<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997
REGISTRATION NO. 333-35991
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
NATIONAL DATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389 58-0977458
(PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
JURISDICTION OF
INCORPORATION)
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
(404) 728-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
E. MICHAEL INGRAM
GENERAL COUNSEL AND SECRETARY
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
(404) 728-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JOEL J. HUGHEY WARREN J. HAUSER
MARK F. MCELREATH PHARMACEUTICAL MARKETING ROBERT A. SCHWED
ALSTON & BIRD LLP SERVICES INC. REBOUL, MACMURRAY, HEWITT,
ONE ATLANTIC CENTER 45 ROCKEFELLER PLAZA MAYNARD & KRISTOL
1201 WEST PEACHTREE STREET SUITE 912 45 ROCKEFELLER PLAZA
ATLANTA, GEORGIA 30309- NEW YORK, NEW YORK 10111 NEW YORK, NEW YORK 1011
3424 (212) 841-0610 (212) 841-5700
(404) 881-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the sameoffering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE (2)(3)
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<S> <C> <C> <C> <C>
Common Stock (including
rights to purchase
shares of Common Stock
or Series A Junior
Participating Pre-
ferred Stock)......... 1,059,829 shares $0.00 $0.00 $100
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</TABLE>
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(1) Represents the estimated number of shares of Common Stock, par value $.125
per share ("NDC Common Stock"), issuable by the Registrant upon
consummation of the purchase (the "Stock Purchase") of all of the Common
Stock, par value $.01 per share ("PMSI Database Common Stock") of PMSI
Database Holdings, Inc. ("PMSI Database") from Pharmaceutical Marketing
Services Inc. ("PMSI"), the sole stockholder of PMSI Database.
(2) Pursuant to Rules 457(f)(2) and 457(f)(3), the registration fee was
computed on the basis of the book value of the PMSI Database Common Stock
as of June 30, 1997, of $5,665,000 less $6,500,000 payable by the
Registrant to PMSI as additional consideration for the Stock Purchase.
(3) Registration fee was paid with the filing of the original registration
statement on September 19, 1997.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997
PROSPECTUS
NATIONAL DATA CORPORATION
COMMON STOCK
(PAR VALUE $.125 PER SHARE)
This Prospectus is being furnished to Pharmaceutical Marketing Services
Inc., a Delaware corporation ("PMSI"), as the sole holder of common stock,
$.01 par value ("PMSI Database Common Stock"), of PMSI Database Holdings,
Inc., a Delaware corporation ("PMSI Database"), in connection with that
certain Stock Purchase Agreement, dated as of August 20, 1997 (the "Stock
Purchase Agreement"), by and among PMSI, PMSI Database and National Data
Corporation, a Delaware corporation ("NDC"), which provides for, among other
things, the purchase by NDC of all of the outstanding shares of PMSI Database
Common Stock (the "Stock Purchase"). See "Summary," "The Stock Purchase" and
Annex A to this Prospectus.
Upon consummation of the Stock Purchase, in consideration of the conveyance
of all the outstanding PMSI Database Common Stock by PMSI, NDC will deliver to
PMSI $6,500,000 in cash and 1,059,829 shares of NDC's common stock, $.125 par
value (the "NDC Common Stock"), subject to certain adjustments discussed in
the Stock Purchase Agreement and in this Prospectus.
This Prospectus constitutes a prospectus of NDC relating to the 1,059,829
shares of NDC Common Stock issuable to PMSI in the Stock Purchase. This
Prospectus is also intended for use by PMSI to offer and resell such shares of
NDC Common Stock. See "Certain Differences in the Rights of NDC And PMSI
Database Stockholders," "The Stock Purchase--Resales of NDC Common Stock" and
"PMSI Database Holdings, Inc.--Security Ownership of Directors, Executive
Officers and Principal Security Holders of PMSI Database."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTSORS
IN EVALUATING AN INVESTMENT IN NDC COMMON STOCK, SEE "RISK FACTORS" BEGINNING
ON PAGE 14.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIESCOMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
The date of this Prospectus is , 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION...................................................... 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................... 2
SUMMARY.................................................................... 3
Parties to the Stock Purchase............................................ 3
The Stock Purchase....................................................... 4
Market Prices and Dividends.............................................. 10
Comparison of Certain Unaudited Per Share Data........................... 10
Recent Developments...................................................... 11
Selected Financial Data.................................................. 11
SELECTED FINANCIAL DATA OF NDC (HISTORICAL)................................ 12
SELECTED FINANCIAL DATA OF PMSI DATABASE (HISTORICAL)...................... 12
SELECTED PRO FORMA COMBINED FINANCIAL DATA OF NDC, PMSI DATABASE AND
SOURCE.................................................................... 13
RISK FACTORS............................................................... 14
THE STOCK PURCHASE......................................................... 16
General.................................................................. 16
Background of the Stock Purchase......................................... 16
The Purchase Price....................................................... 19
Indemnification.......................................................... 21
Certain Federal Income Tax Consequences.................................. 21
Interests of Certain Persons in the Stock Purchase....................... 22
Conditions to Consummation............................................... 23
Regulatory Approvals..................................................... 24
Amendment, Waiver, and Termination....................................... 24
Conduct of Business Pending the Stock Purchase........................... 25
Expenses and Fees........................................................ 26
Accounting Treatment..................................................... 27
Resales of NDC Common Stock.............................................. 27
PMSI DATABASE HOLDINGS, INC................................................ 27
Business................................................................. 27
Selected Financial Information........................................... 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................ 29
Security Ownership of Directors, Executive Officers and Principal
Securityholders of PMSI Database........................................ 30
CERTAIN DIFFERENCES IN THE RIGHTS OF NDC AND PMSI DATABASE STOCKHOLDERS.... 31
Authorized Capital Stock................................................. 31
Directors and Classes of Directors....................................... 32
Stockholder Meetings..................................................... 32
Anti-Takeover Provisions................................................. 33
Stockholder Rights Plan.................................................. 34
EXPERTS.................................................................... 34
LEGAL MATTERS.............................................................. 34
ANNEXES:
ANNEX A--Stock Purchase Agreement, dated as of August 20, 1997, by and
among NDC, PMSI and PMSI Database
ANNEX B--Financial Statements of PMSI Database Holdings, Inc.
ANNEX C--Pro Forma Financial Data
</TABLE>
<PAGE>
AVAILABLE INFORMATION
NDC is subject to the reporting and informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy and information statements,
and other information filed by NDC with the Commission may be inspected and
copied at the principal office of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be available
at the Commission's Regional Offices at 7 World Trade Center, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates and also may be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. In addition, reports, proxy statements and other
information concerning NDC may be inspected at the offices of the New York
Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York,New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement"), which
has been filed by NDC with the Commission under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"). This
Prospectus omits certain information contained in the Registration Statement,
and reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to NDC and the securities to
which this Prospectus relates. Statements contained in this Prospectus
concerning the provisions of certain documents filed as exhibits to the
Registration Statement are necessarily brief descriptions thereof, and are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the full text of such document.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from:
National Data Corporation, National Data Plaza, Atlanta, Georgia 30329-2010,
Attn: Corporate Secretary, (404) 728-2855, as to NDC documents; and from
Pharmaceutical Marketing Services Inc., 45 Rockefeller Plaza, Suite 912, New
York, New York 10111, Attn: Corporate Secretary, (212) 841-0610, as to PMSI
Database and PMSI Documents.
All information contained herein with respect to NDC and its subsidiaries
has been supplied by NDC. All information with respect to PMSI, its
subsidiaries and PMSI Database has been supplied by PMSI including, but not
limited to, "The Stock Purchase--Background of the Stock Purchase," "The Stock
Purchase--Interests of Certain Persons in the Stock Purchase" and "PMSI
Database Holdings, Inc."
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized by NDC, PMSI or PMSI Database. Neither the delivery of this
Prospectus nor any distribution of the securities to which this Prospectus
relates shall, under any circumstances, create any implication that there has
been no change in the affairs of NDC, PMSI, PMSI Database or any of their
respective subsidiaries since the date hereof or that the information
contained herein is correct as of any time subsequent to its date. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to purchase, any securities other than the securities to which it relates or
an offer to sell or a solicitation of an offer to purchase the securities
offered by this Prospectus in any jurisdiction in which such an offer or
solicitation is not lawful.
1
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by NDC with the Commission (File No. 001-
12392) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Prospectus:
NDC documents:
(i) NDC's Annual Report on Form 10-K for the fiscal year ended May 31,
1997;
(ii) NDC's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1997;
(iii) the description of NDC Common Stock contained in NDC's Registration
Statement on Form 8-A as filed with the Commission on October 5, 1993; and
(iv) the description of NDC Series A Junior Participating Preferred Stock
contained in NDC's Registration Statement on Form 8-A as filed with the
Commission on January 22, 1991, as amended on October 5, 1993.
All documents filed by NDC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
Closing Date (hereinafter defined) are hereby incorporated by reference in
this Prospectus and shall be deemed a part hereof from the date of filing of
such document.
Any statement contained herein, in any amendment or supplement hereto or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement and this Prospectus to the extent that a statement contained herein,
in any amendment or supplement hereto or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement, this Prospectus, or any
amendment or supplement hereto. The information contained in this Prospectus
should be read in conjunction with the foregoing materials.
2
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus. This summary is not intended to be a complete description of the
matters covered in this Prospectus and is subject to and qualified in its
entirety by reference to the more detailed information contained elsewhere in
this Prospectus, including the Annexes hereto, and in the documents
incorporated by reference in this Prospectus. The Stock Purchase Agreement is
set forth in Annex A to this Prospectus and reference is made thereto for a
complete description of the terms of the Stock Purchase. Stockholders are urged
to read carefully the entire Prospectus, including the Annexes. As used in this
Prospectus, the terms "NDC," "PMSI" and "PMSI Database" refer to such
corporations, respectively, and where the context requires, such corporations
and their respective subsidiaries.
PARTIES TO THE STOCK PURCHASE
NDC. NDC is a Delaware corporation that was incorporated in 1967. NDC is a
leading provider of high-volume information services and application systems to
the health care and payment systems markets. NDC serves a diverse customer base
comprised of almost 120,000 health care providers, 3,500 health care plans,
more than 750,000 merchant locations, 35,000 corporations and 400 banking
institutions, as well as federal and state government agencies. NDC markets its
services directly to merchants and health care providers and indirectly through
business alliances with a wide range of banks, insurance companies and
distributors.
NDC is one of the largest independent providers of health care information
services and integrated payment systems and services in the United States,
processing transactions at an annualized rate of approximately 3 billion at the
end of fiscal 1997. NDC provides electronic claims processing and adjudication
services, practice management systems, electronic data interchange ("EDI")
services, billing services, business office management services and clinical
data base information for pharmacies, dentists, physicians, hospitals, health
maintenance organizations, managed care companies, clinics and nursing homes,
as well as other health care providers. Management believes that NDC is the
largest independent processor of real-time health care transactions in the
country, and that it is well positioned to capitalize on the growing demand for
cost containment and improved patient care in the health care industry. By the
end of fiscal 1997, approximately 41% of NDC's total revenue was derived from
NDC's health care systems and services, which represent the fastest growing
portion of NDC's business.
NDC's Global Payment Systems LLC subsidiary ("Global Payment Systems" or
"Global") offers such services as authorization, equipment deployment, customer
support, back office processing, merchant accounting and card issuing services
on an outsourcing basis for banks and other participants in the payment systems
industry. Global also offers information reporting and EDI services, cash
management systems and services and electronic tax filing and payment services
to government and corporate customers. In recent years, NDC has expanded the
range of payment instruments services offered and distribution channels. NDC
recently introduced a purchase card processing program that provides electronic
payment capabilities for business-to-business purchasing transactions.
Approximately 29% of NDC's total revenue for fiscal 1997 was derived from
Global.
The Integrated Payment Systems business unit provides a broad range of
payment acceptance services primarily in partnership with banks. Under its Bank
Alliance Program, as well as through other distribution channels, it adds
sales, marketing and risk management services to the range of services provided
by Global Payment Systems. NDC's Integrated Payment Systems unit accounted for
approximately 30% of NDC's total revenue for fiscal 1997.
For the year ended May 31, 1997, NDC reported total revenues of $433.9
million and net income of $38.8 million. As of May 31, 1997, NDC had total
consolidated assets of $521.7 million and consolidated stockholders' equity of
$277.5 million.
3
<PAGE>
NDC's principal executive offices are located at National Data Plaza,
Atlanta, Georgia 30329-2010, and its telephone number is (404) 728-2000. For
additional information regarding NDC and its business, see "Available
Information," "Incorporation of Certain Information By Reference," "--Market
Prices and Dividends," "--Comparison of Certain Unaudited Per Share Data," and
"--Selected Financial Data."
PMSI Database. PMSI Database, a Delaware corporation, was formed as a holding
company by PMSI on June 24, 1997. To date, PMSI Database has not conducted any
business but does hold the assets contributed to it by PMSI. These assets are
comprised of (i) PMSI's minority interest in a United States joint venture
("Source US") with Source Informatics Inc., a Delaware Corporation ("Source"),
to jointly offer a range of services generated from a database of prescription
data collected by Source from retail and mail order pharmacies in the United
States (the "Alpha Database"), and (ii) PMSI's Over-the-Counter Physician
Database business (the "OTC Business").
PMSI Database's principal executive offices are located at 45 Rockefeller
Plaza, Suite 912, New York, New York 10111, and its telephone number is (212)
841-0610. For additional information regarding PMSI Database and its business,
see "--Comparison of Certain Unaudited Per Share Data," "--Selected Financial
Data" and "PMSI Database Holdings, Inc."
As a condition to the consummation of the Stock Purchase, prior to the
Closing Date (hereinafter defined), pursuant to that certain Securities
Transfer Agreement (the "Source Divestiture Agreement") between PMSI and
Source, Source shall convey to PMSI: (i) Source's business operating in Europe
as of August 20, 1997 ("Source Europe"); (ii) all of the shares of PMSI held by
Source or any subsidiary of Source; and (iii) all of the stock of those
subsidiaries of Source conducting Source Europe business.
THE STOCK PURCHASE
General. The Stock Purchase Agreement provides that NDC will acquire from
PMSI all of the outstanding shares of PMSI Database Common Stock for cash and
shares of NDC Common Stock. Pursuant to the NDC Rights Agreement (hereinafter
defined), each share of NDC Common Stock issued in connection with the Stock
Purchase shall be accompanied by an NDC Right (hereinafter defined). If the
Stock Purchase Agreement is adopted by the stockholders of PMSI, all required
governmental and other consents and approvals are obtained, and all of the
other conditions to the obligations of the parties to consummate the Stock
Purchase are either satisfied or waived (as permitted), the Stock Purchase will
be consummated. A copy of the Stock Purchase Agreement is set forth in Annex A
to this Prospectus.
Simultaneously with and as a condition to the consummation of the Stock
Purchase, NDC will consummate the merger of one of its subsidiaries with and
into Source resulting in Source becoming a wholly-owned subsidiary of NDC (the
"Merger"), pursuant to that certain Agreement and Plan of Merger (the "Source
Merger Agreement"), dated as of August 20, 1997, by and among NDC, Source, and
Dunkirk, Inc., a Delaware corporation and a wholly-owned subsidiary of NDC
formed for the purpose of accomplishing the Merger. If the Source Merger
Agreement is adopted by the stockholders of Source at the special meeting
called therefore, all required governmental and other consents and approvals
obtained, and all of the other conditions to the obligations to the parties to
consummate the Source Merger Agreement are either satisfied or waived (as
permitted), the transactions contemplated by the Source Merger Agreement will
be consummated.
Purchase Price. The Stock Purchase Agreement provides that, subject to a
working capital adjustment (discussed below), as consideration for the purchase
by NDC of all of the outstanding shares of PMSI Database Common Stock, PMSI
shall receive: (i) $6,500,000 (the "Cash Amount"); and (ii) 1,059,829 shares of
NDC Common Stock (the "Base Amount" and, together with the Cash Amount, the
"Purchase Price").
The amount of cash and shares of NDC Common Stock to be paid to PMSI was
determined based on a per share value for the NDC Common Stock of $43.875, the
market price for the NDC Common Stock at the time NDC, Source and PMSI
commenced negotiations. See "The Stock Purchase--Background of the Stock
Purchase."
4
<PAGE>
Base Amount Adjustment. If, at the close of trading on the 10th trading date
immediately preceding the Closing Date (the "Determination Date"), the average
of the daily closing sales prices of NDC Common Stock as reported on the NYSE
Composite Transactions reporting system (as reported by The Wall Street Journal
or, if not reported thereby another authoritative source as chosen by NDC) for
the ten consecutive full trading days in which such shares are traded on the
NYSE ending at the close of trading on the Determination Date (the "Average
Closing Price"), shall be greater than $50.50 (the "Upper Threshold Price"),
the Base Amount shall be adjusted to equal that number of shares of NDC Common
Stock (rounded to the nearest whole share) obtained by dividing the product of
the Base Amount and the Upper Threshold Price by the Average Closing Price as
of the Determination Date. If the Average Closing Price on the Determination
Date shall be less than $37.25 (the "Lower Threshold Price"), PMSI shall have
the right to refuse to consummate the Stock Purchase, provided that PMSI shall
have given written notice of such refusal to NDC not later than two trading
days following the Determination Date. During the five-day period commencing
with the receipt of such notice, NDC shall have the option, in its sole
discretion, to elect to revise the Base Amount to equal that number of shares
of NDC Common Stock (rounded to the nearest whole share) obtained by dividing
the product of the Base Amount and the Lower Threshold Price by the Average
Closing Price as of the Determination Date. If NDC makes the election
contemplated by the preceding sentence within such five-day period, it shall
give prompt written notice to PMSI of such election and the revised Base
Amount, whereupon the Stock Purchase Agreement shall remain in effect in
accordance with its terms (except that the Base Amount shall have been so
modified).
Working Capital Adjustment. The Purchase Price shall be adjusted in the
manner described below:
Preliminary Balance Sheet. PMSI will cause to be prepared and delivered to
NDC a balance sheet for PMSI Database, as of the most recent month ending more
than ten days prior to the Closing Date (the "Preliminary Balance Sheet") and a
certificate based on such Preliminary Balance Sheet setting forth PMSI's
calculation of Working Capital, Current Assets and Current Liabilities
(hereinafter defined) as of such date ("Estimated Working Capital," "Estimated
Current Assets" and "Estimated Current Liabilities," respectively). The
Preliminary Balance Sheet shall fairly present the financial position of PMSI
Database as at the close of business on the date of the Preliminary Balance
Sheet in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with those used in the preparation of the balance
sheet of PMSI Database as of March 31, 1997 (the "PMSI Database Balance
Sheet"). As used herein and in the Stock Purchase Agreement, "Working Capital"
shall mean the amount equal to Current Assets less Current Liabilities,
"Current Assets" shall mean the amount equal to the sum of cash, accounts
receivable (net of any reserves), inventories, prepaid expenses, work-in-
process, and any other current assets recognized by GAAP, and "Current
Liabilities" shall mean the amount equal to the sum of accounts payable,
accrued current liabilities of PMSI Database (other than the current portion of
capitalized lease obligations), accrued sales commissions (but only as to
revenues realized and included in the PMSI Database statements of income prior
to such date), accrued bonuses (the amount equal to that percentage of budgeted
annual bonuses for PMSI Database's fiscal year 1998 equal to the ratio of the
earnings of PMSI Database through the date of calculation to budgeted earnings
for the full fiscal year), accrued vacation pay, current portion of long-term
indebtedness, pre-billed revenues and any other current liabilities recognized
by GAAP.
