-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IEaWcwQt4ejneL5edz6TevVPEJVukWmcW2EoyaT65ItDiydSjIByjR+Lt+n1NQuX h+EYnQlby/AiG+yN1TATLw== 0000931763-01-501573.txt : 20010828 0000931763-01-501573.hdr.sgml : 20010828 ACCESSION NUMBER: 0000931763-01-501573 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20010531 FILED AS OF DATE: 20010827 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL DATA CORP CENTRAL INDEX KEY: 0000070033 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 580977458 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12392 FILM NUMBER: 1724282 BUSINESS ADDRESS: STREET 1: NATIONAL DATA COPRORATION STREET 2: NATIONAL DATA PLAZA CITY: ATLANTA STATE: GA ZIP: 30329 BUSINESS PHONE: 4047282000 MAIL ADDRESS: STREET 1: NATIONAL DATA PLZ CITY: ATLANTA STATE: GA ZIP: 30329-2010 10-K 1 d10k.txt FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-K (Mark One) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 31, 2001 or [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File No. 001-12392 ---------------- NATIONAL DATA CORPORATION (Exact name of issuer as specified in its charter) Delaware 58-0977458 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) National Data Plaza Atlanta, Georgia 30329-2010 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 728-2000 Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, Par Value $.125 Per Share New York Stock Exchange Series A Junior Participating Preferred Stock Purchase Rights New York Stock Exchange 5% Convertible Subordinated Notes due 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filer pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the voting stock held by non-affiliates of the registrant was $1,183,944,980 based upon the last reported sale price on The New York Stock Exchange on August 17, 2001 using beneficial ownership of stock rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting stock owned by all directors and officers of the registrant, some of whom may not be held to be affiliates upon judicial determination. The number of shares of the registrant's common stock, par value $.125, outstanding as of August 17, 2001 was 33,966,583 shares. DOCUMENTS INCORPORATED BY REFERENCE
Document Form 10-K -------- --------- Portions of the Company's Definitive Proxy Statement relating to the 2001 Annual Meeting of Stockholders to be held on October 25, 2001 Part III
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NATIONAL DATA CORPORATION 2001 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS ----------------- PART I. - ------- Item 1. BUSINESS........................................................ 3 Item 2. PROPERTIES...................................................... 10 Item 3. LEGAL PROCEEDINGS............................................... 11 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................................... 11 EXECUTIVE OFFICERS OF THE REGISTRANT............................ 12 PART II - ------- Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................... 13 Item 6. SELECTED FINANCIAL DATA......................................... 15 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................. 16 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................. 34 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................... 35 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........................ 71 Part III - -------- Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................................................... 71 Item 11. EXECUTIVE COMPENSATION.......................................... 71 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................ 71 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 71 PART IV - ------- Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K........................................... 72 SIGNATURES................................................................ 78 INDEX TO EXHIBITS......................................................... 80 SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS When used in this Annual Report on Form 10-K, in documents incorporated herein and elsewhere by management of National Data Corporation ("NDCHealth" or the "Company"), from time to time, the words "believes," "anticipates," "expects," "intends," "plans" and similar expressions and statements that are necessarily dependent on future events are intended to identify forward-looking statements concerning the Company's business operations, economic performance and financial condition, including in particular, the Company's business strategy and means to implement the strategy, the Company's objectives, the amount of future capital expenditures, the likelihood of the Company's success in developing and introducing new products and expanding its business, and the timing of the introduction of new and modified products or services. For such statements, the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 is applicable and invoked. Such statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, uncertainties and contingencies that are subject to change. Actual revenues, revenue growth and margins will be dependent upon all such factors and their results subject to risks related to the implementation of changes by the Company, the failure to implement changes, and customer acceptance of such changes or lack of change. There can be no assurance of the expected benefits and prospects for alliances that may be entered into from time to time. These alliances involve risks and uncertainties, including market and customer acceptance of the relationship, the effect of economic conditions, competition, pricing, and development difficulties. Actual results of events could differ materially from those anticipated in the Company's forward-looking statements as a result of a variety of factors, including: (a) those set forth under the caption "Additional Factors that May Affect Future Performance"; (b) those set forth elsewhere herein; (c) those set forth from time to time in the Company's press releases and reports and other filings made with the Securities and Exchange Commission; and (d) those set forth from time to time in the Company's analyst calls and discussions. The Company cautions that such factors are not exclusive. Consequently, all of the forward-looking statements made herein are qualified by these cautionary statements and readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update forward-looking or other statements or to publicly release the results of any revisions of such forward-looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of unanticipated events. 2 PART I ------ Item 1. BUSINESS - ----------------- General National Data Corporation ("NDC", "NDCHealth" or the "Company") is a Delaware corporation incorporated in 1967. On January 31, 2001, NDC completed the spin-off of its eCommerce business segment, Global Payments Inc. ("Global Payments"), into a separate publicly traded company with its own management and Board of Directors to permit the Company to increase focus on its core healthcare businesses. As a result of the spin-off, NDC's Health Information Services business segment remains as a stand-alone integrated company operating as NDCHealth. NDCHealth will continue its focus on providing a full range of services to the healthcare industry through our integrated intelligent network solutions and point-of-service systems as well as information management solutions. Our point-of-service systems, offered directly and indirectly through alliances, enhance connectivity to our intelligent network and increase our transaction volume and data sources. We provide point-of-service systems, high volume, network-based information solutions and information management services to the healthcare industry. Our offerings include electronic claims processing, eligibility verification, claims adjudication and payment systems, processing of administrative and clinical transactions, database information reporting on prescription drug sales and pharmacy operations, consulting services, and practice management systems. We provide products and services to pharmacies, physicians, hospitals, integrated delivery systems, managed care organizations, payers, government healthcare agencies, distributors, clinics, Internet portals, pharmaceutical manufacturers and other healthcare providers and related businesses. Our business strategy centers on providing integrated solutions. We offer answers to fulfill our customers' needs with respect to information processing services for the healthcare industry. We believe that this strategy provides the greatest opportunity for leveraging our existing infrastructure to maintain a consistent base of recurring revenues. We believe that the healthcare market offers attractive opportunities for continued growth. In pursuing our business strategy, we seek both to increase our penetration of existing markets and to identify and create new related markets through the development of new applications, enhancement of existing products, and increasing Internet utilization. Additionally, we are expanding our distribution channels, including through the Internet and, where appropriate, investing in or forging alliances with companies that have compatible products, services, development, and/or distribution capabilities. NDCHealth serves a diverse customer base consisting of more than 100,000 physicians. More than ninety percent of the pharmacies in North America and twenty-five percent of the pharmacies in the United Kingdom are linked to our value added services; approximately forty percent of the nation's large (400+ beds) hospitals are NDCHealth customers; over 100 pharmaceutical manufacturers and over 45 retail pharmacy chains 3 rely on NDCHealth for information management services; and NDCHealth has value- added electronic connections to more than 1,000 commercial and governmental healthcare payers. In addition, we are in the early phases of entering the German and U.K. information markets. We believe that our presence in the pharmacy, managed care organization, physician, hospital, pharmaceutical manufacturer, and healthcare payer markets is broader than any other similar healthcare information company and provides us with a strong competitive advantage. Further, the Internet provides NDCHealth with new product opportunities for handling financial, administrative and clinical transactions as well as for information management services. We are aggressively building upon our systems, network and information management capabilities to take advantage of the Internet. As the Internet has expanded the market to new users and provided new distribution channels, we have and will continue to Internet-enable our existing and new products and services in a secured environment. Our intelligent network solutions provide transaction processing services between providers and payers. Our intelligent network goes beyond simple data transport by offering customized validation and information processes for a broad range of transaction types among multiple providers and payers. The point- of-service systems that we offer directly and through various alliances and strategic investments provide our customers with applications to improve their efficiency of operation, promote cost containment and enhance the overall quality and predictability of patient care outcomes, while providing enhanced connectivity and additional transaction volume to our intelligent network. Our information management service solutions include proprietary healthcare information, consulting services and customized business intelligence solutions for our customers' emerging healthcare business issues. These services are currently offered primarily to pharmaceutical manufacturers, retail chain pharmacies and hospitals. It is our intent to expand our markets for these services to include physicians and payers. Our services assist our customers in managing costs and enhancing the quality of patient care. Our applications help our customers better manage revenue and cash flow, reduce overhead costs, react quickly to changing market conditions, improve business operations and streamline administrative processes. Our revenue consists of recurring transaction processing fees, monthly maintenance and support fees, information management subscription fees, consulting services and software license revenue. Acquisitions, Investments and Strategic Alliances From time to time, we have made acquisitions and investments and entered into strategic alliances in an effort to obtain a competitive advantage or an expanded presence in targeted markets. During the past several years, we made strategic acquisitions in Western Europe to broaden the market for our information management service solutions. We have entered into several new alliances with point of service providers such as Siemens, PDX, TechRx and Vitalworks for intelligent network solutions. These relationships should increase the demand for connectivity to our intelligent network in the future. 4 Subsequent to the end of fiscal 2001, we entered into an ongoing relationship with MedUnite, Inc. and sold our physician network services business to MedUnite, Inc. As a result of this alliance, NDCHealth became a founding investor in MedUnite, Inc. with leading national payers. This alliance should allow us to receive a growing revenue stream from network services sold to our physician system customers. For information regarding our acquisitions, please see Note 2 to the Consolidated Financial Statements. We believe that acquisitions, investments and strategic alliances will continue to be important to our ability to compete effectively. Healthcare Market We believe that the integrated services that we offer to the healthcare industry place us strategically in the center of a very dynamic marketplace. Because of our unique position, we manage healthcare related information from the point of patient contact through the point of payment. Through our information management solutions we provide our customers with useable information while maintaining high standards for patient confidentiality. There is a growing worldwide need in healthcare for information solutions and health information technology services. Industry estimates are that over $1.2 trillion is spent annually on healthcare in the United States alone. Of this amount, $210 billion is spent on administrative tasks and $400 billion is spent on inappropriate treatment, while only $590 billion is spent on appropriate treatment. We believe that our integrated solutions provide information and services useful in reducing administrative and other related healthcare costs and expenses and enhancing the quality of care. Additionally, the aging worldwide population is providing more need for improved information technology services relating to the healthcare industry. Because a high percentage of healthcare transactions are still handled using manual, paper- based methods, or are not being consistently performed, we believe that the healthcare industry is one of the largest untapped markets for providing information services. Our solutions provide the tools to help providers and payers reduce administrative expense and improve the clinical experience, while at the same time providing a robust source for statistical and analytical information required by our customers. Government Regulation The healthcare industry is highly regulated and is subject to changing political, regulatory and other influences. These factors affect the purchasing practices and operation of healthcare organizations such as our customers. Federal and state legislatures and agencies periodically consider programs to reform or revise the U.S. healthcare system. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. We are unable to predict future proposals with any certainty or to predict the effect they would have on our business. 5 In addition, a number of recent legislative and regulatory changes may significantly impact our business. Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, Congress required the adoption of rules to establish standards and requirements for the electronic transmission of certain health information. These rules generally govern the use and disclosure of patient-identifiable health information, and apply to certain of our operations as well as the operations of many of our customers. See detailed discussion in "Additional Factors that May Affect Future Performance." Products, Services and Distribution Channels The following discussion provides greater detail on our major products and services and our distribution channels. NDCHealth, MediSoft, Lytec and Concept are service marks or trademarks, or registered service marks or trademarks, of NDCHealth. Network Services and Systems Solutions We believe our intelligent network and point-of-service systems streamline our customers' workflow, improve cash flow, provide real-time information to help providers better manage their practices, and give the healthcare industry new and improved methods to assure a higher quality of care at a lower cost. We process over five billion transactions per year including those that we process for Global Payments Inc., our former eCommerce business segment, under a network services agreement. Over two billion of these transactions are healthcare transactions and the value of the healthcare claims processed is over $250 billion. We believe that our real-time intelligent health information network is the world's largest and most advanced. We offer our customers NDCHealth proprietary solutions as well as those of our multiple alliance partners. The point-of-service systems that we offer help our customers improve efficiency and reduce costs while also serving as an additional source of transaction volume for our intelligent network. We offer payers customized real-time electronic connectivity to our provider networks through the NDCHealth intelligent network, including Internet access for claims/encounter editing, submission and adjudication, eligibility verification, remittance advice, referral authorization, and claim status and tracking. We also offer payers the ability to receive non-HIPAA transactions through the NDCHealth intelligent network, saving payers from costly legacy system conversions. We believe that with the growing acceptance of healthcare technology and the need to speed payment while reducing costs, there will be a significant increase in the number and types of electronic transactions. Many of the new transaction types may have broad impact across the healthcare continuum. For example, new solutions such as electronic prescriptions add new information management needs as well as directly impacting the way physicians, hospitals, pharmacies and payers practice and do business. Other examples include electronic referrals by physicians to hospitals and the increased 6 use of medical data by physicians, hospitals and other providers to satisfy new types of healthcare information needs. Accordingly, we expect growth opportunities from further automating existing NDCHealth customers. This will happen as a result of the continued increase in transactions as the population ages and increased use of electronic transmission for both existing transaction sets and new transaction sets. We believe that the HIPAA requirements will accelerate this trend. Our Network Services and Systems solutions distributed to the pharmacy, hospital and physician markets described below generally represent between 55% and 60% of our revenues: Pharmacy Solutions Our pharmacy solutions include transaction processing, information management services, value added pre- and post-transaction edit processes, payer adjudication services and, through our alliance with TechRx Incorporated, in-store practice management systems. More than ninety percent of the pharmacies in North America and twenty-five percent of the pharmacies in the United Kingdom are linked to our value added services, totaling over 55,000 chain, independent, mail order, managed care and institutional outlets. Our pharmacy solutions are currently offered in the United States, Canada and the United Kingdom through the Internet, our direct sales force, and alliance partners. We compete with many companies; however, we believe that we are the largest provider of pharmacy solutions in North America. Hospital Solutions Our hospital solutions provide transaction processing, Internet-based services and application software to support the administrative, financial and clinical information management requirements of hospitals and health systems in the United States. Our over 1,200 hospitals and health system customers represent approximately 40% of hospitals in the United States with more than 400 beds. Our application software solutions include claims preparation and submission, payer specific edits, eligibility verification, remittance management, compliance management and document storage. These solutions provide additional transaction volume and interface with our intelligent network to access our transaction processing solutions. We compete with many companies; however, we believe that we are the largest provider of network transaction solutions to large hospitals in North America. Our hospital solutions are offered in the United States through our direct sales force as well as through multiple strategic alliances. 7 Physician Solutions Our physician solutions provide practice management systems and, through our alliance with MedUnite, Inc., transaction processing services to support the administrative, financial and clinical information management requirements of physicians. We believe more than 100,000 physicians in the United States use one or more of our systems or services, including our industry leading, Windows-based practice management systems: MediSoft, Lytec and Concept. In addition, we have a number of alliance partners through which we offer our solutions. Through our alliance with MedUnite, Inc., we are able to offer transaction processing solutions providing claim/encounter editing, submission and adjudication, authorization, and prescription order and refill authorization. Our physician solutions are offered in the United States through value- added resellers, direct mail, our direct sales force, alliance partners, and the Internet. Information Management Solutions We provide sales and marketing management information, research and consulting services, and customized business intelligence information solutions to more than 100 pharmaceutical manufacturers and 45 pharmacy chains, with sales to a single customer representing approximately 11% of total NDCHealth revenue. Our offerings include numerous products and services and customized solutions that draw statistical and analytical inferences and models from our data repository. Our data repository is managed and maintained in a 28-terabyte dynamic data warehouse. Our solutions transform this vast volume of anonymous patient data into information that our customers can use in order to more effectively manage their businesses and provide better patient care. This information includes data sets with information on prescription sales, rebates, and sampling as well as demographic and prescription information on managed care payers, pharmacy providers, physician over the counter recommendations, physician and healthcare providers, retail prescription sales, non-retail institutional sales and non-retail outlets. NDCHealth is able to provide this information in a secure environment respecting the confidentiality, privacy and ownership of patient and provider records. Our customers are able to use this information in analyzing issues such as prescriber targeting and profiling, product research and development, new product launches, sales compensation and management, the influence of managed care, pricing, clinical information and payment information. These solutions generally represent between 40% and 45% of our revenue. Our information solutions are offered in the United States and in early phase operations in the United Kingdom and Germany through our direct sales force. Our primary competitor in providing these solutions is IMS Health. 8 Operations and Systems Infrastructure We operate multiple data and customer support facilities. The primary facilities are in Atlanta, Georgia; Phoenix, Arizona; Tulsa, Oklahoma; the United Kingdom; and Germany. Because of the large number and variety of our products and services, we do not rely on a single technology to satisfy our sophisticated computer systems needs but instead employ technology that is suitable for each particular processing requirement. Given this approach, we utilize (i) fault-tolerant computers for high volume, real-time transaction processing; (ii) client-server technology for end-user data base applications; (iii) Internet technology for transaction processing among computers in our solutions; (iv) Internet solutions to reach directly to providers and pharmaceutical manufacturers; (v) the latest central systems for large scale transaction and batch data processing; and (vi) HP, Compaq, SUN, IBM, UNIX, Dell, NT and Windows-based systems for specialized communication and data base applications systems. The larger systems are linked via high speed, fiber-optic based networked backbones for file exchange and inter-system communication purposes; other systems use high speed LAN connections. The bulk of these system connections utilize the Internet TCP/IP architecture. We also maintain storage systems connected to the backbones, including robotic tape libraries and optical storage for archival purposes. Our systems are supported using advanced network control by our experienced systems, operations and production control staffs. Our communications network is made up of numerous discrete networks, each designed for a different purpose. We maintain four primary communications networks in addition to our support of the public Internet: a dial-up, short transaction network; a private line nationwide high bandwidth network; a frame relay network; and a dial-up voice/data network for interactive and voice traffic. We also maintain a number of support services offering wireless, Internet and ISDN connectivity. The network environment supports a diverse set of telecommunication protocols to respond to its diverse customer requirements. Research and Development During fiscal 2001, 2000, and 1999, NDCHealth expended approximately $17.5 million, $20.7 million, and $20.0 million, respectively, on activities relating to the development and improvement of new and existing products, services and techniques. Of these amounts, approximately $9.0 million, $9.6 million, and $9.5 million were capitalized in fiscal 2001, 2000, and 1999, respectively, resulting in net expenses of approximately $8.5 million, $11.1 million, and $10.5 million, respectively. 9 Employees As of May 31, 2001, NDCHealth had approximately 1,650 employees. On August 6, 2001, we announced the sale of our physician network services business to MedUnite, Inc. As a result of this transaction, we currently have approximately 1,450 employees. Many of our employees are professionals or are highly skilled in technical areas specific to the healthcare industry, and we believe that our current and future operations depend substantially on retaining such employees. Our employees are not represented by any labor union and we believe our employee relations to be excellent. Item 2. PROPERTIES - ------------------- Our corporate headquarters are located in Atlanta, Georgia. We occupy a six-story, 120,000 square foot building at Two National Data Plaza in Atlanta, Georgia. There is no outstanding debt on the facility. Additionally, in May 1999, we purchased a previously leased (by NDC), fully occupied five-story, 85,000 square foot building at Four Corporate Square in Atlanta. This facility is currently leased to Global Payments Inc. for a term ending January 31, 2004. There is an existing $3.1 million mortgage on this facility which we assumed from the seller. In addition to the above facilities, we lease or rent a total of 22 other facilities. Of these 22, three are primary locations and 19 are sales and support offices. Included in these totals are five foreign locations. We own or lease a variety of computers and other computer equipment for our operational needs. We continue to upgrade and expand our computers and related equipment in order to increase efficiency, enhance reliability, and provide the necessary base for business expansion. We believe that our facilities and equipment are suitable and adequate for the business of NDCHealth as presently conducted. Information about leased properties is incorporated by reference from Note 15 of the Notes to the Consolidated Financial Statements. 10 Item 3. LEGAL PROCEEDINGS - -------------------------- We are involved in litigation related to our divested Physician and Hospital Support Services and Hospital Management Services (PHSS) units. We have obtained a ruling from the European Commission ordering IMS Health to license its structure for organizing pharmaceutical sales data to us. We are unable to predict whether IMS Health may be successful in overturning the EU ruling. Additionally, we are party to a number of other claims and lawsuits incidental to our business. We believe that the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on our financial position, liquidity or results of operations. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ None submitted. 11 EXECUTIVE OFFICERS OF THE REGISTRANT The names, titles, ages, and business experience of all present executive officers of the Company are listed below. All officers hold office at the pleasure of the Board of Directors, unless they earlier retire or resign.
Name Business Experience Age ---- ------------------- --- Walter M. Hoff President and Chief Executive Officer of NDCHealth since April 2001, 48 Chief Executive Officer of NDC Health Information Services from August 1998 to March 2001; Executive Vice President of First Data Corporation from 1992 to 1998. Director of Metris Corporation. Randolph L.M. Hutto Executive Vice President - Finance and Business Development and Chief 52 Financial Officer of NDCHealth since November 2000; Executive Vice President and General Counsel of Per-Se Technologies from 1998 to 2000; Senior Vice President - Strategic Planning and Business Development of First Data Corporation from 1996 to 1998. Charles W. Miller Executive Vice President - Operations of NDCHealth since January 2000; 56 various executive positions with McKesson from 1995 to 2000, most recently as Group President - Enterprise Operations. Glenn N. Rosenkoetter Executive Vice President - Sales and Marketing of NDCHealth since April 53 2000; Group President - Payor Solutions Group, and European Operations for the Information Technology Business of McKesson from 1998 to 2000; Senior Vice President - Strategic Business Units of HBO & Company from 1994 to 1998. E. Christine Rumsey Vice President - Human Resources of NDCHealth since September 1999; 50 Senior Vice President - Human Resources and Administration for McKesson from January to September 1999; Senior Vice President - Human Resources for HBO & Company from 1995 to 1999.
12
Name Business Experience Age ---- ------------------- --- David H. Shenk Vice President, Corporate Controller and Chief Accounting Officer of 53 NDCHealth since January 1998; Corporate Controller, Rollins, Inc., 1992-1997. Patricia A. Wilson General Counsel and Secretary of NDCHealth since October 2000; partner 50 with Troutman Sanders LLP from 1988 to 2000.
PART II ------- Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------ Our common stock is traded on the New York Stock Exchange under the ticker symbol "NDC." The high and low sales prices and dividends declared per share of the Company's common stock for each quarter during the last two fiscal years are listed below. The amount of our quarterly dividend was reduced in the third quarter of fiscal 2001 due to the spin-off of Global Payments. While we have historically paid dividends to owners of our common stock, the declaration and payment of future dividends will depend on many factors, including our earnings, financial condition, business needs, capital and surplus, and regulatory considerations, and is at the discretion of our Board of Directors.
Dividend High Low Per Share - ------------------------------------------------------------------------------------------------------- Fiscal Year 2001 First Quarter $31.38 $20.75 $.075 Second Quarter 38.94 27.31 .075 Third Quarter 38.90 23.90 .040 Fourth Quarter 30.80 21.17 .040 Fiscal Year 2000 First Quarter $51.56 $37.14 $.075 Second Quarter 40.62 21.58 .075 Third Quarter 42.79 30.04 .075 Fourth Quarter 31.34 22.00 .075
The number of shareholders of record as of August 17, 2001 was 3,563. 13 On January 31, 2001, we completed the spin-off of Global Payments Inc. The Company's shareholders received 0.8 share of Global Payments Inc. common stock for each share of common stock held as of the January 19, 2001 record date. In light of the spin-off and the resulting change in sales price of our common stock, the high and low sales prices of our common stock for each quarter during the last two fiscal years listed below have been adjusted to reflect the spin- off. High Low - ----------------------------------------------------------------------- Fiscal Year 2001 First Quarter $19.17 $12.65 Second Quarter 23.79 16.69 Third Quarter 27.46 17.45 Fourth Quarter 30.80 21.17 Fiscal Year 2000 First Quarter $31.43 $22.64 Second Quarter 24.76 13.16 Third Quarter 26.08 18.31 Fourth Quarter 19.11 13.41 14 Item 6. SELECTED FINANCIAL DATA - -------------------------------- The table below summarizes selected historical financial information of NDCHealth for each of the last five fiscal years. All amounts have been restated on a continuing operations basis. Discontinued operations and restructuring, impairment, and non-recurring charges are more fully discussed in the Notes to the Consolidated Financial Statements. The selected financial information shown below has been derived from our audited financial statements. This table should be read in conjunction with other financial information included in this report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements.
(In thousands, except per share data) Fiscal Years Ended May 31, ------------------------------------------------------ 2001 2000 1999 1998 1997 ------------------------------------------------------ Revenue: Information Management $138,091 $ 131,229 $128,961 $ 55,223 - Network Services and Systems 205,862 158,051 141,832 130,994 $109,521 Divested Businesses 5,862 56,393 68,203 62,929 64,300 ------------------------------------------------------ Total $349,815 $ 345,673 $338,996 $ 249,146 $173,821 Operating Income (Loss) $ 58,861 $ 12,383 $ 62,104 ($82,595) $ 15,215 Income (Loss) Before Discontinued Operations $ 28,068 ($ 1,163) $ 33,863 ($90,013) $ 4,175 Diluted Earnings (Loss) Per Share Before Discontinued Operations $ .82 ($.03) $ .97 ($2.80) $ .13 Dividends Declared Per Share $ .23 $ .30 $ .30 $ .30 $ .30 Total Assets $488,212 $ 653,632 $534,723 $ 482,961 $391,136 Long-Term Obligations $155,431 $ 160,250 $165,013 $ 160,040 $144,855 Total Shareholders' Equity $230,467 $ 330,136 $409,094 $ 347,935 $323,249
The Company incurred restructuring and impairment charges of $2.2 million and $34.4 million in fiscal 2001 and 2000, respectively, and non-recurring charges of $119.5 million and $9.5 million in fiscal 1998 and 1997, respectively. Operating income excluding these charges was $61.0 million, $46.8 million, $36.9 million and $24.7 million in fiscal 2001, 2000, 1998 and 1997, respectively. Income before discontinued operations excluding these charges was $29.5 million or $0.86 per share, $21.2 million or $0.64 per share, $20.8 million or $0.64 per share, and $14.6 million or $0.45 per share in fiscal 2001, 2000, 1998 and 1997, respectively. 15 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS - ------------- General For an understanding of the significant factors that influenced our results during the past three years, the following discussion should be read in conjunction with the consolidated financial statements of NDCHealth and related notes appearing elsewhere in this report. As a result of the January 31, 2001 spin-off of Global Payments Inc., NDC's eCommerce business segment, NDC's Health Information Services business segment remains as a stand-alone integrated company operating as NDCHealth. NDCHealth classifies its business into two fundamental segments: Network Services and Systems; and Information Management. Network Services and Systems provides point of service systems, high volume, network based information solutions and information management services to the healthcare industry. Our products and services are provided to pharmacies, physicians, hospitals, integrated delivery systems, managed care organizations, payers, government healthcare agencies, distributors, clinics, Internet portals, and other healthcare providers and related businesses and include electronic claims processing, eligibility verification, claims adjudication and payment systems, provision of administrative and clinical services, and physician practice management systems. NDCHealth serves a diverse customer base comprised of more than 100,000 physicians. More than ninety percent of the pharmacies in North America and twenty-five percent of the pharmacies in the United Kingdom are linked to our value added services; approximately forty percent of the nation's large (400+ beds) hospitals are NDCHealth customers; and NDCHealth has value-added electronic connections to more than 1,000 commercial and governmental healthcare payers Information Management products and services provided to pharmaceutical manufacturers, pharmacy chains and hospitals include database information reporting on prescription drug sales and pharmacy operations and consulting services. Our customer base is comprised of over 100 pharmaceutical manufacturers and 45 pharmacy chains. Additionally, we are in the early phases of entering the German and U.K. information markets. We believe that our presence in the pharmacy, managed care organization, physician, hospital, pharmaceutical manufacturer, and healthcare payer markets is broader than any other similar healthcare information company and provides us with a strong competitive advantage. 16 Results of Operations On January 31, 2001, NDC completed the spin-off of its eCommerce business segment, Global Payments Inc., into a separate publicly traded company with its own management and Board of Directors to permit the remaining company to increase focus on its healthcare information businesses. As a result of the spin-off, the Company's financial statements have been prepared with Global Payments' net assets, results of operations, and cash flows displayed separately as "discontinued operations" with all historical financial statements restated to conform to this presentation. National Data Corporation's healthcare information business segment is the remaining stand-alone business after the spin-off. Accordingly, National Data Corporation is now doing business as NDCHealth. Additionally, during the last 24 months we completed a significant strategy review and implemented a plan to focus on our core health products and services. As a result, the last two years have represented a major transition period for our company. As a part of that plan, we determined to divest our management services business in the third quarter of fiscal 2000. The sale of this management services business was completed in the first quarter of fiscal 2001. This business is also accounted for as discontinued operations. The remainder of the results of operations excludes these discontinued operations. During the last eighteen months, we have also eliminated non-core as well as obsolete and redundant product and service offerings. In addition, we accelerated clearinghouse integration, consolidation of locations and associated staff and expense reductions. Total charges related to restructuring and asset impairment were $34.4 million during fiscal 2000. During the second quarter of fiscal 2000, management also evaluated certain significant business risks related to recent acquisitions and those locations that were closed as part of the strategic review, including bankrupt accounts and customer disputes. As a result of this review, unusual expenses were recorded in the second quarter of fiscal 2000 as follows: accounts receivable write-off of $8.0 million; bad debt allowance increases of $2.0 million; litigation settlement expenses of $1.3 million; and write-off of $0.8 million of prepaid expenses and recording of $1.2 million of accrued expenses. Approximately $2.2 million of these unusual expenses were related to the management services operation and are reflected in the results of the discontinued operations. Accordingly, the results of fiscal 2000 include approximately $45.5 million of charges related to restructuring and asset impairment ($34.4 million) and other unusual expenses ($11.1 million). These unusual expenses are included in Sales, General and Administrative expenses ($9.2 million) and Cost of Service ($1.9 million). At the end of the second quarter of fiscal 2000, we disclosed that we would have additional restructuring and other potential charges in the next twelve months. In the 17 second quarter of fiscal 2001, both our Salt Lake City operations and a portion of our Cleveland operations were closed. We also wrote down and divested a small software operation. Therefore, in fiscal 2001, $2.2 million of restructuring and impairment charges are reflected. These actions essentially complete all of the programs identified in our strategic review. For more detailed discussion of these charges, refer to Note 13 to the Consolidated Financial Statements. Additionally, during the first quarter of fiscal 2001, we sold our Pharmacy Systems business to TechRx Incorporated. Through our alliance with TechRx Incorporated, we are able to leverage the combined product development and distribution of systems to the pharmacy market. As we believe it will provide a better comparison and indication of the historical performance of NDCHealth, the table below provides certain financial information regarding NDCHealth that has been "normalized" by adjusting for the following: a) Discontinued operations, net of tax, for all periods (discussed above), b) Restructuring and impairment charges in the amount of $34.4 million and $2.2 million recorded in fiscal 2000 and fiscal 2001, respectively (discuss ed above), c) Unusual expenses in the amount of $11.1 million also recorded in fiscal 2000 (discussed above), d) Other income related to the gain from sale of marketable securities in the amount of $1.6 million recorded in fiscal 2000, e) Other income related to the gain on the divestiture of a business in the amount of $2.3 million recorded in fiscal 2000, f) Other expense related to the non-cash loss recorded to mark to market the Medscape, Inc. investment in the amounts of $9.7 million and $7.0 million recorded in fiscal 2000 and fiscal 2001, respectively, g) Revenue and operating expenses related to divested businesses, as follows: 1) Fiscal 1999: Revenue $68.2 million; and Operating expenses $61.2 million, 2) Fiscal 2000: Revenue $56.4 million; Operating expenses $57.2 million; and Other Income $0.7 million , 3) Fiscal 2001: Revenue $5.9 million; and Operating expenses $5.5 million, h) Incremental Sales, General and Administrative expenses associated with being a separate public company of approximately $2.3 million have been added to fiscal 1999 and 2000. These expenses are estimates for the additional functionality needed for corporate activities such as legal, financial, human resources, communication and similar functions, and i) Income tax provisions for all periods have been recalculated for the above effects utilizing the appropriate effective rate for each period. 18 The following tables are a summary of our results of continuing operations as reported and "normalized" as described above (in millions, except per share data). Please see Exhibit 99.1 to this report for more detailed "normalized" results of operations.
2001 vs. 2000 2000 vs. 1999 2001 2000 1999 Change Change - ------------------------------------------------------------------------------------------------ As Reported - ----------- Revenue: Information Management $138.1 $131.2 $129.0 $ 6.9 5% $ 2.2 2% Network Services and Systems 205.9 158.1 141.8 47.8 30% 16.3 11% Divested Businesses 5.8 56.4 68.2 (50.6) (90%) (11.8) (17%) ----------------------------------------------------------- Total Revenue $349.8 $345.7 $339.0 $ 4.1 1% $ 6.7 2% Operating Income $ 58.9 $ 12.4 $ 62.1 $ 46.5 375% $(49.7) (80%) Income (Loss) Before Discontinued Operations $ 28.1 $ (1.2) $ 33.9 $ 29.3 * $(35.1) (104%) Diluted Earnings (Loss) Per Share Before Discontinued Operations $ 0.82 $(0.03) $ 0.97 $ 0.85 * $(1.00) (103%) Normalized - ---------- Revenue: Information Management $138.1 $131.2 $129.0 $ 6.9 5% $ 2.2 2% Network Services and Systems 205.9 158.1 141.8 47.8 30% 16.3 11% ----------------------------------------------------------- Total Revenue $344.0 $289.3 $270.8 $ 54.7 19% $ 18.5 7% Operating Income $ 60.7 $ 55.4 $ 52.8 $ 5.3 10% $ 2.6 5% Net Income $ 33.6 $ 30.0 $ 28.5 $ 3.6 12% $ 1.5 5% Diluted Earnings Per Share $ 0.98 $ 0.87 $ 0.81 $ 0.11 13% $ 0.06 7%
* - percentage change deemed not meaningful The remainder of the results of operations discussion will be based on the "normalized" results of NDCHealth as we believe that this will provide for more meaningful comparisons. 19 Fiscal Years 2001 and 2000 The following tables provide comparisons of the Company's results of operations (normalized) for fiscal years 2001 and 2000:
(In millions) 2001 2000 Change ------------------ ------------------- ------ Revenue: Information Management $138.1 40% $131.2 45% 5% Network Services and Systems 205.9 60% 158.1 55% 25% ------------------------------------------------------------- Total Revenue $344.0 100% $289.3 100% 19% ============================================================= Operating Income: Information Management $ 19.7 32% $ 25.0 45% (21%) Network Services and Systems 41.0 68% 30.4 55% 35% ------------------------------------------------------------- Total Operating Income $ 60.7 100% $ 55.4 100% 10% =============================================================
Consolidated Total revenue for fiscal 2001 was $344.0 million, an increase of $54.7 million, or 19%, from fiscal 2000. This increase was the result of growth in customer base, transaction volumes and new services to our customers due to increased demand for our services in the pharmacy and hospital markets and due to the favorable impact of the Medisoft systems acquisition in April 2000. Cost of service ("COS"), as a percentage of revenue, increased to 50% in fiscal 2001 from 49% in fiscal 2000 due primarily to increased costs for data acquisition and investments in start-up operations in Western Europe. Absolute COS expense increased $30.1 million, or 21%, from the prior year due primarily to the 19% increase in revenue in addition to the increased data acquisition costs. Sales, general and administrative expenses ("SG&A"), as a percent of revenue, remained constant at 22% for both years due to increased spending in support of operations growth. Absolute SG&A expense increased $14.0 million, or 22%, in fiscal 2001 from fiscal 2000. This increase exceeded the 19% growth in revenue due primarily to increased spending in preparation for the spin-off of Global Payments. Depreciation and amortization expense ("D&A"), as a percent of revenue, was 10% in both fiscal 2001 and fiscal 2000. Absolute D&A expense increased $5.3 million, or 18%, in fiscal 2001 from fiscal 2000 primarily due to the amortization of goodwill from newly acquired businesses. Operating income increased 10% to $60.7 million in fiscal 2001 from $55.4 million in fiscal 2000. As a percentage of revenue, the operating income margin decreased to 18% in fiscal 2001 from 19% in fiscal 2000 due to the increased operating expenses described above. 20 Total other expense decreased from $6.6 million in fiscal 2000 to $6.1 million in fiscal 2001. This decrease was due primarily to the minority interest credit of $1.1 million which represents the minority's share of losses attributable to subsidiaries consolidated in our financial statements but not 100% owned by us, partially mitigated by an increase in convertible debt interest expense that was previously shared with Global Payments. Income before income taxes ("IBIT") increased 12% to $54.6 million in fiscal 2001 from $48.8 million in fiscal 2000. Diluted earnings per share for fiscal 2001 increased 13% to $0.98 as compared to $0.87 for fiscal 2000. Information Management Information Management revenue grew by 5% to $138.1 million in fiscal 2001 from $131.2 million in fiscal 2000 due to new products and services offered to new and existing customers and start-up operations in Western Europe, and was reflective of an accelerating revenue trend throughout the year which offset the negative revenue impact of pharmaceutical company consolidations in our customer base. Operating income for fiscal 2001 was $19.7 million compared to $25.0 million in fiscal 2000. This 21% decline in Operating income was due to the previously described pharmaceutical company consolidations and our investment in start-up operations in Western Europe. Network Services and Systems Network Services and Systems revenue increased 25% to $205.9 million in fiscal 2001 from $158.1 million in fiscal 2000 primarily due to increased demand for our services in the pharmacy and hospital markets resulting in growth in customer base, transaction volume, and new services to existing customers as well as the favorable impact of the Medisoft systems acquisition in April 2000. Operating income for fiscal 2001 was $41.0 million compared to $30.4 million in fiscal 2000. This 35% increase in Operating income was reflective of the 25% increase in revenue and increased leverage of our infrastructure. 21 Fiscal Years 2000 and 1999 The following tables provide comparisons of the Company's results of operations (normalized) for fiscal years 2000 and 1999:
(In millions) 2001 2000 Change ------------------ ------------------- ------ Revenue: Information Management $131.2 45% $129.0 48% 2% Network Services and Systems 158.1 55% 141.8 52% 11% ------------------------------------------------------------ Total Revenue $289.3 100% $270.8 100% 7% ============================================================ Operating Income: Information Management $ 25.0 45% $ 25.8 49% (3%) Network Services and Systems 30.4 55% 27.0 51% 13% ------------------------------------------------------------ Total Operating Income $ 55.4 100% $ 52.8 100% 5% ============================================================
Consolidated Total revenue for fiscal 2000 was $289.3 million, an increase of $18.5 million, or 7%, from fiscal 1999. This increase was the result of growth in distribution channels, customer base, transaction volumes and new services to our customers in the pharmacy and hospital markets. COS increased $6.1 million, or 5%, in fiscal 2000 from fiscal 1999. This increase was the result of increased operating costs associated with the 7% growth in revenue. COS, as a percentage of revenue, was 49% in fiscal 2000 and 50% in fiscal 1999. SG&A expenses increased $7.6 million, or 14%, from the prior year. This increase was primarily due to expenses associated with continuing investments in product development, expenses to support operations growth, and expenses related to the planned spin-off of Global Payments. As a percentage of revenue, SG&A expenses increased to 22% for fiscal 2000 from 21% for fiscal 1999 for the same reasons. D&A expense, as a percent of revenue, was 10% in both fiscal 2000 and fiscal 1999. Absolute D&A expense increased $2.2 million, or 8%, in fiscal 2000 from fiscal 1999 due to capital expenditures for network and database infrastructure made during the year to support future revenue growth. Operating income increased 5% to $55.4 million in fiscal 2000 from $52.8 million in fiscal 1999. As a percentage of revenue, the operating income margin was 19% in both fiscal 2000 and fiscal 1999. Total other expense increased 3% to $6.6 million in fiscal 2000 from $6.4 million in fiscal 1999. This increase was reflective of an increase in interest expense due to increased average borrowings under our line of credit. 22 IBIT for fiscal 2000 increased $2.4 million, or 5%, to $48.8 million from $46.4 million in fiscal 1999. Diluted earnings per share grew 7% to $0.87 for fiscal 2000 versus $0.81 for fiscal 1999. Information Management Information Management revenue increased $2.2 million, or 2%, in fiscal 2000 from fiscal 1999. Information Management revenue growth was negatively impacted in fiscal 2000 by consolidation in our pharmaceutical company customer base. Operating income for fiscal 2000 was $25.0 million compared to $25.8 million in fiscal 1999. This 3% decline in Operating income was due to the pharmaceutical industry consolidation described above. Network Services and Systems Network Services and Systems revenue increased 11% to $158.1 million in fiscal 2000 from $141.8 million in fiscal 1999 reflecting the increased demand for our services in the pharmacy and hospital markets and the favorable impact of our UK pharmacy acquisition in January 1999. Operating income for fiscal 2000 was $30.4 million compared to $27.0 million in fiscal 1999. This 13% growth in Operating income was primarily due to the 11% increase in revenue. Liquidity and Capital Resources Cash flow generated from operations provides us with a significant source of liquidity to meet our needs. At May 31, 2001, we had cash and cash equivalents totaling $12.4 million. Net cash provided by operating activities increased $10.1 million to $68.1 million for fiscal 2001 as compared $58.0 million in fiscal 2000. This difference is driven primarily by the increase in earnings, the change in income taxes, increases in prepaid expenses and other assets and decreases in accrued liabilities. The change in income taxes is primarily due to the loss on the disposal of the management services discontinued operations. These losses were not deductible for tax purposes until the business was divested. During fiscal 2001, we completed the sale of these discontinued operations; therefore, the previously non-deductible reserves are deductible for tax purposes and will decrease the amount of income taxes payable, thereby favorably impacting cash flow. The decrease in accounts payable and accrued liabilities primarily relates to decreases in accruals relating to our recent divestitures. The increase in prepaids and other assets primarily relates to increases in non-trade receivables related to our recent investments and alliances. Net cash used in investing activities was $55.0 million for fiscal 2001 compared to $68.2 million for fiscal 2000. This change is primarily due to capital expenditures of 23 $32.9 million, business acquisitions of $23.2 million and investments of $18.8 million, partially offset by $20.0 million in proceeds received from the divestiture of the management services business. We continue to invest in capital expenditures related to growth in our business and acceleration of certain strategic initiatives. Additionally, during the first quarter of fiscal 2001 we sold existing assets, liabilities and cash for our investment interest in TechRx Incorporated. Net cash used in financing activities increased to $74.7 million for fiscal 2001 from $20.3 million in fiscal 2000. The net effect of the payments and borrowings against the lines of credit is $68.5 million in payments for fiscal 2001 compared to $26.8 million in borrowings for fiscal 2000. Principal payments under capital lease arrangements and other long-term debt decreased $6.6 million for fiscal 2001 from fiscal 2000 due primarily to reduced capital lease activity. Dividends of $8.8 million and $9.9 million were paid during fiscal 2001 and fiscal 2000, respectively. Based upon the relative financial conditions, results of operations and prospects of NDCHealth and Global Payments, NDC determined that $96.1 million would be an appropriate allocation to Global Payments of the existing NDC debt at May 31, 2000. For the eight months ended January 31, 2001 Global Payments made net repayments of $18.5 million, thereby reducing the $96.1 million due to NDCHealth to $77.6 million as of January 31, 2001. At the date of the spin-off and shortly thereafter, Global Payments Inc. made net cash payments to NDCHealth equal to the remaining $77.6 million. We used a portion of the proceeds from this cash payment to retire our existing lines of credit at the time of the spin-off. Net cash provided by discontinued operations, including the cash dividend from Global Payments, was $72.2 million in fiscal 2001 compared to $30.2 million in fiscal 2000. We have a new credit facility providing a $50 million unsecured revolving line of credit which became effective upon completion of the spin-off of Global Payments Inc. and is available for working capital and general corporate purposes. The facility has a one-year term, with the option for NDCHealth to convert any outstanding borrowings at the maturity date to a term loan repayable at the first anniversary of the initial maturity date or January 31, 2003. At May 31, 2001, there were no amounts outstanding under the facility. We believe that our current level of cash and borrowing capacity, along with future cash flows from operations, are sufficient to meet the needs of our existing operations and our planned requirements for the foreseeable future. We regularly evaluate cash requirements for current operations, commitments, development activities and strategic acquisitions. We may elect to raise additional funds for these purposes, either through the issuance of additional debt or equity or otherwise, as appropriate. 24 Forward Looking Results of Operations We believe that NDCHealth is well positioned to provide processing and information products and services to the healthcare industry in the future. For fiscal year 2002, our expectation is that revenue for the full year will be in the $375-385 million range resulting in diluted earnings per share in the range of $1.10 to $1.14, excluding the impact of the accounting change described below. In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 deals with, among other things, amortization of goodwill. We expect to implement this new standard in the first quarter of fiscal 2002. We estimate that the annual impact of SFAS 142 will be an addition of approximately $0.20 diluted earnings per share in fiscal 2002, resulting in an expected reported range of $1.30 to $1.34 in diluted earnings per share for fiscal 2002. Additionally, we estimate that the fiscal 2002 effective tax rate will decline to 36.0% due to our application of this new standard. While past performance does not guarantee future results, the Company is committed to continuing to sustain quality earnings growth. The Company's strategy to attain growth is to position the Company for continued future success through ongoing investment in new market opportunities as well as through strategic alliances and acquisitions. The Company also intends to continue expansion into additional market segments related to its two primary segments. The Company will continue to make investments in new technology infrastructure and productivity tools to ensure long-term competitiveness and maximize operating capacity and efficiency. 25 Additional Factors that May Affect Future Performance In addition to the other information provided in our reports, including this Annual Report on Form 10-K, the following additional risk factors may affect the Company's results. We have provided the following risk factor disclosure in connection with our continuing effort to qualify our written and oral forward-looking statements for the protection of any safe harbor provision that protects companies from securities law liability in connection with such forward-looking statements. We undertake no obligation to update or revise our forward-looking statements or these risk factors to reflect future developments, changed assumptions, the occurrence of unanticipated events or changes to future operating results. Important factors currently known to our management that could cause actual results to differ materially from those in forward-looking statements include the disclosures contained herein and also include the following: Intense Competition Could Damage Our Sales and Profitability If we are unable to compete successfully with providers of systems and services similar to ours, we may lose significant revenue. We compete not only with independent providers of similar systems and services, but also with unrelated businesses' internal divisions that provide similar services. The markets in which we offer our systems and services are highly competitive with respect to functionality of products and services, price, quality and innovation. Competition in the markets in which we offer our systems and services affects our ability to attract new customers and keep existing ones, hire quality employees, and charge prices for our products and services that will maximize our profitability. Some of our competitors have greater access to capital and marketing and technological resources, and we cannot guarantee that we will be able to compete successfully with them. Adverse Rulings in Litigation Could Reduce Our Results of Operation Our profitability could be affected by the outcome of significant litigation in Europe and in the United States. We have obtained an interim ruling from the European Commission ordering IMS Health, a strong competitor to our information business, to license certain proprietary data structures to us. We are also involved in litigation related to our former Physician and Hospital Support Services and Hospital Management Services (PHSS) units. We are unable to predict whether IMS Health may be successful in overturning the EU ruling, or whether we may incur liability stemming from the PHSS litigation. Liability resulting from adverse rulings could reduce our results of operation and profitability. We May Lose Customers or Revenue Due to Consolidation in the Healthcare Industry There has been and continues to be significant consolidation in the healthcare industry, which may reduce the number of existing customers for our services and may reduce the price we are able to charge those customers. In addition, this consolidation of 26 healthcare providers and pharmaceutical suppliers may reduce the number of our potential customers. The increased purchasing power of larger consolidated organizations could also lead to reductions in the amounts these organizations are willing to pay for our services. We cannot predict the overall impact of consolidation in the healthcare industries, and it could have a material adverse effect on our business, financial condition and results of operations. Changes in the United States Healthcare Environment Could Have a Material Negative Impact on Our Revenues In recent years, the healthcare industry, including the healthcare financing and reimbursement system has changed significantly in an effort to reduce costs. These changes include increased use of managed care, cuts in Medicare reimbursement levels, consolidation of pharmaceutical and medical- surgical supply distributors, and the development of large, sophisticated purchasing groups. We expect the healthcare industry to continue to change significantly in the future. Some of these changes, such as a reduction in governmental support of healthcare services or adverse changes in the delivery or pricing of pharmaceuticals and healthcare services or mandated benefits, may cause healthcare industry participants to reduce the price they are willing to pay for our products and services. Changes in pharmaceutical manufacturers' research and distribution policies could also reduce our revenues. We are unable to predict the effect of such changes on our operations and profitability. Our Profitability May Suffer if We Are Unable to Continue Our Expansion in New and Existing Markets Our future growth and profitability depends, in part, upon our continued expansion within the healthcare electronic transaction processing and information services markets in which we currently operate, the further expansion of these markets, the emergence of other markets for electronic transaction processing and healthcare information services and our ability to penetrate these markets. As part of our strategy to expand into new and existing markets, we seek acquisition opportunities and alliance relationships with other businesses that will allow us to increase our market penetration, technological capabilities, product offerings and distribution capabilities. We cannot predict whether we will successfully identify suitable acquisition candidates in the future, or whether any acquisition will provide us with the ability to expand into new markets. Expansion of the healthcare information services and electronic transaction processing markets is dependent upon the continued automation of traditional paper-based processing systems and demand for new decision support applications. Our ability to penetrate these markets depends upon our ability to apply our existing technology, or to develop new technology, to meet the particular service needs of each new or expanded market. We cannot guarantee that markets for our services will continue to expand and develop, that we will be successful in our efforts to meet the demands of these markets, or that we will have adequate financial, marketing and technological resources to penetrate new markets. 27 Complex State and Federal Regulations Could Depress the Demand for Information Products and We Could Incur Redesign Costs or Be Subject to Penalties The healthcare industry is highly regulated and is subject to changing political, regulatory and other influences. These factors affect the purchasing practices and operation of healthcare organizations. Federal and state legislatures and agencies periodically consider programs to reform or revise the U.S. healthcare system. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. We are unable to predict future proposals with any certainty or to predict the effect they would have on our business. HIPAA Administrative Simplification - ----------------------------------- Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, Congress required the adoption of rules to establish standards and requirements for the electronic transmission of certain health information. Five rules were proposed, but only two have been published in final form. Published rules include Standards for Electronic Transactions, published August 17, 2000, and Standards for Privacy of Individually Identifiable Health Information, published December 28, 2000. Each rule is effective 60 days following publication in final form, with compliance required for healthcare providers, healthcare clearinghouses and large health plans two years following the effective date. Small health plans are given an additional year to comply. These regulations generally restrict the use and disclosure of personally identifiable health information without the prior informed consent of the patient, and apply to certain of our operations as well as the operations of many of our customers. Compliance with these final rules will entail additional costs and require changes in our systems. Transaction Standards - --------------------- The Standards for Electronic Transactions rule requires format standards for eight of the most common healthcare transactions, using technical standards issued by certain recognized standards publishing organizations. Health care providers, plans and clearinghouses transmitting or receiving any of these eight health transactions electronically must send and receive data using the common format, rather than the large number of different data formats currently used. The transaction standards are applicable to that portion of our business involving the processing of healthcare transactions among providers, payers and other healthcare industry participants. The transaction standards apply to many of our customers and to our relationships with those customers. We intend to comply with the transaction standards by the compliance dates. Compliance may require costly modifications to some of our systems, products and services. We believe that we are well-positioned to make these changes and to promote compliance among our customers and strategic partners. However, there can be no assurance that we or our customers or strategic 28 partners will be able to do so or that we will be able to take advantage of any business opportunities that implementation of the transaction standards may provide to us. Other state and federal statutes and regulations governing transmission of healthcare information may affect our operations. For example, Medicaid rules require some processing services and eligibility verification to be maintained as separate and distinct operations. We carefully review our practices in an effort to ensure that we are in compliance with all applicable state and federal laws. These laws, though, are complex and changing, and the courts and other governmental authorities may take positions that are inconsistent with our practices. Privacy Standards - ----------------- The Standards for Privacy of Individually Identifiable Health Information rule establishes a set of national privacy standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses, healthcare providers and their business associates. This rule governs the use and disclosure of such information, and establishes procedures for access to and amendment of information in designated record sets. The rule went into effect April 14, 2001, and the compliance date for most entities is April 14, 2003. The privacy standards rule applies to the portions of our business that process healthcare transactions and provide technical services to other participants in the healthcare industry. This rule provides for civil and criminal liability for violations and requires us, our customers and our partners to use health information in a highly restricted manner, to establish policies and procedures to safeguard the information, and may require us to obtain individual consents in some cases, and to provide certain access rights to individuals. This rule may require us to incur costs to change our systems and services, may restrict the manner in which we transmit and use the information, and may therefore adversely affect our ability to generate revenues. Numerous state and federal laws other than HIPAA govern the collection, dissemination, use, access to and confidentiality of patient health information. Many states are considering new laws and regulations that further protect the confidentiality of medical records or medical information. These state laws are not in all cases preempted by the HIPAA privacy standard and may be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us, our customers and business partners. In addition, determining whether data has been sufficiently de-identified may require complex factual and statistical analyses. Regulations governing electronic health data transmissions are evolving rapidly and are often unclear and difficult to apply. These other privacy laws at a state or federal level, or new interpretations of these laws, could create liability for us, could impose additional operational requirements on our business, could affect the manner in which we use and transmit information and could increase our cost of doing business. 29 International Data Regulation - ----------------------------- Other countries also have, or are developing, their own laws governing the collection, use, storage and dissemination of personal information or patient data. These laws could create liability for our international operations, impose additional operations requirements or restrictions on our business, affect the manner in which we use or transmit data and increase our cost of doing business. Regulation of Healthcare Relationships - -------------------------------------- Federal and state laws govern patient referrals, physician financial relationships and inducements to beneficiaries of federal healthcare programs. The federal anti-kickback law prohibits any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. The anti-kickback law is broad and may apply to some of our activities or our relationships with our customers, or business partners. Penalties for violating the anti-kickback law include imprisonment, fines and exclusion from participating, directly or indirectly, in Medicare, Medicaid and other federal healthcare programs. Many states have similar anti- kickback laws that are not necessarily limited to items or services for which payment is made by a federal healthcare program. We carefully review our practices in an effort to ensure that we comply with all applicable laws. However, the laws in this area are both broad and vague and it is often difficult or impossible to determine precisely how the laws will be applied. Any determination by a state or federal regulatory agency that any of our practices violate any of these laws could subject us to civil or criminal penalties and require us to change or terminate some portions of our business. In addition, federal and state agencies have been conducting investigations purportedly related to referral and billing practices of hospitals, laboratories and similar institutions. Although we currently monitor our arrangements with healthcare institutions to ensure compliance with prevailing industry practices and applicable law, we cannot guarantee that governmental investigators will not take positions that are inconsistent with our practices. In order to remain competitive and satisfy the requirements and needs of our clients, we must remain informed of and adapt to new regulations governing the transmission, use and processing of personal information in electronic commerce and over the Internet. Although many of these regulations, such as those recently issued under the Graham-Leach-Bliley Act, may not apply directly to our business, we expect that these regulations and any new laws regulating the solicitation, collection or processing of personal or consumer information could indirectly affect our business. Our efforts to remain competitive and profitable and ensure compliance, and our customer's compliance with these regulations, may require the expenditure of significant sums in research and 30 development and investments in new technology and processes, and will require significant attention from senior management. Defaults in Payment or a Material Reduction in Purchases of the Company's Products by Large Customers Could Have a Significant Negative Impact on Our Financial Condition, Results of Operations and Liquidity We have significant relationships with a limited number of large customers in our electronic processing and information services businesses that are achieving rapid growth. As a result, our sales concentration has increased. Any defaults in payment or a material reduction in purchases from us by these large customers could have a significant negative impact on our financial condition, results of operations and liquidity. Proprietary Technology Protections May Not Be Adequate and Proprietary Rights May Infringe on Rights of Third Parties We rely on a combination of trade secret, patent, copyright and trademark laws, nondisclosure and other contractual provisions and technical measures to protect our proprietary rights in our products and processes. There can be no assurance that these protections will be adequate or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. Although we believe that our products and other proprietary rights do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against us in the future. Additionally, we may find it necessary to initiate litigation to protect our trade secrets, to enforce our patent, copyright and trademark rights, and to determine the scope and validity of the proprietary rights of others. Litigation can be costly and time consuming. Litigation expenses or any damage payments resulting from adverse determinations of third party claims could be significant and result in material losses to us. Recent and Future Combinations and Strategic Relationships May Not Be Profitable We are currently devoting significant management resources and other resources toward the integration of our recent strategic combinations and relationships. We have made investments, and own a majority interest in HealthTran, LLC, and have equity interests in TechRx Incorporated and MedUnite, Inc. These relationships may not achieve levels of revenue growth, profitability or productivity comparable with those achieved by our existing operations, or otherwise perform as expected, and this may adversely impact our revenue and profitability. We May Need Additional Capital to Continue Our Growth and Expansion We may incur indebtedness in the future, including borrowings under a credit facility, if a credit facility is available, to finance acquisitions. As a result, we may be 31 subject to risks associated with debt financing, including increased interest rate expense, insufficient cash flow to meet required payments on our debt and inability to refinance or repay the debt as it comes due. Our Anti-takeover Provisions May Limit Stockholder Value Certain provisions of our Certificate of Incorporation and By-laws, our stockholder protection rights agreement, and Delaware law may delay, defer or prevent a takeover attempt that a stockholder might consider in its best interest. A stockholder may not receive as much in exchange for their shares as they could without these provisions. The following is a description of these provisions. Our Certificate of Incorporation and our By-laws separate our Board of Directors into three classes of directors, with each class as nearly equal in number as the total number of directors permits. Each class serves for three- year terms, and each class' term expires in different successive years. In addition, our Certificate of Incorporation authorizes the Board of Directors to issue preferred stock in one or more classes or series and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any action on the part of the stockholders. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock. Our stockholder rights plan issues rights to our common stockholders, that entitles them to purchase preferred stock upon the happening of certain events. These rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors unless the offer contains certain conditions. In addition, Section 203 of the Delaware General Corporation Law prohibits certain persons from engaging in business combinations, which may also have the effect of delaying, deterring or preventing a change of control. We May Spend Significant Resources Developing and Promoting New Products That May Not Be Profitable The market for our products and services is characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing customer needs. We cannot ensure that we will be successful in developing and marketing new products and services or that our products and services will adequately meet the quickly changing demands of our customers. In addition, in order to meet our customers' demands, we are continually involved in a number of development projects, including our effort to update our core mainframe-based products for the healthcare information services markets. Because we cannot predict the time and cost required in reaching certain research, development and engineering objectives, the costs of product development initiatives could significantly exceed our estimates, and project 32 development schedules could require extensions. In either of these events, our profitability and overall results of operations could be adversely affected. We believe that the future success of our business will depend in large part upon our ability to maintain and enhance our current product and service offerings and to develop and introduce new products and services that will keep pace with technological advances and satisfy evolving customer requirements. Further, we cannot ensure that we will not experience difficulties that could delay or prevent the successful development, introduction and marketing of these products and services. An inability to develop and introduce new products and services in a timely manner, or an unsuccessful new or updated product could materially adversely affect our financial condition and results of operations. We May Experience Volatility in Our Stock Price The market price of our common stock may experience significant volatility from time to time. Such volatility may be affected by factors such as our quarterly operating results or changes in the economy, financial markets or the healthcare information industry. In recent years, the stock market has experienced extreme price and volume fluctuations which has sometimes affected the market price of the securities issued by a particular company which may be unrelated to the operational performance of the company. This type of market effect could strike our common stock price as well. In addition, we may be subject to securities class action litigation if the market price of our stock experiences significant volatility. Our management's attention and resources may be diverted from normal operations if we would become subject to any securities class action, which may have a material adverse effect on our business. If We Lose the Tax-Free Status of the Recent Spinoff, You and NDC Could Be Subject to Substantial Tax Liability As part of our recent spinoff of Global Payments, Inc., we received a tax ruling relating to the qualification of the distribution as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code. The continuing validity of a tax ruling is subject to certain factual representations and assumptions. If the distribution were to lose its status as a tax-free distribution, we would recognize taxable gain equal to the excess of the fair market value of our common stock distributed to our stockholders over our tax basis in the stock. In addition, each NDC stockholder who received Global Payments, Inc. common stock in the distribution would generally be treated as receiving a taxable distribution in an amount equal to the fair market value of the stock. If the distribution disqualified as tax-free to NDC because of certain post distribution circumstances, such as an acquisition of Global Payments, Inc. within two years after the distribution that, together with the distribution, is treated as a single plan, we would recognize taxable gain but the distribution would generally remain tax-free to each NDC stockholder. 33 Under the tax-sharing and indemnification agreement between us and Global Payments, Inc., if the distribution fails to qualify as a tax-free distribution because of an acquisition of their stock or assets, or some other action of theirs, then Global Payments, Inc. would be solely liable for any resulting corporate taxes. However, if Global Payments, Inc. fails to indemnify us, we would be jointly and severally liable for federal income taxes resulting from the distribution being taxable. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------------- The Company has performed sensitivity analyses over the near term regarding the risks listed below. Based on these sensitivity analyses, the Company is not exposed to material market risk from changes in interest rates, foreign currency rates and/or Company equity prices. We also do not anticipate any material risk from changes in interest rates, foreign currency rates and/or Company equity prices. Interest Rate The Company has a line of credit which has variable interest rates for Eurodollar and other floating rate advances based on the London Interbank Offered Rates, Prime Rate, or Federal Funds plus applicable margin. Accordingly, the Company is exposed to the impact of interest rate movement. The Company has performed an interest rate sensitivity analysis over the near term with a 10% change in interest rates. Based on this analysis, the Company's Net income is not subject to material interest rate risk. We also do not anticipate any material interest rate risk from changes in interest rates. Foreign Currency Risk The Company generates a percentage of its Net income from its foreign operations. The Company has performed a foreign exchange sensitivity analysis over the near term with a 10% change in foreign exchange rates. Based on this analysis, the Company's Net income is not subject to material foreign exchange rate risk. We also do not anticipate any material foreign exchange rate risk from changes in foreign currency rates. Convertible Debt The Company has outstanding debt which is convertible into the Company's common stock at a certain level. The Company has performed an equity price sensitivity analysis over the near term with a 10% change in the Company's equity price. The Company's Net income is not subject to material equity price risk based on this analysis. We also do not anticipate any material equity price risk from changes in the Company's equity price. The Company's Diluted earnings per share incorporates the effect of this debt conversion, where applicable. 34 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- Index to Financial Statements and Financial Statement Schedule Consolidated Statements of Income (Loss) for each of the three years ended May 31, 2001....................................................... 36 Consolidated Statements of Cash Flows for each of the three years ended May 31, 2001............................................................. 37 Consolidated Balance Sheets at May 31, 2001 and 2000....................... 38 Consolidated Statements of Changes in Shareholders' Equity for each of the three fiscal years ended May 31, 2001................................ 39 Notes to Consolidated Financial Statements................................. 40 Report of Independent Public Accountants................................... 68 Consolidated Schedule II - Valuation and Qualifying Accounts............... 69 Report of Independent Public Accountants As to Schedule.................... 70 35 CONSOLIDATED STATEMENTS OF INCOME (LOSS) NATIONAL DATA CORPORATION AND SUBSIDIARIES
(In thousands, except per share data) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended May 31, ---------------------------------------------------- 2001 2000 1999 --------- -------- --------- Revenues: Information management $138,091 $131,229 $128,961 Network services and systems 205,862 158,051 141,832 Divested businesses 5,862 56,393 68,203 --------------------------------------------------- 349,815 345,673 338,996 --------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Cost of service 176,413 181,001 179,654 Sales, general and administrative 77,640 86,062 67,577 Depreciation and amortization 34,745 31,834 29,661 Restructuring and impairment charges 2,156 34,393 - --------------------------------------------------- 290,954 333,290 276,892 --------------------------------------------------- Operating income 58,861 12,383 62,104 - ------------------------------------------------------------------------------------------------------------------------------------ Other income (expense): Interest and other income 755 4,549 1,101 Interest and other expense (8,038) (6,532) (7,484) Valuation adjustment in Medscape investment (6,953) (9,738) - Minority interest in loss 1,137 - - --------------------------------------------------- (13,099) (11,721) (6,383) --------------------------------------------------- Income before income taxes and discontinued operations 45,762 662 55,721 Provision for income taxes 17,694 1,825 21,858 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) before discontinued operations 28,068 (1,163) 33,863 Discontinued operations, net of income taxes 8,323 (39,002) 37,574 - ------------------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ 36,391 $(40,165) $ 71,437 =================================================== Basic earnings (loss) per share: Income (loss) before discontinued operations $ 0.85 $ (0.03) $ 1.00 --------------------------------------------------- Discontinued operations $ 0.25 $ (1.17) $ 1.11 --------------------------------------------------- Basic earnings (loss) per share $ 1.10 $ (1.21) $ 2.12 --------------------------------------------------- Diluted earnings (loss) per share: Income (loss) before discontinued operations $ 0.82 $ (0.03) $ 0.97 --------------------------------------------------- Discontinued operations $ 0.24 $ (1.17) $ 1.07 --------------------------------------------------- Diluted earnings (loss) per share $ 1.07 $ (1.21) $ 2.02 --------------------------------------------------- The accompanying notes are an integral part of these Consolidated Financial Statements.
