and
marketable title, free and clear of all Liens, to all of their respective
Assets. All tangible properties that are material to the
-16-
Joint Venture are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with Source's past
practices.
(b) All Assets material to the Joint Venture, that are held under
leases or subleases by any of the Source Entities are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and effect.
(c) None of the Source Entities has received notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $100,000
pending under such policies of insurance and no notices of claims in excess of
such amounts have been given by any Source Entity under such policies.
(d) The Assets of the Joint Venture include, in the aggregate, all
Assets required to operate the business of the Joint Venture as presently
conducted.
5.10 INTELLECTUAL PROPERTY. Section 5.10 of the Source Disclosure
---------------------
Memorandum sets forth a complete and accurate list of, and a brief description
of all governmental registrations or applications for governmental registrations
of, all Intellectual Property owned, used or licensed by or to Source or any
Source Entity, which are used in or necessary for the conduct of the Joint
Venture's business, except as to which the absence thereof would not have a
Source Material Adverse Effect ("Source Intellectual Property"). No Source
Entity is in Default under any of its Source Intellectual Property licenses. No
proceedings have been instituted, or are pending or to the Knowledge of Source
threatened, which challenge the rights of any Source Entity with respect to
Source Intellectual Property used, sold or licensed by such Source Entity in the
course of its business, nor has any person claimed or alleged any rights to such
Source Intellectual Property. The conduct of the business of the Joint Venture
does not infringe any Intellectual Property of any other person. Except as
disclosed in Section 5.10 of the Source Disclosure Memorandum, the Joint Venture
is not obligated to pay any recurring royalties to any Person with respect to
any such Source Intellectual Property. Except as disclosed in Section 5.10 of
the Source Disclosure Memorandum, every officer, director, or employee of any
Source Entity is a party to a Contract which requires such officer, director or
employee to assign any interest in any Intellectual Property developed while in
the employ of Source to a Source Entity and to keep confidential any trade
secrets, proprietary data, customer information, or other business information
of the Joint Venture, and, to the Knowledge of Source, no such officer, director
or employee is party to any Contract with any Person other than a Source Entity
which requires such officer, director or employee to assign any interest in any
Intellectual Property to any Person other than a Source Entity or to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of any Person other than a Source Entity. Except as
disclosed in Section 5.10 of the Source Disclosure Memorandum, to the Knowledge
of Source, no officer, director or
-17-
employee of any Source Entity is party to any Contract which restricts or
prohibits such officer, director or employee from engaging in activities
competitive with any Person, including any Source Entity. Except as disclosed in
Section 5.10 of the Source Disclosure Memorandum, Source has plans to modify its
software systems to include calendar year 2000 date conversion and compatibility
capabilities, including, but not limited to, date data century recognition, same
century and multiple century formula and date value calculations, and user
interface date data values that reflect the century.
5.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Each Source Entity, its Participation Facilities, and its
Operating Properties are, and have been, in compliance in all material respects
with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of Source,
threatened before any court, governmental agency, or authority or other forum in
which any Source Entity or any of its Operating Properties or Participation
Facilities (or Source in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by any Source Entity or any of its Operating
Properties or Participation Facilities, nor is there any reasonable basis for
any Litigation of a type described in this sentence.
(c) During the period of (i) any Source Entity's ownership or
operation of any of their respective current properties, (ii) any Source
Entity's participation in the management of any Participation Facility, or (iii)
any Source Entity's holding of a security interest in a Operating Property,
there have been no material releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, adjacent to, or affecting (or potentially
affecting) such properties. Prior to the period of (i) any Source Entity's
ownership or operation of any of their respective current properties, (ii) any
Source Entity's participation in the management of any Participation Facility,
or (iii) any Source Entity's holding of a security interest in a Operating
Property, to the Knowledge of Source, there were no material releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such property, Participation Facility or Operating Property.
5.12 COMPLIANCE WITH LAWS. The Joint Venture has in effect all Permits
--------------------
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any such
Permit. Except as disclosed in Section 5.12 of the Source Disclosure
Memorandum, none of the Source Entities nor the Joint Venture:
(a) is in Default under any of the provisions of its Certificate of
Incorporation or Bylaws (or other governing instruments);
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(b) is in Default under any Laws, Orders, or Permits applicable to
its business or employees conducting its business; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Source Entity or the Joint Venture is not in compliance in any
material respect with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, (ii) threatening to revoke any
Permits, or (iii) requiring any Source Entity or the Joint Venture to enter
into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment, or memorandum of understanding, or to adopt
any Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to NDC.
5.13 LABOR RELATIONS. No Source Entity is the subject of any Litigation
---------------
asserting that it or any other Source Entity has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Source Entity to bargain with
any labor organization as to wages or conditions of employment, nor is any
Source Entity party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Source Entity, pending or
threatened, or to the Knowledge of Source, is there any activity involving any
Source Entity's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Source has disclosed in Section 5.14 of the Source Disclosure
Memorandum, and has delivered or made available to NDC prior to the execution of
this Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, which is currently, or within the six (6) years preceding the
Closing Date has been, adopted, maintained by, sponsored in whole or in part by,
or contributed to by any Source Entity or ERISA Affiliate (including any entity
which was an ERISA Affiliate during such six (6) year period) thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "Source Benefit Plans"). Any of
the Source Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a "Source
ERISA Plan." Each Source ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code) is referred to herein as
a "Source Pension Plan." No Source Pension Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
-19-
(b) All Source Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Source Material Adverse Effect. Each Source ERISA Plan which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal Revenue Service,
and Source is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. No Source Entity has engaged in a
transaction with respect to any Source Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any
Source Entity to a Tax imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA.
(c) No Source Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Source Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Source Pension Plan, and (iii) no increase in
benefits under any Source Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect or materially adversely affect the
funding status of any such plan. Neither any Source Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Source Entity, or the single-employer
plan of any entity which is considered one employer with Source under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. No Source Entity has provided, or is required to provide,
security to a Source Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any Source Entity with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Source Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Source Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the Source Disclosure
Memorandum, no Source Entity has any Liability for retiree health and life
benefits under any of the Source Benefit Plans and there are no restrictions on
the rights of such Source Entity to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
-20-
(f) Except as disclosed in Section 5.14 of the Source Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Source Entity
from any Source Entity under any Source Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any Source Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Source Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Source Financial Statements to the extent
required by and in accordance with GAAP.
(h) Neither NDC nor any ERISA Affiliate of NDC shall have any
liability or obligation with respect to (i) employment-related liabilities,
whether contingent or otherwise, arising out of any individual's employment or
working relationship with any ERISA Affiliate of Source or any other entity
which participated in or contributed to any Source ERISA Plan other than Source
or any Source Subsidiary; or (ii) any benefit plan, program, arrangement or
policy maintained or contributed to by any ERISA Affiliate of Source other than
Source or any Source Subsidiary.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the
------------------
Source Disclosure Memorandum or otherwise reflected in the Source Financial
Statements or the Joint Venture Financial Statements, none of the Source
Entities, the Joint Venture nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, or retirement Contract, (ii)
any Contract relating to the borrowing of money by any Source Entity or the
guarantee by any Source Entity or the Joint Venture of any such obligation
(other than Contracts evidencing trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Source Entity or the Joint Venture
from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, (iv) any Contract
between or among Source Entities, or other Affiliates of Source, (v) any
Contract involving Intellectual Property (other than Contracts entered into in
the ordinary course with customers and "shrink-wrap" software licenses), (vi)
any Contract relating to the provision of data processing, network
communication, or other technical services to or by any Source Entity or the
Joint Venture, (vii) any Contract relating to the purchase or sale of any goods
or services, including customer contracts, (viii) consulting Contracts, (ix) and
all Contracts referred to in Sections 5.9 and 5.14(a) (other than Contracts in
the case of (iv), (v), (vi), (vii), (viii) and (ix), entered into in the
ordinary course of business and involving payments under any individual Contract
not in excess of $100,000), as of the date of this Agreement (collectively, the
"Source Contracts"). With respect to each Source Contract and except as
disclosed in Section 5.15 of the Source Disclosure Memorandum: (i) the Contract
is in
-21-
full force and effect; (ii) no Source Entity nor the Joint Venture is in Default
thereunder; (iii) no Source Entity has repudiated or waived any material
provision of any such Contract; (iv) no other party to any such Contract is, to
the Knowledge of Source, in Default in any respect or has repudiated or waived
any material provision thereunder; (v) there exists no actual, or to the
Knowledge of Source, threatened, cancellation, termination, or limitation of, or
any amendment, modification, or change to any Contract; (vi) no Source Entity
has received formal notice that any party to a Contract will not renew such
Contract at the end of its existing term; and (vi) no Source Contract requires
consent for assignment in connection with the transactions contemplated by this
Agreement. All of the indebtedness of any Source Entity for money borrowed is
prepayable at any time by such Source Entity without penalty or premium.
5.16 LEGAL PROCEEDINGS. There is no Litigation instituted or pending,
-----------------
or, to the Knowledge of Source, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any Source Entity, or against any
director, employee or employee benefit plan of any Source Entity, or against any
Asset, interest, or right of any of them or the Joint Venture, that is
reasonably likely to have, individually or in the aggregate, a Source Material
Adverse Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Source Entity
or the Joint Venture, that are reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect. Section 5.16 of the Source
Disclosure Memorandum contains a summary of all Litigation as of the date of
this Agreement to which any Source Entity is a party and which names a Source
Entity as a defendant or cross-defendant or for which any Source Entity or the
Joint Venture has any potential Liability.