NDC shall have five business days from the receipt of the Preliminary Balance
Sheet and the calculation of Estimated Working Capital, Estimated Current
Assets and Estimated Current Liabilities to review such statement and
calculations and following such review such statement and calculations shall be
final and binding.
If Estimated Current Assets are less than the product of (i) 1.1659 times
(ii) Estimated Current Liabilities (such amount, the "Estimated Working Capital
Adjustment") as of the date of the Preliminary Balance Sheet, the Cash Amount
payable by NDC shall be decreased by the Estimated Working Capital Adjustment.
Closing Balance Sheet. As promptly as practicable, but not later than 30
days after the Closing Date, NDC will cause to be prepared and delivered to
PMSI a balance sheet for PMSI Database as of the Closing Date (the "Closing
Balance Sheet") setting forth NDC's calculation of Working Capital, Current
Assets and Current
5
<PAGE>
Liabilities, each as of the Closing Date ("Closing Working Capital," "Closing
Current Assets" and "Closing Current Liabilities," respectively). The Closing
Balance Sheet shall fairly present the financial position of PMSI Database as
at the close of business on the Closing Date in accordance with GAAP applied on
a basis consistent with those used in the preparation of the PMSI Database
Balance Sheet.
The Closing Balance Sheet and the calculation of Closing Working Capital,
Closing Current Assets and Closing Current Liabilities shall be deemed final
upon the earliest of: (i) the date on which NDC and PMSI jointly agree that
such documents are final; (ii) the 30th day after delivery of such documents,
if PMSI has not delivered a notice to NDC expressing disagreement with such
calculations and setting forth its calculation of such amount(s); and (iii) the
date on which all disputes relating to such statements and calculations between
the parties are resolved.
If PMSI shall deliver a notice of disagreement, PMSI and NDC, during the 30
days following such delivery, shall use their reasonable efforts to reach
agreement on the disputed items or amounts (the "Disputed Amounts"). If, during
such period, PMSI and NDC are unable to reach such agreement, they shall
promptly thereafter cause Price Waterhouse LLP (or if said firm shall be
unwilling to act thereunder, such other independent accountants of nationally
recognized standing reasonably satisfactory to NDC and PMSI), promptly to
review the Stock Purchase Agreement and any other documents necessary to
calculate the Disputed Amounts (including all work papers of the parties used
in calculating the Disputed Amounts) and such accountants shall then deliver a
report to NDC and PMSI setting forth their calculations which shall be final
and binding.
"Final Current Assets" and "Final Current Liabilities" shall mean: (i) NDC's
calculation of Closing Current Assets and Closing Current Liabilities, if no
notice of disagreement with respect thereto is duly delivered by PMSI; or (ii)
if such a notice of disagreement is delivered, (a) as agreed by NDC and PMSI or
(b) in the absence of such agreement, as shown in the independent accountant's
calculation, subject to certain threshold limits.
If Final Current Assets are less than the product of (i) 1.1659 times (ii)
Final Current Liabilities (the amount of such shortfall referred to as, the
"Final Working Capital Deficit"), PMSI shall pay to NDC in cash the amount of
the Final Working Capital Deficit as an adjustment to the Purchase Price. If
Final Current Assets are greater than the product of (i) 1.1659 times (ii)
Final Current Liabilities (the amount of such surplus referred to as, the
"Final Working Capital Surplus"), NDC shall pay to PMSI in cash the amount of
the Final Working Capital Surplus as an adjustment to the Purchase Price.
Allocation with Source. NDC, PMSI and Source have agreed to the following
adjustment in order to properly allocate the working capital adjustment based
on their respective closing balance sheets. For purposes of such allocation,
"Total Current Assets" shall mean the amount equal to the sum of Final Current
Assets and "Final Current Assets" calculated pursuant to the Source Merger
Agreement; "Total Current Liabilities" shall mean the amount equal to the sum
of Final Current Liabilities and "Final Current Liabilities" calculated
pursuant to the Source Merger Agreement; "Current Asset Allocation Amount"
shall mean the product of: (1) Final Current Assets divided by Total Current
Assets; and (2) the Total Working Capital Deficit (hereinafter defined) or
Total Working Capital Surplus (hereinafter defined), as the case may be.
If Total Current Assets are less than the product of 0.9975 and Total Current
Liabilities (the "Total Working Capital Deficit"), then PMSI shall pay to NDC
the amount of the Current Asset Allocation Amount in cash as a further
adjustment to the Purchase Price. If Total Current Assets are greater than the
product of 0.9975 and Total Current Liabilities, (the "Total Working Capital
Surplus") then NDC shall pay to PMSI the amount of the Current Asset Allocation
Amount in cash as a further adjustment to the Purchase Price.
For purposes of any adjustments to the Purchase Price based on the Closing
Balance Sheet, the parties shall take into account any adjustment made to the
Purchase Price at closing pursuant to the Preliminary Balance Sheet.
6
<PAGE>
Indemnification. Subject to certain limitations described below, PMSI will
indemnify NDC and its officers, directors, stockholders, controlling persons,
affiliates and representatives (collectively, the "NDC Indemnities") from and
against all losses asserted against, or paid, suffered or incurred by, an NDC
Indemnitiee resulting from, based upon, or arising out of: (i) a breach of any
representation or warranty of PMSI or PMSI Database; (ii) a breach of or
failure to perform any covenant or agreement of PMSI or PMSI Database; (iii)
any liability which is not expressly assumed by NDC pursuant to the Stock
Purchase Agreement; and (iv) any liability relating to Source Europe which will
be acquired by PMSI pursuant to the Source Divestiture Agreement. Subject to
certain limitations described below, NDC will indemnify PMSI and its officers,
directors, stockholders, controlling persons, affiliates and representatives
(collectively, the "PMSI Indemnitees") from and against all losses asserted
against, or paid, suffered or incurred by, a PMSI Indemnitee resulting from,
based upon, or arising out of: (i) a breach of any representation or warranty
of NDC; (ii) a breach of or failure to perform any covenant or agreement of
NDC; and (iii) any liability which was expressly assumed by NDC pursuant to the
Stock Purchase Agreement.
Neither PMSI nor NDC shall have any liability with respect to the matters
described above until the total of all losses with respect thereto exceeds
$30,000 (the "Threshold Amount") in which event PMSI or NDC, as the case may
be, shall be obligated to indemnify the other party for all such losses;
provided, however, that each individual claim of $10,000 or less shall not be
indemnifiable, and shall not be includable in determining whether the Threshold
Amount has been reached. In addition, the aggregate liability of PMSI and NDC
for indemnification of the other party for losses shall not exceed $1,000,000
(the "Maximum Amount").
Notwithstanding the foregoing, the Threshold Amount and Maximum Amount
limitations shall not apply to the indemnification rights of NDC with respect
to the liability of PMSI relating to, arising out of, or based upon any
liability which was not expressly assumed by NDC pursuant to the Stock Purchase
Agreement or any liability relating to Source Europe, and shall not apply to
the indemnification rights of PMSI relating to, arising out of or based upon
any liability expressly assumed by NDC pursuant to the Stock Purchase
Agreement.
The liability of NDC and PMSI with respect to any indemnification claim shall
be reduced by the tax benefit actually realized and any insurance proceeds
received and shall include any tax detriment actually suffered, by the
indemnified party as a result of any losses upon which such indemnification
claim is based. PMSI and PMSI Database, on the one hand, and NDC, on the other
hand, will have no liability to the other party under or in connection with any
indemnification claim unless written notice asserting an indemnification claim
based thereon is given to the other party prior to August 31, 1999; provided,
however, that the liability of PMSI relating to, arising out of or based upon
any liability which was not expressly assumed by NDC pursuant to the Stock
Purchase Agreement or any liability relating to Source Europe, and the
liability of NDC relating to, arising out of or based upon any liability
expressly assumed by NDC pursuant to the Stock Purchase Agreement, may be
asserted at any time.
Certain Federal Income Tax Consequences. The Stock Purchase is intended to be
a taxable sale of the common stock of PMSI Database to NDC pursuant to the
terms of the Stock Purchase Agreement. Both parties will make an election under
section 338(h)(10) of the Internal Revenue Code of 1986, as amended, (the
"Code") to treat the Stock Purchase as a deemed sale of assets by PMSI Database
to NDC, which will be followed by a deemed liquidation of PMSI Database and a
distribution to PMSI of the consideration received. See "The Stock Purchase--
Certain Federal Income Tax Consequences."
Upon the sale or exchange of NDC Common Stock, a holder of such stock
generally will recognize capital gain or loss equal to the difference between
the amount of cash and the fair market value of any property received upon the
sale or exchange and such holder's adjusted tax basis in the NDC Common Stock.
Under recently enacted legislation, capital gains recognized by a holder of NDC
Common Stock generally will be subject to a maximum federal income tax rate of
20% if the shares sold or exchanged are held for more than 18 months, and to a
maximum federal income tax rate of 28% if such shares are held for more than
one year but are not held for more than 18 months.
7
<PAGE>
BECAUSE CERTAIN TAX CONSEQUENCES OF THE STOCK PURCHASE MAY VARY DEPENDING
UPON THE PARTICULAR CIRCUMSTANCES OF THE STOCKHOLDER AND OTHER FACTORS, PMSI IS
URGED TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES OF THE STOCK PURCHASE (INCLUDING THE APPLICATION AND EFFECT OF
FOREIGN, STATE AND LOCAL INCOME AND OTHER TAX LAWS).
Conditions To Consummation. Consummation of the Merger is subject to various
conditions, including among other matters: (i) adoption of the Stock Purchase
Agreement and the Souce Divestiture Agreement by the requisite vote of PMSI
stockholders; (ii) receipt of all governmental and other consents and approvals
necessary to permit consummation of the Stock Purchase, including expiration or
termination of the statutory waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act"); (iii) consummation of the
Merger; (iv) consummation of the transactions contemplated by the Source
Divestiture Agreement; (v) consummation of certain agreements related to the
Stock Purchase Agreement; (vi) receipt of releases from third parties for
certain agreements with respect to Source Europe to which Source is a party or
is otherwise obligated; and (vii) satisfaction of certain other traditional
conditions. The foregoing are the material conditions to the consummation of
the Stock Purchase. See "The Stock Purchase--Conditions to Consummation" and
"--Amendment, Waiver and Termination."
Vote Of PMSI Stockholders Required; Recommendation Of PMSI Board Of
Directors. The consummation of the Stock Purchase is conditioned upon adoption
of the Stock Purchase Agreement and consummation of the transactions
contemplated therein by the holders of a majority of the outstanding shares of
the common stock of PMSI present and entitled to vote at a special meeting of
the stockholders of PMSI (the "Special Meeting") called for such purpose.
PMSI's Board of Directors has fixed the close of business on September 30,
1997, as the record date for determining the PMSI stockholders entitled to
receive notice of and to vote at the Special Meeting (the "Record Date"). As of
the Record Date, PMSI's directors and executive officers, and their affiliates,
held approximately 7.7% of the outstanding shares of common stock of PMSI
entitled to vote at the Special Meeting. As of the Record Date, NDC, its
directors and executive officers, and their affiliates, held no shares of the
common stock of PMSI. Certain members of the Board of Directors and certain
executive officers of PMSI also serve as directors and executive officers of
Source. In addition, certain directors of PMSI are stockholders of Source. The
Board of Directors of PMSI, therefore, formed a committee (the "Committee")
comprised solely of directors who are neither directors nor stockholders of
Source and directed the Committee to negotiate the terms of the Stock Purchase.
The Committee recommended to the entire Board of Directors of PMSI that it
approve the Stock Purchase.
Certain stockholders of PMSI who hold 14.57% of the outstanding shares of
common stock of PMSI, including Source and certain affiliates of Source, have
agreed that they will vote their shares of PMSI at the Special Meeting in
accordance with the vote of the unaffiliated stockholders.
The Board of Directors of PMSI believes that the Stock Purchase is in the
best interests of PMSI and its stockholders and has unanimously approved the
Stock Purchase Agreement and the consummation of the transactions contemplated
therein. In considering the Stock Purchase, the Committee and the whole Board
of Directors of PMSI considered a number of factors, including the terms of the
Stock Purchase, the compatibility of the operations of PMSI Database and NDC
and the financial condition, results of operation and future prospects of PMSI
Database and NDC. See "The Stock Purchase--Reasons for the Stock Purchase."
Regulatory Approvals. The consummation of the Stock Purchase is subject to
the expiration or termination of the statutory waiting period under the HSR
Act. See "The Stock Purchase--Regulatory Approvals."
Termination. The Stock Purchase Agreement may be terminated, and the Stock
Purchase abandoned, at any time prior to the Closing Date by mutual consent of
the Boards of Directors of PMSI and NDC. In addition, the Stock Purchase
Agreement may be terminated, and the Stock Purchase abandoned, prior to the
Closing Date by either NDC or PMSI if: (i) the other party materially breaches
and does not timely cure any representation, warranty, covenant or other
agreement contained in the Stock Purchase Agreement; (ii) any consent or
approval
8
<PAGE>
of certain regulatory authorities is denied by final nonappealable action of
such authority or if any action taken by such authority is not appealed within
the time limit for appeal; (iii) the PMSI stockholders fail to adopt the Stock
Purchase Agreement and the transactions contemplated thereby at the Special
Meeting; (iv) any of the conditions precedent to the obligations of the
terminating party to consummate the Stock Purchase cannot be satisfied or
fulfilled by January 31, 1998; or (v) the Stock Purchase has not been
consummated by January 31, 1998. In addition, NDC may unilaterally terminate
the Stock Purchase Agreement if the Board of Directors of PMSI or PMSI Database
fail to reapprove or resolves not to affirm the Stock Purchase or recommends
entering into a transaction other than the Stock Purchase involving a stock
purchase, share exchange, consolidation or transfer of substantially all of
PMSI Database's assets. Furthermore, PMSI may unilaterally terminate the Stock
Purchase Agreement in the event that the Average Closing Price of the shares of
NDC Common Stock is less than the Lower Threshold Amount as of the
Determination Date, subject to NDC's right to revise the Base Amount based on
the Lower Threshold Amount. See "The Stock Purchase--Amendment, Waiver and
Termination."
Conduct Of Business Pending The Stock Purchase. PMSI and PMSI Database have
agreed in the Stock Purchase Agreement among other things, to operate the PMSI
Database business only in the ordinary course and to take no action that would
adversely affect any party's ability to perform its covenants and agreements
under the Stock Purchase Agreement. In addition, PMSI and PMSI Database have
agreed not to take certain actions relating to the operation of PMSI Database
pending consummation of the Stock Purchase without the prior written consent of
NDC, except as otherwise permitted by the Stock Purchase Agreement, including,
among other things: (i) amending its Certificate of Incorporation or Bylaws;
(ii) entering into, modifying, amending or terminating any material contract;
(iii) repurchasing, redeeming or otherwise acquiring any shares of PMSI
Database Common Stock; (iv) subject to certain exceptions, issuing any
additional shares of its capital stock or giving any person the right to
acquire any such shares, or issuing any long-term debt; (v) subject to certain
exceptions, granting any increase in compensation or benefits, or paying any
bonus, to any of its directors, officers or employees; or (vi) modifying or
adopting any employee benefit plans, including any employment contract. See
"The Stock Purchase--Conduct of Business Pending the Stock Purchase."
Expenses And Fees. The Stock Purchase Agreement provides that each party
shall be responsible for its own costs and expenses incurred in connection with
the negotiation and consummation of the transactions contemplated by the Stock
Purchase Agreement, except that each of NDC and PMSI shall pay one-half of the
filing fees payable in connection with the HSR Act filing, and NDC shall pay
all costs associated with the Registration Statement and this Prospectus and
printing costs incurred in connection with the Registration Statement and this
Prospectus.
If the Stock Purchase Agreement is terminated by NDC because the stockholders
of PMSI, or PMSI as the sole stockholder of PMSI Database, fail to approve the
Stock Purchase Agreement, then PMSI shall promptly pay NDC all the out-of-
pocket costs and expenses of NDC, including costs of counsel, investment
brokers, actuaries and accountants up to a maximum of $750,000.
Accounting Treatment. It is anticipated that the Stock Purchase will be
accounted for under the "purchase" method of accounting. See "The Stock
Purchase--Accounting Treatment."
Resale Of NDC Common Stock. The NDC Common Stock issued in connection with
the Stock Purchase will be freely transferable by the holders of such shares,
except for those holders who may be deemed to be "affiliates" (generally
including directors, certain executive officers and holders of 10% or more of
the outstanding capital stock) of PMSI, PMSI Database or NDC under applicable
federal securities laws.
As a condition precedent to consummation of the Stock Purchase, NDC and PMSI
will execute a registration rights agreement (the "Registration Rights
Agreement") in the form attached as an exhibit to the Stock Purchase Agreement,
giving PMSI various rights with regard to the registration of NDC Common Stock
owned by it. Under the Registration Rights Agreement, NDC will agree to use its
best efforts to make this Registration Statement available for use by PMSI for
a period of 90 days from the Closing Date to offer and sell the shares of
9
<PAGE>
NDC Common Stock received by PMSI in the Stock Purchase.
The form of Registration Rights Agreement also provides for one demand
registration right to be granted to PMSI. This demand registration right will
permit PMSI to require NDC to effect one registration statement during a 12-
month period beginning on the Closing Date. See "The Stock Purchase--Resales of
NDC Common Stock."
This Registration Statement is intended for use by PMSI to offer and resell
the shares of NDC Common Stock received by it pursuant to the Stock Purchase
Agreement.
Closing Date. The closing of the Stock Purchase shall take place on such date
as the parties shall mutually agree (the "Closing Date").
MARKET PRICES AND DIVIDENDS
NDC Common Stock is traded on the NYSE under the symbol "NDC." The following
table sets forth the high and low sale prices per share of NDC Common Stock on
the NYSE, and the dividends declared per share of NDC Common Stock with respect
to each quarterly period since June 1, 1996. There is no established trading
market for shares of PMSI Database Common Stock. No cash dividends have been
declared or paid on PMSI Database Common Stock.