36 CONSOLIDATED STATEMENTS OF CASH FLOWS NATIONAL DATA CORPORATION AND SUBSIDIARIES (In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ Year Ended May 31, ------------------------------------- 2001 2000 1999 -------- --------- --------- Cash flows from operating activities: Net income (loss) $ 36,391 $(40,165) $ 71,437 Adjustments to reconcile net income (loss) to cash provided by operating activities: Non-cash restructuring and impairment charges 930 23,880 - (Income) loss from discontinued operations (8,323) 39,002 (37,574) Depreciation and amortization 34,745 31,834 29,661 Deferred income taxes 12,919 (33,106) 11,930 Provision for bad debts 1,322 10,198 2,146 Valuation adjustment in Medscape investment 6,953 9,738 - Other, net 54 137 3,398 Changes in assets and liabilities which provided (used) cash, net of the effects of acquisitions: Accounts receivable, net (4,121) 4,789 (14,245) Prepaid expenses and other assets (15,539) (325) (1,715) Accounts payable and accrued liabilities 10,018 16,712 4,867 Deferred income (9,114) (2,685) 2,216 Income taxes 1,857 (1,968) (1,587) ------------------------------------- Net cash provided by operating activities 68,092 58,041 70,534 ------------------------------------- Cash flows from investing activities: Capital expenditures (32,915) (26,517) (21,099) Business acquisitions, net of acquired cash (23,224) (38,098) (8,055) Business divestiture and sale of marketable securities 20,000 6,474 - (Purchase) sale of investment (18,831) (10,045) 1,125 ------------------------------------- Net cash used in investing activities (54,970) (68,186) (28,029) ------------------------------------- Cash flows from financing activities: Net (repayments) borrowings under lines of credit (68,500) 26,750 (20,000) Net principal payments under capital lease arrangements and other long-term debt (4,814) (11,469) (11,637) Net issuances (purchases) related to stock activities 7,360 (25,680) (790) Dividends paid (8,762) (9,937) (10,109) ------------------------------------- Net cash used in financing activities (74,716) (20,336) (42,536) ------------------------------------- Net cash (used) provided by discontinued operations (5,375) 30,212 2,027 Cash dividend from Global Payments Inc. 77,600 - - ------------------------------------- Increase (decrease) in cash and cash equivalents 10,631 (269) 1,996 Cash and cash equivalents, beginning of period 1,789 2,058 62 ------------------------------------- Cash and cash equivalents, end of period $ 12,420 $ 1,789 $ 2,058 ===================================== The accompanying notes are an integral part of these Consolidated Financial Statements.
37 CONSOLIDATED BALANCE SHEETS NATIONAL DATA CORPORATION AND SUBSIDIARIES
(In thousands, except share data) - ---------------------------------------------------------------------------------------------------------------------------------- May 31, May 31, 2001 2000 --------- ---------- ASSETS Current assets: Cash and cash equivalents $ 12,420 $ 1,789 Accounts receivable 70,648 76,325 Allowance for doubtful accounts (6,628) (7,316) --------- --------- Accounts receivable, net 64,020 69,009 --------- --------- Income tax receivable 2,265 1,962 Deferred income taxes 29,539 20,097 Prepaid expenses and other current assets 18,788 13,857 --------- --------- Total current assets 127,032 106,714 --------- --------- Property and equipment, net 82,956 69,265 Intangible assets, net 221,757 214,800 Deferred income taxes 9,886 32,247 Investments 35,591 5,948 Other 10,990 4,346 Net assets of discontinued operations - 220,312 --------- --------- Total Assets $ 488,212 $ 653,632 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Line of credit $ - $ 68,500 Current portion of long-term debt 170 159 Obligations under capital leases 2,586 5,803 Accounts payable and accrued liabilities 53,228 55,082 Deferred income 13,624 26,619 --------- --------- Total current liabilities 69,608 156,163 --------- --------- Long-term debt 151,567 152,495 Obligations under capital leases 1,108 1,793 Other long-term liabilities 23,044 13,045 --------- --------- Total liabilities 245,327 323,496 --------- --------- Commitments and contingencies Minority interest in equity of subsidiaries 12,418 - Shareholders' equity: Preferred stock, par value $1.00 per share; 1,000,000 shares authorized, none issued - - Common stock, par value $.125 per share; 200,000,000 shares authorized; 33,875,235 and 33,953,008 shares issued in 2001 and 2000, respectively 4,234 4,244 Capital in excess of par value 188,636 349,387 Treasury stock, at cost, 1,211,880 shares at May 31, 2000 - (31,960) Retained earnings 48,392 20,763 Deferred compensation and other (7,101) (7,332) Unrealized holding loss (111) (1,727) Cumulative translation adjustment (3,583) (3,239) --------- --------- Total shareholders' equity 230,467 330,136 --------- --------- Total Liabilities and Shareholders' Equity $ 488,212 $ 653,632 ========= ========= The accompanying notes are an integral part of these Consolidated Financial Statements.
38 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY NATIONAL DATA CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) Accumulated Other Comprehensive Income (Loss) Common Stock --------------------- --------------- Unrealized Number Capital in Deferred Holding Cumulative of Excess of Treasury Retained Compensation Gain Translation Total Shares Amount Par Value Stock Earnings and Other (Loss) Adjustment Equity - ------------------------------------------------------------------------------------------------------------------------------------ Balance at May 31, 1998 33,792 $4,224 $ 344,019 $ (5,980) $ 9,537 $(1,854) $ - $ (2,011) $ 347,935 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income Net income 71,437 71,437 Foreign currency translation adjustment (571) (571) --------- Total comprehensive income 70,866 --------- Cash dividends (10,109) (10,109) Treasury shares purchased (9,465) (9,465) Stock issued under employee stock plans 7 2,001 2,008 Stock issued under non- employee stock plans 166 20 395 4,409 4,824 Stock issued under restricted stock plans (5) (217) 3,178 (2,961) - Tax benefit from exercise of stock options 1,435 1,435 Amortization of deferred compensation 1,600 1,600 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 1999 33,953 4,244 345,639 (5,857) 70,865 (3,215) - (2,582) 409,094 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive loss Net loss (40,165) (40,165) Foreign currency translation adjustment (657) (657) Unrealized loss (1,727) (1,727) --------- Total comprehensive loss (42,549) --------- Cash dividends (9,937) (9,937) Treasury shares purchased (42,844) (42,844) Stock issued under employee stock plans (1,615) 12,657 11,042 Stock issued under non- employee stock plans (329) 329 - Stock issued under restricted stock plans 3,682 3,755 (7,437) - Tax benefit from exercise of stock options 2,010 2,010 Amortization of deferred compensation 3,320 3,320 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at May 31, 2000 33,953 4,244 349,387 (31,960) 20,763 (7,332) (1,727) (3,239) 330,136 - ------------------------------------------------------------------------------------------------------------------------------------ Comprehensive income Net Income 36,391 36,391 Foreign currency translation adjustment (1,387) (1,387) Realized loss 1,616 1,616 --------- Total comprehensive income 36,620 --------- Cash dividends (8,762) (8,762) Spin-off dividend (141,572) 3,421 1,043 (137,108) Stock issued under employee stock plans 47 6 (19,394) 28,684 (4,287) 5,009 Stock issued under non- employee stock plans (7) 67 60 Stock issued under restricted stock plans (125) (16) (839) 3,209 (2,354) - Tax benefit from exercise of stock options 1,061 1,061 Amortization of deferred compensation 3,451 3,451 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at May 31, 2001 33,875 $ 4,234 $ 188,636 $ - $48,392 $(7,101) $ (111) $ (3,583) $ 230,467 - ------------------------------------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these Consolidated Financial Statements.
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies On January 31, 2001, National Data Corporation (the "Company" or "NDCHealth") completed the spin-off of its eCommerce business segment, Global Payments Inc. ("Global Payments"), into a separate publicly traded company with its own management and Board of Directors to permit the Company to increase focus on its healthcare information businesses. As a result of the spin-off, the Company's financial statements have been prepared with Global Payments' net assets, results of operations, and cash flows displayed separately as "discontinued operations" with all historical financial statements restated to conform to this presentation, in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations". National Data Corporation's healthcare information business segment is the remaining stand-alone business after the spin-off. To more accurately reflect the Company's business, National Data Corporation is now doing business as NDCHealth. In the third quarter of fiscal 2000, the Company decided to pursue the divestiture of its management services business and accordingly, the Company's financial statements have been prepared with the net assets, results of operations, and cash flows of this business displayed separately as "discontinued operations" with all historical financial statements restated to conform to this presentation in accordance with Accounting Principles Board Opinion No. 30. During the first quarter of fiscal 2001, the Company completed the sale of the management services business. Nature of operations - The Company provides network based information processing - -------------------- services and systems to the healthcare market and offers information management products and services to pharmaceutical manufacturers and pharmacy chains, which include consulting services and database information reporting on prescription drug sales and pharmacy operations. The principal markets for the Company's products and services are healthcare providers, payers, managed care organizations, pharmaceutical manufacturers, and distributors. Basis of presentation - The consolidated financial statements include the - --------------------- accounts of the Company and its majority-owned subsidiaries. Significant intercompany transactions have been eliminated in consolidation. Certain reclassifications have been made to the fiscal 1999 and 2000 consolidated financial statements to conform with the fiscal 2001 presentation. Use of estimates - The preparation of financial statements in conformity with - ---------------- accounting principles generally accepted in the United States requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. 40 Revenue - Revenue related to services provided is recognized as services are - ------- performed. Revenue related to software installation is recognized when obligations to the customer are fulfilled. Revenue related to license agreements for customer installed software is recognized upon shipment. Revenue related to software maintenance contracts is recognized ratably over the terms of the contracts. Cash and cash equivalents - Cash and cash equivalents includes cash on hand and - ------------------------- all investments with a maturity of three months or less. Property and equipment - Property and equipment, including equipment under - ---------------------- capital leases, are stated at cost. Depreciation and amortization are calculated using the straight-line method for financial reporting purposes, whereas accelerated methods are used for income tax reporting purposes. Equipment is depreciated over 2 to 5 year lives, and buildings are depreciated over 20 to 40 year lives. Leasehold improvements and property acquired under capital leases are amortized over the shorter of the useful life of the asset or the term of the lease. The costs of software are capitalized and amortized on a straight-line basis over their estimated useful lives, not to exceed five years. Maintenance and repairs are charged to operations as incurred. Intangible assets - Intangible assets primarily represent goodwill and customer - ----------------- relationships associated with the Company's acquisitions. Customer relationships acquired are amortized using the straight-line method over their estimated useful lives ranging from 5 to 25 years. Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets. Goodwill is being amortized on a straight-line basis over periods ranging from 10 to 25 years. Impairment of long-lived assets - The Company regularly evaluates whether events - ------------------------------- and circumstances have occurred that indicate the carrying amount of property and equipment or goodwill and other intangibles may warrant revision or may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the future undiscounted net cash flows associated with the asset over the remaining life of the asset in measuring whether the long-lived asset is recoverable (see Notes 2 and 13). If such evaluation indicates a potential impairment, the Company uses undiscounted cash flows to measure fair value in determining the amount of these assets that should be written off. In management's opinion, the long-lived assets, including property and equipment and intangible assets, are appropriately valued at May 31, 2001 and 2000 and any necessary adjustments have been made. Investments - The Company maintains investments in both publicly traded and - ----------- privately held entities. The investments in publicly traded entities are classified as available-for-sale securities and are reported at fair value. Unrealized gains and losses are reported, net of taxes, as a component of shareholders' equity. Unrealized losses are charged against income when a decline in fair value is determined to be other than temporary. The specific identification method is used to determine the cost of securities sold. Realized gains and losses on investments are included in other income/expense when realized. Investments in 41 privately held entities are accounted for under either the cost or equity method, whichever is appropriate for the level of investment. Income taxes - The Company uses the asset and liability method of accounting for - ------------ income taxes in accordance with SFAS No. 109. Under this method, deferred income taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax laws and rates (see Note 9). Fair value of financial instruments - The carrying amounts of financial - ----------------------------------- instruments, including cash, receivables, accounts payable and accrued expenses, and current maturities of long-term obligations, approximate fair value. Interest on long-term debt is primarily payable at fixed rates, which approximate market rates at May 31, 2001 and 2000 (see Note 10). Foreign currency translation - The Company maintains subsidiaries in Western - ---------------------------- Europe and Canada. The functional currency of these subsidiaries is their local currency. The assets and liabilities of foreign subsidiaries are translated at the year-end rate of exchange, and income statement items are translated at the average rates prevailing during the year. The resulting translation adjustments are recorded as a component of shareholders' equity. Exchange gains and losses on intercompany balances of a long-term investment nature are also recorded as a component of shareholders' equity. The effects of foreign currency gains and losses arising from these translations of assets and liabilities are included as a component of other comprehensive income. Earnings per share - Basic earnings per share is computed by dividing reported - ------------------ earnings available to common shareholders by weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing reported earnings available to common shareholders by weighted average shares outstanding during the period and the impact of securities that, if exercised, and convertible debt that, if converted, would have a dilutive effect on earnings per share. 42 The following table sets forth the computation of basic and diluted earnings for the fiscal years ending May 31:
Fiscal Year Ended (Before Discontinued Operations) (In thousands, except per share data) 2001 2000 1999 --------------------------------------------------------------------------- Per Per Per ------ ------ ------ Income Shares Share Loss Shares Share Income Shares Share ------- ------ ------ ------- ------ ------ ------- ------ ------ Basic EPS: Income (loss) before discontinued $28,068 33,009 $0.85 $(1,163) 33,232 $(0.03) $33,863 33,725 $1.00 operations Effect of dilutive securities: Stock options - 1,144 - - - 1,346 --------------- ---------------- --------------- 28,068 34,153 (1,163) 33,232 33,863 35,071 Convertible debt - - - - - - --------------- ---------------- --------------- Diluted EPS: Income (loss) before discontinued operations available to common stockholders plus assumed conversions $28,068 34,153 $0.82 $(1,163) 33,232 $(0.03) $33,863 35,071 $0.97 ===========================================================================
Fiscal Year End (In thousands, except per share data) 2001 2000 1999 --------------------------------------------------------------------------- Per Per Per ------ ------ ------ Income Shares Share Loss Shares Share Income Shares Share ------- ------ ------ ------- ------ ------ ------- ------ ------ Basic EPS: Net income (loss) $36,391 33,009 $1.10 $(40,165) 33,232 $(1.21) $71,438 33,725 $2.12 Effect of dilutive securities: Stock options - 1,144 - - - 1,346 --------------- ---------------- --------------- 36,391 34,153 (40,165) 33,232 71,438 35,071 Convertible debt - - - - 4,778 2,752 --------------- ---------------- --------------- Diluted EPS: Net income (loss) available to common stockholders plus assumed conversions $36,391 34,153 $1.07 $(40,165) 33,232 $(1.21) $76,216 37,823 $2.02 ===========================================================================
Basic and diluted earnings per share for the fiscal year ended May 31, 2000 is the same as the effect of any potentially dilutive securities and convertible debt is antidilutive due to the loss generated by the restructuring and non- recurring charges and discontinued operations. 43 Recent accounting pronouncements - In June 1998, the Financial Accounting - -------------------------------- Standards Board (the "FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities and supersedes several existing standards. SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company adopted this standard on June 1, 2001 and does not expect that the adoption will have a material impact on its financial statements. In June 2001, the FASB finalized SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 eliminates pooling of interests accounting and requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. SFAS No. 142 eliminates the amortization of goodwill and other non-separable intangible assets and requires that goodwill be evaluated for impairment by applying a fair value-based test. The Company plans to adopt these new standards during the first quarter of fiscal year 2002, in accordance with the established effective dates, and estimates that the annual impact of SFAS No. 142 will be an addition of approximately $0.20 diluted earnings per share in fiscal 2002. Note 2 - Business Acquisitions and Investments During fiscal 2001, 2000, and 1999, the Company completed the following acquisitions: Date Ownership Business Acquired Percentage - -------------------------------------------------------------------------- 2001 - ---- Source Dispenser UK, LTD. August 2000 100% Medprint, Inc. August 2000 100% Pharma Internet & Co AG October 2000 51% 2000 - ---- The Computer Place, Inc. ("Medisoft") April 2000 100% 1999 - ---- John Richardson Computers January 1999 100% Each of the above acquisitions has been recorded using the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. The operating results of the acquired businesses are included in the Company's consolidated statements of income (loss) from their respective dates of acquisition. The aggregate price paid for the 2001 purchase acquisitions was $23.2 million, consisting entirely of cash. The goodwill and other intangible assets of these acquisitions are being amortized over periods ranging from 5 to 20 years. 44 The aggregate price paid for the 2000 purchase acquisition was $44.1 million, consisting of $38.1 million cash and $6.0 million deferred purchase price. The excess of cost over tangible assets acquired of $42.3 million was allocated to goodwill and other intangible assets. The goodwill and other intangible assets of this acquisition are being amortized over periods ranging from 5 to 15 years. The aggregate price paid for the 1999 purchase acquisition and final adjustments to the 1998 purchase price allocation was $8.1 million, consisting of cash. The excess of cost over tangible assets acquired of $6.6 million was allocated to goodwill and other intangible assets. The goodwill and other intangible assets of these acquisitions are amortized over periods ranging from 5 to 20 years. In July 2000 the Company sold its pharmacy systems business to TechRx, Inc. In exchange for the business and $10 million, the Company received an equity interest in TechRx, Inc. This cost method investment is valued at $35.1 million, net of a deferred gain of $4.9 million. Note 3 - Discontinued Operations On December 20, 1999, the Company announced its intention to spin-off its eCommerce business segment, encompassed in the newly formed Global Payments Inc. subsidiary. This spin-off was contingent on receiving a favorable opinion from outside counsel regarding the tax-free status of the dividend. On November 15, 2000 the Company received a favorable opinion from counsel based on an IRS ruling and completed the spin-off on January 31, 2001. The spin-off was accomplished by distributing all of the shares of common stock of Global Payments Inc. to the Company shareholders. The Company shareholders received 0.8 share of Global Payments Inc. common stock for each share of the Company common stock held as of the January 19, 2001 record date. Certain network and other services are provided to Global Payments Inc. under the Company's services agreements. As a result of the spin-off, the Company's May 31, 2001 financial statements have been prepared with Global Payments Inc.'s net assets, results of operations, and cash flows displayed separately as "discontinued operations" with all historical financial statements restated to conform to this presentation. During the second quarter of fiscal 2001, the Company recorded an expense of $10.0 million to reflect the net costs associated with effecting the spin-off ($8.7 million after tax, or $0.26 per share). These costs include legal and investment banker fees, severance, duplicate software licenses, and other related costs partially offset by the projected income for Global Payments Inc. for the period from the measurement date through January 31, 2001. Additionally, in the third quarter of fiscal 2000, the Company decided to pursue the divestiture of its management services business and accordingly, the Company's financial statements have been prepared with the net assets, results of operations, and cash flows of this business displayed separately as "discontinued operations" with all historical financial statements restated to conform to this presentation. The Company successfully completed the sale of this management services business for total cash consideration of $20.0 million in the first quarter of fiscal 2001. 45 The operating results of the discontinued operations are summarized as follows for the fiscal years ending May 31:
2001 -------------------------------------------------- (In thousands, except per share data): Global Management Payments Inc. Services Total - --------------------------------------------------------------------------------------------------------------------- Revenue $223,592 $ 21,905 $245,497 Operating income $ 40,801 $ 168 $ 40,969 Income from operations, net of tax $ 17,056 - $ 17,056 Spin-off special charge, net of tax (8,733) - (8,733) ----------------------------------------------- Net income from discontinued operations $ 8,323 $ - $ 8,323 =============================================== Diluted earnings (loss) per share: From operations $ 0.50 $ - $ 0.50 ----------------------------------------------- Spin-off special charge $ (0.26) $ - $ (0.26) ----------------------------------------------- Total $ 0.24 $ - $ 0.24 ----------------------------------------------- Share count 34,153 34,153 -----------------------------------------------
2000 -------------------------------------------------- (In thousands, except per share data): Global Management Payments Inc. Services Total - --------------------------------------------------------------------------------------------------------------------- Revenue $340,033 $107,051 $447,084 Operating income (loss) $ 63,212 $(26,587) $ 36,625 Income (loss) from operations, net of tax $ 33,047 $(16,848) $ 16,199 Projected phase-out loss from operations, net of tax - (10,381) (10,381) Projected loss on disposal, net of tax - (31,060) (31,060) ----------------------------------------------- Income (loss) from discontinued operations before cumulative effect of change in accounting principle 33,047 (58,289) (25,242) Cumulative effect of change in accounting principle, net of tax - (13,760) (13,760) ----------------------------------------------- Net income (loss) from discontinued operations $ 33,047 $(72,049) $(39,002) =============================================== Diluted earnings (loss) per share: From operations $ 0.96 $ (0.51) $ 0.47 ----------------------------------------------- Projected phase-out loss from operations $ - $ (0.31) $ (0.31) ----------------------------------------------- Projected loss on disposal $ - $ (0.94) $ (0.94) ----------------------------------------------- Cumulative effect of change in accounting principle $ - $ (0.41) $ (0.41) ----------------------------------------------- Total $ 0.96 $ (2.17) $ (1.17) ----------------------------------------------- Share count 34,448 33,232 33,232 -----------------------------------------------
46
1999 -------------------------------------------------- (In thousands, except per share data): Global Management Payments Inc. Services Total - --------------------------------------------------------------------------------------------------------------------- Revenue $330,051 $115,859 $445,910 Operating income (loss) $ 76,675 $ (5,773) $ 70,902 Net income (loss) from discontinued operations $ 41,335 $ (3,761) $ 37,574 =============================================== Diluted earnings (loss) per share: ----------------------------------------------- Total $ 1.18 $ (0.11) $ 1.07 =============================================== Share count 35,071 33,725 35,071 -----------------------------------------------
The net income (loss) from discontinued operations for fiscal 2001, 2000, and 1999 is net of tax expense (benefit) of $13.1 million, $(17.2) million, and $22.9 million, respectively. For the Physician Management Services component of the discontinued operations, the Company continued a revenue recognition accounting policy followed by this business prior to its acquisition by the Company. The Company maintained this generally accepted policy after the acquisition for Physician Management Services offerings for which the Company invoiced and collected amounts on its customers' behalf. Previously, for customers where the amount and timing of collection of their accounts receivable could be reasonably estimated, the Company estimated the fees that it expected to invoice upon collection of their accounts receivable. It recognized such revenues when substantially all services performed by the Company had been completed. The estimated costs to complete were accrued separately. Effective June 1, 1999, the Company elected to change its revenue recognition policy. Effective with the change in policy, the Company recognized revenue when the services were billed to the customer, at which point all services performed by the Company were completed. The impact of this change resulted in the elimination of estimated or unbilled receivables and related accrued collection costs. Management believes that this change was appropriate and was consistent with recent authoritative literature, specifically SEC Staff Accounting Bulletin No. 101, issued December 3, 1999. The cumulative after-tax effect of this change in accounting principle was $13.8 million, net of income taxes of $8.6 million, at June 1, 1999. The cumulative after-tax effect on both the basic and diluted earnings per share was $(0.41). The following unaudited pro forma information assumes the new revenue recognition policy was retroactively applied: (in thousands) 2000 1999 - -------------------------------------------------------------------------- Net income (loss) $(26,405) $68,661 Basic earnings (loss) per share $ (0.79) $ 2.04 Diluted earnings (loss) per share $ (0.79) $ 1.94 47 As of May 31, 2000, the net assets of discontinued operations are summarized as follows:
May 31, 2000 ------------------------------------------------------ Global Management (In thousands): Payments Inc. Services Total - -------------------------------------------------------------------------------------------------------------------------- Current assets $ 67,935 $ 27,535 $ 95,470 Property and equipment, net 28,665 5,756 34,421 Intangible assets, net 173,726 - 173,726 Other assets (liabilities) (73) 1,384 1,311 Current liabilities (28,149) (7,788) (35,937) Other long-term liabilities (6,623) (2,370) (8,993) Provision for estimated losses - (21,214) (21,214) Minority interest in equity of subsidiaries (18,472) - (18,472) ---------------------------------------------------- Net assets of discontinued operations $217,009 $ 3,303 $220,312 ====================================================
Note 4 - Property and Equipment As of May 31, 2001 and 2000, property and equipment consisted of the following:
(In thousands) 2001 2000 - ------------------------------------------------------------------------------------------------------------- Land $ 1,602 $ 1,602 Buildings 11,792 12,161 Property under capital leases 1,504 15,932 Equipment 48,330 35,581 Software 38,240 31,616 Leasehold improvements 3,654 7,397 Furniture and fixtures 4,081 3,995 Work in progress 24,936 22,363 ------------------------------ 134,139 130,647 Less: accumulated depreciation and amortization 51,183 61,382 ------------------------------ $ 82,956 $ 69,265 ==============================
48 Note 5 - Software Costs The following table sets forth information regarding the Company's costs associated with software development for the years ended May 31, 2001, 2000 and 1999:
(In thousands) 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------- Total costs associated with software development $17,501 $20,725 $20,002 Less: capitalization of internally developed software 8,999 9,609 9,471 --------------------------------------- Net research and development expense $ 8,502 $11,116 $10,531 ========================================
The Company capitalizes costs related to the development of certain software products. In accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed", capitalization of costs begins when technological feasibility has been established and ends when the product is available for general release to customers. Amortization is computed on an individual product basis and has been recognized for those products available for market based on the products' estimated economic lives, not to exceed five years. Additionally, the Company capitalizes costs related to the development of computer software developed or obtained for internal use in accordance with the AICPA SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Costs incurred in the application development phase are capitalized by the Company and amortized over the useful life, not to exceed five years. Total unamortized capitalized software costs (purchased and internally developed) were approximately $24.6 million and $18.4 million as of May 31, 2001 and 2000, respectively and are included in Property and equipment. Total software amortization expense was approximately $6.9 million, $6.4 million and $4.9 million in fiscal 2001, 2000 and 1999, respectively. Note 6 - Intangible Assets As of May 31, 2001 and 2000, intangible assets consisted of the following:
(In thousands) 2001 2000 - ------------------------------------------------------------------------------------------------ Customer relationship $ 56,415 $ 55,115 Goodwill 201,395 184,077 Other intangibles 15,437 15,237 ------------------------- 273,247 254,429 Less: accumulated amortization 51,490 39,629 ------------------------- $221,757 $214,800 =========================
49 Note 7 - Accounts Payable and Accrued Liabilities As of May 31, 2001 and 2000, accounts payable and accrued liabilities consisted of the following:
(In thousands) 2001 2000 - ------------------------------------------------------------------------------------------------ Trade accounts payable $26,816 $22,185 Accrued compensation and benefits 13,361 16,337 Deferred purchase price on acquisition - 6,000 Accrued restructuring and merger related costs 420 4,789 Other accrued liabilities 12,631 5,771 ------------------------ $53,228 $55,082 ========================
Note 8 - Retirement Benefits The Company provides a variety of retirement benefits for its employees. During fiscal year 1998, the Company made an evaluation of its current retirement plan offerings and decided to provide its employees with a greater emphasis on its deferred compensation 401(k) plan by substantially increasing the Company's match of participants' contributions. At the same time, the Company closed the defined benefit pension plan to new participants beginning June 1, 1998. The Company has a noncontributory defined benefit pension plan (the "Plan") covering substantially all of its United States employees who have met the eligibility provisions of the Plan as of May 31, 1998. Benefits are based on years of service and the employee's compensation during the highest five consecutive years of earnings of the last ten years of service. Plan provisions and funding meet the requirements of the Employee Retirement Income Security Act of 1974, as amended. The following table provides a reconciliation of the changes in the Plan's benefit obligations and fair value of assets over the two-year period ending May 31, 2001 and a statement of funded status at May 31 for each year:
Changes in benefit obligations (In thousands) 2001 2000 - -------------------------------------------------------------------------------------------------- Balance at beginning of year $24,012 $24,598 Interest cost 1,831 1,750 Amendments 32 - Benefits paid (1,223) (860) Actuarial loss (gain) 857 (1,476) ------------------------- Balance at end of year $25,509 $24,012 =========================
50
Changes in plan assets (In thousands) 2001 2000 - ------------------------------------------------------------------------------------------------- Balance at beginning of year $24,277 $22,619 Actual return on plan assets (669) 2,518 Employer contributions - - Benefits paid (1,223) (860) ------------------------- Balance at end of year $22,385 $24,277 =========================
The accrued pension costs recognized in the Consolidated Balance Sheets were as follows:
(In thousands) 2001 2000 - ------------------------------------------------------------------------------------------------- Funded status $(3,124) $ 265 Unrecognized net (gain) loss 2,379 (1,535) Unrecognized prior service cost 121 159 Unrecognized net asset at June 1, 1985, being amortized over 17 years (164) (352) ------------------------- Accrued pension cost $ (788) $(1,463) ==========================
Net pension expense/(income) included the following components for the fiscal years ending May 31:
(In thousands) 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Service cost $ - $ - $ 197 Interest cost on projected benefit obligation 1,831 1,750 1,794 Expected return on plan assets (2,389) (2,225) (2,068) Net amortization and deferral (117) (117) (117) ------------------------------------------- Net pension expense/(income) $ (675) $ (592) $ (194) ===========================================
Significant assumptions used in determining net pension expense and related obligations were as follows:
2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------- Discount rate 7.50% 7.75% 7.50% Rate of increase in compensation levels 4.33% 4.33% 4.33% Expected long-term rate of return on assets 10.00% 10.00% 10.00% - -------------------------------------------------------------------------------------------------------------------
The Company has a retirement plan for non-employee directors of the Company elected prior to January 1, 1995 with five or more years of service (the "Directors' Plan"). The Directors' Plan benefits are based on 50% of the annual director retainer amount in effect on the date of a director's retirement plus 10% for each year of service for a combined total of up to 100% of the base amount for 10 years' service. The benefits are payable upon retirement, at or after age 70, for a period equal to the number of years of service as a director, but not more than 15 years for participants with 15 or more years of board service as of the effective date of the Directors' Plan and not more than 10 years for all other 51 participants. The expense related to the Directors' Plan was immaterial in 2001, 2000, and 1999. The projected benefit obligation for the plan was $0.7 million and $0.3 million as of May 31, 2001 and 2000, respectively. On June 1, 1997, the Company adopted a pilot Supplemental Executive Retirement Plan ("SERP") for certain key executives. Benefits payable under this plan are based upon the participant's highest three consecutive years of earnings of the last ten years of service. Retirement benefits are reduced by a portion of the participant's annual social security benefits and any retirement benefits under the company's tax-qualified or non-qualified defined benefit plans. Benefits earned under the SERP are fully vested after five years of service. Expense related to the plan was $1.0 million, $0.7 million and $1.0 million in 2001, 2000, and 1999, respectively. The projected benefit obligation for the plan was $6.4 million and $3.6 million as of May 31, 2001 and 2000, respectively. The Company sponsors a deferred compensation 401(k) plan that is available to substantially all employees. The charges to expense for the Company match were $1.9 million in 2001, $1.1 million in 2000, and $2.3 million in 1999. Note 9 - Income Taxes The provision for income taxes for continuing operations includes:
(In thousands) 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------- Current tax expense: Federal $ 7,117 $ 15,175 $ 5,175 State 1,253 1,197 1,311 ------------------------------------------ 8,370 16,372 6,486 ------------------------------------------ Deferred (prepaid) tax expense: Federal 9,569 (13,399) 14,144 State (245) (1,148) 1,228 ------------------------------------------ 9,324 (14,547) 15,372 ------------------------------------------ Total $17,694 $ 1,825 $21,858 ==========================================
The Company's effective tax rates differ from federal statutory rates as follows:
2001 2000 1999 ------------------------------------------ Federal statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal income tax benefit 3.3% 4.7% 3.0% Other 0.4% 235.9% 1.2% ------------------------------------------ Total 38.7% 275.6% 39.2% ==========================================
52 Deferred income taxes as of May 31, 2001 and 2000 reflect the impact of temporary differences between the amounts of assets and liabilities for financial accounting and income tax purposes. As of May 31, 2001 and 2000, principal components of deferred tax items were as follows:
(In thousands) 2001 2000 - -------------------------------------------------------------------------------------------- Deferred tax assets: Net operating loss and credit carryforwards $27,918 $12,340 Write-down of investment 6,197 4,493 Accrued non-recurring charges 5,944 21,402 Accrued expenses 5,871 2,729 Other 2,636 2,147 Employee benefit plans 2,218 1,065 Acquired intangibles 2,011 2,397 Projected loss on discontinued operations - 16,583 ------------------------- 52,795 63,156 Deferred tax liabilities: Property and equipment 12,600 10,428 Prepaid expenses 515 384 Other 255 - ------------------------- 13,370 10,812 ------------------------- Net deferred tax asset 39,425 52,344 Less: current deferred tax asset 29,539 20,097 ------------------------- Non-current deferred tax asset $ 9,886 $32,247 =========================
Net operating loss and credit carryforwards expire between the years 2002 and 2021. Note 10 - Long-Term Debt As of May 31, 2001 and 2000, long-term debt consisted of the following:
(In thousands) 2001 2000 - ----------------------------------------------------------------------------------------------------------- Mortgage payable - due in monthly installments until May 15, 2005 with interest at 6.87% $ 3,056 $ 3,195 Convertible notes - mature on November 1, 2003 143,750 143,750 Promissory notes issued in consideration for acquisitions: Spring Anesthesia Group, Inc. - 7.6% due August 2003 4,831 5,500 Hadley Hutt Computing Ltd. - 6.97% due June 2003 100 209 -------------------------- 151,737 152,654 Less: current maturities 170 159 -------------------------- Long-term debt $151,567 $152,495 ==========================
53 On November 6, 1996, the Company issued convertible notes (the "Notes"), providing $139.7 million in proceeds, net of $4.1 million in debt issuance costs. The issuance costs are included in other assets and are being amortized over the life of the Notes. The Notes are unsecured subordinated obligations of the Company, $143.8 million aggregate principal amount, and will mature on November 1, 2003. The Notes bear interest at 5% per annum. When originally issued, the Notes were convertible into approximately 2,752,000 shares of common stock at $52.23 per share at any time prior to maturity. On January 22, 2001, in anticipation of the spin-off of Global Payments Inc., the conversion rate of the Notes was adjusted as provided for in the indenture governing the Notes. As a result of this adjustment, the Notes are now convertible into approximately 4,140,000 shares of common stock at $34.72 per share at any time prior to maturity. Subsequent to November 1, 1999, the Notes are redeemable at the option of the Company, in whole or in part, initially at 102.857% and thereafter at prices declining to 100% at maturity, together with accrued interest. On April 29, 1999, the Company assumed a mortgage payable in connection with the purchase of an office building. The mortgage is due in monthly installments with a fixed rate of 6.87% per annum with the final installment due on May 15, 2005. This final installment includes a balloon payment of $2.4 million. Scheduled maturities of the Company's long-term debt during the fiscal years subsequent to May 31, 2001 are as follows: $0.2 million in 2002; $0.2 million in 2003; $148.9 million in 2004; and $2.5 million in 2005. Note 11 - Shareholders' Equity Stock Option Plans - On October 28, 1999, the Company adopted a stock-based - ------------------ compensation plan, the 2000 Long-Term Incentive Plan (the "2000 Plan"). The aggregate number of shares of common stock of the Company reserved and available for awards at May 31, 2001 was 1,446,341 shares. The number of shares available for awards will be adjusted annually on the last day of the Company's fiscal year through fiscal 2004. The 2000 Plan authorizes the granting of awards to employees, officers and directors of the Company or its subsidiaries in the following forms: (i) options to purchase shares of common stock, which may be incentive stock options or nonqualified stock options, (ii) stock appreciation rights; (iii) performance shares; (iv) restricted stock; (v) dividend equivalents; (vi) other stock-based awards; or (vii) any other right or interest relating to common stock or cash. During fiscal 2000 and 2001, the Company has only granted awards in the forms of options and restricted stock. Not more than 15% of the total authorized shares may be granted as awards of restricted stock or unrestricted stock awards. Shares awarded as restricted stock under the plan are held in escrow and released to the grantee upon the grantee's satisfaction of conditions set forth in the grantee's restricted stock agreement. Such awards are recorded as deferred compensation, a reduction of shareholders' equity, based on the quoted fair market value of the Company's common stock at the award date. Compensation expense is recognized ratably during the escrow period of the award. Options may be issued at, below, or above the fair market value of the common stock at the time of grant. No awards have been granted below the 54 fair market value since the 2000 Plan's inception. Options granted become exercisable in various annual increments and terminate over a period not to exceed 10 years. The Company has two employee stock option plans, the 1997 Stock Option Plan (the "1997 Plan") and the 1987 Stock Option Plan (the "1987 Plan"), that provide for the granting of options to certain officers and key employees to purchase the Company's common stock. No additional options will be granted under the 1997 and 1987 Plans. Options granted under such plans become exercisable in various annual increments and terminate over a period not to exceed 10 years. The Company's 1984 Non-Employee Directors Stock Option Plan (the "1984 Plan") provided for annual grants of options (each to purchase 5,000 shares of common stock of the Company), to directors who are not employees of the Company. The maximum number of shares for which options may be granted is 545,000. No additional options will be granted under the 1984 Plan. Options granted prior to October 26, 1995 are exercisable immediately at the current market value on the date of grant. Options granted on or after October 26, 1995 vest 20% two years after the date of grant, an additional 25% after three years, another 25% after four years, and the remaining 30% after five years. Additionally, as a result of the merger with PHSS on December 19, 1997, the Company assumed the Physician Support Systems, Inc. Stock Option Plan and the Synergistic Systems, Inc. Stock Option Plan (the "PHSS Plans"). No additional options will be granted under the PHSS Plans. All options issued under the PHSS Plans have an exercise price of not less than 100% of the fair market value of a share of the Company's common stock on the date of the grant, vest over five years and must be exercised within 10 years from the date of the grant. Each PHSS option outstanding on December 19, 1997 was converted to 0.435 options to receive the Company's common stock. The PHSS Plans were terminated during fiscal year 2001. Accordingly, there are no outstanding or available stock options under the PHSS Plans at May 31, 2001. Other Stock Plans - On October 26, 2000, the Company adopted an Employee Stock - ----------------- Purchase Plan under which the sale of 1,500,000 shares of its common stock has been authorized. During each quarterly offering period under the plan, employees may authorize payroll deductions of up to 20% of compensation, which funds are used to purchase shares of the Company's common stock at the end of the offering period at a price equal to the lower of 85% of market value on the first day or the last day of the offering period, subject to an annual purchase limit of $25,000. At May 31, 2001, 88,136 shares have been issued under this plan, with 1,411,864 shares reserved for future issuance. The Company's 1983 Restricted Stock Plan (the "1983 Restricted Stock Plan") authorizes shares of the Company's common stock to be awarded to key employees. No additional shares will be awarded under the 1983 Restricted Stock Plan. Shares previously awarded under the 1983 Restricted Stock Plan are held in escrow and released to the grantee upon the grantee's satisfaction of conditions set forth in the grantee's restricted stock agreement. Such awards are recorded as deferred compensation, a reduction of shareholders' equity, based on the quoted fair market value of the Company's common stock at the award date. 55 Compensation expense is recognized ratably during the escrow period of the award. Under the 1983 Restricted Stock Plan and the 2000 Plan, there were 122,962, 311,850 and 83,138 shares of the Company's common stock awarded as restricted stock during fiscal years 2001, 2000 and 1999, respectively. These awards have restriction periods of one to four years. As of May 31, 2001, 161,783 restricted shares remained in escrow. The Company expensed $1.8 million, $2.2 million and $1.0 million in 2001, 2000 and 1999, respectively, in connection with restricted stock awards granted under these two plans. Transactions under the stock option plans are summarized in the following tables. On January 31, 2001, as a result of the spin-off of Global Payments Inc., options and restricted stock held by Global Payments Inc. employees were cancelled and replaced with grants of Global Payments Inc. options. The number of options outstanding and the exercise prices for options held by employees that remained with the Company have been adjusted pursuant to a formula. This was accomplished by canceling each option and replacing them with newly issued options. Each replacement stock option had an aggregate intrinsic value and term equal to the aggregate intrinsic value of the original option.
1987 Plan 1984 Plan ----------------------------------------------------------------------------- Weighted Weighted Shares Under Option Average Option Shares Under Average Option Price Per Share Option Price Per Share - ------------------------------------------------------------------------------------------------------------------ Outstanding at May 31, 1998 2,271,983 $19.21 244,500 $18.65 Granted - - 20,000 33.88 Exercised (220,073) 11.64 (27,000) 16.64 Expired or terminated (114,585) 37.59 (14,000) 35.01 - ------------------------------------------------------------------------------------------------------------------ Outstanding at May 31, 1999 1,937,325 18.98 223,500 19.23 Granted - - 29,000 29.25 Exercised (298,452) 9.58 (45,000) 14.71 Expired or terminated (63,923) 30.52 - - - ------------------------------------------------------------------------------------------------------------------ Outstanding at May 31, 2000 1,574,950 20.30 207,500 21.61 Option adjustment due to spinoff 1,427,430 - 324,160 - Granted - - 39,312 37.44 Exercised (939,934) 25.07 (7,500) 35.00 Expired or terminated (1,396,310) 18.70 (215,000) 23.23 - ------------------------------------------------------------------------------------------------------------------ Outstanding at May 31, 2001 666,136 14.85 348,472 14.33 - ------------------------------------------------------------------------------------------------------------------ Exercisable at May 31, 2001 574,324 14.18 245,540 11.43 - ------------------------------------------------------------------------------------------------------------------ Available for future grants - - - - - ------------------------------------------------------------------------------------------------------------------
56
1997 Plan PHSS Plans ----------------------------------------------------------------------------- Weighted Weighted Shares Under Option Average Option Shares Under Average Option Price Per Share Option Price Per Share - ----------------------------------------------------------------------------------------------------------------- Outstanding at May 31, 1998 114,800 $33.40 241,771 $37.79 Granted 817,075 35.88 - - Exercised - - (62,442) 31.05 Expired or terminated (38,325) 34.09 - - - ----------------------------------------------------------------------------------------------------------------- Outstanding at May 31, 1999 893,550 35.63 179,329 40.14 Granted 322,525 25.45 - - Exercised - - (14,167) 27.91 Expired or terminated (237,066) 33.36 (121,306) 42.18 - ----------------------------------------------------------------------------------------------------------------- Outstanding at May 31, 2000 979,009 32.83 43,856 38.46 Option adjustment due to spinoff 782,176 - - - Granted - - - - Exercised (20,723) 30.75 (10,875) 25.81 Expired or terminated (1,011,453) 32.21 (32,981) 44.53 - ----------------------------------------------------------------------------------------------------------------- Outstanding at May 31, 2001 729,009 20.65 - - - ----------------------------------------------------------------------------------------------------------------- Exercisable at May 31, 2001 123,071 22.26 - - - ----------------------------------------------------------------------------------------------------------------- Available for future grants - - - - - -----------------------------------------------------------------------------------------------------------------
2000 Plan ---------------------------------------- Weighted Shares Under Option Average Option Price Per Share - -------------------------------------------------------------------------------- Outstanding at May 31, 1999 Granted 824,200 25.48 Exercised - - Expired or terminated (5,880) 31.48 - -------------------------------------------------------------------------------- Outstanding at May 31, 2000 818,320 25.44 Option adjustment due to spinoff 1,552,368 - Granted 874,021 26.03 Exercised (13,927) 29.88 Expired or terminated (1,683,430) 24.90 - -------------------------------------------------------------------------------- Outstanding at May 31, 2001 1,547,352 17.43 - -------------------------------------------------------------------------------- Exercisable at May 31, 2001 152,925 19.63 - -------------------------------------------------------------------------------- Available for future grants 1,446,341 - - --------------------------------------------------------------------------------
57 The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives by groups of similar price and grant dates:
1987 Plan 1984 Plan ---------------------------------------------------------------------------------------------- Number of Weighted Weighted Number of Weighted Weighted Exercise Price Range Shares Average Price Average Shares Average Price Average Contractual Life Contractual Life - ------------------------------------------------------------------------------------------------------------------- $ 4.12 - $12.42 209,045 $10.98 3.6 years 145,872 $ 5.62 1.4 years $12.96 - $13.91 185,522 11.25 4.0 years - - - $14.73 - $21.21 202,985 16.90 4.2 years 97,248 17.11 6.7 years $22.79 - $25.37 68,584 23.61 5.0 years 105,352 23.83 6.7 years
1997 Plan 2000 Plan ---------------------------------------------------------------------------------------------- Number of Weighted Weighted Number of Weighted Weighted Exercise Price Range Shares Average Price Average Shares Average Price Average Contractual Life Contractual Life - ------------------------------------------------------------------------------------------------------------------- $13.54 - $13.69 - - - 315,959 13.65 9.0 years $13.69 - $16.47 219,053 16.05 8.3 years 394,488 13.96 8.8 years $16.51 - $18.71 - - - 206,489 16.86 9.0 years $19.75 - $20.21 254,770 20.13 6.2 years 255,806 19.93 6.8 years $20.36 - $21.95 - - - 191,570 21.50 9.6 years $22.14 - $29.25 255,186 25.07 7.4 years 183,040 24.33 9.2 years
The Company has chosen the disclosure option under SFAS No. 123 and continues to apply APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for options granted under the plans. Had compensation cost for these plans been recognized based on the fair value of the options at the grant dates for awards under the plans consistent with the method of SFAS No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
(In thousands, except per share data) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Net income (loss): As reported $36,391 $(40,165) $71,437 Pro forma 28,858 (44,461) 68,250 Basic earnings (loss) per share: As reported 1.10 (1.21) 2.12 Pro forma 0.87 (1.34) 2.02 Diluted earnings (loss) per share: As reported 1.07 (1.21) 2.02 Pro forma 0.85 (1.34) 1.97
58 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for the grants during the respective fiscal year:
2001 2000 1999 ----------------------------------------------------- Non-employee Directors Plan Risk-free interest rates 6.3% 6.6% 4.5% Expected dividend yields 1.1% 1.3% 0.9% Expected lives 10 years 10 years 10 years 1997 Plan Risk-free interest rates - 6.3% 4.7% Expected dividend yields - 1.1% 0.9% Expected lives - 7 years 7 years 2000 Plan Risk-free interest rates 5.8% 6.5% - Expected dividend yields 0.9% 1.0% - Expected lives 7 years 7 years - Employee Stock Purchase Plan Risk-free interest rates 5.4% 5.5% 4.4% Expected dividend yields 0.8% 1.4% 1.0% Expected lives 1 year 1 year 1 year Expected volatility-all plans 47% 50% 40%
Note 12 - Segment Information SFAS 131 defines operating segments as components of an enterprise whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess performance. The chief operating decision making group for NDCHealth consists of the Chief Executive Officer, the Chief Financial Officer, the Executive Vice President - Operations, and certain senior executive officers. NDCHealth operates its business as two fundamental reportable segments: Network Services and Systems; and Information Management. Network Services and Systems provides electronic connectivity to our intelligent network and system solutions throughout the healthcare industry. Information Management provides management information, research, and consulting services to pharmaceutical manufacturers, pharmacy chains and hospitals. Other includes results from divested businesses, restructuring and impairment charges, income related to gains from the sale of securities, income related to gains on business divestitures, and expense related to non-cash losses on an investment in Medscape. 59 The accounting policies of the reportable segments are generally the same as those described in the summary of significant accounting policies. Corporate overhead is allocated to the segments based on various methodologies (i.e., percentage of revenue, square footage, headcount, etc.). These various methodologies allow the Company to equitably allocate overhead costs based on the demands of the segment. Income taxes are not allocated to the segments incurring them for internal evaluation purposes. Revenues are attributed to geographic region based on the location of the business unit processing the transactions. No individual foreign country accounted for more than 10% of consolidated revenues in any period presented.