5.17 STATEMENTS TRUE AND CORRECT. None of the information supplied or
---------------------------
to be supplied by any Source Entity or any Affiliate thereof for inclusion in
the Registration Statement to be filed by NDC with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Source Entity or any Affiliate thereof for inclusion in any
documents to be filed by a Source Entity or any Affiliate thereof with any
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. All documents that any Source Entity or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.18 REGULATORY MATTERS. No Source Entity or any Affiliate thereof has
------------------
taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 9.1(b) or result
in the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
-22-
5.19 STATE TAKEOVER LAWS. Each Source Entity has taken all necessary
-------------------
action to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws"), including Section 203 of the
DGCL.
5.20 CHARTER PROVISIONS. Each Source Entity has taken all action so
------------------
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Certificate of Incorporation,
Bylaws or other governing instruments of any Source Entity or restrict or impair
the ability of NDC or any of its Subsidiaries to vote, or otherwise to exercise
the rights of a stockholder with respect to, shares of any Source Entity that
may be directly or indirectly acquired or controlled by them.
5.21 STOCKHOLDERS' VOTING AGREEMENTS. The holders of 51% or more of
-------------------------------
Source Preferred Stock have executed and delivered to NDC, as of the date
hereof, an agreement in substantially the form of Exhibit 2 (the "Voting
Agreements").
5.22 BOARD RECOMMENDATION. The Board of Directors of Source, at a
--------------------
meeting duly called and held, has by unanimous vote of the directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger and the
Voting Agreements and the transactions contemplated thereby, taken together, are
fair to and in the best interests of the stockholders and (ii) resolved to
recommend that the holders of the shares of Source Common Stock and the holders
of Source Preferred Stock adopt this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF NDC
-------------------------------------
NDC hereby represents and warrants to Source and the Stockholders as
follows:
6.1 ORGANIZATION, STANDING, AND POWER. NDC is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. NDC is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a NDC Material Adverse Effect.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) NDC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions
-23-
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of NDC. This Agreement represents a legal, valid,
and binding obligation of NDC, enforceable against NDC in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by NDC, nor
the consummation by NDC of the transactions contemplated hereby, nor compliance
by NDC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of NDC's Certificate of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any NDC Entity under, any
Contract or Permit of any NDC Entity, or, (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any NDC Entity or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, no notice to, filing with, or Consent of, any public body
or authority is necessary for the consummation by NDC of the Merger and the
other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of NDC consists of (i) 100,000,000
shares of NDC Common Stock, of which 26,629,947 shares are issued and
outstanding as of August 18, 1997, and (ii) 1,000,000 shares of NDC Preferred
Stock, of which no shares are issued and outstanding. All of the issued and
outstanding shares of NDC Capital Stock are, and all of the shares of NDC Common
Stock to be issued in exchange for shares of Source Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the DGCL. None of the outstanding shares of NDC Capital
Stock has been, and none of the shares of NDC Common Stock to be issued in
exchange for shares of Source Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
stockholders of NDC.
(b) Except as set forth in Section 6.3(a), or as provided pursuant to
the NDC Rights Agreement, or as disclosed in Section 6.3 of the NDC Disclosure
Memorandum, there are
-24-
no shares of capital stock or other equity securities of
NDC outstanding and no outstanding Equity Rights relating to the capital stock
of NDC.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
---------------------------------
(a) NDC has timely filed and made available to Source all SEC
Documents required to be filed by NDC since May 31, 1993 (the "NDC SEC
Reports"). The NDC SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such NDC SEC Reports or necessary in
order to make the statements in such NDC SEC Reports, in light of the
circumstances under which they were made, not misleading. No NDC Subsidiary is
required to file any SEC Documents.
(b) Each of the NDC Financial Statements (including, in each case,
any related notes) contained in the NDC SEC Reports, including any NDC SEC
Reports filed after the date of this Agreement until the Effective Time,
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of NDC
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount or
effect.
6.5 ABSENCE OF UNDISCLOSED LIABILITIES. No NDC Entity has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a NDC Material Adverse Effect, except Liabilities which are accrued
or reserved against in the consolidated balance sheets of NDC as of May 31, 1996
and February 28, 1997, included in the NDC Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. No NDC Entity
has incurred or paid any Liability since February 28, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since May 31, 1996, except as
------------------------------------
disclosed in the NDC Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 6.6 of the NDC Disclosure Memorandum, (i)
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a NDC Material
Adverse Effect, and (ii) the NDC Entities have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of NDC
provided in Article 7.
-25-
6.7 COMPLIANCE WITH LAWS. Each NDC Entity has in effect all Permits
--------------------
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any such
Permit. Except as disclosed in Section 6.7 of the NDC Disclosure Memorandum,
none of the NDC Entities:
(a) is in Default under its Certificate of Incorporation or Bylaws
(or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business; or
(c) since May 31, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any NDC Entity is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, or (iii)
requiring any NDC Entity to enter into or consent to the issuance of a cease
and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking, which
restricts materially the conduct of its business.
6.8 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
-----------------
to the Knowledge of NDC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any NDC Entity, or against any director,
employee or employee benefit plan of any NDC Entity, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any NDC Entity, that are reasonably likely to
have, individually or in the aggregate, a NDC Material Adverse Effect.
6.9 STATEMENTS TRUE AND CORRECT. None of the information supplied or to
---------------------------
be supplied by any NDC Entity or any Affiliate thereof for inclusion in the
Registration Statement to be filed by NDC with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any NDC Entity or any Affiliate thereof for inclusion in any
documents to be filed by any NDC Entity or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All documents that any NDC Entity or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
-26-
6.10 AUTHORITY OF SUB. Sub is a corporation duly organized, validly
----------------
existing and in good standing under the Laws of the State of Delaware as a
wholly owned Subsidiary of NDC. The authorized capital stock of Sub shall
consist of 1,000 shares of Sub Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by NDC free and clear of
any Lien. Sub has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Sub. This Agreement
represents a legal, valid, and binding obligation of Sub, enforceable against
Sub in accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought). NDC, as the sole stockholder of Sub, has voted
prior to the Effective Time the shares of Sub Common Stock in favor of adoption
of this Agreement, as and to the extent required by applicable Law.
6.11 TAX AND REGULATORY MATTERS. No NDC Entity or any Affiliate thereof
--------------------------
has taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.12 RIGHTS AGREEMENT. Execution of this Agreement and consummation of
----------------
the Merger and the other transactions contemplated by this Agreement will not
result in the grant of any rights to any Person under the NDC Rights Agreement
(other than as contemplated by Section 3.1) or enable or require the NDC Rights
to be exercised, distributed or triggered.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 AFFIRMATIVE COVENANTS OF SOURCE.
-------------------------------
(a) From the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, except as provided in
Section 7.1(b) below, unless the prior written consent of NDC shall have been
obtained, and except as otherwise expressly contemplated herein, Source shall
and shall cause each of its Subsidiaries to (a) operate its business only in
the usual, regular, and ordinary course, (b) preserve intact its business
organization and Assets and maintain its rights and franchises, and (c) take
no action which would (i) materially adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred
to in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially
-27-
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement.
(b) Prior to the Effective Time, Source shall, pursuant to the
Source Divestiture Agreement between Source and PMSI the terms and conditions
of which will have been approved by NDC, complete the divestiture (the
"Divestiture") of (i) its business operated in Europe as of the date of this
Agreement (the "European Business"), (ii) all of the shares of PMSI held by
Source or any Subsidiary of Source, and (iii) all of the stock of those
subsidiaries listed in Section 7.1(b) of the Source Disclosure Memorandum
(the "Source Divestiture Subsidiaries"). In connection with the Divestiture,
Source shall assign all of its interest in and obligations under any and all
Contracts related to the European Business, including but not limited to
those listed in Section 7.1(b) of the Source Disclosure Memorandum (the
"European Contracts"), to the purchaser of the European Business, and shall
obtain a release of all obligations of Source under the European Contracts
from the parties thereto. Other than as required under the terms of the
Target Divestiture Agreement or in connection with the operation of the
European Business in the ordinary course, any matters regarding the conduct,
ownership or divestiture of the European Business shall be undertaken only
with the advance written consent of NDC, which consent will not be
unreasonably withheld.
(c) Prior to the Effective Time, Source shall amend the designation
contained in the Source Certificate of Incorporation relating to the Source
Preferred Stock (such designation, as amended, the "Designation") to provide
that the holders of Source Preferred Stock shall receive the Preferred Stock
Merger Consideration upon consummation of the Merger.
(d) Prior to Closing, Source shall terminate the employment
agreements set forth in Section 5.15(Nos. 1-14) of the Source Disclosure
Memorandum and the executive pension plan set forth in Section 5.14(9) of the
Source Disclosure Memorandum and shall satisfy any liabilities or obligations
arising out of the termination of such. In addition, prior to Closing Source
agrees to cause the trademark registrations set forth in Section 5.10 of the
Source Disclosure Memorandum, to the extent not already accomplished, to be
transferred into the name of Source.
(e) Prior to Closing, all indebtedness or other obligations or
accounts of any kind between a Source Divestiture Subsidiary or PMSI or its
Subsidiaries, on the one hand and Source or a Source Subsidiary on the other
hand will have satisfied in accordance with Schedule 2 hereto.