<TABLE>
<CAPTION>
SALE PRICES PER
SHARE OF NDC
COMMON STOCK DIVIDENDS DECLARED
--------------- PER SHARE OF NDC
HIGH LOW COMMON STOCK
------ -------- ------------------ ---
<S> <C> <C> <C> <C>
FISCAL 1996
Quarter ended August 31, 1995......... $26.63 $20.50 $.075
Quarter ended November 30, 1995....... 28.00 22.00 .075
Quarter ended February 29, 1996....... 35.00 20.00 .075
Quarter ending May 31, 1996........... 40.25 29.88 .075
FISCAL 1997
Quarter ended August 31, 1996......... 44.50 33.75 .075
Quarter ended November 30, 1996....... 46.63 37.88 .075
Quarter ended February 29, 1997....... 47.50 35.00 .075
Quarter ending May 31, 1997........... 44.00 33.75 .075
FISCAL 1998
Quarter ended August 31, 1997......... 46.50 36.125 .075
Quarter ending November 30, 1997
(through October 24, 1997)........... 40.25 36.6875 --
</TABLE>
On August 19, 1997, the last trading day prior to public announcement that
NDC and PMSI had executed the Stock Purchase Agreement, the last reported sale
prices per share of NDC Common Stock on the NYSE was $36.81. On October 24,
1997, the last reported sale prices per share of NDC Common Stock on the NYSE
was $38.69.
The Stock Purchase Agreement provides for the filing of a listing application
with the NYSE covering the shares of NDC Common Stock issuable pursuant to the
Stock Purchase. It is a condition to consummation of the Stock Purchase that
NDC use its reasonable efforts to ensure that such shares of NDC Common Stock
be authorized for listing on the NYSE effective upon official notice of
issuance. See "The Stock Purchase--Conditions to Consummation."
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following summary presents selected comparative unaudited per share data
for NDC and PMSI Database on a historical basis and on a pro forma combined
basis assuming the Stock Purchase and the Merger had been effective during the
period presented, and on an equivalent pro forma combined basis assuming the
Stock Purchase and the Merger had been effective during the period presented.
The Stock Purchase is reflected
10
<PAGE>
under the purchase method of accounting and pro forma data is derived
accordingly. The information shown below should be read in conjunction with the
historical financial statements of NDC and PMSI Database, including the
respective notes thereto, appearing elsewhere or incorporated by reference
herein, and with the unaudited pro forma combined financial information
including the notes thereto, appearing elsewhere herein. See "Available
Information," "Incorporation of Certain Information by Reference," "Annex B--
Financial Statements of PMSI Database Holdings, Inc." and "Annex C--Pro Forma
Combined Financial Information."
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED AUGUST 31,
MAY 31, 1997 1997
------------ ----------
<S> <C> <C>
NET INCOME PER SHARE:
NDC Historical....................................... $ 1.38 $ 0.38
Pro Forma Combined................................... 1.37 0.38
Equivalent Pro Forma(a).............................. 1.02 0.29
DIVIDENDS PER COMMON SHARE:
NDC Historical....................................... 0.30 0.08
Pro Forma Combined................................... 0.23 0.06
Equivalent Pro Forma(a).............................. 0.17 0.04
STOCKHOLDER'S EQUITY (BOOK VALUE) PER COMMON SHARE:
(AT PERIOD END)
NDC Historical....................................... 10.45 10.77
Pro Forma Combined................................... 11.02 11.08
Equivalent Pro Forma(a).............................. 8.27 8.31
</TABLE>
- --------
(a) Excludes the effect of the cash to be issued in conjunction with the Stock
Purchase and Merger.
RECENT DEVELOPMENTS
On October 14, 1997, NDC signed a definitive agreement to acquire Physician
Support Systems, Inc., a publicly-held Delaware corporation ("PSS"), in
exchange for approximately 4,230,000 shares of NDC Common Stock. PSS provides
business management services to physicians and hospitals in 29 states. The PSS
transaction is subject to the approval of the PSS stockholders as well as other
standard closing conditions and is expected to become effective during the
fourth quarter of calendar 1997.
SELECTED FINANCIAL DATA
Set forth below is certain unaudited historical consolidated selected
financial data relating to NDC and PMSI Database and certain unaudited pro
forma combined selected financial data, giving effect to the Stock Purchase and
the Merger on a purchase accounting basis. This information should be read in
conjunction with the historical financial statements of NDC and PMSI Database,
including the respective notes thereto, and with the unaudited pro forma
combined financial information appearing elsewhere in this Prospectus or
incorporated by referenced herein. See "Available Information," "Incorporation
of Certain Information by Reference," "Annex B--Financial Statements of PMSI
Database Holdings, Inc." and "Annex C--Pro Forma Combined Financial
Information."
11
<PAGE>
SELECTED FINANCIAL DATA OF NDC (HISTORICAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of NDC and
has been derived from and should be read in conjunction with NDC's Annual
Report on Form 10-K and Quarterly Report on Form 10-Q which are incorporated by
reference herein. See "Available Information" and "Incorporation of Certain
Information by Reference." In the opinion of management of NDC, interim
unaudited historical data reflect and include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of such
data. Unaudited results of operations for the three months ended August 31,
1997, are not necessarily indicative of results which may be expected for any
other interim period or for the fiscal year as a whole.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED MAY 31
--------------------- ---------------------------------------------
AUGUST 31, AUGUST 31,
1997 1996 1997 1996 1995 1994 1993
---------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............. $120,102 $101,164 $433,860 $325,803 $278,083 $237,659 $239,810
Operating income
(loss)............... 19,633 13,934 66,656 (11,834) 28,426 18,423 14,894
Income (loss) from
continuing
operations........... 10,604 8,205 38,753 (8,458) 18,421 12,226 8,045
PER SHARE DATA:
Income (loss) from
continuing
operations........... $ 0.38 $ 0.30 $ 1.38 $ (0.31) $ 0.79 $ 0.55 $ 0.37
Cash dividends........ 0.075 0.075 0.30 0.30 0.30 0.29 0.29
Fully diluted weighted
average common and
common equivalent
shares outstanding... 28,201 27,800 28,039 27,189 23,481 22,851 18,803
BALANCE SHEET DATA (AT
PERIOD END):
Total assets.......... $529,403 $369,417 $521,683 $368,039 $255,758 $214,864 $203,391
Long-term obligations. 156,407 12,853 155,690 13,324 26,410 21,664 20,254
Total stockholders'
equity............... 286,912 242,134 277,470 233,299 164,651 134,723 124,001
</TABLE>
SELECTED FINANCIAL DATA OF PMSI DATABASE (HISTORICAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of PMSI
Database more fully set forth in Annex B.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. $25,009 $19,801 $18,010 $14,225 $14,675
Operating income...................... 5,918 3,025 3,793 2,818 3,584
Income from continuing operations..... 3,529 1,789 2,344 2,211 1,895
BALANCE SHEET DATA (AT PERIOD END):
Total assets.......................... $14,209 $ 8,213 $ 7,135 $ 6,795 $ 9,351
Long-term obligations................. 776 189 7 29 53
Total stockholders' equity............ 5,665 2,136 2,247 3,403 1,192
</TABLE>
12
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
OF NDC, PMSI DATABASE AND SOURCE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected pro forma combined financial
information as of and for the year ended May 31, 1997, and the three months
ended August 31, 1997, giving effect to the Merger and the consummation of the
Stock Purchase using the purchase method of accounting. The pro forma combined
financial information represents the historical operations of NDC, Source and
PMSI Database adjusted for the effects of the Stock Purchase and the Merger as
well as the effects of the acquisition of NDC Healthcare EDI Services, Inc.
consummated in October 1996. This information has also been adjusted to conform
presentation format and accounting policy to those of NDC. For comparability
purposes, Source and PMSI Database's twelve months ended June 30, 1997,
respectively, are used in conjunction with the NDC three and twelve months
ended August 31, 1997 and May 31, 1997. The weighted average common shares
outstanding and related per share data has been adjusted to reflect the maximum
number of shares of NDC Common Stock issuable in the Stock Purchase and the
Merger. The pro forma combined financial information is provided for
informational purposes only and is not necessarily indicative of actual results
that would have been achieved had the Stock Purchase and the Merger been
consummated at the beginning of the period presented or of future results. The
selected pro forma combined financial information is derived from the Pro Forma
Combined Financial Information attached to this Prospectus as Annex C. This
information should be read in conjunction with the historical financial
statements of NDC and PMSI Database, including the respective notes thereto,
appearing elsewhere or incorporated by reference herein.
<TABLE>
<CAPTION>
PRO FORMA COMBINED
----------------------------
YEAR THREE MONTHS
ENDED ENDED
MAY 31, 1997 AUGUST 31, 1997
------------ ---------------
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues......................................... $523,605 $145,224
Operating income................................. 73,061 21,758
Income from continuing operations................ 42,110 11,832
PER SHARE DATA:
Income from continuing operations................ $ 1.37 $ 0.38
Cash dividends................................... 0.30 0.08
Weighted average common shares outstanding....... 30,654 30,816
BALANCE SHEET DATA (AT AUGUST 31, 1997):
Total assets..................................... $635,458
Long-term obligations............................ 164,673
Total stockholders' equity....................... 324,092
</TABLE>
13
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in NDC Common Stock.
COMPETITION
The markets for the applications systems and services offered by NDC are
highly competitive. Competition in the health care transaction processing and
payment systems markets affects NDC's ability to gain new customers and the
prices it can charge. The key competitive factors for NDC are functionality of
products, quality of service and price. Many of NDC's competitors have access
to significant capital and management, marketing and technological resources
that are equal to or greater than those of NDC, and there can be no assurance
that NDC will continue to be able to compete successfully with them. In
addition, NDC competes with businesses that internally perform data processing
or other services offered by NDC.
MARKETS AND APPLICATIONS
NDC's future growth and profitability will depend, in part, upon the further
expansion of the health care transaction processing and payment systems
markets, the emergence of other markets for electronic transaction processing
services and NDC's ability to penetrate such markets. Further expansion of
these markets is dependent upon the continued growth in the number of
transactions available to be processed and the continued automation of
traditional paper-based processing systems. NDCs ability to penetrate such
markets will depend, in turn, upon its ability to apply its existing
technology, or to develop new technology, to meet the particular service needs
of each new market. There can be no assurance that markets for NDC's services
will continue to expand and develop or that NDC will be successful in its
efforts, or have adequate financial, marketing and technological resources to
penetrate new markets.
INTEGRATED PAYMENT SYSTEMS BUSINESS
NDC's merchant customers have liability for charges disputed by cardholders.
However, in the case of merchant fraud, or insolvency or bankruptcy of the
merchant, NDC may be liable for any of such charges disputed by cardholders.
NDC requires cash deposits and other types of collateral by certain merchants
to minimize any such contingent liability. Based on its historical loss
experience, NDC has established reserves for estimated losses on transactions
processed which management believes are adequate. There can be no assurance,
however, that such reserves for losses will be adequate. Any such losses in
excess of reserves could have a material adverse effect on the financial
condition and results of operations of NDC.
HEALTH CARE INFORMATION SERVICES
Federal and state governments have recently focused significant attention on
health care reform. It is not possible to predict which, if any, proposal that
has been or will be considered will be adopted. There can be no assurance that
the health care regulatory environment will not change so as to restrict the
existing operations of, impose additional requirements on or limit the
expansion of NDC. Costs of compliance with changes in government regulations
may not be subject to recovery by NDC through price increases.
Significant media and public attention has recently been focused on the
health care industry due to ongoing federal and state investigations
purportedly related to certain referral and billing practices. The Office of
the Inspector General and the Department of Justice have initiated hospital
and laboratory billing review projects in certain states and are expected to
extend such projects to additional states, including states in which NDC, upon
the consummation of its acquisition of PSS, will operate. These projects
increase the likelihood of governmental
14
<PAGE>
investigations of hospitals, laboratories and other institutions for which NDC
and PSS perform services. Although PSS currently monitors, and, upon the
consummation of its acquisition of PSS, NDC intends to continue to monitor,
billing practices and arrangements to ensure compliance with prevailing
industry practices under applicable laws, such laws are complex and constantly
evolving and there can be no assurance that governmental investigators will
not take positions that are inconsistent with industry practices.
ACQUISITION RISKS
NDC completed five acquisitions in fiscal 1997, and intends to seek
additional acquisition opportunities and alliance relationships with other
businesses that will allow it to increase its market penetration,
technological capabilities, product offerings and distribution capabilities.
There can be no assurance that NDC will be able successfully to identify
suitable acquisition candidates, complete acquisitions, integrate acquired
operations into its existing operations or expand into new markets. There can
also be no assurance that future acquisitions will not have an adverse effect
upon NDC's operating results, particularly in the fiscal quarters immediately
following the completion of such acquisitions while the operations of the
acquired business are being integrated into NDC's operations. Once integrated,
acquired operations may not achieve levels of revenues, profitability or
productivity comparable with those achieved by NDC's existing operations, or
otherwise perform as expected. In addition, NDC competes for acquisition and
expansion opportunities with companies that have substantially greater
resources. NDC may incur indebtedness in the future, including through
borrowings under a credit facility, if a credit facility is available, to
finance acquisitions. As a result, NDC expects to be subject to risks
associated with debt financing, including the risk that interest rates may
increase, the risk that NDC's cash flow will be insufficient to meet required
payments on its debt and the risk that NDC may be unable to refinance or repay
the debt as it comes due.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW, CERTAIN CHARTER AND BY-LAW
PROVISIONS AND STOCKHOLDER RIGHTS PLAN
Certain provisions of the NDC's Certificate of Incorporation and By-laws
could delay, defer or prevent a takeover attempt that a stockholder might
consider in its best interest. These provisions may adversely affect
prevailing market prices for NDC Common Stock. These provisions, among other
things, classify NDC's Board of Directors into three classes as nearly equal
in number as the total number of directors permits, each of which serve for
different three-year terms, and authorize the Board of Directors to issue
preferred stock in one or more classes or series and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of
those shares without any action on the part of the stockholders. The rights of
the holders of NDC Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be
issued in the future. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of NDC. NDC
has no current plans to issue shares of preferred stock. NDC also maintains a
stockholder rights plan which entitles the stockholders of NDC, upon the
happening of certain events, to purchase preferred stock of NDC. These NDC
Rights (hereinafter defined) may have certain anti-takeover effects because
the rights will cause substantial dilution to a person or group that attempts
to acquire NDC on terms not approved by the Board of Directors of NDC unless
the offer is conditioned on a substantial number of NDC Rights being acquired.
In addition, Section 203 of the Delaware General Corporation Law prohibits
certain persons from engaging in business combinations with NDC which may also
have the effect of delaying, deterring or preventing a change of control of
NDC.
FORWARD-LOOKING STATEMENTS
When used in this Prospectus and elsewhere by management or NDC from time to
time, the words "believes," "anticipates," "expects" and similar expressions
are intended to identify forward-looking statements concerning NDC's
operations, economic performance and financial condition, including in
particular,
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the likelihood of NDC's success in developing and expanding its business.
These statements are based on a number of assumptions and estimates which are
inherently subject to significant uncertainties and contingencies, many of
which are beyond the control of NDC, and reflect future business decisions
which are subject to change. A variety of factors could cause actual results
to differ materially from those anticipated in NDC's forward- looking
statements, some of which include competition in the market for NDC's
services, continued expansion of NDC's processing and payment systems markets,
successfully completing and integrating acquisitions in existing and new
markets and other risk factors that are discussed herein and from time to time
in other NDC reports and other filings with the Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date they are made. NDC undertakes no obligations
to publicly release the results of any revisions to such forward- looking
statements that may be made to reflect events or circumstances after the date
hereof, or thereof, as the case may be, or to reflect the occurrence of
unanticipated events.
THE STOCK PURCHASE
The following information describes certain information pertaining to the
Stock Purchase. This description does not purport to be complete and is
qualified in its entirely by reference to the Annexes hereto, including the
Stock Purchase Agreement, a copy of which is set forth in Annex A to this
Prospectus and is incorporated herein by reference.
GENERAL
The Stock Purchase Agreement provides that NDC will acquire from PMSI all of
the outstanding shares of PMSI Database Common Stock for cash and shares of
NDC Common Stock. Pursuant to the NDC Rights Agreement, each share of NDC
Common Stock issued in connection with the Stock Purchase shall be accompanied
by an NDC Right. If the Stock Purchase Agreement is adopted by the
stockholders of PMSI at a Special Meeting, all required governmental and other
consents and approvals are obtained and all of the other conditions to the
obligations of the parties to consummate the Stock Purchase are either
satisfied or waived (as permitted), the Stock Purchase will be consummated. A
copy of the Stock Purchase Agreement is set forth in Annex A to this
Prospectus.
Simultaneously with and as a condition to the consummation of the Stock
Purchase, NDC will consummate the merger of one of its subsidiaries with and
into Source with Source becoming a wholly-owned subsidiary of NDC, pursuant to
that certain Agreement and Plan of Merger, dated as of August 20, 1997, by and
among NDC, Source and Dunkirk, Inc. If the Source Merger Agreement is adopted
by the stockholders of Source at the special meeting called therefore, all
required governmental and other consents and approvals obtained, and all of
the other conditions to the obligations to the parties to consummate the
Source Merger Agreement are either satisfied or waived (as permitted), the
transactions contemplated by the Source Merger Agreement will be consummated.
BACKGROUND OF THE STOCK PURCHASE
In April 1996, PMSI's Board decided, following the conclusion of a strategic
reassessment, to concentrate PMSI's efforts on the development of its core
business as an information services provider to the pharmaceutical and
healthcare industries. As a consequence, PMSI announced that it would divest
its non-database segment. Since that date, PMSI has sold all businesses in
this segment, except its French point-of-sale business, which is presented in
PMSI's financial statements as an "asset held for sale."
In May 1996, to further its efforts towards achieving its business goals
while building stockholder value and to avoid any appearance of a conflict of
interest with Source, which PMSI perceived as having potentially conflicting
goals, PMSI formed the Committee, comprised solely of independent directors,
none of whom are directors or stockholders of Source. The Committee then
retained investment bankers to evaluate how PMSI could best achieve such
goals, including possibly a sale or merger of PMSI. Subsequently, PMSI and its
investment bankers had preliminary discussions regarding business combinations
with several potentially interested parties.