Network Year Ended May 31, 2001 Information Services and (In thousands) Management Systems Other Totals - ---------------------------------------------------------------------------------------------------------- Revenues $138,091 $205,862 $ 5,862 $349,815 Income before income taxes and discontinued operations 18,105 36,482 (8,825) 45,762 Depreciation and amortization 15,303 19,173 269 34,745 Segment assets 133,675 354,537 - 488,212
Network Year Ended May 31, 2000 Information Services and (In thousands) Management Systems Other Totals - ---------------------------------------------------------------------------------------------------------- Revenues $131,229 $158,051 $ 56,393 $345,673 Income before income taxes and discontinued operations 17,728 24,781 (41,847) 662 Depreciation and Amortization 14,875 14,320 2,639 31,834 Segment assets 98,966 303,484 30,870 433,320
Network Year Ended May 31, 1999 Information Services and (In thousands) Management Systems Other Totals - ---------------------------------------------------------------------------------------------------------- Revenues $128,961 $141,832 $68,203 $338,996 Income before income taxes and discontinued operations 23,857 24,842 7,022 55,721 Depreciation and Amortization 12,772 14,269 2,620 29,661 Segment assets 117,985 293,376 18,908 430,269
60 A reconciliation of reportable segment assets to the Company's consolidated assets is as follows:
(In thousands) 2001 2000 1999 - ----------------------------------------------------------------------------------------------------- Assets: Information Management $133,675 $ 98,966 $117,985 Network Services and Systems 354,537 303,484 293,376 Other - 30,870 18,908 --------------------------------------------- Total reportable segment assets 488,212 433,320 430,269 Net assets of discontinued operations - 220,312 104,454 --------------------------------------------- Consolidated total assets $488,212 $653,632 $534,723 =============================================
The following presents information about the Company's operations in different geographic regions for and as of the years ended May 31, 2001, 2000, and 1999:
(In thousands) 2001 2000 1999 - ----------------------------------------------------------------------------------------------------- Revenues: United States $334,553 $330,562 $323,095 All other 15,262 15,111 15,901 --------------------------------------------- Total revenues $349,815 $345,673 $338,996 ============================================= Long-lived assets: United States $ 79,586 $ 66,433 $ 59,311 All other 3,370 2,832 3,288 --------------------------------------------- Total long-lived assets $ 82,956 $ 69,265 $ 62,599 =============================================
61 Note 13 - Non-recurring, Restructuring and Impairment Charges and Other Unusual Expenses: During the last 24 months, the Company completed a significant strategy review and implemented a plan to focus on core products and services. As a result, the last two years have represented a major transition period for the Company. This included management's evaluation, during the second quarter of fiscal year 2000, of the Company's current product and service offerings in light of changing market and technological environments. The decision was made to focus management attention on the core information management and network services and systems as well as related Internet initiatives. Accordingly, actions were initiated to eliminate non-core as well as obsolete and redundant product and service offerings. In addition, the Company accelerated clearinghouse integration, consolidation of locations, and associated staff and expense reductions. Total restructuring and asset impairment charges during the second quarter of fiscal 2000 were $34.4 million and were categorized as follows:
(in thousands) Total Cash Non-cash - --------------------------------------------------------------------------------------------------- Impairment of goodwill and other intangibles $15,972 $ - $15,972 Impairment of property and equipment 6,908 - 6,908 Closed or planned closings of facilities 6,100 6,100 - Estimated costs for settlements on contracts 3,236 2,236 1,000 Severance and related costs 2,177 2,177 - ----------------------------------------- Total $34,393 $10,513 $23,880 =========================================
The items considered cash items were accrued at the time the charges were incurred. Based on management's assessment during the second quarter of fiscal 2000, the Company evaluated whether events and circumstances had occurred that indicated the carrying amount of property and equipment or goodwill and other intangibles may warrant revision or may not be recoverable. The Company uses an estimate of the future undiscounted net cash flows associated with the asset over the remaining life of the asset in measuring whether the long-lived asset is recoverable. Management believes this approach is consistent with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). As a result, it was determined the above impairment losses should be recognized under SFAS 121. At the end of the second quarter of fiscal 2000, the Company also disclosed that we would have additional restructuring and other unusual charges. Subsequently, the Company incurred $2.2 million of restructuring and impairment charges during the second quarter of fiscal 2001 as these actions were finalized and implemented. Of this total, approximately $1.2 million were cash items that were accrued at the time the charges were incurred. These cash items include severance and related costs of $1.1 million and facility exit costs of $0.1 million. The severance and related costs arose from the Company's actions to reduce personnel staffing in areas of redundant operations and activities. These charges 62 reflect 58 specifically identified executives and employees who were informed of their termination during the second quarter of fiscal 2001. The facility costs relate to a location that was closed during the quarter. The remaining $1.0 million impairment charge was the result of the write down and divestiture of a non-core operation. As of May 31, 2001, $0.4 million of the cash portion of the restructuring charges remains accrued as a current liability in the liabilities sections of the balance sheet as follows:
(in thousands) Original FY00 FY01 FY01 Total Payments Additions Payments Current - ---------------------------------------------------------------------------------------------------------------- Closed or planned closings of facilities $ 6,100 $1,768 $ 160 $4,372 $120 Estimated costs for settlements on contracts 2,236 498 - 1,738 - Severance and related costs 2,177 1,621 1,066 1,322 300 ------------------------------------------------------------------ Total $10,513 $3,887 $1,226 $7,432 $420 ===================================================================
In accordance with the Company's policy regarding investments in publicly traded entities, losses in the amounts of $9.7 million and $7.0 million were recognized in fiscal 2000 and fiscal 2001, respectively, to mark to fair value its investment in Medscape, Inc. as these losses were determined to be other than temporary. Note 14 - Related Party Transactions Executive recruiting services provided by related parties were $0.2 million and $0.1 million for the years ended May 31, 2001 and 2000, respectively. Promissory notes totaling approximately $4.3 million were issued to the Company in fiscal 2001 by a partnership owned by a director of the Company for the exercise of stock options previously granted to the director and transferred to the partnership. The interest rates on these notes range from 4.63% to 4.77%, payable at the maturity date. The notes mature on various dates between July 2002 and June 2004. The notes are secured by substantially all the assets of the partnership. The entire $4.3 million note balance was outstanding at May 31, 2001, and is included in Deferred compensation and other as a reduction of Shareholders' equity. 63 Note 15 - Lease Obligations The Company conducts a major part of its operations using leased facilities and equipment. Many of these leases have renewal and purchase options and provide that the Company pay the cost of property taxes, insurance and maintenance. Rent expense on all operating leases for fiscal 2001, 2000 and 1999 was approximately $8.5 million, $10.2 million and $9.4 million, respectively. Future minimum lease payments for all non-cancelable leases at May 31, 2001 were as follows:
Capital Operating (In thousands) Leases Leases - ------------------------------------------------------------------------------------------------------------ 2002 $2,626 $ 8,785 2003 870 5,734 2004 239 3,995 2005 - 2,684 2006 - 191 Thereafter - - ------------------------ Total future minimum lease payments 3,735 $21,389 ======= Less: amount representing interest 41 ------ Present value of net minimum lease payments 3,694 Less: current portion 2,586 ------ Long-term obligations under capital leases at May 31, 2001 $1,108 ======
Note 16 - Commitments and Contingencies The Company is involved in litigation related to its divested Physician and Hospital Support Services and Hospital Management Services (PHSS) units. The Company has obtained a ruling from the European Commission ordering IMS Health to license its structure for organizing pharmaceutical sales data to us. The Company is unable to predict whether IMS Health may be successful in overturning the EU ruling. Additionally, the Company is party to a number of other claims and lawsuits incidental to its business. In the opinion of management, the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on the Company's financial position, liquidity or results of operations. The Company has obtained a credit facility providing a $50 million unsecured revolving line of credit. This credit facility replaced the Company's $125 million line of credit and became effective upon completion of the spin-off of Global Payments Inc. on January 31, 2001, and is available for working capital and general corporate purposes. The line has a variable interest rate based on market rates and is not secured. The credit agreement contains certain financial and non-financial covenants customary for financings of this 64 nature. The facility has a one-year term, with the option for NDC Health to convert any outstanding borrowings at the maturity date to a term loan repayable at the first anniversary of the initial maturity date or January 31, 2003. As of May 31, 2001 and 2000, there was $0.0 million and $68.5 million, respectively, outstanding under this line of credit and its predecessor and the Company was in compliance with all restrictive covenants. Note 17 - Supplemental Cash Flow Information Supplemental cash flow disclosures and non-cash investing and financing activities for the years ended May 31, 2001, 2000 and 1999 are as follows:
(in thousands) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Supplemental cash flow information: Net income taxes paid (refunded) $(1,174) $ 754 $ 6,122 Interest paid 8,226 8,506 7,070 Supplemental non-cash investing and financing activities: Capital leases entered into in exchange for property and equipment - 1,197 13,191 Mortgage assumed with purchase of office building - - 3,362 Investment in MedicaLogic/Medscape, Inc. - 7,000 -
In fiscal 2001, 2000 and 1999, the Company acquired various businesses that were accounted for as purchases (see Note 2). In conjunction with these transactions, liabilities were assumed as follows:
(in thousands) 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------- Fair value of assets acquired $23,624 $46,160 $10,473 Notes and deferred payments - (6,000) - Stock issued - - - Cash acquired - (902) - Liabilities assumed (400) (1,160) (2,418) --------------------------------------- Cash paid for acquisitions $23,224 $38,098 $ 8,055 =======================================
65 Note 18 - Quarterly Consolidated Financial Information (Unaudited)
(in thousands, except per share data) Quarter Ended - ------------------------------------------------------------------------------------------------------------------------ August 31 November 30 February 28 May 31 --------- ----------- ----------- ----------- Fiscal Year 2001 - ---------------- Revenue $85,874 $83,666 $88,232 $92,043 Restructuring and impairment charge - 2,156 - - Operating income 14,187 12,780 15,175 16,719 Income before discontinued operations 7,531 6,689 8,649 5,199 Discontinued operations 8,649 (326) - - Net income 16,180 6,363 8,649 5,199 Basic earnings per share: Income before discontinued operations 0.23 0.20 0.26 0.15 Discontinued operations 0.26 (0.01) - - Basic earnings per share 0.49 0.19 0.26 0.15 Diluted earnings per share: Income before discontinued operations 0.21 0.20 0.25 0.15 Discontinued operations 0.24 (0.01) - - Diluted earnings per share 0.48 0.19 0.25 0.15
66
Quarter Ended - ------------------------------------------------------------------------------------------------------------------------ August 31 November 30 February 28 May 31 --------- ----------- ----------- ----------- Fiscal Year 2000 - ---------------- Revenue $85,720 $ 85,027 $85,868 $ 89,058 Restructuring and impairment charge - 34,393 - - Operating income (loss) 15,823 (32,330) 14,331 14,559 Income (loss) before discontinued operations 9,633 (21,168) 7,810 2,562 Discontinued operations (4,696) 5,700 (6,616) (33,390) Net income (loss) 4,937 (15,468) 1,194 (30,828) Basic earnings (loss) per share: Income (loss) before discontinued Operations 0.28 (0.63) 0.24 0.08 Discontinued operations (0.14) 0.17 (0.20) (1.02) Basic earnings (loss) per share 0.15 (0.46) 0.04 (0.94) Diluted earnings (loss) per share: Income (loss) before discontinued operations 0.27 (0.63) 0.23 0.08 Discontinued operations (0.14) 0.17 (0.20) (1.02) Diluted earnings (loss) per share 0.14 (0.46) 0.04 (0.94)
Note 19 - Subsequent event (Unaudited) On August 6, 2001, the Company announced that it had sold its physician network services business to MedUnite. As a result of this alliance, NDCHealth became a founding investor in MedUnite, joining Aetna, Anthem, CIGNA, Health Net, Inc., Oxford, Pacificare and WellPoint Health Networks. In exchange for the assets of its physician network services business, NDCHealth received a 17.9% equity interest in MedUnite. 67 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To National Data Corporation: We have audited the accompanying consolidated balance sheets of National Data Corporation (a Delaware corporation) and subsidiaries as of May 31, 2001 and 2000 and the related consolidated statements of income (loss), changes in shareholders' equity, and cash flows for each of the three years in the period ended May 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Data Corporation and subsidiaries as of May 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2001, in conformity with accounting principles generally accepted in the United States. As discussed in Note 3 to the consolidated financial statements, effective June 1, 1999, the Company changed the method of revenue recognition in its Physicians Management Services business. /s/ Arthur Andersen LLP Atlanta, Georgia July 13, 2001 68 NATIONAL DATA CORPORATION CONSOLIDATED SCHEDULE II Valuation & Qualifying Accounts
- ------------------------------------------------------------------------------------------------------------------------------ (In thousands) Column A Column B Column C Column D Column E 1 2 Balance at Charged to Acquired/ Uncollectible Balance at Beginning Costs and (Divested) Accounts End Description of Period Expenses Balances Write-Off of Period Trade Receivable Allowances May 31, 1999 $2,371 $ 4,823 $ - $ 3,212 $3,982 May 31, 2000 3,982 14,165 - 10,831 7,316 May 31, 2001 7,316 5,189 (1,113) 4,764 6,628
69 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE We have audited, in accordance with auditing standards generally accepted in the United States, the financial statements included in National Data Corporation's annual report to shareholders in this Form 10-K and have issued our report thereon dated July 13, 2001. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index on page 35 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Atlanta, Georgia July 13, 2001 70 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON - --------------------------------------------------------- ACCOUNTING AND FINANCIAL DISCLOSURE - ----------------------------------- None. PART III -------- Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ The Company hereby incorporates by reference the information contained under the heading "Election of Directors - Certain Information Concerning the Nominees and Other Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" from its definitive Proxy Statement (the "2001 Proxy Statement") to be delivered to the stockholders of the Company in connection with the 2001 Annual Meeting of Stockholders to be held on October 25, 2001. Certain information relating to executive officers of the Company appears in Part I of this Annual Report on Form 10-K. Item 11. EXECUTIVE COMPENSATION - -------------------------------- The Company hereby incorporates by reference the information contained under the heading "Election of Directors - Compensation and Other Benefits" from the 2001 Proxy Statement. In no event shall the information contained in the 2001 Proxy Statement under the sections entitled "Stockholder Return Analysis" and "Report of the Compensation Committee" be included herein by this reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The Company hereby incorporates by reference the information contained under the headings "Election of Directors - Common Stock Ownership of Management" and " - Common Stock Ownership by Certain Other Persons" from the 2001 Proxy Statement. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The Company hereby incorporates by reference the information contained under the headings "Transactions with Related Parties" and "Compensation Committee Interlocks and Insider Participation" from the 2001 Proxy Statement. 71 PART IV ------- Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------- (a)(1) Listing of Financial Statements The following consolidated financial statements for the Registrant and its subsidiaries are included in Part II, Item 8 of this report and are filed as a part hereof: Consolidated Statements of Income (Loss) for each of the three fiscal years ended May 31, 2001. Consolidated Statements of Cash Flows for each of the three fiscal years ended May 31, 2001. Consolidated Balance Sheets at May 31, 2001 and 2000. Consolidated Statements of Changes in Shareholders' Equity for each of the three fiscal years ended May 31, 2001. Notes to Consolidated Financial Statements Report of Independent Public Accountants (a)(2) Listing of Financial Statement Schedules Other than as described below, Financial Statement Schedules are not filed with this Report because the Schedules are either inapplicable or the required information is presented in the Financial Statements or Notes thereto. Consolidated Schedule II - Valuation and Qualifying Accounts Report of Independent Public Accountants as to Schedule (a)(3) Exhibits 2(i) Distribution Agreement, Plan of Distribution and Reorganization, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). 3(i) Certificate of Incorporation of the Registrant, as amended (filed as Exhibit 4(a) to the Registrant's Registration Statement on Form S-8 (Registration No. 333-05427) and incorporated herein by reference). 72 (ii) Certificate of Amendment to Certificate of Incorporation of the Registrant, dated October 28, 1996 (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated herein by reference.) (iii) Amended Certificate of Designations of the Registrant, dated October 28, 1996 (filed as Exhibit 3.2 to the Registrant's Current Report on Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated herein by reference.) (iv) Certificates of Amendment to Certificate of Incorporation of the Registrant, dated March 22, 1999; May 26, 1999; June 21, 1999 and June 30, 2000 (filed as Exhibit 3(iv) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 2000, file No. 001-12392, and incorporated herein by reference.) (v) Certificate of Amendment to Certificate of Incorporation of the Registrant, dated March 26, 2001. (vi) Bylaws of the Registrant, as amended (filed as Exhibit 3(ii) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1991, file No. 001-12392, and incorporated herein by reference.) (vii) Amendment to Bylaws of the Registrant, as previously amended (filed as Exhibit 3(iii) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1995, file No. 001-12392, and incorporated herein by reference.) 4(i) Form of Indenture between the Registrant and The First National Bank of Chicago, as Trustee, relating to Registrant's 5% Convertible Subordinated Notes due 2003 (filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated herein by reference.) (ii) Form of the Registrant's 5% Convertible Subordinated Note due 2003 (filed as Exhibit 4.2 to Registrant's Current Report on Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated herein by reference.) (iii) Stockholder Protection Rights Agreement, dated March 26, 2001, between the Registrant and the Rights Agent (filed as Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated March 26, 2001, file No. 001-12392, and incorporated herein by reference.) 10(i) Tax Sharing and Indemnification Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (ii) Employee Benefits Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.2 to the 73 Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (iii) Transition Support Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (iv) Intercompany Systems/Network Services Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (v) Services Agreement (Batch Processing), dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (vi) Amendment to Services Agreement (Batch Processing), dated as of May 31, 2001 by and between National Data Corporation and Global Payments Inc. (vii) Headquarters Lease Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.6 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (viii) Sublease Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Systems LLC. (filed as Exhibit 10.7 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (ix) Sublease Agreement, dated as of January 31, 2001 by and between National Data Corporation and National Data Payment Systems, Inc. (filed as Exhibit 10.8 to the Registrant's Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference). (x) Credit Agreement dated as of January 31, 2001, among the Registrant, Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders named therein. (xi) First Amendment dated May 22, 2001 to the Credit Agreement dated as of January 31, 2001, among the Registrant, Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders named therein. 74 (xii) Second Amendment dated July 25, 2001 to the Credit Agreement dated as of January 31, 2001, among the Registrant, Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders named therein. (xiii) Promissory Notes dated April 3, 2001 and May 14, 2001 between MRY Partners, L.P. and the Registrant. (xiv) Stock Pledge Agreement dated as of April 3, 2001 by and between MRY Partners, L.P. and the registrant. Executive Compensation Plans and Arrangements (xv) Non-Employee Directors Stock Option Plan (filed as Exhibit 10(iv) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1987, file No. 001-2392, and incorporated herein by reference). (xvi) 1995 Non-Employee Director Compensation Plan (filed as Exhibit 10(vii) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1996, file No. 001-12392, and incorporated herein by reference). (xvii) Amended and Restated Retirement Plan for Non-Employee Directors, dated as of April 20, 1994 (filed as Exhibit 10(xii) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1994, file No. 001-12392, and incorporated herein by reference). (xviii) Amendment to Amended and Restated Retirement Plan for Non-Employee Directors (filed as Exhibit 4(xi) to the Registrant's Annual Report on Form 10- K for the year ended May 31, 1995, file No. 001-12392, and incorporated herein by reference). (xix) 1983 Restricted Stock Plan, as amended (incorporated by reference from Exhibit 10 to the Registrant's Registration Statement on Form S-8, No. 333- 05451). (xx) 1987 Stock Option Plan, as amended (incorporated by reference from Exhibit 10 to the Registrant's Registration Statement on Form S-8, No. 333-05449). (xxi) Amended and Restated C.I.S. Technologies, Inc. Stock Option Plan (incorporated by reference from Exhibit 10(a) to the Registrant's Registration Statement on Form S-8, No. 333-05427). (xxii) Amended and Restated C.I.S. Technologies, Inc. Employee Stock Option Plan (incorporated by reference from Exhibit 10(b) to the Registrant's Registration Statement on Form S-8, No. 333-05427). (xxiii) C.I.S. Technologies, Inc. HCC Management Stock Option Plan (incorporated by reference from Exhibit 10(c) to the Registrant's Registration Statement on Form S-8, No. 333-05427). 75 (xxiv) C.I.S. Technologies, Inc. 1995 Stock Incentive Plan (incorporated by reference from Exhibit 10(e) to the Registrant's Registration Statement on Form S-8, No. 333-05427). (xxv) Supplemental Executive Retirement Plan effective June 1, 1997 (incorporated by reference from Exhibit 10(xx) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1997, file No. 001-12392). (xxvi) Amendment to Registrant's 1987 Stock Option Plan effective September 28, 1996 (incorporated by reference from Exhibit 10(xxi) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1997, file No. 001-12392). (xxvii) Amendment to Registrant's 1983 Restricted Stock Plan effective December 17, 1996 (incorporated by reference from Exhibit 10(xxii) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1997, file No. 001-12392). (xxviii) Employment Agreement effective June 1, 1997 between Robert A. Yellowlees and the Registrant (incorporated by reference from Exhibit 10(xxiv) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1997, file No. 001-12392). (xxix) Amendment dated May 31, 1999 to the Employment Agreement effective June 1, 1997 between Robert A. Yellowlees and the Registrant. (incorporated by reference from Exhibit 10(xxvii) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1999, file No. 001-12392). (xxx) Amendment to the National Data Corporation Employees Retirement Plan effective July 31, 1998 (incorporated by reference from Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the quarter end August 31, 1998, file No. 001-12392). (xxxi) Amendment to the 1984 Non-Employee Director Stock Option Plan effective October 22, 1998. (filed as Exhibit 10 (xxix) to the Registrant's Annual Report on Form 10-K for the year ended May 31, 1999, file No. 001-12392, and incorporated herein by reference). (xxxii) 2000 Long-term Incentive Plan (filed as Exhibit A to the Registrant's Definitive Proxy Statement on Form 14A for the year ended May 31, 1999 and incorporated herein by reference). (xxxiii) Employment Agreement effective December 1, 1999 between Walter M. Hoff and the Registrant. (xxxiv) Employment Agreement effective December 1, 1999 between E. Christine Rumsey and the Registrant. 76 (xxxv) Employment Agreement effective January 17, 2000 between Charles W. Miller and the Registrant. (xxxvi) Employment Agreement effective May 1, 2000 between Glenn Rosenkoetter and the Registrant. (xxxvii) Employment Agreement effective November 20, 2000 between Randolph L.M. Hutto and the Registrant. 21 Subsidiaries of the Registrant 23 Consent of Independent Public Accountants 99.1 National Data Corporation (unaudited) Consolidated Statements of Income (normalized) for fiscal 1999, 2000 (by quarter) and 2001 (by quarter). (Normalized for certain items discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations herein) 99.2 National Data Corporation (unaudited) Consolidated Statements of Income or (Loss) (GAAP) for fiscal 1999, 2000 (by quarter) and 2001 (by quarter). (b) Listing of Reports on Form 8-K (i) National Data Corporation's Current Report on Form 8-K dated March 21, 2001, was filed on March 21, 2001, reporting as an exhibit under Item 7 the Company's press release dated March 21, 2000 and under Item 9 the Company's release of business and financial information giving effect to the spin-off of the Global Payments Inc. subsidiary. (ii) National Data Corporation's Current Report on Form 8-K dated March 26, 2001, was filed on March 27, 2001, reporting under Item 5 the adoption of the Company's Stockholder Protection Rights Agreement, dated March 26, 2001, between the Registrant and the Rights Agent. (c) The Exhibits to this Report are listed under Item 14(a)(3) above. (d) The Financial Statement Schedule to this Report is listed under Item 14(a)(2) above. 77 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, National Data Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NATIONAL DATA CORPORATION By: /s/ Walter M. Hoff ------------------------------ Walter M. Hoff, President and Chief Executive Officer (Principal Executive Officer) By: /s/ Randolph L.M. Hutto ----------------------------- Randolph L.M. Hutto Chief Financial Officer (Principal Financial Officer) By: /s/ David H. Shenk ----------------------------- David H. Shenk Corporate Controller (Chief Accounting Officer) Date: August 27, 2001 78 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by a majority of the Board of Directors of the Registrant on the dates indicated:
Signature Title Date - --------- ----- ---- /s/ Robert A. Yellowlees Chairman of the Board August 17, 2001 - -------------------------- Robert A. Yellowlees /s/ J. Veronica Biggins Director August 17, 2001 - -------------------------- J. Veronica Biggins /s/ Terri A. Dial Director August 17, 2001 - -------------------------- Terri A. Dial /s/ Walter M. Hoff Director August 17, 2001 - -------------------------- Walter M. Hoff /s/ Kurt M. Landgraf Director August 17, 2001 - -------------------------- Kurt M. Landgraf /s/ Neil Williams Director August 17, 2001 - -------------------------- Neil Williams
79 NATIONAL DATA CORPORATION FORM 10-K INDEX TO EXHIBITS Exhibit Numbers Description 3(v) Certificate of Amendment to Certificate of Incorporation of the Registrant, dated March 26, 2001. 10(vi) Amendment to Services Agreement (Batch Processing), dated as of May 31, 2001 by and between National Data Corporation and Global Payments Inc. (x) Credit Agreement dated as of January 31, 2001, among the Registrant, Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders named therein. (xi) First Amendment dated May 22, 2001 to the Credit Agreement dated as of January 31, 2001, among the Registrant, Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders named therein. (xii) Second Amendment dated July 25, 2001 to the Credit Agreement dated as of January 31, 2001, among the Registrant, Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and the Lenders named therein. (xiii) Promissory Notes dated April 3, 2001 and May 14, 2001 between MRY Partners, L.P. and the Registrant. (xiv) Stock Pledge Agreement dated as of April 3, 2001 by and between MRY Partners, L.P. and the registrant. (xxxiii) Employment Agreement effective December 1, 1999 between Walter M. Hoff and the Registrant. (xxxiv) Employment Agreement effective December 1, 1999 between E. Christine Rumsey and the Registrant. (xxxv) Employment Agreement effective January 17, 2000 between Charles W. Miller and the Registrant. (xxxvi) Employment Agreement effective May 1, 2000 between Glenn Rosenkoetter and the Registrant. 80 (xxxvii) Employment Agreement effective November 20, 2000 between Randolph L.M. Hutto and the Registrant. 21 Subsidiaries of the Registrant. 23 Consent of Independent Public Accountants 99.1 National Data Corporation (unaudited) Consolidated Statements of Income (normalized) for fiscal 1999, 2000 (by quarter) and 2001 (by quarter). (Normalized for certain items discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations herein) 99.2 National Data Corporation (unaudited) Consolidated Statements of Income or (Loss) (GAAP) for fiscal 1999, 2000 (by quarter) and 2001 (by quarter). 81 EX-3.V 3 dex3v.txt CERTIFICATE OF AMENDMENT Exhibit 3(v) CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF NATIONAL DATA CORPORATION National Data Corporation, a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "Corporation"), does hereby certify: FIRST: That effective as of March 26, 2001, the Board of Directors of the Corporation adopted resolutions setting forth and adopting a proposed amendment to the Certificate of Incorporation of the Corporation, and declaring said amendment to be advisable and in the best interests of the Corporation. The proposed amendment is as follows: NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation is hereby amended by adding the attached "Appendix A Amended and Restated Certificate of Designations, Preferences, Limitations and Relative Rights of Series A Junior Participating Preferred Stock" as Appendix A to the Certificate of Incorporation. SECOND: That the proposed amendment does not require the approval of the stockholders of the Corporation, pursuant to Section 151 of the Delaware General Corporation Law and the authority expressly vested in the Board of Directors of the Corporation by the provisions of its Certificate of Incorporation. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by a duly authorized officer this ____ day of April, 2001. NATIONAL DATA CORPORATION By: ___________________________________ Name:__________________________________ Its:___________________________________ AMENDED CERTIFICATE OF DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF NATIONAL DATA CORPORATION National Data Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: That, the Corporation has designated 1,000,00 shares of its Preferred Stock, par value $1.00 per share (the "Preferred Stock") as Series A Junior Participating Preferred Stock of the Corporation ("Series A Shares") pursuant to a Certificate of Designations, originally filed with the Secretary of State of Delaware on January 22, 1991, and as amended pursuant to an Amended Certificate of Designations filed with the Secretary of State of Delaware on October 28, 1996 ("Certificate of Designations"); That, none of the Series A Shares have been issued and there are no securities convertible into the Series A Shares outstanding or reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation; That, pursuant to the authority conferred upon the Board of Directors of the Corporation by the Corporation's Certificate of Incorporation, as amended, the Board of Directors adopted resolutions by unanimous written consent on March 26, 2001 in accordance with the provisions of Section 228 of the Delaware General Corporation Law, decreasing the number of shares designated as Series A Shares from 1,000,000 shares to 200,000 shares and replacing the existing Certificate of Designations in its entirety with the following: 1. Series A Junior Participating Preferred Stock. There is hereby --------------------------------------------- established a series of Preferred Stock, $1.00 par value per share, of the Corporation, and the designation and certain terms, powers, preferences and other rights of the shares of such series, and certain qualifications, limitations and restrictions thereon, are hereby fixed as follows: (i) The distinctive serial designation of this series shall be "Series A Junior Participating Preferred Stock" (hereinafter called "this Series"). Each share of this Series shall be identical in all respects with the other shares of this Series except as to the dates from and after which dividends thereon shall be cumulative. (ii) The number of shares in this Series shall initially be 200,000, which number may from time to time be increased or decreased (but not below the number then outstanding) by the Board of Directors. Shares of this Series purchased by the Corporation shall be canceled and shall revert to authorized but unissued shares of Preferred Stock undesignated as to series. Shares of this Series may be issued in fractional shares, which fractional shares shall entitle the holder, in proportion to such holder's fractional share, to all rights of a holder of a whole share of this Series. (iii) The holders of full or fractional shares of this Series shall be entitled to receive, when and as declared by the Board of Directors, but only out of funds legally available therefor, dividends, (A) on each date that dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) are payable on or in respect of Common Stock comprising part of the Reference Package (as defined below), in an amount per whole share of this Series equal to the aggregate amount of dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) that would be payable on such date to a holder of the Reference Package and (B) on the last day of March, June, September and December in each year, in an amount per whole share of this Series equal to the excess (if any) of $1.00 over the aggregate dividends paid per whole share of this Series during the three-month period ending on such last day. Each such dividend shall be paid to the holders of record of shares of this Series on the date, not exceeding 60 days preceding such dividend or distribution payment date, fixed for that purpose by the Board of Directors in advance of payment of each particular dividend or distribution. Dividends on each full and each fractional share of this Series shall be cumulative from the date such full or fractional share is originally issued; provided that any such full or fractional share originally issued after a dividend record date and on or prior to the dividend payment date to which such record date relates shall not be entitled to receive the dividend payable on such dividend payment date or any amount in respect of the period from such original issuance to such dividend payment date. The term "Reference Package" shall initially mean 1,000 shares of Common Stock, $.125 par value ("Common Stock"), of the Corporation. In the event the Corporation shall at any time (A) declare or pay a dividend on any Common Stock payable in Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock into a smaller number of shares, then and in each such case the Reference Package after such event shall be the Common Stock that a holder of the Reference Package immediately prior to such event would hold thereafter as a result thereof. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends -2- and upon liquidation), unless, in each case, the full cumulative dividends (including the dividend to be due upon payment of such dividend, distribution, redemption, purchase or other acquisition) on all outstanding shares of this Series shall have been, or shall contemporaneously be, paid. (iv) In the event of any merger, consolidation, reclassification or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of this Series shall at the same time be similarly exchanged or changed in an amount per whole share equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, that a holder of the Reference Package would be entitled to receive as a result of such transaction. (v) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of full and fractional shares of this Series shall be entitled, before any distribution or payment is made on any date to the holders of the Common Stock or any other stock of the Corporation ranking junior to this Series upon liquidation, to be paid in full an amount per whole share of this Series equal to the greater of (A) $1.00 or (B) the aggregate amount distributed or to be distributed prior to such date in connection with such liquidation, dissolution or winding up to a holder of the Reference Package (such greater amount being hereinafter referred to as the "Liquidation Preference"), together with accrued dividends to such distribution or payment date, whether or not earned or declared. If such payment shall have been made in full to all holders of shares of this Series, the holders of shares of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such liquidation, dissolution or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably in proportion to the full distributable, amounts for which holders of all such parity shares are respectively entitled upon such liquidation, dissolution or winding up. Upon the liquidation, dissolution or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v) before any payment shall be made to the holders of Common Stock or any other stock of the Corporation ranking junior upon liquidation to this Series. For the purposes of this Section (v), the consolidation or merger of, or binding share exchange by, the Corporation with any other corporation shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation. -3- (vi) The shares of this Series shall not be redeemable. (vii) In addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation of the Corporation, each whole share of this Series shall, on any matter, vote as a class with any other capital stock comprising part of the Reference Package and voting on such matter and shall have the number of votes thereon that a holder of the Reference Package would have. IN WITNESS WHEREOF, National Data Corporation has caused this Amended Certificate of Designations, Preferences, Limitations and Relative Rights of Series A Junior Participating Preferred Stock to be executed by its duly authorized officer this 5/th/ day of April, 2001. NATIONAL DATA CORPORATION By: /s/ Patricia A. Wilson ------------------------------------- Patricia A. Wilson General Counsel and Secretary -4- EX-10.VI 4 dex10vi.txt AMENDMENT TO SERVICE AGREEMENT Exhibit 10(vi) May 31, 2001 Patricia Wilson, Esq. General Counsel National Data Corporation Two National Data Plaza Atlanta, Georgia 30329 RE: Amendment to Services Agreement (Batch Processing) Dear Pat: Reference is hereby made to that certain Services Agreement (Batch Processing), dated as of January 31, 2001 (the "Agreement"), by and between Global Payments Inc. ("Global") and National Data Corporation ("NDC") that was executed in connection with the Global spin-off transaction. Pursuant to the Agreement, Global agreed to provide certain batch processing services on behalf of NDC until such time as the parties were able to separate the batch processing capabilities of the Unisys computers that supported both the NDC health business and the Global electronic transaction processing business. The original term of the Agreement expired on May 31, 2001, but the parties desire to continue the existing arrangement for the foreseeable future subject to the following amendments to the Agreement. In order to continue the term of the Agreement, the parties have agreed to amend and restate Section 4.02 of the Agreement in its entirety to read as follows: Upon the expiration of the Initial Term, this Agreement will automatically be renewed for two (2) successive one (1) year terms (each, a "Renewal Term", and together with the Initial Term, collectively referred to as the "Term"), unless the Recipient gives written notice of non-renewal to the Provider at least thirty (30) days prior to the expiration of the then current Term. It is understood and agreed by the parties hereto that the final Renewal Term (unless earlier terminated) will expire on May 31, 2003. The parties have also agreed to amend and restate Section 4.04(a) of the Agreement in its entirety to read as follows: (a) By Recipient for Convenience Recipient may terminate this Agreement for convenience, in whole or in part, by giving the Provider at least ninety (90) days prior written notice of termination. Finally, the parties have agreed to amend and restate "Addendum II - Allocation of Costs" in its entirety, so that it now reads as provided in Exhibit A attached to this letter. - --------- Other than as expressly provided above, the Agreement shall remain in full force and effect. Please indicate your acceptance to the foregoing amendment to the Agreement by acknowledging this letter in the space provided below. Sincerely yours, /s/ Suellyn P. Tornay Suellyn P. Tornay General Counsel Acknowledged and Agreed to: By: /s/ Patricia A. Wilson -------------------------- Name: Patricia A. Wilson ------------------------ Title: General Counsel ----------------------- Date: May 31, 2001 ----------------------- EXHIBIT A --------- Addendum II--Allocation of Costs -------------------------------- Recipient will pay monthly fees to Provider for the Services. The Fees will be based on the allocated cost of the Services. As of June 1, 2001, Provider has estimated that the Services will have an allocated monthly cost of $24,436.50, calculated as follows: Provider estimates that the following personnel time will be required to provide the Services: (i) thirty minutes of manpower per day for print time, (ii) one hour of manpower per day for batch run set-up, (iii) three hours of manpower per day for tape handling, (iv) two hours of manpower per day for offsite handling, (v) thirty minutes of manpower per day for customer support and (vi) two hours of manpower per day for system operations, for an estimated monthly allocated cost of $10,800.00. Provider estimates that (i) it will print an estimated 13,500 daily claims processing print files (HC/RX) per month; (ii) print an estimated 2,000 weekly Customer Profile System files per month for an estimated monthly allocated cost of $297.00 Provider estimates that the estimated time requirement by Provider to conduct all of the above batch runs is 14 hours per month, for an allocated monthly cost of $10,150.00. Provider estimates that Recipient will require an estimated 6,604 Tandem backup tapes annually and an estimated 5,034 Unisys backup tapes annually, for an allocated monthly cost of $970.00. Provider estimates that Recipient will require (i) off-site storage for 225 total Tandem back-up tapes; (ii) [off-site] storage for 3,960 total generic daily tapes, and (iii) [off-site] storage for twelve cases of VAX/CLINIX backup tapes, for an estimated fee to an outside vendor of $2,152.50 for such offsite storage. The parties acknowledge that the Services provided by the Provider under the Agreement will likely be terminated by the Recipient in phases over time and that the monthly allocated costs under the Agreement and this Addendum will be correspondingly reduced as such Services are no longer provided hereunder. EX-10.X 5 dex10x.txt CREDIT AGREEMENT Exhibit 10(x) CREDIT AGREEMENT ---------------- THIS CREDIT AGREEMENT dated as of January 31, 2001, among NATIONAL DATA CORPORATION, a Delaware corporation, as Borrower, the banks and other financial institutions listed on the signature pages hereof, as Lenders, and BANK ONE, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent, Swing Line Lender and LC Issuer. W I T N E S S E T H: ------------------- WHEREAS, the Borrower, certain banks and other financial institutions that are parties thereto, Bank One, N.A. (formerly The First National Bank of Chicago), as administrative agent, and Wachovia Bank, N.A., as documentation agent, are parties to a certain Credit Agreement dated as of December 19, 1997, as the same has heretofore been amended and supplemented, and is now in effect (the "Existing Credit Agreement"); WHEREAS, the eCommerce business segment of the Borrower has been organized as Global Payments Inc. and its subsidiaries, and the Borrower intends to distribute to its shareholders on a pro rata basis all of the common stock of Global Payments Inc.; WHEREAS, immediately prior to such distribution, Global Payments Inc. shall pay to the Borrower a cash dividend to reflect Global Payment Inc.'s share of the Borrower's debt prior to such distribution; WHEREAS, the Borrower shall use all or a portion of such cash dividend to pay amounts outstanding under the Existing Credit Agreement; WHEREAS, upon such repayment, the Borrower has requested that the Lenders establish in its favor a revolving credit facility in order to provide the Borrower a source of working capital and other funds for general corporate purposes of the Borrower and its Subsidiaries, and simultaneously therewith the Borrower shall pay any and all other amounts due and owing under the Existing Credit Agreement and all commitments of the lenders under the Existing Credit Agreement shall be terminated; WHEREAS, the Lenders have agreed to establish such revolving credit facility on the terms, and subject to the conditions and requirements, set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE 1 DEFINITIONS ----------- SECTION 1.1. Definitions. The terms as defined in this Section 1.1 ----------- shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Acquired Entity" means the assets, in the case of an acquisition of --------------- assets, or Capital Stock (or, if the context requires, the Person that is the issuer of such Capital Stock), in the case of an acquisition of Capital Stock, acquired by the Borrower or any of its Subsidiaries pursuant to an Acquisition permitted by Section 6.6. "Acquired Entity EBITDA" means, with respect to any Acquired Entity for any ---------------------- period, the net income of such Acquired Entity for such period plus to the extent deducted in the determination of such Acquired Entity's net income, the sum of such Acquired Entity's (a) aggregate amount of income tax expense for such period, (b) aggregate amount of interest expense for such period, and (c) aggregate amount of depreciation and amortization, all for such period and as determined in accordance with GAAP, provided that there shall be excluded from the determination of such Acquired Entity's net income (x) the net income (or loss) attributable to all joint ventures and non-wholly owned subsidiaries of such Acquired Entity that are subject to restrictions as to distribution of funds from such entities to the Acquired Entity or any of its wholly owned subsidiaries, to the extent that cash has not actually been distributed to such Acquired Entity or its wholly owned subsidiary, and (y) all non-cash gains or losses. "Acquisition" means any transaction, or any series of related transactions, ----------- consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation, partnership, limited liability company or division thereof, whether through purchase of assets, merger or otherwise, or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company. "Administrative Agent" means Bank One, in its capacity as administrative -------------------- agent for the Lenders hereunder, its successors and permitted assigns in such capacity, and any other Person appointed as Administrative Agent in accordance with Section 8.9. "Administrative Agent/Arranger Letter Agreement" means that certain letter ---------------------------------------------- agreement dated as of October 16, 2000, among the Administrative Agent, the Arranger, and the Borrower relating to certain fees from time to time payable to the Administrative Agent and the Arranger, together with all amendments and supplements thereto. 2 "Advance" means a Borrowing hereunder (and, in the case of a Eurodollar ------- Advance, the conversion or continuation thereof) consisting of the aggregate amount of the several Loans made by one or more of the Lenders to the Borrower on the same Borrowing Date (or date of conversion or continuation), of the same Type and, in the case of a Fixed Rate Advance, for the same Interest Period, and includes a Syndicated Advance and a Swing Line Advance. "Affiliate" means (i) any Person that directly, or indirectly through one --------- or more intermediaries, controls the Borrower (a "Controlling Person"), (ii) any Person (other than the Borrower) which is controlled by or is under common control with a Controlling Person, or (iii) any Person of which the Borrower owns, directly or indirectly, 20% or more of the common stock or equivalent equity interests. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Commitment" means the aggregate of the Commitments of all the -------------------- Lenders, being $50,000,000 as of the date of this Agreement, as the same may be reduced from time to time pursuant to the terms hereof. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate ------------------------------------- of the Outstanding Credit Exposure of all the Lenders. "Aggregate Subsidiary Threshold" means an amount equal to eighty percent ------------------------------ (80%) of the total consolidated revenue of the Borrower and its Subsidiaries for the most recent Fiscal Quarter as shown on the Financial Statements (Annual) or Financial Statements (Quarterly), as the case may be, as most recently delivered or required to be delivered pursuant to Section 5.1. "Agreement" means this Credit Agreement, together with all amendments and --------- supplements hereto and all restatements hereof. "Alternate Base Rate" means, for any day, a rate of interest per annum ------------------- equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2%. "Applicable Margin" means, at any date of determination thereof with ----------------- respect to any Syndicated Advance, the respective rates per annum for such Syndicated Advance calculated in accordance with Section 2.9. "Applicable Pledge Amount" means, in respect of the amount of Capital Stock ------------------------ of a First Tier Non-U.S. Operating Subsidiary to be pledged to the Administrative Agent, for the ratable benefit of the Lenders, Swing Line Lender, LC Issuer and Administrative Agent, pursuant to a Pledge Agreement, the lesser of (i) 65% of all outstanding Capital Stock of such Subsidiary, and (ii) the total amount of all outstanding Capital Stock of such Subsidiary owned by the Borrower and its other Subsidiaries. "Approved Investment Policy" means, with respect to the Borrower or any of -------------------------- its Subsidiaries, the cash investments policy formally approved by its Board of Directors from time 3 to time, and approved by the Required Lenders, together with any subsequent amendment, exception or supplement thereto, to the extent such amendment, exception or supplement has been approved by the Required Lenders. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, -------- and its successors, in its capacity as arranger of the credit facilities provided to the Borrower by this Agreement. "Asset Sale" means the sale (including any transaction that has the ---------- economic effect of a sale), transfer or other disposition (by way of merger or otherwise, including sales in connection with a sale and leaseback transaction, or as a result of any condemnation or casualty in respect of property) by the Borrower or any Subsidiary to any Person other than the Borrower or any Subsidiary Guarantor, of (i) any capital stock of any Subsidiary, or (ii) any other assets of the Borrower or any Subsidiary (other than inventory, obsolete or worn out assets, scrap, and cash and cash equivalent investments made pursuant to an Approved Investment Policy, in each case disposed of in the ordinary course of business), except sales, transfers or other dispositions of any assets in one transaction or a series of related transactions having a value not in excess of $50,000. "Assignee" has the meaning set forth in Section 9.8(c) -------- "Assignment Agreement" means an Assignment Agreement executed in accordance -------------------- with Section 9.8(c) in the form attached hereto as Exhibit E. --------- "Authorized Officer" means any of the President, Chief Financial Officer, ------------------ Treasurer, or Secretary of the Borrower, acting singly. "Available Aggregate Commitment" means, at any time, the Aggregate ------------------------------ Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Bank One" means Bank One, NA, a national banking association having its -------- principal office in Chicago, Illinois, and its successors and assigns. "Borrower" means National Data Corporation, a Delaware corporation, and its -------- successors and permitted assigns. "Borrowing" means a borrowing hereunder consisting of a Loan or Loans made --------- to the Borrower pursuant to Article 2. "Borrowing Date" means a date on which an Advance is made hereunder. -------------- "Business Day" means (i) with respect to any borrowing, payment or rate ------------ selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market, and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks 4 generally are open in Chicago for the conduct of substantially all of their commercial lending activities. "Capital Expenditures" means, without duplication, any expenditures for any -------------------- purchase or other acquisition of any asset that would be classified as a fixed or capital asset on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP, but excluding any such assets acquired as part of an Acquisition otherwise permitted pursuant to the terms of this Agreement. "Capital Stock" means any nonredeemable capital stock (or in the case of a ------------- partnership or limited liability company, the partners' or members' equivalent equity interest) of the Borrower or any of its Consolidated Subsidiaries (to the extent issued to a Person other than the Borrower), whether common or preferred. "Capitalized Lease" of a Person means any lease of Property by such Person ----------------- as lessee that would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "CERCLA" means the Comprehensive Environmental Response Compensation and ------ Liability Act, 42 U.S.C. (S) 9601 et. seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and ------- Liability Inventory System established pursuant to CERCLA. "Closing Date" means the date on which all conditions set forth in Section ------------ 3.1 are fulfilled. "Code" means the Internal Revenue Code of 1986, as amended, or any ---- successor Federal tax code. "Collateral Shortfall Amount" is defined in Section 7.3. --------------------------- "Commitment" means for each Lender, the obligation of such Lender to make ---------- Syndicated Loans, and participate in Facility LCs and Swing Line Loans, in an aggregate amount not exceeding the applicable amount set forth opposite its signature below or as set forth in any Notice of Assignment relating to any assignment thereof that has become effective pursuant to Section 9.8(c), as such amount may be reduced from time to time pursuant to the terms hereof. "Compliance Certificate" means a compliance certificate, substantially in ---------------------- the form of Exhibit D hereto, signed by the chief financial officer or chief --------- accounting officer of the Borrower, showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Event of Default exists, or if any Default or Event of Default exists, stating the nature and status thereof. "Consolidated Adjusted EBITDA" means, as at any date of determination for ---------------------------- any period, with respect to the Borrower and its Consolidated Subsidiaries on a consolidated basis for such period and in accordance with GAAP, the Consolidated Net Income of the Borrower for such 5 period, plus (a) to the extent deducted from revenues in determining such Consolidated Net Income, (i) Consolidated Interest Expense for such period, (ii) expense for income taxes paid or accrued during such period, (iii) depreciation during such period, and (iv) amortization for such period, plus, without duplication (b) any Acquired Entity EBITDA during such period calculated on a pro forma basis as of the first day of such period. "Consolidated Debt" means at any date all Debt of the Borrower and its ----------------- Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated EBITR" means, as at any date of determination for any period, ------------------ with respect to the Borrower and its Consolidated Subsidiaries on a consolidated basis for such period and in accordance with GAAP, Consolidated Net Income of the Borrower for such period, plus to the extent deducted from revenues in determining such Consolidated Net Income, (i) Consolidated Fixed Charges for such period, and (ii) expenses for income taxes paid or accrued during such period. "Consolidated Fixed Charges" means, without duplication, as at any date of -------------------------- determination for any period, with respect to the Borrower and its Consolidated Subsidiaries on a consolidated basis for such period and in accordance with GAAP, the sum of (i) Consolidated Interest Expense, and (ii) all payment obligations of the Borrower and its Consolidated Subsidiaries under all Operating Leases and rental agreements. "Consolidated Interest Expense" means, as at any date of determination for ----------------------------- any period, without duplication, interest, whether expensed or capitalized, in respect of outstanding Consolidated Debt of the Borrower and its Consolidated Subsidiaries during such period; provided that, in determining Consolidated Interest Expense, interest on Debt referred to in clauses (viii) and (ix) of the definition of Debt shall only be included to the extent that the Borrower's or any Consolidated Subsidiary's obligation to pay such Debt is not contingent in nature, as of any date of determination. "Consolidated Net Income" means, as at any date of determination for any ----------------------- period, the Net Income of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis for such period, but excluding (i) non-cash gains and losses, and (ii) any equity interests of the Borrower or any Consolidated Subsidiary in the unremitted earnings and losses of any Person that is not a Consolidated Subsidiary. "Consolidated Net Worth" means, at any date, the shareholders' (or in the ---------------------- case of a partnership or limited liability company, the partners' or the members') equity of the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with GAAP, but excluding any Redeemable Preferred Stock of the Borrower or any of its Consolidated Subsidiaries. Shareholders' equity generally would include, but not be limited to (i) the par or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii) retained earnings, and (iv) various deductions such as (A) purchases of treasury stock, (B) valuation allowances, (C) receivables due from an employee stock ownership plan, (D) employee stock 6 ownership plan debt guarantees, and (E) translation adjustments for foreign currency transactions. "Consolidated Subsidiary" means at any date any Subsidiary or other entity ----------------------- the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Total Debt" means at any date, with respect to the Borrower ----------------------- and its Consolidated Subsidiaries on a consolidated basis as of such date and in accordance with GAAP, Consolidated Debt (excluding therefrom, however, Guarantees of Debt of the Borrower or any of its Consolidated Subsidiaries, respectively, by the Borrower or any such Consolidated Subsidiary). "Contribution Agreement" means the Contribution Agreement, substantially in ---------------------- the form of Exhibit C executed and delivered by the Borrower and those --------- Consolidated Subsidiaries of the Borrower that are parties to the Subsidiary Guarantee, in favor of the Administrative Agent for the ratable benefit of the Lenders, Swing Line Lender, LC Issuer, and Administrative Agent, as the same may be amended, supplemented and restated from time to time. "Contribution Agreement Supplement" means the Supplement substantially in --------------------------------- the form of Annex I to the Contribution Agreement executed and delivered by a ------- Domestic Operating Subsidiary of the Borrower pursuant to Section 5.3. "Controlled Group" means all members of a controlled group of corporations ---------------- and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Conversion/Continuation Notice" is defined in Section 2.3(g). ------------------------------ "Credit Extension" means the making of an Advance or the issuance of a ---------------- Facility LC hereunder. "Credit Extension Date" means the Borrowing Date for an Advance or the --------------------- issuance date for a Facility LC. "Debt" of any Person means at any date, without duplication, (i) all ---- obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under Capitalized Leases and leases (so-called "synthetic leases") that are treated as finance leases for tax purposes but that do not constitute Capitalized Leases under generally accepted accounting principles, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person, (vii) all obligations (regardless of whether contingent or absolute) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (viii) all 7 Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, (ix) all Debt of others Guaranteed by such Person, (x) the present value of estimated future payments payable in connection with earn-out agreements executed in connection with Acquisitions by such Person, and (xi) the Net Mark-to-Market Exposure of such Person under all Rate Management Transactions, all as determined in accordance with GAAP. "Default" means any condition or event which constitutes an Event of ------- Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Designated Officer" means any of the chairman, president, chief executive ------------------ officer, chief operating officer, chief financial officer, chief information officer, chief accounting officer, and treasurer of the Borrower. "Dollars" or "$" means dollars in lawful currency of the United States of ------- - America. "Domestic Operating Subsidiary" means an Operating Subsidiary organized ----------------------------- under the laws of any State of the United States of America or the District of Columbia, or the federal laws of the United States of America. "Environmental Authorizations" means all licenses, permits, orders, ---------------------------- approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower and its Subsidiaries required by any Environmental Requirement. "Environmental Authority" means any foreign, federal, state, local or ----------------------- regional government that exercises any form of jurisdiction or authority under any Environmental Requirement. "Environmental Judgments and Orders" means all judgments, decrees or orders ---------------------------------- arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement, whether or not incorporated in a judgment, decree or order. "Environmental Liabilities" means any liabilities, whether accrued, ------------------------- contingent or otherwise, arising from and in any way associated with any Environmental Requirements. "Environmental Notices" means notice from any Environmental Authority or by --------------------- any other person or entity, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any, violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement. "Environmental Proceedings" means any judicial or administrative ------------------------- proceedings arising from or in any way associated with any Environmental Requirement. 8 "Environmental Releases" means releases as defined in CERCLA or under any ---------------------- applicable state or local environmental law or regulation. "Environmental Requirements" means any legal requirement relating to -------------------------- health, safety or the environment and applicable to the Borrower, any Subsidiary or the Properties, including but not limited to any such requirement under CERCLA or similar state legislation and all federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Eurodollar Advance" means a Syndicated Advance which, except as otherwise ------------------ provided in Section 2.11, bears interest at a Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the -------------------- relevant Eurodollar Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in Dollars appearing on the Reuters Screen FRBD as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Eurodollar Interest Period, and having a maturity equal to such Eurodollar Interest Period, provided that (i) if Reuters Screen FRBD is not available to the Administrative Agent for any reason, the applicable Eurodollar Base Rate for the relevant Eurodollar Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in Dollars as reported by any other generally recognized financial information service as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Eurodollar Interest Period, and having a maturity equal to such Eurodollar Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Administrative Agent, the applicable Eurodollar Base Rate for the relevant Eurodollar Interest Period shall instead be the rate determined by the Administrative Agent to the rate at which Bank One or one of its Affiliate banks offers to place deposits in Dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Eurodollar Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Eurodollar Interest Period. "Eurodollar Interest Period" means, with respect to a Eurodollar Advance, a -------------------------- period of fourteen days or one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Each Eurodollar Interest Period of one, two, three or six months shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Eurodollar Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If a Eurodollar Interest Period would otherwise end on a day which is not a Business Day, such Eurodollar Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Eurodollar Interest Period shall end on the immediately preceding Business Day. 9 "Eurodollar Loan" means a Syndicated Loan which, except as otherwise --------------- provided in Section 2.11, bears interest at a Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the --------------- relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Eurodollar Interest Period, plus (ii) the Applicable Margin for Eurodollar Advances then in effect. The Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is not such a multiple. "Event of Default" has the meaning set forth in Section 7.1. ---------------- "Excluded Taxes" means, in the case of each Lender, Swing Line Lender, LC -------------- Issuer, or Administrative Agent, or its applicable Lending Installation, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which it is incorporated or organized, or (ii) the jurisdiction in which its principal executive office or applicable Lending Installation is located. "Existing Credit Agreement" means the Credit Agreement dated as of December ------------------------- 19, 1997, among the Borrower, the lenders that are parties thereto, The First National Bank of Chicago (now Bank One), as Administrative Agent, and Wachovia Bank, N.A., as Documentation Agent, as the same has been amended and is in effect as of the Closing Date. "Facility LC" is defined in Section 2.4(a). ----------- "Facility LC Application" is defined in Section 2.4(c). ----------------------- "Facility LC Collateral Account" is defined in Section 2.4(k). ------------------------------ "Facility Termination Date" means (i) January 29, 2002, or (ii) any earlier ------------------------- date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms of this Agreement. "Federal Funds Effective Rate" means, for any day, an interest rate per ---------------------------- annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10 a.m. (Chicago time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. "Financial Statements (Annual)" means the balance sheet of such Person as ----------------------------- of the end of such Fiscal Year and the related consolidated statements of income, shareholders' equity and 10 cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year. "Financial Statements (Quarterly)" means the balance sheet of such Person ------------------------------- as of the end of such quarter and the related statement of income and statement of cash flows for such quarter and for the portion of the Fiscal Year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the previous Fiscal Year. "First Tier Non-U.S. Operating Subsidiary" means a Non-U.S. Operating ---------------------------------------- Subsidiary, the majority of whose Capital Stock is owned by the Borrower and/or its Domestic Operating Subsidiaries. "Fiscal Quarter" means any fiscal quarter of the Borrower. -------------- "Fiscal Year" means any fiscal year of the Borrower. ----------- "Fixed Charge Coverage Ratio" means the ratio, determined as of the end of --------------------------- each Fiscal Quarter of the Borrower, for the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters, of (i) Consolidated EBITR for such period to (ii) Consolidated Fixed Charges for such period. "Fixed Rate" means a Eurodollar Rate or Quoted Fixed Rate, as the case may ---------- be. "Fixed Rate Advance" means an Advance which bears interest at a Fixed Rate. ------------------ "Fixed Rate Swing Line Advance" means a Swing Line Advance which bears ----------------------------- interest at a Quoted Fixed Rate. "Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate. --------------- "Floating Rate" means, for any day, a rate per annum equal to the sum of ------------- (i) the Alternate Base Rate for such day, plus (ii) the Applicable Margin for Floating Rate Advances then in effect for such day, in each case changing when and as the Alternate Base Rate changes. "Floating Rate Advance" means a Syndicated Advance or Swing Line Advance --------------------- which bears interest at the Floating Rate. "Floating Rate Loan" means a Syndicated Loan or Swing Line Loan which bears ------------------ interest at the Floating Rate. "Form 10 Filing" means the registration statement on Form 10 filed by GPI -------------- with the Securities and Exchange Commission in respect of the Spin-off on September 8, 2000, as amended by each of Amendment No. 1 filed on October 27, 2000, Amendment No. 2 filed on November 2, 2000, Amendment No. 3 filed on December 1, 2000, Amendment No. 4 filed on 11 December 13, 2000, and Amendment No. 5 filed on December 28, 2000, all as effective on January 2, 2001. "GAAP" means generally accepted accounting principles applied on a basis ---- consistent with those which, in accordance with Section 1.2, are to be used in making the calculations for purposes of determining compliance with the terms of this Agreement. "GPI" means Global Payments Inc., a Georgia corporation, and its successors --- and assigns. "GPI Group" means GPI and each of its Subsidiaries. --------- "Guarantee" by any Person means any obligation, contingent or otherwise, of --------- such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Materials" includes, without limitation, (a) solid or hazardous ------------------- waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. (S) 6901 et. seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by- product, including, crude oil or any fraction thereof (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable state or local law or regulation or (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Indenture" means the trust indenture dated as of November 6, 1996, between --------- National Data Corporation and The First National Bank of Chicago, as trustee, pursuant to which National Data Corporation issued its Convertible Subordinated Notes Due 2003 in an aggregate principal amount of $143,750,000. "Information Statement" means the Information Statement in respect of the --------------------- Spin-off as sent to the Borrower's shareholders on December 28, 2000. "Interest Period" means (i) a Eurodollar Interest Period, or (ii) a Quoted --------------- Fixed Rate Interest Period. 12 "Investment" means any investment in any Person, whether by means of ---------- purchase or acquisition of obligations or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any obligation of such Person or otherwise. "LC Fee" is defined in Section 2.4(d). ------ "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One --------- designated by it) in its capacity as issuer of Facility LCs hereunder. "LC Obligations" means, at any time, the sum, without duplication, of (i) -------------- the aggregate undrawn stated amount of all Facility LCs outstanding at such time, plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.4(e). --------------- "Lender" means each bank or other financial institution or lender listed on ------ the signature pages hereof as having a Commitment, and its successors and permitted assigns. Unless otherwise specified, the term "Lender" includes Bank One in its capacity as Swing Line Lender. "Lending Installation" means, with respect to a Lender, Swing Line Lender, -------------------- or LC Issuer, any office, branch, subsidiary or affiliate of such Lender, Swing Line Lender, or LC Issuer. "Level I Status" exists at any date if the Leverage Ratio in effect as of -------------- such date is less than 1.0 to 1.0. "Level II Status" exists at any date if the Leverage Ratio in effect as of --------------- such date is greater than or equal to 1.0 to 1.0, but less than or equal to 1.5 to 1.0. "Level III Status" exists at any date if the Leverage Ratio in effect as of ---------------- such date is greater than 1.5 to 1.0, but less than or equal to 2.0 to 1.0. "Level IV Status" exists at any date if the Leverage Ratio in effect as of --------------- such date is greater than 2.0 to 1.0. "Leverage Ratio" means, as of the end of any Fiscal Quarter, the ratio of -------------- Consolidated Total Debt as of such date to Consolidated Adjusted EBITDA for such Fiscal Quarter and the immediately preceding three Fiscal Quarters. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, ---- deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement, which has the practical effect of constituting a security interest or encumbrance, or encumbrance or servitude of any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law. For the purposes of this Agreement, the Borrower and each of its Subsidiaries shall be deemed to own subject to a Lien 13 any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Syndicated Loan or a Swing Line Loan, as the case may be. ---- "Loan Documents" means this Agreement, the Notes, the Subsidiary Guarantee, -------------- the Contribution Agreement, the Pledge Agreements, the Facility LC Applications, and all other documents and agreements contemplated hereby and executed by the Borrower or any Consolidated Subsidiary of the Borrower in favor of the Administrative Agent or any Lender. "Margin Stock" means "margin stock" as defined in Regulations T, U or X. ------------ "Material Adverse Effect" means, with respect to any event, act, condition ----------------------- or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business, properties or prospects of the Borrower and its Consolidated Subsidiaries (excluding the GPI Group prior to giving effect to the Spin-off) taken as a whole, (b) the rights and remedies of the Administrative Agent, the LC Issuer, the Swing Line Lender, or the Lenders under the Loan Documents, or the ability of the Borrower or any of its Subsidiaries to perform its obligations under the Loan Documents to which it is a party (such obligations to include, without limitation, payment of the Obligations and observance and performance of the covenants set forth in Articles 5 and 6 hereof), as applicable, or (c) the legality, validity or enforceability of any Loan Document. "Maturity Date" means the Facility Termination Date or, if the Borrower has ------------- exercised the term-out option pursuant to Section 2.25, the date to which the Maturity Date has been extended pursuant to such Section, or in any event such earlier date on which an acceleration of the maturity of the Obligations has occurred pursuant to Section 7.3. "Modify" and "Modification" are defined in Section 2.4(a). ------ ------------ "Multiemployer Plan" shall have the meaning set forth in Section 4001(a) ------------------ (3) of ERISA. "Net Income" means, as applied to any Person for any period, the aggregate ---------- amount of net income of such Person, after taxes, for such period, as determined in accordance with GAAP. "Net Mark-to-Market Exposure" means, with respect to any Person as of any --------------------------- date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. "Unrealized losses" means the fair market value of the cost to such Person of ----------------- replacing such Rate Management Transaction as of the date of determination and on the same terms thereof (assuming the Rate Management Transaction were to be terminated as of that date), and "unrealized profits" means the fair market ------------------ value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination 14 and on the same terms thereof (assuming such Rate Management Transaction were to be terminated as of that date). "Net Proceeds of Capital Stock" means any proceeds received or deemed ----------------------------- received by the Borrower or its Consolidated Subsidiary in respect of the issuance or sale of Capital Stock or conversion of any Debt to Capital Stock, after deducting therefrom all reasonable and customary costs and expenses incurred by the Borrower or such Consolidated Subsidiary directly in connection with such issuance or sale of such Capital Stock or conversion of such Debt. In the case of an Acquisition where some or all of the consideration for the Acquisition is Capital Stock, the amount of proceeds received or deemed received in respect of such Capital Stock shall be equal to the shareholders' (or in the case of a partnership or limited liability company, the partners' or members') equity of the Acquired Entity immediately following the Acquisition, as determined in accordance with GAAP, less all non-cash, non-recurring charges required or appropriate under GAAP to be taken by the Borrower and its Consolidated Subsidiaries as a result of the Acquisition, provided that in no instance shall "Net Proceeds of Capital Stock" as so calculated be less than zero. "Non-U.S. Lender" is defined in Section 2.24(d). --------------- "Non-U.S. Operating Subsidiary" means any Operating Subsidiary of the ----------------------------- Borrower other than a Domestic Operating Subsidiary. "Notes" means, collectively, the Syndicated Notes and the Swing Line Note; ----- and "Note" means any one of the Notes. "Notice of Assignment" means a Notice of Assignment to be delivered -------------------- pursuant to the provisions of the Assignment Agreement. "Obligations" means all unpaid principal of and accrued and unpaid interest ----------- on all Loans, LC Obligations, accrued and unpaid fees, and expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Swing Line Lender, the LC Issuer, the Administrative Agent or any indemnified party hereunder arising under the Loan Documents. "Operating Lease" of a Person means any lease of Property (other than a --------------- Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Operating Subsidiary" means any Subsidiary of the Borrower that owns or -------------------- acquires assets, including without limitation, Capital Stock issued by any other Person. "Other Taxes" is defined in Section 2.24(b). ----------- "Outstanding Credit Exposure" means, as to any Lender at any time, the sum --------------------------- of (i) the aggregate principal amount of its Loans outstanding at such time, (ii) an amount equal to its Pro 15 Rata Share of the aggregate principal amount of Swing Line Loans outstanding at such time, and (iii) an amount equal to its Pro Rata Share of the LC Obligations outstanding at such time. "Participant" has the meaning set forth in Section 9.8(b). ----------- "Payment Date" means the first Business Day of each calendar quarter, ------------ beginning with the calendar quarter commencing April 2, 2001, and the Maturity Date. "PBGC" means the Pension Benefit Guaranty Corporation or any entity ---- succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a limited liability company, a ------ partnership, an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered ---- by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pledge Agreements" means the pledge and security agreements made by the ----------------- Borrower and/or its Subsidiaries pursuant to which the Applicable Pledge Amount of the Capital Stock of First Tier Non-U.S. Operating Subsidiaries is pledged to the Administrative Agent, for the ratable benefit of the Lenders, Swing Line Lender, LC Issuer, and Administrative Agent, creating and granting a first priority pledge and Lien thereon, as required by Sections 3.1 and 5.3, all in form and substance satisfactory to the Administrative Agent. "Prime Rate" means a rate per annum equal to the prime rate of interest ---------- announced from time to time by Bank One or its parent company (which is not necessarily the lowest charged to any customer), changing when and as said prime rate changes. "Properties" means, as of the date of any determination, all real property ---------- currently owned, leased or otherwise used or occupied by the Borrower or any of its Subsidiaries, wherever located. "Pro Rata Share" means, with respect to a Lender, a portion equal to a -------------- fraction the numerator of which is such Lender's Commitment and the denominator of which is the Aggregate Commitment. "Quoted Fixed Rate" means a fixed rate of interest quoted by the Swing Line ----------------- Lender to the Borrower, and accepted by the Borrower, pursuant to Section 2.5(e) to be applicable to a Swing Line Loan as specified by the Borrower for a Quoted Fixed Rate Interest Period. 