7.2 NEGATIVE COVENANTS OF SOURCE. From the date of this Agreement until
----------------------------
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of NDC shall have been obtained, and except as
otherwise expressly contemplated herein, Source covenants and agrees that it
will not do or agree or commit to do, or permit any of its Subsidiaries to do or
agree or commit to do, any of the following:
-28-
(a) amend the Certificate of Incorporation, Bylaws or other
governing instruments of any Source Entity, including the Certificate of
Designation for the Source Preferred Stock except for the amendment of the
Source Preferred Stock designation provided in Section 7.1(c) above, which
may include a provision to postpone any mandatory redemption provisions, or
(b) except as provided in Section 5.5 of the Source Disclosure
Memorandum and the Source Divestiture Agreement for the purposes set forth
therein, incur any additional debt obligation, capital lease obligation or
other obligation for borrowed money, or make any capital expenditures or
impose, or suffer the imposition, on any Asset of any Source Entity or the
Joint Venture of any Lien or permit any such Lien to exist (other than in
connection with Liens in effect as of the date hereof that are disclosed in
the Source Disclosure Memorandum, the pledge by Source of the stock of one of
its Subsidiaries to PMSI pursuant to the Source Divestiture Agreement, which
pledge will be released at Closing, and the pledge by Source of shares of
PMSI Common Stock held by Source pursuant to the Source Divestiture
Agreement); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any Source Entity, or declare or pay any dividend or make
any other distribution in respect of Source's capital stock, excluding for
purposes of this Section 7.2(c) the redemption of Source Preferred Stock
pursuant to Section 3.1(d); or
(d) except as provided for in this Agreement and in the Source
Divestiture Agreement, or pursuant to the exercise of stock options or
warrants outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof, or as disclosed in Section 7.2(d) of the
Source Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of Source Common Stock or Source Preferred Stock or any
other capital stock of any Source Entity, or any stock appreciation rights,
or any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any
Source Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Source Common Stock or Source
Preferred Stock, or sell, lease, mortgage or otherwise dispose of or
otherwise encumber (x) any shares of capital stock of any Source Subsidiary
(unless any such shares of stock are sold or otherwise transferred to another
Source Entity and except for the pledge by Source of the stock of one of its
Subsidiaries to PMSI pursuant to the Source Divestiture Agreement, which
pledge will be released at Closing) or (y) any Asset other than in the
ordinary course of business for reasonable and adequate consideration (except
for the pledge by Source of shares of PMSI Common Stock
-29-
held by Source pursuant to the Source Divestiture Agreement), excluding for
purposes of this Section 7.2(e) the Divestiture; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock of securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a wholly owned
Source Subsidiary, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary course
of business, or (ii) the creation of new wholly owned Subsidiaries organized
to conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the employees
or officers of any Source Entity, except in accordance with past practice
disclosed in Section 7.2(g) of the Source Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of
this Agreement and disclosed in Section 7.2(g) of the Source Disclosure
Memorandum; enter into or amend any severance agreements with officers of any
Source Entity; or grant any material increase in fees or other increases in
compensation or other benefits to directors of any Source Entity except in
accordance with past practice disclosed in Section 7.2(g) of the Source
Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any Source
Entity and any Person that the Source Entity does not have the unconditional
right to terminate without Liability (other than Liability for services
already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Source Entity or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Source Entity other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such plan,
or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP;
or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Source Entity
or the Joint Venture for material money damages or restrictions upon the
operations of any Source Entity or the Joint Venture;
(l) without the prior written consent of NDC, which consent shall
not be unreasonably withheld, enter into, modify, amend or terminate any
Source Contract and any
-30-
other material Contract or waive, release, compromise or assign any material
rights or claims; or
(m) amend the Source Divestiture Agreement or, without the prior
written consent of NDC, waive any conditions to the closing of the
transactions contemplated by the Source Divestiture Agreement.
7.3 COVENANTS OF NDC. From the date of this Agreement until the earlier
----------------
of the Effective Time or the termination of this Agreement, unless the prior
written consent of Source shall have been obtained, and except as otherwise
expressly contemplated herein, NDC covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed, in its reasonable judgment, to enhance the long-term value of
the NDC Common Stock and the business prospects of the NDC Entities and to the
extent consistent therewith use all reasonable efforts to preserve intact the
NDC Entities' core businesses and goodwill with their respective employees and
the communities they serve, and (b) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c), or (ii) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement; provided, that the foregoing
shall not prevent any NDC Entity from acquiring any Assets or other businesses
or from discontinuing or disposing of any of its Assets or business if such
action is, in the judgment of NDC, desirable in the conduct of the business of
NDC and its Subsidiaries, provided that such actions shall not materially delay
the Effective Time or materially hinder consummation of the Merger. NDC further
covenants and agrees that it will not, without the prior written consent of
Source, which consent shall not be unreasonably withheld, amend the Certificate
of Incorporation or Bylaws of NDC or, except as expressly contemplated by this
Agreement, the NDC Rights Agreement, in each case, in any manner adverse to the
holders of Source Common Stock as compared to rights of holders of NDC Common
Stock generally as of the date of this Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Source Material Adverse Effect or a NDC Material Adverse Effect, as
applicable, or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows for the periods then ended in
accordance with GAAP consistently applied (subject in
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the case of interim financial statements to normal recurring year-end
adjustments that are not material). As of their respective dates, such reports
filed with the SEC will comply in all material respects with the Securities Laws
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any financial statements contained in any other reports to
another Regulatory Authority shall be prepared in accordance with Laws
applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 REGISTRATION STATEMENT; STOCKHOLDER APPROVAL. As soon as reasonably
--------------------------------------------
practicable after execution of this Agreement, NDC shall prepare and file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of NDC Common
Stock upon consummation of the Merger. Source shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as NDC may
reasonably request in connection with such action. Source shall call
Stockholders' Meetings for the holders of Source Common Stock and Source
Preferred Stock, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon adoption of this Agreement and such other related matters as it
deems appropriate. In connection with such Stockholders' Meetings, (i) Source
shall prepare and mail a notice of meeting to its stockholders, (ii) Newco and
NDC shall furnish to Source all information that Source may reasonably request
in preparation of such notice of meeting, (iii) the Board of Directors of Source
shall recommend to its stockholders the approval of the matters submitted for
approval, subject only to the Board of Directors' legal obligations (if any) as
directors of Source, and (iv) the Board of Directors and officers of Source
shall use their reasonable efforts to obtain such stockholders' approval. NDC
and Source shall make all necessary filings with respect to the Merger under the
Securities Laws.
8.2 EXCHANGE LISTING. NDC shall use its reasonable efforts to list,
----------------
prior to the Effective Time, on the NYSE, subject to official notice of
issuance, the shares of NDC Common Stock to be issued to the holders of Source
Common Stock pursuant to the Merger, and NDC shall give all notices and make all
filings with the NYSE required in connection with the transactions contemplated
herein.
8.3 APPLICATIONS; ANTITRUST NOTIFICATION. NDC shall promptly prepare and
------------------------------------
file, and Source shall cooperate in the preparation and, where appropriate,
filing of, applications with all Regulatory Authorities having jurisdiction over
the transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. To the
extent required by the HSR Act, each of the Parties will promptly file with the
United States Federal Trade Commission and the United States Department of
Justice the notification and report form required for the transactions
contemplated hereby and
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any supplemental or additional information which may reasonably be requested in
connection therewith pursuant to the HSR Act and will comply in all material
respects with the requirements of the HSR Act. The Parties shall deliver to each
other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated hereby.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, Source shall execute and file the Certificate of
Merger with the Secretary of State of the State of Delaware in connection with
the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use,
and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party shall keep the other
Party advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Source shall use its reasonable efforts to exercise its rights
under confidentiality agreements entered into with Persons which were
considering an Acquisition Proposal with respect to Source to preserve the
confidentiality of the information relating to the Source Entities provided to
such Persons and their Affiliates and Representatives.
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(d) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Source Material Adverse
Effect or a NDC Material Adverse Effect, as applicable.
8.7 PRESS RELEASES. Prior to the Effective Time, Source and NDC shall
--------------
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the
---------------
transactions contemplated hereby, no Source Entity nor any Stockholder nor any
Affiliate thereof nor any Representatives thereof retained by any Source Entity
shall directly or indirectly solicit any Acquisition Proposal by any Person.
Except to the extent the Board of Directors of Source, after having consulted
with and considered the advice of outside counsel, reasonably determines in good
faith that the failure to take such actions would constitute a breach of
fiduciary duties of the members of such Board of Directors to Source's
stockholders under applicable law, no Source Entity, any Stockholder or any
Affiliate or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, but Source may
communicate information about such an Acquisition Proposal to its stockholders
if and to the extent that it is required to do so in order to comply with its
legal obligations as advised by outside counsel. Each Stockholder and Source
shall promptly advise NDC following the receipt of any Acquisition Proposal and
the details thereof, and advise NDC of any developments with respect to such
Acquisition Proposal promptly upon the occurrence thereof. Each Stockholder and
Source shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its Affiliates and Representatives not to engage in any
of the foregoing.
8.9 TAX TREATMENT. NDC undertakes and agrees to use its reasonable
-------------
efforts to cause the Merger, and to take no action which would cause the Merger
not, to qualify for or as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. Each Source Entity shall take all necessary
-------------------
steps to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable Takeover
Law, including Section 203 of the DGCL.
8.11 CHARTER PROVISIONS. Each Source Entity shall take all necessary
------------------
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any
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Person under the Certificate of Incorporation, Bylaws or other governing
instruments of any Source Entity or restrict or impair the ability of NDC or any
of its Subsidiaries to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of any Source Entity that may be directly or
indirectly acquired or controlled by them.
8.12 AGREEMENT OF AFFILIATES. Source has disclosed in Section 8.12 of
-----------------------
the Source Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of Source for purposes of Rule 145 under the 1933 Act. Source shall
use its reasonable efforts to cause each such Person to deliver to NDC not later
than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 3, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Source Common
Stock or Source Preferred Stock held by such Person except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of NDC Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder. NDC shall
be entitled to place restrictive legends upon certificates for shares of NDC
Common Stock issued to affiliates of Source pursuant to this Agreement to
enforce applicable provisions of Law. NDC shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of NDC Common Stock by such affiliates.