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In addition, during this period PMSI also reviewed the feasibility and
financial implications of acquiring Source, since PMSI had been informally
notified by the board of directors of Source that Source was looking for a way
of creating liquidity for its stockholders. From a business and strategic
perspective, the acquisition of Source by PMSI had certain attractive features
given the significant business relationships between the two parties. In 1991,
PMSI and Walsh, as the predecessor of Source, had entered into an agreement
with respect to the Alpha Database and in 1994 PMSI and Walsh had commenced
the Source US operating venture to more fully exploit the databases produced
by Source. More recently, PMSI and Source had also reached agreement in
principle for PMSI's profit participation in Source Europe's efforts to build
and commercialize similar databases in major European markets. However, after
considering the matter, the Committee concluded that the acquisition of Source
in a purchase transaction at the value placed on the business by the Source
board would be significantly dilutive to future earnings per share.
Furthermore, the Source board of directors was seeking liquidity that would
have been difficult for PMSI to achieve, the Committee therefore rejected the
acquisition of Source as a viable option.
During the first half of calendar 1996, Source US and NDC, which has been a
significant data supplier to Source US since inception of the US operating
venture between Source and PMSI, commenced discussions with regard to creating
a new information service. During the course of these discussions, NDC
management suggested that, due to the complementary nature of the businesses,
there be a senior management meeting of all three companies to explore the
potential for further cooperation.
Commencing in November 1996, senior management from NDC, PMSI and Source met
several times to explore the potential synergies among their businesses. While
a possible transaction in which NDC would acquire all of PMSI and Source was
discussed, NDC did not submit an acquisition proposal to PMSI and Source. NDC
expressed the view that, since it had no significant operations outside the
United States, it believed that the greatest benefits would be derived from
cooperative ventures with Source US, the OTC Business and NDC's health care
transaction processing network, all based and operating solely in the United
States. In May 1997, NDC expressed an interest in acquiring these parts of the
PMSI and Source businesses. NDC's proposal contemplated the acquisition by NDC
of the OTC Business and all the outstanding capital stock of Source and that
of Source US, subject to Source's divestiture of its interest in Source
Europe. The Committee considered that the proposal did present PMSI with the
opportunity to capitalize on the value of its minority participation in Source
US and the value of the OTC Business (which is the only PMSI operation located
in the same offices and utilizing significant common resources as Source) and
to construct a financially attractive transaction to acquire 100% of Source
Europe to further strengthen and expand PMSI's European businesses. Moreover,
since no other possible business combinations had progressed beyond the
preliminary stage, the Committee determined that NDC's proposal was the
transaction most likely to increase stockholder value in PMSI.
In June 1997, NDC, PMSI and Source commenced negotiations on a proposal for
PMSI to acquire 100% of Source Europe and for NDC to acquire 100% of Source US
(including PMSI's interest in Source US) together with the OTC Business, for a
total purchase price payable to PMSI and the stockholders of Source consisting
of $153 million, based on a value of $43.875 per share, payable 75% in
registered shares of NDC Common Stock and 25% in cash. The investment bankers
were directed to negotiate on PMSI's behalf both the allocation between PMSI
and Source of the total NDC consideration to be received in the Stock Purchase
and the Merger and the terms of the transfer from Source to PMSI of Source
Europe. Source was represented in these negotiations by its own investment
bankers.
Through July and August 1997, PMSI, Source and NDC continued to negotiate
the terms of the Stock Purchase and the Merger, including the scope of
representations and warranties, the scope and duration of indemnities and
related escrow arrangements and the principal terms of ancillary agreements
between the parties. On August 20, 1997, the Stock Purchase Agreement, the
Source Divestiture Agreement and the Source Merger Agreement were executed.
RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE STOCK PURCHASE
Over the last few years, Source US has been a major factor in the growth of
PMSI's information business. However, the Source US venture is governed by the
Alpha Database License Agreement (the "Alpha Database Agreement"), between
Source and PMSI, which is cancelable by Source in its complete discretion in
2011 at
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the end of the 20-year term. PMSI's minority position in Source US allows it
to recognize a fixed 26% of revenue and a percentage of total costs that
increases over time from 22.6% in 1995 to 26% in 2002. As a consequence,
overall operating profits of Source US recognized by PMSI will decline over
the next four years to 26% of Source US's total operating profits and stay at
that level for the remaining nine years of the Alpha Database Agreement.
In view of the desire of Source stockholders for liquidity, it became clear
to the Board of Directors of PMSI that there was a significant likelihood
that, in order to achieve such liquidity, Source would have to sell its
majority ownership of Source US, leaving PMSI, if it took no other action, as
a minority partner in a venture controlled by an unknown third party. The
Board decided that increasing long-term stockholder value was best served
either by full ownership of such databases or compete liquidation of its
minority interest in the operating venture. The Committee and the Board
unanimously felt that maintaining access to the Source US databases only
through PMSI's minority ownership of finite duration was not an effective way
to increase PMSI stockholder value. Rather, after investigating and rejecting
on financial grounds the possibility of purchasing Source, the Committee and
the Board concluded that it would best serve the interests of PMSI's
stockholders to take the opportunity of selling PMSI's interests in the
venture at the same time as the sale by Source of its majority interest and
investing in wholly-owned healthcare database businesses.
The Committee and the Board approved including the OTC Business in the sale
to NDC because this business is physically located in Phoenix, Arizona with,
and supported by, Source US and would be difficult to manage and develop as a
stand-alone operation. Moreover, NDC included it in its formal offer. The
Committee and the Board also concluded that the sale of Source US and the OTC
Business would have no material adverse impact on Scott-Levin, PMSI's other
business in the United States, since this research and consulting business is
located separately in Newtown, Pennsylvania. Scott-Levin has a substantially
broader client base than either Source US or the OTC Business. In addition,
the Committee and Board concluded that the sale of Source US and the OTC
Business would have no material adverse impact on PMSI's growing information
services business in Japan.
In June, 1997, PMSI and Source commenced negotiations on a proposal for PMSI
to acquire 100% of Source Europe. Concurrent with the Stock Purchase, and as a
condition of closing, PMSI will purchase Source Europe from Source. Source
Europe is a development stage business focused on building a range of services
similar to Source US, for clients in continental Europe. While PMSI is
currently developing software and databases to deliver prescriber-linked
prescription service and has delivered initial services to certain clients,
the business will need further funding to continue business development
through cash flow self-sufficiency. Source Europe may also require additional
investment in the event of problems with the development of the software and
databases, delays in bringing products to market or delays in obtaining
government approval to launch prescriber-based services in certain countries.
Source Europe has incurred operating losses since inception in 1994.
Prior to approving the acquisition of this venture, PMSI's Board requested a
detailed review of this opportunity for PMSI by management and independent
advisers. The review concluded that, although the transaction is not without
risks, the acquisition and the completion of the development of Source Europe
are in the overall best interests of PMSI given the substantial investment
already made by Source in the venture over the past three fiscal years, the
projected future returns and required costs of completing the project and the
availability to PMSI of some of the same experienced team that developed
Source US. To date, the investments in Source Europe include researching the
market potential and entry strategies for Source Europe data services in
Europe, entering into contracts with prescription data vendors in five
national markets, developing the databases, gaining regulatory approval in
certain markets and initiating the procedure for regulatory approval in other
markets for the collection of prescriber level data and delivery of data
products, building infrastructure and entering into contracts with over 30
pharmaceutical companies and obtaining sales commitments from others.
The pharmaceutical industry in the countries covered by Source Europe has a
market size in excess of the market in the United States and management of
PMSI believes that the European market for prescription data
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has the potential of generating profits at least as high as those for the
prescription information services business in the United States. Moreover, the
Board believes that this European market is as yet essentially unrealized,
offering Source Europe an opportunity to participate in the development of the
market and in its potential gains. The Board believes that PMSI's already
existing European presence and infrastructure, along with the overall
experience, background and industry knowledge of PMSI's management and
personnel place it and Source Europe in the position to exploit this
opportunity. Source Europe is already delivering initial data products to
clients and beginning to recognize revenue. The Committee and the Board
concluded that Source Europe would be complementary to PMSI's existing
European businesses and would thereby enhance PMSI's market position in the
future.
Source Europe's operating results have been significantly affected by the
expense of creating a management infrastructure to support an international
business, including the addition of staff and expansion of office facilities
as well as the cost of investment in technology and database development. With
the close of this transaction, PMSI will implement plans to combine Source
Europe with PMSI's European operations and pursue investment to increase
PMSI's revenues.
The Committee and the Board reviewed the effects on fiscal 1998 financial
results of the Stock Purchase, the acquisition of Source Europe and the
investment in Source Europe to complete its development including a reduction
in information services revenue and a dilution in PMSI's earnings per share.
However, the Committee and the Board also considered the cash and PMSI common
stock to be received from Source in the Stock Purchase should contribute
significantly to the funding requirements and that, over the longer term, the
revenue from Source Europe should at least replace the revenues that had been
derived from the OTC Business and Source US. Therefore, the Committee and the
Board concluded that the potential financial return from Source Europe
outweighed the risks in taking on a developmental stage of business of this
magnitude.
THE COMMITTEE, COMPRISED SOLELY OF INDEPENDENT DIRECTORS OF PMSI WHO ARE
NEITHER DIRECTORS NOR STOCKHOLDERS OF SOURCE, UNANIMOUSLY APPROVED THE STOCK
PURCHASE AGREEMENT AND THE SOURCE DIVESTITURE AGREEMENT AND RECOMMENDED TO THE
BOARD THAT THE STOCK PURCHASE AGREEMENT AND THE SOURCE DIVESTITURE AGREEMENT
BE APPROVED. THE BOARD HAS UNANIMOUSLY APPROVED THE STOCK PURCHASE AGREEMENT
AND THE SOURCE DIVESTITURE AGREEMENT AND RECOMMENDS THAT HOLDERS OF PMSI
COMMON STOCK VOTE "FOR" APPROVAL OF SUCH.
THE PURCHASE PRICE
Purchase Price. The Stock Purchase Agreement provides that, subject to a
working capital adjustment (discussed below), as consideration for the
purchase by NDC of all of the outstanding shares of PMSI Database Common
Stock, PMSI shall receive: (i) $6,500,000; and (ii) 1,059,829 shares of NDC
Common Stock.
The amount of cash and shares of NDC Common Stock to be paid to PMSI was
determined based on a per share value for the NDC Common Stock of $43.875, the
market price for the NDC Common Stock at the time NDC, Source and PMSI
commenced negotiations. See "The Stock Purchase--Background of the Stock
Purchase."
Base Amount Adjustment. If, at the Determination Date, the Average Closing
Price shall be greater than the Upper Threshold Price, the Base Amount shall
be adjusted to equal that number of shares of NDC Common Stock (rounded to the
nearest whole share) obtained by dividing the product of the Base Amount and
the Upper Threshold Price by the Average Closing Price as of the Determination
Date. If the Average Closing Price on the Determination Date shall be less
than the Lower Threshold Price, PMSI shall have the right to refuse to
consummate the Stock Purchase, provided PMSI shall have given written notice
of such refusal to NDC not later than two trading days following the
Determination Date. During the five-day period commencing with the receipt of
such notice, NDC shall have the option, in its sole discretion, to elect to
revise the Base Amount to equal that
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number of shares of NDC Common Stock (rounded to the nearest whole share)
obtained by dividing the product of the Base Amount and the Lower Threshold
Price by the Average Closing Price as of the Determination Date. If NDC makes
the election contemplated by the preceding sentence within such five-day
period, it shall give prompt written notice to PMSI of such election and the
revised Base Amount, whereupon the Stock Purchase Agreement shall remain in
effect in accordance with its terms (except that the Base Amount shall have
been so modified).
Working Capital Adjustment. The Purchase Price shall be further adjusted in
the manner described below:
Preliminary Balance Sheet. PMSI will cause to be prepared and delivered to
NDC the Preliminary Balance Sheet and a certificate based on such Preliminary
Balance Sheet setting forth PMSI's calculation of Estimated Working Capital,
Estimated Current Assets and Estimated Current Liabilities. The Preliminary
Balance Sheet shall fairly present the financial position of PMSI Database as
at the close of business on the date of the Preliminary Balance Sheet in
accordance with GAAP applied on a basis consistent with those used in the
preparation of the PMSI Database Balance Sheet.
NDC shall have five business days from the receipt of the Preliminary
Balance Sheet and the calculation of Estimated Working Capital, Estimated
Current Assets and Estimated Current Liabilities to review such statement and
calculations and following such review such statement and calculations shall
be final and binding.
If Estimated Current Assets are less than the product of (i) 1.1659 times
(ii) Estimated Current Liabilities as of the date of the Preliminary Balance
Sheet, the Cash Amount payable by NDC shall be decreased by the Estimated
Working Capital Adjustment.
Closing Balance Sheet. As promptly as practicable, but not later than 30
days after the Closing Date, NDC will cause to be prepared and delivered to
PMSI the Closing Balance Sheet setting forth NDC's calculation of Closing
Working Capital, Closing Current Assets and Closing Current Liabilities. The
Closing Balance Sheet shall fairly present the financial position of PMSI
Database as at the close of business on the Closing Date in accordance with
GAAP applied on a basis consistent with those used in the preparation of the
PMSI Database Balance Sheet.
The Closing Balance Sheet and the calculation of Closing Working Capital,
Closing Current Assets and Closing Current Liabilities shall be deemed final
upon the earliest of: (i) the date on which NDC and PMSI jointly agree that
such documents are final; (ii) the 30th day after delivery of such documents,
if PMSI has not delivered a notice to NDC expressing disagreement with such
calculations and setting forth its calculation of such amount(s); and (iii)
the date on which all disputes relating to such statements and calculations
between the parties are resolved.
If PMSI shall deliver a notice of disagreement, PMSI and NDC shall, during
the 30 days following such delivery, use their reasonable efforts to reach
agreement on the Disputed Amounts. If, during such period, PMSI and NDC are
unable to reach such agreement, they shall promptly thereafter cause Price
Waterhouse LLP (or if said firm shall be unwilling to act thereunder, such
other independent accountants of nationally recognized standing reasonably
satisfactory to NDC and PMSI), promptly to review the Stock Purchase Agreement
and any other documents necessary to calculate the Disputed Amounts (including
all work papers of the parties used in calculating the Disputed Amounts) and
such accountants shall then deliver a report to NDC and PMSI setting forth
their calculations which shall be final and binding.
If Final Current Assets are less than the product of (i) 1.1659 times (ii)
Final Current Liabilities, PMSI shall pay to NDC in cash the amount of the
Final Working Capital Deficit as an adjustment to the Purchase Price. If Final
Current Assets are greater than the product of (i) 1.1659 times (ii) Final
Current Liabilities, NDC shall pay to PMSI in cash the amount of the Final
Working Capital Surplus as an adjustment to the Purchase Price.
Allocation with Source. NDC, PMSI and Source have agreed to the following
adjustment in order to properly allocate the working capital adjustment based
on their respective closing balance sheets. If Total Current
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Assets are less than the product of 0.9975 and Total Current Liabilities, then
PMSI shall pay to NDC the amount of the Current Asset Allocation Amount in
cash as a further adjustment to the Purchase Price. If Total Current Assets
are greater than the product of 0.9975 and Total Current Liabilities, then NDC
shall pay to PMSI the amount of the Current Asset Allocation Amount in cash,
as a further adjustment to the Purchase Price.
For purposes of any adjustments to the Purchase Price based on the Closing
Balance Sheet, the parties shall take into account any adjustment made to the
Purchase Price at closing pursuant to the Preliminary Balance Sheet.
INDEMNIFICATION
Subject to certain limitations described below and in the Stock Purchase
Agreement, PMSI will indemnify NDC and its officers, directors, stockholders,
controlling persons, affiliates and representatives from and against all
losses asserted against, or paid, suffered or incurred by, an NDC Indemnitee
resulting from, based upon, or arising out of: (i) a breach or any
representation or warranty of PMSI or PMSI Database; (ii) a breach of or
failure to perform any covenant or agreement of PMSI or PMSI Database (except
with respect to certain contract terminations); (iii) any liability which is
not expressly assumed by NDC pursuant to the Stock Purchase Agreement; and
(iv) any liability relating to Source Europe which will be acquired by PMSI
pursuant to the Source Divestiture Agreement. Subject to certain limitations
described below and in the Stock Purchase Agreement, NDC will indemnify PMSI
and its officers, directors, stockholders, controlling persons, affiliates and
representatives from and against all losses asserted against, or paid,
suffered or incurred by, a PMSI Indemnitee resulting from, based upon, or
arising out of: (i) a breach of any representation or warranty of NDC; (ii) a
breach of or failure to perform any covenant or agreement of NDC; and (iii)
any liability which was expressly assumed by NDC pursuant to the Stock
Purchase Agreement.
Neither PMSI nor NDC shall have any liability with respect to the matters
described above until the total of all losses with respect thereto exceeds the
Threshold Amount in which event PMSI or NDC, as the case may be, shall be
obligated to indemnify for all such losses; provided, however, that each
individual claim of $10,000 or less shall not be indemnifiable, and shall not
be includable in determining whether the Threshold Amount has been reached. In
addition, the aggregate liability of PMSI and NDC for indemnification of the
other party for losses shall not exceed the Maximum Amount.
Notwithstanding the foregoing, the Threshold Amount and Maximum Amount
limitations shall not apply to the indemnification rights of NDC with respect
to the liability of PMSI relating to, arising out of, or based upon any
liability which was not expressly assumed by NDC pursuant to the Stock
Purchase Agreement or any liability relating to Source Europe, and shall not
apply to the indemnification rights of PMSI relating to, arising out of or
based upon any liability expressly assumed by NDC pursuant to the Stock
Purchase Agreement.
The liability of NDC and PMSI with respect to any indemnification claim
shall be reduced by the tax benefit actually realized and any insurance
proceeds received, and shall include any tax detriment actually suffered by
the indemnified party as a result of any losses upon which such
indemnification claim is based. PMSI, on the one hand, and NDC, on the other
hand, will have no liability to the other party under or in connection with
any indemnification claim unless written notice asserting an indemnification
claim based thereon is given to the other party prior to August 31, 1999;
provided, however, the liability of PMSI relating to, arising out of or based
upon any liability which was not expressly assumed by NDC pursuant to the
Stock Purchase Agreement or any liability relating to Source Europe, and the
liability of NDC relating to, arising out of or based upon any liability
expressly assumed by NDC pursuant to the Stock Purchase Agreement may be
asserted at any time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Stock Purchase. This discussion is based on the provisions
of the Code, the United States Department of the Treasury Regulations
thereunder and rulings and court decisions as of the date hereof, all of which
are subject to change, possibly retroactive. The discussion is included for
general information purposes only and applies only to PMSI. NDC
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and PMSI have not requested a ruling from the Internal Revenue Service (the
"Service") and neither party has obtained a tax opinion from counsel.
The Stock Purchase is intended to be a taxable sale of the common stock of
PMSI Database to NDC pursuant to the terms of the Stock Purchase Agreement.