16 "Quoted Fixed Rate Interest Period" means a period not to exceed seven (7) --------------------------------- calendar days specified by the Borrower as being applicable to a Swing Line Loan being requested by the Borrower to bear interest at a Quoted Fixed Rate. "Rate Management Transaction" means any transaction (including an agreement --------------------------- with respect thereto) now existing or hereafter entered into between the Borrower and any counterparty which is a rate swap, basis swap, forward rate transaction, commodity swap, equity or equity index swap, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Redeemable Preferred Stock" of any Person means any preferred stock (or in -------------------------- the case of a limited liability company, the members' equivalent equity interest) issued by such Person which is at any time prior to the Maturity Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Regulation D" means Regulation D of the Board of Governors of the Federal ------------ Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation T" means Regulation T of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U" means Regulation U of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal ------------ Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Reimbursement Obligations" means, at any time, the aggregate of all ------------------------- obligations of the Borrower then outstanding under Section 2.4 to reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one or more drawings under Facility LCs. "Reportable Event" means a reportable event as defined in Section 4043 of ---------------- ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. 17 "Required Lenders" means at any time Lenders having at least two-thirds ---------------- (2/3) of the Aggregate Commitment or, if the Aggregate Commitment is no longer in effect, Lenders holding at least two-thirds (2/3) of the Aggregate Outstanding Credit Exposure. "Reserve Requirement" means, with respect to a Eurodollar Interest Period, ------------------- the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on new non- personal time deposits of $100,000 or more with a maturity equal to that of such Eurocurrency liabilities (in the case of Eurodollar Advances). "Restricted Investments" means cash investments in U.S. dollars in (i) U.S. ---------------------- Government securities and United States agency securities, including repurchase agreements with a short-term rating of A1 by Standard & Poor's Corporation ("S&P") or P1 by Moody's Investors Services, Inc. ("Moody's"), (ii) municipal securities rated A or better by S&P or Moody's, (iii) certificates of deposit issued by a bank rated A1 by S&P or P1 by Moody's, (iv) commercial paper rated A1 by S&P or P1 by Moody's, (v) tender bonds or variable rate demand bonds supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated A or better by S&P or Moody's, (vi) auction rate municipal securities (35-day auction cycle) with long-term debt ratings of A or better by S&P or Moody's, or (vii) investments of the types approved pursuant to an applicable Approved Investment Policy, provided that all such cash investments shall be made in accordance with the guidelines and other requirements of the Approved Investment Policy, including without limitation, the requirement that an amount estimated to meet a minimum seven day cash requirement of the Borrower be held in overnight funds, and without giving effect to any exceptions to any such guidelines or requirements. "Restricted Payment" means (i) any dividend or other distribution on any ------------------ Capital Stock of the Borrower (except dividends payable solely in its Capital Stock), or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any Capital Stock of the Borrower (except as acquired upon the conversion thereof into additional Capital Stock) or (b) any option, warrant or other right to acquire any Capital Stock of the Borrower. "Single Subsidiary Threshold" means an amount equal to ten percent (10%) of --------------------------- the total consolidated revenue of the Borrower and its Subsidiaries for the most recent Fiscal Quarter as shown on the Financial Statements (Annual) or Financial Statements (Quarterly), as the case may be, as most recently delivered or required to be delivered pursuant to Section 5.1. "Spin-off" means the distribution by the Borrower on a tax-free basis of -------- all of the shares of GPI's common stock to the Borrower's shareholders pursuant to a pro rata dividend to such shareholders. "Spin-off Dividend" means a cash dividend payable to the Borrower to ----------------- reflect GPI's share of the Borrower's debt prior to the Spin-off, to be paid to the Borrower immediately prior to the Spin-off. 18 "Status" means, at any date of determination, whichever of Level I Status, ------ Level II Status, Level III Status, or Level IV Status exists at such time. "Subsidiary" of a Person means (i) any corporation more than 50% of the ---------- outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Subsidiary Guarantee" means the Subsidiary Guarantee substantially in the -------------------- form of Exhibit B executed and delivered by the Subsidiary Guarantors, in favor --------- of the Administrative Agent for the ratable benefit of the Lenders, as the same may be amended, supplemented and restated from time to time. "Subsidiary Guarantee Supplement" means each Supplement substantially in ------------------------------- the form of Annex I to the Subsidiary Guarantee executed and delivered by a ------- Domestic Operating Subsidiary of the Borrower pursuant to Section 5.3. "Subsidiary Guarantors" means, collectively, the Subsidiaries of the --------------------- Borrower that are parties to the Subsidiary Guarantee and each additional Domestic Operating Subsidiary of the Borrower that executes and delivers a Subsidiary Guarantee Supplement pursuant to Section 5.3. "Swing Line Advance" means a Borrowing pursuant to Section 2.5 consisting ------------------ of a Swing Line Loan (which may be made either as a Floating Rate Advance or as a Quoted Fixed Rate Advance) made by the Swing Line Lender to the Borrower on the same date and interest rate basis and, if made as a Quoted Fixed Rate Advance, for the same Interest Period. "Swing Line Borrowing Notice" means the notice given by the Borrower to the --------------------------- Administrative Agent requesting a Swing Line Advance as provided in Section 2.5(e). "Swing Line Commitment" means the commitment of the Swing Line Lender to --------------------- make Swing Line Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $5,000,000. "Swing Line Lender" means Bank One or any subsequent Lender extending to ----------------- the Borrower the Swing Line Commitment hereunder. "Swing Line Loans" means, collectively, the loans made to the Borrower by ---------------- the Swing Line Lender pursuant to Section 2.5. "Swing Line Note" means the promissory note evidencing the Swing Line Loans --------------- substantially in the form of Exhibit A-2 and duly completed in accordance with ----------- the terms hereof, including any amendment, modification, renewal or replacement of such promissory note. 19 "Syndicated Advance" means a borrowing hereunder (or conversion or ------------------ continuation thereof) consisting of the aggregate amount of the several Syndicated Loans made by the Lenders to the Borrower, on the same Borrowing Date (or date of conversion or continuation), of the same Type and, in the case of a Eurodollar Advance, for the same Interest Period. "Syndicated Borrowing Notice" is defined in Section 2.3(f). --------------------------- "Syndicated Loan" means, with respect of a Lender, a Loan made by such --------------- Lender pursuant to Section 2.3. "Syndicated Note" means a promissory note, substantially in the form of --------------- Exhibit A-1 with appropriate insertions, duly executed and delivered to the - ----------- Administrative Agent by the Borrower for the account of a Lender and payable to the order of such Lender in the amount of its Commitment, including any amendment, modification, renewal or replacement of such promissory note. "Taxes" means any and all present or future taxes, duties, levies, imposts, ----- deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Term-Out Period" is defined in Section 2.25. --------------- "Third Parties" means all lessees, sublessees, licensees and other users of ------------- the Properties, excluding those users of the Properties in the ordinary course of the Borrower's business and on a temporary basis. "Transferee" has the meaning set forth in Section 9.8(d) ---------- "Type" means (i) with respect to any Advance, its nature as a Eurodollar ---- Advance, a Quoted Fixed Rate Advance, or a Floating Rate Advance, (ii) with respect to any Syndicated Advance, its nature as a Eurodollar Advance or a Floating Rate Advance, and (iii) with respect to any Swing Line Advance, its nature as a Quoted Fixed Rate Advance or a Floating Rate Advance. "Wholly Owned Subsidiary" means any Subsidiary all of the Capital Stock or ----------------------- other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.2. Accounting Terms and Determinations. Unless otherwise ----------------------------------- specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders, unless with respect to 20 any such change concurred in by the Borrower's independent public accountants or required by GAAP, in determining compliance with any of the provisions of any of the Loan Documents: (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Lenders shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if such objection is made in respect of the first financial statements delivered under Section 5.1, shall mean the financial statements referred to in Section 4.4). SECTION 1.3. References. Unless otherwise indicated, references in this ---------- Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other Subdivisions are references to Articles, exhibits, schedules, sections and other subdivisions hereof. SECTION 1.4. Use of Defined Terms. All terms defined in this Agreement -------------------- shall have the same defined meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall require otherwise. SECTION 1.5. Terminology. ----------- (a) General. All personal pronouns used in this Agreement, whether used ------- in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. (b) Special Corporate Terminology. All references to corporate nature, ----------------------------- the capital stock, stockholders, directors, articles or certificate of incorporation and by-laws, or such similar terms, of any Person shall, if such Person is a limited liability company, refer respectively to the limited liability company nature, the equity interest, members, managing member, articles of organization and operating agreement of such Person. ARTICLE 2 THE CREDITS ----------- SECTION 2.1. Description of Facility. Upon the terms and subject to the ----------------------- conditions set forth in this Agreement, the Lenders hereby grant to the Borrower a revolving credit facility pursuant to which: (i) each Lender severally agrees to make Syndicated Loans to the Borrower in accordance with Section 2.3; (ii) each Lender severally agrees to participate in Facility LCs issued for the account of the Borrower pursuant to Section 2.4; and (iii) each Lender agrees to participate in Swing Line Loans made by the Swing Line Lender to the Borrower pursuant to Section 2.5; provided that, no Lenders shall be required to make any Loans or participate in any Facility LCs or Swing Line Loans where, after giving effect thereto, the Aggregate Outstanding Credit Exposure would exceed the Aggregate Commitment. 21 SECTION 2.2. Availability of Facility. Subject to the terms and ------------------------ conditions of this Agreement, the revolving credit facility is available from the date of this Agreement to the Facility Termination Date, and the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. SECTION 2.3. Syndicated Advances. ------------------- (a) Commitment. From and including the date of this Agreement and prior ---------- to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Syndicated Loans to the Borrower from time to time in amounts not to exceed in the aggregate at any one time outstanding an amount equal to its Commitment less the sum of its Pro Rata Share of all Swing Line Loans and LC Obligations then outstanding. The Commitment by each Lender to lend hereunder shall expire on the Facility Termination Date. (b) Required Payments; Termination. The Borrower agrees to pay all ------------------------------ outstanding Syndicated Advances and all other unpaid Obligations in full on the Maturity Date. (c) Ratable Loans. Each Syndicated Advance hereunder shall consist of ------------- Syndicated Loans made from the several Lenders based on their respective Pro Rata Shares of the Aggregate Commitment. (d) Types of Syndicated Advances. The Syndicated Advances may be ---------------------------- Eurodollar Advances, Floating Rate Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.3(f) and 2.3(g). (e) Minimum Amount of Each Syndicated Advance; Maximum Number of ------------------------------------------------------------ Advances. Each Eurodollar Advance shall be in the minimum amount of $1,000,000 - -------- (and in multiples of $500,000 if in excess thereof), and each Floating Rate Advance shall be in the minimum amount of $500,000 (and in multiples of $100,000 if in excess thereof); provided, however, that any Floating Rate Advance may be in the amount of the then-Available Aggregate Commitment, and any Eurodollar Advance may be in the amount of the then-Available Aggregate Commitment so long as such Eurodollar Advance is not less than $1,000,000; and provided, further, that the total number of Syndicated Advances outstanding at any time shall not exceed nine (9) (with all Floating Rate Advances for purposes of the foregoing limitation being deemed to constitute a single Advance). (f) Method of Selecting Types and Interest Periods for New Syndicated ----------------------------------------------------------------- Advances. The Borrower shall select the Type of Syndicated Advance and, in the - -------- case of each Eurodollar Advance, the Interest Period applicable to each such Eurodollar Advance from time to time. The Borrower shall give the Administrative Agent irrevocable notice (a "Syndicated Borrowing Notice") not later than 10:00 a.m. (Chicago time) at least one Business Day before the Borrowing Date of each Floating Rate Advance and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Syndicated Advance, 22 (ii) the aggregate amount of such Syndicated Advance, (iii) the Type of Syndicated Advance selected, and (iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than noon (Chicago time) on each Borrowing Date, each Lender shall make available its Syndicated Loan or Loans, in funds immediately available in Chicago to the Administrative Agent at its address specified pursuant to Article 9. The Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address not later than 2:00 p.m. (Chicago time) on such date. (g) Conversion and Continuation of Outstanding Syndicated Advances. -------------------------------------------------------------- Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances. Each Eurodollar Advance of any Type shall continue as a Eurodollar Advance of such Type until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless the Borrower shall have given the Administrative Agent a Conversion/Continuation Notice requesting that, at the end of such Interest Period, such Eurodollar Advance either continue as a Eurodollar Advance of such Type for the same or another Interest Period or be converted into a Syndicated Advance of another Type. Subject to the terms of Section 2.3(e), the Borrower may elect from time to time to convert all or any part of a Syndicated Advance of any Type into any other Type or Types of Syndicated Advances; provided that any conversion of any Eurodollar Advance shall be made on, and only on, the last day of the Interest Period applicable thereto. The Borrower shall give the Administrative Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Syndicated Advance or continuation of a Eurodollar Advance not later than 10:00 a.m. (Chicago time) at least one Business Day, in the case of a conversion into a Floating Rate Advance, or three Business Days, in the case of a conversion into or continuation of a Eurodollar Advance, prior to the date of the requested conversion or continuation, specifying: (i) the requested date which shall be a Business Day, of such conversion or continuation; (ii) the aggregate amount and Type of Syndicated Advance(s) to be converted or continued; and (iii) the amount and Type(s) of Syndicated Advance(s) into which such Syndicated Advance is to be converted or continued and, in the case of a conversion into or continuation of a Eurodollar Advance, the duration of the Interest Period applicable thereto. SECTION 2.4. Facility LCs. ------------ 23 (a) Issuance. The LC Issuer hereby agrees, on the terms and conditions -------- set forth in this Agreement, to issue standby letters of credit (each, a "Facility LC") and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time from and including the date of this Agreement and prior to the Facility Termination Date upon the request of the Borrower; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed $10,000,000, (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment, and (iii) no more than ten (10) Facility LCs shall then be outstanding. No Facility LC shall have an expiry date later than the earlier of the fifth Business Day prior to the Facility Termination Date. (b) Participations. Upon the issuance or Modification by the LC Issuer -------------- of a Facility LC in accordance with this Section 2.4, the LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share. (c) Notice. Subject to Section 2.4(a), the Borrower shall give the LC ------ Issuer notice prior to 10:00 a.m. (Chicago time) at least five Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the LC Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Lender, of the contents thereof and of the amount of such Lender's participation in such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article 3 (the satisfaction of which the LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be satisfactory to the LC Issuer and that the Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the LC Issuer shall have reasonably requested (each, a "Facility LC Application"). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. (d) LC Fees. The Borrower shall pay to the Administrative Agent, for the ------- account of the Lenders ratably in accordance with their respective Pro Rata Shares, a letter of credit fee at a per annum rate equal to the Applicable Margin in effect from time to time for Eurodollar Advances on the average daily undrawn stated amount under such Facility LC, such fee to be payable in arrears on each Payment Date (such fee described in this sentence as an "LC Fee"). The Borrower shall also pay to the LC Issuer for its own account (x) at the time of issuance of each Facility LC, a fronting fee in an amount equal to 0.100% of the face amount of such Facility LC, and (y) documentary and processing charges in connection with the issuance or Modification of and draws under Facility LCs in accordance with the LC Issuer's standard schedule for such charges as in effect from time to time. 24 (e) Administration; Reimbursement by Lenders. Upon receipt from the ---------------------------------------- beneficiary of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the Administrative Agent and the Administrative Agent shall promptly notify the Borrower and each other Lender as to the amount to be paid by the LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of the LC Issuer to the Borrower and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. The LC Issuer shall endeavor to exercise the same care in the issuance and administration of the Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the LC Issuer, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or Event of Default or any condition precedent whatsoever, to reimburse the LC Issuer on demand for (i) such Lender's Pro Rata Share of the amount of each payment made by the LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.4(f) below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for each day from the date of the LC Issuer's demand for such reimbursement (or, if such demand is made after 11:00 a.m. (Chicago time) on such date, from the next succeeding Business Day) to the date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Floating Rate Advances. (f) Reimbursement by Borrower. The Borrower irrevocably and ------------------------- unconditionally agrees to reimburse the LC Issuer on or before the applicable LC Payment Date for any amounts to be paid by the LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Lender shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) the LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. All such amounts paid by the LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus the rate applicable to Floating Rate Advances for such day if such day falls after such LC Payment Date. The LC Issuer will pay to each Lender ratably in accordance with its Pro Rata Share all amounts received by it from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by the LC Issuer, but only to the extent such Lender has made payment to the LC Issuer in respect of such Facility LC pursuant to Section 2.4(e). Subject to the terms and conditions of this Agreement (including, without limitation, the submission of a Syndicated Borrowing Notice in compliance with Section 2.3 or a Swing Line Borrowing Notice in compliance with Section 2.5, and the satisfaction of the applicable conditions precedent set forth in Article 3), the Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement Obligation. 25 (g) Obligations Absolute. The Borrower's obligations under this Section -------------------- 2.4 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC Issuer, any Lender or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and the Lenders that the LC Issuer and the Lenders shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. The LC Issuer shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by the LC Issuer or any Lender under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrower and shall not put the LC Issuer or any Lender under any liability to the Borrower. (h) Actions of LC Issuer. The LC Issuer shall be entitled to rely, and -------------------- shall be fully protected in relying, upon any Facility LC, Facility LC Application, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.4, the LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Facility LC. (i) Indemnification. The Borrower hereby agrees to indemnify and hold --------------- harmless each Lender, the LC Issuer and the Administrative Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender, the LC Issuer or the Administrative Agent may incur (or which may be claimed against such Lender, the LC Issuer or the Administrative Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Lender) or 26 (ii) by reason of or on account of the LC Issuer issuing any Facility LC which specifies that the term "beneficiary" included therein includes any successor by operation of law of the named beneficiary, but which Facility LC does not require that any drawing by any such successor beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Lender, the LC Issuer or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.4 is intended to limit the obligations of the Borrower under any other provision of this Agreement. (j) Lenders' Indemnification. Each Lender shall, ratably in accordance ------------------------ with its Pro Rata Share, indemnify the LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of the Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.4 or any action taken or omitted by such indemnitees hereunder. (k) Facility LC Collateral Account. The Borrower agrees that it will, ------------------------------ upon the request of the Administrative Agent or the Required Lenders and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuer or the Lenders in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Administrative Agent (the "Facility LC Collateral Account") at the Administrative Agent's office at the address specified pursuant to Article 9, in the name of such Borrower but under the sole dominion and control of the Administrative Agent, for the benefit of the Lenders and in which such Borrower shall have no interest other than as set forth in Section 7.3. The Borrower hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuer, a security interest in all of the Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account to secure the prompt and complete payment and performance of the Obligations. The Administrative Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in certificates of deposit of Bank One having a maturity not exceeding 30 days. Nothing in this Section 2.4 shall either obligate the Administrative Agent to require the Borrower to deposit any funds in the Facility LC Collateral Account or limit the right of the Administrative Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 7.3. (l) Rights as a Lender. In its capacity as a Lender, the LC Issuer shall ------------------ have the same rights and obligations as any other Lender. SECTION 2.5. Swing Line Advances. ------------------- 27 (a) Commitment. From and including the date of this Agreement and prior ---------- to the Facility Termination Date, the Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make Swing Line Loans to the Borrower from time to time in amounts not to exceed in the aggregate at any one time outstanding the amount of the Swing Line Commitment then in effect, provided that immediately after giving effect to any Swing Line Loan, the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment. The Borrower shall be entitled to repay and reborrow Swing Line Loans in accordance with the provisions, and subject to the limitations, set forth herein (including the limitations set forth in Section 2.1). The Swing Line Commitment shall expire on the Facility Termination Date. (b) Required Payments; Termination. The Borrower agrees to pay each ------------------------------ Swing Line Advance in full within seven (7) days from the date such Advance is made to the Borrower. The Borrower agrees to pay all outstanding Swing Line Advances in full on the Facility Termination Date. (c) Types of Swing Line Advances. The Swing Line Advances may be ---------------------------- Floating Rate Advances or Quoted Fixed Rate Advances, or a combination thereof, selected by the Borrower in accordance with Section 2.5(e). (d) Minimum Amount of Each Swing Line Advance. Each Swing Line Advance ----------------------------------------- shall be in the minimum amount of $500,000 and in multiples of $100,000 if in excess thereof; provided, however, that any Swing Line Advance may be in the amount of the unused portion of the Swing Line Commitment so long as such Advance is not less than $100,000. Notwithstanding the foregoing, the Borrower shall not be entitled to have outstanding at any time more than five (5) Swing Line Advances. (e) Method of Selecting Types of Swing Line Advances. Whenever the ------------------------------------------------ Borrower desires to obtain a Swing Line Advance, the Borrower shall give the Swing Line Lender (with a copy to the Administrative Agent) prior written notice (or telephonic notice promptly confirmed in writing) of such Swing Line Advance (each a "Swing Line Borrowing Notice"). Each Swing Line Borrowing Notice --------------------------- requesting a Floating Rate Advance shall be given prior to 3:30 p.m. (Chicago time) on the Borrowing Date for such Advance and shall specify the aggregate principal amount of such Advance and the date such Advance is to be made (which shall be a Business Day). Each Swing Line Borrowing Notice requesting a Quoted Fixed Rate Advance shall be given prior to 12:00 noon (Chicago time) on the Borrowing Date and shall specify the aggregate principal amount of such Advance, the date such Advance is to be made (which shall be a Business Day), and the Interest Period to be applicable to such Advance. The Swing Line Lender shall promptly furnish the Borrower (with a copy to the Administrative Agent) with a quotation of the Quoted Fixed Rate being offered with respect to such Swing Line Advance by telephone (promptly confirmed in writing, if requested) or by facsimile transmission. The Borrower shall immediately inform the Swing Line Lender (with a copy to the Administrative Agent) of its decision as to whether to accept the Quoted Fixed Rate and to confirm the borrowing of the Swing Line Advance (which may be done by telephone, promptly confirmed in writing, and which decision shall be irrevocable). If the Borrower has so informed the Swing Line Lender and confirmed the terms of the Swing Line Advance, then no later than 4:00 p.m. 28 (Chicago time) on such date, the Swing Line Lender shall make the principal amount of the Swing Line Advance available to the Administrative Agent in immediately available funds at the Payment Office of the Administrative Agent, and the Administrative Agent will make available to the Borrower such amount at the Administrative Agent's address specified in Article 9 by such time. In the event the Swing Line Lender does not make such amount available to the Administrative Agent at the time prescribed above, but such amount is received later that day, such amount may be credited to the Borrower in the manner described in the preceding sentence on the next Business Day (with interest on such amount to begin accruing hereunder on such next Business Day). (f) Purchase by Lenders of Swing Line Advances. If the Borrower fails to ------------------------------------------ repay a Swing Line Advance when required by Section 2.5(b), then upon request of the Swing Line Lender, each Lender other than the Swing Line Lender shall purchase a participating interest in such Swing Line Advance in an amount equal to its Pro Rata Share of such Swing Line Advance, and the Swing Line Lender shall furnish each Lender with confirmation evidencing such participating interest. Such purchase shall be made on the next Business Day following such request. On the date of such required purchase, each Lender will immediately transfer to the Swing Line Lender, in immediately available funds, the amount of its participation. If such Swing Line Advance is not outstanding as a Floating Rate Advance at the time of such purchase, such Swing Line Advance shall automatically be converted to, and thereafter bear interest, as a Floating Rate Advance. Whenever, at any time after the Swing Line Lender has received from any such Lender the funds for its participating interest in a Swing Line Advance, the Administrative Agent receives any payment on account thereof, the Administrative Agent will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded); provided, however, that if such payment received by the Administrative Agent is required to be returned, such Lender will return to the Administrative Agent any portion thereof previously distributed by the Administrative Agent to it. Each Lender's obligation to purchase such participating interest shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the Swing Line Lender or any other Person for any reason whatsoever, (ii) the occurrence or continuation of a Default or an Event of Default or the termination of any of the Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Consolidated Subsidiaries, or any other Person, (iv) any breach of this Agreement by the Borrower or by any other Lender, or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.6. Fees. The Borrower agrees to pay to the Administrative ---- Agent the following fees: (a) for the account of each Lender, a facility fee equal to the applicable per annum facility fee rate set forth in Section 2.9, multiplied by (i) at all times on or before the Facility Termination Date, the total Commitment of such Lender in effect from time to time (whether or not used by the Borrower), and (ii) at all times during the Term-Out Period, the aggregate principal amount of the outstanding Syndicated Loans held by such Lender from time to time, in 29 each case payable quarterly in arrears on each Payment Date commencing April 2, 2001, and on the Facility Termination Date and the Maturity Date; (b) for the account of each Lender, up-front fees payable in the amount of 0.15% of such Lender's Commitment, such up-front fees being payable on the Closing Date; (c) for the account of the LC Issuer and the Lenders, the fees required by Section 2.4(d), payable on the dates and in the amounts set forth in Section 2.4(d); and (d) for the account of the Administrative Agent and the Arranger, the fees due under the Administrative Agent/Arranger Letter Agreement, payable on the dates and in the amounts as provided therein. SECTION 2.7. Reductions in Commitments. The Borrower may, at its ------------------------- option, permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in accordance with their Pro Rata Shares, in a minimum amount of $1,000,000 and in integral multiples of $500,000, upon at least three Business Days' written notice to the Administrative Agent, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Commitment may not be reduced below the Aggregate Outstanding Credit Exposure. SECTION 2.8. Principal Prepayments. The Borrower may, at its option, --------------------- from time to time pay, without penalty or premium, any outstanding Floating Rate Advance in full, or in part in a minimum aggregate amount of $500,000 or any integral multiple of $100,000 in excess thereof, upon one Business Day's prior notice to the Administrative Agent. Any Fixed Rate Advance may be paid in full, or in part in a minimum aggregate amount of $1,000,000 (or $500,000, in the case of a Swing Line Advance) or any integral multiple of $500,000 (or $100,000, in the case of a Swing Line Advance) in excess thereof, upon three Business Days' prior notice to the Administrative Agent (i) without penalty or premium if paid on the last day of an applicable Interest Period, or (ii) with payment of all applicable amounts specified in Section 2.22 if paid on any other day. SECTION 2.9. Applicable Margin and Facility Fee Rates. The Applicable ---------------------------------------- Margin set forth below with respect to each Eurodollar Advance and Floating Rate Advance and the applicable rates set forth below for the facility fees payable pursuant to Section 2.6(a) shall be subject to adjustment (upwards or downwards, as appropriate) based on the Borrower's Status as at the end of each Fiscal Quarter in accordance with the table set forth below. The Borrower's Status as at the last day of each Fiscal Quarter shall be determined from the then most recent annual or quarterly financial statements of the Borrower delivered by the Borrower pursuant to Section 5.1(a) or 5.1(b) and the Compliance Certificate delivered by the Borrower pursuant to Section 5.1(c). The adjustment, if any, to the Applicable Margin shall be effective with respect to all Advances made, and all conversions to and continuations of Eurodollar Advances occurring, on and after the next Business Day following the delivery to the Administrative Agent of such financial statements and Compliance Certificate (the "Adjustment Effective Date"); the adjustment, if any, to the facility fee rates shall be effective on the Adjustment Effective Date. No adjustment in Applicable Margin shall be effective with respect to any Eurodollar Advances 30 outstanding on and prior to the Adjustment Effective Date until such Advances are subsequently continued or converted as Eurodollar Advances with a new Interest Period. In the event that the Borrower shall at any time fail to furnish to the Lenders such financial statements and Compliance Certificate within the applicable time limitations specified by Section 5.1, then the maximum Applicable Margin and facility fee rates shall apply from the date of such failure until the next Business Day after such financial statements and Compliance Certificate are so delivered. Notwithstanding anything to the contrary contained herein, the Borrower's Status as of the date of this Agreement shall be deemed to be Level III Status, and the Applicable Margin and facility fee rate shall not be less than the respective percentages shown below for Level III Status during the first three months following the Closing Date; thereafter the Applicable Margin and facility fee rate will be adjusted as provided herein.
Applicable Applicable Margin for Margin for Applicable Eurodollar Floating Rate Facility Status Advances Advances Fee Rates ------ ---------- ------------- ---------- Level I 0.675% 0.000% 0.250% Level II 0.700% 0.000% 0.375% Level III 0.925% 0.000% 0.375% Level IV 1.050% 0.000% 0.500%
SECTION 2.10. Changes in Interest Rate, etc. Each Floating Rate Advance ------------------------------ shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Floating Rate Advance is made or is converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.3(f) to but excluding the date it becomes due or is converted into a Eurodollar Advance pursuant to Section 2.3(f) hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on any Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Fixed Rate Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Fixed Rate Advance. No Interest Period may end after the Facility Termination Date. SECTION 2.11. Rates Applicable After Default. Notwithstanding anything to ------------------------------ the contrary contained in Section 2.3 or 2.5, during the continuance of a Default or Event of Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 9.6(a) requiring unanimous consent of the Lenders to changes in interest rates), declare that no Syndicated Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of an Event of Default, the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 9.6(a) requiring unanimous consent of the Lenders to 31 changes in interest rates), declare that (x) each Fixed Rate Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum, (y) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate plus 2% per annum, and (z) the LC Fee shall be increased by 2% per annum, provided that during the continuance of an Event of Default under Section 7.1(h) or (i), the interest rates and fees set forth in the preceding clauses (x), (y) and (z) shall be applicable to all Credit Extensions without any election or action on the part of the Administrative Agent or the Lenders. SECTION 2.12. Method of Payment. All payments of the Obligations ----------------- hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Administrative Agent at the Administrative Agent's address specified pursuant to Article 9, or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Borrower, by 1:00 p.m. (local time at the Lending Installation) on the date when due, and the Administrative Agent will promptly distribute to the Swing Line Lender, the LC Issuer and/or the Lenders, as the case may be, their respective portions of each such payment received by the Administrative Agent for the account of the Swing Line Lender, LC Issuer, or the Lenders, as the case may be; provided, however, that if on any date the Borrower shall pay less than the full amount of its Obligations owing to the Lenders on such date, such payment shall be distributed to the Lenders ratably based upon the ratio that the aggregate amount of such Obligations owing to each such Lender on such date bears to the aggregate amount of such Obligations owing to all the Lenders on such date. Each payment delivered to the Administrative Agent for the account of the Swing Line Lender, LC Issuer, or the Lenders, as the case may be, shall be delivered promptly by the Administrative Agent to such Person in the same type of funds that the Administrative Agent received at its address specified pursuant to Article 9 or at any Lending Installation specified in a notice received by the Administrative Agent from such Person. The Administrative Agent is hereby authorized to charge the respective accounts of the Borrower maintained with Bank One for each payment of principal, interest, Reimbursement Obligations, fees and other Obligations as it becomes due hereunder. Each reference to the Administrative Agent in this Section 2.12 shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of payments required to be made by the Borrower to the LC Issuer pursuant to Section 2.4(f). SECTION 2.13. Noteless Agreement; Evidence of Indebtedness. -------------------------------------------- (a) Each Lender (including the Swing Line Lender) shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (b) The Administrative Agent shall also maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, (iii) the original stated amount of each Facility LC and the amount of LC Obligations outstanding at any time, and (iv) the amount of 32 any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (c) The entries maintained in the accounts maintained pursuant to paragraphs (a) and (b) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Administrative Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (d) Any Lender may request that its Loans be evidenced by a promissory note (a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender in a form supplied by the Administrative Agent. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after any assignment pursuant to Section 9.8) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 9.8, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (a) and (b) above. SECTION 2.14. Telephonic Notices. The Borrower hereby authorizes the ------------------ Lenders, the Swing Line Lender, and the Administrative Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Administrative Agent, the Swing Line Lender, or any Lender in good faith believes to be acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the Administrative Agent a written confirmation, if such confirmation is requested by the Administrative Agent, any Lender or the Swing Line Lender of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Administrative Agent, the Lenders, or the Swing Line Lender, the records of the Administrative Agent, the Lenders, and the Swing Line Lender shall govern absent manifest error. SECTION 2.15. Interest Payment Dates; Interest and Fee Basis. The ---------------------------------------------- Borrower agrees to pay interest accrued on each Floating Rate Advance on each Payment Date, commencing with the first such date to occur after the date hereof, on any date on which the Floating Rate Advance is paid, whether due to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding principal amount of any Floating Rate Advance converted into a Eurodollar Advance on a day other than a Payment Date shall be payable on the date of conversion. The Borrower agrees to pay interest accrued on each Fixed Rate Advance on the last day of its applicable Interest Period, on any date on which the Fixed Rate Advance is paid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Fixed Rate Advances, LC Fees, and facility fees shall be calculated for actual days elapsed on the basis of a 360-day year; interest on Floating Rate Advances shall be calculated for actual days elapsed on the basis of a 365 or 366-day year, as applicable. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or 33 interest on an Advance or any fees or other Obligations hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. SECTION 2.16. Notification of Advances, Interest Rates, Prepayments and --------------------------------------------------------- Commitment Reductions. Promptly after receipt thereof, the Administrative Agent - --------------------- will notify each Lender of the contents of each Aggregate Commitment reduction notice, Syndicated Borrowing Notice, Conversion/Continuation Notice and repayment notice received by it hereunder. Promptly after notice from the LC Issuer, the Administrative Agent will notify each Lender of the contents of each request for issuance of a Facility LC hereunder. The Administrative Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. SECTION 2.17. Lending Installations. Subject to Section 2.23, each of the --------------------- Lenders and Swing Line Lender may book its Loans and its participation in any LC Obligations and Swing Line Loans, and the LC Issuer may book the Facility LCs, at any Lending Installation selected by it and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Notes, Facility LCs, and participations in Facility LCs shall be deemed held by each Lender, Swing Line Lender or LC Issuer, as the case may be, for the benefit of such Lending Installation. Each Lender, Swing Line Lender or LC Issuer, as the case may be, may, by written or telex notice to the Administrative Agent and the Borrower, designate a Lending Installation through which Loans or participations in Facility LCs and Swing Line Loans will be made or booked by it or Facility LCs will be issued by it and for whose account payments are to be made in respect of such Loans, Facility LCs or participations therein. SECTION 2.18. Non-Receipt of Funds by the Administrative Agent. Unless ------------------------------------------------ the Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or participation in any Facility LC or Swing Line Loan, or (ii) in the case of the Borrower, a payment of principal, interest, Reimbursement Obligation, or fees to the Administrative Agent for the account of the Lenders, LC Issuer, or the Swing Line Lender, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (i) in the case of repayment by a Lender, LC Issuer, or the Swing Line Lender, the Federal Funds Effective Rate for such day or (ii) in the case of repayment by the Borrower, the interest rate applicable to the relevant Loan or Reimbursement Obligation. 34 SECTION 2.19. Yield Protection. If any law or any governmental or quasi- ---------------- governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any interpretation thereof, or the compliance of any Lender, Swing Line Lender or LC Issuer therewith, (i) subjects any Lender, Swing Line Lender or LC Issuer or its applicable Lending Installation to any tax, duty, charge or withholding on or from payments due from the Borrower (excluding taxation of the overall net income of such Lender, Swing Line Lender or LC Issuer or its applicable Lending Installation imposed by the jurisdiction or taxing authority in which its principal executive office or Lending Installation is located), or changes the basis of taxation of payments to any Lender, Swing Line Lender or LC Issuer in respect of its Loans, Facility LCs, or participations therein, or other amounts due it hereunder, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender, Swing Line Lender or LC Issuer or its applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender, Swing Line Lender or LC Issuer or its applicable Lending Installation of making, funding or maintaining its Loans or of issuing or participating in Facility LCs or Swing Line Loans, or reduces any amount receivable by any Lender, Swing Line Lender or LC Issuer or its applicable Lending Installation in connection with its Loans, Facility LCs or participations therein, or requires any Lender, Swing Line Lender or LC Issuer or its applicable Lending Installation to make any payment calculated by reference to the amount of Loans, Facility LCs or participations therein held or interest received by it, by an amount deemed material by it, and the result of any of the foregoing is to increase the cost to such Lender, Swing Line Lender, or LC Issuer or its applicable Lending Installation, as the case may be, of making or maintaining its Eurodollar Loans or Commitment or of issuing or participating in Facility LCs or Swing Line Loans or to reduce the return received by such Lender, Swing Line Lender, or LC Issuer or its applicable Lending Installation, as the case may be, in connection with such Eurodollar Loans, Commitment, Facility LCs or participations therein, then, within 15 days of demand by such Lender, Swing Line Lender, or LC Issuer, as the case may be, the Borrower shall pay such Lender, Swing Line Lender, or LC Issuer, such additional amount or amounts as will compensate it for such increased cost or reduction in amount received. SECTION 2.20. Changes in Capital Adequacy Regulations. If a Lender, Swing --------------------------------------- Line Lender, or LC Issuer determines the amount of capital required or expected to be maintained by such Lender, Swing Line Lender, or LC Issuer, or its applicable Lending 35 Installation, or any corporation controlling such Lender, Swing Line Lender, or LC Issuer, is increased as a result of a Change, then, within 15 days of demand by such Lender, Swing Line Lender, or LC Issuer, the Borrower shall pay such Lender, Swing Line Lender, or LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender, Swing Line Lender, or LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and issue or participate in Facility LCs or Swing Line Loans, as the case may be, hereunder (after taking into account such Lender's, Swing Line Lender's, or LC Issuer's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines, or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender, Swing Line Lender, or LC Issuer or its applicable Lending Installation or any corporation controlling any Lender, Swing Line Lender, or LC Issuer. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. SECTION 2.21. Availability of Types of Advances. If any Lender determines --------------------------------- that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to a Eurodollar Advance does not accurately reflect the cost of making or maintaining such Eurodollar Advance, then the Administrative Agent shall suspend the availability of the Eurodollar Advance and require any Eurodollar Advances to be repaid or promptly converted into a Floating Rate Advance. SECTION 2.22. Funding Indemnification. If any payment of a Fixed Rate ----------------------- Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or if the Borrower fails to make a prepayment of a Fixed Rate Advance on the date specified in any notice given in respect of such prepayment, or if a Fixed Rate Advance is not made on the date specified by the Borrower in any notice given in respect of such Fixed Rate Advance for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any lost profits and any loss or cost in liquidating or employing deposits acquired to fund or maintain the Fixed Rate Advance. SECTION 2.23. Lending Installation; Lender Statements; Survival of ---------------------------------------------------- Indemnity. To the extent reasonably possible, each Lender, Swing Line Lender and - --------- LC Issuer shall designate an alternate Lending Installation with respect to its Fixed Rate Loans or Facility LCs or participations therein to reduce any liability of the Borrower to it under Sections 2.19 and 2.20 or to avoid the unavailability of a Type of Advance under Section 2.21, so long as such 36 designation is not disadvantageous to it in its reasonable judgment. Each Lender, Swing Line Lender and LC Issuer shall deliver a written statement to the Borrower (with a copy to the Administrative Agent) as to the amount due, if any, under Section 2.19, 2.20, or 2.22. Such written statement shall set forth in reasonable detail the calculations upon which it determined such amount and shall be conclusive in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Fixed Rate Loan shall be calculated as though such Lender or the Swing Line Lender funded its Fixed Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Fixed Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any such Lender, Swing Line Lender or LC Issuer shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 2.19, 2.20, and 2.22 shall survive payment of the Obligations and termination of this Agreement. SECTION 2.24. Taxes. ----- (a) All payments by the Borrower to or for the account of any Lender, Swing Line Lender, the LC Issuer or the Administrative Agent hereunder or under any Note or Loan or in respect of any Facility LC shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender, Swing Line Lender, LC Issuer or the Administrative Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.24) such Lender, Swing Line Lender, LC Issuer or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (b) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or Loan in respect of any Facility LC or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application ("Other Taxes"). (c) The Borrower hereby agrees to indemnify the Administrative Agent, the LC Issuer, Swing Line Lender, and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 2.24) paid by the Administrative Agent, the LC Issuer, Swing Line Lender, or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Administrative Agent, the LC Issuer, Swing Line Lender, or such Lender makes demand therefor pursuant to this Section 2.24. 37 (d) Each Lender, Swing Line Lender and LC Issuer that is not incorporated under the laws of the United States of America or a state thereof (each a "Non- U.S. Lender") agrees that it will, not more than ten Business Days after the date of this Agreement (i) deliver to each of the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Non-U.S. Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to each of the Borrower and the Administrative Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certifying that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower and the Administrative Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Administrative Agent. All forms or amendments described in the preceding sentence shall certify that such Non-U.S. Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Non-U.S. Lender from duly completing and delivering any such form or amendment with respect to it and such Non-U.S. Lender advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (e) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to subsection (d) above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 2.24 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (d) above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (f) Any Non-U.S. Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Loan or in respect of any Facility LC pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (g) If the Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Non-U.S. Lender (because the appropriate form was not delivered or properly completed, 38 because such Non-U.S. Lender failed to notify the Administrative Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Non-U.S. Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Administrative Agent under this subsection, together with all costs and expenses related thereto (including attorneys' fees and time charges of attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent). The obligations of the Non-U.S. Lenders under this Section 2.24(g) shall survive the payment of the Obligations and termination of this Agreement. SECTION 2.25. Term-Out Option. Not earlier than 60 days, and not later --------------- than 30 days, prior to January 29, 2002, the Borrower may, by written notice thereof delivered to the Administrative Agent, extend the Maturity Date to a date not later than January 27, 2003 (such extended period being referred to herein as the "Term-Out Period"). No additional Syndicated Advances or Swing Line Advances, and no additional Facility LCs, shall be made or issued to or for the account of the Borrower during the Term-Out Period. All Syndicated Advances outstanding and not repaid on the Facility Termination Date may be continued or converted as provided in Section 2.3(g), shall bear interest and be payable as otherwise provided herein, and shall be paid in full on the Maturity Date as so extended. The Borrower shall also pay the fees specified in Section 2.6 during the Term-Out Period. As a condition precedent to such extension, the Borrower shall deliver to the Administrative Agent (with sufficient copies for all Lenders), on the Business Day immediately preceding the first day of the Term- Out Period, a certificate of an Authorized Officer of the Borrower, certifying (i) the resolutions (with copies attached) adopted by the governing boards of the Borrower and each Subsidiary Guarantor approving or consenting to such extension, and (ii) that before and after giving effect to such extension, the representations and warranties in Article 4 are true and correct as of the date of such certificate (except for changes expressly permitted herein and except to the extent that such representations and warranties relate solely to an earlier date), and no Default or Event of Default then exists or would occur as a result thereof. The Administrative Agent shall confirm to the Lenders the extension of the Maturity Date. ARTICLE 3 CONDITIONS TO CREDIT EXTENSIONS ------------------------------- SECTION 3.1. Conditions to First Credit Extension. The obligation of ------------------------------------ each Lender and the Swing Line Lender to make a Loan, and the LC Issuer to issue a Facility LC, on the occasion of the first Credit Extension, is subject to the satisfaction of the conditions set forth in this Section 3.1 and in Section 3.2, and receipt by the Administrative Agent of the following (in sufficient number of counterparts (except as to the Notes)) for delivery of a counterpart to each Lender, Swing Line Lender, and LC Issuer and retention of one counterpart by the Administrative Agent: 39 (a) from each of the Lenders, either (i) a duly executed counterpart of this Agreement, or (ii) a facsimile transmission of the duly executed counterpart of this Agreement together with a confirmation that such original counterpart is being sent to the Administrative Agent; (b) a duly executed Syndicated Note for the account of each Lender requesting the same, and a duly executed Swing Line Note for the account of the Swing Line Lender if so requested; (c) the duly executed Subsidiary Guarantee and Contribution Agreement; (d) if applicable, the duly executed Pledge Agreement(s), together with any and all certificates representing the Capital Stock pledged thereby, instruments of transfer and stock powers endorsed in blank, and Uniform Commercial Code financing statements in appropriate form with respect thereto; (e) the opinions of (i) Patricia Wilson, general counsel of the Borrower and the Subsidiary Guarantors, and (ii) Alston & Bird, LLP, special counsel for the Borrower and the Subsidiary Guarantors, in each case dated as of the date hereof, substantially in the forms of Exhibit G-1 and G-2, respectively, and ----------- --- covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Lender may reasonably request; (f) a certificate, dated as of the date hereof, signed on behalf of the Borrower by its principal financial officer, to the effect that (i) no Default or Event of Default has occurred and is continuing on such date, (ii) the representations and warranties of the Borrower contained in Article 4 are true on and as of such date, and (iii) all conditions to such Credit Extension pursuant to this Article 3 have been satisfied as of such date; (g) all documents which the Administrative Agent or any Lender may reasonably request relating to the existence of the Borrower and each Subsidiary Guarantor, the authority for and the validity of this Agreement, the Notes, the Subsidiary Guarantee, the Contribution Agreement, the Pledge Agreement(s) (if applicable), and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent, including, without limitation, a certificate of the Borrower and each Subsidiary Guarantor signed by the Secretary or an Assistant Secretary of such Person, certifying as to the names, true signatures and incumbency of the officer or officers of such Person authorized to execute and deliver the Loan Documents, and certified copies of the following items: (i) the certificate of incorporation of the Borrower and the certificate or articles of incorporation of each of the Subsidiary Guarantors that is a corporation, (ii) the articles of organization of each of the Subsidiary Guarantors that is a limited liability company, (iii) the partnership agreement of each of the Subsidiary Guarantors that is a partnership, (iv) the by-laws of the Borrower and each of the Subsidiary Guarantors that is a corporation, (v) each operating or management agreement of a Subsidiary Guarantor that is a limited liability company, (vi) a certificate of the Secretary of State of the jurisdiction of organization of the Borrower and the Subsidiary Guarantors as to the good standing of the Borrower and Subsidiary Guarantors in such jurisdiction and, as to the Borrower and each of the 40 Subsidiary Guarantors doing business in Georgia, a certificate of the Secretary of State of Georgia as to its good standing in such jurisdiction, and (vii) the action taken by the respective boards of directors of the Borrower and the Subsidiary Guarantors authorizing the execution, delivery and performance of this Agreement, the Notes, the Subsidiary Guarantee, the Contribution Agreement, the Pledge Agreement(s), and the other Loan Documents to which they are parties; (h) certified copies of all consents, approvals, authorizations, registrations, and filings required to be made or obtained by the Borrower or GPI in connection with the financings evidenced by this Agreement, the Spin-off, the Spin-off Dividend, and the other transactions contemplated herein, including without limitation, the Form 10 Filing and the Information Statement; (i) certified copy of the resolutions adopted by the respective boards of directors of the Borrower and GPI approving the Spin-off and Spin-off Dividend; (j) a pro forma consolidated balance sheet dated as of the Closing Date for the Borrower and its Subsidiaries after giving effect to the Spin-off and the Spin-off Dividend, reflecting a Consolidated Net Worth for Borrower of not less than $210,000,000; (k) written money transfer instructions, in substantially the form of Exhibit F hereto, addressed to the Administrative Agent and signed by an - --------- Authorized Officer of the Borrower, together with such other related money transfer authorizations as the Administrative Agent may have reasonably requested; (l) a copy of the Borrower's and each of its Subsidiaries' cash investments policy as formally approved by its board of directors as in effect on the Closing Date; (m) an opinion of King & Spalding, special counsel for the Administrative Agent, addressed to the Administrative Agent and the Lenders and dated the date hereof, as to the enforceability of the Loan Documents and covering such additional matters relating to the Loan Documents as the Administrative Agent or any Lender may reasonably request; (n) a Syndicated Borrowing Notice, Swing Line Borrowing Notice, or request for issuance of a Facility LC, as the case may be; and (o) all other documents, certificates, and other information as the Administrative Agent may reasonably request. In addition, each of the following conditions shall have been satisfied on such date: (p) the Borrower and GPI shall have made arrangements to pay the Spin-off Dividend and effect the Spin-off, with the effectiveness of the Spin-off to occur no later than 11:59 p.m. on such date, and subject to no conditions or requirements other than the passage of time, and otherwise on terms consistent in all material respects with the terms of the Form 10 Filing and the Information Statement; 41 (q) the pro forma financial condition of the Borrower and its Subsidiaries on the Closing Date, after giving effect to the Spin-off and the Spin-off Dividend, is consistent in all material respects with the pro forma financial statements for the Borrower and its Subsidiaries delivered by the Borrower to the Administrative Agent and the Lenders on January 29, 2001; (r) since May 31, 2000, there shall have occurred no events, acts, conditions or occurrences of whatever nature, singly or in the aggregate, that have had, or are reasonably expected to have, a Material Adverse Effect (and for purposes of the foregoing, an Acquisition by the Borrower otherwise permitted by the terms of this Agreement shall not be deemed to have had such a Material Adverse Effect at the time of the Acquisition); (s) no actions, suits or other legal proceedings shall be pending or, to the knowledge of the Borrower, threatened, against or affecting the Borrower or GPI and seeking to enjoin, restrain, or otherwise challenge or contest the validity of the Spin-off or payment of the Spin-off Dividend; (t) The Borrower shall have made arrangements satisfactory to the Administrative Agent and the Lenders to have a portion of the Spin-off Dividend paid to the lenders under the Existing Credit Agreement in a sufficient amount, together with the amount of any initial Borrowing hereunder, to pay in full all principal, interest, fees, and other amounts owing under the Existing Credit Agreement, and to terminate all existing commitments thereunder; (u) neither the Spin-off nor payment of the Spin-off Dividend shall cause or result in the occurrence of any Default or Event of Default under the Indenture, or require any prepayment, repurchase or redemption of any indebtedness governed thereby; and (v) all fees, costs and expenses (including the fees and expenses of counsel to the Administrative Agent) required to be paid as of the Closing Date to the Administrative Agent and the Lenders shall have been paid and satisfied in full. SECTION 3.2. Conditions to All Borrowings. The obligation of each ---------------------------- Lender, Swing Line Lender and LC issuer to make a Loan or issue or Modify a Facility LC on the occasion of each Credit Extension is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Syndicated Borrowing Notice, Swing Line Borrowing Notice, or request for issuance or Modification of a Facility LC, as the case may be; (b) the fact that, immediately after such Credit Extension, no Default or Event of Default shall have occurred and be continuing; (c) the fact that the representations and warranties of the Borrower contained in Article 4 of this Agreement shall be true on and as of the date of such Credit Extension except for changes expressly permitted herein and except to the extent that such representations and warranties relate solely to an earlier date; 42 (d) the fact that, immediately after such Credit Extension (i) the Outstanding Credit Exposure of each Lender will not exceed the amount of its Commitment, and (ii) the Aggregate Outstanding Credit Exposure of all Lenders will not exceed the amount of the Aggregate Commitment; and (e) since May 31, 2000, there shall have been no events, acts, conditions or occurrences of whatever nature, singly or in the aggregate, which have had, or could reasonably be expected to have, a Material Adverse Effect (and for purposes of the foregoing, an Acquisition by the Borrower otherwise permitted by the terms of this Agreement shall not be deemed to have such a Material Adverse Effect at the time of the Acquisition thereof). Each request for a Credit Extension hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such request and the date of such Credit Extension as to the facts specified in paragraphs (b), (c), (d) and (e) of this Section 3.2. ARTICLE 4 REPRESENTATIONS AND WARRANTIES ------------------------------ On the Closing Date, and at such other times as specified in Section 3.2, the Borrower represents and warrants to the Lenders, Swing Line Lender, LC Issuer and the Administrative Agent that: SECTION 4.1. Existence and Power. The Borrower (i) is duly organized, ------------------- validly existing and in good standing under the laws of its jurisdiction of organization, (ii) is duly qualified to transact business in every jurisdiction set forth on Schedule 4.1, and the failure of the Borrower to be so qualified in ------------ any other jurisdiction could not reasonably be expected to have or cause a Material Adverse Effect, and (iii) has all powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any such licenses, authorizations, consents and approvals could not reasonably be expected to have or cause a Material Adverse Effect. SECTION 4.2. Organizational and Governmental Authorization; No ------------------------------------------------- Contravention. The execution, delivery and performance by the Borrower of this - ------------- Agreement, the Notes and the other Loan Documents (i) are within the Borrower's powers as a corporation or limited liability company, as the case may be, (ii) have been duly authorized by all necessary organizational action, (iii) require no action by or in respect of or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the Borrower's organizational documents or of any material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. 43 SECTION 4.3. Binding Effect. This Agreement constitutes a valid and -------------- binding agreement of the Borrower enforceable in accordance with its terms, and the Notes, Subsidiary Guarantee, Contribution Agreement, Pledge Agreement(s), and the other Loan Documents to which the Borrower or any Subsidiary is a party, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower or such Subsidiary, as the case may be, enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency, fraudulent transfer, and similar laws affecting the enforcement of creditors' rights generally. SECTION 4.4. Financial Information. --------------------- (a) The Borrower has heretofore furnished to the Lenders true and correct copies of the audited consolidated balance sheets of the Borrower and of the Borrower's eCommerce business segment (reorganized as GPI) as of May 31, 2000 and May 31, 1999 and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended May 31, 2000 (collectively, the "Prior Annual Financial Statements"). All --------------------------------- such Prior Annual Financial Statements fairly present in all material respects and in accordance with GAAP the financial position of the respective entities covered by such Prior Annual Financial Statements and the results of operations and cash flows for such entities for the respective Fiscal Years then ended. (b) The Borrower has heretofore furnished to the Lenders true and correct copies of the consolidated balance sheet of the Borrower and of the Borrower's eCommerce business segment (reorganized as GPI) as of November 30, 2000 and the related consolidated statements of income and cash flows for the Fiscal Quarter ending November 30, 2000 (collectively, the "2001 Second Quarter Financial ----------------------------- Statements"). The 2001 Second Quarter Financial Statements fairly present in - ---------- all material respects and in accordance with GAAP (subject to normal year-end adjustments) the financial position of the respective entities covered by such 2001 Second Quarter Financial Statements and the results of operations and cash flows for such entities for the Fiscal Quarter then ended. (c) Since May 31, 2000, there have been no events, acts, conditions or occurrences, singly or in the aggregate, having or reasonably expected to have or cause a Material Adverse Effect (and for purposes of the foregoing, an Acquisition by the Borrower otherwise permitted by the terms of this Agreement shall not be deemed to have such a Material Adverse Effect at the time of the Acquisition thereof). SECTION 4.5. No Litigation, Contingent Liabilities. There is no action, ------------------------------------- suit or proceeding pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which could reasonably be expected to have or cause a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries has any material Contingent Obligations not provided for or disclosed in the financial statements referred to in Section 4.4(a) or delivered to the Lenders pursuant to Section 5.1. 44 SECTION 4.6. Compliance with ERISA. --------------------- (a) The Borrower and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC under Title IV of ERISA. (b) Neither the Borrower nor any member of the Controlled Group is or ever has been obligated to contribute to any Multiemployer Plan. SECTION 4.7. Compliance with Laws; Taxes. The Borrower and its --------------------------- Subsidiaries are in compliance with all applicable laws, regulations and similar requirements of governmental authorities, except where such compliance is being contested in good faith through appropriate proceedings. There have been filed on behalf of the Borrower and its Subsidiaries all Federal, state and local income, excise, property and other tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower or any Subsidiary have been paid or contested as permitted by Section 5.6. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.8. Subsidiaries. Each of the Subsidiaries, if any, listed on ------------ Schedule 4.8 is a corporation (or a limited liability company or partnership) - ------------ duly organized, validly existing and in good standing under the laws of the jurisdiction where it was created and organized, is qualified to transact business in every jurisdiction where the failure of any such Subsidiary to be so qualified in any other jurisdictions could reasonably be expected to have or cause a Material Adverse Effect, and has all powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any such licenses, authorizations, consents and approvals could not reasonably be expected to have or cause a Material Adverse Effect. The Borrower has no Subsidiaries except for those Subsidiaries listed on Schedule 4.8, as the same may be supplemented from ------------ time to time in writing by the Borrower, which accurately sets forth their respective jurisdictions of creation. SECTION 4.9. Not an Investment Company. Neither the Borrower nor any ------------------------- Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Ownership of Property; Liens. The Borrower and its ---------------------------- Subsidiaries have title to its properties sufficient for the conduct of its business, including without limitation, all properties reflected in the Borrower's most recent consolidated financial statements provided to the Lenders as described in Section 4.4 or delivered pursuant to Section 5.1, as the case may be (but excluding any such assets sold in the ordinary course of business, or as otherwise expressly permitted by Section 6.9 of this Agreement or consented to in writing by the Required Lenders, subsequent to the date of such financial statements), and none of such properties is subject to any Lien except as permitted by Section 6.8. 