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time, NDC
-------------------------------
shall provide generally to officers and employees of the Source Entities
employee benefits under employee benefit and welfare plans on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the NDC Entities to their similarly situated officers and
employees. For purposes of participation, vesting and (except in the case of
NDC retirement plans) benefit accrual under NDC's employee benefit plans, the
service of the employees of the Source Entities prior to the Effective Time
shall be treated as service with a NDC Entity participating in such employee
benefit plans. NDC also shall cause the Surviving Corporation and its
Subsidiaries to honor in accordance with their terms all employment, severance,
consulting and other compensation Contracts disclosed in Section 8.13 of the
Source Disclosure Memorandum to NDC between any Source Entity and any current or
former director, officer, or employee thereof, and all provisions for vested
benefits or other vested amounts earned or accrued through the Effective Time
under the Source Benefit Plans. If so advised by NDC at least 30 days prior to
the Effective Time, Source, on behalf of itself and each Source Entity, shall
terminate its participation in the Source Informatics America, PMSI Xxxxx-Xxxxx,
and Xxxxx America Retirement Plan (the "401(k) Plan"), effective no later than
the day preceding the Effective Time. The amendment to the 401(k) Plan which
effects such termination shall be adopted no later than ten (10) days prior to
the Effective Time. Immediately following its adoption, Source shall provide
NDC with a copy of such amendment which (i) terminates Source's participation in
the plan, (ii) fully vests employees of each Source Entity in their account
balances under the 401(k) Plan as of the effective date of the termination; and
(iii) provides for lump sum distributions (which shall be "eligible rollover
distributions," within the meaning of Section 402(c)(4) of the Internal Revenue
Code) of the participants' accrued benefits as soon as practicable following
Source's or its successor's receipt of a letter from the Internal Revenue
Service to the effect that the Source Entities' termination of participation in
the 401(k) Plan and
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the subsequent distribution of the participants' accounts thereunder does not
adversely affect the 401(k) Plan's qualified status under Section 401(a) of the
Internal Revenue Code. The effectiveness of Source's termination of its
participation in the 401(k) Plan may be contingent upon the receipt of such a
letter from the IRS. Under no circumstances may an employee of any Source
Entity, prior to the receipt of such a determination letter, receive a
distribution from the 401(k) Plan on account of Source's termination of its
participation in the plan.
8.14 INDEMNIFICATION.
---------------
(a) Except as set forth in the Waivers, for a period of six years
after the Effective Time, NDC shall, and shall cause the Surviving Corporation
to, indemnify, defend and hold harmless the present and former directors,
officers, employees and agents of the Source Entities (each, an "Indemnified
Party") against all Liabilities arising out of actions or omissions arising out
of the Indemnified Party's service or services as directors, officers, employees
or agents of Source or, at Source's request, of another corporation,
partnership, joint venture, trust or other enterprise occurring at or prior to
the Effective Time to the fullest extent permitted under Delaware Law and by
Source's Certificate of Incorporation and Bylaws as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any Litigation and whether or not any NDC Entity is insured against
any such matter. Without limiting the foregoing, in any case in which approval
by the Surviving Corporation is required to effectuate any indemnification, the
Surviving Corporation shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent counsel
mutually agreed upon between NDC and the Indemnified Party.
(b) NDC shall, or shall cause the Surviving Corporation to, use its
reasonable efforts (and Source shall cooperate prior to the Effective Time in
these efforts) to maintain in effect for a period of three years after the
Effective Time Source's existing directors' and officers' liability insurance
policy (provided that NDC may substitute therefor (i) policies of at least the
same coverage and amounts containing terms and conditions which are
substantially no less advantageous or (ii) with the consent of Source given
prior to the Effective Time, any other policy) with respect to claims arising
from facts or events which occurred prior to the Effective Time and covering
persons who are currently covered by such insurance; provided, that neither NDC
nor the Surviving Corporation shall be obligated to make aggregate premium
payments for such three-year period in respect of such policy (or coverage
replacing such policy) which exceed, for the portion related to Source's
directors and officers, 150% of the annual premium payments on Source's current
policy in effect as of the date of this Agreement (the "Maximum Amount"). If
the amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, NDC shall use its reasonable efforts to
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount. Prior to the
Closing Date, NDC shall provide Source with an estimate of the costs associated
with maintaining a directors' and officers' liability insurance policy as
discussed above, which estimate shall have been prepared by an independent third
party and which amount shall be listed as a Transaction Expense on Schedule 1
----------
hereof.
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(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.14, upon learning of any such Liability or
Litigation, shall promptly notify NDC thereof. In the event of any such
Litigation (whether arising before or after the Effective Time), (i) NDC or the
Surviving Corporation shall have the right to assume the defense thereof and
neither NDC nor the Surviving Corporation shall be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if NDC or the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between NDC or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and NDC or the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that NDC and the
Surviving Corporation shall be obligated pursuant to this paragraph (c) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction,
(ii) the Indemnified Parties will cooperate in the defense of any such
Litigation, and (iii) neither NDC nor the Surviving Corporation shall be liable
for any settlement effected without its prior written consent; and provided
further that neither NDC nor the Surviving Corporation shall have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable Law.
(d) If NDC or the Surviving Corporation or any successors or
assigns shall consolidate with or merge into any other Person and shall not be
the continuing or surviving Person of such consolidation or merger or shall
transfer all or substantially all of its assets to any Person, then and in each
case, proper provision shall be made so that the successors and assigns of NDC
or the Surviving Corporation shall assume the obligations set forth in this
Section 8.14.
(e) The provisions of this Section 8.14 are intended to be for the
benefit of and shall be enforceable by, each Indemnified Party and its
respective heirs and representatives.
8.15 TRANSACTION EXPENSES. NDC agrees that it will cause Source to pay
--------------------
the Transaction Expenses when due and payable.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 12.6:
(A) STOCKHOLDER APPROVAL. The stockholders of Source shall have
--------------------
adopted this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law or by the provisions of any governing
-37-
instruments. The stockholders of Source shall have agreed to terminate, without
recourse, the Source Common Stockholders Agreement and the Source Preferred
Stockholders Agreement, as applicable, as of the Effective Time.
(B) REGULATORY APPROVALS. All Consents of, filings and registrations
--------------------
with, and notifications to, all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of NDC would so materially adversely impact the economic or business
assumptions of the transactions contemplated by this Agreement that, had such
condition or requirement been known, such Party would not, in its reasonable
judgment, have entered into this Agreement.
(C) CONSENTS AND APPROVALS. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b)) or for the preventing of any Default under any Contract or
Permit of such Party which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a Source Material Adverse Effect or a
NDC Material Adverse Effect, as applicable. No Consent so obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
Board of Directors of NDC would so materially adversely impact the economic or
business assumptions of the transactions contemplated by this Agreement that,
had such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(D) LEGAL PROCEEDINGS. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(E) REGISTRATION STATEMENT. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of NDC Common Stock issuable pursuant to the Merger shall have been
received.
(F) EXCHANGE LISTING. The shares of NDC Common Stock issuable pursuant
----------------
to the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
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9.2 CONDITIONS TO OBLIGATIONS OF NDC. The obligations of NDC to perform
--------------------------------
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by NDC pursuant to Section 12.6(a):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
------------------------------
9.2(a), the accuracy of the representations and warranties of Source set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties set forth in Section 5.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties set forth in Sections 5.18, 5.19, and 5.20 shall be true and
correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of Source set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3,
5.18, 5.19, and 5.20) such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Source Material Adverse Effect;
provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to
include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of Source to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(C) CERTIFICATES. Source shall have delivered to NDC (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to Source and in Section 9.2(a)
and 9.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by Source's Board of Directors and stockholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as NDC and its counsel shall
request.
(D) OPINION OF COUNSEL. NDC shall have received an opinion of
------------------
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, counsel to Source, dated as of the
Closing, in form reasonably satisfactory to NDC, as to the matters set forth in
Exhibit 4.
(E) EMPLOYMENT AGREEMENTS. Each of the persons identified in
---------------------
Section 9.2(e) of the Source Disclosure Memorandum shall have executed and
delivered to NDC an employment agreement on terms substantially consistent with
those set forth on Exhibit 5 (collectively, the "Employment Agreements").
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(F) NONCOMPETITION AGREEMENTS. Each of the persons identified in
-------------------------
Section 9.2(f) of the Source Disclosure Memorandum shall have executed and
delivered to NDC a noncompetition agreement in substantially the form of
Exhibit 6 (collectively, the "Noncompetition Agreements").
(G) PMSI AGREEMENT. Each and all of the agreements and covenants of
--------------
the parties to the PMSI Agreement to be performed and complied with shall be
duly performed and complied with, or duly waived by the appropriate party
thereto, prior to or substantially simultaneously with the Effective Time. All
conditions to the closing of the transactions contemplated under the PMSI
Agreement shall have been satisfied or waived and the consummation of such
transactions shall have occurred concurrently with the Closing.
(H) ADDITIONAL AGREEMENTS. Each of the following agreements, in the
---------------------
form attached hereto as an Exhibit, with such additions and changes as may be
approved by NDC and all parties thereto, shall have been executed and
delivered to NDC:
(i) Source Europe License Agreement - Exhibit 7.
(ii) East Asia License Agreement Exhibit 8
(ii) Source Europe Transition Services
Agreement - Exhibit 9.
(iii) Assignment of Lease for Source
property in Newtown, PA - Exhibit 10.
(iv) Sublease for use of
property in Newtown, PA - Exhibit 11.
(v) Sublease for use of
property in Phoenix, AZ - Exhibit 12.
(vi) SL Services Agreement - Exhibit 13.
(I) STOCKHOLDER DISSENT. Less than 10% of the holders of Source
-------------------
Preferred Stock or Source Common Stock shall have perfected his dissenters'
rights pursuant to Section 3.6 hereof and Section 262 of the DGCL.
(J) INDEMNIFICATION WAIVERS. Each director and officer of Source
-----------------------
shall have executed and delivered to NDC Waivers in substantially the form of
Exhibit 14 which will provide that such director or officer release their
rights of indemnification under the bylaws of Source or Sub or the DGCL or
otherwise with respect to claims arising from their acting or failing to act
in connection with the Divestiture or with the allocation of consideration to
be paid by NDC pursuant to the transactions contemplated by this Agreement and
the PMSI Agreement, except and to the extent such is covered by directors' and
officers' insurance.