Both parties will make an election under section 338(h)(10) of the Code to
treat the Stock Purchase as a sale of assets by PMSI Database to NDC, which
will be followed by a liquidation of PMSI Database and a distribution to PMSI
of the consideration received.
Upon the sale or exchange of NDC Common Stock, a holder of such stock
generally will recognize capital gain or loss equal to the difference between
the amount of cash and the fair market value of any property received upon the
sale or exchange and such holder's adjusted tax basis in the NDC Common Stock.
Under recently enacted legislation, capital gains recognized by a holder of
NDC Common Stock generally will be subject to a maximum federal income tax
rate of 20% if the shares sold or exchanged are held for more than 18 months,
and to a maximum federal income tax rate of 28% if such shares are held for
more than one year but are not held for more than 18 months.
INTERESTS OF CERTAIN PERSONS IN THE STOCK PURCHASE
Other than as described herein, no director or executive officer of NDC or
PMSI, and no associate of any such person, has any substantial interest,
direct or indirect, in the Stock Purchase.
Certain members of the Board of Directors of PMSI also serve as directors of
Source. In addition, certain directors of PMSI are stockholders of Source.
Handel E. Evans and Dennis M.J. Turner, directors and the Chairman of the
Board and the Chief Executive Officer, respectively, of PMSI, are also
directors and the Chairman of the Board and the Chief Executive Officer,
respectively, of Source. In addition, Patrick J. Welsh, a director of PMSI, is
also a director of Source and is a general partner of the general partner of a
significant stockholder of PMSI ("WCAS") and, along with certain of its
affiliated entities, the largest stockholder of Source.
At consummation of the Stock Purchase, Messrs. Evans and Turner are to each
receive aggregate annual bonuses from PMSI of $570,000. In determining these
bonuses, compensation committees of each of PMSI and Source considered the
successful completion of the transactions pursuant to the Stock Purchase and
the Source Divestiture Agreement. At consummation of the Stock Purchase, the
employment by Source of Messrs. Evans and Turner will be terminated and they
will each receive termination payments pursuant to their respective employment
agreements with Source aggregating $1.2 million and $880,000, respectively,
after which Mr. Evans will enter into an employment agreement with PMSI as its
full- time Chairman of the Board and Mr. Turner will enter into an employment
agreement with PMSI as its full-time Chief Executive Officer. In the event
that either Source or PMSI do not have sufficient cash available to consummate
the Stock Purchase and the Source Divestiture Agreement, including related
expenses, Messrs. Evans and Turner have agreed to receive partial payment of
their respective termination payments in the form of registered NDC Common
Stock. In addition, the annual bonuses of three other executives of PMSI and
Source, including Warren J. Hauser, Vice President and Secretary of PMSI,
aggregating $490,000, will reflect the successful completion of the Stock
Purchase.
Mr. Evans and trusts for the benefit of his family beneficially own an
aggregate of 133,879 shares of PMSI common stock (representing approximately
1.0% of the shares of PMSI common stock outstanding and entitled to vote on
the Stock Purchase as of the Record Date) and options to purchase an
additional 300,000 shares of PMSI common stock, 250,000 of which are currently
exercisable. Mr. Turner and trusts for the benefit of his family beneficially
own an aggregate of 134,384 shares of PMSI common stock (representing
approximately 1.0% of the shares of PMSI common stock outstanding and entitled
to vote on the Stock Purchase as of the Record Date) and options to purchase
an additional 300,000 shares of PMSI common stock, 250,000 of which are
currently exercisable.
Messrs. Evans and Turner and trusts for the benefit of their respective
families currently own an aggregate of 247,586 and 242,584 shares,
respectively of Source common stock (representing approximately 3.6% and
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3.5%, respectively, of the outstanding capital stock of Source entitled to
vote on the Merger). In addition, Messrs. Evans and Turner own options to
purchase 201,250 and 151,250 shares, respectively, of Source common stock, all
of which are currently exercisable or will become exercisable upon
consummation of the Merger.
Mr. Welsh owns 15,733 shares of PMSI common stock and 26,550 shares of
Source Common Stock. In addition, Mr. Welsh may be deemed to beneficially own
an aggregate of 746,315 shares of PMSI common stock (or approximately 5.6% of
the shares of PMSI common stock outstanding and entitled to vote on the Stock
Purchase as of the Record Date) and an aggregate of 2,544,147 shares of Source
common stock (or approximately 37.19% of the Source capital stock outstanding
and entitled to vote on the Merger) owned by WCAS and related entities. In
addition, Mr. Welsh owns options to purchase an aggregate of 24,000 shares of
PMSI common stock, 16,000 of which are currently exercisable, and options to
purchase an aggregate of 7,500 shares of Source common stock, all of which are
currently exercisable.
The Stock Purchase Agreement provides that, after the Closing Date, NDC will
either provide generally to officers and employees of PMSI working in the PMSI
Database business, employee benefits under employee benefit plans, on terms
and conditions that, when taken as a whole, are substantially similar to those
currently provided by NDC and its subsidiaries to their similarly situated
officers and employees. For purposes of participation and vesting and benefit
accrual (other than benefit accrual under retirement plan) under such employee
benefit plans, service with PMSI or its subsidiaries prior to the Closing Date
will be treated as service with NDC or its subsidiaries. Subject to certain
exceptions set forth in the Stock Purchase Agreement, NDC will honor all
employment, severance, consulting and other compensation contracts previously
disclosed to NDC between PMSI or any of its subsidiaries and any current or
former director, officer or employee, and all provisions for vested amounts
earned or accrued through the Closing Date under PMSI's benefit plans.
CONDITIONS TO CONSUMMATION
The obligations of PMSI, PMSI Database and NDC to consummate the Stock
Purchase are subject to the satisfaction or waiver (to the extent permitted)
of the following conditions: (i) the stockholders of PMSI shall have adopted
the Stock Purchase Agreement and the Source Divestiture Agreement and the
consummation of the transactions contemplated thereby by the requisite vote;
(ii) PMSI, as the sole stockholder of PMSI Database, shall have adopted the
Stock Purchase Agreement and the consummation of the transactions contemplated
thereby; (iii) the required regulatory approvals and clearances described
under "--Regulatory Approvals" shall have been received and shall be in full
force and effect with all waiting periods required by law having expired, and
no such regulatory approval shall be conditioned or restricted in a manner
which would, in the reasonable judgment of the Board of Directors of NDC, so
materially adversely affect the economic or business benefits of the
transactions contemplated by the Stock Purchase Agreement that had NDC known
of such condition it would not, in its reasonable judgment, have entered into
the Stock Purchase Agreement; (iv) each party shall have received any required
consents of third parties and no consent so obtained which is necessary to
consummate the transactions contemplated by the Stock Purchase Agreement shall
be conditioned or restricted in a manner which in the reasonable judgment of
the Board of Directors of NDC would so materially adversely impact the
economic or business assumptions of the Stock Purchase Agreement that, had
such condition or requirement been known, NDC would not, in its reasonable
judgment have entered into the Stock Purchase Agreement; (v) no court or
governmental or regulatory authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal consummation of the transactions
contemplated by the Stock Purchase Agreement; (vi) the Registration Statement
of which this Prospectus is a part shall have been declared effective by the
Commission and shall not be subject to a stop order or any threatened stop
order, and the shares of NDC Common Stock issuable in connection with the
Stock Purchase Agreement shall have been qualified, registered or otherwise
approved for exchange under the securities laws of the various states in which
such qualification, registration or approval is required; (vii) the shares of
NDC Common Stock issuable pursuant to the Stock Purchase Agreement shall have
been approved for listing on the NYSE, subject to effective notice of
issuance; (viii) the accuracy, as of the date of the Stock Purchase Agreement
and as of the Closing Date, of the
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<PAGE>
representations and warranties of the other party as set forth in the Stock
Purchase Agreement; (ix) prior to the Closing Date, the other party shall have
performed in all material respects all of the agreements, covenants, acts and
undertakings to be performed by it pursuant to the Stock Purchase Agreement;
(x) each party shall have received customary closing documents, including,
without limitation, an opinion of the other party's counsel, dated the Closing
Date, as to certain matters; (xi) the consummation of the Merger; (xii)
consummation of the transactions contemplated by the Source Divestiture
Agreement; (xiii) the execution of certain agreements related to the Stock
Purchase Agreement; (xiv) the execution of the Registration Rights Agreement;
and (xv) the release by third parties for certain agreements relating to
Source Europe to which Source is a party or otherwise obligated.
No assurances can be provided as to when or if all of the conditions
precedent to the Stock Purchase can or will be satisfied or waived by the
appropriate party. As of the date of this Prospectus, the parties have no
reason to believe that any of the conditions set forth above will not be
satisfied.
The conditions to consummation of the Stock Purchase may be waived, in whole
or in part, to the extent permissible under applicable law, by the party for
whose benefit the condition has been imposed, without the adoption of the PMSI
stockholders. See "--Amendment, Waiver and Termination."
REGULATORY APPROVALS
The obligations of NDC, PMSI and PMSI Database to perform under the Stock
Purchase Agreement and consummate the Stock Purchase are subject to the
consent of, filings and registrations with, and notifications to, all
regulatory authorities required for consummation of the Stock Purchase having
been obtained or made and being in full force and effect and the expiration of
all waiting periods required by law. Furthermore, no consent from any
regulatory authority which is necessary to consummate the Stock Purchase shall
be conditioned or restricted in a manner which in the reasonable judgment of
the Board of Directors of NDC would so materially adversely impact the
economic or business benefits of the Stock Purchase that, had such condition
or requirement been known, NDC would not, in its reasonable judgment, have
entered into the Stock Purchase Agreement.
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Stock Purchase may not be consummated until
notifications have been given and certain information has been furnished to
the FTC and the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the applicable waiting period has expired or been
terminated. NDC and PMSI filed notification and report forms under the HSR Act
with the FTC and the Antitrust Division on October 7, 1997. At any time before
or after consummation of the Stock Purchase, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the consummation
of the Stock Purchase or seeking divestiture of substantial assets of NDC or
PMSI. At any time before or after the Closing Date, and notwithstanding that
the waiting period under the HSR Act has expired, any state could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest. Such state action could include seeking to enjoin the
consummation for the Stock Purchase or seeking divestiture of substantial
assets of NDC or PMSI. Private parties may also seek to take legal action
under the antitrust laws under certain circumstances.
NDC and PMSI believe that the Stock Purchase can be effected in compliance
with federal and state antitrust laws; however, there can be no assurance that
a challenge to the consummation of the Stock Purchase on antitrust grounds
will not be made or that, if such a challenge were made, NDC and PMSI would
prevail or would not be required to accept certain adverse conditions in order
to consummate the Stock Purchase.
AMENDMENT, WAIVER AND TERMINATION
To the extent permitted by law, PMSI and NDC, with the approval of their
respective Boards of Directors, may amend the Stock Purchase Agreement by
written agreement at any time without the approval of the stockholders of
PMSI, provided that after the adoption of the Stock Purchase Agreement by
PMSI's stockholders,
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<PAGE>
no amendment may decrease the consideration to be received by PMSI without the
requisite approval of PMSI stockholders.
Prior to or at the Closing Date, either PMSI or NDC, acting through its
respective Board of Directors, chief executive officer or other authorized
officer, may waive any default in the performance of any term of the Stock
Purchase Agreement by the other party, may waive or extend the time for the
fulfillment by the other party of any of its obligations under the Stock
Purchase Agreement, and may waive any of the conditions precedent to the Stock
Purchase Agreement, except any condition that, if not satisfied, would result
in the violation of an applicable law or governmental regulation.
The Stock Purchase Agreement may be terminated, and the Stock Purchase
abandoned, at any time prior to the Closing Date: (a) by the mutual consent of
PMSI and NDC; (b) by either party in the event of any inaccuracy of any
representation or warranty of the other party contained in the Stock Purchase
Agreement which cannot be or has not been cured within 30 days after giving
written notice to the breaching party of such inaccuracy and which inaccuracy
would provide the terminating party the ability to refuse to consummate the
Stock Purchase under the applicable standards set forth in the Stock Purchase
Agreement (provided that the terminating party is not then in breach of any
representation, warranty, covenant or other agreement contained in the Stock
Purchase Agreement); (c) by either party in the event of a material breach by
the other party of any covenant or agreement
contained in the Stock Purchase Agreement which cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach (provided that the terminating party is not then in breach of
any representation, warranty, covenant or other agreement contained in the
Stock Purchase Agreement); (d) by either party if the Stock Purchase is not
consummated by January 31, 1998, provided that the failure to consummate is
not due to the breach by the party electing to terminate; (e) by either party
if any approval of any regulatory authority required for consummation of the
Stock Purchase and the other transactions contemplated by the Stock Purchase
Agreement has been denied by final nonappealable action, or if any action
taken by such authority is not appealed within the time limit for appeal
(provided that the terminating party is not then in breach of any
representation, warranty, covenant or other agreement contained in the Stock
Purchase Agreement); (f) by either party if the stockholders of PMSI fail to
vote their approval of the matters submitted for the approval by such
stockholders at the Special Meeting (provided that the terminating party is
not then in breach of any representation, warranty, covenant or other
agreement contained in the Stock Purchase Agreement); or (g) if any of the
conditions precedent to the obligations of such party to consummate the Stock
Purchase cannot be satisfied, fulfilled, or waived by the appropriate party by
January 31, 1998 (provided that the terminating party is not then in breach of
any representation, warranty, covenant or other agreement contained in the
Stock Purchase Agreement. See "--Expenses and Fees."
In addition, NDC may unilaterally terminate the Stock Purchase Agreement if
the Board of Directors of PMSI or PMSI Database fails to reapprove or resolves
not to affirm the Stock Purchase or recommends entering into a transaction
other than the Stock Purchase involving a stock purchase, share exchange,
consolidation or transfer of substantially all of PMSI Database's assets.
Furthermore, PMSI may unilaterally terminate the Stock Purchase Agreement in
the event that the Average Closing Price of the shares of NDC Common Stock is
less than the Lower Threshold Amount as of the Determination Date, subject to
NDC's right to revise the Base Amount based on the Lower Threshold Price. See
"The Stock Purchase--Amendment, Waiver and Termination."
CONDUCT OF BUSINESS PENDING THE STOCK PURCHASE
PMSI and PMSI Database have agreed in the Stock Purchase Agreement, unless
the prior consent of NDC is obtained, and except as otherwise contemplated by
the Stock Purchase Agreement, to operate PMSI Database's business only in the
ordinary course, to use its reasonable efforts to preserve PMSI Database's
business organizations and assets and to maintain PMSI Database's assets,
rights and franchises and to take no action that would adversely affect either
the ability of either party to perform its covenants and agreements under the
Stock Purchase Agreement or the ability of either party to obtain any consents
or approvals pursuant to any contract,
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<PAGE>
law, order or permit that are required for the transactions contemplated by
the Stock Purchase Agreement. In addition, the Stock Purchase Agreement
contains certain other restrictions applicable to the conduct of the business
of PMSI Database prior to consummation of the Stock Purchase, as described
below.
PMSI and PMSI Database have agreed in the Stock Purchase Agreement not to
take certain actions relating to the operation of PMSI Database's business
pending consummation of the Stock Purchase without the prior approval of NDC.
Those actions include, without limitation: (i) amending PMSI Database's
Certificate of Incorporation or Bylaws; (ii) subject to certain exceptions,
incurring any additional debt or other obligation for borrowed money on any
asset of PMSI Database; (iii) acquiring or exchanging any shares of PMSI
Database capital stock or paying any dividend or other distribution in respect
of PMSI Database capital stock; (iv) subject to certain exceptions, issuing,
selling or pledging additional shares of any PMSI Database Common Stock, any
rights to acquire any such stock or any security convertible into such stock,
except pursuant to the exercise of outstanding stock options; (v) purchasing
any assets other than in the ordinary course; (vi) adjusting or reclassifying
any of PMSI Database capital stock; (vii) subject to certain exceptions,
purchasing any securities of or acquiring control over any other entity;
(viii) granting any increase in compensation or benefits to its employees or
officers (except as previously disclosed to NDC or as required by law), paying
any bonus (except as previously disclosed to NDC or in accordance with any
existing program or plan), entering into or amending any severance agreements
with its officers or granting any increase in compensation or other benefits
to any of its directors (except as previously disclosed to NDC); (ix) entering
into or amending any employment contract that it does not have the
unconditional right to terminate without certain liability (except as
previously disclosed to NDC and except for any amendment required by law); (x)
adopting any new employee benefit plan or program or materially changing any
existing plan or program; (xi) making any significant changes in tax or
accounting methods, except for any change required by law; (xii) commencing
any litigation other than in accordance with past practice or settling any
litigation for material money damages; or (xiii) materially amending or
terminating any material contracts including, without limitation, the Source
Divestiture Agreement.
In addition, PMSI has agreed not to solicit, directly or indirectly, any
acquisition proposal with respect to the PMSI Database business from any other
person or entity. PMSI also has agreed not to negotiate with respect to any
such proposal, to provide information to any party making such a proposal or
to enter into any agreement with respect to any such proposal, except in
compliance with its legal obligations or the fiduciary obligations of its
Board of Directors. PMSI has also agreed to cause its advisors and other
representatives not to engage in any of the foregoing activities. Furthermore,
PMSI has agreed that prior to the Closing Date, it shall: (i) acquire Source
Europe, and all of the shares of Source Informatics European Holding LLC held
by Source or any subsidiary of Source, all pursuant to the Source Divestiture
Agreement; (ii) use commercially reasonable efforts to obtain consents to the
assignment of the contracts associated with the business of PMSI Database in
connection with the contribution of assets in the formation of PMSI Database
and the transactions contemplated by the Stock Purchase Agreement; (iii)
obtain releases with respect to certain agreements relating to Source Europe
to which Source is a party or otherwise obligated; and (iv) satisfy all
intercompany accounts between PMSI and its subsidiaries, on the one hand, and
Source and its subsidiaries on the other hand.
Pursuant to the Stock Purchase Agreement, NDC has agreed that, prior to the
Closing Date, it will continue to conduct its business and the business of its
subsidiaries in a manner designed in its reasonable judgment to enhance the
long-term value of the NDC Common Stock and the business prospects of NDC. NDC
further agrees that it will take no action which would materially adversely
affect either the ability of NDC, PMSI or PMSI Database to obtain the consents
required by the Stock Purchase Agreement or the ability of NDC, PMSI or PMSI
Database to perform its covenants and agreements contained in the Stock
Purchase Agreement.
EXPENSES AND FEES
The Stock Purchase Agreement provides that each party shall be responsible
for its own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Stock Purchase Agreement,
except that each of NDC and PMSI shall pay one-half of the filing fees payable
in
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<PAGE>
connection with the HSR filing, and NDC shall pay all costs associated with
the Registration Statement and this Prospectus and printing costs incurred in
connection with the Registration Statement and this Prospectus.