45 SECTION 4.11. No Default. Neither the Borrower nor any of its ---------- Subsidiaries is in default under or with respect to any agreement, instrument or undertaking to which it is a party (including, without limitation, the Subsidiary Guarantee) or by which it or any of its property is bound which could reasonably be expected to have or cause a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 4.12. Full Disclosure. All financial statements, reports, --------------- certificates, and other information (whether written or, in the case of information furnished by any Designated Officer, oral) heretofore furnished by or on behalf of the Borrower to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby (excluding any superseded information corrected or updated by delivery to the Administrative Agent, prior to the Closing Date, of corrected, updated or restated information) is, and all such information hereafter furnished by such representatives of the Borrower to the Administrative Agent or any Lender will be, true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. The Borrower has disclosed to the Lenders in writing any and all facts known to the Borrower, after due inquiry, which could reasonably be expected to have or cause a Material Adverse Effect. SECTION 4.13. Environmental Matters. --------------------- (a) Neither the Borrower nor any of its Subsidiaries is subject to any Environmental Liability which could reasonably be expected to have or cause a Material Adverse Effect and, to the best of the Borrower's knowledge, neither the Borrower nor any of its Subsidiaries has been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA. To the best of the Borrower's knowledge, none of the Properties has been identified on any current or proposed (i) National Priorities List under 40 C.F.R. (S) 300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to CERCLA. (b) No Hazardous Materials are being, and, to the best of the Borrower's knowledge, have been, used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled at, or shipped or transported to or from the Properties or are otherwise present at, on, in or under the Properties, or, to the best of the knowledge of the Borrower, without independent inquiry, at or from any adjacent site or facility, except for Hazardous Materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed of, managed, or otherwise handled in minimal amounts in the ordinary course of business in compliance in all material respects with all applicable Environmental Requirements. (c) The Borrower and its Subsidiaries are in compliance in all material respects with all Environmental Requirements in connection with the operation of the Properties and the Borrower's and its Subsidiary's respective businesses. SECTION 4.14. Capital Stock. All Capital Stock, redeemable capital stock, ------------- debentures, bonds, notes and all other securities and equity interests of the Borrower and its Subsidiaries presently issued and outstanding are validly and properly issued in accordance with all applicable laws, including but not limited to, the "Blue Sky" laws of all applicable states and 46 the federal securities laws. The Capital Stock of the Borrower's Wholly Owned Subsidiaries is owned by the Borrower free and clear of any Lien or adverse claim (other than Liens created under the Pledge Agreements as contemplated herein). At least a majority of the Capital Stock of the Borrower's other Subsidiaries (other than Wholly Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or adverse claim. SECTION 4.15. Margin Stock. Neither the Borrower nor any of its ------------ Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation U or Regulation X. SECTION 4.16. Insolvency. After giving effect to the execution and ---------- delivery of the Loan Documents, the making of the Loans under this Agreement, and the Spin-off, the Borrower will not be "insolvent," within the meaning of such term as used in O.C.G.A. (S) 18-2-22 or as defined in (S) 101 of Title 11 of the United States Code, as amended from time to time, or be unable to pay its debts generally as such debts become due, or have an unreasonably small capital to engage in any business or transaction, whether current or contemplated. SECTION 4.17. Spin-off Transactions. The Spin-off and the Spin-off --------------------- Dividend and all other related transactions comply in all material respects with all applicable laws and regulations, including without limitation, federal and state securities laws and regulations, and all organizational documents of the Borrower and GPI. The Spin-off and Spin-off Dividend and related transactions have been, or will be not later than 11:59 p.m. on the date of the initial Credit Extension made hereunder, consummated in all material respects in accordance with the terms and conditions set forth in the Form 10 Filing and Information Statement. ARTICLE 5 AFFIRMATIVE COVENANTS --------------------- The Borrower agrees that, from and after the Closing Date and for so long as any Lender or Swing Line Lender has any Commitment or Swing Line Commitment hereunder, any Facility LC remains outstanding, or any amount payable under any Loan, Reimbursement Obligation or any other Obligation hereunder remains unpaid: SECTION 5.1. Information. The Borrower will deliver to each of the ----------- Lenders: (a) as soon as available and in any event within 95 days after the end of each Fiscal Year, Financial Statements (Annual) of the Borrower and its Consolidated Subsidiaries on a consolidated basis, all certified by Arthur Andersen LLP or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications (including, without limitation, statements as to "going concern" status) not acceptable to the Required Lenders (provided, that delivery pursuant to subsection (g) below of 47 copies of the Annual Report on Form 10-K of the Borrower for such Fiscal Year filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 5.1(a) with respect to the Borrower); (b) as soon as available and in any event within 50 days after the end of each of the first three quarters of each Fiscal Year, Financial Statements (Quarterly) of the Borrower and its Consolidated Subsidiaries on a consolidated basis, all certified as to fairness of presentation in all material respects, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Borrower (provided, that delivery pursuant to subsection (g) below of copies of the Quarterly Report on Form 10-Q of the Borrower for such Fiscal Quarter filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 5.1(b) with respect to the Borrower); (c) simultaneously with the delivery of each set of financial statements referred to in subsections (a) and (b) above, a Compliance Certificate (i) setting forth in reasonable detail the calculations required to establish compliance with the requirements of Sections 5.3, 6.1 through 6.9 inclusive, and 6.14 on the date of such financial statements and (ii) stating whether any Default or Event of Default exists on the date of such certificate and, if any Default or Event of Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five Business Days after the delivery of each set of annual financial statements referred to in subsection (a) above, a statement of the firm of independent public accountants which reported on such statements to the effect that nothing has come to their attention in the course of their audit to cause them to believe that any Default or Event of Default existed on the date of such financial statements; (e) within five Business Days after the chief executive officer, chief financial officer, chief accounting officer, controller or chief legal officer of the Borrower (or any other individual having similar duties and responsibilities as any of the foregoing although not having the same title) becomes aware of the occurrence of any Default or Event of Default, a certificate of the chief financial officer or the chief accounting officer or such other Person of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Borrower shall have filed with the Securities and Exchange Commission; (h) if and when the Borrower or any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any Reportable Event with respect to any Plan which might reasonably be expected to constitute grounds for a termination of such Plan under Title IV 48 of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such Reportable Event, a copy of the notice of such Reportable Event given or required to be given to the PBGC, (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice, or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice, in each case where such Reportable Event, withdrawal liability, termination or appointment could reasonably be expected to have or cause a Material Adverse Effect; (i) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request; (j) copies of the Borrower's and each of its Operating Subsidiaries' Approved Investment Policy as of the Closing Date and within 14 Business Days of any subsequent change therein; (k) promptly upon the receipt thereof, a copy of any management letter or management report prepared by the Borrower's independent certified public accountants in conjunction with the financial statements described in Section 5.1(a); and (l) within five Business Days after the chief executive officer, chief financial officer, chief accounting officer, controller or chief legal officer of the Borrower (or any other individual having similar duties and responsibilities as any of the foregoing although not having the same title) becomes aware of any pending or overtly threatened litigation or other legal proceedings, or any cancellation or termination of any material agreement or receipt or sending of written notice of default or intended cancellation or termination in respect thereof, or the occurrence of any other event or condition that, in any such case, could reasonably be expected to have a Material Adverse Effect. SECTION 5.2. Inspection of Property, Books and Records. The Borrower ----------------------------------------- will (i) keep, and cause each of its Subsidiaries to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities; and (ii) permit, and cause each of its Subsidiaries to permit, representatives of any Lender, after notice to an officer of the Borrower or Subsidiary, at such Lender's expense during any period in which a Default or Event of Default is not in existence and at the Borrower's expense during any period in which a Default or Event of Default is in existence, to visit (which date of visit shall be two (2) Business Days after the date such request is made or any earlier date as may be mutually agreed by the Borrower and such Lender) and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrower agrees to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired. Notwithstanding the foregoing, during any period in which a Default or Event of Default is not in existence, no Lender may engage in (i) more than two inspections per Fiscal Year or (ii) discussions with the Borrower's independent public accountants, unless the Borrower shall have otherwise consented to same. 49 SECTION 5.3. Additional Subsidiary Guarantors; Additional Pledge --------------------------------------------------- Agreements. - ---------- (a) If any Domestic Operating Subsidiary of the Borrower, whether now existing or hereafter organized or acquired, has consolidated revenue in any Fiscal Quarter that exceeds the Single Subsidiary Threshold, then the Borrower shall cause such Domestic Operating Subsidiary to become an additional Subsidiary Guarantor, as provided in this Section 5.3, within 30 days after delivery of the Financial Statements (Annual) or Financial Statements (Quarterly), as the case may be, with respect to such Fiscal Quarter; provided, however, that in those instances where as a result of an Acquisition, or as a result of the sale, contribution, or other transfer of assets to a Subsidiary of the Borrower, the consolidated revenue of the resulting Domestic Operating Subsidiary is projected (on a pro forma basis) by the Borrower to exceed the Single Subsidiary Threshold during the current or the immediately succeeding Fiscal Quarter of the Borrower, and such Domestic Operating Subsidiary is not then a Subsidiary Guarantor, the Borrower shall cause such Domestic Operating Subsidiary to become an additional Subsidiary Guarantor, as provided in this Section 5.3, within 30 days after the date of such Acquisition, sale, contribution or other transfer of assets. (b) If any First Tier Non-U.S. Operating Subsidiary, whether now existing or hereafter organized or acquired, has consolidated revenue in any Fiscal Quarter that exceeds the Single Subsidiary Threshold, then the Borrower shall cause the Applicable Pledge Amount of the Capital Stock of such First Tier Non- U.S. Operating Subsidiary to be pledged to the Administrative Agent, for the ratable benefit of the Lenders, the Swing Line Lender, the LC Issuer, and the Administrative Agent, pursuant to a Pledge Agreement as provided in this Section 5.3, within 30 days after delivery of the Financial Statements (Annual) or Financial Statements (Quarterly), as the case may be, with respect to such Fiscal Quarter; provided, however, that in those instances where as a result of an Acquisition, or as a result of the sale, contribution, or other transfer of assets to a Subsidiary of the Borrower, the consolidated revenue of the resulting First Tier Non-U.S. Operating Subsidiary is projected (on a pro forma basis) by the Borrower to exceed the Single Subsidiary Threshold during the current or the immediately succeeding Fiscal Quarter of the Borrower, and none of the Capital Stock of such First Tier Non-U.S. Operating Subsidiary is then pledged to the Administrative Agent pursuant to a Pledge Agreement, then the Borrower shall cause the Applicable Pledge Amount of the Capital Stock of such First Tier Non-U.S. Operating Subsidiary to be so pledged to the Administrative Agent pursuant to a Pledge Agreement as provided in this Section 5.3, within 30 days after the date of such Acquisition, sale, contribution or other transfer of assets. (c) If for any Fiscal Quarter of the Borrower, the aggregate revenue (on a non-consolidated basis) of the Borrower and those Domestic Operating Subsidiaries that are then Subsidiary Guarantors, and those First Tier Non-U.S. Operating Subsidiaries whose Capital Stock has been pledged to the Administrative Agent pursuant to a Pledge Agreement, are less than the Aggregate Subsidiary Threshold, then the Borrower shall cause one or more other Domestic Operating Subsidiaries to become additional Subsidiary Guarantors, as provided in this Section 5.3, and/or shall cause the Applicable Pledge Amount of Capital Stock of one or more other First Tier Non-U.S. Operating Subsidiaries to be pledged to the Administrative Agent pursuant to a Pledge Agreement, within 30 days after delivery of the Financial Statements 50 (Annual) or Financial Statements (Quarterly), as the case may be, with respect to such Fiscal Quarter, so that after including the revenue of any such additional Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries, the aggregate revenue (on a non-consolidated basis) of the Borrower and all such Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries would equal or exceed the Aggregate Subsidiary Threshold for such Fiscal Quarter; provided, however, that in those instances where as a result of an Acquisition, or as a result of the sale, contribution, or other transfer of assets to a Subsidiary of the Borrower, or as a result of the sale or other disposition of assets by the Borrower or any Subsidiary (including the sale or other disposition of the capital stock of any Subsidiary), the aggregate revenue (on a non-consolidated basis) of the Borrower, those Domestic Operating Subsidiaries that are then Subsidiary Guarantors, and those First Tier Non-U.S. Operating Subsidiaries whose Capital Stock has been pledged to the Administrative Agent pursuant to a Pledge Agreement, are projected (on a pro forma basis) by the Borrower to be less than the Aggregate Subsidiary Threshold during the current or the immediately succeeding Fiscal Quarter of the Borrower, then the Borrower shall cause one or more other Domestic Operating Subsidiaries to become additional Subsidiary Guarantors, as provided in this Section 5.3, and/or shall cause the Applicable Pledge Amount of the Capital Stock of one or more other First Tier Non-U.S. Operating Subsidiaries to be pledged to the Administrative Agent pursuant to a Pledge Agreement, within 30 days after the date of such Acquisition, sale, contribution or other transfer or disposition, so that after including the revenue of any such additional Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries, the aggregate revenue (on a non- consolidated basis) of the Borrower and all such Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries for such Fiscal Quarter would equal or exceed the Aggregate Subsidiary Threshold. (d) The Borrower may elect at any time to have a Domestic Operating Subsidiary become an additional Subsidiary Guarantor as provided in this Section 5.3. (e) Upon the occurrence and during the continuation of any Event of Default, if the Required Lenders so direct, the Borrower shall (i) cause all of its Domestic Operating Subsidiaries to become additional Subsidiary Guarantors, as provided in this Section 5.3, within 30 days after the Borrower's receipt of written confirmation of such direction from the Administrative Agent, and (ii) cause the Applicable Pledge Amount of the Capital Stock of all First Tier Non- U.S. Subsidiaries to be pledged to the Administrative Agent pursuant to a Pledge Agreement, as provided in this Section 5.3, within 30 days after the Borrower's receipt of written confirmation of such direction from the Administrative Agent. (f) A Domestic Operating Subsidiary shall become an additional Subsidiary Guarantor by executing and delivering to the Administrative Agent a Subsidiary Guarantee Supplement and a Contribution Agreement Supplement, accompanied by (i) all other Loan Documents related thereto, (ii) certified copies of certificates or articles of incorporation or organization, by-laws, membership operating agreements, and other organizational documents, appropriate authorizing resolutions of the board of directors of such Domestic Operating Subsidiaries, and opinions of counsel comparable to those delivered pursuant to Section 3.1(e), and (iii) such other documents as the Administrative Agent may reasonably request. No Domestic Operating Subsidiary that becomes a Subsidiary Guarantor shall thereafter cease to be 51 a Subsidiary Guarantor or be entitled to be released or discharged from its obligations under the Subsidiary Guarantee or Contribution Agreement. (g) The Capital Stock of a First Tier Non-U.S. Operating Subsidiary shall be pledged to the Administrative Agent by the execution and delivery to the Administrative Agent of a Pledge Agreement, accompanied by (i) all certificates representing such Capital Stock, instruments of transfer and stock powers endorsed in blank, and Uniform Commercial Code financing statements in appropriate form in respect thereof, and (ii) such other documents as the Administrative Agent may reasonably request (including, without limitation, certified copies of certificates or articles of incorporation or organization, by-laws, membership operating agreements, and other organizational documents, appropriate authorizing resolutions of the Board of Directors of the holders of such Capital Stock, and opinions of counsel comparable to those delivered pursuant to Section 3.1(e)). The Capital Stock of a First Tier Non-U.S. Operating Subsidiary that has been pledged to the Administrative Agent pursuant to a Pledge Agreement shall not be entitled thereafter to be released from such Pledge Agreement, except in connection with a sale of such Capital Stock otherwise expressly permitted pursuant to Section 5.4 or Section 6.9 of this Agreement or consented to in writing by all of the Lenders. SECTION 5.4. Maintenance of Existence. The Borrower shall at all times ------------------------ maintain its existence as a corporation in the jurisdiction of its incorporation. The Borrower shall cause each of its Operating Subsidiaries to maintain its legal existence, and carry on its business in substantially the same industry as such business shall be carried on the date of the first Borrowing hereunder; provided, that (i) the Borrower may dissolve Subsidiaries -------- from time to time if (x) the Board of Directors of the Borrower has determined that such dissolution is desirable, and (y) such dissolution could not reasonably be expected to have or cause a Material Adverse Effect, and (ii) the Borrower or any Subsidiary may eliminate or discontinue a business line pursuant to Section 6.9(a). SECTION 5.5. Use of Proceeds. The proceeds of the Loans shall be used --------------- for working capital and other general corporate purposes, in each case to the extent not otherwise prohibited herein (including, without limitation, pursuant to Section 6.6(b)). No portion of the proceeds of the Loans will be used by the Borrower (i) in connection with any hostile tender offer for, or other hostile acquisition of, stock (or in the case of a limited liability company, the members' equivalent equity interest) of any corporation or limited liability company with a view towards obtaining control of such other corporation or limited liability company, (ii) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose in violation of any applicable law or regulation. SECTION 5.6. Compliance with Laws; Payment of Taxes. The Borrower will, -------------------------------------- and will cause each of its Subsidiaries and each member of the Controlled Group to, comply in all material respects with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to PBGC), except where the necessity of such compliance is being contested in good faith through appropriate proceedings. The Borrower will, and will cause each of its Subsidiaries to, pay, prior to the accrual of any penalty in respect thereof, all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a Lien against the 52 property of the Borrower or any Subsidiary, except liabilities being contested in good faith and against which, if reasonably requested by the Administrative Agent, the Borrower will set up reserves in accordance with GAAP. SECTION 5.7. Insurance. The Borrower will maintain, and will cause each --------- of its Subsidiaries to maintain (either in the name of the Borrower or in such Subsidiary's own name), with financially sound and reputable insurance companies, insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. SECTION 5.8. Maintenance of Property. The Borrower shall, and shall ----------------------- cause each of its Subsidiaries to, maintain all of its properties and assets in good condition, repair and working order, ordinary wear and tear excepted. SECTION 5.9. Environmental Notices. Upon obtaining knowledge thereof, --------------------- the Borrower shall furnish to the Lenders and the Administrative Agent prompt written notice of all Environmental Liabilities, pending, threatened or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders, and Environmental Releases at, on, in, under or in any way affecting the Properties or any adjacent property, and all facts, events, or conditions that could lead to any of the foregoing if any of the foregoing could reasonably be expected to have or cause a Material Adverse Effect; provided, that should the Borrower or any of its Subsidiaries receive any written notice with respect to any of the foregoing, then the Borrower shall provide the Lenders and the Administrative Agent with a copy of same, regardless of whether the facts, events or conditions described therein might have or cause a Material Adverse Effect. SECTION 5.10. Environmental Release. The Borrower agrees that upon the --------------------- occurrence of an Environmental Release it will act promptly to investigate the extent of, and to take appropriate remedial action to remedy, such Environmental Release, to the extent required by any applicable Environmental Requirement or any Environmental Judgment and Order, unless the Borrower is contesting such action in good faith through appropriate proceedings. ARTICLE 6 NEGATIVE COVENANTS ------------------ The Borrower agrees that, from and after the Closing Date and for so long as any Lender or Swing Line Lender has any Commitment or Swing Line Commitment hereunder, any Facility LC remains outstanding, or any amount payable under any Loan, Reimbursement Obligation or any other Obligation hereunder remains unpaid: SECTION 6.1. Leverage Ratio. The Leverage Ratio at the end of each -------------- Fiscal Quarter shall not be greater than 2.25 to 1.00 for the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters. 53 SECTION 6.2. Minimum Consolidated Net Worth. Consolidated Net Worth, as ------------------------------ at the end of each Fiscal Quarter, will not be less than the sum of (i) $200,000,000, plus (ii) 50% of cumulative Consolidated Net Income of the Borrower earned in each Fiscal Quarter beginning with the first Fiscal Quarter ending after the Closing Date (taken as one accounting period), but excluding from such calculations of Consolidated Net Income for purposes of this clause (ii), any Fiscal Quarter in which the Consolidated Net Income of the Borrower and its Consolidated Subsidiaries is negative, plus (iii) 100% of the cumulative Net Proceeds of Capital Stock received or deemed received during any period after the Closing Date, calculated quarterly at the end of each Fiscal Quarter, plus (iv) 100% of the increase to Consolidated Net Worth resulting from the conversion of Debt into equity interests. SECTION 6.3. Fixed Charge Coverage Ratio. The ratio of (i) Consolidated --------------------------- EBITR to (ii) Consolidated Fixed Charges as at the end of each Fiscal Quarter, shall not be less than 2.50 to 1.00 for the Fiscal Quarter just ended and the immediately preceding three Fiscal Quarters. SECTION 6.4. Restricted Payments. The Borrower will not declare or make ------------------- any Restricted Payment if, after giving effect thereto, (i) the aggregate of all Restricted Payments declared or made in any period of four consecutive Fiscal Quarters (excluding Fiscal Quarters ending on or before November 30, 2000) exceeds $10,000,000; or (ii) any Default or Event of Default shall be in existence (which has not been specifically waived in writing pursuant to Section 9.6) either immediately preceding or succeeding the making or declaration of any such Restricted Payment. SECTION 6.5. Loans or Advances. Neither the Borrower nor any of its ----------------- Subsidiaries shall make loans or advances to any Person (excluding accounts receivable of the Borrower and its Subsidiaries arising from advances made by them in the ordinary course of their respective businesses), except: (i) loans or advances (other than travel advances described in clause (v) below) to employees not exceeding $1,000,000 in aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on the Closing Date, (ii) deposits required by government agencies or public utilities, (iii) loans or advances by the Borrower to its Operating Subsidiaries or by such Operating Subsidiaries to the Borrower, (iv) travel advances to employees not exceeding $500,000 in the aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on the Closing Date, and (v) loans or advances representing Investments as described in Schedule 6.6; ------------ provided that after giving effect to the making of any loans, advances or deposits permitted by clauses (i) through (iv) of this Section, no Default or Event of Default shall be in existence (which has not been specifically waived in writing pursuant to Section 9.6). SECTION 6.6. Investments; Acquisitions. ------------------------- (a) Neither the Borrower nor any of its Subsidiaries shall make Investments in any Person except as permitted by Section 6.5 and except the following Investments (provided such Investments do not violate Section 6.6(b)): 54 (i) absent the existence of a Default or Event of Default, Restricted Investments; (ii) Investments in Subsidiaries (including, without limitation, any Person becoming a Subsidiary as a result of such Investment pursuant to an Acquisition otherwise permitted pursuant to Section 6.6(b)); (iii) capital contributions of assets as permitted by Section 6.9(a); (iv) Investments made pursuant to an Acquisition otherwise permitted pursuant to Section 6.6(b); (v) Investments in existence on the Closing Date and described on Schedule -------- 6.6; and --- (vi) Other Investments not described in the preceding clauses (i) through (iv) made in an aggregate amount during any period of four consecutive Fiscal Quarters (excluding Fiscal Quarters ending on or before November 30, 2000) not to exceed $10,000,000. (b) Without the prior written consent of the Required Lenders, the Borrower will not, nor will it permit any of its Subsidiaries to, acquire, whether directly or through the purchase of stock, convertible notes or otherwise, effect an Acquisition, or otherwise acquire any assets other than the loans, advances and investments permitted by Section 6.5 or 6.6(a), the assets of one of its Subsidiaries, or of fixed assets (which fixed assets do not constitute all or substantially all of the assets of the Person from whom such assets are acquired), unless in each case (i) such acquisition is of a business which is similar (as to product sold or service rendered) to the Borrower's or any relevant Subsidiary's, (ii) such acquisition is to be made upon a negotiated basis with the approval of the board of directors of the Person to be acquired, or of the percentage of ownership interests required by the charter documents of such Person to approve any such acquisition, (iii) the total amount of cash consideration paid, and Debt assumed or otherwise becoming part of Consolidated Total Debt (x) in such acquisition shall not exceed $25,000,000, and (y) in such acquisition, together with the aggregate amount of such cash consideration and Debt in respect of all other acquisitions made during the then-current Fiscal Year (or, in the case of the Borrower's 2001 Fiscal Year, the period from the Closing Date through the end of such 2001 Fiscal Year) shall not exceed $50,000,000, (iv) the then-current market value of all capital stock of the Borrower given as consideration in such acquisition, together with the aggregate value of all such capital stock given in respect of all other acquisitions made during the then-current Fiscal Year (or, in the case of the Borrower's 2001 Fiscal Year, the period from the Closing Date through the end of such 2001 Fiscal Year) shall not exceed $50,000,000, and (v) no Default or Event of Default shall be in existence or be caused thereby which has not been specifically waived in writing pursuant to Section 9.6 (and, if requested by the Administrative Agent, the Borrower has provided to the Administrative Agent a certificate to such effect, with supporting calculations of the financial covenants set forth in Sections 6.1 and 6.3 on a pro forma basis for the most recent four Fiscal Quarters of the 55 Borrower for which Financial Statements (Annual or Quarterly) are available after giving effect to such acquisition as of the first day of such period, and the financial covenant set forth in Section 6.2 on a pro forma basis as of the end of the most recent Fiscal Quarter of the Borrower for which Financial Statements (Annual or Quarterly) are available after giving effect to such acquisition as of the end of such Fiscal Quarter). SECTION 6.7. Indebtedness. The Borrower will not, nor will it permit ------------ any of its Subsidiaries to, create, incur or suffer to exist any Debt, other than: (a) the Loans, LC Obligations, and Subsidiary Guarantees; (b) Debt secured by Liens permitted pursuant to Section 6.8; (c) Debt owing to the Borrower by any of its Subsidiaries payable on demand on a non-subordinated basis; (d) Debt arising from the renewal or extension of any Debt described in clause (b) above, provided that the amount of such Debt is not increased; (e) Debt owing to any Person as a portion of the consideration payable to the seller(s) in an Acquisition permitted by Section 6.6; (f) Debt owing by a Subsidiary of the Borrower that was in existence at the time such Person became a Subsidiary of the Borrower and not created or incurred in contemplation of such event, and that cannot be prepaid without penalty or premium or assumed by the Borrower, in an aggregate principal amount not to exceed $10,000,000 for all such Subsidiaries; (g) Debt in existence on the Closing Date and described on Schedule 6.7; ------------ (h) Debt of the Borrower arising from any Rate Management Transactions entered into in the ordinary course of business for protection against fluctuations in interest rates and/or foreign currency exchange rates, and not for speculative purposes; and (i) Debt of the Borrower not described in clauses (a) through (h) above in an aggregate principal amount outstanding at any time not to exceed $25,000,000. Notwithstanding the foregoing, no Subsidiary of the Borrower that is not a Subsidiary Guarantor shall in any event create, incur or suffer to exist any Debt of the types described in clause (i) or (ii) of the definition of the term "Debt", other than Debt owing to the Borrower or any Subsidiary Guarantor and payable on demand on a non-subordinated basis. SECTION 6.8. Negative Pledge. Neither the Borrower nor any of its --------------- Subsidiaries will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for the following. 56 (a) Liens existing on the date of this Agreement and described on Schedule -------- 6.8 securing Debt outstanding on the date of this Agreement in an aggregate - --- principal amount not exceeding $11,000,000; (b) any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary, not created in contemplation of such event, that secures Debt permitted by Section 6.7(f); (c) any Lien on any asset securing Debt (including, without limitation, a Capitalized Lease) incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, provided that such Lien (i) attaches to such asset (and no other asset) concurrently with or within 18 months after the acquisition or completion of construction thereof, and (ii) secures solely such Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset; (d) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Consolidated Subsidiary and not created in contemplation of such event, that secures Debt permitted by Section 6.7(f); (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition; (f) Liens securing Debt owing by any Subsidiary of the Borrower to the Borrower or to any other Subsidiary of the Borrower; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses (a) through (f) of this Section, provided that (i) such Debt is not secured by any additional assets, and (ii) the amount of such Debt secured by any such Lien is not increased; (h) Liens incidental to the conduct of its business or the ownership of its assets, including, without limitation, Liens of materialmen and landlords, which (i) do not secure Debt and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (i) any Lien in respect of any taxes which are either (x) not, as at any date of determination, due and payable or (y) being contested in good faith as permitted by Section 5.6; (j) Liens in respect of judgments or awards for which appeals or proceedings for review are being prosecuted and in respect of which a stay of execution upon any such appeal or proceeding for review shall have been secured, provided that such Person shall have established reserves which are adequate under GAAP for such judgments or awards; (k) Liens not otherwise permitted by the foregoing paragraphs of this Section securing Debt, otherwise permitted pursuant to Section 6.7, in an aggregate principal amount at any time outstanding not to exceed $5,000,000; 57 provided that Liens permitted by the foregoing paragraphs (a) through (k) shall at no time secure Debt or other liabilities or obligations in an aggregate amount greater than $20,000,000. SECTION 6.9. Consolidations, Mergers and Sales of Assets. The Borrower ------------------------------------------- will not, nor will it permit any of its Subsidiaries to, consolidate or merge with or into, or effect any Asset Sale to, any other Person, or discontinue or eliminate any Operating Subsidiary or business segment, provided that (A) the Borrower may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower is the corporation surviving such merger and (iii) immediately after giving effect to such merger, no Default or Event of Default shall have occurred and be continuing, (B) Subsidiaries may merge with, and sell assets to, one another and the Borrower, (C) the Borrower and its Subsidiaries may eliminate or discontinue business lines and segments from time to time if (i) such action has been approved by the Board of Directors of the Borrower, and (ii) such elimination or discontinuance will not jeopardize the Borrower's or any Subsidiary Guarantor's ability to perform under any of the Loan Documents, (D) so long as no Default or Event of Default shall be in existence either immediately prior to or following any asset disposition, the Borrower and its respective Subsidiaries may effect any Asset Sale so long as the value of the assets sold (measured at the higher of book value or the total sale price for such assets) pursuant to all such Asset Sales during any period of four consecutive Fiscal Quarters (excluding Fiscal Quarters ending on or before November 30, 2000) does not exceed $25,000,000, and (E) Subsidiaries which are formed for the sole purpose of (1) merging into Persons that will become Subsidiaries, or (2) acquiring the assets or stock (or in the case of a limited liability company, the members' equivalent equity interests) of Persons and thereafter becoming Subsidiaries, may merge with such Persons or consolidate those Persons' assets with the assets of those Subsidiaries. SECTION 6.10. Limitation on Payment Restrictions Affecting Subsidiaries. --------------------------------------------------------- The Borrower will not, nor will it permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective, any consensual encumbrance or restriction (excluding any such encumbrance or restriction under this Agreement) on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of its Capital Stock, or (ii) pay any indebtedness owed to the Borrower or any of its Subsidiaries, or (iii) transfer any of its property or assets to the Borrower or any of its Subsidiaries, except any such encumbrance or restriction imposed by a lender extending purchase money financing in respect of any asset or assets of the Borrower or any Subsidiary so long as such encumbrance or restriction does not so encumber or restrict any other assets or property of the Borrower or any Subsidiary. SECTION 6.11. Change in Fiscal Year. The Borrower will not change its --------------------- Fiscal Year without the consent of the Required Lenders, which consent shall not be unreasonably withheld. SECTION 6.12. Environmental Matters. The Borrower will not, and will not --------------------- permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or transport to or from the Properties any Hazardous Materials except for Hazardous Materials used, produced, manufactured, processed, 58 treated, recycled, generated, stored, disposed, managed, or otherwise handled in the ordinary course of business in compliance in all material respects with all applicable Environmental Requirements. SECTION 6.13. Transactions with Affiliates. Except for those agreements ---------------------------- more particularly described on Schedule 6.13, neither the Borrower nor any of ------------- its Subsidiaries shall enter into, or be a party to, any transaction with any Affiliate of the Borrower or such Subsidiary (which Affiliate is not the Borrower or a Guarantor), except as permitted by law and in the ordinary course of business and pursuant to reasonable terms which are no less favorable to the Borrower or such Subsidiary than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate. SECTION 6.14. Capital Expenditures. Neither the Borrower nor any of its -------------------- Subsidiaries will make or permit to be made Capital Expenditures in any Fiscal Quarter ending after the Closing Date such that the aggregate amount of such Capital Expenditures during such Fiscal Quarter and the immediately preceding three (3) Fiscal Quarters (but excluding Fiscal Quarters ending on or before November 30, 2000) exceeds $35,000,000. ARTICLE 7 DEFAULTS -------- SECTION 7.1. Events of Default. Each of the following events ("Events ----------------- of Default") shall constitute an Event of Default under this Agreement: (a) the Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay any Reimbursement Obligation within one Business Day after such obligation shall become due, or shall fail to pay any interest on any Loan within three Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within five Business Days after such fee or other amount becomes due; or (b) the Borrower shall fail to observe or perform any covenant contained in Section 5.1(e), Section 5.2(ii), Sections 6.1 through 6.11 inclusive, Section 6.13, or Section 6.14; (c) the Borrower shall fail to observe or perform any covenant or agreement contained or incorporated by reference in this Agreement (other than those covered by paragraph (a) or (b) above) and such failure shall not have been cured within 30 days after the earlier to occur of (i) written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Lender or (ii) the Borrower otherwise becomes aware of any such failure; or (d) any representation, warranty, certification or statement made or incorporated by reference in Article 4 hereof, in any other Loan Document, or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or 59 (e) the Borrower or any of its Subsidiaries shall fail to make any payment in respect of Debt outstanding in the aggregate principal amount of $1,000,000 or greater (other than (i) the Loans and (ii) Debt held by the Borrower owed by a Consolidated Subsidiary or Debt held by a Consolidated Subsidiary owed by the Borrower) when due or within any applicable grace period; or (f) an "Event of Default" shall occur under any of the other Loan Documents; provided, that, should any such "Event of Default" be waived by the Required Lenders (or, if required by Section 9.6(a) or the terms of such other Loan Document, all Lenders), then, such waiver shall operate as a waiver of an Event of Default arising under this Section 7.1(f) as a result of same; or (g) any event or condition shall occur which results in the acceleration of the maturity of Debt outstanding of the Borrower or any of its Subsidiaries (other than (i) the Loans and (ii) Debt held by the Borrower owed by a Consolidated Subsidiary or Debt held by a Consolidated Subsidiary owed by the Borrower) in the aggregate principal amount of $1,000,000 or greater (including, without limitation, any "put" of such Debt to the Borrower or any of its Subsidiaries) or enables (or, with the giving of notice or lapse of time or both, would enable) the holders of such Debt or any Person acting on such holders' behalf to accelerate the maturity thereof (including, without limitation, any "put" of such Debt to the Borrower or any of its Subsidiaries); or (h) the Borrower or any of its Subsidiaries shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any action to authorize any of the foregoing; or (i) an involuntary case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any of its Subsidiaries under the federal bankruptcy laws as now or hereafter in effect; or (j) the Borrower or any member of its Controlled Group shall fail to pay when due any material amount which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a 60 proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c) (5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or the Borrower or any other member of its Controlled Group shall enter into, contribute or be obligated to contribute to, terminate or incur any withdrawal liability with respect to, a Multiemployer Plan; provided, that no Default or Event of Default shall arise under this paragraph (j) so long as the maximum potential liability to the Borrower or any member of its Controlled Group shall be not greater than $5,000,000; or (k) one or more judgments or orders for the payment of money in an aggregate amount in excess of $5,000,000, shall be rendered against the Borrower or any of its Subsidiaries and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (l) a federal tax lien shall be filed against the Borrower under Section 6323 of the Code or a lien of the PBGC shall be filed against the Borrower under Section 4068 of ERISA and in either case such lien shall (i) secure an obligation, or asserted obligation, in excess of $5,000,000 and (ii) remain undischarged or unstayed for a period of 30 days after the date of filing; or (m) (i) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 30% or more of the outstanding shares of the voting stock of the Borrower, or (ii) as of any date a majority of the Board of Directors of the Borrower consists of individuals who were not either (A) directors of the Borrower as of the corresponding date of the previous year, (B) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A), or (C) selected or nominated to become directors by the Board of Directors of the Borrower of which a majority consisted of individuals described in clause (A) and individuals described in clause (B); or (n) (i) the Subsidiary Guarantee or any Pledge Agreement shall cease to be enforceable or (ii) the Borrower or any Subsidiary shall assert that any Loan Document is not enforceable. SECTION 7.2. Notice of Default. The Administrative Agent shall give ----------------- notice to the Borrower of any Default under Section 7.1(c) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof. SECTION 7.3. Termination of Commitments; Acceleration; Facility LC ----------------------------------------------------- Collateral Account. - ------------------ (a) If any Default or Event of Default described in Section 7.1(h) or 7.1(i) occurs with respect to the Borrower, the obligations of the Lenders (including the Swing Line Lender) to make Loans hereunder and the obligation of the LC Issuer to issue Facility LCs shall automatically terminate and the Obligations shall immediately become due and payable without 61 any election or action on the part of the Administrative Agent, the LC Issuer, the Swing Line Lender, or any Lender, and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the Administrative Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the "Collateral Shortfall Amount"). If any other Default or Event of Default occurs, the Required Lenders (or the Administrative Agent with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the Lenders (including the Swing Line Lender) to make Loans hereunder and the obligation of the LC Issuer to issue Facility LCs, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives, and (b) upon notice to the Borrower and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (b) If at any time while any Default or Event of Default is continuing, the Administrative Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Administrative Agent may (and at the direction of the Required Lenders shall) make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (c) The Administrative Agent may (and at the direction of the Required Lenders shall) at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the Obligations and any other amounts as shall from time to time have become due and payable by the Borrower to the Lenders (including the Swing Line Lender) or the LC Issuer under the Loan Documents. (d) At any time while any Default or Event of Default is continuing, neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After all of the Obligations have been indefeasibly paid in full and the Aggregate Commitment (including the Swing Line Commitment) has been terminated, any fund remaining in the Facility LC Collateral Account shall be returned by the Administrative Agent to the Borrower or paid to whomever may be legally entitled thereto at such time. ARTICLE 8 THE ADMINISTRATIVE AGENT ------------------------ SECTION 8.1. Appointment; Powers and Immunities. Each Lender and the LC ---------------------------------- Issuer hereby irrevocably appoints and authorizes the Administrative Agent to act as its 62 Administrative Agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent: (a) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Lender under, this Agreement or any other Loan Document, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by the Borrower to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Lenders, and then only on terms and conditions satisfactory to the Administrative Agent, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Administrative Agent may employ Administrative Agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such Administrative Agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Article 8 are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof, other than the right of the Borrower to consent to the appointment of a successor Administrative Agent as set forth in the second sentence of Section 8.9. In performing its functions and duties under this Agreement and under the other Loan Documents, the Administrative Agent shall act solely as Administrative Agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Administrative Agent shall be ministerial and administrative in nature, and the Administrative Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender. SECTION 8.2. Reliance by Administrative Agent. The Administrative Agent -------------------------------- shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telefax, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Required Lenders, and such instructions of the Required Lenders in any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. SECTION 8.3. Defaults. The Administrative Agent shall not be deemed to -------- have knowledge of the occurrence of a Default or an Event of Default (other than the nonpayment of principal of or interest on the Loans) unless the Administrative Agent has received notice from a 63 Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default." In the event that the Administrative Agent receives such a notice of the occurrence of a Default or an Event of Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall give each Lender prompt notice of each nonpayment of principal of or interest on the Loans whether or not it has received any notice of the occurrence of such nonpayment. The Administrative Agent shall (subject to Section 8.8 and Section 9.6) take such action hereunder with respect to such Default or Event of Default as shall be directed by the Required Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 8.4. Rights of Administrative Agent as a Lender. With respect ------------------------------------------ to the Loans made by it, Bank One in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Bank One in its individual capacity. The Administrative Agent may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower and any of its Affiliates) as if it were not acting as the Administrative Agent, and the Administrative Agent may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore agreed to between the Borrower and the Administrative Agent) for services in connection with this Agreement or any other Loan Document or otherwise without having to account for the same to the Lenders. SECTION 8.5. Indemnification. Each Lender severally agrees to indemnify --------------- the Administrative Agent, to the extent the Administrative Agent shall not have been reimbursed by the Borrower, ratably in accordance with its Pro Rata Share, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; provided, however that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Administrative Agent. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. SECTION 8.6. Payee of Note Treated as Owner. The Administrative Agent ------------------------------ may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the 64 Administrative Agent and the provisions of Section 9.8(c) have been satisfied. Any requests, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. SECTION 8.7. Nonreliance on Administrative Agent and Other Lenders. ----------------------------------------------------- Each Lender agrees that it has, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Person (or any of their Affiliates) which may come into the possession of the Administrative Agent. SECTION 8.8. Failure to Act. Except for action expressly required of -------------- the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 8.5 against any and all liability and expense which may be incurred by the Administrative Agent by reason of taking, continuing to take, or failing to take any such action. SECTION 8.9. Resignation or Removal of Administrative Agent. Subject to ---------------------------------------------- the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower and the Administrative Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent, provided that so long as no Event of Default -------- shall have occurred and be continuing, such appointment shall be subject to the prior written consent of the Borrower, which consent shall not be unreasonably withheld or delayed. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent's notice of resignation or the Required Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent. Any successor Administrative Agent shall be a bank which has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment 65 as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 8 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder. ARTICLE 9 MISCELLANEOUS ------------- SECTION 9.1. Notices. All notices, requests and other communications to ------- any party hereunder shall be in writing (including bank wire, telex, telecopier or similar writing) and shall be given to such party at its address or telecopier or telex number set forth on the signature pages hereof or such other address or telecopier or telex number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier or telex, when such telecopier or telex is transmitted to the telecopier or telex number specified in this Section and the appropriate confirmation or answerback is received, (ii) if given by certified mail return-receipt requested, on the date set forth on the receipt (provided, that any refusal to accept any such notice shall be deemed to be notice thereof as of the time of any such refusal), addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent -------- under Article 2 shall not be effective until received. SECTION 9.2. No Waivers. No failure or delay by any party to this ---------- Agreement in exercising any right, power or privilege hereunder or under any Note, Subsidiary Guarantee, Pledge Agreement or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.3. Expenses; Documentary Taxes. The Borrower shall pay (i) --------------------------- all reasonable out-of-pocket costs and expenses of the Administrative Agent, including the fees and disbursements of Administrative Agent's counsel (including King & Spalding), in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereto or thereto, and (ii) if a Default or Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Administrative Agent, or any Lender, Swing Line Lender or LC Issuer, including reasonable fees and disbursements of counsel, in connection with such Default and collection and other enforcement proceedings resulting therefrom, including reasonable out-of-pocket expenses incurred in enforcing this Agreement and the other Loan Documents. The Borrower shall indemnify the Administrative Agent and each Lender against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or any other Loan Documents. 66 SECTION 9.4. Indemnification. --------------- (a) The Borrower shall indemnify the Administrative Agent, the Lenders, the Swing Line Lender, the LC Issuer, and each affiliate thereof and their respective directors, officers, and employees (each an "Indemnified Party") from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any Credit Extension or any Facility LC hereunder or breach by the Borrower of this Agreement or any other Loan Document or from any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to the foregoing (an "Indemnity Proceeding"), and the Borrower shall reimburse each Indemnified Party, upon demand (but no more frequently than every Fiscal Quarter) for any reasonable expenses (including, without limitation, reasonable legal fees) incurred in connection with any such investigation or proceeding ("Claims and Expenses"); but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Indemnified Party; provided, that should the Borrower pay any amounts to the Administrative Agent, the Lenders, Swing Line Lender, or LC Issuer due to this Section, and it shall be determined that the harm being indemnified against resulted from the Administrative Agent's or any Lender's, Swing Line Lender's, or LC Issuer's gross negligence or willful misconduct, then such party receiving such payment shall rebate such payment to the Borrower, together with interest thereon accruing at the Federal Funds Rate from the date such payment was made until the date such rebate is received by the Borrower (calculated for the actual number of days elapsed on the basis of a 365 day year). (b) If the Borrower is required to indemnify an Indemnified Party pursuant hereto and have provided evidence reasonably satisfactory to such Indemnified Party that the Borrower has the financial wherewithal to reimburse such Indemnified Party for any amount paid by such Indemnified Party with respect to such Indemnity Proceeding, such Indemnified Party shall not settle or compromise any such Indemnity Proceeding without the prior written consent of the Borrower (which consent shall not be unreasonably withheld or delayed). (c) If a claim is to be made by an Indemnified Party under this Section, the Indemnified Party shall give written notice to the Borrower promptly after the Indemnified Party receives actual notice of any Claims and Expenses incurred or instituted for which the indemnification is sought; provided, that, the -------- ---- failure to give such prompt notice shall not decrease the Claims and Expenses payable by the Borrower, except to the extent that such failure has caused the Borrower to forfeit any substantive right of a material nature. If requested by the Borrower in writing, and so long as (i) no Event of Default shall have occurred and be continuing and (ii) the Borrower has acknowledged in writing to the Indemnified Party that the Borrower shall be obligated under the terms of its indemnity hereunder in connection with such Indemnity Proceeding (subject to the exclusion of any losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Indemnified Party), the Borrower may, at its election, conduct the defense of any such Indemnified Proceeding to the extent such contest may be conducted in good faith on legally supported grounds. If any lawsuit or enforcement action is filed against any Indemnified Party entitled to the benefit of indemnity 67 under this Section, written notice thereof shall be given to the Borrower as soon as practicable (and in any event within 15 days after the service of the citation or summons). Notwithstanding the foregoing, the failure so to notify the Borrower as provided in this Section will not relieve the Borrower from liability hereunder. After such notice, the Borrower shall be entitled, if they so elect, to take control of the defense and investigation of such lawsuit or action and to employ and engage counsel of their own choice reasonably acceptable to the Indemnified Party to handle and defend the same, at the Borrower's cost, risk and expense; provided however, that the Borrower and its -------- ------- counsel shall proceed with diligence and in good faith with respect thereto. If (i) the engagement of such counsel by the Borrower would present a conflict of interest which would prevent such counsel from effectively defending such action on behalf of the Indemnified Party, (ii) the defendants in, or targets of, any such lawsuit or action include both the Indemnified Party and Borrower, and the Indemnified Party reasonably concludes that there may be legal defenses available to it that are different from or in addition to those available to the Borrower, (iii) the Borrower fails to assume the defense of the lawsuit or action or to employ counsel reasonably satisfactory to such Indemnified Party, in either case in a timely manner, or (iv) an Event of Default shall occur and be continuing, then such Indemnified Party may employ separate counsel to represent or defend it in any such action or proceeding and the Borrower will pay the fees and disbursements of such counsel; provided, however that each Indemnified Party shall, in connection with any matter covered by this Section which also involves other Indemnified Parties, use reasonable efforts to avoid unnecessary duplication of efforts by counsel for all indemnities. Should the Borrower be entitled to conduct the defense of any Indemnity Proceeding pursuant to the terms of this Section, the Indemnified Party shall cooperate (with all Claims and Expenses associated therewith to be paid by the Borrower) in all reasonable respects with the Borrower and such attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom; provided, however that the Indemnified Party may, at its own cost (except as set - -------- ------- forth in, and in accordance with, the foregoing sentence), participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. (d) The Administrative Agent, LC Issuer, Swing Line Lender and each Lender agree that in the event that any Indemnity Proceeding is asserted or threatened in writing or instituted against it or any other party entitled to indemnification hereunder, the Administrative Agent, LC Issuer, Swing Line Lender or such Lender shall promptly notify the Borrower thereof in writing and agree, to the extent appropriate, to consult with the Borrower with a view to minimizing the cost to the Borrower of its obligations under this Section; provided that the failure to so notify the Borrower will not relieve the Borrower from liability hereunder except to the extent such failure has caused the Borrower to forfeit any substantive right of a material nature. SECTION 9.5. Sharing of Setoffs. Each of the Lender (including the ------------------ Swing Line Lender) agrees that if it shall, by exercising any right of setoff or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Loans held by it which is greater than the proportion received by any other Lender in respect of the aggregate amount of all principal and interest owing with respect to the Loan held by such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Lenders owing to such other Lenders, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans held by the Lenders owing to such other Lenders 68 shall be shared by the Lenders pro rata; provided that (i) nothing in this -------- Section shall impair the right of any Lender to exercise any right of setoff or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Loans, and (ii) if all or any portion of such payment received by the purchasing Lender is thereafter recovered from such purchasing Lender, such purchase from each other Lender shall be rescinded and such other Lender shall repay to the purchasing Lender the purchase price of such participation to the extent of such recovery together with an amount equal to such other Lender's ratable share (according to the proportion of (x) the amount of such other Lender's required repayment to (y) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of setoff or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.6. Amendments and Waivers. ---------------------- (a) Except as otherwise specifically provided herein, any provision of this Agreement or any other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if the rights, commitments, or duties of the Administrative Agent, Swing Line Lender or LC Issuer are affected thereby, by the Administrative Agent, Swing Line Lender, or LC Issuer, as the case may be); provided that, no such amendment or waiver shall, unless signed by all Lenders, (i) change the Commitment or Swing Line Commitment of any Lender or Swing Line Lender or subject any Lender or Swing Line Lender to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan, Reimbursement Obligation, or any fees hereunder (other than fees payable under the Administrative Agent/Arranger Letter Agreement), (iii) extend the date fixed for any payment of principal of or interest on any Loan, Reimbursement Obligation, or any fees (other than fees payable under the Administrative Agent/Arranger Letter Agreement) hereunder, (iv) reduce the amount of principal, interest, Reimbursement Obligation, or fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Obligations, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement, (vii) reduce any obligation owed under or release any Subsidiary Guarantee (except as permitted under Section 5.4 or 6.9 in connection with the dissolution, sale or other disposition of a Subsidiary Guarantor) given to support payment of the Obligations, (viii) release all or any material portion of the collateral under any Pledge Agreement (except as permitted under Section 5.4 or 6.9 in connection with the dissolution, sale or other disposition of a First Tier Non-U.S. Operating Subsidiary), (ix) extend the Facility Termination Date or Maturity Date, or the expiry date of any Facility LC to a date after the Facility Termination Date, or (x) amend this Section 9.6(a). (b) The Borrower will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement unless each Lender 69 shall be informed thereof by the Borrower and shall be afforded an opportunity of considering the same and shall be supplied by the Borrower with both (i) reasonably sufficient information to enable it to make an informed decision with respect thereto, and (ii) substantially the same information as supplied by the Borrower to any other Lender. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to each Lender within two Business Days following the date on which the same shall have been executed and delivered by the requisite percentage of Lenders. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any Lender (in its capacity as such) as consideration for or as an inducement to the entering into by such Lender of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Lenders. SECTION 9.7. No Margin Stock Collateral. Each of the Lenders represents -------------------------- to the Administrative Agent, each of the other Lenders and the Borrower that it in good faith is not, directly or indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.8. Successors and Assigns. ---------------------- (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of the Administrative Agent, the Lenders and the LC Issuer. (b) Any Lender may at any time sell to one or more Persons (each a "Participant") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment hereunder or any other interest of such Lender hereunder, provided that such participations shall be in minimum amounts of $5,000,000. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan and Note for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. In no event shall a Lender that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Lender may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the extension of any date fixed for the payment of principal of or interest on the related Loan or Loans, (ii) the reduction of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related Loan or Loans, (iii) the reduction in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) facility fee is payable hereunder from the rate at which the Participant is entitled to receive interest or facility fee (as the case may be) in respect of such participation, or (iv) the reduction of any obligation owing under or the release of the Subsidiary Guarantee (except as permitted under Section 5.4 or 6.9(a) in connection with the dissolution, sale or other disposition of a Subsidiary Guarantor) given to support payment of the Loans. Each Lender selling a 70 participating interest in any Loan, Note, Commitment or other interest under this Agreement, shall, within 10 Business Days of such sale, provide the Borrower and the Administrative Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. The Borrower acknowledges and agrees that the benefits of Sections 2.19 through 2.22 shall continue in effect with respect to the full amount of each Lender's Loans and Commitment, notwithstanding its sale of participating interests therein as contemplated hereby. (c) Any Lender may at any time transfer and assign to one or more banks or financial institutions (each an "Assignee") all, or a proportionate part of all, of its Outstanding Credit Exposure or other rights and obligations under this Agreement, the Notes, and any other Loan Documents, and such Assignee shall assume all such Outstanding Credit Exposure or other rights and obligations, pursuant to an Assignment Agreement in the form attached hereto as Exhibit E, --------- executed by such Assignee, such transferor Lender and the Administrative Agent (and, in the case of an Assignee that is not then a Lender, by the Borrower); provided that (i) no interest may be sold pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent portions of the transferor Lender's Commitment and obligations in respect of Facility LCs and Swing Line Loans, (ii) the amount of the Commitment of the transferor Lender subject to such assignment (determined as of the effective date of the assignment) shall be equal to $5,000,000 (or any larger multiple of $1,000,000) or, if less, the remaining amount of the transferor Lender's Commitment as of the date of such assignment, and (iii) so long as no Event of Default has occurred and is continuing, no interest may be sold by a Lender pursuant to this paragraph (c) to any Assignee that is not then a Lender, or an Affiliate of a Lender, without the prior written consent of the Borrower and the Administrative Agent (which consent of the Borrower and the Administrative Agent shall not be unreasonably withheld or delayed). Upon (A) execution of the Assignment Agreement by such transferor Lender, such Assignee, the Administrative Agent and (if applicable) the Borrower, (B) delivery of a Notice of Assignment and an executed copy of the Assignment Agreement to the Borrower and the Administrative Agent, (C) payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, and (D) payment of a processing and recordation fee of $3,500 to the Administrative Agent, such Assignee shall, on the "Effective Date" as provided in the Assignment Agreement, for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Lenders, the LC Issuer or the Administrative Agent shall be required. Upon the consummation of any transfer to an Assignee pursuant to this paragraph (c), the transferor Lender, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to such Assignee and, if necessary, a new Note shall be issued to the transferor Lender. (d) Subject to the provisions of Section 9.9, the Borrower authorizes each Lender to disclose to any Participant, Assignee or other transferee (each a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Borrower which has been delivered to such Lender by the Borrower pursuant to this 71 Agreement or which has been delivered to such Lender by the Borrower in connection with such Lender's credit evaluation prior to entering into this Agreement. (e) Transferees shall be entitled to receive a greater payment under Section 2.19 or 2.20 than the transferor Lender would have been entitled to receive with respect to the rights transferred, only if such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 2.23 requiring such Lender to designate a different Lending Installation under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Anything in this Section 9.8 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of the Loans and/or other Obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans and/or other Obligations made by the Borrower to the assigning and/or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Loans and/or other Obligations to the extent of such payment. No such assignment shall release the assigning and/or pledging Lender from its obligations hereunder. SECTION 9.9. Confidentiality. Each Lender agrees to exercise its --------------- reasonable efforts and in any event not less than the same degree of care as it uses to maintain its own confidential information in maintaining the confidentiality of any information delivered or made available by the Borrower to it which is clearly indicated to be confidential information from any one other than persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided, however that nothing herein shall prevent any Lender from disclosing such information (i) to any other Lender or an affiliate of any Lender, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Lender, (iv) which has been publicly disclosed by means which are not violative of this Section 9.9, (v) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Lender or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any right, power of remedy hereunder or under any of the other Loan Documents, (vii) to such Lender's legal counsel and independent auditors and (viii) to any actual or proposed Participant, Assignee or other Transferee of all or part of its rights hereunder which has agreed in writing (x) to be bound by the provisions of this Section 9.9 and (y) that the Borrower is a third party beneficiary of such agreement, and (z) to return all copies of the confidential information to the Administrative Agent if the proposed assignment or participation is not consummated. SECTION 9.10. Representation by Lenders. Each Lender hereby represents ------------------------- that it is a commercial lender or financial institution which makes Loans and other Credit Extensions in the ordinary course of its business and that it will make its Loans and other Credit Extensions hereunder for its own account in the ordinary course of such business; provided, however that, 72 subject to Section 9.8, the disposition of the Loan or Loans held by that Lender shall at all times be within its exclusive control. SECTION 9.11. Obligations Several. The obligations of each Lender, Swing ------------------- Line Lender and LC Issuer hereunder are several, and none of them shall be responsible for the obligations or commitment of any other party hereunder. Nothing contained in this Agreement and no action taken by the Lenders, Swing Line Lender and LC Issuer pursuant hereto shall be deemed to constitute any of them to be a partnership, an, association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender, Swing Line Lender and LC Issuer shall be a separate and independent debt, and each Lender, Swing Line Lender and LC Issuer shall be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other of them to be joined as an additional party in any proceeding for such purpose. SECTION 9.12. Georgia Law. This Agreement and each Note shall be ----------- construed in accordance with and governed by the law of the State of Georgia without regard to the effect of conflicts of laws. SECTION 9.13. Interpretation. No provision of this Agreement or any of -------------- the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. SECTION 9.14. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. THE BORROWER --------------------------------------------- (A) AND EACH OF THE LENDERS, SWING LINE LENDER, LC ISSUER, AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (B) SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF GEORGIA, THE COURTS THEREOF AND THE UNITED STATES DISTRICT COURTS SITTING THEREIN, FOR THE ENFORCEMENT OF THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, AND (C) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY JURISDICTION TO OBJECT ON ANY BASIS (INCLUDING, WITHOUT LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN THE STATE OF GEORGIA FOR THE PURPOSE OF LITIGATION TO ENFORCE THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS. NOTHING HEREIN CONTAINED, HOWEVER, SHALL PREVENT THE ADMINISTRATIVE AGENT, THE LENDERS, THE SWING LINE LENDER OR LC ISSUER FROM BRINGING ANY ACTION OR EXERCISING ANY RIGHTS AGAINST THE BORROWER PERSONALLY, AND AGAINST ANY ASSETS OF THE BORROWER, WITHIN ANY OTHER STATE OR JURISDICTION. SECTION 9.15. Counterparts. This Agreement may be signed in any number of ------------ counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 73 SECTION 9.16. Severability. In case any one or more of the provisions ------------ contained in this Agreement, the Notes, Subsidiary Guarantee, Pledge Agreement(s), or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. SECTION 9.17. Interest. In no event shall the amount of interest, and all -------- charges, amounts or fees contracted for, charged or collected pursuant to this Agreement, the Notes or the other Loan Documents and deemed to be interest under applicable law (collectively, "Interest") exceed the highest rate of interest allowed by applicable law (the "Maximum Rate"), and in the event any such payment is inadvertently received by any Lender, then the excess sum (the "Excess") shall be credited as a payment of principal, unless the Borrower shall notify such Lender in writing that it elects to have the Excess returned forthwith. It is the express intent hereof that the Borrower not pay and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. The right to accelerate maturity of any of the Loans and other Obligations does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the Administrative Agent and the Lenders do not intend to collect any unearned interest in the event of any such acceleration. All monies paid to the Administrative Agent or the Lenders hereunder or under any of the Notes or the other Loan Documents, whether at maturity or by prepayment, shall be subject to rebate of unearned interest as and to the extent required by applicable law. By the execution of this Agreement, the Borrower covenants, to the fullest extent permitted by law, that (i) the credit or return of any Excess shall constitute the acceptance by the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any other remedy, legal or equitable, against the Administrative Agent or any Lender, based in whole or in part upon contracting for charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by the Administrative Agent or any Lender, all interest at any time contracted for, charged or received from the Borrower in connection with this Agreement, the Notes or any of the other Loan Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Commitments. The Borrower, the Administrative Agent and each Lender shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into each Note and each of the other Loan Documents (whether or not any provision of this Section is referred to therein). All such Loan Documents and communications relating to any Interest owed by the Borrower and all figures set forth therein shall, for the sole purpose of computing the extent of obligations hereunder and under the Notes and the other Loan Documents be automatically recomputed by the Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section. SECTION 9.18. Replacement of Lenders. If (i) any Lender demands payment ---------------------- of amounts pursuant to Sections 2.19, 2.20 or 2.24 that exceed comparable amounts being demanded by the other Lenders in respect of the circumstances described in either such Section, 74 or (ii) any Lender sends the Borrower a notice of violation of applicable law, rule, regulation, or directive pursuant to Section 2.21 and such notice is not sent by the other Lenders, then in any such case the Borrower may, in its sole discretion and at its sole expense, on 10 Business Days' prior notice to the Administrative Agent and the affected Lender, cause such Lender to (and such Lender shall) assign, pursuant to Section 9.8(c), all of its rights and obligations under this Agreement to a financial institution designated by the Borrower that is willing to become a Lender, such assignment to be made upon payment to the assigning Lender of an amount equal to the outstanding principal amount of the Loans payable to such Lender plus all accrued but unpaid interest on such Loans, all accrued but unpaid fees with respect to such Lender's Commitment, the assumption of such Lender's obligations in respect of all LC Obligations and Swing Line Loans, and all other amounts payable to such Lender under this Agreement. Without limiting the foregoing, the Borrower may in lieu of finding a replacement Lender for the affected Lender, elect to reduce the Aggregate Commitment by the amount of the Commitment of such affected Lender. SECTION 9.19. LIMITATION OF DAMAGES. NEITHER THE ADMINISTRATIVE AGENT NOR --------------------- ANY OF THE LENDERS SHALL BE RESPONSIBLE OR LIABLE TO ANY PERSON OR ENTITY FOR ANY PUNITIVE OR EXEMPLARY DAMAGES WHICH MAY BE ALLEGED AGAINST THE ADMINISTRATIVE AGENT IN ITS AGENCY CAPACITY OR AGAINST ANY OF THE LENDERS AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 75 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. NATIONAL DATA CORPORATION Address for Notices: By: /s/ Randolph L.M. Hutto - ------------------- ------------------------------- Name: Randolph L.M. Hutto National Data Plaza Title: Chief Financial Officer Atlanta, Georgia 30329-2010 Attention: Patricia Wilson, Esq. Telecopier No.: [404/728-2990] 76 BANK ONE, NA, as Administrative Agent, Lender, LC Issuer and Swing Line Lender Address for Notices By: /s/ Jennifer Schmoll - ------------------- ------------------------------ Name: Jennifer Schmoll Bank One Plaza Title: Customer Service Officer Mail Suite 0324, Tenth Floor Chicago, Illinois 60670 Attention: David McNeela Telecopier No.: 312/732-2991 Lending Installation: -------------------- Bank One Plaza Chicago, Illinois 60670 SYNDICATED LOAN COMMITMENT: -------------------------- $25,000,000 SWING LINE COMMITMENT: --------------------- $5,000,000 77 SUNTRUST BANK, as Lender Address for Notices By: /s/ Robert Massenburg - ------------------- ------------------------------ Name: Robert Massenburg SunTrust Plaza Title: Director 303 Peachtree Street, NE 4th Floor, MC-____ Atlanta, GA 30308 Attention: Robert Massenburg Telecopier No.: 404/588-7497 Lending Installation: -------------------- SunTrust Plaza 303 Peachtree Street, N.E. Atlanta, GA 30308 SYNDICATED LOAN COMMITMENT: -------------------------- $15,000,000 78 WACHOVIA BANK, N.A., as Lender Address for Notices By: /s/ Karen H. McClain - ------------------- ------------------------------- Name: Karen H. McClain 191 Peachtree Street Title: Senior Vice President 29th Floor Atlanta, GA 30303 Attention: Karen McClain Telecopier No.: 404/332-4048 Lending Installation: -------------------- Wachovia Bank, N.A. 191 Peachtree Street Atlanta, GA 30303 SYNDICATED LOAN COMMITMENT: -------------------------- $10,000,000 79 EX-10.XI 6 dex10xi.txt AMENDMENT #1 TO CREDIT AGREEMENT Exhibit 10(xi) CONFIDENTIAL TREATMENT REQUESTED -------------------------------- Confidential Portions of This Agreement Which Have Been Redacted Are Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The United States Securities and Exchange Commission. AMENDMENT NO. 1 TO CREDIT AGREEMENT ----------------------------------- THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Amendment") dated as of May --------- 22, 2001, by and among NATIONAL DATA CORPORATION, a Delaware corporation, as Borrower, the banks and other financial institutions listed on the signature pages hereof, as Lenders, and BANK ONE, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent, Swing Line Lender and LC Issuer. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Borrower, the Lenders, and the Administrative Agent are parties to a certain Credit Agreement dated as of January 31, 2001 (the "Credit Agreement"; capitalized terms used in this Amendment without definition that are defined in the Credit Agreement shall have the meanings in this Amendment as specified for such capitalized terms in the Credit Agreement); WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in certain respects as set forth in this Amendment; NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: SECTION 1. Amendments to Credit Agreement. Subject to the satisfaction of ------------------------------ the conditions precedent set forth in Section 2 hereof, and effective as of the Effective Date (as hereinafter defined), the Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by adding the new defined terms "Initial MedUnite Assets", "Initial MedUnite Transaction", ----------------------- ---------------------------- "MedUnite", "MedUnite Transactions" and "Subsequent MedUnite Transactions" and - --------- --------------------- -------------------------------- accompanying definitions, in appropriate alphabetical order, as follows: "Initial MedUnite Assets" means those assets to be transferred to ----------------------- MedUnite pursuant to the Initial MedUnite Transaction, such assets to be comprised of tangible assets having an aggregate book value of approximately [***] (in each case as reflected on the Borrower's March 31, 2001 pro forma financial statements furnished to the Lenders), all of which assets are used solely in connection with the Borrower's physician real- time and batch clearinghouse network business based in Norcross, Georgia, and include the Norcross computer network data center, and contracts with payers, providers and EDI clearinghouses. [***] - CONFIDENTIAL TREATMENT REQUESTED "Initial MedUnite Transaction" means the transfer and assignment by ---------------------------- Borrower to MedUnite of the Initial MedUnite Assets, together with contributed liabilities of the Borrower of approximately [***] (as reflected on the Borrower's March 31, 2001 pro forma financial statements furnished to the Lenders) to be assumed by MedUnite, in exchange for common stock of MedUnite representing 17.9% of the total equity of MedUnite. "MedUnite" means MedUnite Inc., a Delaware corporation. -------- "MedUnite Transactions" means, collectively, the Initial MedUnite --------------------- Transaction and any Subsequent MedUnite Transactions. "Subsequent MedUnite Transactions" means one or more cash Investments -------------------------------- made by the Borrower in MedUnite, subsequent to the Initial MedUnite Transaction, in exchange for common stock of MedUnite in an aggregate amount for all such cash Investments not to exceed [***]. (b) Section 6.6(a) of the Credit Agreement is hereby amended by deleting clauses (iii) and (vi) of said Section 6.6(a) in their entirety and substituting in lieu thereof the following clauses (iii) and (vi): (iii) Investment in MedUnite pursuant to the MedUnite Transactions and any other capital contributions of assets expressly permitted by Section 6.9; . . . . (vi) Other Investments not described in the preceding clauses (i) through (iv) made in an aggregate amount during any period of four consecutive Fiscal Quarters (excluding Fiscal Quarters ending on or before November 30, 2000) not to exceed $10,000,000 provided that no such Investments pursuant to this clause (vi) shall be made in respect of MedUnite. (c) Section 6.9 of the Credit Agreement is hereby amended by deleting clause (D) of said Section 6.9 in its entirety and substituting in lieu thereof the following clause (D): (D) so long as no Default or Event of Default shall be in existence either immediately prior to or following any asset disposition, the Borrower and its respective Subsidiaries may effect (x) the MedUnite Transactions, and (y) any other Asset Sale so long as the value of the assets sold (measured at the higher of book value or the total sale price for such assets) pursuant to all such other Asset Sales during any period of four (4) consecutive Fiscal Quarters (excluding Fiscal Quarters ending on or before November 30, 2000) does not exceed $25,000,000, and SECTION 2. Conditions to Effectiveness of Amendment. This Amendment ---------------------------------------- shall become effective on the first day when the Administrative Agent shall have received all of the following: (i) counterparts of this Amendment as executed on behalf of Borrower and the Lenders, together with the Acknowledgment and Agreement of Subsidiary Guarantors as executed on behalf of the Subsidiary Guarantors, and (ii) payment to the Administrative Agent, -2- for the account of each Lender, of an amendment fee equal to one-tenth of one percent (0.10%) of each such Lender's Commitment. Such date shall be the "Amendment No. 1 Effective Date" for purposes of this Amendment. - -------------------------------- SECTION 3. Status of Obligations. Borrower hereby confirms and --------------------- agrees that all Loans and all other Obligations outstanding under the Credit Agreement and the other Loan Documents as of the date hereof were duly and validly created and incurred by Borrower thereunder, that all such outstanding amounts are owed in accordance with the terms of the Credit Agreement and other Loan Documents, and that there are no rights of offset, defense, counterclaim, claim or objection in favor of Borrower arising out of or with respect to any of the Loans or other Obligations of Borrower to the Administrative Agent or the Lenders, and any such rights of offset, defense, counterclaim, claims or objections have been and are hereby waived and released by Borrower. SECTION 4. Representations and Warranties of Borrower. Borrower, ------------------------------------------ without limiting the representations and warranties provided in the Credit Agreement, represents and warrants to the Lenders and the Administrative Agent as follows: 4.1 The execution, delivery and performance by Borrower of this Amendment are within Borrower's corporate powers, have been duly authorized by all necessary corporate action (including any necessary shareholder action) and do not and will not (a) violate any provision of any law, rule or regulation, any judgment, order or ruling of any court or governmental agency, the certificate of incorporation or by-laws of Borrower, or any indenture, agreement or other instrument to which Borrower is a party or by which Borrower or any of its properties is bound or (b) be in conflict with, result in a breach of, or constitute with notice or lapse of time or both a default under any such indenture, agreement or other instrument. 4.2 This Amendment constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms. 4.3 After giving effect to this Amendment, no Default or Event of Default has occurred and is continuing. 4.4 The representations and warranties of Borrower contained in the Credit Agreement are true and accurate on and as of the date of this Amendment, except for changes expressly permitted under the terms of the Credit Agreement and except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and accurate as of such earlier date). 