(K) EUROPEAN CONTRACT RELEASES. Source shall have been released from
--------------------------
any and all obligations under the European Contracts to the reasonable
satisfaction of NDC.
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(L) SOURCE DIVESTITURE AGREEMENT. Each and all of the agreements and
----------------------------
covenants of the parties to the Source Divestiture Agreement to be performed
and complied with shall be duly performed and complied with in all material
respects prior to or substantially simultaneous with the Closing. All
conditions to the closing of the transactions contemplated under the Source
Divestiture Agreement shall have been satisfied or waived and the consummation
of such transactions shall have occurred concurrently with the Closing.
(M) SOURCE OPTIONS AND WARRANTS. Source shall have secured the
---------------------------
cancellation of all outstanding options and warrants to purchase shares of
Source Common Stock and shall provide to NDC a schedule of the number of
Option Shares payable to the holders of such options and warrants in
consideration of such cancellation.
9.3 CONDITIONS TO OBLIGATIONS OF SOURCE. The obligations of Source to
-----------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Source pursuant to Section 12.6(b):
(A) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
------------------------------
9.3(a), the accuracy of the representations and warranties of NDC set forth in
this Agreement shall be assessed as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of NDC set
forth in Sections 6.3, 6.4 and 6.11 shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of NDC set forth in this Agreement (including the representations
and warranties set forth in Sections 6.3, 6.4 and 6.11) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
NDC Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references
to "material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of NDC to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(C) CERTIFICATES. NDC shall have delivered to Source (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Section 9.1 as relates to NDC and in Section
9.3(a) and 9.3(b) have been satisfied, and (ii) certified copies of
resolutions duly adopted by NDC's Board of Directors and Sub's Board of
Directors and sole stockholder evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the
-41-
transactions contemplated hereby, all in such reasonable detail as Source and
its counsel shall request.
(D) OPINION OF COUNSEL. Source shall have received an opinion of
------------------
either the General Counsel of NDC or Xxxxxx & Bird LLP, counsel to NDC, dated
as of the Effective Time, in form reasonably acceptable to Source, as to the
matters set forth in Exhibit 15.
ARTICLE 10
INDEMNIFICATION
---------------
10.1 AGREEMENT OF INDEMNITORS TO INDEMNIFY. Subject to the terms and
-------------------------------------
conditions of this Article 10, Indemnitors jointly and severally agree to
indemnify, defend, and hold harmless Indemnitees, and each of them, from,
against, for and in respect of any and all Losses asserted against, or paid,
suffered or incurred by, an Indemnitee and resulting from, based upon, or
arising out of:
(a) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any Indemnitor or Source contained in or made
pursuant to this Agreement or in any certificate, Schedule, or Exhibit
furnished by Indemnitors or Source in connection herewith (except that Source
shall not be obligated to indemnify NDC for Losses arising out of the
termination or cancellation of a Source Contract by a third party prior to
Closing; provided that such termination or cancellation was not due to any
breach of such Contract by Source), and for purposes of this Section 10.1(a)
any qualification of such representations and warranties by reference to the
materiality of matters stated therein or as to matters having or not having a
"Material Adverse Effect,", and any limitation of such representations and
warranties as being "to the knowledge of," or "known to" or words of similar
effect, shall be disregarded, in determining any inaccuracy, untruth,
incompleteness or breach thereof;
(b) a breach of or failure to perform any covenant or agreement of
Indemnitors or Source made in this Agreement;
(c) any and all Taxes arising out of or associated with the
Divestiture, as provided in Section 7.1(b) and determined as provided in
Section 10.12;
(d) any and all Taxes arising out of or associated with the matters
set forth on Section 5.8(a)(ii) of the Source Disclosure Memorandum to the
extent that, after using commercially reasonable efforts, NDC has been unable
to collect such amounts from Xxxxx International Inc. or the customers
involved in the transactions resulting in such Taxes; provided that NDC shall
not pay such amounts to the applicable governmental authorities without direct
assessment, or similar notice, from such authority directing payment thereof;
or
-42-
(e) any and all Losses relating to the matter set forth in Section
5.16(2) of the Source Disclosure Memorandum.
10.2 PROCEDURES FOR INDEMNIFICATION.
------------------------------
(a) An Indemnification Claim shall be made by an Indemnitee by
delivery of a written notice to the Stockholder Representative requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim,
containing (by attachment or otherwise) such other information as such
Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 10.3 shall be observed by the Indemnitee and the
Stockholder Representative.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Stockholder Representative shall have 30 days to object to such
Indemnification Claim by delivery of a written notice of such objection to such
Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute a final and binding acceptance of
the Indemnification Claim by the Stockholder Representative on behalf of all
Indemnitors, and the Indemnification Claim shall be paid in accordance with
subsection (d) hereof. If an objection is timely interposed by the Stockholder
Representative and the dispute is not resolved by such Indemnitee and the
Stockholder Representative within 15 days from the date the Indemnitee receives
such objection, such dispute shall be resolved by arbitration as provided in
Section 10.11.
(d) Upon determination of the amount of an Indemnification Claim,
whether by agreement between the Stockholder Representative and the Indemnitee
or by an arbitration award or by any other final adjudication, such
Indemnification Claim shall be paid out of the Stock Escrow pursuant to the
provisions of the Escrow Agreement.
10.3 THIRD PARTY CLAIMS. The obligations and liabilities of the parties
------------------
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Stockholder Representative written
notice of a Third Party Claim promptly after receipt by the Indemnitee of
notice thereof, and the Stockholder Representative, on behalf of the
Indemnitors, may undertake the defense, compromise and settlement thereof by
representatives of its own choosing reasonably acceptable to the Indemnitee.
The failure of the Indemnitee to notify the Stockholder Representative of such
claim shall not relieve the Indemnitors of any liability that they may have
with respect to such claim except to the extent the Stockholder Representative
demonstrates that the defense of such claim is prejudiced by such failure. The
assumption of the defense, compromise and settlement of any such Third Party
Claim by the Stockholder Representative shall be an acknowledgment of the
obligation of the Indemnitors to indemnify the Indemnitee with respect to such
claim hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at
-43-
its sole cost and expense. If, however, the Stockholder Representative fails
or refuses to undertake the defense of such Third Party Claim within ten (10)
days after written notice of such claim has been given to the Stockholder
Representative by the Indemnitee, the Indemnitee shall have the right to
undertake the defense, compromise and settlement of such claim with counsel of
its own choosing. In the circumstances described in the preceding sentence,
the Indemnitee shall, promptly upon its assumption of the defense of such
claim, make an Indemnification Claim as specified in Section 10.2 which shall
be deemed an Indemnification Claim that is not a Third Party Claim for the
purposes of the procedures set forth herein. For purposes of this paragraph,
the Stockholder Representative shall be deemed to have received notice of the
claim specified in Section 5.16(2) of the Source Disclosure Memorandum and to
have agreed to assume the defense thereof following the Closing; provided,
however, that such claim is still subject to the provisions of Section 10.7
hereof.
(b) If, in the reasonable opinion of the Indemnitee, any Third Party
Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations,
assets, properties or prospects of the Indemnitee (including, without
limitation, the administration of the tax returns and responsibilities under
the tax laws of the Indemnitee), the Indemnitee shall have the right to
control the defense, compromise and settlement of such Third Party Claim
undertaken by the Stockholder Representative, and the costs and expenses of
the Indemnitee in connection therewith shall be included as part of the
indemnification obligations of the Indemnitors hereunder. If the Indemnitee
shall elect to exercise such right, the Stockholder Representative shall have
the right to participate in, but not control, the defense, compromise and
settlement of such Third Party Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of the Indemnitors under this Article shall be made without the
prior written consent by or on behalf of the Stockholder Representative, which
consent shall not be unreasonably withheld or delayed. Consent shall be
presumed in the case of settlements of $20,000 or less where the Stockholder
Representative has not responded within five business days of notice of a
proposed settlement. If the Stockholder Representative assumes the defense of
such a Third Party Claim, (a) no compromise or settlement thereof may be
effected by the Stockholder Representative without the Indemnitee's consent
unless (i) there is no finding or admission of any violation of law or any
violation of the rights of any person and no effect on any other claim that
may be made against the Indemnitee, (ii) the sole relief provided is monetary
damages that are paid in full by the Indemnitors, and (iii) the compromise or
settlement includes, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the Indemnitee of a release, in form and
substance satisfactory to the Indemnitee, from all liability in respect of
such Third Party Claim, and (b) the Indemnitee shall have no liability with
respect to any compromise or settlement thereof effected without its consent.
(d) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit participation
of counsel selected by any
-44-
party hereto and, as may reasonably be related to any such claim or action,
shall provide access to the counsel, accountants and other representatives of
each party during normal business hours to all properties, personnel, books,
tax records, contracts, commitments and all other business records of such
other party and will furnish to such other party copies of all such documents
as may reasonably be requested (certified, if requested).
10.4 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The rights of the Indemnitees
--------------------------------------
under this Article 10 are independent of and in addition to such rights and
remedies as the Indemnitees may have at law or in equity or otherwise based upon
any inaccuracy, untruth, incompleteness or breach of any representation or
warranty of any Indemnitor contained herein or in any certificate, schedule or
exhibit furnished by such party in connection herewith, or based upon the
failure of an Indemnitor to perform any covenant, agreement or undertaking
required by the terms hereof to be performed by such Indemnitor, including
without limitation the right to seek specific performance, recession or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
10.5 SURVIVAL. Subject to the time limitations set forth in Section 10.6
--------
below, all representations, warranties and agreements contained in this
Agreement or in any certificate delivered pursuant to this Agreement shall
survive the Closing notwithstanding any investigation conducted with respect
thereto or any knowledge acquired as to the accuracy or inaccuracy of any such
representation or warranty.