If the Stock Purchase Agreement is terminated by NDC because the
stockholders of PMSI or PMSI, as the sole stockholder of PMSI Database, fail
to approve the Stock Purchase Agreement, then PMSI shall promptly pay NDC all
the out-of-pocket costs and expenses of NDC, including costs of counsel,
investment brokers, actuaries and accountants up to a maximum of $750,000.
ACCOUNTING TREATMENT
The Stock Purchase is anticipated to be accounted for under the "purchase"
method of accounting, pursuant to which the assets and liabilities of PMSI
will be recorded at their respective fair values and added to those of NDC as
of the Closing Date. Financial statements of NDC issued after the Closing Date
will reflect such values and will not be restated retroactively to reflect the
historical financial position or results of operations of PMSI Database.
RESALES OF NDC COMMON STOCK
The shares of NDC Common Stock issued in connection with the Stock Purchase
will be freely transferable under the Securities Act, except for shares issued
to any stockholder who may be deemed to be an "affiliate" (generally
including, without limitation, directors, certain executive officers, and
beneficial owners of 10% or more of any class of capital stock) of PMSI, PMSI
Database or NDC for purposes of Rule 145 under the Securities Act as of the
date of the Special Meeting. Such affiliates may not sell their shares of NDC
Common Stock acquired in connection with the Stock Purchase except pursuant to
an effective registration statement under the Securities Act or other
applicable exemption from the registration requirements of the Securities Act.
NDC may place restrictive legends on certificates representing NDC Common
Stock issued to all persons who are deemed to be "affiliates" of PMSI under
Rule 145. In addition, PMSI has agreed to enter into a written agreement in
substantially the form attached to the Stock Purchase Agreement relating to
such restrictions on sale or other transfer.
As a condition precedent to consummation of the Stock Purchase, NDC and PMSI
will execute the Registration Rights Agreement, giving PMSI various rights to
the registration of NDC Common Stock owned by it while the Registration Rights
Agreement is in effect. Under the Registration Rights Agreement, NDC will
agree to use its best efforts to make this Registration Statement available
for use by PMSI for a period of 90 days from the Closing Date to offer and
sell the shares of NDC Common Stock received by PMSI pursuant to the Stock
Purchase Agreement.
The form of Registration Rights Agreement also provides for one demand
registration right to be granted to PMSI. This demand registration right will
permit PMSI to require NDC to effect one registration statement during a 12-
month period from the Closing Date.
This Registration Statement is intended for use by PMSI to offer and resell
the shares of NDC Common Stock received by it pursuant to the Stock Purchase
Agreement.
PMSI DATABASE HOLDINGS, INC.
BUSINESS
PMSI Database was formed as a holding company by PMSI on June 24, 1997, for
purposes of accomplishing the Stock Purchase. PMSI Database's assets,
contributed to it by PMSI, are comprised of (i) PMSI's minority interest in
Source US which jointly offers a range of services generated from Source's
Alpha Database and (ii) PMSI's OTC Business. PMSI Database has not conducted
any business other than organizational activities and holding the assets
described.
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SELECTED FINANCIAL INFORMATION
The following table sets forth selected historical financial data of PMSI
Database more fully set forth in Annex B.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30
---------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. $25,009 $19,801 $18,010 $14,225 $14,675
Operating income...................... 5,918 3,025 3,793 2,818 3,584
Income from continuing operations..... 3,529 1,789 2,344 2,211 1,895
BALANCE SHEET DATA (AT PERIOD END):
Total assets.......................... $14,209 $ 8,213 $ 7,135 $ 6,795 $ 9,351
Long-term obligations................. 776 189 7 29 53
Total stockholders' equity............ 5,665 2,136 2,247 3,403 1,192
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
PMSI Database represents PMSI's minority interest in Source U.S. together
with its OTC Business.
OPERATING RESULTS
Revenue
Revenue for the year ended June 30, 1997 was $25.0 million, an increase of
$5.2 million (27%) over revenue for the year ended June 30, 1996. Revenues
from Source U.S. increased 19% from $17.6 million for the year ended June 30,
1996 to $20.9 million for the year ended June 30, 1997. Revenues from the OTC
Business increased $1.9 million from $2.2 million for the year ended June 30,
1996 to $4.1 million for the year ended June 30, 1997, almost doubling in its
second full year of operations. The growth in the Source U.S. business
resulted primarily from increases in the information services and research and
consulting divisions. The growth in the information services division revenue
was driven by increased subscription sales for the Source Alpha database. The
growth in research and consulting revenue was driven by sales of newly
launched consulting services. Both were driven by increased business from
existing clients and the addition of new clients. The increase in the OTC
Business resulted from increased subscribers to the OTC physician database.
Revenue for the year ended June 30, 1996 was $19.8 million, an increase of
$1.8 million (10%) over revenue for the year ended June 30, 1995. Revenue from
Source U.S. increased $0.8 million from $16.8 million for the year ended June
30, 1995 to $17.6 million for the year ended June 30, 1996. The increase in
Source U.S. business resulted from increased sales of the Source Alpha
database. Revenues from the OTC Business increased $1.0 million from $1.2
million for the year ended June 30, 1995, the year this business was launched,
to $2.2 million for the year ended June 30, 1996. The alpha increase in the
OTC Business resulted primarily from new customers for the OTC physician
database.
Production Costs
PMSI Database production costs principally consist of costs of data
collection, outside supplies and services, internal computer costs and
associated personnel costs.
Production costs for the year ended June 30, 1997 were $6.5 million (26% of
revenue), compared with $5.6 million (28% of revenue) for the year ended June
30, 1996. Production costs for the year ended June 30, 1997 for the Source
U.S. business were $4.5 million (22% of revenue), compared to $4.6 million
(26% of revenue) for the same period in 1996. This decrease as a percentage of
revenue resulted primarily from the implementation of programs to streamline
the production process, including more effective utilization of technology in
order to reduce unit costs. Production costs for the year ended June 30, 1997
for the OTC Business were $2.0 million (49% of revenue), compared to $1
million (45% of revenue) for the year ended June 30, 1996. This increase
resulted from the expense of an additional physician survey conducted during
the year in order to improve response rates in 1997.
Production costs for the year ended June 30, 1996 were $5.6 million (28% of
revenue) compared to $4.8 million for the year ended June 30, 1995 (27% of
revenue). Production costs for the year ended June 30, 1996 for the Source
U.S. business were $4.6 million (26% of revenue), compared to $4.0 million
(24% of revenue) for the same period in 1995. This increase was due primarily
to a data inventory write-off for a product that was commercially
unsuccessful. Production costs for the year ended June 30, 1996 for the OTC
Business were $1.0 million (45% of revenue) compared to $0.8 million (67% of
revenue) for the year ended June 30, 1995, the business' first year of
operation. This increase reflects the level of incremental database expansion
required to support new customers.
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<PAGE>
Selling, General And Administrative Expenses
Selling, general and administrative expenses were $12.1 million (48% of
revenue) for the year ended June 30, 1997, compared to $10.9 million (55% of
revenue) for the year ended June 30, 1996.
Selling, general and administrative expenses for the year ended June 30,
1997 for the Source U.S. business were $10.5 million (50% of revenue),
compared to $9.6 million (55% of revenue) for the year ended June 30, 1996.
The decrease in expense as a percentage of revenue was driven by the effective
leveraging of the company's fixed expense base, which kept operating costs
flat, combined with minimal increases in employment costs. Selling, general
and administrative expenses for the year ended June 30, 1997 for the OTC
Business were $1.6 million (39% of revenue), compared with $1.3 million (59%
of revenue) for the year ended June 30, 1996. The decease in cost as a
percentage of revenue was due to the effective leveraging of the company's
fixed expense base, partially offset by additional selling costs associated
with higher revenues.
Selling, general and administrative costs were $10.9 million (55% of
revenue) for the year ended June 30, 1996, compared with $9.3 million (52% of
revenue) for the year ended June 30, 1995. Selling, general and administrative
expenses for the year ended June 30, 1996 for the Source U.S. business were
$9.6 million (55% of revenue), compared with $8.4 million (50% of revenue) for
the year ended June 30, 1995. The increase in costs as a percentage of revenue
was due to one-time severance and relocation charges expensed by the business
in 1996.
Selling, general and administrative expenses for the OTC Business for the
year ended June 30, 1996 were $1.3 million (59% of revenue) compared with $0.9
million (75% of revenue) for the year ended June 30, 1995. The expense
increase reflects the addition of sales capacity during the business' second
year of operations. The decrease in expense as a percentage of revenue
reflects the effective leveraging of the business' fixed expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997 PMSI Database's cash and cash equivalents totaled $1.3
million and its current ratio was 1.4:1. During the year ended June 30, 1997
cash and cash equivalents increased by $1.1 million due to growth of the
business and consequent improved profitability.
Existing cash together with internally generated funds are anticipated to
provide PMSI Database with the necessary capital resources to meet working
capital requirements for fiscal 1998.
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SECURITYHOLDERS OF PMSI DATABASE
PMSI is the sole record and beneficial owner of all the outstanding capital
stock of PMSI Database. PMSI is an "affiliate" of PMSI Database for purposes
of Rule 145 under the Securities Act and, in connection with any offer or
resale to the public of the NDC Common Stock received in connection with the
Stock Purchase, may be deemed to be an underwriter in connection therewith.
This Prospectus is intended to be used by PMSI to comply with the prospectus
delivery requirements of the Securities Act in connection with any offers or
resales of NDC Common Stock for a period of 90 days from the Closing Date.
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<PAGE>
CERTAIN DIFFERENCES IN THE RIGHTS OF NDC AND PMSI DATABASE STOCKHOLDERS
At the Closing Date, PMSI will become a stockholder of NDC, and its rights
as stockholder will be determined by NDC's Certificate of Incorporation and
Bylaws. The following is a summary of the material differences in the rights
of stockholders of NDC and PMSI Database. Both NDC and PMSI Database are
Delaware corporations governed by the DGCL. Accordingly, except as set forth
below, there are no material differences between the rights of an NDC
stockholder under NDC's Certificate of Incorporation and Bylaws and the DGCL,
on the one hand, and the rights of a PMSI Database stockholder under PMSI
Database's Certificate of Incorporation and Bylaws and the DGCL, on the other
hand. This summary does not purport to be a complete discussion of, and is
qualified in its entirety by reference to, the DGCL and the Certificate of
Incorporation and Bylaws of each corporation.
AUTHORIZED CAPITAL STOCK
NDC
The authorized capital stock of NDC consists of 100,000,000 shares of Common
Stock, par value $.125 per share, and 1,000,000 shares of Preferred Stock, par
value $1.00 per share. The following description of the capital stock is
qualified in all respects by reference to the Certificate of Incorporation, as
amended, and Bylaws, as amended, of NDC, copies of which are on file at NDC's
principal executive offices.
NDC Common Stock. The holders of NDC Common Stock, subject to such rights as
may be granted to the holders of NDC Preferred Stock, elect all directors and
are entitled to one vote per share. All shares of NDC Common Stock participate
equally in dividends when, as and if declared by the Board of Directors and
share ratably, subject to the rights and preferences of any NDC Preferred
Stock, in net assets on liquidation. The shares of NDC Common Stock
outstanding are duly authorized, validly issued, fully paid and nonassessable.
The shares of NDC Common Stock have no preference, conversion, exchange,
preemptive or cumulative voting rights.
Stock Purchase Rights. Pursuant to a Rights Agreement dated as of January
18, 1991, each share of NDC Common Stock is issued one NDC right (an "NDC
Right") which entitles the registered holder to purchase from the NDC one one-
hundredth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $1.00 per share (the "NDC Participating Preferred"), at a
purchase price of $45.00 per Unit, subject to adjustment. Until the Separation
Date, as hereinafter defined (see "--Stockholder Rights Plan"), the NDC Rights
are unexercisable and attach to and transfer with the NDC Common Stock
certificates.
The NDC Rights may have certain anti-takeover effects because the rights
will cause substantial dilution to a person or group that attempts to acquire
NDC on terms not approved by the Board of Directors of NDC unless the offer is
conditioned on a substantial number of NDC Rights being acquired. However, the
NDC Rights should not interfere with the Stock Purchase or any other business
combination approved by a majority of the directors since the NDC Rights may
be redeemed by NDC at $.01 per NDC Right at any time on or prior to a stock
acquisition. Thus, the NDC Rights are intended to encourage persons who may
seek to acquire control of NDC to initiate such an acquisition through
negotiations with the Board of Directors. However, the effect of the NDC
Rights may be to discourage a third party from making a partial tender offer
or otherwise attempting to obtain a substantial equity position in the equity
securities of, or seeking to obtain control of, NDC. To the extent any
potential acquirers are deterred by the NDC Rights, the NDC Rights may have
the effect of preserving incumbent management in office.
NDC Preferred Stock. NDC is authorized to issue 1,000,000 shares of
Preferred Stock, par value $1.00 per share, none of which is outstanding,
although 300,000 shares of Preferred Stock have been reserved for issuance
pursuant to the NDC Rights described above. NDC Preferred Stock may be issued
from time to time by the Board of Directors of NDC, without stockholder
approval, in such series and with such voting powers, full or limited, and
such designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions as may be fixed by
the Board of Directors. The issuance of NDC Preferred Stock by the Board of
Directors could adversely affect the rights of holders of shares of NDC Common
Stock since NDC Preferred Stock may be issued having preference over the NDC
Common Stock with respect
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to dividends and liquidation, and have voting rights, contingent or otherwise,
that could dilute the voting rights, net income per share and net book value
of the NDC Common Stock. In addition, while the Board of Directors has no
current intention of doing so, the ability of the Board of Directors to issue
shares of NDC Preferred Stock and to set the voting powers and such
designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions thereof without
further stockholder action could help to perpetuate incumbent management of
NDC or prevent a business combination involving NDC that is favored by NDC's
stockholders. As of the date of this Prospectus, other than in connection with
the NDC Rights described above, the Board of Directors has not authorized the
issuance of any shares of NDC Preferred Stock, and NDC has no agreements,
arrangements or understandings with respect to the issuance of any shares of
NDC Preferred Stock.
PMSI DATABASE
The authorized capital stock of PMSI Database consists of 1,000 shares of
PMSI Database Common Stock, $.01 par value. The following description of
Common Stock is qualified in all respects by reference to the Certificate of
Incorporation and Bylaws, of PMSI Database, copies of which are on file at
PMSI Database's principal executive offices.
PMSI Database Common Stock. The holders of PMSI Database Common Stock are
entitled to one vote per share on all matters submitted to PMSI for a vote.
All shares of PMSI Database Common Stock participate equally in dividends
when, as and if declared by the Board of Directors and share ratably, in net
assets on dissolution. The shares of PMSI Database Common Stock outstanding
are duly authorized, validly issued, fully paid and nonassessable. The shares
of PMSI Database Common Stock have no preference, conversion, exchange or
cumulative voting right.
DIRECTORS AND CLASSES OF DIRECTORS
NDC
The Board of Directors of NDC is divided into three classes as nearly equal
in number as the total number of directors permits. Directors are elected to
each class at successive annual meetings to serve three-year terms. Any newly
created or eliminated directorships resulting from an increase or decrease in
the number of authorized directors are divided equally among the three classes
so as to maintain such classes as nearly equal as possible. Any director or
the entire Board of Directors of NDC may be removed from office only upon the
affirmative vote of at least 80% of the holders of all classes of NDC stock,
voting as a single class.
The above-mentioned provisions (the "NDC Board Provisions") with regard to
the Board of Directors of NDC may have certain anti-takeover effects by
preventing or delaying a change in the membership of the Board of Directors of
NDC. The NDC Board Provisions are intended to encourage persons who may seek
to acquire control of NDC to initiate such an acquisition through negotiations
with the Board of Directors of NDC. However, the effect of the NDC Board
Provisions may be to discourage a third party from making a partial tender
offer or otherwise attempting to obtain a substantial position in the equity
securities of, or seeking to obtain control of, NDC. To the extent any
potential acquirers are deterred by the NDC Board Provisions, the NDC Board
Provisions may have the effect of preserving incumbent management in office.
PMSI DATABASE
The Board of Directors of PMSI Database consists of one member, serving as a
single class. Directors of PMSI Database serve until their successors are
elected and qualified. Directors of PMSI Database may be removed, with or
without cause, by the affirmative vote of the holders of a majority of the
shares of PMSI Database capital stock entitled to vote at an election of
directors.
STOCKHOLDER MEETINGS
NDC
NDC's Bylaws provide for annual meetings of stockholders to be held on the
fourth Thursday of October and for special meetings to be held: (i) on call of
the Chairman or President; (ii) at the request of a majority of
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the members of the Board of Directors; or (iii) at the request of the holders
of a majority of the then-outstanding capital stock of NDC entitled to vote.
Stockholders entitled to vote are entitled to written notice stating the
place, date, hour and, in the case of a special meeting, the purpose of the
meeting, not less than 10 nor more than 50 days before the date of the
meeting. The holders of a majority of the stock issued and outstanding and
entitled to vote at a meeting, present in person or represented by proxy,
constitutes a quorum. When a quorum is present at a meeting, the vote of the
holders of a majority of the stock having voting power, present in person or
by proxy, can approve any resolution properly brought before the meeting,
except for resolutions: (i) increasing the number of authorized shares of
capital stock; (ii) approving a Business Combination (as defined in NDC's
Certificate of Incorporation); (iii) amending Article Fourth of NDC's
Certificate of Incorporation (Business Combination provisions); (iv) removing
any director or the entire Board of Directors; (v) amending Article Eighth,
Thirteenth, or Fourteenth of NDC's Certificate of Incorporation (board
classes, no stockholder action except at a meeting and board authority to
alter, amend or repeal bylaws without stockholder approval); or (vi) requiring
a greater vote than is provided by applicable law. The foregoing resolutions
must be approved by the affirmative vote of (i) 50%; (ii) 66.67%; (iii)
66.67%; (iv) 80%; and (v) 80%, respectively of the stockholders entitled to
vote. NDC's Bylaws provide that its stockholders may take action without a
meeting only upon the written consent of all such stockholders.
PMSI DATABASE
PMSI Database's bylaws provide for annual meetings to be held on such dates
and at such times as shall be designated by the Board of Directors and for
special meetings to be held (i) at the request of the Chairman or by order of
the Board of Directors; (ii) at the request of the President of PMSI Database
or (iii) written request of stockholders holding of record at least 50% of the
outstanding shares entitled to vote at such meeting. Stockholders entitled to
vote are entitled to written notice stating the place, date, hour, and, in the
case of a special meeting, the purpose of the meeting, not less than 10 nor
more than 60 days before the date of the meeting. The holders of a majority of
the stock issued and outstanding and entitled to vote at a meeting, present in
person or represented by proxy, constitute a quorum. When a quorum is present
at a meeting, the vote of the holders of a majority of the stock having voting
power, present in person or by proxy, can approve any resolution properly
brought before the meeting, except where a greater vote is required by
applicable law.