4.5 Since February 28, 2001, there have been no events, acts, conditions or occurrences of whatever nature, singly or in the aggregate, which have had, or could reasonably be expected to have, a Material Adverse Effect. SECTION 5. Survival. Each of the foregoing representations and -------- warranties shall be made at and as of the date of this Amendment and shall be deemed to have been made as of the Amendment No. 1 Effective Date. Each of the foregoing representations and warranties shall constitute a representation and warranty of Borrower under the Credit Agreement, and it shall be an Event of Default if any such representation and warranty shall prove to have been -3- incorrect or false in any material respect at the time when made or deemed to have been made. Each of the foregoing representations and warranties shall survive and not be waived by the execution and delivery of this Amendment or any investigation by the Lenders or the Administrative Agent. SECTION 6. Ratification of Credit Agreement and Loan Documents. --------------------------------------------------- Except as expressly amended herein, all terms, covenants and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect, and the parties hereto do expressly ratify and confirm the Credit Agreement (as amended herein) and the other Loan Documents. All future references to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby. SECTION 7. Indemnity. In consideration of the amendments agreed to ---------- by the Lenders pursuant to this Amendment, Borrower hereby indemnifies the Administrative Agent, and each Lender, and their respective officers, partners, directors, employees, representatives and agents from, and hold each of them harmless against, any and all costs, losses, liabilities, claims, damages or expenses incurred by any of them (whether or not any of them is designated a party thereto) (an "Indemnitee") arising out of or by reason of any investigation, litigation or other proceeding related to this Amendment, the Credit Agreement or any other Loan Documents or any actual or proposed use of the proceeds of any of the Loans, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, Borrower shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee's gross negligence or willful misconduct. SECTION 8. No Waiver, Etc. Borrower hereby agrees that nothing --------------- herein shall constitute a waiver by the Lenders of any Default or Event of Default, whether known or unknown, which may exist under the Credit Agreement. Borrower hereby further agrees that no action, inaction or agreement by the Lenders, including without limitation, any indulgence, waiver, consent or agreement altering the provisions of the Credit Agreement which may have occurred with respect to the non-performance of any obligation under the terms of the Credit Agreement or any portion thereof, or any other matter relating to the Credit Agreement, shall require or imply any future indulgence, waiver, or agreement by the Lenders. SECTION 9. Binding Nature. This Amendment shall be binding upon and -------------- inure to the benefit of the parties hereto, their respective successors, successors-in-titles, and assigns. SECTION 10. Costs and Expenses. Borrower shall be responsible for ------------------ the costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including, without limitation, the fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. SECTION 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. -4- SECTION 12. Entire Understanding. This Amendment sets forth the -------------------- entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto. SECTION 13. Counterparts. This Amendment may be executed in any ------------ number of counterparts and by the different parties hereto in separate counterparts and may be delivered by telecopier. Each counterpart so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same instrument. -5- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their duly authorized officers as of the day and year first above written. NATIONAL DATA CORPORATION By: /s/ Patricia A. Wilson ---------------------------------- Name: Patricia A. Wilson Title: General Counsel -6- BANK ONE, NA, as Administrative Agent, Lender, LC Issuer and Swing Line Lender By: /s/ Jennifer Schmoll -------------------------------- Name: Jennifer Schmoll Title: Customer Service Officer [Signature page to Amendment No. 1] SUNTRUST BANK, as Lender By: /s/ Robert Massenburg ------------------------------- Name: Robert Massenburg Title: Director [Signature page to Amendment No. 1] WACHOVIA BANK, N.A. as Lender By: /s/ Karen H. McClain ------------------------------- Name: Karen H. McClain Title: Senior Vice President [Signature page to Amendment No. 1] ACKNOWLEDGMENT AND AGREEMENT OF SUBSIDIARY GUARANTORS ----------------------------------------------------- Reference is hereby made to the within and foregoing Amendment No. 1 to Credit Agreement, dated as of May 22, 2001, by and among NATIONAL DATA CORPORATION, a Delaware corporation ("Borrower"), BANK ONE, NA, a national banking association, as Administrative Agent, Lender, Swing Line Lender and LC Issuer, SUNTRUST BANK, a Georgia banking corporation, as Lender, and WACHOVIA BANK, N.A., a national banking association, as Lender ("Amendment No. 1"; capitalized terms used herein that are defined in Amendment No. 1 or in the "Credit Agreement" as defined in Amendment No. 1 being used herein with the respective meanings assigned to such capitalized terms in Amendment No. 1 or the Credit Agreement, as the case may be). Each of the undersigned, which is a Subsidiary Guarantor under the terms of the Subsidiary Guarantee as provided in the Credit Agreement, hereby acknowledges and agrees that (i) the undersigned has consented to the foregoing Amendment No. 1, (ii) the Subsidiary Guarantee and the other Loan Documents to which each of the undersigned is a party shall remain in full force and effect on and after the date hereof, and (iii) each of the undersigned hereby reaffirms and restates its obligations and liabilities under the Subsidiary Guarantee and the other Loan Documents to which each of the undersigned is a party after giving effect to Amendment No. 1. This Acknowledgment and Agreement of Subsidiary Guarantors made and delivered as of May 22, 2001. GUARANTORS: ---------- NDC HEALTH INFORMATION SERVICES (ARIZONA) INC., as a Subsidiary Guarantor By: ________________________________ Name: Title: SOURCE INFORMATICS INC., as a Subsidiary Guarantor By: ________________________________ Name: Title: -10- THE COMPUTER PLACE, INC., as a Subsidiary Guarantor By: ________________________________ Name: Title: -11- EX-10.XII 7 dex10xii.txt AMENDMENT #2 TO CREDIT AGREEMENT Exhibit 10(xii) CONFIDENTIAL TREATMENT REQUESTED Confidential Portions of This Amendment Which Have Been Redacted Are Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately With The United States Securities and Exchange Commission. AMENDMENT NO. 2 TO CREDIT AGREEMENT ----------------------------------- THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Amendment") dated as --------- of July 25, 2001, by and among NATIONAL DATA CORPORATION, a Delaware corporation, as Borrower, the banks and other financial institutions listed on the signature pages hereof, as Lenders, and BANK ONE, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent, Swing Line Lender and LC Issuer. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Borrower, the Lenders, and the Administrative Agent are parties to a certain Credit Agreement dated as of January 31, 2001, as amended by a certain Amendment No. 1 to Credit Agreement dated as of May 22, 2001 (as so amended, the "Credit Agreement"; capitalized terms used in this Amendment without definition that are defined in the Credit Agreement shall have the meanings in this Amendment as specified for such capitalized terms in the Credit Agreement); WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in certain respects as set forth in this Amendment; NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: SECTION 1. Amendments to Credit Agreement. Subject to the ------------------------------- satisfaction of the conditions precedent set forth in Section 2 hereof, and effective as of the Effective Date (as hereinafter defined), Section 1.1 of the Credit Agreement is hereby amended by deleting the defined terms "Initial ------- MedUnite Assets", "Initial MedUnite Transaction", and "Subsequent MedUnite - --------------- ---------------------------- ------------------- Transactions" and accompanying definitions, and substituting in lieu thereof the - ------------ following defined terms and accompanying definitions: "Initial MedUnite Assets" means those assets to be transferred to ----------------------- MedUnite pursuant to the Initial MedUnite Transaction, such assets to be comprised of tangible assets having an aggregate book value of approximately [***] (in each case as reflected on the Borrower's March 31, 2001 pro forma financial statements furnished to the Lenders), all of which assets are used in connection with the Borrower's physician real-time and batch [***] - CONFIDENTIAL TREATMENT REQUESTED clearinghouse network business based in Norcross, Georgia, and Richmond, Virginia, and include the Norcross computer network data center, and contracts with payers, providers and EDI clearinghouses. "Initial MedUnite Transaction" means the transfer and assignment by ---------------------------- Borrower to MedUnite of the Initial MedUnite Assets, together with contributed liabilities of the Borrower of approximately [***] (as reflected on the Borrower's March 31, 2001 pro forma financial statements furnished to the Lenders) to be assumed by MedUnite, in exchange for capital stock of MedUnite representing 17.9% of the total equity of MedUnite. "Subsequent MedUnite Transactions" means one or more cash Investments -------------------------------- made by the Borrower in MedUnite, subsequent to the Initial MedUnite Transaction, in exchange for capital stock of MedUnite in an aggregate amount for all such cash Investments not to exceed [***]. SECTION 2. Conditions to Effectiveness of Amendment. This Amendment ---------------------------------------- shall become effective on the first day when the Administrative Agent shall have received counterparts of this Amendment as executed on behalf of Borrower and the Lenders, together with the Acknowledgment and Agreement of Subsidiary Guarantors as executed on behalf of the Subsidiary Guarantors. Such date shall be the "Amendment No. 2 Effective Date" for purposes of this Amendment. ------------------------------ SECTION 3. Status of Obligations. Borrower hereby confirms and --------------------- agrees that all Loans and all other Obligations outstanding under the Credit Agreement and the other Loan Documents as of the date hereof were duly and validly created and incurred by Borrower thereunder, that all such outstanding amounts are owed in accordance with the terms of the Credit Agreement and other Loan Documents, and that there are no rights of offset, defense, counterclaim, claim or objection in favor of Borrower arising out of or with respect to any of the Loans or other Obligations of Borrower to the Administrative Agent or the Lenders, and any such rights of offset, defense, counterclaim, claims or objections have been and are hereby waived and released by Borrower. SECTION 4. Representations and Warranties of Borrower. Borrower, ------------------------------------------ without limiting the representations and warranties provided in the Credit Agreement, represents and warrants to the Lenders and the Administrative Agent as follows: 4.1 The execution, delivery and performance by Borrower of this Amendment are within Borrower's corporate powers, have been duly authorized by all necessary corporate action (including any necessary shareholder action) and do not and will not (a) violate any provision of any law, rule or regulation, any judgment, order or ruling of any court or governmental agency, the certificate of incorporation or by-laws of Borrower, or any indenture, agreement or other instrument to which Borrower is a party or by which Borrower or any of its properties is bound or (b) be in conflict with, result in a breach of, or constitute with notice or lapse of time or both a default under any such indenture, agreement or other instrument. 4.2 This Amendment constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms. 4.3 After giving effect to this Amendment, no Default or Event of Default has occurred and is continuing. 4.4 The representations and warranties of Borrower contained in the Credit Agreement are true and accurate on and as of the date of this Amendment, except for changes expressly permitted under the terms of the Credit Agreement and except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were true and accurate as of such earlier date). 4.5 Since February 28, 2001, there have been no events, acts, conditions or occurrences of whatever nature, singly or in the aggregate, which have had, or could reasonably be expected to have, a Material Adverse Effect. SECTION 5. Survival. Each of the foregoing representations and -------- warranties shall be made at and as of the date of this Amendment and shall be deemed to have been made as of the Amendment No. 2 Effective Date. Each of the ----- foregoing representations and warranties shall constitute a representation and warranty of Borrower under the Credit Agreement, and it shall be an Event of Default if any such representation and warranty shall prove to have been incorrect or false in any material respect at the time when made or deemed to have been made. Each of the foregoing representations and warranties shall survive and not be waived by the execution and delivery of this Amendment or any investigation by the Lenders or the Administrative Agent. SECTION 6. Ratification of Credit Agreement and Loan Documents. --------------------------------------------------- Except as expressly amended herein, all terms, covenants and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect, and the parties hereto do expressly ratify and confirm the Credit Agreement (as amended herein) and the other Loan Documents. All future references to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby. SECTION 7. Indemnity. In consideration of the amendments agreed to ---------- by the Lenders pursuant to this Amendment, Borrower hereby indemnifies the Administrative Agent, and each Lender, and their respective officers, partners, directors, employees, representatives and agents from, and hold each of them harmless against, any and all costs, losses, liabilities, claims, damages or expenses incurred by any of them (whether or not any of them is designated a party thereto) (an "Indemnitee") arising out of or by reason of any investigation, litigation or other proceeding related to this Amendment, the Credit Agreement or any other Loan Documents or any actual or proposed use of the proceeds of any of the Loans, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, Borrower shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee's gross negligence or willful misconduct. SECTION 8. No Waiver, Etc. Borrower hereby agrees that nothing --------------- herein shall constitute a waiver by the Lenders of any Default or Event of Default, whether known or unknown, which may exist under the Credit Agreement. Borrower hereby further agrees that no action, inaction or agreement by the Lenders, including without limitation, any indulgence, waiver, consent or agreement altering the provisions of the Credit Agreement which may have occurred with respect to the non-performance of any obligation under the terms of the Credit Agreement or any portion thereof, or any other matter relating to the Credit Agreement, shall require or imply any future indulgence, waiver, or agreement by the Lenders. SECTION 9. Binding Nature. This Amendment shall be binding upon and -------------- inure to the benefit of the parties hereto, their respective successors, successors-in-titles, and assigns. SECTION 10. Costs and Expenses. Borrower shall be responsible for ------------------ the costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including, without limitation, the fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. SECTION 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. SECTION 12. Entire Understanding. This Amendment sets forth the -------------------- entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto. SECTION 13. Counterparts. This Amendment may be executed in any ------------ number of counterparts and by the different parties hereto in separate counterparts and may be delivered by telecopier. Each counterpart so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their duly authorized officers as of the day and year first above written. NATIONAL DATA CORPORATION By: /s/ Patricia A. Wilson ------------------------- Name: Patricia A. Wilson Title: General Counsel BANK ONE, NA, as Administrative Agent, Lender, LC Issuer and Swing Line Lender By: /s/ Jennifer Schmoll -------------------------------- Name: Jennifer Schmoll Title: Customer Service Officer SUNTRUST BANK, as Lender By: /s/ Robert Massenburg ----------------------------- Name: Robert Massenburg Title: Director WACHOVIA BANK, N.A. as Lender By: /s/ Karen H. McClain ---------------------------- Name: Karen H. McClain Title: Senior Vice President ACKNOWLEDGMENT AND AGREEMENT OF SUBSIDIARY GUARANTORS ----------------------------------------------------- Reference is hereby made to the within and foregoing Amendment No. 2 to Credit Agreement, dated as of July 25, 2001, by and among NATIONAL DATA CORPORATION, a Delaware corporation ("Borrower"), BANK ONE, NA, a national banking association, as Administrative Agent, Lender, Swing Line Lender and LC Issuer, SUNTRUST BANK, a Georgia banking corporation, as Lender, and WACHOVIA BANK, N.A., a national banking association, as Lender ("Amendment No. 2"; capitalized terms used herein that are defined in Amendment No. 2 or in the "Credit Agreement" as defined in Amendment No. 2 being used herein with the respective meanings assigned to such capitalized terms in Amendment No. 2 or the Credit Agreement, as the case may be). Each of the undersigned, which is a Subsidiary Guarantor under the terms of the Subsidiary Guarantee as provided in the Credit Agreement, hereby acknowledges and agrees that (i) the undersigned has consented to the foregoing Amendment No. 2, (ii) the Subsidiary Guarantee and the other Loan Documents to which each of the undersigned is a party shall remain in full force and effect on and after the date hereof, and (iii) each of the undersigned hereby reaffirms and restates its obligations and liabilities under the Subsidiary Guarantee and the other Loan Documents to which each of the undersigned is a party after giving effect to Amendment No. 2. This Acknowledgment and Agreement of Subsidiary Guarantors made and delivered as of July 25, 2001. GUARANTORS: ---------- NDC HEALTH INFORMATION SERVICES (ARIZONA) INC., as a Subsidiary Guarantor By: ________________________________ Name: Title: SOURCE INFORMATICS INC., as a Subsidiary Guarantor By: ________________________________ Name: Title: THE COMPUTER PLACE, INC., as a Subsidiary Guarantor By:_____________________________ Name: Title: EX-10.XIII 8 dex10xiii.txt PROMISSORY NOTE Exhibit 10(xiii) PROMISSORY NOTE $1,128,373.24 Date: April 3, 2001 FOR VALUE RECEIVED, the undersigned, MRY Partners, L.P., a Georgia limited partnership (the "Borrower"), hereby unconditionally promises to pay to the order of National Data Corporation (hereafter, together with any holder hereof, the "Holder") at the offices of the Holder located at National Data Plaza, Atlanta, Georgia 30329, or at such other place as the Holder may designate in writing to the Borrower, in lawful money of the United States of America, in immediately available funds, the principal sum of ONE MILLION ONE HUNDRED TWENTY - - EIGHT THOUSAND THREE HUNDRED SEVENTY-THREE AND 24/100 DOLLARS ($1,128,373.24), together with interest on the principal balance from time to time outstanding hereunder (computed on the basis of a 360-day year for the actual number of days elapsed) from the date hereof until paid in full at a per annum rate equal to 4.63% in simple interest terms. The principal balance shall be payable in full on July 28, 2002. Accrued interest shall be payable annually on each April 3 during the term of this Note. Accrued interest shall also be due and payable on any date on which the principal balance is due (whether by acceleration, maturity or otherwise) other than any date on which a Collateral Sale Mandatory Prepayment is due. The Borrower shall prepay a portion of the outstanding principal amount owing under this Note immediately following the settlement date with respect to the sale, transfer or other disposition of a portion (but not all) of the July 28, 1992 Option Securities (as such term is defined Schedule 1 to that certain Stock Pledge Agreement dated as of the date hereof between the Borrower and the Holder). Such prepayment shall be in an amount equal to the product of (a) a fraction, (i) the numerator of which is the number of shares of such July 28, 1992 Option Securities so sold, transferred or disposed of, and (ii) the denominator of which is the total number of shares of such July 28, 1992 Option Securities owned by the Borrower immediately prior to such sale, transfer or disposition, multiplied by (b) the unpaid principal amount of this note as of such date (the "Collateral Sale Mandatory Prepayment"). Upon a sale, transfer or other disposition of all of the July 28, 1992 Option Securities, the entire principal balance hereunder and any accrued interest thereon shall become due and payable immediately following the settlement date with respect to the sale, transfer or other disposition. Interest shall accrue on any amount past due hereunder at a per annum rate equal to 2.0% in excess of the interest rate otherwise payable hereunder. All such interest shall be due and payable on demand. In no event shall the amount of interest due and payable under this Note exceed the maximum rate of interest allowed by applicable law and, in the event any such payment is inadvertently paid by the Borrower or inadvertently received by the Holder, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Holder in writing that the Borrower elects to have such excess sum returned to it forthwith. It is the express intent of the parties hereto that the Borrower not pay and the Holder not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by the Borrower under applicable law. THE BORROWER, AND THE HOLDER BY ACCEPTING THIS NOTE, EACH AGREES AND STIPULATES THAT THE ONLY CHARGE IMPOSED UPON THE BORROWER FOR THE USE OF MONEY IN CONNECTION WITH THIS NOTE IS AND SHALL BE THE INTEREST DESCRIBED IN THE FIRST PARAGRAPH HEREOF, AND FURTHER AGREES AND STIPULATES THAT ALL OTHER CHARGES IMPOSED BY THE HOLDER ON THE BORROWER IN CONNECTION WITH THIS NOTE, INCLUDING WITHOUT LIMITATION, ALL DEFAULT CHARGES, LATE CHARGES AND ATTORNEYS' FEES, ARE CHARGES MADE TO COMPENSATE THE HOLDER FOR ADMINISTRATIVE SERVICES AND COSTS OR LOSSES INCURRED, AND TO BE INCURRED, BY THE HOLDER IN CONNECTION WITH THIS NOTE AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF MONEY PURSUANT TO OFFICIAL CODE OF GEORGIA ANNOTATED SECTION 7-4-2 OR SECTION 7-4-18. ALL CHARGES OTHER THAN CHARGES FOR THE USE OF MONEY SHALL BE FULLY EARNED AND NONREFUNDABLE WHEN DUE. Each of the following events shall constitute an "Event of Default" under this Note: (i) failure of the Borrower to pay any principal, interest or other amount due hereunder when due; (ii) the Borrower shall fail to comply with any of the terms, covenants or conditions contained in this Note or in the Stock Pledge Agreement dated as of the date hereof executed by the Borrower in favor of the Holder (as amended, restated, supplemented or otherwise modified from time to time, the "Pledge Agreement"); (iii) any written representation or warranty made at any time by the Borrower to the Holder shall prove to have been incorrect or misleading in any material respect when made; (iv) the institution of bankruptcy proceedings against the Borrower or Robert A. Yellowlees and such proceedings have not been dismissed on or before 60 days after the institution thereof, the bankruptcy of the Borrower or Robert A. Yellowlees or the commencement of a voluntary case by the Borrower or Robert A. Yellowlees under the Bankruptcy Code of 1978, as amended or other federal bankruptcy law (as now or hereafter in effect); (v) the Holder shall cease to have a valid and perfected security interest in the Collateral (as defined in the Pledge Agreement) for any reason other than the failure of the Holder to take any action within its control; and (vi) the Holder shall reasonably determine that the prospect of repayment under this Note is impaired. Upon the occurrence of an Event of Default (other than an Event of Default described in clause (iv) of the definition thereof), the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, and all of the Borrower's other obligations owing hereunder, at the option of the Holder, and without demand or notice of any kind, may be immediately declared, and thereupon shall immediately become in default and due and payable and the Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. Upon the occurrence of an Event of Default described in clause (iv) of the definition thereof, the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, and all of the Borrower's other obligations owing hereunder, without demand or -2- notice of any kind, shall immediately become in default and due and payable and the Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. The Borrower shall pay all expenses incurred by the Holder in the collection of this Note, including, without limitation, the reasonable fees and disbursements of counsel to the Holder if this Note is collected by or through an attorney-at-law. Time is of the essence of this Note. EACH OF THE HOLDER AND THE BORROWER HEREBY AGREES THAT ANY ACTION OR PROCEEDING RELATING TO THIS NOTE SHALL BE SUBJECT TO BINDING ARBITRATION BEFORE THE NATIONAL ASSOCIATION OF SECURITIES DEALERS ("NASD") OR, IF FOR ANY REASON INELIGIBLE, THE AMERICAN ARBITRATION ASSOCIATION ("ASA"), IN ACCORDANCE WITH THE RULES OF PROCEDURE THEN IN EFFECT. ANY ARBITRATION PROCEEDINGS SHALL TAKE PLACE IN ATLANTA, GEORGIA AND BORROWER IRREVOCABLY SUBMITS AND CONSENTS TO THIS ARBITRATION PROVISION AND VENUE. THE BORROWER AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS HEREUNDER SHALL BE ABSOLUTE, UNCONDITIONAL AND, FOR THE PURPOSES OF MAKING PAYMENTS HEREUNDER, THE BORROWER HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR CROSS- CLAIM. No delay or failure on the part of the Holder in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Holder of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. All amendments to this Note, and any waiver or consent of the Holder, must be in writing and signed by the Holder and the Borrower. The Borrower hereby waives presentment, demand, notice of dishonor, protests and all other notices whatever. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. This Note shall be binding upon the administrators, successors or assigns of the Borrower. A Holder of this Note may assign or transfer this Note to any person or entity without notice to, or the consent of, the Borrower; provided, this Note may not be assigned by the Borrower. Any notice to be given hereunder shall be in writing, shall be sent to the Holder's address as specified in the first paragraph hereof or the Borrower's addresses set forth below its signature hereto, as the case may be, and shall be deemed received (i) on the earlier of the date of receipt or the date three business days after deposit of such notice in the United States mail, if sent postage prepaid, certified mail, return receipt requested or (ii) when actually received, if personally delivered. -3- [Signature on Next Page] -4- IN WITNESS WHEREOF, the Borrower has executed and delivered this Promissory Note under seal as of the date and year first written above. MRY PARTNERS, L.P. By: /s/ Robert A. Yellowlees ------------------------------ Name: Robert A. Yellowlees Title: General Partner -5- PROMISSORY NOTE $1,483,503.21 Date: April 3, 2001 FOR VALUE RECEIVED, the undersigned, MRY Partners, L.P., a Georgia limited partnership (the "Borrower"), hereby unconditionally promises to pay to the order of National Data Corporation (hereafter, together with any holder hereof, the "Holder") at the offices of the Holder located at National Data Plaza, Atlanta, Georgia 30329, or at such other place as the Holder may designate in writing to the Borrower, in lawful money of the United States of America, in immediately available funds, the principal sum of ONE MILLION FOUR HUNDRED EIGHT-THREE THOUSAND FIVE HUNDRED THREE AND 21/100 DOLLARS ($1,483,503.21), together with interest on the principal balance from time to time outstanding hereunder (computed on the basis of a 360-day year for the actual number of days elapsed) from the date hereof until paid in full at a per annum rate equal to 4.63% in simple interest terms. The principal balance shall be payable in full on June 1, 2003. Accrued interest shall be payable annually on each April 3 during the term of this Note. Accrued interest shall also be due and payable on any date on which the principal balance is due (whether by acceleration, maturity or otherwise) other than any date on which a Collateral Sale Mandatory Prepayment is due. The Borrower shall prepay a portion of the outstanding principal amount owing under this Note immediately following the settlement date with respect to the sale, transfer or other disposition of a portion (but not all) of the June 1, 1993 Option Securities (as such term is defined Schedule 1 to that certain Stock Pledge Agreement dated as of the date hereof between the Borrower and the Holder). Such prepayment shall be in an amount equal to the product of (a) a fraction, (i) the numerator of which is the number of shares of such June 1, 1993 Option Securities so sold, transferred or disposed of, and (ii) the denominator of which is the total number of shares of such June 1, 1993 Option Securities owned by the Borrower immediately prior to such sale, transfer or disposition, multiplied by (b) the unpaid principal amount of this note as of such date (the "Collateral Sale Mandatory Prepayment"). Upon a sale, transfer or other disposition of all of the June 1, 1993 Option Securities, the entire principal balance hereunder and any accrued interest thereon shall become due and payable immediately following the settlement date with respect to the sale, transfer or other disposition. Interest shall accrue on any amount past due hereunder at a per annum rate equal to 2.0% in excess of the interest rate otherwise payable hereunder. All such interest shall be due and payable on demand. In no event shall the amount of interest due and payable under this Note exceed the maximum rate of interest allowed by applicable law and, in the event any such payment is inadvertently paid by the Borrower or inadvertently received by the Holder, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Holder in writing that the Borrower elects to have such excess sum returned to it forthwith. It is the express intent of the parties hereto that the Borrower not pay and the Holder not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by the Borrower under applicable law. -6- THE BORROWER, AND THE HOLDER BY ACCEPTING THIS NOTE, EACH AGREES AND STIPULATES THAT THE ONLY CHARGE IMPOSED UPON THE BORROWER FOR THE USE OF MONEY IN CONNECTION WITH THIS NOTE IS AND SHALL BE THE INTEREST DESCRIBED IN THE FIRST PARAGRAPH HEREOF, AND FURTHER AGREES AND STIPULATES THAT ALL OTHER CHARGES IMPOSED BY THE HOLDER ON THE BORROWER IN CONNECTION WITH THIS NOTE, INCLUDING WITHOUT LIMITATION, ALL DEFAULT CHARGES, LATE CHARGES AND ATTORNEYS' FEES, ARE CHARGES MADE TO COMPENSATE THE HOLDER FOR ADMINISTRATIVE SERVICES AND COSTS OR LOSSES INCURRED, AND TO BE INCURRED, BY THE HOLDER IN CONNECTION WITH THIS NOTE AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF MONEY PURSUANT TO OFFICIAL CODE OF GEORGIA ANNOTATED SECTION 7-4-2 OR SECTION 7-4-18. ALL CHARGES OTHER THAN CHARGES FOR THE USE OF MONEY SHALL BE FULLY EARNED AND NONREFUNDABLE WHEN DUE. Each of the following events shall constitute an "Event of Default" under this Note: (i) failure of the Borrower to pay any principal, interest or other amount due hereunder when due; (ii) the Borrower shall fail to comply with any of the terms, covenants or conditions contained in this Note or in the Stock Pledge Agreement dated as of the date hereof executed by the Borrower in favor of the Holder (as amended, restated, supplemented or otherwise modified from time to time, the "Pledge Agreement"); (iii) any written representation or warranty made at any time by the Borrower to the Holder shall prove to have been incorrect or misleading in any material respect when made; (iv) the institution of bankruptcy proceedings against the Borrower or Robert A. Yellowlees and such proceedings have not been dismissed on or before 60 days after the institution thereof, the bankruptcy of the Borrower or Robert A. Yellowlees or the commencement of a voluntary case by the Borrower or Robert A. Yellowlees under the Bankruptcy Code of 1978, as amended or other federal bankruptcy law (as now or hereafter in effect); (v) the Holder shall cease to have a valid and perfected security interest in the Collateral (as defined in the Pledge Agreement) for any reason other than the failure of the Holder to take any action within its control; and (vi) the Holder shall reasonably determine that the prospect of repayment under this Note is impaired. Upon the occurrence of an Event of Default (other than an Event of Default described in clause (iv) of the definition thereof), the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, and all of the Borrower's other obligations owing hereunder, at the option of the Holder, and without demand or notice of any kind, may be immediately declared, and thereupon shall immediately become in default and due and payable and the Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. Upon the occurrence of an Event of Default described in clause (iv) of the definition thereof, the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, and all of the Borrower's other obligations owing hereunder, without demand or notice of any kind, shall immediately become in default and due and payable and the Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. -7- The Borrower shall pay all expenses incurred by the Holder in the collection of this Note, including, without limitation, the reasonable fees and disbursements of counsel to the Holder if this Note is collected by or through an attorney-at-law. Time is of the essence of this Note. EACH OF THE HOLDER AND THE BORROWER HEREBY AGREES THAT ANY ACTION OR PROCEEDING RELATING TO THIS NOTE SHALL BE SUBJECT TO BINDING ARBITRATION BEFORE THE NATIONAL ASSOCIATION OF SECURITIES DEALERS ("NASD") OR, IF FOR ANY REASON INELIGIBLE, THE AMERICAN ARBITRATION ASSOCIATION ("ASA"), IN ACCORDANCE WITH THE RULES OF PROCEDURE THEN IN EFFECT. ANY ARBITRATION PROCEEDINGS SHALL TAKE PLACE IN ATLANTA, GEORGIA AND BORROWER IRREVOCABLY SUBMITS AND CONSENTS TO THIS ARBITRATION PROVISION AND VENUE. THE BORROWER AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS HEREUNDER SHALL BE ABSOLUTE, UNCONDITIONAL AND, FOR THE PURPOSES OF MAKING PAYMENTS HEREUNDER, THE BORROWER HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM. No delay or failure on the part of the Holder in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Holder of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. All amendments to this Note, and any waiver or consent of the Holder, must be in writing and signed by the Holder and the Borrower. The Borrower hereby waives presentment, demand, notice of dishonor, protests and all other notices whatever. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. This Note shall be binding upon the administrators, successors or assigns of the Borrower. A Holder of this Note may assign or transfer this Note to any person or entity without notice to, or the consent of, the Borrower; provided, this Note may not be assigned by the Borrower. Any notice to be given hereunder shall be in writing, shall be sent to the Holder's address as specified in the first paragraph hereof or the Borrower's addresses set forth below its signature hereto, as the case may be, and shall be deemed received (i) on the earlier of the date of receipt or the date three business days after deposit of such notice in the United States mail, if sent postage prepaid, certified mail, return receipt requested or (ii) when actually received, if personally delivered. [Signature on Next Page] -8- IN WITNESS WHEREOF, the Borrower has executed and delivered this Promissory Note under seal as of the date and year first written above. MRY PARTNERS, L.P. By: /s/ Robert A. Yellowlees ---------------------------- Name: Robert A. Yellowlees Title: General Partner -9- PROMISSORY NOTE $1,675,503.21 Date: April 3, 2001 FOR VALUE RECEIVED, the undersigned, MRY Partners, L.P., a Georgia limited partnership (the "Borrower"), hereby unconditionally promises to pay to the order of National Data Corporation (hereafter, together with any holder hereof, the "Holder") at the offices of the Holder located at National Data Plaza, Atlanta, Georgia 30329, or at such other place as the Holder may designate in writing to the Borrower, in lawful money of the United States of America, in immediately available funds, the principal sum of ONE MILLION FOUR HUNDRED EIGHT-THREE THOUSAND FIVE HUNDRED THREE AND 21/100 DOLLARS ($1,483,503.21), together with interest on the principal balance from time to time outstanding hereunder (computed on the basis of a 360-day year for the actual number of days elapsed) from the date hereof until paid in full at a per annum rate equal to 4.63% in simple interest terms. The principal balance shall be payable in full on June 1, 2003. Accrued interest shall be payable annually on each April 3 during the term of this Note. Accrued interest shall also be due and payable on any date on which the principal balance is due (whether by acceleration, maturity or otherwise) other than any date on which a Collateral Sale Mandatory Prepayment is due. The Borrower shall prepay a portion of the outstanding principal amount owing under this Note immediately following the settlement date with respect to the sale, transfer or other disposition of a portion (but not all) of the June 1, 1993 Option Securities (as such term is defined Schedule 1 to that certain Stock Pledge Agreement dated as of the date hereof between the Borrower and the Holder). Such prepayment shall be in an amount equal to the product of (a) a fraction, (i) the numerator of which is the number of shares of such June 1, 1993 Option Securities so sold, transferred or disposed of, and (ii) the denominator of which is the total number of shares of such June 1, 1993 Option Securities owned by the Borrower immediately prior to such sale, transfer or disposition, multiplied by (b) the unpaid principal amount of this note as of such date (the "Collateral Sale Mandatory Prepayment"). Upon a sale, transfer or other disposition of all of the June 1, 1993 Option Securities, the entire principal balance hereunder and any accrued interest thereon shall become due and payable immediately following the settlement date with respect to the sale, transfer or other disposition. Interest shall accrue on any amount past due hereunder at a per annum rate equal to 2.0% in excess of the interest rate otherwise payable hereunder. All such interest shall be due and payable on demand. In no event shall the amount of interest due and payable under this Note exceed the maximum rate of interest allowed by applicable law and, in the event any such payment is inadvertently paid by the Borrower or inadvertently received by the Holder, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Holder in writing that the Borrower elects to have such excess sum returned to it forthwith. It is the express intent of the parties hereto that the Borrower not pay and the Holder not receive, directly or indirectly, in -10- any manner whatsoever, interest in excess of that which may be lawfully paid by the Borrower under applicable law. THE BORROWER, AND THE HOLDER BY ACCEPTING THIS NOTE, EACH AGREES AND STIPULATES THAT THE ONLY CHARGE IMPOSED UPON THE BORROWER FOR THE USE OF MONEY IN CONNECTION WITH THIS NOTE IS AND SHALL BE THE INTEREST DESCRIBED IN THE FIRST PARAGRAPH HEREOF, AND FURTHER AGREES AND STIPULATES THAT ALL OTHER CHARGES IMPOSED BY THE HOLDER ON THE BORROWER IN CONNECTION WITH THIS NOTE, INCLUDING WITHOUT LIMITATION, ALL DEFAULT CHARGES, LATE CHARGES AND ATTORNEYS' FEES, ARE CHARGES MADE TO COMPENSATE THE HOLDER FOR ADMINISTRATIVE SERVICES AND COSTS OR LOSSES INCURRED, AND TO BE INCURRED, BY THE HOLDER IN CONNECTION WITH THIS NOTE AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF MONEY PURSUANT TO OFFICIAL CODE OF GEORGIA ANNOTATED SECTION 7-4-2 OR SECTION 7-4-18. ALL CHARGES OTHER THAN CHARGES FOR THE USE OF MONEY SHALL BE FULLY EARNED AND NONREFUNDABLE WHEN DUE. Each of the following events shall constitute an "Event of Default" under this Note: (i) failure of the Borrower to pay any principal, interest or other amount due hereunder when due; (ii) the Borrower shall fail to comply with any of the terms, covenants or conditions contained in this Note or in the Stock Pledge Agreement dated as of the date hereof executed by the Borrower in favor of the Holder (as amended, restated, supplemented or otherwise modified from time to time, the "Pledge Agreement"); (iii) any written representation or warranty made at any time by the Borrower to the Holder shall prove to have been incorrect or misleading in any material respect when made; (iv) the institution of bankruptcy proceedings against the Borrower or Robert A. Yellowlees and such proceedings have not been dismissed on or before 60 days after the institution thereof, the bankruptcy of the Borrower or Robert A. Yellowlees or the commencement of a voluntary case by the Borrower or Robert A. Yellowlees under the Bankruptcy Code of 1978, as amended or other federal bankruptcy law (as now or hereafter in effect); (v) the Holder shall cease to have a valid and perfected security interest in the Collateral (as defined in the Pledge Agreement) for any reason other than the failure of the Holder to take any action within its control; and (vi) the Holder shall reasonably determine that the prospect of repayment under this Note is impaired. Upon the occurrence of an Event of Default (other than an Event of Default described in clause (iv) of the definition thereof), the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, and all of the Borrower's other obligations owing hereunder, at the option of the Holder, and without demand or notice of any kind, may be immediately declared, and thereupon shall immediately become in default and due and payable and the Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. Upon the occurrence of an Event of Default described in clause (iv) of the definition thereof, the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, and all of the Borrower's other obligations owing hereunder, without demand or notice of any kind, shall immediately become in default and due and payable and the Holder may exercise any and all rights and remedies available to it at law, in equity or otherwise. -11- The Borrower shall pay all expenses incurred by the Holder in the collection of this Note, including, without limitation, the reasonable fees and disbursements of counsel to the Holder if this Note is collected by or through an attorney-at-law. Time is of the essence of this Note. EACH OF THE HOLDER AND THE BORROWER HEREBY AGREES THAT ANY ACTION OR PROCEEDING RELATING TO THIS NOTE SHALL BE SUBJECT TO BINDING ARBITRATION BEFORE THE NATIONAL ASSOCIATION OF SECURITIES DEALERS ("NASD") OR, IF FOR ANY REASON INELIGIBLE, THE AMERICAN ARBITRATION ASSOCIATION ("ASA"), IN ACCORDANCE WITH THE RULES OF PROCEDURE THEN IN EFFECT. ANY ARBITRATION PROCEEDINGS SHALL TAKE PLACE IN ATLANTA, GEORGIA AND BORROWER IRREVOCABLY SUBMITS AND CONSENTS TO THIS ARBITRATION PROVISION AND VENUE. THE BORROWER AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS HEREUNDER SHALL BE ABSOLUTE, UNCONDITIONAL AND, FOR THE PURPOSES OF MAKING PAYMENTS HEREUNDER, THE BORROWER HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM. No delay or failure on the part of the Holder in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Holder of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. All amendments to this Note, and any waiver or consent of the Holder, must be in writing and signed by the Holder and the Borrower. The Borrower hereby waives presentment, demand, notice of dishonor, protests and all other notices whatever. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. This Note shall be binding upon the administrators, successors or assigns of the Borrower. A Holder of this Note may assign or transfer this Note to any person or entity without notice to, or the consent of, the Borrower; provided, this Note may not be assigned by the Borrower. Any notice to be given hereunder shall be in writing, shall be sent to the Holder's address as specified in the first paragraph hereof or the Borrower's addresses set forth below its signature hereto, as the case may be, and shall be deemed received (i) on the earlier of the date of receipt or the date three business days after deposit of such notice in the United States mail, if sent postage prepaid, certified mail, return receipt requested or (ii) when actually received, if personally delivered. [Signature on Next Page] -12- IN WITNESS WHEREOF, the Borrower has executed and delivered this Promissory Note under seal as of the date and year first written above. MRY PARTNERS, L.P. By: /s/ Robert A. Yellowlees ------------------------- Name: Robert A. Yellowlees Title: General Partner -13- EX-10.XIV 9 dex10xiv.txt STOCK PLEDGE AGREEMENT Exhibit 10(xiv) STOCK PLEDGE AGREEMENT THIS STOCK PLEDGE AGREEMENT (this "Agreement") dated as of April 3, 2001 by and between MRY PARTNERS, L.P., a Georgia limited partnership (the "Pledgor") and NATIONAL DATA CORPORATION, a Delaware corporation (the "Pledgee"). WHEREAS, the Pledgor has executed in favor of the Pledgee a certain Promissory Note dated as of the date hereof in an original principal amount of $1,128,373.24, a certain Promissory Note dated as of the date hereof in an original principal amount of $1,483,503.21, and a certain Promissory Note dated as of the date hereof in an original principal amount of $1,675,131.25 (as amended, supplemented, restated or otherwise modified from time to time in accordance with their terms, together with any promissory note given in substitution or replacement thereof, individually a "Note" and collectively, the "Notes"); WHEREAS, it is a condition precedent to the extension of financial accommodations under the Notes that the Pledgor execute and deliver this Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Pledge. The Pledgor hereby pledges, hypothecates, assigns, ------ transfers, sets over and delivers unto the Pledgee, and grants to the Pledgee a security interest in, all of the Pledgor's right, title and interest in, to and under the following (collectively, the "Collateral"): (a) all of the common stock, shares, equity interest and other securities described in Schedule 1 attached hereto (collectively, "Securities"); (b) any cash or additional Securities or other property at any time and from time to time receivable or otherwise distributable in respect of, in exchange for, or in substitution of, any of the Securities (excluding cash dividends payable with respect to the Securities); and (c) any and all products and proceeds of any of the foregoing (excluding cash dividends payable with respect to the Securities), together with any and all other rights, titles, interests, powers, privileges and preferences pertaining to said property. Section 2. Obligations Secured. This Agreement is made, and the security ------------------- interest created hereby is granted to the Pledgee, to secure the prompt performance and payment in full of the following (collectively, the "Secured Obligations"): (a) all obligations of the Pledgor under the Notes; (b) any reasonable costs or expenses incurred by the Pledgee or Pledgee's counsel in connection with the realization of the security for which this Agreement provides, including, without limitation, any reasonable costs or expenses of any proceedings to which this Agreement may give rise; and (c) any and all extensions, renewals, modifications, amendments or substitutions of the foregoing. Section 3. Representations and Warranties. The Pledgor hereby represents ------------------------------ and warrants to the Pledgee as follows: (a) Formation; Name; Location; Etc. The Pledgor is a limited partnership ------------------------------ duly formed under the laws of the State of Georgia. Robert A. Yellowlees is the sole general partner of the Pledgor. The exact legal name of the Pledgor is set forth in the first paragraph of this Agreement. The chief executive office and principal place of business of the Pledgor is located at 2696 Habersham Road, Fulton County, Atlanta, Georgia 30305. The tax payer ID number of the Pledgor is 58-2595162. (b) Authorization. The Pledgor has the right and power, and has taken all ------------- necessary action to authorize it, to execute, deliver and perform this Agreement and each of the Notes (collectively, the "Loan Documents"). The Loan Documents have been duly executed and delivered by the general partner of the Pledgor and each is a legal, valid and binding obligation of the Pledgor enforceable against it in accordance with its respective terms. (c) Compliance of Loan Documents with Laws, Etc. The execution, delivery ------------------------------------------- and performance of the Loan Documents in accordance with their respective terms do not and will not, by the passage of time, the giving of notice, or both: (i) require any governmental approval or violate any applicable law relating to the Pledgor; (ii) conflict with, result in a breach of or constitute a default under the partnership agreement of the Pledgor, or any indenture, agreement or other instrument to which the Pledgor is a party or by which it or any of its properties may be bound, except as such conflict, breach or default shall have been waived in a writing presented to the Pledgee; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Pledgor. (d) Title and Liens. The Pledgor is the legal and beneficial owner of the --------------- Collateral and none of the Collateral is subject to any Lien other than Permitted Liens. Section 4. Covenants. The Pledgor hereby unconditionally covenants and --------- agrees as follows: (a) No Liens; No Sale of Collateral. The Pledgor will not create, assume, ------------------------------- incur or permit or suffer to exist or to be created, assumed or incurred, any Lien on any of the Collateral (or any interest therein), other than Permitted Liens, and will not sell, lease, assign, transfer or otherwise dispose of all or any portion of the Collateral (or any interest therein) except as otherwise provided herein other than as permitted under the Notes. (b) Change of Locations, Name, Etc. Without giving the Pledgee at least 30 ------------------------------ days' prior written notice, the Pledgor will not (i) change the Pledgor's chief executive -2- office, principal place of business, or the location of its books and records relating to the Collateral or (ii) change its name, identity or structure. (c) Maintenance of Existence. The Pledgor shall preserve and maintain its ------------------------ existence, rights, franchises, licenses and privileges in the jurisdiction of its formation. (d) Compliance with Laws. The Pledgor shall comply with all laws -------------------- applicable to it or any of its property. (e) No Merger, Etc. The Pledgor shall not (i) enter into any transaction -------------- of merger or consolidation; (ii) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or (iii) convey, sell, lease, sublease, transfer or otherwise dispose of any of its assets, other than periodic distributions to partners of the Pledgor in an amount reasonably necessary to satisfy current tax liabilities resulting from their status as partners of the Pledgor. (f) General Partner. The Pledgor shall not permit any Person other than --------------- Robert A. Yellowlees to be a general partner of the Pledgor, during such time as he is in life and legally competent to serve as general partner. Section 5. Additional Shares. The Pledgor agrees that, until this ----------------- Agreement has terminated in accordance with its terms, any additional Securities at any time issued to the Pledgor or otherwise acquired by the Pledgor on account of the Securities shall be promptly delivered or otherwise transferred to the Pledgee as additional Collateral and shall be subject to the Lien of, and the terms and conditions of, this Agreement. Section 6. Voting Rights; Dividends, etc. ------------------------------ (a) So long as no Event of Default shall have occurred and be continuing: (i) the Pledgor shall be entitled to exercise any and all voting and/or consensual rights and powers accruing to an owner of the Collateral or any part thereof for any purpose not inconsistent with the terms and conditions of this Agreement or any agreement giving rise to or otherwise relating to any of the Secured Obligations; provided, however, that the -------- ------- Pledgor shall not exercise, or refrain from exercising, any such right or power if any such action would have a materially adverse effect on the value of such Collateral in the judgment of the Pledgee; and (ii) the Pledgor shall be entitled to retain and use any and all cash dividends paid on the Collateral, but any and all stock and/or liquidating dividends, other distributions in property, return of capital or other distributions made on or in respect of Securities, whether resulting from a subdivision, combination or reclassification of outstanding Securities or received in exchange for Collateral or any part thereof or as a result of any merger, consolidation, -3- acquisition or other exchange of assets, or otherwise, shall be and become part of the Collateral pledged hereunder and, if received by the Pledgor, shall forthwith be delivered to the Pledgee to be held as collateral subject to the terms and conditions of this Agreement. The Pledgee agrees to execute and deliver to the Pledgor, or cause to be executed and delivered to the Pledgor, as appropriate, at the sole cost and expense of the Pledgor, all such proxies, powers of attorney, dividend orders and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting and/or consensual rights and powers which Pledgor is entitled to exercise pursuant to clause (i) above and/or to receive the dividends which Pledgor is authorized to retain pursuant to clause (ii) above. (b) Upon the occurrence and during the continuance of an Event of Default, all rights of the Pledgor to exercise the voting and/or consensual rights and powers which Pledgor is entitled to exercise pursuant to subsection (a)(i) above and/or to receive the dividends which Pledgor is authorized to receive and retain pursuant to subsection (a)(ii) above shall cease, and all such rights thereupon shall become immediately vested in the Pledgee, which shall have, to the extent permitted by law, the sole and exclusive right and authority to exercise such voting and/or consensual rights and powers which the Pledgor shall otherwise be entitled to exercise pursuant to subsection (a)(i) above and/or to receive and retain the dividends which the Pledgor shall otherwise be authorized to retain pursuant to subsection (a)(ii) above. Any and all money and other property paid over to or received by the Pledgee pursuant to the provisions of this subsection (b) shall be retained by the Pledgee as additional collateral hereunder and shall be applied in accordance with the provisions of Section 8. If the Pledgor shall receive any dividends or other property which it is not entitled to receive under this Section, the Pledgor shall hold the same in trust for the Pledgee, without commingling the same with other funds or property of or held by the Pledgor, and shall promptly deliver the same to the Pledgee upon receipt by the Pledgor in the identical form received, together with any necessary endorsements. Section 7. Remedies upon Default. --------------------- (a) In addition to any right or remedy that the Pledgee may have under the Notes or otherwise under applicable law, if an Event of Default shall have occurred, the Pledgee may exercise any and all the rights and remedies of a secured party under the Uniform Commercial Code as in effect in any applicable jurisdiction (the "Code") and may otherwise sell, assign, transfer, endorse and deliver the whole or, from time to time, any part of the Collateral at a public or private sale or on any securities exchange, for cash, upon credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Pledgee in its discretion shall deem appropriate. The Pledgee shall be authorized at any sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account in compliance with the Securities Act -4- and upon consummation of any such sale the Pledgee shall have the right to assign, transfer, endorse and deliver to the purchaser or purchasers thereof the Collateral so sold. Each purchaser at any sale of Collateral shall take and hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the fullest extent permitted by applicable law) all rights of redemption, stay and/or appraisal which the Pledgor now has or may at any time in the future have under any applicable law now existing or hereafter enacted. The Pledgor agrees that, to the extent notice of sale shall be required by applicable law, at least 10 days' prior written notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification, but notice given in any other reasonable manner or at any other reasonable time shall constitute reasonable notification. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Pledgee may fix and shall state in the notice or publication (if any) of such sale. At any such sale, the Collateral, or portion thereof to be sold, may be sold in one lot as an entirety or in separate parcels, as the Pledgee may determine in its sole and absolute discretion. The Pledgee shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. The Pledgee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case the sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Pledgee until the sale price is paid by the purchaser or purchasers thereof, but the Pledgee shall not incur any liability to the Pledgor in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public sale made pursuant to this Agreement, the Pledgee, to the extent permitted by applicable law, may bid for or purchase, free from any right of redemption, stay and/or appraisal on the part of the Pledgor (all said rights being also hereby waived and released to the extent permitted by applicable law), any part of or all the Collateral offered for sale and may make payment on account thereof by using any claim then due and payable to the Pledgee from the Pledgor as a credit against the purchase price, and the Pledgee may, upon compliance with the terms of sale and to the extent permitted by applicable law, hold, retain and dispose of such property without further accountability to the Pledgor therefor. For purposes hereof, a written agreement to purchase all or any part of the Collateral shall be treated as a sale thereof; the Pledgee shall be free to carry out such sale pursuant to such agreement and the Pledgor shall not be entitled to the return of any Collateral subject thereto, notwithstanding the fact that after the Pledgee shall have entered into such an agreement all Events of Default may have been remedied or the Secured Obligations may have been paid in full as herein provided. The Pledgor hereby waives any right to require any marshaling of assets and any similar right. (b) In addition to exercising the power of sale herein conferred upon it, the Pledgee shall also have the option to proceed by suit or suits at law or in equity to -5- foreclose this Agreement and sell the Collateral or any portion thereof pursuant to judgment or decree of a court or courts having competent jurisdiction. (c) Upon the occurrence of an Event of Default, the Pledgee shall also have the right to retain the Securities and denominate the same as "treasury shares" and the Pledgor shall continue to be liable for the difference between the outstanding amount of Secured Obligations and the fair market value of Collateral so denominated as "treasury shares." In this connection, and for purposes of this Agreement, the Pledgor acknowledges and agrees that the Pledged Collateral is of "a type customarily sold on a recognized market" within the meaning of Section 9-504(3) of the Uniform Commercial Code in effect in the State of Georgia (or any similar successor statue). Accordingly, the Pledgor specifically acknowledges and agrees that retaining Securities as "treasury shares" constitutes a "commercially reasonable " disposition of the Pledged Collateral within the meaning of the Uniform Commercial Code and that it is appropriate for the Pledgor to continue to be liable for, and the Pledgor agrees to be so liable for, any deficiency between the outstanding amount of Secured Obligations at the time of such denomination as "treasury shares" and the fair market value of such "treasury shares." (d) The rights and remedies of the Pledgee under this Agreement are cumulative and not exclusive of any rights or remedies which it would otherwise have. Section 8. Application of Proceeds of Sale and Cash. The proceeds of any ---------------------------------------- sale of the whole or any part of the Collateral, together with any other moneys held by the Pledgee under the provisions of this Agreement, shall be applied by the Pledgee in the following order (a) First: to the payment of all costs and expenses incurred in connection with such sale or other realization, including reasonable attorneys' fees incurred if the Pledgee endeavored to collect the Secured Obligations by or through an attorney at law; (b) Second: to the payment of the interest due upon any of the Secured Obligations, in any order which the Pledgee may elect; (c) Third: to the payment of the principal due upon any of the Secured Obligations in any order which the Pledgee may elect; and (d) Fourth: the balance (if any) of such proceeds shall be paid to the Pledgor or to whomsoever may be legally entitled thereto. The Pledgor shall remain liable and will pay, on demand, any deficiency remaining in respect of the Secured Obligations. Section 9. Pledgee Appointed Attorney-in-Fact. The Pledgor hereby ---------------------------------- constitutes and appoints the Pledgee as the attorney-in-fact of the Pledgor with full power of substitution either in the Pledgee's name or in the name of the Pledgor to carry out the -6- provisions of this Agreement and to take any action and execute any instrument which the Pledgee may deem necessary or advisable to accomplish the purposes hereof, and to do all acts and things and execute all documents in the name of the Pledgor or otherwise, deemed by the Pledgee as necessary, proper and convenient in connection with the preservation, perfection or enforcement of its rights hereunder. Nothing herein contained shall be construed as requiring or obligating the Pledgee to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by it, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken by the Pledgee or omitted to be taken with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of the Pledgor or to any claim or action against the Pledgee. The power or attorney granted herein is irrevocable and coupled with an interest. Section 10. Further Assurances. The Pledgor shall, at its sole cost and ------------------ expense, take all action that may be reasonably necessary or desirable in the Pledgee's sole discretion, so as at all times to maintain the validity, perfection, enforceability and priority of the Pledgee's security interest in the Collateral, or to enable the Pledgee to exercise or enforce its rights hereunder. The Pledgor agrees to take, and authorizes the Pledgee to take on the Pledgor's behalf, any or all of the following actions with respect to any Collateral as the Pledgee shall deem necessary to perfect the security interest and pledge created hereby or to enable the Pledgee to enforce its rights and remedies hereunder: (i) to register in the name of the Pledgee any Collateral in certificated or uncertificated form; (ii) to endorse in the name of the Pledgee any Collateral issued in certificated form; and (iii) by book entry or otherwise, identify as belonging to the Pledgee a quantity of securities that constitutes all or part of the Collateral registered in the name of the Pledgee. Notwithstanding the foregoing the Pledgor agrees that Collateral which is not in certificated form or is otherwise in book-entry form shall be held for the account of the Pledgee. The Pledgor hereby authorizes the Pledgee to execute and file in all necessary and appropriate jurisdictions (as determined by the Pledgee) one or more financing or continuation statements in the name of the Pledgor and to sign the Pledgor's name thereto. The Pledgor authorizes the Pledgee to file any such financing statement, document or instrument without the signature of the Pledgor to the extent permitted by applicable law. To the extent permitted by applicable law, a carbon, photographic, xerographic or other reproduction of this Agreement or any financing statement is sufficient as a financing statement. Any property comprising part of the Collateral required to be delivered to the Pledgee pursuant to this Pledge Agreement shall be accompanied by proper instruments of assignment duly executed by the Pledgor and by such other instruments or documents as the Pledgee may reasonably request. Section 11. Securities Act. In view of the position of the Pledgor in -------------- relation to the Collateral, or because of other current or future circumstances, a question may arise under the Securities Act or any similar applicable law hereafter enacted analogous in purpose or effect (such Act and any such similar applicable law as from time to time in effect being called the "Federal Securities Laws") with respect to any disposition of the -7- Collateral permitted hereunder. The Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Pledgee if the Pledgee were to attempt to dispose of all or any part of the Collateral in accordance with the terms hereof, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Pledgee in any attempt to dispose of all or part of the Collateral in accordance with the terms hereof under applicable Blue Sky or other state securities laws or similar applicable law analogous in purpose or effect. The Pledgor recognizes that in light of the foregoing restrictions and limitations the Pledgee may, with respect to any sale of the Collateral, limit the purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that in light of the foregoing restrictions and limitations, the Pledgee, in its sole and absolute discretion, may, in accordance with applicable law, (a) proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) approach and negotiate with a single potential purchaser to effect such sale. The Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Collateral in accordance with the terms hereof at a price that the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Pledgee sells. Section 12. Indemnification. The Pledgor agrees to indemnify and hold the --------------- Pledgee and any corporation controlling, controlled by, or under common control with, the Pledgee and any officer, attorney, director, shareholder, agent or employee of the Pledgee or any such corporation (each an "Indemnified Person"), harmless from and against any claim, loss, damage, action, cause of action, liability, cost and expense or suit of any kind or nature whatsoever (collectively, "Losses"), brought against or incurred by an Indemnified Person, in any manner arising out of or, directly or indirectly, related to or connected with this Agreement, including without limitation, the exercise by the Pledgee of any of its rights and remedies under this Agreement or any other action taken by the Pledgee pursuant to the terms of this Agreement; provided, however, the -------- ------- Pledgor shall not be liable to an Indemnified Person for any Losses to the extent that such Losses result from the gross negligence or willful misconduct of such Indemnified Person. The Pledgor's obligations under this section shall survive the termination of this Agreement and the payment in full of the Secured Obligations. -8- Section 13. Continuing Security Interest. This Agreement shall create a ---------------------------- continuing security interest in the Collateral and shall remain in full force and effect until it terminates in accordance with its terms. The Pledgor and the Pledgee hereby agree that the security interest created by this Agreement in the Collateral shall not terminate and shall continue and remain in full force and effect notwithstanding the transfer to the Pledgor or any person designated by it of all or any portion of the Collateral. Section 14. No Waiver. Neither the failure on the part of the Pledgee to --------- exercise, nor the delay on its part in exercising any right, power or remedy hereunder, nor any course of dealing between the Pledgee and the Pledgor shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy hereunder preclude any other or the further exercise thereof or the exercise of any other right, power or remedy. Section 15. Notices. Notices, requests and other communications required ------- or permitted hereunder shall be given in accordance with the applicable terms of the Note. SECTION 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 17. Amendments. No amendment or waiver of any provision of this ---------- Agreement nor consent to any departure by the Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by the parties hereto, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 18. Binding Agreement; Assignment. This Agreement shall be ----------------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Pledgor shall not be permitted to assign this Agreement or any interest herein or in the Collateral, or any part thereof, or any cash or property held by the Pledgee as collateral under this Agreement. Section 19. Termination. Upon indefeasible payment in full of all of the ----------- Secured Obligations, this Agreement shall terminate. Upon termination of this Agreement in accordance with its terms the Pledgee agrees to take such actions as the Pledgor may reasonably request, and at the sole cost and expense of the Pledgor, (a) to return the Collateral to the Pledgor, and (b) to evidence the termination of this Agreement, including, without limitation, the filing of any releases or any termination statements under the Uniform Commercial Code. Section 20. Severability. Whenever possible, each provision of this ------------ Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provisions shall be ineffective only to the extent of such prohibition or invalidity, -9- without invalidating the remainder of such provisions or the remaining provisions of this Agreement. Section 21. Headings. Section headings used herein are for convenience -------- only and are not to affect the construction of or be taken into consideration in interpreting this Agreement. Section 22. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed an original and all of which shall constitute but one agreement. Section 23. Definitions. ----------- (a) For purposes hereof: "Event of Default" has the meaning given such term in the Notes. ---------------- "Lien" means as applied to the property of any Person means: (a) any ---- security interest, encumbrance, mortgage, deed to secure debt, deed of trust, pledge, lien, charge or lease constituting a capitalized lease obligation, conditional sale or other title retention agreement, or other security title or encumbrance of any kind in respect of any property of such Person, or upon the income or profits therefrom; (b) any arrangement, express or implied, under which any property of such Person is transferred, sequestered or otherwise identified for the purpose of subjecting the same to the payment of indebtedness or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person; (c) the filing of any financing statement under the Uniform Commercial Code or its equivalent in any jurisdiction; and (d) any agreement by such Person to grant, give or otherwise convey any of the foregoing. "Permitted Liens" means: (a) Liens securing taxes, assessments and other --------------- charges or levies imposed by any governmental authority or the claims of materialmen, mechanics, carriers, warehousemen or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, the payment with respect to which is not yet due; and (b) Liens in favor of the Pledgor. "Person" means an individual, corporation, partnership, limited liability ------ company, association, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Securities Act" means the Securities Act of 1933, as amended from time to -------------- time, together with all rules and regulations issued thereunder. [Signatures on Next Page] -10- IN WITNESS WHEREOF, the Pledgor has executed and delivered this Pledge Agreement under seal as of this the date first written above. MRY PARTNERS, L.P. By: /s/ Robert A. Yellowlees ------------------------ Name: Robert A. Yellowlees Title: General Partner Agreed to, accepted and acknowledged as of the date first written above. NATIONAL DATA CORPORATION By: /s/ Patricia A. Wilson ---------------------- Name: Patricia A. Wilson Title: General Counsel -11- Schedule 1 to Pledge Agreement Pledged Shares --------------
- -------------------------------------------------------------------------------------------------------------- Issuer No. and Type of Securities Certificate No(s). ----- -------------------------- ------------------ - -------------------------------------------------------------------------------------------------------------- National Data Corporation 273,877 shares of common stock delivered to Pledgor upon exercise of that certain non-qualified stock option agreement dated as of July 28, 1992 between the National Data Corporation and Robert A. Yellowlees (the "July 28, 1992 Option Securities") - -------------------------------------------------------------------------------------------------------------- National Data Corporation 248,493 shares of common stock delivered to Pledgor upon exercise of that certain non-qualified stock option agreement dated as of June 1, 1993 between the National Data Corporation and Robert A. Yellowlees (the "June 1, 1993 Option Securities") - -------------------------------------------------------------------------------------------------------------- National Data Corporation 243,125 shares of common stock delivered to Pledgor upon exercise of that certain non-qualified stock option agreement dated as of June 1, 1994 between the National Data Corporation and Robert A. Yellowlees (the "June 1, 1994 Option Securities") - --------------------------------------------------------------------------------------------------------------
-12- EX-10.33 10 dex1033.txt EMPLOYMENT AGREEMENT Exhibit 10(xxxiii) Walter Hoff EMPLOYMENT AGREEMENT CONTENTS 1. Effective Date..................................................................................... 1 -------------- 2. Employment......................................................................................... 1 ---------- 3. Employment Period.................................................................................. 1 ----------------- 4. Extent of Service.................................................................................. 1 ----------------- 5. Compensation and Benefits.......................................................................... 2 ------------------------- (a) Base Salary......................................................................... 2 (b) Incentive and Savings Plans......................................................... 2 (c) Welfare Benefit Plans............................................................... 3 (d) Expenses............................................................................ 3 (e) Fringe Benefits..................................................................... 3 6. Change in Control.................................................................................. 3 ----------------- 7. Termination of Employment.......................................................................... 4 ------------------------- (a) Death, Retirement or Disability..................................................... 4 (b) Termination by the Company.......................................................... 5 (c) Termination by Executive............................................................ 5 (d) Notice of Termination............................................................... 6 (e) Date of Termination................................................................. 6 8. Obligations of the Company upon Termination........................................................ 6 ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Poor Performance, Cause or Disability................. 6 (b) Prior to Change in Control: Termination by the Company for Poor Performance......... 8 (c) After or in Connection with a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Cause or Disability............... 9
(d) Death, Disability or Retirement..................................................... 10 (e) Cause or Voluntary Termination without Good Reason.................................. 11 9. Non-exclusivity of Rights.......................................................................... 11 ------------------------- 10. Certain Additional Payments by the Company......................................................... 11 ------------------------------------------ 11. Costs of Enforcement............................................................................... 14 -------------------- 12. Representations and Warranties..................................................................... 14 ------------------------------ 13. Restrictions on Conduct of Executive............................................................... 14 ------------------------------------ (a) General............................................................................. 14 (b) Definitions......................................................................... 14 (c) Restrictive Covenants............................................................... 16 (d) Enforcement of Restrictive Covenants................................................ 18 14. Arbitration........................................................................................ 19 ----------- 15. Letter of Credit................................................................................... 19 ---------------- 16. Assignment and Successors.......................................................................... 19 ------------------------- 17. Miscellaneous...................................................................................... 20 ------------- (a) Waiver.............................................................................. 20 (b) Severability........................................................................ 20 (c) Other Agents........................................................................ 20 (d) Entire Agreement.................................................................... 20 (e) Governing Law....................................................................... 20 (f) Notices............................................................................. 21 (g) Amendments and Modifications........................................................ 21