10.6 TIME LIMITATIONS. The Indemnitors will have no liability to the
----------------
Indemnitees under or in connection with a breach of any of the representations,
warranties, covenants or agreements made or to be performed by the Indemnitors
or Source contained in this Agreement unless written notice asserting an
Indemnification Claim based thereon is given to the Stockholder Representative
prior to August 31, 1999.
10.7 LIMITATIONS AS TO AMOUNT.
------------------------
(a) Indemnitors shall have no liability with respect to the matters
described in Section 10.1 (other than the agreements in Sections 3.2 and 3.4)
until the total of all Losses with respect thereto exceeds $200,000 in which
event Indemnitors shall be obligated to indemnify the Indemnitees as provided in
this Article 10 for all such Losses; provided, however, that each individual
claim of $10,000 or less shall not be indemnifiable, and shall not be includable
in determining whether the $200,000 threshold has been reached.
(b) In no event shall the aggregate liability of the Indemnitors under
this Article 10 exceed the lesser of (i) the Aggregate Value (as defined in the
Escrow Agreement) of the Indemnification Escrow Amount (as defined in the Escrow
Agreement), and (ii) $20,000,000.
10.8 TAX EFFECT AND INSURANCE. The liability of the Indemnitors with
------------------------
respect to any Indemnification Claim shall be reduced by the tax benefit
actually realized and any insurance proceeds received by the Indemnitees as a
result of any Losses upon which such Indemnification Claim is based, and shall
include any tax detriment actually suffered by the Indemnitees as a result
-45-
of such Losses or the claims hereunder. The amount of any such tax benefit or
detriment shall be determined by taking into account the effect, if any and to
the extent determinable, of timing differences resulting from the acceleration
or deferral of items of gain or loss resulting from such Losses and shall
otherwise be determined so that payment by the Indemnitors of the
Indemnification Claim, as adjusted to give effect to any such tax benefit or
detriment, will make the Indemnitee as economically whole as is reasonably
practical with respect to the Losses upon which the Indemnification Claim is
based. Any dispute as to the amount of such tax benefit or detriment shall be
resolved by arbitration as provided in Section 10.11 of this Agreement.
10.9 SUBROGATION. Upon payment in full of any Indemnification Claim,
-----------
whether such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitors
shall be subrogated to the extent of such payment to the rights of the
Indemnitee against any person or entity with respect to the subject matter of
such Indemnification Claim or Third Party Claim.
10.10 APPOINTMENT OF STOCKHOLDER REPRESENTATIVE. Each Indemnitor
-----------------------------------------
constitutes and appoints the Stockholder Representative as his or her true and
lawful attorney-in-fact to act for and on behalf of such Indemnitor in all
matters relating to or arising out of this Article 10 and the liability or
asserted liability of such Indemnitor hereunder, including specifically, but
without limitation, accepting and agreeing to the liability of such Indemnitor
with respect to any Indemnification Claim, objecting to any Indemnification
Claim, disputing the liability of such Indemnitor, or the amount of such
liability, with respect to any Indemnification Claim and prosecuting and
resolving such dispute as herein provided, accepting the defense, compromise and
settlement of any Third Party Claim on behalf of such Indemnitor or refusing to
accept the same, settling and compromising the liability of such Indemnitor
hereunder, instituting and prosecuting such actions (including arbitration
proceedings) as the Stockholder Representative shall deem appropriate in
connection with any of the foregoing, retaining counsel, accountants, appraisers
and other advisers in connection with any of the foregoing, all for the account
of the Indemnitor, such Indemnitor agreeing to be fully bound by the acts,
decisions and agreements of the Stockholder Representative taken and done
pursuant to the authority herein granted. Each Indemnitor hereby agrees to
indemnify and to save and hold harmless the Stockholder Representative from any
liability incurred by the Stockholder Representative based upon or arising out
of any act, whether of omission or commission, of the Stockholder Representative
pursuant to the authority herein granted, other than acts, whether of omission
or commission, of the Stockholder Representative that constitute gross
negligence or willful misconduct in the exercise by the Stockholder
Representative of the authority herein granted.
10.11 ARBITRATION. All disputes arising under this Article 10 (other than
-----------
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at issue
and selected by the Stockholder Representative and NDC in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in such place in Washington, D.C. as may be specified
by the arbitrator (or any place agreed to by the Stockholder Representative, NDC
and the arbitrator). The decision of the arbitrator shall be final and binding
as to any matters submitted under this Article 10; provided,
-46-
however, if necessary, such decision and satisfaction procedure may be enforced
by either the Stockholder Representative or NDC in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. All costs and expenses incurred in connection with any such
arbitration proceeding (including reasonable attorneys fees) shall be borne by
the party against which the decision is rendered, or, if no decision is
rendered, such costs and expenses shall be borne equally by the Indemnitors as
one party and the Indemnitees as the other party. If the arbitrator's decision
is a compromise, the determination of which party or parties bears the costs and
expenses incurred in connection with any such arbitration proceeding shall be
made by the arbitrator on the basis of the arbitrator's assessment of the
relative merits of the parties' positions.
10.12 DIVESTITURE TAXES.
-----------------
(a) For purposes of 10.1(c) above, a "Tax" shall mean any federal,
state, local or foreign Tax and shall be determined by assuming (i) that the
only net operating loss available to offset income or gain related to the
Divestiture is equal to 30% of the combined net operating loss of the Source
Entities computed as of the Closing Date (determined by assuming that Tax
Returns would have been filed for a period ending on the Closing Date and
exclusive of any loss related to the Divestiture), and (ii) that such Tax
attributable to the Divestiture is represented by the difference between (x) the
Tax liability of Source for a hypothetical reporting period ending on the
Closing Date and including the Divestiture computed based on the assumption
contained in paragraph (i), and (y) the Tax liability of Source for such a
period computed assuming that no taxable income or gain had resulted from the
Divestiture.
(b) Tax Returns for any period including the Divestiture shall be
prepared by NDC and subject to review and approval of the Stockholder
Representative with respect to the treatment of the Divestiture in the Tax
Returns and the determination of the combined net operating loss of the Source
Entities.
(c) The Stockholder Representative and NDC agree to cooperate in a
commercially reasonable manner in the preparation and filing of the Tax Returns
for Source for any period including the Divestiture such that such Tax Returns
shall be filed within the applicable filing deadlines.
ARTICLE 11
TERMINATION
-----------
11.1 TERMINATION. Notwithstanding any other provision of this
-----------
Agreement, and notwithstanding the approval of this Agreement by the
stockholders of Source, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of NDC and Source; or
(b) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this
-47-
Agreement) in the event of a material breach by the other Party of any
representation or warranty contained in this Agreement which cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching Party of such breach and which breach is reasonably likely, in the
opinion of the non-breaching Party, to have, individually or in the
aggregate, a Source Material Adverse Effect or a NDC Material Adverse Effect,
as applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of Source fail to vote their approval of the matters relating to
this Agreement and the transactions contemplated hereby at the Stockholders'
Meeting where such matters were presented to such stockholders for approval
and voted upon; or
(e) By either Party in the event that the Merger shall not have been
consummated by January 31, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
Section 11.1(e); or
(f) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
11.1(e); or
(g) By NDC, in the event that the Board of Directors of Source shall
have failed to reaffirm its approval of the Merger and the transactions
contemplated by this Agreement (to the exclusion of any other Acquisition
Proposal), or shall have resolved not to reaffirm the Merger, or shall have
affirmed, recommended or authorized entering into any other Acquisition
Proposal or other transaction involving a merger, share exchange,
consolidation or transfer of substantially all of the Assets of Source; or
(h) By Source if the Average Closing Price on the Determination Date
of shares of NDC Common Stock shall be less than the Lower Threshold Amount;
subject, however, to the following three sentences. If Source elects to
refuse to consummate the Merger pursuant to this Section 11.1(h), it shall
give written notice thereof to NDC not later
-48-
than two trading days following the Determination Date. During the five-day
period commencing with its receipt of such notice, NDC shall have the option,
in its sole discretion, to elect to revise the Common Exchange Ratios to
equal that fraction of a share of NDC Common Stock (rounded to the nearest
ten thousandth of a share) obtained by dividing the product of the Common
Base Exchange Ratio or the Common Escrow Exchange Ratio, as the case may be,
and the Lower Threshold Price by the Average Closing Price at the
Determination Date. If NDC makes an election contemplated by the preceding
sentence, within such five-day period, it shall give prompt written notice to
Source of such election and the revised Common Exchange Ratios, whereupon the
condition to consummation provided in this Section 11.1(h) shall be deemed to
be satisfied and this Agreement shall remain in effect in accordance with its
terms (except as the Common Exchange Ratios shall have been so modified), and
any references in this Agreement to "Common Exchange Ratios" shall thereafter
be deemed to refer to the Common Exchange Ratios as adjusted pursuant to this
Section 11.1(h); or
(i) By Source in the event that Source has entered into negotiations
with a third party in accordance with Sections 8.1 and 8.8 of this Agreement,
and pursuant to the continuing fiduciary duties of the Source's Board of
Directors as required by applicable Law, Source has entered into a binding
Acquisition Proposal with a third party.
11.2 EFFECT OF TERMINATION. In the event of the termination and abandonment
---------------------
of this Agreement pursuant to Section 11.1, this Agreement shall become void and
have no effect, except that (i) the provisions of this Section 11.2 and Article
12 and Section 8.6(b) shall survive any such termination and abandonment, and
(ii) a termination pursuant to Sections 11.1(b), 11.1(c) or 11.1(f) shall not
relieve the breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 DEFINITIONS.