ANTI-TAKEOVER PROVISIONS
NDC
The provisions of NDC's Certificate of Incorporation, Bylaws, and the NDC
Rights Agreement contain certain protective provisions, which are intended to
facilitate stability of leadership and enhance the NDC Board of Directors'
role in connection with attempts to acquire control of NDC so that the Board
may further and protect the interests of NDC, its stockholders and its other
constituencies as appropriate under the circumstances. In particular, if the
Board determines that a sale of control is in the best interests of the
stockholders, these protective provisions are designed to enhance the Board's
ability to maximize the value to be received by the stockholders upon such a
sale. Although NDC management believes that the protective provisions are
beneficial to NDC's stockholders, such provisions may also discourage certain
acquisition proposals, which may deprive NDC's stockholders of certain
opportunities to sell their shares at a premium over prevailing market prices.
Pursuant to its authority to issue different series of NDC Preferred Stock,
the Board of Directors of NDC has established the NDC Rights Agreement and has
designated the preferences and rights of the NDC Participating Preferred to
include certain provisions which may have the effect of discouraging
unsolicited offers to acquire NDC. See "--Stockholder Rights Plan."
PMSI DATABASE
PMSI Database does not have any antitakeover provisions in its governing
instruments.
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STOCKHOLDER RIGHTS PLAN
NDC
Each share of NDC Common Stock has attached to it an NDC Right issued
pursuant to a Rights Agreement between NDC and Wachovia Bank of North
Carolina, N.A., as Rights Agent (the "NDC Rights Agreement"). Each NDC Right
entitles its registered holder to purchase a Unit equal to one one-hundredth
of a share of NDC Participating Preferred at a price of $45.00 (the "Rights
Purchase Price"), as adjusted from time to time under certain circumstances,
after the earlier of (i) the tenth day following the commencement of, or first
public announcement of an intention to commence, a tender offer or exchange
offer which, if successful, would result in any person or group having
beneficial ownership of 15% or more of the outstanding NDC Common Stock (an
"Acquiring Person"), and (ii) the tenth day after the first date of a public
announcement that a person or group has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding NDC Common
Stock (the "Stock Acquisition Date") (in either case, the "Separation Date").
The NDC Rights will not trade separately from the NDC Common Stock unless
and until the Separation Date occurs. The dividend, liquidation and voting
rights of the shares of NDC Participating Preferred are designed so that the
value of the one one-hundredth of a share of NDC Participating Preferred
purchasable upon the exercise of each NDC Right should approximate the value
of one share of NDC Common Stock.
In the event that any person or group becomes an Acquiring Person, each
holder of an NDC Right, except an Acquiring Person or any affiliate or
associate thereof, will be entitled to purchase at the then-current Rights
Purchase Price shares of NDC Common Stock with a market value of two times the
Rights Purchase Price.
In the event that NDC is acquired in a merger or other business combination,
or 30% or more of its assets or earning power is sold to any person or group
other than NDC or its wholly-owned subsidiaries, then, in each such case, each
holder of an NDC Right, except an Acquiring Person or an affiliate or an
associate thereof, will be entitled to purchase shares of stock of the other
party to the business combination with a market value of two times the Rights
Purchase Price.
Prior to the Stock Acquisition Date the NDC Rights are redeemable for one
cent per NDC Right at the option of the Board of Directors. The NDC Rights
will expire on January 18, 2001 or at an earlier date under certain
circumstances.
The NDC Rights will not prevent a takeover of NDC. The NDC Rights, however,
may cause substantial dilution to a person or group that acquires 15% or more
of the NDC Common Stock unless the NDC Rights are first redeemed or terminated
by the Board of Directors of NDC. Nevertheless, the NDC Rights should not
interfere with a transaction that in the opinion of NDC's Board of Directors
is in the best interests of NDC and its stockholders because the NDC Rights
can be redeemed or terminated, as hereinbefore described, before the
consummation of such a transaction.
PMSI DATABASE
PMSI Database has not adopted any rights or similar plan.
EXPERTS
The consolidated financial statements of NDC at May 31, 1996 and 1997, and
for each of the years in the three-year period ended May 31, 1997,
incorporated by reference from NDC's Annual Report on Form 10-K for the fiscal
year ended May 31, 1997, have been audited by Arthur Andersen LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference in reliance upon such reports given on the
authority of said firm as experts in accounting and auditing.
The financial statements of PMSI Database at June 30, 1997, and for the year
ended June 30, 1997 have been audited by Arthur Andersen LLP, independent
certified public accountants, as set forth in their report included herein, in
reliance upon such report, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the shares of NDC Common Stock being offered hereby is being
passed upon for NDC by Alston & Bird LLP, Atlanta, Georgia. Neil Williams, a
partner of Alston & Bird LLP, is a director and stockholder of NDC.
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ANNEX A
STOCK PURCHASE AGREEMENT
A-1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
NATIONAL DATA CORPORATION,
PMSI DATABASE HOLDINGS, INC.
AND
PHARMACEUTICAL MARKETING SERVICES INC.,
THE SOLE STOCKHOLDER OF PMSI DATABASE HOLDINGS, INC.
DATED AS OF AUGUST 20, 1997
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into as
of August 20, 1997, by and among NATIONAL DATA CORPORATION ("NDC"), a Delaware
corporation; PMSI DATABASE HOLDINGS, INC. ("PMSI Database"), a Delaware
corporation; and PHARMACEUTICAL MARKETING SERVICES INC., a Delaware
corporation and the sole stockholder of PMSI Database ("PMSI").
PREAMBLE
The respective Boards of Directors of PMSI Database, PMSI and NDC are of the
opinion that the transactions described herein are in the best interests of
the parties to this Agreement and their respective stockholders. PMSI is the
record and beneficial owner of all of the issued and outstanding shares of
PMSI Database Common Stock (the "Shares"). PMSI desires to sell all of the
Shares to NDC, and NDC desires to purchase the Shares from PMSI, upon the
terms and subject to the conditions set forth in this Agreement. The
transactions described in this Agreement are subject to the approvals of the
stockholders of PMSI and PMSI Database, expiration of the required waiting
period under the HSR Act, the consummation of the Agreement and Plan of Merger
dated as of even date herewith by and among Source Informatics Inc.
("Source"), Dunkirk, Inc. and NDC (the "Source Agreement"), the consummation
of the Source Transfer Agreement and the satisfaction of certain other
conditions described in this Agreement.
Certain terms used in this Agreement are defined in Section 9.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
Purchase and Sale
1.1 Purchase And Sale. Upon the terms and subject to the conditions of this
Agreement, PMSI shall sell to NDC, and NDC shall purchase from PMSI, the
Shares at the Closing (the "Stock Purchase"). The aggregate purchase price for
the Shares is equal to (i) the Cash Amount and (ii)1,059,829 shares of NDC
Common Stock (the "Base Amount");
(a) At the Closing Date, the "Cash Amount" shall be equal to $6,500,000 less
the adjustment, if any, made pursuant to Section 1.2(c) hereof.
(b) In the event that the Average Closing Price at the close of trading on
the tenth trading day immediately preceding the Closing Date (the
"Determination Date") shall be greater than $50.50 (the "Upper Threshold
Price"), the Base Amount shall be adjusted to equal that number of shares of
NDC Common Stock (rounded to the nearest whole share) obtained by dividing the
product of the Base Amount and the Upper Threshold Price by the Average
Closing Price as of the Determination Date; provided further, that, in the
event that the Average Closing Price on the Determination Date shall be less
than $37.25 (the "Lower Threshold Price" and, together with the Upper
Threshold Price, the "Threshold Prices"), the Base Amount may, at the sole
discretion of NDC, and in accordance with the provisions of Section 8.1(h), be
adjusted to equal that number of shares of NDC Common Stock (rounded to the
nearest whole share) obtained by dividing the product of the Base Amount and
the Lower Threshold Price by the Average Closing Price as of the Determination
Date.
(c) Pursuant to the NDC Rights Agreement, each share of NDC Common Stock
issued in connection with the Stock Purchase shall be accompanied by a NDC
Right.
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1.2 Preliminary Balance Sheet.
(a) PMSI will cause to be prepared and delivered to NDC a balance sheet for
PMSI Database as of the most recent month ending more than ten days prior to
the Closing Date (the "Preliminary Balance Sheet") and a certificate based on
such Preliminary Balance Sheet setting forth PMSI's calculation of Working
Capital, Current Assets and Current Liabilities as of such date ("Estimated
Working Capital," "Estimated Current Assets" and "Estimated Current
Liabilities", respectively). The Preliminary Balance Sheet shall (v) include
only the assets, liabilities and stockholders' equity of the Acquired Business
and the Joint Venture Interest, (x) fairly present the financial position of
PMSI Database as at the close of business on such date in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the balance sheet of PMSI Database dated
March 31, 1997 (the "PMSI Database Balance Sheet") previously delivered to
NDC, (y) include no material increase in long-term indebtedness and include
line items substantially consistent with those in the PMSI Database Balance
Sheet, and (z) subject to the provisions of clause (x) above, be prepared in
accordance with accounting policies and practices consistent with those used
in the preparation of the PMSI Database Balance Sheet. As used herein,
"Working Capital" shall mean the amount equal to Current Assets less Current
Liabilities; "Current Assets" shall mean the amount equal to the sum of cash,
accounts receivable (net of any reserves), inventories, prepaid expenses and
work-in-process and any other assets classified as current assets under GAAP;
and "Current Liabilities" shall mean the amount equal to the sum of accounts
payable, accrued current liabilities of PMSI Database (other than the current
portion of capitalized lease obligations), accrued sales commissions (but only
as to revenues realized and included in the PMSI Database statements of income
prior to such date), Accrued Bonuses, accrued vacation pay, current portion of
long-term indebtedness and pre-billed revenues and any other liabilities
classified as current liabilities under GAAP.
(b) NDC shall have five (5) business days from the receipt of the
Preliminary Balance Sheet and the calculation of Estimated Working Capital,
Estimated Current Assets and Estimated Current Liabilities delivered pursuant
to Section 1.2(a) to review such statement and calculations and following such
review such shall be final and binding upon the parties hereto.
(c) If Estimated Current Assets are less than the product of 1.1659 times
Estimated Current Liabilities (the amount of such difference referred to as,
the "Estimated Working Capital Adjustment") as of the date of the Preliminary
Balance Sheet, the Cash Amount payable by NDC pursuant to Section 1.1 shall be
decreased by the Estimated Working Capital Adjustment.
1.3 Closing Balance Sheet.
(a) As promptly as practicable, but not later than 30 days after the Closing
Date, NDC will cause to be prepared and delivered to PMSI a balance sheet for
PMSI Database as of the Closing Date (the "Closing Balance Sheet") setting
forth NDC's calculation of Working Capital, Current Assets and Current
Liabilities as of the Closing Date (the "Closing Working Capital," "Closing
Current Assets" and "Closing Current Liabilities," respectively). The Closing
Balance Sheet shall (v) include only the assets, liabilities and stockholders'
equity of the Acquired Business and the Joint Venture Interest (x) fairly
present the financial position of PMSI Database as at the close of business on
the Closing Date in accordance with generally accepted accounting principles
applied on a basis consistent with those used in the preparation of the PMSI
Database Balance Sheet, (y) include no material increase in long-term
indebtedness and include line items substantially consistent with those in the
PMSI Database Balance Sheet, and (z) subject to the provisions of clause (x)
above, be prepared in accordance with accounting policies and practices
consistent with those used in the preparation of the PMSI Database Balance
Sheet.
(b) The Closing Balance Sheet and the calculation of Closing Working
Capital, Closing Current Assets and Closing Current Liabilities delivered
pursuant to Section 1.3(a) shall be deemed final upon the earliest of (i) the
date on which NDC and PMSI jointly agree that such documents are final, (ii)
the 30th day after delivery of such documents pursuant to Section 1.3(a), if
PMSI has not delivered a notice to NDC expressing disagreement with such
calculations and setting forth its calculation of such amount(s), and (iii)
the date on which all disputes
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relating to such statements and calculations between the parties are resolved
in accordance with Section 1.3(c). If PMSI delivers a notice of disagreement
pursuant to this Section 1.3(b) it shall specify those items or amounts as to
which it disagrees, and it shall be deemed to have agreed with all other items
and amounts contained in the Closing Balance Sheet and the calculation of
Closing Working Capital delivered pursuant to Section 1.3(a) (except to the
extent resolution of the items or amounts to which it expresses disagreement
requires conforming changes to other items and amounts contained in the
Closing Balance Sheet or the calculation of Closing Working Capital).
(c) If PMSI shall deliver a notice of disagreement pursuant to Section
1.3(b), PMSI and NDC shall, during the 30 days following such delivery, use
their reasonable efforts to reach agreement on the disputed items or amounts
(the "Disputed Amounts"). If, during such period, PMSI and NDC are unable to
reach such agreement, they shall promptly thereafter cause Price Waterhouse
LLP (or if said firm shall have a conflict due to a relationship with NDC,
PMSI, or any of their respective Subsidiaries or shall be unwilling to act
thereunder, such other independent accountants of nationally recognized
standing reasonably satisfactory to NDC and PMSI who shall not have any
material relationship with NDC or PMSI), promptly to review this Agreement,
the documents delivered pursuant to Section 1.3(a) and any other documents
necessary to calculate the Disputed Amounts (including all work papers of the
parties used in calculating the Disputed Amounts). In making such calculation,
such independent accountants shall act as experts and not arbitrators and
shall consider only the Disputed Amounts, solely in accordance with the terms
of this Agreement. Such independent accountants shall deliver to PMSI and NDC,
as promptly as practicable, a report setting forth such calculation. Such
report shall be final and binding upon PMSI and NDC. The cost of such review
and report shall be borne (i) by PMSI if the difference between Closing
Working Capital shown in the independent accountant's calculation and PMSI's
calculation of Closing Working Capital delivered pursuant to Section 1.3(b) is
greater than the difference between Closing Working Capital shown in the
independent accountant's calculation and NDC's calculation of Closing Working
Capital delivered pursuant to Section 1.3(a), (ii) by NDC if the difference
between Closing Working Capital shown in the independent accountant's
calculation and PMSI's calculation of Closing Working Capital delivered
pursuant to Section 1.3(b) is less than the difference between Closing Working
Capital shown in the independent accountant's calculation and NDC's
calculation of Closing Working Capital delivered pursuant to Section 1.3(a),
and (iii) otherwise equally by PMSI and NDC.
(d) PMSI and NDC agree that they will, and will cause their respective
independent accountants and PMSI Database to, cooperate and assist in the
preparation of the Closing Balance Sheet and the calculation of Closing
Working Capital, Closing Current Assets and Closing Current Liabilities and in
the conduct of the reviews referred to in this Section 1.3, including, without
limitation, making available, to the extent necessary, relevant books,
records, working papers, analyses and schedules, and permitting
representatives of the parties to consult with the respective employees,
auditors, actuaries, attorneys and agents of PMSI Database.
1.4 Adjustment Of Purchase Price.
(a) Subject to Section 1.4(c) below,
(i) If Final Current Assets are less than the product of 1.1659 times
Final Current Liabilities (the amount of such shortfall referred to as, the
"Final Working Capital Deficit"), then PMSI shall pay to NDC in cash, as an
adjustment to the Purchase Price, the Final Working Capital Deficit, plus
any amount owing to NDC pursuant to Section 1.4(b) below.
(ii) If Final Current Assets are greater than the product of 1.1659 times
Final Current Liabilities (the amount of such surplus referred to as, the
"Final Working Capital Surplus"), then NDC shall pay to PMSI in cash, as an
adjustment to the Purchase Price, the Final Working Capital Surplus.
(iii) "Final Working Capital," "Final Current Assets" and "Final Current
Liabilities" mean such amounts (A) as shown in NDC's calculation delivered
pursuant to Section 1.3(a), if no notice of disagreement with respect
thereto is duly delivered pursuant to Section 1.3(b); or (B) if such a
notice of disagreement is delivered, (1) as agreed by NDC and PMSI pursuant
to Section 1.3(b) or (2) in the absence
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of such agreement, as shown in the independent accountant's calculation
delivered pursuant to Section 1.3(c); provided that, in no event shall
Final Working Capital be (A) more than PMSI's calculation of Closing
Working Capital delivered pursuant to Section 1.3(b), if any, or (B) less
than the lesser of NDC's calculation of Closing Working Capital delivered
pursuant to Section 1.3(a) or PMSI's calculation of Closing Working Capital
delivered pursuant to Section 1.3(b), if any.
(b) (i) If Total Current Assets are less than the product of 0.9975 times
Total Current Liabilities (the "Total Working Capital Deficit"), then PMSI
shall pay to NDC in cash, as a further adjustment to the Purchase Price, an
amount equal to the Current Asset Allocation Amount.
(ii) If Total Current Assets are greater than the product of 0.9975 times
Total Current Liabilities (the "Total Working Capital Surplus"), then NDC
shall pay to PMSI in cash, as a further adjustment to the Purchase Price, an
amount equal to the Current Asset Allocation Amount.
(iii) As used herein, "Total Current Assets" shall mean the amount equal to
the sum of Final Current Assets in this Agreement and Final Current Assets
calculated pursuant to the Source Agreement; "Total Current Liabilities" shall
mean the amount equal to the sum of Final Current Liabilities in this
Agreement and Final Current Liabilities calculated pursuant to the Source
Agreement; "Current Asset Allocation Amount" shall mean the amount equal to
the product of (A) the quotient of Final Current Assets in this Agreement
divided by Total Combined Assets multiplied by (B) the Total Working Capital
Deficit or Total Working Capital Surplus, as the case may be; and "Total
Combined Assets" shall mean the amount equal to the sum of Final Current
Assets in this Agreement and Final Current Assets calculated pursuant to the
Source Agreement
(c) For purposes of any adjustments to the Purchase Price made pursuant to
this Section, the parties shall take into account any adjustment made to the
Purchase Price at Closing pursuant to Section 1.2(c) hereof.
(d) Any payment pursuant to Section 1.4(a) shall be made at a mutually
convenient time and place within ten days after Final Working Capital, Final
Current Assets and Final Current Liabilities have been determined by delivery
by NDC or PMSI, as the case may be, of one or more certified or official bank
checks payable in immediately available funds to the appropriate party or
parties or by causing such payments to be credited to such account of the
appropriate party or parties as may be designated by such other party or
parties.
(e) Any payment pursuant to Section 1.4(b) shall be made at a mutually
convenient time and place within ten days after Current Asset Allocation
Amount has been determined by delivery by NDC or PMSI, as the case may be, of
one or more certified or official bank checks payable in immediately available
funds to the appropriate party or parties or by causing such payments to be
credited to such account of the appropriate party or parties as may be
designated by such other party or parties.