-ii- EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this ____ day of January, 2000 by and between National Data Corporation, a Delaware corporation (the "Company"), and Walter M. Hoff ("Executive"), to be effective as of the Effective Date, as defined in Section 1. BACKGROUND ---------- Executive currently serves as the President and Chief Executive Officer of NDC Health Information Services, a line of business of the Company. Executive and the Company desire to memorialize the terms of such employment in this Agreement. In addition, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. As it is desired and anticipated that Executive will continue to be employed and provide services for the Company's successor for at least 24 months following a Change in Control, one purpose of this Agreement is to provide Executive with compensation and benefits arrangements which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. The effective date of this Agreement (the "Effective -------------- Date") is December 1, 1999. 2. Employment. Executive is hereby employed as the President and Chief ---------- Executive Officer of NDC Health Information Services, a line of business of the Company. In such capacity, Executive shall have the responsibilities outlined on Exhibit A to this Agreement and such other responsibilities commensurate with such position as shall be assigned to him by the Chief Executive Officer of the Company, in accordance with the policies and objectives established by the Board. 3. Employment Period. Executive's employment hereunder shall begin on ----------------- the Effective Date and continue until terminated in accordance with Section 7 hereof (the "Employment Period"). 4. Extent of Service. During the Employment Period, Executive shall ----------------- render his services to the Company (or to its successor following a Change in Control) in conformity with professional standards, in a prudent and workmanlike manner and in a manner consistent with the obligations imposed on officers of corporations under applicable law. Executive shall promote the interests of the Company and its subsidiaries in carrying out Executive's duties and shall not deliberately take any action which could, or fail to take any action which failure could, reasonably be expected to have a material adverse effect upon the business of the Company or any of its subsidiaries or any of their respective affiliates. Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder (both before and after a Change in Control); provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the date of this Agreement (as to which activities Executive shall have given written notice to the Company prior to the Effective Date), the continued conduct of such activities subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities hereunder. 5. Compensation and Benefits. ------------------------- (a) Base Salary. Thereafter, during the Employment Period, the ----------- Company will pay to Executive a base salary in the amount of U.S. $400,000 per year ("Base Salary"), less normal withholdings, payable in equal bi-weekly or other installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board shall review Executive's Base Salary periodically and in its sole discretion, subject to approval of the Board, may increase Executive's Base Salary from time to time. The periodic review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive and Savings Plans. During the Employment Period, --------------------------- Executive shall be entitled to participate in incentive and savings plans, practices, policies and programs applicable generally to employees of the Company. Certain executive programs will be made available on a selective basis at the discretion of the Chief Executive Officer or the Compensation Committee of the Board. Without limiting the foregoing, the following shall apply: (i) Annual Bonus. Executive will have an annual bonus ------------ opportunity of not less than $400,000, based on 100% achievement of agreed-upon financial objectives ("Bonus Opportunity"). The Company may determine in any year that a portion of the Bonus Opportunity for that year will be deferred based upon sustained results over time. The annual Bonus Opportunity and specific performance objectives will be set forth in Executive's individual performance and incentive plan for each year. -2- (ii) Incentive Awards. On or about the Effective Date (or ---------------- earlier upon Executive's hire date), the Company made a grant of restricted stock and/or stock options to Executive as a long-term incentive for performance and in consideration for entering into this Agreement. Further grants of incentive awards may be made to Executive in future years. (c) Welfare Benefit Plans. During the Employment Period, Executive --------------------- and Executive's family shall be eligible for participation in, and shall receive all benefits under, the welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) ("Welfare Plans"). (d) Expenses. During the Employment Period, Executive shall be -------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company. (e) Fringe Benefits. During the Employment Period, Executive shall --------------- be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company. 6. Change in Control. For the purposes of this Agreement, a "Change in ----------------- Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by a Person who is on the Effective Date the beneficial owner of 35% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Company, (iii) any acquisition by the Company which reduces the number of Outstanding Company Voting Securities and thereby results in any person having beneficial ownership of more than 35% of the Outstanding Company Voting Securities, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (b) of this Section 6; or (b) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, -3- respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; provided, however, that (c) Notwithstanding anything in this definition to the contrary, a restructuring and/or separation of any line of business or business unit from the Company will not of itself constitute a Change in Control. 7. Termination of Employment. ------------------------- (a) Death, Retirement or Disability. Executive's employment and the ------------------------------- Employment Period shall terminate automatically upon Executive's death or Retirement. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of his regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. -4- (b) Termination by the Company. The Company may terminate -------------------------- Executive's employment for Poor Performance or with or without Cause. For purposes of this Agreement: "Poor Performance" shall mean the consistent failure of Executive to meet reasonable performance expectations (other than any such failure resulting from incapacity due to physical or mental illness); provided, however, that termination for Poor Performance shall not be effective unless at least 30 days prior to such termination Executive shall have received written notice from Chief Executive Officer or the Board which specifically identifies the manner in which the Board or the Chief Executive Officer believes that Executive has not met performance expectations and Executive shall have failed after receipt of such notice to resume the diligent performance of his duties to the satisfaction of the Chief Executive Officer or the Board; and "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President, Chief Executive Officer or the Board of Directors of the Company which specifically identifies the manner in which such Board or officer believes that Executive has not substantially performed Executive's duties, or (ii) any act of fraud, misappropriation, embezzlement or similar dishonest or wrongful act by Executive, or (iii) Executive's abuse of alcohol or any substance which materially interferes with Executive's ability to perform services on behalf of the Company, or (iv) Executive's conviction for, or plea of guilty or nolo contendere to, a felony. (c) Termination by Executive. Executive's employment may be ------------------------ terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; -5- (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the same may be increased from time to time, unless a similar reduction is made in salary and benefits of similarly-situated senior executives; (iii) the Company's requiring Executive, without his consent, to be based at any office or location other than in the greater metropolitan area of the city in which his office is located at the Effective Date; or (iv) any failure by the Company to comply with and satisfy Section 16(c) of this Agreement. (d) Notice of Termination. Any termination by the Company for Poor --------------------- Performance or Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 17(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason, Poor Performance or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if ------------------- Executive's employment is terminated other than by reason of death, Disability or Retirement, the date of receipt of the Notice of Termination, or any later date specified therein (which shall not be more than 60 days after the date of delivery of the Notice of Termination), or (ii) if Executive's employment is terminated by reason of death, Disability or Retirement, the Date of Termination will be the date of death or Retirement, or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good --------------------------------------------------------------- Reason; Termination by the Company Other Than for Poor Performance, Cause or - ---------------------------------------------------------------------------- Disability. If, prior to a Change in Control, the Company shall terminate - ---------- Executive's employment other than for Poor Performance, Cause or Disability, or Executive shall terminate employment for Good Reason within a period of 90 days after the occurrence of the event giving rise to Good Reason, then (and with respect to the payments and benefits -6- described in clauses (ii) through (vii) below, only if Executive executes a Release in substantially the form of Exhibit B hereto (the "Release")): (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination the sum of (A) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (B) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (A) and (B) shall be hereinafter referred to as the "Accrued Obligations"); and (ii) for the longer of six months or until Executive becomes employed with a subsequent employer, but in no event to exceed 18 months from the Date of Termination (the "Normal Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Normal Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to the greater of (1) 50% of his Bonus Opportunity (as defined in Section 5(b)(i)) for such year, or (2) 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of restricted stock of the Company ("Restricted Stock") held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's options to acquire Common Stock of the Company ("Options") that would have become vested (by lapse of time) within the 24- -7- month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to Section 8(a)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the Normal Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Prior to a Change in Control: Termination by the Company for Poor ----------------------------------------------------------------- Performance. If, prior to the occurrence of a Change in Control, the Company - ----------- shall terminate Executive's employment for Poor Performance, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for the shorter of 12 months after the Date of Termination or until Executive becomes employed with a subsequent employer (the "Poor Performance Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Poor Performance Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount -8- equal to 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(b)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the later of (1) six months from the Date of Termination, or (2) the end of the Poor Performance Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (c) After or in Connection with a Change in Control: Termination by --------------------------------------------------------------- Executive for Good Reason; Termination by the Company Other Than for Cause or - ----------------------------------------------------------------------------- Disability. If there occurs a Change in Control and, within 36 months following - ---------- such Change in Control (or if Executive can reasonably show that such termination by the Company was in anticipation of the Change in Control), the Company shall terminate Executive's employment other than for Cause or Disability, or Executive shall terminate employment for Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company (or its successor) shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for 24 months after the Date of Termination (the "Change in Control Severance Period"), the Company (or its successor) will, as a severance benefit, continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll -9- practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Change in Control Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of his Bonus Opportunity (as defined in Section 5(b)(i)); provided, however that the bonus payment described in this Section 8(c)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options held by Executive as of the Date of Termination will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(c)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the Change in Control Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (d) Death, Disability or Retirement. Regardless of whether or not a ------------------------------- Change in Control shall have occurred, if Executive's employment is terminated by reason of Executive's death, Disability or Retirement, this Agreement shall terminate without further obligations to Executive or his estate or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of -10- Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 8(d) shall include, without limitation, and Executive or his estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. (e) Cause or Voluntary Termination without Good Reason. Regardless -------------------------------------------------- of whether or not a Change in Control shall have occurred, if Executive's employment shall be terminated for Cause, or if Executive voluntarily terminates employment without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or ------------------------- limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 17(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross- Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross- Up Payment and a reduction of the Payments, in the aggregate, to an amount (the -11- "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. In that event, Executive shall direct which Payments are to be modified or reduced. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP or such other certified public accounting firm reasonably acceptable to the Company as may be designated by Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, -12- (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after- tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such -13- determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 11. Costs of Enforcement. Unless otherwise provided by the arbitrator(s) -------------------- in an arbitration proceeding pursuant to Section 14 hereof, in any action taken in good faith relating to the enforcement of this Agreement or any provision herein, Executive shall be entitled to be paid any and all costs and expenses incurred by him in enforcing or establishing his rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Executive is successful on at least one material issue raised in the enforcement proceeding. 12. Representations and Warranties. Executive hereby represents and ------------------------------ warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. ------------------------------------ (a) General. Executive and the Company understand and agree that the ------- purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor ------ is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, Executive shall be subject to the restrictions set forth in this Section 13. (b) Definitions. The following terms used in this Section 13 shall ----------- have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Position" means any employment with a Competitor in -------------------- which Executive will use or is likely to use any Confidential Information or Trade Secrets, or in which Executive has duties for such Competitor that relate to Competitive Services and that are the same or similar to those services actually performed by Executive for the Company; "Competitive Services" means the provision of health information -------------------- products and services, including, without limitation, practice management systems, value- -14- added networks, information management, health management services and health- related eCommerce. "Competitor" means any Person engaged, wholly or in part, in ---------- Competitive Services, including without limitation, Shared Medical Systems Corporation, McKesson HBOC, Inc., Quintiles Transnational Corporation, IMS Health Incorporated, PDX, IDX Systems Corporation, Medical Manager Corporation, Healtheon/WebMD Corporation and Medscape, Inc. "Confidential Information" means all information regarding the ------------------------ Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. "Confidential Information" shall include, but is not limited to, financial plans and data concerning the Company; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; lists of current or prospective customers; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Determination Date" means the date of termination of Executive's ------------------ employment with the Company for any reason whatsoever or any earlier date of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, ------ joint venture, limited liability company, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, --------------------------- shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Customers" means any Person to whom NDC Health ------------------- Information Services has sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date. "Protected Employees" means employees of the Company who were ------------------- employed by the Company at any time within six (6) months prior to the Determination Date. -15- "Restricted Period" means the Employment Period and a period ----------------- extending two (2) years from the termination of Executive's employment with the Company. "Restricted Territory" means the States of California, Florida, -------------------- Georgia, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Texas, plus Canada, the United Kingdom and South America. "Restrictive Covenants" means the restrictive covenants --------------------- contained in Section 13(c) hereof. "Trade Secret" means all information, without regard to form, ------------ including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or applicable state law. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential ------------------------------------------------- Information and Trade Secrets. Executive understands and agrees that the - ----------------------------- Confidential Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not directly or indirectly transmit or disclose any Trade Secret of the Company to any Person, and shall not make use of any such Trade Secret, directly or indirectly, for himself or for others, without the prior written consent of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process; provided, however, that in the event -16- disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (ii) Nonsolicitation of Protected Employees. Executive -------------------------------------- understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person. (iii) Restriction on Relationships with Protected Customers. ----------------------------------------------------- Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive shall not, without the prior written consent of the Company, directly or indirectly, on Executive's own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom Executive had Material Contact on the Company's behalf during the twelve (12) months immediately preceding the termination of his employment hereunder. For purposes of this Agreement, Executive had "Material Contact" with a Protected Customer if (a) he had business dealings with the Protected Customer on the Company's behalf; (b) he was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) he obtained Trade Secrets or Confidential Information about the customer as a result of his association with the Company. (iv) Noncompetition with the Company. The parties ------------------------------- acknowledge: (A) that Executive's services under this Agreement require special expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts with customers, suppliers, advertisers and vendors of the Company; (B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility and he will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing him in such position and giving him access to such information in reliance upon his agreement not to compete with the Company during the Restricted Period; (C) that due to his management duties, Executive will be the repository of a substantial portion of the goodwill of the Company and would have an unfair advantage in competing with the Company; (D) that due to Executive's special experience and talent, the loss of Executive's services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law; (E) that Executive is capable of competing with the Company; and (F) that Executive is capable of obtaining gainful, lucrative and desirable employment that does not violate the -17- restrictions contained in this Agreement. In consideration of the compensation and benefits being paid and to be paid by the Company to Executive hereunder, Executive hereby agrees that, during the Restricted Period, Executive will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. (d) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Executive ------------------------------- breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: (A) the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and (B) the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and ------------------------- agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. -18- 14. Arbitration. Any claim or dispute arising under this Agreement (other ----------- than under Section 13) shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all such controversies. The arbitration shall be conducted in Atlanta, Georgia, in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. (S)1, et. seq. The arbitrator(s) shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney's fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award shall be binding and conclusive upon the parties hereto, subject to 9 U.S.C. (S)10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. Initials of parties as to this Section 14: Company (by R.A.Y.): _________ Executive: _________ 15. Letter of Credit. In order to ensure the payment of the severance ---------------- benefit provided for in Section 8(c)(ii) of this Agreement, immediately following the commencement of any action by a third party with the aim of effecting a Change in Control of the Company, or the publicly-announced threat by a third party to commence any such action, the Company shall establish an irrevocable standby Letter of Credit issued by a national banking association in favor of Executive in the amount of the severance payment that would have been paid to Executive under Section 8(c)(ii) if the Date of Termination had occurred on the date of commencement, or publicly-announced threat of commencement, of such action by the third party. Such Letter of Credit shall provide that the issuer thereof, subject only to Executive's written certification to such issuer that Executive is entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement and that the Company shall have failed to commence payment of such benefit to Executive, shall have the unconditional obligation to pay the amount of such Letter of Credit to Executive in 24 equal monthly installments commencing on the first day of the month following the Date of Termination. In the event that subsequent to commencement of such installment payments to Executive pursuant to such Letter of Credit (i) the Company and Executive shall mutually agree that Executive shall not have been entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement or (ii) a court of competent jurisdiction shall finally adjudge Executive not to have been entitled to payment of such severance benefit and such judgment shall have been affirmed on appeal or shall not have been appealed within any time period specified for the filing of an appeal, Executive shall promptly pay to the Company the total amount previously paid to Executive by the issuer of such Letter of Credit and no further payment shall be made to Executive pursuant to such Letter of Credit. 16. Assignment and Successors. ------------------------- -19- (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 17. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more ------ instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, ------------ of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement ---------------- contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. (e) Governing Law. Except to the extent preempted by federal law, ------------- and without regard to conflict of laws principles, (i) the laws of the State of Florida shall govern the rights and obligations of the parties under Section 13 hereof, and (ii) the laws -20- of the State of Georgia shall govern this Agreement in all other respects, in each case, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: National Data Corporation National Data Plaza Atlanta, Georgia 30329-2010 To Executive: Walter M. Hoff ____________________ ____________________ Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. NATIONAL DATA CORPORATION By: /s/ Robert A. Yellowlees -------------------------------- Robert A. Yellowlees Chief Executive Officer EXECUTIVE: /s/ Walter M. Hoff -------------------------------- Walter M. Hoff -21- EXHIBIT A Description of Responsibilities ------------------------------- As Chief Executive Officer of NDC Health Information Services, Executive's responsibilities will include, but not be limited to, providing leadership in: . Developing aggressive strategies and operating plans to meet assigned goals that grow the NDC Health Information Services business at or faster than the market . Assuring programs to produce industry-leading products, services, systems, infrastructures and customer support in terms of cost, function and quality . Continuing development of an organization, management system, management team and workforce to assure that NDC Health Information Services is the leader in its industry in the health information services business. EXHIBIT B Form of Release --------------- This Release is granted effective as of the ____ day of _____, ____, by Walter M. Hoff ("Executive") in favor of National Data Corporation (the "Company"). This is the Release referred to that certain Employment Agreement dated as of January __, 2000 by and between the Company and Executive (the "Employment Agreement"). Executive gives this Release in consideration of the Company's promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part. 1. Release of the Company. Executive, for himself, his successors, assigns, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, employees, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys ("the Released Parties"), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney's fees and costs, or liabilities whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. (S) 2000(e), et seq. or the Americans With -- ---- Disabilities Act, 42 U.S.C. (S) 12101 et seq.; claims for statutory or common -- ---- law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. (S) 201 et seq.; claims for attorney's fees, expenses -- ---- and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Executive Retirement Income Security Act, 29 U.S.C. (S) 1001, et seq.; and provided, however, that nothing -- ---- herein shall release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company's bylaws, certificate of incorporation, Delaware law or otherwise. 2. Release of Claims Under Age Discrimination in Employment Act. Without ------------------------------------------------------------ limiting the generality of the foregoing, Executive agrees that by executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. (S) 621, et seq. It is understood -- --- that Executive is advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof. Executive agrees that he has carefully read this Release and is signing it voluntarily. Executive acknowledges that he has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving his right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by him. However, if Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to him under the Employment Agreement and he shall return to the Company any such payment received prior to that date. EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS. -2- EX-10.34 11 dex1034.txt EMPLOYMENT AGREEMENT Exhibit 10(xxxiv) Christine Rumsey EMPLOYMENT AGREEMENT CONTENTS 1. Effective Date................................................................. 1 -------------- 2. Employment..................................................................... 1 ---------- 3. Employment Period.............................................................. 1 ----------------- 4. Extent of Service.............................................................. 1 ----------------- 5. Compensation and Benefits...................................................... 2 ------------------------- (a) Base Salary.......................................................... 2 (b) Incentive and Savings Plans.......................................... 2 (c) Welfare Benefit Plans................................................ 3 (d) Expenses............................................................. 3 (e) Fringe Benefits...................................................... 3 6. Change in Control.............................................................. 3 ----------------- 7. Termination of Employment...................................................... 4 ------------------------- (a) Death, Retirement or Disability...................................... 4 (b) Termination by the Company........................................... 4 (c) Termination by Executive............................................. 5 (d) Notice of Termination................................................ 6 (e) Date of Termination.................................................. 6 8. Obligations of the Company upon Termination.................................... 6 ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Poor Performance, Cause or Disability........................................................ 6 (b) Prior to Change in Control: Termination by the Company for Poor Performance......................................... 8 (c) After or in Connection with a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Cause or Disability........................................................ 9
(d) Death, Disability or Retirement...................................... 10 (e) Cause or Voluntary Termination without Good Reason................... 11 9. Non-exclusivity of Rights...................................................... 11 ------------------------- 10. Certain Additional Payments by the Company..................................... 11 ------------------------------------------ 11. Costs of Enforcement........................................................... 14 -------------------- 12. Representations and Warranties................................................. 14 ------------------------------ 13. Restrictions on Conduct of Executive........................................... 14 ------------------------------------ (a) General.............................................................. 14 (b) Definitions.......................................................... 14 (c) Restrictive Covenants................................................ 16 (d) Enforcement of Restrictive Covenants................................. 18 14. Arbitration.................................................................... 19 ----------- 15. Letter of Credit............................................................... 19 ---------------- 16. Assignment and Successors...................................................... 20 ------------------------- 17. Miscellaneous.................................................................. 20 ------------- (a) Waiver............................................................... 20 (b) Severability......................................................... 20 (c) Other Agents......................................................... 20 (d) Entire Agreement..................................................... 20 (e) Governing Law........................................................ 20 (f) Notices.............................................................. 21 (g) Amendments and Modifications......................................... 21
-ii- EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this ____ day of January, 2000 by and between National Data Corporation, a Delaware corporation (the "Company"), and E. Christine Rumsey ("Executive"), to be effective as of the Effective Date, as defined in Section 1. BACKGROUND ---------- Executive currently serves as the Vice President, Human Resources of the Company. Executive and the Company desire to memorialize the terms of such employment in this Agreement. In addition, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. As it is desired and anticipated that Executive will continue to be employed and provide services for the Company's successor for at least 24 months following a Change in Control, one purpose of this Agreement is to provide Executive with compensation and benefits arrangements which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. The effective date of this Agreement (the "Effective -------------- Date") is December 1, 1999. 2. Employment. Executive is hereby employed as the Vice President, Human ---------- Resources of the Company. In such capacity, Executive shall have the responsibilities outlined on Exhibit A to this Agreement and such other responsibilities commensurate with such position as shall be assigned to her by the Chief Executive Officer of the Company, in accordance with the policies and objectives established by the Board. 3. Employment Period. Executive's employment hereunder shall begin on ----------------- the Effective Date and continue until terminated in accordance with Section 7 hereof (the "Employment Period"). 4. Extent of Service. During the Employment Period, Executive shall ----------------- render her services to the Company (or to its successor following a Change in Control) in conformity with professional standards, in a prudent and workmanlike manner and in a manner consistent with the obligations imposed on officers of corporations under applicable law. Executive shall promote the interests of the Company and its subsidiaries in carrying out Executive's duties and shall not deliberately take any action which could, or fail to take any action which failure could, reasonably be expected to have a material adverse effect upon the business of the Company or any of its subsidiaries or any of their respective affiliates. Executive agrees to devote her business time, attention, skill and efforts exclusively to the faithful performance of her duties hereunder (both before and after a Change in Control); provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the date of this Agreement (as to which activities Executive shall have given written notice to the Company prior to the Effective Date), the continued conduct of such activities subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities hereunder. 5. Compensation and Benefits. ------------------------- (a) Base Salary. Thereafter, during the Employment Period, the ----------- Company will pay to Executive a base salary in the amount of U.S. $235,000 per year ("Base Salary"), less normal withholdings, payable in equal bi-weekly or other installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board shall review Executive's Base Salary periodically and in its sole discretion, subject to approval of the Board, may increase Executive's Base Salary from time to time. The periodic review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive and Savings Plans. During the Employment Period, --------------------------- Executive shall be entitled to participate in incentive and savings plans, practices, policies and programs applicable generally to employees of the Company. Certain executive programs will be made available on a selective basis at the discretion of the Chief Executive Officer or the Compensation Committee of the Board. Without limiting the foregoing, the following shall apply: (i) Annual Bonus. Executive will have an annual bonus ------------ opportunity of not less than $100,000, based on 100% achievement of agreed-upon financial objectives ("Bonus Opportunity"). The annual Bonus Opportunity and specific performance objectives will be set forth in Executive's individual performance and incentive plan for each year. (ii) Incentive Awards. On or about November 1, 1999, the ---------------- Company made a grant of stock options to Executive as a long-term incentive for performance and in consideration for entering into this Agreement. Further grants of incentive awards may be made to Executive in future years. -2- (c) Welfare Benefit Plans. During the Employment Period, Executive --------------------- and Executive's family shall be eligible for participation in, and shall receive all benefits under, the welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) ("Welfare Plans"). (d) Expenses. During the Employment Period, Executive shall be -------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company. (e) Fringe Benefits. During the Employment Period, Executive shall --------------- be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company. 6. Change in Control. For the purposes of this Agreement, a "Change in ----------------- Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by a Person who is on the Effective Date the beneficial owner of 35% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Company, (iii) any acquisition by the Company which reduces the number of Outstanding Company Voting Securities and thereby results in any person having beneficial ownership of more than 35% of the Outstanding Company Voting Securities, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (b) of this Section 6; or (b) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the -3- corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; provided, however, that (c) Notwithstanding anything in this definition to the contrary, a restructuring and/or separation of any line of business or business unit from the Company will not of itself constitute a Change in Control. 7. Termination of Employment. ------------------------- (a) Death, Retirement or Disability. Executive's employment and the ------------------------------- Employment Period shall terminate automatically upon Executive's death or Retirement. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of her regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. (b) Termination by the Company. The Company may terminate -------------------------- Executive's employment for Poor Performance or with or without Cause. For purposes of this Agreement: "Poor Performance" shall mean the consistent failure of Executive to meet reasonable performance expectations (other than any such failure resulting from incapacity due to physical or mental illness); provided, however, that termination for Poor -4- Performance shall not be effective unless at least 30 days prior to such termination Executive shall have received written notice from Chief Executive Officer or the Board which specifically identifies the manner in which the Board or the Chief Executive Officer believes that Executive has not met performance expectations and Executive shall have failed after receipt of such notice to resume the diligent performance of her duties to the satisfaction of the Chief Executive Officer or the Board; and "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President, Chief Executive Officer or the Board of Directors of the Company which specifically identifies the manner in which such Board or officer believes that Executive has not substantially performed Executive's duties, or (ii) any act of fraud, misappropriation, embezzlement or similar dishonest or wrongful act by Executive, or (iii) Executive's abuse of alcohol or any substance which materially interferes with Executive's ability to perform services on behalf of the Company, or (iv) Executive's conviction for, or plea of guilty or nolo contendere to, a felony. (c) Termination by Executive. Executive's employment may be ------------------------ terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the same may be increased from time to time, unless a similar reduction is made in salary and benefits of similarly-situated senior executives; -5- (iii) the Company's requiring Executive, without her consent, to be based at any office or location other than in the greater metropolitan area of the city in which her office is located at the Effective Date; or (iv) any failure by the Company to comply with and satisfy Section 16(c) of this Agreement. (d) Notice of Termination. Any termination by the Company for Poor --------------------- Performance or Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 17(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason, Poor Performance or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if ------------------- Executive's employment is terminated other than by reason of death, Disability or Retirement, the date of receipt of the Notice of Termination, or any later date specified therein (which shall not be more than 60 days after the date of delivery of the Notice of Termination), or (ii) if Executive's employment is terminated by reason of death, Disability or Retirement, the Date of Termination will be the date of death or Retirement, or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good --------------------------------------------------------------- Reason; Termination by the Company Other Than for Poor Performance, Cause or - ---------------------------------------------------------------------------- Disability. If, prior to a Change in Control, the Company shall terminate - ---------- Executive's employment other than for Poor Performance, Cause or Disability, or Executive shall terminate employment for Good Reason within a period of 90 days after the occurrence of the event giving rise to Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes a Release in substantially the form of Exhibit B hereto (the "Release")): (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination the sum of (A) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (B) any accrued vacation pay -6- to the extent not theretofore paid (the sum of the amounts described in clauses (A) and (B) shall be hereinafter referred to as the "Accrued Obligations"); and (ii) for the longer of six months or until Executive becomes employed with a subsequent employer, but in no event to exceed 18 months from the Date of Termination (the "Normal Severance Period"), the Company will continue to pay Executive an amount equal to her monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Normal Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to the greater of (1) 50% of her Bonus Opportunity (as defined in Section 5(b)(i)) for such year, or (2) 100% of her Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to her year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of restricted stock of the Company ("Restricted Stock") held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's options to acquire Common Stock of the Company ("Options") that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to Section 8(a)(vi) above) -7- shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the Normal Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Prior to a Change in Control: Termination by the Company for Poor ----------------------------------------------------------------- Performance. If, prior to the occurrence of a Change in Control, the Company - ----------- shall terminate Executive's employment for Poor Performance, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for the shorter of 12 months after the Date of Termination or until Executive becomes employed with a subsequent employer (the "Poor Performance Severance Period"), the Company will continue to pay Executive an amount equal to her monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Poor Performance Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of her Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that -8- Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(b)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the later of (1) six months from the Date of Termination, or (2) the end of the Poor Performance Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive her Other Benefits. (c) After or in Connection with a Change in Control: Termination by --------------------------------------------------------------- Executive for Good Reason; Termination by the Company Other Than for Cause or - ----------------------------------------------------------------------------- Disability. If there occurs a Change in Control and, within 36 months following - ---------- such Change in Control (or if Executive can reasonably show that such termination by the Company was in anticipation of the Change in Control), the Company shall terminate Executive's employment other than for Cause or Disability, or Executive shall terminate employment for Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company (or its successor) shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for 24 months after the Date of Termination (the "Change in Control Severance Period"), the Company (or its successor) will, as a severance benefit, continue to pay Executive an amount equal to her monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and -9- (iii) during the Change in Control Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of her Bonus Opportunity (as defined in Section 5(b)(i)); provided, however that the bonus payment described in this Section 8(c)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options held by Executive as of the Date of Termination will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(c)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the Change in Control Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive her Other Benefits. (d) Death, Disability or Retirement. Regardless of whether or not a ------------------------------- Change in Control shall have occurred, if Executive's employment is terminated by reason of Executive's death, Disability or Retirement, this Agreement shall terminate without further obligations to Executive or her estate or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 8(d) shall include, without limitation, and Executive or her estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. -10- (e) Cause or Voluntary Termination without Good Reason. Regardless -------------------------------------------------- of whether or not a Change in Control shall have occurred, if Executive's employment shall be terminated for Cause, or if Executive voluntarily terminates employment without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or ------------------------- limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 17(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross- Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross- Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. In that event, Executive shall direct which Payments are to be modified or reduced. -11- (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP or such other certified public accounting firm reasonably acceptable to the Company as may be designated by Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, -12- (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after- tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. -13- 11. Costs of Enforcement. Unless otherwise provided by the arbitrator(s) -------------------- in an arbitration proceeding pursuant to Section 14 hereof, in any action taken in good faith relating to the enforcement of this Agreement or any provision herein, Executive shall be entitled to be paid any and all costs and expenses incurred by her in enforcing or establishing her rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Executive is successful on at least one material issue raised in the enforcement proceeding. 12. Representations and Warranties. Executive hereby represents and ------------------------------ warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of her obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. ------------------------------------ (a) General. Executive and the Company understand and agree that the ------- purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor ------ is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of her labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair her ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, Executive shall be subject to the restrictions set forth in this Section 13. (b) Definitions. The following terms used in this Section 13 shall ----------- have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Position" means any employment with a Competitor -------------------- in which Executive will use or is likely to use any Confidential Information or Trade Secrets, or in which Executive has duties for such Competitor that relate to Competitive Services and that are the same or similar to those services actually performed by Executive for the Company; "Competitive Services" means (i) the provision of products and -------------------- services to facilitate or assist with the movement of electronic payment and financial information, including, without limitation, merchant and cardholder processing, credit and debit transaction processing, check guarantee and verification, electronic authorization and capture, terminal management services, portfolio risk management, purchase card services, financial electronic data interchange, and cash management services, including internet applications of any of the foregoing, and (ii) the provision of health information -14- products and services, including, without limitation, practice management systems, value-added networks, information management, health management services and health-related eCommerce. "Competitor" means any Person engaged, wholly or in part, in ---------- Competitive Services, including without limitation, Equifax Inc., Vital, Electronic Data Systems Corporation, Concord EFS, Inc., First Data Corporation, Total System Services, Inc., Nova Corporation, Harbinger Corporation, First USA, Inc., First USA Paymentech, Inc., Automatic Data Processing, Inc., Shared Medical Systems Corporation, McKesson HBOC, Inc., Quintiles Transnational Corporation, IMS Health Incorporated, PDX, IDX Systems Corporation, Medical Manager Corporation, Healtheon/WebMD Corporation and Medscape, Inc. "Confidential Information" means all information regarding the ------------------------ Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. "Confidential Information" shall include, but is not limited to, financial plans and data concerning the Company; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; lists of current or prospective customers; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Determination Date" means the date of termination of Executive's ------------------ employment with the Company for any reason whatsoever or any earlier date of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, ------ joint venture, limited liability company, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, --------------------------- shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Customers" means any Person to whom the Company has ------------------- sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date. -15- "Protected Employees" means employees of the Company who were ------------------- employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the Employment Period and a period ----------------- extending two (2) years from the termination of Executive's employment with the Company. "Restricted Territory" means the States of Arizona, California, -------------------- Florida, Georgia, Illinois, Maryland, New York, Pennsylvania and Texas, plus Canada, the United Kingdom and South America. "Restrictive Covenants" means the restrictive covenants --------------------- contained in Section 13(c) hereof. "Trade Secret" means all information, without regard to form, ------------ including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or applicable state law. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential ------------------------------------------------- Information and Trade Secrets. Executive understands and agrees that the - ----------------------------- Confidential Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not directly or indirectly transmit or disclose any Trade Secret of the Company to any Person, and shall not make use of any such Trade Secret, directly or indirectly, for herself or for others, without the prior written consent of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. -16- Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (ii) Nonsolicitation of Protected Employees. Executive -------------------------------------- understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate her or her employment relationship with the Company or to enter into employment with any other Person. (iii) Restriction on Relationships with Protected Customers. ----------------------------------------------------- Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive shall not, without the prior written consent of the Company, directly or indirectly, on Executive's own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom Executive had Material Contact on the Company's behalf during the twelve (12) months immediately preceding the termination of her employment hereunder. For purposes of this Agreement, Executive had "Material Contact" with a Protected Customer if (a) she had business dealings with the Protected Customer on the Company's behalf; (b) she was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) she obtained Trade Secrets or Confidential Information about the customer as a result of her association with the Company. (iv) Noncompetition with the Company. The parties ------------------------------- acknowledge: (A) that Executive's services under this Agreement require special expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts with customers, suppliers, advertisers and vendors of the Company; (B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility and she will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing her in such position and giving her access to such information in reliance upon her agreement not to compete with the Company during the Restricted Period; (C) that due to her management duties, Executive will be the repository of a substantial portion of the goodwill of the Company and would have an unfair advantage in competing with the Company; (D) that due to Executive's special experience -17- and talent, the loss of Executive's services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law; (E) that Executive is capable of competing with the Company; and (F) that Executive is capable of obtaining gainful, lucrative and desirable employment that does not violate the restrictions contained in this Agreement. In consideration of the compensation and benefits being paid and to be paid by the Company to Executive hereunder, Executive hereby agrees that, during the Restricted Period, Executive will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. (d) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Executive ------------------------------- breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: (A) the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and (B) the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and ------------------------- agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and -18- Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. 14. Arbitration. Any claim or dispute arising under this Agreement (other ----------- than under Section 13) shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all such controversies. The arbitration shall be conducted in Atlanta, Georgia, in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. (S)1, et. seq. The arbitrator(s) shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney's fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award shall be binding and conclusive upon the parties hereto, subject to 9 U.S.C. (S)10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. Initials of parties as to this Section 14: Company (by R.A.Y.): _________ Executive: _________ 15. Letter of Credit. In order to ensure the payment of the severance ---------------- benefit provided for in Section 8(c)(ii) of this Agreement, immediately following the commencement of any action by a third party with the aim of effecting a Change in Control of the Company, or the publicly-announced threat by a third party to commence any such action, the Company shall establish an irrevocable standby Letter of Credit issued by a national banking association in favor of Executive in the amount of the severance payment that would have been paid to Executive under Section 8(c)(ii) if the Date of Termination had occurred on the date of commencement, or publicly-announced threat of commencement, of such action by the third party. Such Letter of Credit shall provide that the issuer thereof, subject only to Executive's written certification to such issuer that Executive is entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement and that the Company shall have failed to commence payment of such benefit to Executive, shall have the unconditional obligation to pay the amount of such Letter of Credit to Executive in 24 equal monthly installments commencing on the first day of the month following the Date of Termination. In the event that subsequent to commencement of such installment payments to Executive pursuant to such Letter of Credit (i) the Company and Executive shall mutually agree that Executive shall not have been entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement or (ii) a court of competent jurisdiction shall finally adjudge Executive not to have been entitled to payment of such severance benefit and such judgment shall have been affirmed on appeal or shall not have been appealed within any time period specified for the filing of an appeal, Executive shall promptly pay to the Company the total amount previously paid to Executive by the issuer of such Letter of Credit and no further payment shall be made to Executive pursuant to such Letter of Credit. -19- 16. Assignment and Successors. ------------------------- (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 17. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more ------ instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, ------------ of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement ---------------- contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. (e) Governing Law. Except to the extent preempted by federal law, ------------- and without regard to conflict of laws principles, (i) the laws of the State of Florida shall -20- govern the rights and obligations of the parties under Section 13 hereof, and (ii) the laws of the State of Georgia shall govern this Agreement in all other respects, in each case, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: National Data Corporation National Data Plaza Atlanta, Georgia 30329-2010 To Executive: E. Christine Rumsey ____________________ ____________________ Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. NATIONAL DATA CORPORATION By: /s/ Robert A. Yellowlees ------------------------------ Robert A. Yellowlees Chief Executive Officer EXECUTIVE: /s/ E. Christine Rumsey ------------------------------ E. Christine Rumsey -21- EXHIBIT A Description of Responsibilities ------------------------------- Executive's responsibilities will include, but not be limited to, the following: . Serving as head of Human Resources, providing leadership in establishing human resources strategies and programs to support line management achievement of goals and operating plan objectives. . Establishing proactive programs to strengthen the skill set and effectiveness of the human resources personnel at multiple locations. EXHIBIT B Form of Release --------------- This Release is granted effective as of the ____ day of _____, ____, by E. Christine Rumsey ("Executive") in favor of National Data Corporation (the "Company"). This is the Release referred to that certain Employment Agreement dated as of January __, 2000 by and between the Company and Executive (the "Employment Agreement"). Executive gives this Release in consideration of the Company's promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part. 1. Release of the Company. Executive, for herself, her successors, assigns, attorneys, and all those entitled to assert her rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, employees, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys ("the Released Parties"), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney's fees and costs, or liabilities whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. (S) 2000(e), et seq. or the Americans With -- ---- Disabilities Act, 42 U.S.C. (S) 12101 et seq.; claims for statutory or common -- ---- law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. (S) 201 et seq.; claims for attorney's fees, expenses -- ---- and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Executive Retirement Income Security Act, 29 U.S.C. (S) 1001, et seq.; and provided, however, that nothing -- ---- herein shall release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company's bylaws, certificate of incorporation, Delaware law or otherwise. 2. Release of Claims Under Age Discrimination in Employment Act. Without ------------------------------------------------------------ limiting the generality of the foregoing, Executive agrees that by executing this Release, she has released and waived any and all claims she has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. (S) 621, et seq. It is understood -- --- that Executive is advised to consult with an attorney prior to executing this Release; that she in fact has consulted a knowledgeable, competent attorney regarding this Release; that she may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration she receives for this Release is in addition to amounts to which she was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof. Executive agrees that she has carefully read this Release and is signing it voluntarily. Executive acknowledges that she has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving her right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by her. However, if Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to her under the Employment Agreement and she shall return to the Company any such payment received prior to that date. EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EXECUTIVE ACKNOWLEDGES THAT SHE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HER CHOOSING CONCERNING HER EXECUTION OF THIS RELEASE AND THAT SHE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS. -2- EX-10.35 12 dex1035.txt EMPLOYMENT AGREEMENT Exhibit 10(xxxv) Charles Miller EMPLOYMENT AGREEMENT CONTENTS 1. Effective Date.................................................. 1 -------------- 2. Employment...................................................... 1 ---------- 3. Employment Period............................................... 1 ----------------- 4. Extent of Service............................................... 1 ----------------- 5. Compensation and Benefits....................................... 2 ------------------------- (a) Base Salary........................................ 2 (b) Incentive and Savings Plans........................ 2 (c) Welfare Benefit Plans.............................. 3 (d) Expenses........................................... 3 (e) Fringe Benefits.................................... 3 6. Change in Control............................................... 3 ----------------- 7. Termination of Employment....................................... 4 ------------------------- (a) Death, Retirement or Disability.................... 4 (b) Termination by the Company......................... 5 (c) Termination by Executive........................... 5 (d) Notice of Termination.............................. 6 (e) Date of Termination................................ 6 8. Obligations of the Company upon Termination..................... 6 ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Poor Performance, Cause or Disability...................................... 6 (b) Prior to Change in Control: Termination by the Company for Poor Performance....................... 8 (c) After or in Connection with a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Cause or Disability......................................... 9
(d) Death, Disability or Retirement...................... 10 (e) Cause or Voluntary Termination without Good Reason... 11 9. Non-exclusivity of Rights...................................... 11 ------------------------- 10. Certain Additional Payments by the Company..................... 11 ------------------------------------------ 11. Costs of Enforcement........................................... 14 -------------------- 12. Representations and Warranties................................. 14 ------------------------------ 13. Restrictions on Conduct of Executive........................... 14 ------------------------------------ (a) General............................................ 14 (b) Definitions........................................ 14 (c) Restrictive Covenants.............................. 16 (d) Enforcement of Restrictive Covenants............... 18 14. Arbitration.................................................... 19 ----------- 15. Letter of Credit............................................... 19 ---------------- 16. Assignment and Successors...................................... 19 ------------------------- 17. Miscellaneous.................................................. 20 ------------- (a) Waiver............................................. 20 (b) Severability....................................... 20 (c) Other Agents....................................... 20 (d) Entire Agreement................................... 20 (e) Governing Law...................................... 20 (f) Notices............................................ 21 (g) Amendments and Modifications....................... 21
-ii- EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this ____ day of March, 2000 by and between National Data Corporation, a Delaware corporation (the "Company"), and Charles W. Miller ("Executive"), to be effective as of the Effective Date, as defined in Section 1. BACKGROUND ---------- Executive currently serves as the Executive Vice President of NDC Health Information Services, a line of business of the Company. Executive and the Company desire to memorialize the terms of such employment in this Agreement. In addition, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. As it is desired and anticipated that Executive will continue to be employed and provide services for the Company's successor for at least 24 months following a Change in Control, one purpose of this Agreement is to provide Executive with compensation and benefits arrangements which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. The effective date of this Agreement (the -------------- "Effective Date") is January 17, 2000. 2. Employment. Executive is hereby employed as the Executive Vice ---------- President of NDC Health Information Services, a line of business of the Company. In such capacity, Executive shall have the responsibilities outlined on Exhibit A to this Agreement and such other responsibilities commensurate with such position as shall be assigned to him by the Chief Executive Officer of the Company, in accordance with the policies and objectives established by the Board. 3. Employment Period. Executive's employment hereunder shall begin ----------------- on the Effective Date and continue until terminated in accordance with Section 7 hereof (the "Employment Period"). 4. Extent of Service. During the Employment Period, Executive shall ----------------- render his services to the Company (or to its successor following a Change in Control) in conformity with professional standards, in a prudent and workmanlike manner and in a manner consistent with the obligations imposed on officers of corporations under applicable law. Executive shall promote the interests of the Company and its subsidiaries in carrying out Executive's duties and shall not deliberately take any action which could, or fail to take any action which failure could, reasonably be expected to have a material adverse effect upon the business of the Company or any of its subsidiaries or any of their respective affiliates. Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder (both before and after a Change in Control); provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the date of this Agreement (as to which activities Executive shall have given written notice to the Company prior to the Effective Date), the continued conduct of such activities subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities hereunder. 5. Compensation and Benefits. ------------------------- (a) Base Salary. Thereafter, during the Employment Period, the ----------- Company will pay to Executive a base salary in the amount of U.S. $310,000 per year ("Base Salary"), less normal withholdings, payable in equal bi-weekly or other installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board shall review Executive's Base Salary periodically and in its sole discretion, subject to approval of the Board, may increase Executive's Base Salary from time to time. The periodic review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive and Savings Plans. During the Employment Period, --------------------------- Executive shall be entitled to participate in incentive and savings plans, practices, policies and programs applicable generally to employees of the Company. Certain executive programs will be made available on a selective basis at the discretion of the Chief Executive Officer or the Compensation Committee of the Board. Without limiting the foregoing, the following shall apply: (i) Annual Bonus. Executive will have an annual bonus ------------ opportunity of not less than $200,000, based on 100% achievement of agreed-upon financial objectives ("Bonus Opportunity"). The Company may determine in any year that a portion of the Bonus Opportunity for that year will be deferred based upon sustained results over time. The annual Bonus Opportunity and specific performance objectives will be set forth in Executive's individual performance and incentive plan for each year. -2- (ii) Incentive Awards. On or about the Effective Date ---------------- (or earlier upon Executive's hire date), the Company made a grant of restricted stock and/or stock options to Executive as a long-term incentive for performance and in consideration for entering into this Agreement. Further grants of incentive awards may be made to Executive in future years. (c) Welfare Benefit Plans. During the Employment Period, --------------------- Executive and Executive's family shall be eligible for participation in, and shall receive all benefits under, the welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) ("Welfare Plans"). (d) Expenses. During the Employment Period, Executive shall be -------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company. (e) Fringe Benefits. During the Employment Period, Executive --------------- shall be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company. 6. Change in Control. For the purposes of this Agreement, a "Change ----------------- in Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by a Person who is on the Effective Date the beneficial owner of 35% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Company, (iii) any acquisition by the Company which reduces the number of Outstanding Company Voting Securities and thereby results in any person having beneficial ownership of more than 35% of the Outstanding Company Voting Securities, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (b) of this Section 6; or (b) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, -3- respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; provided, however, that (c) Notwithstanding anything in this definition to the contrary, a restructuring and/or separation of any line of business or business unit from the Company will not of itself constitute a Change in Control. 7. Termination of Employment. ------------------------- (a) Death, Retirement or Disability. Executive's employment and ------------------------------- the Employment Period shall terminate automatically upon Executive's death or Retirement. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of his regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. -4- (b) Termination by the Company. The Company may terminate -------------------------- Executive's employment for Poor Performance or with or without Cause. For purposes of this Agreement: "Poor Performance" shall mean the consistent failure of Executive to meet reasonable performance expectations (other than any such failure resulting from incapacity due to physical or mental illness); provided, however, that termination for Poor Performance shall not be effective unless at least 30 days prior to such termination Executive shall have received written notice from Chief Executive Officer or the Board which specifically identifies the manner in which the Board or the Chief Executive Officer believes that Executive has not met performance expectations and Executive shall have failed after receipt of such notice to resume the diligent performance of his duties to the satisfaction of the Chief Executive Officer or the Board; and "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President, Chief Executive Officer or the Board of Directors of the Company which specifically identifies the manner in which such Board or officer believes that Executive has not substantially performed Executive's duties, or (ii) any act of fraud, misappropriation, embezzlement or similar dishonest or wrongful act by Executive, or (iii) Executive's abuse of alcohol or any substance which materially interferes with Executive's ability to perform services on behalf of the Company, or (iv) Executive's conviction for, or plea of guilty or nolo contendere to, a felony. (c) Termination by Executive. Executive's employment may be ------------------------ terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; -5- (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the same may be increased from time to time, unless a similar reduction is made in salary and benefits of similarly-situated senior executives; (iii) the Company's requiring Executive, without his consent, to be based at any office or location other than in the greater metropolitan area of the city in which his office is located at the Effective Date; or (iv) any failure by the Company to comply with and satisfy Section 16(c) of this Agreement. (d) Notice of Termination. Any termination by the Company for Poor --------------------- Performance or Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 17(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason, Poor Performance or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if ------------------- Executive's employment is terminated other than by reason of death, Disability or Retirement, the date of receipt of the Notice of Termination, or any later date specified therein (which shall not be more than 60 days after the date of delivery of the Notice of Termination), or (ii) if Executive's employment is terminated by reason of death, Disability or Retirement, the Date of Termination will be the date of death or Retirement, or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. ------------------------------------------ (a) Prior to a Change in Control: Termination by Executive for Good --------------------------------------------------------------- Reason; Termination by the Company Other Than for Poor Performance, Cause or - ---------------------------------------------------------------------------- Disability. If, prior to a Change in Control, the Company shall terminate - ---------- Executive's employment other than for Poor Performance, Cause or Disability, or Executive shall terminate employment for Good Reason within a period of 90 days after the occurrence of the event giving rise to Good Reason, then (and with respect to the payments and benefits -6- described in clauses (ii) through (vii) below, only if Executive executes a Release in substantially the form of Exhibit B hereto (the "Release")): (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination the sum of (A) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (B) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (A) and (B) shall be hereinafter referred to as the "Accrued Obligations"); and (ii) for the longer of six months or until Executive becomes employed with a subsequent employer, but in no event to exceed 18 months from the Date of Termination (the "Normal Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Normal Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to the greater of (1) 50% of his Bonus Opportunity (as defined in Section 5(b)(i)) for such year, or (2) 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of restricted stock of the Company ("Restricted Stock") held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's options to acquire Common Stock of the Company ("Options") that would have become vested (by lapse of time) within the 24- -7- month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to Section 8(a)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90th day following the end of the Normal Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Prior to a Change in Control: Termination by the Company for Poor ----------------------------------------------------------------- Performance. If, prior to the occurrence of a Change in Control, the Company - ----------- shall terminate Executive's employment for Poor Performance, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for the shorter of 12 months after the Date of Termination or until Executive becomes employed with a subsequent employer (the "Poor Performance Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Poor Performance Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount -8- equal to 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(b)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90th day following the end of the later of (1) six months from the Date of Termination, or (2) the end of the Poor Performance Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (c) After or in Connection with a Change in Control: Termination by --------------------------------------------------------------- Executive for Good Reason; Termination by the Company Other Than for Cause or - ----------------------------------------------------------------------------- Disability. If there occurs a Change in Control and, within 36 months - ---------- following such Change in Control (or if Executive can reasonably show that such termination by the Company was in anticipation of the Change in Control), the Company shall terminate Executive's employment other than for Cause or Disability, or Executive shall terminate employment for Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company (or its successor) shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for 24 months after the Date of Termination (the "Change in Control Severance Period"), the Company (or its successor) will, as a severance benefit, continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll -9- practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Change in Control Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of his Bonus Opportunity (as defined in Section 5(b)(i)); provided, however that the bonus payment described in this Section 8(c)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options held by Executive as of the Date of Termination will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(c)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90th day following the end of the Change in Control Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (d) Death, Disability or Retirement. Regardless of whether or not a ------------------------------- Change in Control shall have occurred, if Executive's employment is terminated by reason of Executive's death, Disability or Retirement, this Agreement shall terminate without further obligations to Executive or his estate or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of -10- Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 8(d) shall include, without limitation, and Executive or his estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. (e) Cause or Voluntary Termination without Good Reason. Regardless -------------------------------------------------- of whether or not a Change in Control shall have occurred, if Executive's employment shall be terminated for Cause, or if Executive voluntarily terminates employment without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or ------------------------- limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 17(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross- Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross- Up Payment and a reduction of the Payments, in the aggregate, to an amount (the -11- "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. In that event, Executive shall direct which Payments are to be modified or reduced. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP or such other certified public accounting firm reasonably acceptable to the Company as may be designated by Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, -12- (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after- tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such -13- determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 11. Costs of Enforcement. Unless otherwise provided by the arbitrator(s) -------------------- in an arbitration proceeding pursuant to Section 14 hereof, in any action taken in good faith relating to the enforcement of this Agreement or any provision herein, Executive shall be entitled to be paid any and all costs and expenses incurred by him in enforcing or establishing his rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Executive is successful on at least one material issue raised in the enforcement proceeding. 12. Representations and Warranties. Executive hereby represents and ------------------------------ warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. ------------------------------------ (a) General. Executive and the Company understand and agree that the ------- purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor ------ is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, Executive shall be subject to the restrictions set forth in this Section 13. (b) Definitions. The following terms used in this Section 13 shall ----------- have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Position" means any employment with a Competitor -------------------- in which Executive will use or is likely to use any Confidential Information or Trade Secrets, or in which Executive has duties for such Competitor that relate to Competitive Services and that are the same or similar to those services actually performed by Executive for the Company; "Competitive Services" means the provision of health information -------------------- products and services, including, without limitation, practice management systems, value- -14- added networks, information management, health management services and health- related eCommerce. "Competitor" means any Person engaged, wholly or in part, in ---------- Competitive Services, including without limitation, Shared Medical Systems Corporation, McKesson HBOC, Inc., Quintiles Transnational Corporation, IMS Health Incorporated, PDX, IDX Systems Corporation, Medical Manager Corporation, Healtheon/WebMD Corporation and Medscape, Inc. "Confidential Information" means all information regarding the ------------------------ Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. "Confidential Information" shall include, but is not limited to, financial plans and data concerning the Company; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; lists of current or prospective customers; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Determination Date" means the date of termination of ------------------ Executive's employment with the Company for any reason whatsoever or any earlier date of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, ------ joint venture, limited liability company, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, --------------------------- shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Customers" means any Person to whom NDC Health ------------------- Information Services has sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date. "Protected Employees" means employees of the Company who were ------------------- employed by the Company at any time within six (6) months prior to the Determination Date. -15- "Restricted Period" means the Employment Period and a period ----------------- extending two (2) years from the termination of Executive's employment with the Company. "Restricted Territory" means the States of California, Florida, -------------------- Georgia, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Texas, plus Canada, the United Kingdom and South America. "Restrictive Covenants" means the restrictive covenants --------------------- contained in Section 13(c) hereof. "Trade Secret" means all information, without regard to form, ------------ including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or applicable state law. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential ------------------------------------------------- Information and Trade Secrets. Executive understands and agrees that the - ----------------------------- Confidential Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not directly or indirectly transmit or disclose any Trade Secret of the Company to any Person, and shall not make use of any such Trade Secret, directly or indirectly, for himself or for others, without the prior written consent of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process; provided, however, that in the event -16- disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (ii) Nonsolicitation of Protected Employees. Executive -------------------------------------- understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person. (iii) Restriction on Relationships with Protected Customers. ----------------------------------------------------- Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive shall not, without the prior written consent of the Company, directly or indirectly, on Executive's own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom Executive had Material Contact on the Company's behalf during the twelve (12) months immediately preceding the termination of his employment hereunder. For purposes of this Agreement, Executive had "Material Contact" with a Protected Customer if (a) he had business dealings with the Protected Customer on the Company's behalf; (b) he was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) he obtained Trade Secrets or Confidential Information about the customer as a result of his association with the Company. (iv) Noncompetition with the Company. The parties acknowledge: ------------------------------- (A) that Executive's services under this Agreement require special expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts with customers, suppliers, advertisers and vendors of the Company; (B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility and he will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing him in such position and giving him access to such information in reliance upon his agreement not to compete with the Company during the Restricted Period; (C) that due to his management duties, Executive will be the repository of a substantial portion of the goodwill of the Company and would have an unfair advantage in competing with the Company; (D) that due to Executive's special experience and talent, the loss of Executive's services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law; (E) that Executive is capable of competing with the Company; and (F) that Executive is capable of obtaining gainful, lucrative and desirable employment that does not violate the -17- restrictions contained in this Agreement. In consideration of the compensation and benefits being paid and to be paid by the Company to Executive hereunder, Executive hereby agrees that, during the Restricted Period, Executive will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. (d) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Executive ------------------------------- breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: (A) the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and (B) the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and ------------------------- agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. -18- 14. Arbitration. Any claim or dispute arising under this Agreement (other ----------- than under Section 13) shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all such controversies. The arbitration shall be conducted in Atlanta, Georgia, in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. (S)1, et. seq. The arbitrator(s) shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney's fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award shall be binding and conclusive upon the parties hereto, subject to 9 U.S.C. (S)10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. Initials of parties as to this Section 14: Company (by R.A.Y.): _________ Executive: _________ 15. Letter of Credit. In order to ensure the payment of the severance ---------------- benefit provided for in Section 8(c)(ii) of this Agreement, immediately following the commencement of any action by a third party with the aim of effecting a Change in Control of the Company, or the publicly-announced threat by a third party to commence any such action, the Company shall establish an irrevocable standby Letter of Credit issued by a national banking association in favor of Executive in the amount of the severance payment that would have been paid to Executive under Section 8(c)(ii) if the Date of Termination had occurred on the date of commencement, or publicly-announced threat of commencement, of such action by the third party. Such Letter of Credit shall provide that the issuer thereof, subject only to Executive's written certification to such issuer that Executive is entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement and that the Company shall have failed to commence payment of such benefit to Executive, shall have the unconditional obligation to pay the amount of such Letter of Credit to Executive in 24 equal monthly installments commencing on the first day of the month following the Date of Termination. In the event that subsequent to commencement of such installment payments to Executive pursuant to such Letter of Credit (i) the Company and Executive shall mutually agree that Executive shall not have been entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement or (ii) a court of competent jurisdiction shall finally adjudge Executive not to have been entitled to payment of such severance benefit and such judgment shall have been affirmed on appeal or shall not have been appealed within any time period specified for the filing of an appeal, Executive shall promptly pay to the Company the total amount previously paid to Executive by the issuer of such Letter of Credit and no further payment shall be made to Executive pursuant to such Letter of Credit. 16. Assignment and Successors. ------------------------- -19- (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 17. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more ------ instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part ------------ thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement ---------------- contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. (e) Governing Law. Except to the extent preempted by federal law, ------------- and without regard to conflict of laws principles, (i) the laws of the State of Florida shall govern the rights and obligations of the parties under Section 13 hereof, and (ii) the laws -20- of the State of Georgia shall govern this Agreement in all other respects, in each case, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other ------- communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: National Data Corporation National Data Plaza Atlanta, Georgia 30329-2010 To Executive: Charles W. Miller ____________________ ____________________ Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. NATIONAL DATA CORPORATION By: /s/ Robert A. Yellowlees --------------------------- Robert A. Yellowlees Chief Executive Officer EXECUTIVE: /s/ Charles W. Miller -------------------------------- Charles W. Miller -21- EXHIBIT A Description of Responsibilities ------------------------------- Executive's responsibilities will include, but not be limited to, overseeing operations in the Health Information Services line of business of the Company following the spinoff of eCommerce. EXHIBIT B Form of Release --------------- This Release is granted effective as of the ____ day of _____, ____, by Charles W. Miller ("Executive") in favor of National Data Corporation (the "Company"). This is the Release referred to that certain Employment Agreement dated as of March __, 2000 by and between the Company and Executive (the "Employment Agreement"). Executive gives this Release in consideration of the Company's promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part. 1. Release of the Company. Executive, for himself, his successors, assigns, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, employees, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys ("the Released Parties"), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney's fees and costs, or liabilities whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. (S) 2000(e), et seq. or the Americans With -- ---- Disabilities Act, 42 U.S.C. (S) 12101 et seq.; claims for statutory or common -- ---- law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. (S) 201 et seq.; claims for attorney's fees, expenses -- ---- and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Executive Retirement Income Security Act, 29 U.S.C. (S) 1001, et seq.; and provided, however, that nothing -- ---- herein shall release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company's bylaws, certificate of incorporation, Delaware law or otherwise. 2. Release of Claims Under Age Discrimination in Employment Act. Without ------------------------------------------------------------ limiting the generality of the foregoing, Executive agrees that by executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. (S) 621, et seq. It is understood ------ that Executive is advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof. Executive agrees that he has carefully read this Release and is signing it voluntarily. Executive acknowledges that he has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving his right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by him. However, if Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to him under the Employment Agreement and he shall return to the Company any such payment received prior to that date. EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS. -2- EX-10.36 13 dex1036.txt EMPLOYMENT AGREEMENT EXHIBIT 10(XXXVI) ________________________________________________________________ EMPLOYMENT AGREEMENT BETWEEN GLENN ROSENKOETTER AND NATIONAL DATA CORPORATION Dated as of May 1, 2000 _________________________________________________________________ EMPLOYMENT AGREEMENT CONTENTS 1. Effective Date................................................................................ 1 -------------- 2. Employment.................................................................................... 1 ---------- 3. Employment Period............................................................................. 1 ----------------- 4. Extent of Service............................................................................. 1 ----------------- 5. Compensation and Benefits..................................................................... 2 ------------------------- (a) Base Salary........................................................................... 2 (b) Incentive and Savings Plans........................................................... 2 (c) Welfare Benefit Plans................................................................. 3 (d) Expenses.............................................................................. 3 (e) Fringe Benefits....................................................................... 3 6. Change in Control............................................................................. 3 ---------------- 7. Termination of Employment..................................................................... 4 ------------------------- (a) Death, Retirement or Disability....................................................... 4 (b) Termination by the Company............................................................ 5 (c) Termination by Executive.............................................................. 6 (d) Notice of Termination................................................................. 6 (e) Date of Termination................................................................... 6 8. Obligations of the Company upon Termination................................................... 7 ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Poor Performance, Cause or Disability............................................................................ 7 (b) Prior to Change in Control: Termination by the Company for Poor Performance........................................................................... 8 (c) After or in Connection with a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Cause or Disability.......................................................... 9 (d) Death, Disability or Retirement....................................................... 11