-----------
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACCRUED BONUSES" shall mean the amount equal to that percentage of
budgeted annual bonuses for Source's fiscal year 1998 equal to the ratio of
the earnings of Source through the date of calculation to budgeted earnings
for the full fiscal year. All budgeted amounts used herein to be as set
forth in Schedule 5.5 of the Source Disclosure Memorandum.
-49-
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of,
such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person; or (iii) any other Person for which a
Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by reference.
"AMENDED AND RESTATED ALPHA DATABASE LICENSE AGREEMENT" shall mean
that certain Amended and Restated Alpha Database License Agreement dated July
1, 1994 by and among Xxxxx International Holdings Limited and Xxxxx America
Limited and PMSI and all customer, data provider and service contracts,
agreements or understandings relating thereto.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not carried
on the books and records of such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and wherever located.
"AVERAGE CLOSING PRICE" shall mean the average of the daily closing
sales prices of NDC Common Stock as reported on the NYSE Composite
Transactions reporting system (as reported by The Wall Street Journal or, if
not reported thereby, another authoritative source as chosen by NDC) for the
ten consecutive full trading days in which such shares are traded on the NYSE
ending at the close of trading on the date specified.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by Source and filed with the Secretary of State of the State of
Delaware relating to the Merger as contemplated by Section 1.1.
"CLOSING BALANCE SHEET" shall mean the balance sheet which includes
the consolidated financial position of Source and the Source Subsidiaries as
of the Closing Date delivered to the Stockholder Representative.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CLOSING WORKING CAPITAL" shall mean the Working Capital determined
based on the Closing Balance Sheet.
-50-
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that
is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Source
Material Adverse Effect or a NDC Material Adverse Effect, as applicable.
"DETERMINATION DATE" shall mean the close of trading on the tenth
trading day immediately preceding the Closing Date.
"DGCL" shall mean the Delaware General Corporation Law.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the
environment, including the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.
("RCRA"), and other Laws relating to emissions, discharges, releases, or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Material.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
-51-
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXHIBITS" 1 through 15, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred
to in this Agreement and any other related instrument or document without
being attached hereto.
"FINAL WORKING CAPITAL" shall mean Closing Working Capital (i) as
shown in NDC's calculation delivered pursuant to Section 3.3(a), if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
3.3(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed
by NDC and the Stockholder Representative pursuant to Section 3.3(b) or (B)
in the absence of such agreement, as shown in the independent accountant's
calculation delivered pursuant to Section 3.3(c); provided that, in no event
shall Final Working Capital be (i) more than the Stockholder Representative's
calculation of Closing Working Capital delivered pursuant to Section 3.3(b),
if any, or (ii) less than the lesser of NDC's calculation of Closing Working
Capital delivered pursuant to Section 3.3(a) or the Stockholder
Representatives calculation of Closing Working Capital delivered pursuant to
Section 3.3(b), if any.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Xxxxxxx Act, as added by Title
II of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INDEMNIFICATION CLAIM" shall mean a claim for indemnification under
Article 10.
"INDEMNITEES" shall mean NDC, Source and their respective officers,
directors, controlling persons, Affiliates and Representatives.
"INDEMNITORS" shall mean the Stockholders.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating
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thereto), trade secrets, franchises, know-how, inventions, and other
intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"JOINT VENTURE FINANCIAL STATEMENTS" shall mean a balance sheet of the
Joint Venture (including related notes and schedules, if any), and the
related statements of income and cash flows for the Joint Venture
(including related notes and schedules, if any) for the period ended March
31,1997.
"JOINT VENTURE" shall mean the combination of the business conducted
in the United States by Source and its subsidiaries as of the date of this
Agreement and the PMSI Joint Venture Interest.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known after due inquiry by the
chairman, president, chief financial officer, chief accounting officer,
chief operating officer, general counsel, any assistant or deputy general
counsel, or any senior, executive or other vice president or general
manager of such Person and the knowledge of any such persons obtained or
which would have been obtained from a reasonable investigation.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination
or investigation, hearing,
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administrative or other proceeding relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement.
"LOSSES" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including
special and consequential damages), liabilities, costs, and expenses,
including interest, penalties, cost of investigation and defense, and
reasonable attorneys' and other professional fees and expenses.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the Nasdaq National Market, a
district tier of The Nasdaq Stock Market operated by The Nasdaq Stock
Market, Inc., a wholly-owned subsidiary of the National Association of
Securities Dealers Automated Quotations System.
"NDC CAPITAL STOCK" shall mean, collectively, the NDC Common Stock,
the NDC Preferred Stock and any other class or series of capital stock of
NDC.
"NDC COMMON STOCK" shall mean the $0.125 par value common stock of
NDC.
"NDC DISCLOSURE MEMORANDUM" shall mean the written information
entitled "National Data Corporation Disclosure Memorandum" delivered prior
to the date of this Agreement to Source describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made unless such disclosure is reasonably
adequate to inform the other party that each matter disclosed would be
responsive to another section of disclosure in the Disclosure Memorandum.
"NDC ENTITIES" shall mean, collectively, NDC and all NDC Subsidiaries.
"NDC FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of NDC as of
February 28, 1997, and as of May 31, 1996 and 1995, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
February 28, 1997, and for each of the three fiscal years ended May 31,
1996, 1995 and 1994, as filed by NDC in SEC Documents, and (ii) the
consolidated balance sheets of NDC (including related notes and schedules,
if any) and related statements of income, changes in stockholders' equity,
and cash flows (including related notes and schedules, if any) included in
SEC Documents filed with respect to periods ended subsequent to February
28, 1997.
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"NDC MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of NDC and its Subsidiaries, taken as a
whole, or (ii) the ability of NDC to perform its obligations under this
Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "Material Adverse Effect"
shall not be deemed to include the impact of (a) actions and omissions of
NDC (or any of its Subsidiaries) taken with the prior informed written
Consent of Source in contemplation of the transactions contemplated hereby,
and (b) the direct effects of compliance with this Agreement on the
operating performance of NDC, including expenses incurred by NDC in
consummating the transactions contemplated by this Agreement.
"NDC PREFERRED STOCK" shall mean the $1.00 par value preferred stock
of NDC.
"NDC RIGHTS AGREEMENT" shall mean that certain Rights Agreement, dated
January 18, 1991, between NDC and Wachovia Bank of North Carolina, N.A., as
Rights Agent.
"NDC RIGHTS" shall mean the preferred stock purchase rights issued
pursuant to the NDC Rights Agreement.
"NDC SUBSIDIARIES" shall mean the Subsidiaries of NDC and any
corporation or other organization acquired as a Subsidiary of NDC in the
future and held as a Subsidiary by NDC at the Effective Time.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest
(including an interest in a fiduciary capacity), and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either Source or NDC, and "PARTIES" shall mean both
Source and NDC.
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"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PMSI JOINT VENTURE INTEREST" shall mean all of the rights, benefits,
obligations and interests of PMSI under the Amended and Restated Alpha
Database License Agreement.
"PRELIMINARY BALANCE SHEET" shall mean the balance sheet which
includes the consolidated financial position of Source and the Source
Subsidiaries as of the most recent month ending more than ten days prior to
the Closing Date delivered to NDC.
"PURCHASE PRICE" shall mean the total consideration to be paid to the
Stockholders by NDC for the purchase of the Source Common Stock and the
Source Preferred Stock, pursuant to Section 3.1 of this Agreement.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-
effective amendments or supplements thereto, filed with the SEC by NDC
under the 1933 Act with respect to the shares of NDC Common Stock to be
issued to the stockholders of Source in connection with the transactions
contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the NYSE,
the NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other governmental
or regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, commissions, boards or bodies having
jurisdiction over the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a
Person.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
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"SIGNIFICANT SUBSIDIARY" shall mean any present or future consolidated
Subsidiary of the Party in question, the assets of which constitute ten
percent (10%) or more of the consolidated assets of such Party as reflected
on such Party's consolidated statement of condition prepared in accordance
with GAAP.
"SOURCE BALANCE SHEET" shall mean the balance sheet which includes the
consolidated financial position of Source and the Source Subsidiaries at
March 31, 1997.
"SOURCE COMMON STOCK" shall mean the $0.01 par value common stock of
Source.
"SOURCE DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Source Informatics Inc. Disclosure Memorandum" delivered prior to
the date of this Agreement to NDC describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made unless such disclosure is reasonably
adequate to inform the other party that each matter disclosed would be
responsive to another section of disclosure in the Disclosure Memorandum.
"SOURCE ENTITIES" shall mean, collectively, Source and all Source
Subsidiaries.
"SOURCE FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheet (including related notes and schedules, if any) of Source and its
Subsidiaries as of June 30, 1996, and the related statement of income,
changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for the fiscal year ended June 30, 1996, and (ii)
the consolidated balance sheet of Source and the Source Subsidiaries
(including related notes and schedules, if any) as of March 31, 1997, and
related statement of income and cash flows (including related notes and
schedules, if any) with respect to the nine month period ended March 31,
1997.
"SOURCE MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of the Joint Venture, or (ii) the
ability of Source to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this
Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) actions and omissions of Source (or any of its
Subsidiaries) taken with the prior informed written Consent of NDC in
contemplation of the transactions contemplated hereby, and (b) the direct
effects of compliance with this Agreement on the operating performance of
Source, including expenses incurred by Source in consummating the
transactions contemplated by this Agreement.
"SOURCE PREFERRED STOCK" shall mean the $1.00 par value preferred
stock of Source.
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"SOURCE SUBSIDIARIES" shall mean the Subsidiaries of Source, which
shall include the Source Subsidiaries described in Section 5.4 and any
corporation or other organization acquired as a Subsidiary of Source in the
future and held as a Subsidiary by Source at the Effective Time but which
exclude the Source Divestiture Subsidiaries.