(e) Cause or Voluntary Termination without Good Reason.................................... 11 9. Non-exclusivity of Rights..................................................................... 11 ------------------------- 10. Certain Additional Payments by the Company................................................... 11 ------------------------------------------ 11. Costs of Enforcement......................................................................... 14 -------------------- 12. Representations and Warranties............................................................... 14 ------------------------------ 13. Restrictions on Conduct of Executive......................................................... 14 ------------------------------------ (a) General............................................................................... 14 (b) Definitions........................................................................... 15 (c) Restrictive Covenants................................................................. 16 (d) Enforcement of Restrictive Covenants.................................................. 18 14. Arbitration.................................................................................. 19 ----------- 15. Letter of Credit............................................................................. 19 ---------------- 16. Assignment and Successors.................................................................... 20 ------------------------- 17. Miscellaneous................................................................................ 20 ------------- (a) Waiver................................................................................ 20 (b) Severability.......................................................................... 20 (c) Other Agents.......................................................................... 21 (d) Entire Agreement...................................................................... 21 (e) Governing Law......................................................................... 21 (f) Notices............................................................................... 21 (g) Amendments and Modifications.......................................................... 21
-ii- EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this 23rd day of May, 2000 by and between National Data Corporation, a Delaware corporation (the "Company"), and Glenn Rosenkoetter ("Executive"), to be effective as of the Effective Date, as defined in Section 1. BACKGROUND ---------- Executive has been offered a position as Executive Vice President, Sales and Marketing, of NDC Health Information Services, a line of business of the Company. Executive and the Company desire to memorialize the terms of such employment in this Agreement. In addition, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. As it is desired and anticipated that Executive will continue to be employed and provide services for the Company's successor for at least 24 months following a Change in Control, one purpose of this Agreement is to provide Executive with compensation and benefits arrangements which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. The effective date of this Agreement (the -------------- "Effective Date") is May 1, 2000. 2. Employment. Executive is hereby employed as the Executive Vice ---------- President, Sales and Marketing, of NDC Health Information Services, a line of business of the Company. In such capacity, Executive shall have the responsibilities outlined on Exhibit A to this Agreement and such other responsibilities commensurate with such position as shall be assigned to him by the Chief Executive Officer of the Company, in accordance with the policies and objectives established by the Board. 3. Employment Period. Executive's employment hereunder shall begin on ----------------- the Effective Date and continue until terminated in accordance with Section 7 hereof (the "Employment Period"). 4. Extent of Service. During the Employment Period, Executive shall ----------------- render his services to the Company (or to its successor following a Change in Control) in conformity with professional standards, in a prudent and workmanlike manner and in a manner consistent with the obligations imposed on officers of corporations under applicable law. Executive shall promote the interests of the Company and its subsidiaries in carrying out Executive's duties and shall not deliberately take any action which could, or fail to take any action which failure could, reasonably be expected to have a material adverse effect upon the business of the Company or any of its subsidiaries or any of their respective affiliates. Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder (both before and after a Change in Control); provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities, (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement, and (iii) with the approval of the Company, which approval shall not be unreasonably withheld, conditioned or delayed, to devote reasonable periods of time to industry or professional activities. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the date of this Agreement (as to which activities Executive shall have given written notice to the Company prior to the Effective Date), the continued conduct of such activities subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities hereunder. 5. Compensation and Benefits. ------------------------- (a) Base Salary. Thereafter, during the Employment Period, the ----------- Company will pay to Executive a base salary in the amount of U.S. $310,000 per year ("Base Salary"), less normal withholdings, payable in equal bi-weekly or other installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board shall review Executive's Base Salary periodically and in its sole discretion, subject to approval of the Board, may increase Executive's Base Salary from time to time. The periodic review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive and Savings Plans. During the Employment Period, --------------------------- Executive shall be entitled to participate in incentive and savings plans, practices, policies and programs applicable generally to employees of the Company. Certain executive programs will be made available on a selective basis at the discretion of the Chief Executive Officer or the Compensation Committee of the Board. Without limiting the foregoing, the following shall apply: (i) Annual Bonus. Executive will have an annual bonus ------------ opportunity of not less than $200,000, based on 100% achievement of agreed-upon financial objectives ("Bonus Opportunity"). The Company may determine in any year that a portion of the Bonus Opportunity for that year will be deferred based upon sustained results over time. The annual Bonus Opportunity and specific performance objectives will be set forth in Executive's individual performance and incentive plan for each year. -2- (ii) Incentive Awards. As a long-term incentive for performance ---------------- and in consideration for entering into this Agreement, on or about the Effective Date, the Company shall grant to Executive under the Company's 2000 Long-Term Incentive Plan stock options to acquire shares of the Company's common stock having a fair market value of $1,000,000 on the date of grant ("Initial Options"), and a number of shares of restricted stock valued at $500,000 ("Initial Restricted Stock"). The Company will recommend that the Board of Directors approve in August 2000 additional grants to Executive of options to acquire shares of common stock having a fair market value of $1,000,000 on the date of grant ("Additional Options") and restricted stock awards having a fair market value of $250,000 on the date of grant ("Additional Restricted Stock"). The per share exercise price of the Initial Options and the Additional Options shall be the fair market value of a share of common stock of the Company on the respective dates of grant. The shares of Initial Restricted Stock and Additional Restricted Stock will vest 100% at the end of four years from the respective dates of grant provided Executive is still employee by the Company on such vesting dates. Further grants of incentive awards may be made to Executive in future years. (c) Welfare Benefit Plans. During the Employment Period, Executive --------------------- and Executive's family shall be eligible for participation in, and shall receive all benefits under, the welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) ("Welfare Plans"). (d) Expenses. During the Employment Period, Executive shall be -------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company. (e) Fringe Benefits. During the Employment Period, Executive shall --------------- be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company. 6. Change in Control. For the purposes of this Agreement, a "Change in ----------------- Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by a Person who is on the Effective Date the beneficial owner of 35% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Company, (iii) any acquisition by the Company which -3- reduces the number of Outstanding Company Voting Securities and thereby results in any person having beneficial ownership of more than 35% of the Outstanding Company Voting Securities, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (b) of this Section 6; or (b) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; provided, however, that (c) Notwithstanding anything in this definition to the contrary, a restructuring and/or separation of any line of business or business unit from the Company will not of itself constitute a Change in Control. 7. Termination of Employment. ------------------------- (a) Death, Retirement or Disability. Executive's employment and the ------------------------------- Employment Period shall terminate automatically upon Executive's death or Retirement. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or if there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance -4- of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those applicable under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of his regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. (b) Termination by the Company. The Company may terminate -------------------------- Executive's employment for Poor Performance or with or without Cause. For purposes of this Agreement: "Poor Performance" shall mean the consistent failure of Executive to meet reasonable performance expectations (other than any such failure resulting from incapacity due to physical or mental illness); provided, however, that termination for Poor Performance shall not be effective unless at least 30 days prior to such termination Executive shall have received written notice from Chief Executive Officer or the Board which specifically identifies the manner in which the Board or the Chief Executive Officer believes that Executive has not met performance expectations and Executive shall have failed after receipt of such notice to resume the diligent performance of his duties to the reasonable satisfaction of the Chief Executive Officer or the Board; and "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President, Chief Executive Officer or the Board of Directors of the Company which specifically identifies the manner in which such Board or officer believes that Executive has not substantially performed Executive's duties, and following such notice, Executive fails within thirty (30) days thereafter to initiate actions, which to the reasonable satisfaction of the Chief Executive Officer or the Board, are likely to correct any performance deficiencies identified in the notice, or (ii) any act of fraud, misappropriation, embezzlement or similar dishonest or wrongful act by Executive, or (iii) Executive's abuse of alcohol or any substance which materially interferes with Executive's ability to perform services on behalf of the Company, or (iv) Executive's conviction for, or plea of guilty or nolo contendere to, a felony. -5- (c) Termination by Executive. Executive's employment may be ------------------------ terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the same may be increased from time to time, unless a similar reduction is made in salary and benefits of similarly-situated senior executives; (iii) the Company's requiring Executive, without his consent, to be based at any office or location other than in the greater metropolitan area of the city in which his office is located at the Effective Date; or (iv) any failure by the Company to comply with and satisfy Section 16(c) of this Agreement. (d) Notice of Termination. Any termination by the Company for Poor --------------------- Performance or Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 17(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason, Poor Performance or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if ------------------- Executive's employment is terminated other than by reason of death, Disability or Retirement, the date of receipt of the Notice of Termination, or any later date specified therein (which shall not be more than 60 days after the date of delivery of the Notice of Termination), or -6- (ii) if Executive's employment is terminated by reason of death, Disability or Retirement, the Date of Termination will be the date of death or Retirement, or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good --------------------------------------------------------------- Reason; Termination by the Company Other Than for Poor Performance, Cause or - ---------------------------------------------------------------------------- Disability. If, prior to a Change in Control, the Company shall terminate - ---------- Executive's employment other than for Poor Performance, Cause or Disability, or Executive shall terminate employment for Good Reason within a period of 90 days after the occurrence of the event giving rise to Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes a Release in substantially the form of Exhibit B hereto (the "Release")): (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination the sum of (A) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (B) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (A) and (B) shall be hereinafter referred to as the "Accrued Obligations"); and (ii) for the longer of six months or until Executive becomes employed with a subsequent employer, but in no event to exceed 18 months from the Date of Termination (the "Normal Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the reasonable satisfaction of the Board within 10 days of written notice of such violation; and (iii) during the Normal Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the reasonable satisfaction of the Board within 10 days of written notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to the greater of (1) 50% of his Bonus Opportunity (as defined in Section 5(b)(i)) for such year, or (2) 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the -7- Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of restricted stock of the Company ("Restricted Stock") held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's options to acquire Common Stock of the Company ("Options") that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to Section 8(a)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the Normal Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Prior to a Change in Control: Termination by the Company for Poor ----------------------------------------------------------------- Performance. If, prior to the occurrence of a Change in Control, the Company - ----------- shall terminate Executive's employment for Poor Performance, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for the shorter of 12 months after the Date of Termination or until Executive becomes employed with a subsequent employer (the "Poor Performance Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the reasonable satisfaction of the Board within 10 days of written notice of such violation; and -8- (iii) during the Poor Performance Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the reasonable satisfaction of the Board within 10 days of written notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(b)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the later of (1) six months from the Date of Termination, or (2) the end of the Poor Performance Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (c) After or in Connection with a Change in Control: Termination by --------------------------------------------------------------- Executive for Good Reason; Termination by the Company Other Than for Cause or - ----------------------------------------------------------------------------- Disability. If there occurs a Change in Control and, within 36 months - ---------- following such Change in Control (or if Executive can reasonably show that such termination by the Company was in anticipation of the Change in Control), the Company shall terminate -9- Executive's employment other than for Cause or Disability, or Executive shall terminate employment for Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company (or its successor) shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for 24 months after the Date of Termination (the "Change in Control Severance Period"), the Company (or its successor) will, as a severance benefit, continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the reasonable satisfaction of the Board within 10 days of written notice of such violation; and (iii) during the Change in Control Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(a) of this Agreement) and fails to remedy such violation to the reasonable satisfaction of the Board within 10 days of written notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of his Bonus Opportunity (as defined in Section 5(b)(i)); provided, however that the bonus payment described in this Section 8(c)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options held by Executive as of the Date of Termination will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(c)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of -10- the Option, or (B) the 90/th/ day following the end of the Change in Control Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (d) Death, Disability or Retirement. Regardless of whether or not a ------------------------------- Change in Control shall have occurred, if Executive's employment is terminated by reason of Executive's death, Disability or Retirement, this Agreement shall terminate without further obligations to Executive or his estate or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 8(d) shall include, without limitation, and Executive or his estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. (e) Cause or Voluntary Termination without Good Reason. Regardless -------------------------------------------------- of whether or not a Change in Control shall have occurred, if Executive's employment shall be terminated for Cause, or if Executive voluntarily terminates employment without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or ------------------------- limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 17(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, -11- together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. In that event, Executive shall direct which Payments are to be modified or reduced. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP or such other certified public accounting firm reasonably acceptable to the Company as may be designated by Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. -12- (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after- tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited -13- solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 11. Costs of Enforcement. Unless otherwise provided by the arbitrator(s) -------------------- in an arbitration proceeding pursuant to Section 14 hereof, in any action taken in good faith relating to the enforcement of this Agreement or any provision herein, Executive shall be entitled to be paid any and all costs and expenses incurred by him in enforcing or establishing his rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Executive is successful on at least one material issue raised in the enforcement proceeding. 12. Representations and Warranties. Executive hereby represents and ------------------------------ warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. ------------------------------------ (a) General. Executive and the Company understand and agree that the ------- purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor ------ is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, Executive shall be subject to the restrictions set forth in this Section 13. -14- (b) Definitions. The following terms used in this Section 13 shall ----------- have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Position" means any employment with a Competitor in -------------------- which Executive will use or is likely to use any Confidential Information or Trade Secrets, or in which Executive has duties for such Competitor that relate to Competitive Services and that are the same or similar to those services actually performed by Executive for the Company; "Competitive Services" means the provision of health information -------------------- products and services, including, without limitation, practice management systems, value-added networks, information management, health management services and health-related eCommerce. "Competitor" means any Person engaged, wholly or in part, in ---------- Competitive Services, including without limitation, Shared Medical Systems Corporation, McKesson HBOC, Inc., Quintiles Transnational Corporation, IMS Health Incorporated, PDX, IDX Systems Corporation, Medical Manager Corporation, Healtheon/WebMD Corporation and Medscape, Inc. "Confidential Information" means all information regarding the ------------------------ Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. "Confidential Information" shall include, but is not limited to, financial plans and data concerning the Company; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; lists of current or prospective customers; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Determination Date" means the date of termination of Executive's ------------------ employment with the Company for any reason whatsoever or any earlier date of proven breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, ------ joint venture, limited liability company, association or other entity or enterprise. -15- "Principal or Representative" means a principal, owner, partner, --------------------------- shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Customers" means any Person to whom NDC Health ------------------- Information Services has sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date. "Protected Employees" means employees of the Company who were ------------------- employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the Employment Period and a period ----------------- extending two (2) years from the termination of Executive's employment with the Company. "Restricted Territory" means the States of California, Florida, -------------------- Georgia, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Texas, plus Canada, the United Kingdom and South America. "Restrictive Covenants" means the restrictive covenants --------------------- contained in Section 13(c) hereof. "Trade Secret" means all information, without regard to form, ------------ including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or applicable state law. (c) Restrictive Covenants. --------------------- (i) Restriction on Disclosure and Use of Confidential ------------------------------------------------- Information and Trade Secrets. Executive understands and agrees that the - ----------------------------- Confidential Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in -16- connection with any business activity other than that of the Company. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not directly or indirectly transmit or disclose any Trade Secret of the Company to any Person, and shall not make use of any such Trade Secret, directly or indirectly, for himself or for others, without the prior written consent of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (ii) Nonsolicitation of Protected Employees. Executive -------------------------------------- understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person. (iii) Restriction on Relationships with Protected Customers. ----------------------------------------------------- Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive shall not, without the prior written consent of the Company, directly or indirectly, on Executive's own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom Executive had Material Contact on the Company's behalf during the twelve (12) months immediately preceding the termination of his employment hereunder. For purposes of this Agreement, Executive had "Material Contact" with a Protected Customer if (a) he had business dealings with the Protected Customer on the Company's behalf; (b) he was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) he obtained Trade Secrets or Confidential Information about the customer as a result of his association with the Company. (iv) Noncompetition with the Company. The parties ------------------------------- acknowledge: (A) that Executive's services under this Agreement require special expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts -17- with customers, suppliers, advertisers and vendors of the Company; (B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility, and he will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing him in such position and giving him access to such information in reliance upon his agreement not to compete with the Company during the Restricted Period; (C) that due to his management duties, Executive will be the repository of a substantial portion of the goodwill of the Company and would have an unfair advantage in competing with the Company; (D) that due to Executive's special experience and talent, the loss of Executive's services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law; (E) that Executive is capable of competing with the Company; and (F) that Executive is capable of obtaining gainful, lucrative and desirable employment that does not violate the restrictions contained in this Agreement. In consideration of the compensation and benefits being paid and to be paid by the Company to Executive hereunder, Executive hereby agrees that, during the Restricted Period, Executive will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, even if such ownership would otherwise violate the terms of this subparagraph (iv). (d) Enforcement of Restrictive Covenants. ------------------------------------ (i) Rights and Remedies Upon Breach. In the event Executive ------------------------------- breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: (A) the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and (B) the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and ------------------------- agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other -18- respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. 14. Arbitration. Any claim or dispute arising under this Agreement (other ----------- than under Section 13) shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all such controversies. The arbitration shall be conducted in Atlanta, Georgia, in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. (S)1, et. seq. The arbitrator(s) shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney's fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award shall be binding and conclusive upon the parties hereto, subject to 9 U.S.C. (S)10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. Initials of parties as to this Section 14: Company (by R.A.Y.): _________ Executive: _________ 15. Letter of Credit. In order to ensure the payment of the severance ---------------- benefit provided for in Section 8(c)(ii) of this Agreement, immediately following the commencement of any action by a third party with the aim of effecting a Change in Control of the Company, or the publicly-announced threat by a third party to commence any such action, the Company shall establish an irrevocable standby Letter of Credit issued by a national banking association in favor of Executive in the amount of the severance payment that would have been paid to Executive under Section 8(c)(ii) if the Date of Termination had occurred on the date of commencement, or publicly-announced threat of commencement, of such action by the third party. Such Letter of Credit shall provide that the issuer thereof, subject only to Executive's written certification to such issuer that Executive is entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement and that the Company shall have failed to commence payment of such benefit to Executive, shall have the unconditional obligation to pay the amount of such Letter of Credit to Executive in 24 equal monthly installments commencing on the first day of the month following the Date of Termination. In the event that subsequent to commencement of such installment payments to Executive pursuant to such Letter of Credit (i) the Company and Executive shall mutually agree that Executive -19- shall not have been entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement or (ii) a court of competent jurisdiction shall finally adjudge Executive not to have been entitled to payment of such severance benefit and such judgment shall have been affirmed on appeal or shall not have been appealed within any time period specified for the filing of an appeal, Executive shall promptly pay to the Company the total amount previously paid to Executive by the issuer of such Letter of Credit and no further payment shall be made to Executive pursuant to such Letter of Credit. 16. Assignment and Successors. ------------------------- (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 17. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more ------ instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, ------------ of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. -20- (c) Other Agents. Nothing in this Agreement is to be interpreted as ------------ limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement ---------------- contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. (e) Governing Law. Except to the extent preempted by federal law, ------------- and without regard to conflict of laws principles, (i) the laws of the State of Florida shall govern the rights and obligations of the parties under Section 13 hereof, and (ii) the laws of the State of Georgia shall govern this Agreement in all other respects, in each case, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: National Data Corporation National Data Plaza Atlanta, Georgia 30329-2010 To Executive: Glenn Rosenkoetter ________________________ ________________________ Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. NATIONAL DATA CORPORATION By: /s/ Robert A. Yellowlees --------------------------- Robert A. Yellowlees Chief Executive Officer -21- EXECUTIVE: /s/ Glenn Rosenkoetter ------------------------------ Glenn Rosenkoetter -22- EXHIBIT A Description of Responsibilities ------------------------------- Executive Vice President of Sales and Marketing The following departments report to him: . Hospital Sales . Pharma Sales . Payer Sales . Marketing Programs . Government Affairs EXHIBIT B Form of Release --------------- This Release is granted effective as of the ____ day of _____, ____, by Glenn Rosenkoetter ("Executive") in favor of National Data Corporation (the "Company"). This is the Release referred to that certain Employment Agreement dated effective as of May 1, 2000 by and between the Company and Executive (the "Employment Agreement"). Executive gives this Release in consideration of the Company's promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part. 1. Release of the Company. Executive, for himself, his successors, ---------------------- assigns, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, employees, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys ("the Released Parties"), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney's fees and costs, or liabilities whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. (S) 2000(e), et seq. or the Americans With -- ---- Disabilities Act, 42 U.S.C. (S) 12101 et seq.; claims for statutory or common -- ---- law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. (S) 201 et seq.; claims for attorney's fees, expenses -- ---- and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Executive Retirement Income Security Act, 29 U.S.C. (S) 1001, et seq.; and provided, however, that nothing -- ---- herein shall release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company's bylaws, certificate of incorporation, Delaware law or otherwise. 2. Release of Claims Under Age Discrimination in Employment Act. Without ------------------------------------------------------------ limiting the generality of the foregoing, Executive agrees that by executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. (S) 621, et seq. It is understood ------ that Executive is advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof. Executive agrees that he has carefully read this Release and is signing it voluntarily. Executive acknowledges that he has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving his right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by him. However, if Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to him under the Employment Agreement and he shall return to the Company any such payment received prior to that date. EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS. -2- EX-10.37 14 dex1037.txt EMPLOYMENT AGREEMENT EXHIBIT 10(XXXVII) ________________________________________________________________ EMPLOYMENT AGREEMENT BETWEEN RANDOLPH L.M. HUTTO AND NATIONAL DATA CORPORATION _________________________________________________________________ EMPLOYMENT AGREEMENT CONTENTS 1. Effective Date......................................................... 1 -------------- 2. Employment............................................................. 1 ---------- 3. Employment Period...................................................... 1 ----------------- 4. Extent of Service...................................................... 1 ----------------- 5. Compensation and Benefits.............................................. 2 ------------------------- (a) Base Salary............................................... 2 (b) Incentive and Savings Plans............................... 2 (c) Welfare Benefit Plans..................................... 2 (d) Expenses.................................................. 3 (e) Fringe Benefits........................................... 3 6. Change in Control...................................................... 3 ----------------- 7. Termination of Employment.............................................. 4 ------------------------- (a) Death, Retirement or Disability........................... 4 (b) Termination by the Company................................ 4 (c) Termination by Executive.................................. 5 (d) Notice of Termination..................................... 6 (e) Date of Termination....................................... 6 8. Obligations of the Company upon Termination............................ 6 ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Poor Performance, Cause or Disability............................................. 6 (b) Prior to Change in Control: Termination by the Company for Poor Performance.............................. 8 (c) After or in Connection with a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Cause or Disability............................................. 9 (d) Death, Disability or Retirement........................... 10
(e) Cause or Voluntary Termination without Good Reason.................................................... 10 9. Non-exclusivity of Rights............................................. 11 ------------------------- 10. Certain Additional Payments by the Company............................ 11 ------------------------------------------ 11. Costs of Enforcement.................................................. 13 -------------------- 12. Representations and Warranties........................................ 14 ------------------------------ 13. Restrictions on Conduct of Executive.................................. 14 ------------------------------------ (a) General................................................... 14 (b) Definitions............................................... 14 (c) Restrictive Covenants..................................... 16 (d) Enforcement of Restrictive Covenants...................... 18 14. Arbitration........................................................... 18 ----------- 15. Letter of Credit...................................................... 19 ---------------- 16. Assignment and Successors............................................. 19 ------------------------- 17. Miscellaneous......................................................... 20 ------------- (a) Waiver.................................................... 20 (b) Severability.............................................. 20 (c) Other Agents.............................................. 20 (d) Entire Agreement.......................................... 20 (e) Governing Law............................................. 20 (f) Notices................................................... 20 (g) Amendments and Modifications.............................. 21
-ii- EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this 20th day of November, 2000 by and between National Data Corporation, a Delaware corporation (the "Company"), and Randolph L.M. Hutto ("Executive"), to be effective as of the Effective Date, as defined in Section 1. BACKGROUND ---------- The Company desires to engage Executive, and Executive desires to serve, as the Chief Financial Officer of the Company, in accordance with the terms of this Agreement. In addition, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company. As it is desired and anticipated that Executive will continue to be employed and provide services for the Company's successor for at least 24 months following a Change in Control, one purpose of this Agreement is to provide Executive with compensation and benefits arrangements which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. The effective date of this Agreement (the "Effective -------------- Date") is November 20, 2000. 2. Employment. Executive is hereby employed as the Chief Financial ---------- Officer of NDC Health Information Services, a line of business of the Company. In such capacity, Executive shall have the responsibilities outlined on Exhibit A to this Agreement and such other responsibilities commensurate with such position as shall be assigned to him by the Chief Executive Officer of the Company, in accordance with the policies and objectives established by the Board. 3. Employment Period. Executive's employment hereunder shall begin on ----------------- the Effective Date and continue until terminated in accordance with Section 7 hereof (the "Employment Period"). 4. Extent of Service. During the Employment Period, Executive shall ----------------- render his services to the Company (or to its successor following a Change in Control) in conformity with professional standards, in a prudent and workmanlike manner and in a manner consistent with the obligations imposed on officers of corporations under applicable law. Executive shall promote the interests of the Company and its subsidiaries in carrying out Executive's duties and shall not deliberately take any action which could, or fail to take any action which failure could, reasonably be expected to have a material adverse effect upon the business of the Company or any of its subsidiaries or any of their respective affiliates. Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder (both before and after a Change in Control); provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the date of this Agreement (as to which activities Executive shall have given written notice to the Company prior to the Effective Date), the continued conduct of such activities subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive's responsibilities hereunder. 5. Compensation and Benefits. ------------------------- (a) Base Salary. Thereafter, during the Employment Period, the ----------- Company will pay to Executive a base salary in the amount of U.S. $300,000 per year ("Base Salary"), less normal withholdings, payable in equal bi-weekly or other installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board shall review Executive's Base Salary periodically and in its sole discretion, subject to approval of the Board, may increase Executive's Base Salary from time to time. The periodic review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive and Savings Plans. During the Employment Period, --------------------------- Executive shall be entitled to participate in incentive and savings plans, practices, policies and programs applicable generally to employees of the Company. Certain executive programs will be made available on a selective basis at the discretion of the Chief Executive Officer or the Compensation Committee of the Board. Without limiting the foregoing, the following shall apply: (i) Annual Bonus. Executive will have an annual bonus ------------ opportunity of not less than $120,000, based on 100% achievement of agreed-upon financial objectives ("Bonus Opportunity"). The Company may determine in any year that a portion of the Bonus Opportunity for that year will be deferred based upon sustained results over time. The annual Bonus Opportunity and specific performance objectives will be set forth in Executive's individual performance and incentive plan for each year. (c) Welfare Benefit Plans. During the Employment Period, Executive --------------------- and Executive's family shall be eligible for participation in, and shall receive all benefits -2- under, the welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) ("Welfare Plans"). (d) Expenses. During the Employment Period, Executive shall be -------- entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company. (e) Fringe Benefits. During the Employment Period, Executive shall --------------- be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company. 6. Change in Control. For the purposes of this Agreement, a "Change in ----------------- Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by a Person who is on the Effective Date the beneficial owner of 35% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Company, (iii) any acquisition by the Company which reduces the number of Outstanding Company Voting Securities and thereby results in any person having beneficial ownership of more than 35% of the Outstanding Company Voting Securities, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (b) of this Section 6; or (b) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in -3- substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; provided, however, that (c) Notwithstanding anything in this definition to the contrary, a restructuring and/or separation of any line of business or business unit from the Company will not of itself constitute a Change in Control. 7. Termination of Employment. ------------------------- (a) Death, Retirement or Disability. Executive's employment and ------------------------------- the Employment Period shall terminate automatically upon Executive's death or Retirement. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred (pursuant to the definition of Disability set forth below), it may give to Executive written notice of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of his regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. (b) Termination by the Company. The Company may terminate -------------------------- Executive's employment for Poor Performance or with or without Cause. For purposes of this Agreement: "Poor Performance" shall mean the consistent failure of Executive to meet reasonable performance expectations (other than any such failure resulting from incapacity due to physical or mental illness); provided, however, that termination for Poor Performance shall not be effective unless at least 30 days prior to such termination Executive shall have received written notice from Chief Executive Officer or the Board which specifically identifies the manner in which the Board or the Chief Executive -4- Officer believes that Executive has not met performance expectations and Executive shall have failed after receipt of such notice to resume the diligent performance of his duties to the satisfaction of the Chief Executive Officer or the Board; and "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President, Chief Executive Officer or the Board of Directors of the Company which specifically identifies the manner in which such Board or officer believes that Executive has not substantially performed Executive's duties, or (ii) any act of fraud, misappropriation, embezzlement or similar dishonest or wrongful act by Executive, or (iii) Executive's abuse of alcohol or any substance which materially interferes with Executive's ability to perform services on behalf of the Company, or (iv) Executive's conviction for, or plea of guilty or nolo contendere to, a felony. (c) Termination by Executive. Executive's employment may be ------------------------ terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the same may be increased from time to time, unless a similar reduction is made in salary and benefits of similarly-situated senior executives; (iii) the Company's requiring Executive, without his consent, to be based at any office or location other than in the greater metropolitan area of the city in which his office is located at the Effective Date; or -5- (iv) any failure by the Company to comply with and satisfy Section 16(c) of this Agreement. (d) Notice of Termination. Any termination by the Company for Poor --------------------- Performance or Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 17(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 60 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason, Poor Performance or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if ------------------- Executive's employment is terminated other than by reason of death, Disability or Retirement, the date of receipt of the Notice of Termination, or any later date specified therein (which shall not be more than 60 days after the date of delivery of the Notice of Termination), or (ii) if Executive's employment is terminated by reason of death, Disability or Retirement, the Date of Termination will be the date of death or Retirement, or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. ------------------------------------------- (a) Prior to a Change in Control: Termination by Executive for Good --------------------------------------------------------------- Reason; Termination by the Company Other Than for Poor Performance, Cause or - ---------------------------------------------------------------------------- Disability. If, prior to a Change in Control, the Company shall terminate - ---------- Executive's employment other than for Poor Performance, Cause or Disability, or Executive shall terminate employment for Good Reason within a period of 90 days after the occurrence of the event giving rise to Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes a Release in substantially the form of Exhibit B hereto (the "Release")): (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination the sum of (A) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, and (B) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (A) and (B) shall be hereinafter referred to as the "Accrued Obligations"); and -6- (ii) for the longer of six months or until Executive becomes employed with a subsequent employer, but in no event to exceed 18 months from the Date of Termination (the "Normal Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Normal Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to the greater of (1) 50% of his Bonus Opportunity (as defined in Section 5(b)(i)) for such year, or (2) 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(a)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of restricted stock of the Company ("Restricted Stock") held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's options to acquire Common Stock of the Company ("Options") that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to Section 8(a)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90th day following the end of the Normal Severance Period; and -7- (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Prior to a Change in Control: Termination by the Company for Poor ----------------------------------------------------------------- Performance. If, prior to the occurrence of a Change in Control, the Company - ----------- shall terminate Executive's employment for Poor Performance, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for the shorter of 12 months after the Date of Termination or until Executive becomes employed with a subsequent employer (the "Poor Performance Severance Period"), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Poor Performance Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of his Bonus Opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive's bonus plan for such year; provided, however that the bonus payment described in this Section 8(b)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and -8- (v) all grants of Restricted Stock held by Executive as of the Date of Termination that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(b)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the later of (1) six months from the Date of Termination, or (2) the end of the Poor Performance Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (c) After or in Connection with a Change in Control: Termination by --------------------------------------------------------------- Executive for Good Reason; Termination by the Company Other Than for Cause or - ----------------------------------------------------------------------------- Disability. If there occurs a Change in Control and, within 36 months - ---------- following such Change in Control (or if Executive can reasonably show that such termination by the Company was in anticipation of the Change in Control), the Company shall terminate Executive's employment other than for Cause or Disability, or Executive shall terminate employment for Good Reason, then (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release): (i) the Company (or its successor) shall pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination; and (ii) for 24 months after the Date of Termination (the "Change in Control Severance Period"), the Company (or its successor) will, as a severance benefit, continue to pay Executive an amount equal to his monthly Base Salary, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time; provided, however that the Company's obligation to make or continue such payments shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iii) during the Change in Control Severance Period, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the Welfare Plans described -9- in Section 5(c) of this Agreement if Executive's employment had not been terminated; provided, however that the Company's obligation to provide such benefits shall cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and (iv) not later than 30 days after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in an amount equal to 100% of his Bonus Opportunity (as defined in Section 5(b)(i)); provided, however that the bonus payment described in this Section 8(c)(iv) shall be reduced by the amount (if any) of the Bonus Opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and (v) all grants of Restricted Stock held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and (vi) all of Executive's Options held by Executive as of the Date of Termination will become immediately vested and exercisable as of the Date of Termination; and (vii) notwithstanding the provisions of the applicable Option agreement, all of Executive's vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(c)(vi) above) shall remain exercisable through the earlier of (A) the original expiration date of the Option, or (B) the 90/th/ day following the end of the Change in Control Severance Period; and (viii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive his Other Benefits. (d) Death, Disability or Retirement. Regardless of whether or not ------------------------------- a Change in Control shall have occurred, if Executive's employment is terminated by reason of Executive's death, Disability or Retirement, this Agreement shall terminate without further obligations to Executive or his estate or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 8(d) shall include, without limitation, and Executive or his estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. (e) Cause or Voluntary Termination without Good Reason. Regardless -------------------------------------------------- of whether or not a Change in Control shall have occurred, if Executive's employment shall -10- be terminated for Cause, or if Executive voluntarily terminates employment without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or ------------------------- limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 17(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. ----------------------------------------- (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross- Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross- Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. In that event, Executive shall direct which Payments are to be modified or reduced. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in -11- arriving at such determination, shall be made by Arthur Andersen LLP or such other certified public accounting firm reasonably acceptable to the Company as may be designated by Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and -12- (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 11. Costs of Enforcement. Unless otherwise provided by the arbitrator(s) -------------------- in an arbitration proceeding pursuant to Section 14 hereof, in any action taken in good faith relating to the enforcement of this Agreement or any provision herein, Executive shall be entitled to be paid any and all costs and expenses incurred by him in enforcing or -13- establishing his rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Executive is successful on at least one material issue raised in the enforcement proceeding. 12. Representations and Warranties. Executive hereby represents and ------------------------------ warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. ----------------------------------- (a) General. Executive and the Company understand and agree that ------- the purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive's right to work, - ------ earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, Executive shall be subject to the restrictions set forth in this Section 13. (b) Definitions. The following terms used in this Section 13 shall ----------- have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Position" means any employment with a Competitor in -------------------- which Executive will use or is likely to use any Confidential Information or Trade Secrets, or in which Executive has duties for such Competitor that relate to Competitive Services and that are the same or similar to those services actually performed by Executive for the Company; "Competitive Services" means the provision of health information -------------------- products and services, including, without limitation, practice management systems, value-added networks, information management, health management services and health-related eCommerce. "Competitor" means any Person engaged, wholly or in part, in ---------- Competitive Services, including without limitation, Shared Medical Systems Corporation, McKesson HBOC, Inc., Quintiles Transnational Corporation, IMS Health Incorporated, PDX, IDX Systems Corporation, Medical Manager Corporation, Healtheon/WebMD Corporation and Medscape, Inc. -14- "Confidential Information" means all information regarding the ------------------------ Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. "Confidential Information" shall include, but is not limited to, financial plans and data concerning the Company; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; lists of current or prospective customers; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition shall not limit any definition of "confidential information" or any equivalent term under state or federal law. "Determination Date" means the date of termination of Executive's ------------------ employment with the Company for any reason whatsoever or any earlier date of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, ------ joint venture, limited liability company, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, --------------------------- shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Customers" means any Person to whom NDC Health ------------------- Information Services has sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date. "Protected Employees" means employees of the Company who were ------------------- employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the Employment Period and a period ----------------- extending two (2) years from the termination of Executive's employment with the Company. "Restricted Territory" means the States of California, Florida, -------------------- Georgia, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Texas, plus Canada, the United Kingdom and South America. "Restrictive Covenants" means the restrictive covenants contained --------------------- in Section 13(c) hereof. -15- "Trade Secret" means all information, without regard to form, ------------ including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or applicable state law. (c) Restrictive Covenants. -------------------- (i) Restriction on Disclosure and Use of Confidential ------------------------------------------------- Information and Trade Secrets. Executive understands and agrees that the - ----------------------------- Confidential Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive shall not directly or indirectly transmit or disclose any Trade Secret of the Company to any Person, and shall not make use of any such Trade Secret, directly or indirectly, for himself or for others, without the prior written consent of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company's rights or Executive's obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (ii) Nonsolicitation of Protected Employees. Executive -------------------------------------- understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected -16- Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person. (iii) Restriction on Relationships with Protected Customers. ----------------------------------------------------- Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive shall not, without the prior written consent of the Company, directly or indirectly, on Executive's own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant shall apply only to Protected Customers with whom Executive had Material Contact on the Company's behalf during the twelve (12) months immediately preceding the termination of his employment hereunder. For purposes of this Agreement, Executive had "Material Contact" with a Protected Customer if (a) he had business dealings with the Protected Customer on the Company's behalf; (b) he was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) he obtained Trade Secrets or Confidential Information about the customer as a result of his association with the Company. (iv) Noncompetition with the Company. The parties ------------------------------- acknowledge: (A) that Executive's services under this Agreement require special expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts with customers, suppliers, advertisers and vendors of the Company; (B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility and he will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing him in such position and giving him access to such information in reliance upon his agreement not to compete with the Company during the Restricted Period; (C) that due to his management duties, Executive will be the repository of a substantial portion of the goodwill of the Company and would have an unfair advantage in competing with the Company; (D) that due to Executive's special experience and talent, the loss of Executive's services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law; (E) that Executive is capable of competing with the Company; and (F) that Executive is capable of obtaining gainful, lucrative and desirable employment that does not violate the restrictions contained in this Agreement. In consideration of the compensation and benefits being paid and to be paid by the Company to Executive hereunder, Executive hereby agrees that, during the Restricted Period, Executive will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. -17- (d) Enforcement of Restrictive Covenants. ----------------------------------- (i) Rights and Remedies Upon Breach. In the event Executive ------------------------------- breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: (A) the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and (B) the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and ------------------------- agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. 14. Arbitration. Any claim or dispute arising under this Agreement (other ----------- than under Section 13) shall be subject to arbitration, and prior to commencing any court action, the parties agree that they shall arbitrate all such controversies. The arbitration shall be conducted in Atlanta, Georgia, in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. (S)1, et. seq. The arbitrator(s) shall be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney's fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award shall be binding and conclusive upon the parties hereto, subject to 9 U.S.C. (S)10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. -18- 15. Letter of Credit. In order to ensure the payment of the severance ---------------- benefit provided for in Section 8(c)(ii) of this Agreement, immediately following the commencement of any action by a third party with the aim of effecting a Change in Control of the Company, or the publicly-announced threat by a third party to commence any such action, the Company shall establish an irrevocable standby Letter of Credit issued by a national banking association in favor of Executive in the amount of the severance payment that would have been paid to Executive under Section 8(c)(ii) if the Date of Termination had occurred on the date of commencement, or publicly-announced threat of commencement, of such action by the third party. Such Letter of Credit shall provide that the issuer thereof, subject only to Executive's written certification to such issuer that Executive is entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement and that the Company shall have failed to commence payment of such benefit to Executive, shall have the unconditional obligation to pay the amount of such Letter of Credit to Executive in 24 equal monthly installments commencing on the first day of the month following the Date of Termination. In the event that subsequent to commencement of such installment payments to Executive pursuant to such Letter of Credit (i) the Company and Executive shall mutually agree that Executive shall not have been entitled to payment of the severance benefit pursuant to Section 8(c)(ii) of this Agreement or (ii) a court of competent jurisdiction shall finally adjudge Executive not to have been entitled to payment of such severance benefit and such judgment shall have been affirmed on appeal or shall not have been appealed within any time period specified for the filing of an appeal, Executive shall promptly pay to the Company the total amount previously paid to Executive by the issuer of such Letter of Credit and no further payment shall be made to Executive pursuant to such Letter of Credit. 16. Assignment and Successors. ------------------------ (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. -19- 17. Miscellaneous. ------------- (a) Waiver. Failure of either party to insist, in one or more ------ instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part ------------ thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted ------------ as limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement ---------------- contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. (e) Governing Law. Except to the extent preempted by federal law, ------------- and without regard to conflict of laws principles, (i) the laws of the State of Florida shall govern the rights and obligations of the parties under Section 13 hereof, and (ii) the laws of the State of Georgia shall govern this Agreement in all other respects, in each case, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other ------- communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: National Data Corporation National Data Plaza Atlanta, Georgia 30329-2010 To Executive: Randolph L.M. Hutto _______________________ _______________________ -20- Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or ---------------------------- modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. NATIONAL DATA CORPORATION By: /s/ Robert A. Yellowlees --------------------------- Robert A. Yellowlees Chief Executive Officer EXECUTIVE: /s/ Randolph L.M. Hutto ------------------------------ Randolph L.M. Hutto -21- EXHIBIT A Description of Responsibilities ------------------------------- As Chief Financial Officer of NDC Health Information Services, Executive's responsibilities will include, but not be limited to finance and business development for NDC Health Information Services. He will be responsible for strategic and operational planning as well as business development. EXHIBIT B Form of Release --------------- This Release is granted effective as of the ____ day of _____, ____, by Randolph L.M. Hutto ("Executive") in favor of National Data Corporation (the "Company"). This is the Release referred to that certain Employment Agreement dated as of November 20, 2000 by and between the Company and Executive (the "Employment Agreement"). Executive gives this Release in consideration of the Company's promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part. 1. Release of the Company. Executive, for himself, his successors, assigns, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, employees, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys ("the Released Parties"), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney's fees and costs, or liabilities whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. (S) 2000(e), et seq. or the Americans With -- ---- Disabilities Act, 42 U.S.C. (S) 12101 et seq.; claims for statutory or common -- ---- law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. (S) 201 et seq.; claims for attorney's fees, expenses -- ---- and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Executive Retirement Income Security Act, 29 U.S.C. (S) 1001, et seq.; and provided, however, that nothing -- ---- herein shall release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company's bylaws, certificate of incorporation, Delaware law or otherwise. 2. Release of Claims Under Age Discrimination in Employment Act. Without ------------------------------------------------------------ limiting the generality of the foregoing, Executive agrees that by executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. (S) 621, et seq. It is understood ------ that Executive is advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof. Executive agrees that he has carefully read this Release and is signing it voluntarily. Executive acknowledges that he has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving his right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by him. However, if Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to him under the Employment Agreement and he shall return to the Company any such payment received prior to that date. EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS. -2- EX-21 15 dex21.txt SUBSIDIARIES OF THE REGISTRANT Exhibit 21 Subsidiaries of the Registrant The Registrant had the following subsidiaries at May 31, 2001, each of which was wholly owned by the Registrant, except as noted below: Jurisdiction of Name Incorporation - ------------------------------------------------------------------------------ The Computer Place, Inc. Arizona Source Informatics, Inc. Delaware NDC Health Information Services (Arizona) Inc. Delaware SI PMSI Ltd. Delaware Physerv Solutions, Inc. Delaware HealthTran LLC (Note 1) Delaware National Data Corporation of Canada, Ltd. Canada NDC Health Holding GmbH Germany NDC Health GmbH and Co. KG (Note 2) Germany NDC Health Management GmbH (Note 3) Germany NDC Health Limited United Kingdom NDC Pharma Services, Ltd. United Kingdom Note 1. HealthTran LLC is 55% owned by the Registrant. Note 2. NDC Health GmbH and Co. KG is 51% owned by the Registrant. Note 3. NDC Health Management GmbH is 51% owned by the Registrant. EX-23 16 dex23.txt CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K into the Registrant's previously filed Registration Statements, File Numbers 2-81717, 2-86961, 2-92193, 33-25635, 33- 43005, 33-44858, 33-58622, 33-58624, 33-59717, 33-55057, 333-05449, 333-05451, 333-05427, 333-35991, 333-41553, 333-44803, 333-44823 and 333-67497. /s/ Arthur Andersen LLP Atlanta, Georgia August 27, 2001 EX-99.1 17 dex991.txt UNAUDITED CONSOLIDATED STMTS OF INCOME Exhibit 99.1 CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) STAND ALONE NDC HEALTH (NORMALIZED) (in thousands)
FY99 FY00 FY01 ---------- ---------------------------------------------- ---------------------------------------------- Total Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Year ---------- ------- ------- ------- ------- ---------- ------- ------- ------- ------- ---------- Revenues: Information management......... $128,961 $31,077 $34,076 $32,236 $33,840 $131,229 $31,298 $33,917 $35,342 $37,534 $138,091 Network services and systems............ 141,832 40,082 37,135 39,467 41,367 158,051 48,947 49,516 52,890 54,509 205,862 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- -------- 270,793 71,159 71,211 71,703 75,207 289,280 80,245 83,433 88,232 92,043 343,953 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- -------- Operating expenses: Cost of service..... 135,157 34,083 35,342 35,081 36,792 141,298 38,462 41,521 45,718 45,693 171,394 Sales, general and administrative..... 55,835 14,267 14,444 17,161 17,539 63,411 19,926 18,303 18,653 20,468 77,350 Depreciation and amortization....... 27,042 7,450 7,281 6,375 8,089 29,195 7,989 8,638 8,686 9,163 34,476 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- -------- 218,034 55,800 57,067 58,617 62,420 233,904 66,377 68,462 73,057 75,324 283,220 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- -------- Operating income.... 52,759 15,359 14,144 13,086 12,787 55,376 13,868 14,971 15,175 16,719 60,733 EBITDA.............. 79,801 22,809 21,425 19,461 20,876 84,571 21,857 23,609 23,861 25,882 95,209 Other income (expense).......... (6,383) (1,772) (1,679) (1,639) (1,490) (6,580) (1,942) (1,781) (1,112) (1,311) (6,146) -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- -------- Income before income taxes.............. 46,376 13,587 12,465 11,447 11,297 48,796 11,926 13,190 14,063 15,408 54,587 Income taxes........ 17,855 5,231 4,799 4,407 4,349 18,786 4,592 5,078 5,414 5,932 21,016 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- -------- Net income.......... $ 28,521 $ 8,356 $ 7,666 $ 7,040 $ 6,948 $ 30,010 $ 7,334 $ 8,112 $ 8,649 $ 9,476 $ 33,571 ======== ======= ======= ======= ======= ======== ======= ======= ======= ======= ======== Basic shares........ 33,725 33,876 33,376 32,920 32,755 33,232 32,778 32,889 32,992 33,970 33,009 ======== ======= ======= ======= ======= ======== ======= ======= ======= ======= ======== Basic earnings per share.............. $ 0.85 $ 0.25 $ 0.23 $ 0.21 $ 0.21 $ 0.90 $ 0.22 $ 0.25 $ 0.26 $ 0.28 $ 1.02 ======== ======= ======= ======= ======= ======== ======= ======= ======= ======= ======== Diluted shares...... 35,071 35,265 34,128 33,810 33,617 34,448 33,441 34,057 34,348 35,368 34,153 ======== ======= ======= ======= ======= ======== ======= ======= ======= ======= ======== Diluted earnings per share.............. $ 0.81 $ 0.24 $ 0.22 $ 0.21 $ 0.21 $ 0.87 $ 0.22 $ 0.24 $ 0.25 $ 0.27 $ 0.98 ======== ======= ======= ======= ======= ======== ======= ======= ======= ======= ========
EX-99.2 18 dex992.txt UNAUDITED STATEMENTS OF INCOME Exhibit 99.2 CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) NATIONAL DATA CORPORATION (in thousands)
FY99 FY00 FY01 ---------- ------------------------------------------------ ---------------------------------------------- Total Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Year ---------- ------- -------- ------- -------- ---------- ------- ------- ------- ------- ---------- Revenues: Information management..... $128,961 $31,077 $ 34,076 $32,236 $ 33,840 $131,229 $31,298 $33,917 $35,342 $37,534 $138,091 Network services and systems.... 141,832 40,082 37,135 39,467 41,367 158,051 48,947 49,516 52,890 54,509 205,862 Divested businesses..... 68,203 14,561 13,816 14,165 13,851 56,393 5,629 233 -- -- 5,862 -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- 338,996 85,720 85,027 85,868 89,058 345,673 85,874 83,666 88,232 92,043 349,815 -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- Operating expenses: Cost of service........ 179,654 43,878 47,332 44,893 44,898 181,001 43,340 41,662 45,718 45,693 176,413 Sales, general and administrative.. 67,577 17,879 27,620 19,654 20,909 86,062 20,134 18,385 18,653 20,468 77,640 Depreciation and amortization... 29,661 8,140 8,012 6,990 8,692 31,834 8,213 8,683 8,686 9,163 34,745 Non-recurring charges........ -- -- 34,393 -- -- 34,393 -- 2,156 -- -- 2,156 -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- 276,892 69,897 117,357 71,537 74,499 333,290 71,687 70,886 73,057 75,324 290,954 -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- Operating income (loss)........... 62,104 15,823 (32,330) 14,331 14,559 12,383 14,187 12,780 15,175 16,719 58,861 EBITDA.......... 91,765 23,963 10,075 21,321 23,251 78,610 22,400 23,619 23,861 25,882 95,762 Other income (expense)...... (6,383) (173) 616 (1,639) (10,525) (11,721) (1,942) (1,781) (1,112) (8,264) (13,099) -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- Income before income taxes... 55,721 15,650 (31,714) 12,692 4,034 662 12,245 10,999 14,063 8,455 45,762 Income taxes.... 21,858 6,017 (10,546) 4,882 1,472 1,825 4,714 4,310 5,414 3,256 17,694 -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- Net income (loss) before discontinued operations..... 33,863 9,633 (21,168) 7,810 2,562 (1,163) 7,531 6,689 8,649 5,199 28,068 -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- Discontinued operations..... 37,574 (4,696) 5,700 (6,616) (33,390) (39,002) 8,649 (326) -- -- 8,323 -------- ------- -------- ------- -------- -------- ------- ------- ------- ------- -------- Net income (loss)......... $ 71,437 $ 4,937 $(15,468) $ 1,194 $(30,828) $(40,165) $16,180 $ 6,363 $ 8,649 $ 5,199 $ 36,391 ======== ======= ======== ======= ======== ======== ======= ======= ======= ======= ======== Basic shares.... 33,725 33,876 33,376 32,920 32,755 33,232 32,778 32,889 32,992 33,970 33,009 ======== ======= ======== ======= ======== ======== ======= ======= ======= ======= ======== Basic earnings (loss) per share.......... $ 2.12 $ 0.15 $ (0.46) $ 0.04 $ (0.94) $ (1.21) $ 0.49 $ 0.19 $ 0.26 $ 0.15 $ 1.10 ======== ======= ======== ======= ======== ======== ======= ======= ======= ======= ======== Diluted shares.. 37,823 35,265 33,376 33,810 32,755 33,232 36,193 34,057 34,348 35,368 34,153 ======== ======= ======== ======= ======== ======== ======= ======= ======= ======= ======== Diluted earnings (loss) per share.......... $ 2.02 $ 0.14 $ (0.46) $ 0.04 $ (0.94) $ (1.21) $ 0.48 $ 0.19 $ 0.25 $ 0.15 $ 1.07 ======== ======= ======== ======= ======== ======== ======= ======= ======= ======= ========
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