"STOCKHOLDER REPRESENTATIVE" shall mean a committee comprised of
Messrs. Xxxxxx Xxxxxx, Handel Xxxxx and Xxxxxxx Xxxxx.
"STOCKHOLDERS" shall mean the holders of Source Common Stock.
"STOCKHOLDERS' MEETINGS" shall mean either or both, as indicated, of
the meeting of the holders of Source Common Stock and Source Preferred
Stock to be held pursuant to Section 8.1, including any adjournment or
adjournments thereof.
"SUB COMMON STOCK" shall mean the $0.01 par value common stock of Sub.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii)
in the case of partnerships, serves as a general partner, (iii) in the case
of a limited liability company, serves as a managing member, or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof.
"SURVIVING CORPORATION" shall mean Source as the surviving corporation
resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposes or required to be withheld by the United
States or any state, county, local or foreign government or subdivision or
agency thereof, including any interest, penalties, and additions imposed
thereon or with respect thereto.
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"THIRD PARTY CLAIM" shall mean any Litigation (including, without
limitation, a binding arbitration or an audit by any taxing authority) that
is instituted against an Indemnitee by a Person other than an Indemnitor
and which, if prosecuted successfully, would result in a Loss for which
such Indemnitee is entitled to indemnification hereunder.
(b) The terms set forth below shall have the meanings ascribed thereto
in the referenced sections:
Aggregate Cash Amount Section 3.1(c)
Certificates Section 4.1
Closing Section 1.2
Closing Current Assets Section 3.3(a)
Closing Current Liabilities Section 3.3(a)
Closing Date Section 1.2
Common Base Exchange Ratio Section 3.1(c)
Common Cash Amount Section 3.1(c)
Common Escrow Exchange Ratio Section 3.1(c)
Common Exchange Ratio Section 3.1(c)
Current Asset Allocation Section 3.4(b)
Current Assets Section 3.2(a)
Current Liabilities Section 3.2(a)
Disputed Amounts Section 3.3(c)
Divestiture Section 7.1(b)
Effective Time Section 1.3
Employment Agreements Section 9.1(k)
ERISA Affiliate Section 5.14(b)
Escrow Agreement Section 4.3
Estimated Current Assets Section 3.2(a)
Estimated Current Liabilities Section 3.2(a)
Estimated Working Capital Section 3.2(a)
Estimated Working Capital Adjustment Section 3.2(c)
European Business Section 7.1(b)
European Contracts Section 7.1(b)
Excess Expense Section 3.1(c)
Exchange Agent Section 4.1
Expense Schedule Section 3.1(c)
Final Working Capital Deficit Section 3.4(a)
Final Working Capital Surplus Section 3.4(a)
Indemnified Party Section 8.14(a)
Lower Threshold Amount Section 3.1(c)
Maximum Amount Section 8.14
Merger Section 1.1
NDC SEC Reports Section 6.4(a)
Noncompetition Agreements Section 9.2(k)
Option Shares Section 3.1(c)
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Payment Shares Section 3.1(c)
Preferred Stock Merger Consideration Section 3.1(d)
PMSI Agreement Section 3.1(c)
Scheduled Stockholders Section 5.3
Source Benefit Plans Section 5.14
Source Contracts Section 5.15
Source Divestiture Agreement Section 5.4
Source Divestiture Subsidiaries Section 7.1(b)
Source ERISA Plan Section 5.14
Source Intellectual Property Section 5.10
Source Pension Plan Section 5.14
Stock Escrow Section 3.1(c)
Takeover Laws Section 5.19
Threshold Prices Section 3.1(c)
Total Combined Assets Section 3.4(b)
Total Current Assets Section 3.4(b)
Total Current Liabilities Section 3.4(b)
Total Working Capital Deficit Section 3.4(b)
Total Working Capital Surplus Section 3.4(b)
Transaction Expenses Section 3.1(c)
Upper Threshold Amount Section 3.1(c)
Voting Agreements Section 5.21
Working Capital Section 3.2(a)
(c) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
12.2 EXPENSES.
--------
(a) Excluding the Transaction Expenses and except as otherwise
provided in this Section 12.2, each of the Parties shall bear and pay all direct
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including filing, registration and
application fees, printing fees, and fees and expenses of its own financial or
other consultants, investment bankers, accountants, and counsel, except that
each of the Parties shall bear and pay one-half of the filing fees payable in
connection with the HSR Act.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated pursuant to any of Sections
11.1(c) (but only on the basis of failure of the agreement provided in
Section 8.1 that Source shall call meetings of the Stockholders of Source for
the purpose of voting on the adoption of this Agreement), 11.1(d)(ii) (but
only as it relates to approval of Source's stockholders), or
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(ii) if this Agreement is terminated by NDC pursuant to Section
11.1(g), or
(iii) if this Agreement is terminated by Source pursuant to
Section 11.1(i),
and the conditions to the obligations of Source hereunder pursuant to Section
9.1, except for the provisions of Section 9.1(a), and Section 9.3(a) and 9.3(b),
have been satisfied, then Source shall promptly pay NDC all documented out-of-
pocket costs and expenses of NDC, including costs of counsel, investment
bankers, actuaries and accountants up to a maximum amount of $750,000.
(c) In addition to the foregoing, if, this Agreement is terminated
pursuant to Section 11.1 (c) (but only on the basis of failure of the agreement
provided in Section 8.1 that Source shall call meetings of the Stockholders of
Source for the purpose of voting on the adoption of this Agreement) or Section
11.1(d)(ii) (but only with respect to approval of the stockholders of Source),
Source shall pay to NDC an amount in cash equal to the sum of $3,000,000, which
sum represents compensation for NDC's loss as the result of the transactions
contemplated by this Agreement not being consummated.
(d) In addition to the foregoing, if, after the date of this Agreement
and within twelve (12) months following any termination of this Agreement by NDC
pursuant to Section 10.1(g) or any termination of this Agreement by Source
pursuant to Section 10.1(i) of this Agreement, any third-party shall acquire,
merge with, combine with, purchase substantially all of the Assets of, or engage
in any other business combination with, or purchase any equity securities
involving an acquisition of 50% or more of the voting stock of Source, or enter
into any binding agreement to do any of the foregoing (collectively, a "Business
Combination"), such third-party that is a party to the business combination
shall pay to NDC, as a condition consummation of the Business Combination, an
amount in cash equal to $3,000,000, which sum represents additional combination
for NDC's loss as a result of the transactions contemplated by this Agreement
not being consummated. In the event such third-party shall refuse to pay such
amounts within ten days of demand therefore by NDC, the amount shall be an
obligation of Source and shall be paid by Source promptly upon notice to Source
by NDC. Notwithstanding the foregoing, the payment required by this Section
12.2(d) will only come due if a third party that was involved in discussions or
negotiations with Source on or before the termination of this agreement
consummates the Business Combination.
(e) Nothing contained in this Section 12.2 shall constitute or shall
be deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
12.3 BROKERS AND FINDERS. Except for Xxxxxxxxxx Securities Corporation
-------------------
as to Source and except for Lazard Freres & Co. LLC as to NDC, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the
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transactions contemplated hereby. In the event of a claim by any broker or
finder based upon his or its representing or being retained by or allegedly
representing or being retained by Source or any Stockholder or by NDC, each of
Source and the Stockholders and NDC, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
12.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Sections 8.13 and 8.14.
12.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after stockholder approval of this
Agreement has been obtained; provided, that after any such approval by the
holders of Source Common Stock, there shall be made no amendment that pursuant
to Section 251 of the DGCL requires further approval by such stockholders.
12.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, NDC, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by Source or the Stockholders, to waive or extend the time for the compliance or
fulfillment by Source or the Stockholders of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to the
obligations of NDC under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of NDC.
(b) Prior to or at the Effective Time, Source, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by NDC, to waive or extend the time for the compliance or fulfillment
by NDC of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Source and the
Stockholders under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Source.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed
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as a further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
12.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
12.8 NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Source or
any Stockholder: Source Informatics Inc.
Xxxxx 000
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xx. Xxxxxx Xxxxxx, Esq.
Copy to Counsel: Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxxx, Esq.
NDC: National Data Corporation
Xxxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: E. Xxxxxxx Xxxxxx, Esq.
Copy to Counsel: Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopy Number: (000) 000-0000
Attention: B. Xxxxxx Xxxx, Xx., Esq.
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12.9 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
12.10 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
-------------------------------
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
12.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
---------------
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
12.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
12.14 SEVERABILITY. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
-64-
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
NATIONAL DATA CORPORATION
By: /s/ E. Xxxxxxx Xxxxxx
Name: E. Xxxxxxx Xxxxxx
Title: Senior Vice President
DUNKIRK, INC.
By: /s/ E. Xxxxxxx Xxxxxx
Name: E. Xxxxxxx Xxxxxx
Title: Senior Vice President
SOURCE INFORMATICS INC.
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Vice President
-65-
LIST OF EXHIBITS*
----------------
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
1. Form of Escrow Agreement. ((S) 4.3).
2. Form of Stockholders' Voting Agreement. ((S) 5.21).
3. Form of agreement of affiliates of Source. ((S) 8.12).
4. Matters as to which Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
will opine. ((S) 9.2(d)).
5. Terms of Employment Agreements. ((S) 9.2(f)).
6. Form of Noncompetition Agreement. ((S) 9.2(g)).
7. Form of Source Europe License Agreement.
8. Form of East Asia License Agreement.
9. Form of Source Europe Transition Services Agreement.
10. Form of Assignment of Lease for Source property in Newtown, PA.
11. Form of Sublease for use of property in Newtown, PA.
12. Form of Sublease for use of property in Phoenix, AZ.
13. Form of SL Services Agreement.
14. Form of Waiver. ((S) 9.2(k)).
15. Matters as to which Xxxxxx & Bird LLP will opine. ((S) 9.3(d)).
------------
* Exhibits to be filed by amendment