(f) The amount of any payment to be made pursuant to Sections 1.4(a) and (b)
shall bear interest from and including the Closing Date to but excluding the
date of payment at a rate per annum equal to the Prime Rate determined as of
the Closing Date. Such interest shall be payable at the same time as the
payment to which it relates and shall be calculated daily on the basis of a
year of 365 days and the actual number of days elapsed.
1.5 Anti-Dilution Provisions. In the event NDC changes the number of shares
of NDC Common Stock issued and outstanding prior to the Closing Date as a
result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefore (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or
similar recapitalization for which a record date is not established) shall be
prior to the Closing Date, the Base Amount shall be proportionately adjusted.
1.6 Time And Place Of Closing. The closing of the transactions contemplated
hereby (the "Closing") will take place at 9:00 A.M. on the date that the
Closing Date occurs (or the immediately preceding day if the Closing Date is
earlier than 9:00 A.M.), or at such other time as the Parties, acting through
their authorized officers, may mutually agree. The Closing shall be held at
such location as may be mutually agreed upon by the Parties.
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ARTICLE 2
Representations and Warranties of PMSI Database and PMSI
PMSI and PMSI Database, jointly and severally, hereby represent and warrant
to NDC as follows:
2.1 Organization, Standing, And Power. PMSI Database is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Delaware, and has the corporate power and authority to carry on the
Acquired Business as now and previously conducted by PMSI and to own, lease
and operate the Acquired Assets. PMSI Database is, or will be prior to
Closing, duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of the Acquired Assets or the nature or
conduct of the Acquired Business requires it to be so qualified or licensed,
except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
PMSI Database Material Adverse Effect. The minute book and other
organizational documents for PMSI Database have been made available to NDC for
its review and, except as disclosed in Section 2.1 of the PMSI Database
Disclosure Memorandum, are true and complete in all material respects as in
effect as of the date of this Agreement and accurately reflect in all material
respects all amendments thereto and all proceedings of the Board of Directors
and stockholders thereof. The minute books of PMSI as such relate to PMSI
Database, the Acquired Business, the Acquired Assets and the Joint Venture
Interest have been made available to NDC for its review.
2.2 Authority Of PMSI Database; No Breach By Agreement.
(a) PMSI Database has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and,
subject to receipt of stockholder approval, to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated herein,
including the Stock Purchase, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of PMSI Database,
subject to the adoption of this Agreement by PMSI, as the sole stockholder of
PMSI Database. Subject to such requisite stockholder approval, this Agreement
represents a legal, valid, and binding obligation of PMSI Database,
enforceable against PMSI Database in accordance with its terms (except in all
cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance
or injunctive relief is subject to the discretion of the court before which
any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by PMSI Database,
nor the consummation by PMSI Database of the transactions contemplated hereby,
nor compliance by PMSI Database with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of PMSI Database's
Certificate of Incorporation or Bylaws or any resolution adopted by the board
of directors or stockholder of PMSI Database, or (ii) except as disclosed in
Section 2.2 of the PMSI Database Disclosure Memorandum and, subject to receipt
of the requisite Consents referred to in Sections 6.1(b) and 6.1(c),
constitute or result in a Default under, or require any Consent pursuant to,
or result in the creation of any Lien on any Acquired Asset under, any
Acquired Contract or Acquired Permit.
(c) Other than in connection or compliance with the provisions of applicable
state corporate and securities Laws and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to
any employee benefit plans, or under the HSR Act, no notice to, filing with,
or Consent of, any Regulating Authority is necessary for the consummation by
PMSI Database of the Stock Purchase and the other transactions contemplated in
this Agreement, or necessary for the consummation by PMSI Database and PMSI of
the Contribution.
2.3 Authority Of PMSI; No Breach By Agreement.
(a) PMSI has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and, subject to
receipt of stockholder approval, to consummate the transactions
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contemplated hereby. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated herein,
including the Stock Purchase, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of PMSI, subject to
the adoption of this Agreement by the stockholders of PMSI. Subject to such
requisite stockholder approval, this Agreement represents a legal, valid, and
binding obligation of PMSI, enforceable against PMSI in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by PMSI, nor the
consummation by PMSI of the transactions contemplated hereby, nor compliance
by PMSI with any of the provisions hereof, will (i) conflict with or result in
a breach of any provision of PMSI Database's Certificate of Incorporation or
Bylaws, or (ii) conflict with or result in a breach of any provision of PMSI's
Certificate of Incorporation or Bylaws or the certificate or articles of
incorporation or bylaws of any Subsidiary of PMSI, or (iii) except as
disclosed in Section 2.3 of the PMSI Database Disclosure Memorandum and,
subject to receipt of the requisite Consents referred to in Sections 6.1(b)
and 6.1(c), constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Acquired Asset
under, any Acquired Contract or Acquired Permit.
(c) Other than in connection or compliance with the provisions of the
applicable state corporate and securities Laws and other than Consents
required from Regulatory Authorities, and other than notices to or filings
with the Internal Revenue Service or the Pension Benefit Guaranty Corporation
with respect to any employee benefit plans, or under the HSR Act, no notice
to, filing with, or Consent of, any Regulatory Authority is necessary for the
consummation by PMSI of the transactions contemplated in this Agreement.
2.4 Capital Stock.
(a) The authorized capital stock of PMSI Database consists of 1,000 shares
of PMSI Database Common Stock, of which 100 shares are issued and outstanding
as of the date of this Agreement and at the Closing Date. All of the issued
and outstanding shares of capital stock of PMSI Database are duly and validly
issued and outstanding and are fully paid and nonassessable under the DGCL.
None of the outstanding shares of capital stock of PMSI Database has been
issued in violation of any preemptive rights of the current or past
stockholders of PMSI Database.
(b) Except as set forth in Section 2.4(a), there are no shares of capital
stock or other equity securities of PMSI Database outstanding and no
outstanding Equity Rights relating to the capital stock of PMSI Database. As
of the date of this Agreement, a Subsidiary of PMSI owns, and, as of the
Closing Date, PMSI will own, all right, title and interest (legal and
beneficial) in and to all of the issued and outstanding shares of PMSI
Database's capital stock free and clear of all Liens. Except as specifically
contemplated by this Agreement, no Person has any Contract or any right or
privilege (whether pre- emptive or contractual) capable of becoming a Contract
for the purchase from PMSI of any of the shares of PMSI Database's capital
stock, or any Contract or Equity Right for the purchase, subscription or
issuance of any securities of PMSI Database.
2.5 PMSI Database Subsidiaries. PMSI Database has no Subsidiaries.
2.6 Financial Statements. Each of the OTC Financial Statements (including,
in each case, any related notes) was prepared in accordance with GAAP applied
on a consistent basis as of and for the periods involved (except as may be
indicated in the notes to such financial statements), and fairly presented in
all material respects the financial position of the Acquired Business as of
their respective dates and the results of operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount or effect. Except as set forth on
Section 2.6 of the PMSI Database Disclosure Memorandum, the Acquired Business
has no liabilities or obligations (secured or unsecured, whether accrued,
absolute, direct, indirect, contingent or
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otherwise, and whether due or to become due) which are not fully and
adequately accrued or reserved against in the OTC Financial Statements, as of
their respective dates, in accordance with GAAP consistently applied. Further,
the OTC Balance Sheet only includes the Acquired Assets and the Assumed
Liabilities relating to the Acquired Business and does not include (i)
Retained Liabilities, (ii) domestic income tax assets or liabilities, (iii)
recorded goodwill, and (iv) deferred gains on sale and lease-back
transactions. The Statements of Income are those of the Acquired Business and
the Acquired Assets and do not include revenue, expenses or income tax of PMSI
or any other Assets of PMSI or the Joint Venture Interest.
2.7 Absence Of Undisclosed Liabilities. At the Closing, PMSI Database will
have no Liabilities other than the Assumed Liabilities and the Liabilities set
forth in Section 2.7 of the PMSI Database Disclosure Memorandum. None of the
Assumed Liabilities or those Liabilities set forth in Section 2.7 of the PMSI
Database Disclosure Memorandum are reasonably likely to have, individually or
in the aggregate, a PMSI Database Material Adverse Effect.
2.8 Absence Of Certain Changes Or Events. Since March 31, 1997, except as
disclosed in the OTC Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 2.8 of the PMSI Database Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
PMSI Database Material Adverse Effect, (ii) neither PMSI Database nor PMSI has
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of PMSI Database and PMSI provided in Article 4.
2.9 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of PMSI Database or
PMSI on behalf of or including the Acquired Business have been timely filed or
requests for extensions have been timely filed, granted, and have not expired
for periods ended on or before June 30, 1996, and on or before the date of the
most recent fiscal year end immediately preceding the Closing Date, and all
such Tax Returns filed are complete and accurate in all material respects. All
Taxes shown on filed Tax Returns have been paid. There is no audit examination
or deficiency or refund Litigation with respect to any Taxes, except as
reserved against in the PMSI Database Financial Statements or as disclosed in
Section 2.9 of the PMSI Database Disclosure Memorandum for which PMSI Database
could be found responsible. All Taxes and other Liabilities due with respect
to completed and settled examinations or concluded Litigation have been paid.
There are no Liens with respect to Taxes upon any of the Acquired Assets,
except for any such Liens which are not reasonably likely to have a PMSI
Database Material Adverse Effect.
(b) PMSI has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due with respect to the
Acquired Business or the Acquired Assets (excluding such statutes that relate
to years currently under examination by the Internal Revenue Service or other
applicable taxing authorities) or with respect to the filing of any Tax Return
including the Acquired Business that is currently in effect.
(c) The provision for any Taxes due or to become due for the Acquired
Business and the Acquired Assets for the period or periods through and
including the date of the respective PMSI Database Financial Statements that
has been made and is reflected on such PMSI Database Financial Statements is
sufficient to cover all such Taxes.
(d) Deferred Taxes of PMSI Database reflected on the PMSI Database Financial
Statements have been provided for in accordance with GAAP.
(e) PMSI Database is not a party to any Tax allocation or sharing agreement
and PMSI Database has not been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the
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common PMSI of which was PMSI Database or PMSI) that has any Liability for
Taxes of any Person (other than PMSI Database) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as
a transferee or successor or by Contract or otherwise.
(f) PMSI Database and PMSI with respect to the Acquired Business and the
Acquired Assets are in compliance with, and its records contain all
information and documents (including properly completed IRS Forms W-9)
necessary to comply with in all material respects, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 2.9 of the PMSI Database Disclosure
Memorandum, PMSI Database and PMSI with respect to the Acquired Business and
the Acquired Assets have not made any payments, are not obligated to make any
payments, and are not a party to any Contract that could obligate either of
them to make any payments that would be disallowed as a deduction under
Section 280G or 162(m) of the Internal Revenue Code.
2.10 Assets.
(a) Except as disclosed in Section 2.10 of the PMSI Database Disclosure
Memorandum or as disclosed or reserved against in the OTC Financial Statements
delivered prior to the date of this Agreement and except for the Contracts set
forth in Sections 2.2 and 2.3 of the PMSI Database Disclosure Memorandum, PMSI
Database currently has, good, valid and marketable title, free and clear of
all Liens, to all of the Acquired Assets. All tangible properties that are
material to the conduct of the Acquired Business are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with PMSI's past practices with respect to the Acquired
Business.
(b) The Acquired Assets and the Acquired Business are insured under various
policies of general liability and other forms of insurance, which policies are
in amounts adequate in the reasonable judgment of PMSI and PMSI Database.
Neither PMSI nor PMSI Database has been refused any insurance, with respect to
the Acquired Assets or the Acquired Business, by any insurance carrier to
which it has applied for insurance or with which it has carried insurance
during the past five (5) years. There are no outstanding requirements or
recommendations by any current insurer or underwriter with respect to the
Acquired Business or the Acquired Assets which require or recommend changes in
the conduct of the Acquired Business, or require any repairs or other work to
be done with respect to any of the Acquired Assets or operations of the
Acquired Business.
(c) The Acquired Assets include all rights, properties, interests in
properties, and assets necessary to permit NDC to carry on the Acquired
Business as presently conducted by PMSI and PMSI Database.
2.11 Intellectual Property. Section 2.11 of the PMSI Database Disclosure
Memorandum is a complete and accurate list of all Acquired Intellectual
Property, containing a brief description of all governmental registrations or
applications for governmental registrations of each such item and the nature
of PMSI Database's interest therein. PMSI Database owns or has a license to
use all of the Acquired Intellectual Property. PMSI Database is the owner of
or has a license to any Acquired Intellectual Property sold or licensed to a
third party by PMSI Database, and PMSI Database has the right to convey by
sale or license any Acquired Intellectual Property so conveyed. PMSI Database
is not in Default under any of its Acquired Intellectual Property licenses. No
proceedings have been instituted, or are pending or to the Knowledge of PMSI
Database and PMSI threatened, which challenge the rights of PMSI or PMSI
Database with respect to Acquired Intellectual Property used, sold or licensed
by PMSI or PMSI Database in the course of the Acquired Business, nor has any
person claimed or alleged any rights to such Acquired Intellectual Property.
The conduct of the Acquired Business does not infringe any Intellectual
Property of any other person. Except as disclosed in Section 2.11 of the PMSI
Database Disclosure Memorandum, neither PMSI nor PMSI Database is obligated to
pay any recurring royalties to any Person with respect to any Acquired
Intellectual Property. Except as disclosed in Section 2.11 of the PMSI
Database Disclosure Memorandum, every Employee is a party to a Contract which
requires such Person to assign
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any interest in any Intellectual Property to PMSI which rights have been
assigned to PMSI Database and to keep confidential any trade secrets,
proprietary data, customer information, or other business information of the
Acquired Business, and no such Employee is party to any Contract with any
Person other than PMSI which requires such Employee to assign any interest in
any Intellectual Property developed while in the employ of PMSI to any Person
other than PMSI or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than
PMSI. Except as disclosed in Section 2.11 of the PMSI Database Disclosure
Memorandum, no Employee is party to any Contract which restricts or prohibits
such Employee from engaging in activities competitive with any Person,
including PMSI and PMSI Database, in each case with respect to the Acquired
Business. All material items of the Acquired Intellectual Property and the
material registrations, applications, and agreements related thereto will be
legally assigned to PMSI Database, subject to the consent of any third party
as set forth in Section 2.11 of the PMSI Database Disclosure Memorandum.
2.12 Compliance With Laws. PMSI or PMSI Database has in effect all Acquired
Permits. The Acquired Permits include all Permits necessary for PMSI Database
to own, lease, or operate the Acquired Assets and to carry on the Acquired
Business as now conducted, and there has occurred no Default under any such
Acquired Permit and, except as set forth in Section 2.12 of the PMSI Database
Disclosure Memorandum, all right in and to such Acquired Permits has been
legally transferred to PMSI Database and did not require the consent of any
third party. Except as disclosed in Section 2.12 of the PMSI Database
Disclosure Memorandum, neither PMSI nor PMSI Database:
(a) is in Default under any of the provisions of its Certificate of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Acquired Permits applicable
to the Acquired Business or the Employees; or
(c) since January 1, 1993, has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that PMSI Database
or PMSI with respect to the Acquired Business is not in compliance in any
material respect with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, (ii) threatening to revoke any
Acquired Permits, or (iii) requiring PMSI with respect to the Acquired
Business or PMSI Database to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority relating to the Acquired Business
or the Acquired Assets have been made available to NDC.
2.13 Labor Relations. PMSI Database and PMSI have disclosed in Section 2.13
of the PMSI Database Disclosure Memorandum all employees of the Acquired
Business (the "Employees"). With respect to the Acquired Business, PMSI and
PMSI Database are not the subject of any Litigation asserting that they have
committed an unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel them to bargain
with any labor organization as to wages or conditions of employment, nor is
PMSI Database, or PMSI with respect to the Acquired Business, a party to any
collective bargaining agreement, nor is there any strike or other labor
dispute involving the Acquired Business, pending or threatened, or to the
Knowledge of PMSI and PMSI Database, is there any activity involving the
Employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
2.14 Employees And Employee Benefit Plans.
(a) Neither PMSI Database nor any ERISA Affiliate of PMSI Database currently
or within the 6 years preceding the Closing Date, has maintained, sponsored in
whole or in part, or contributed to any plan or
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arrangement which is a "defined benefit plan" (as defined in Section 414(j) of
the Internal Revenue Code) or which is a multiemployer plan within the meaning
of Section 3(37) of ERISA. For purposes of this Section 2.14, "ERISA
Affiliate" shall mean any entity which is considered one employer with PMSI
Database under Section 4001 of ERISA or Section 414 of the Internal Revenue
Code.
(b) All PMSI Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a PMSI Database Material Adverse Effect.
(c) PMSI Database will not have had any employees prior to Closing.
2.15 Material Contracts. Section 2.15 of the PMSI Database Disclosure
Memorandum contains a true and correct list, and (if oral) summary
description, of all PMSI Database Contracts (as defined below). Except as
contemplated hereunder and except as disclosed in Section 2.15 of the PMSI
Database Disclosure Memorandum or otherwise reflected in the OTC Financial
Statements or the PMSI Database Balance Sheet, neither PMSI Database, nor PMSI
with respect to the Acquired Business and the Joint Venture Interest, nor any
of the Acquired Assets, the Acquired Business, or the related operations, is a
party to, or is bound or affected by, or receives benefits under, (i) any
employment, severance, termination, consulting, or retirement Contract, (ii)
any Contract relating to the borrowing of money by PMSI Database, or PMSI with
respect to the Acquired Business or the Joint Venture Interest, or the
guarantee by PMSI Database, or PMSI with respect to the Acquired Business or
the Joint Venture Interest, of any such obligation (other than Contracts
evidencing trade payables and Contracts relating to borrowings or guarantees
made in the ordinary course of business), (iii) any Contract which prohibits
or restricts PMSI Database, or PMSI with respect to the Acquired Business or
the Joint Venture Interest, from engaging in any business activities in any
geographic area, line of business or otherwise in competition with any other
Person, (iv) any Contract between or among PMSI Database and PMSI or any
Affiliate of PMSI Database or PMSI, (v) any Contract involving Intellectual
Property (other than Contracts entered into in the ordinary course with
customers and "shrink-wrap" software licenses), (vi) any Contract relating to
the provision of data processing, network communication, or other technical
services to or by PMSI Database, or PMSI with respect to the Acquired Business
or the Joint Venture Interest, (vii) any Contract relating to the purchase or
sale of any goods or services including customer contracts (other than
Contracts entered into in the ordinary course of business and involving
payments under any individual Contract not in excess of $50,000), (viii) real
property leases and (ix) all Contracts referred to in Section 2.17(b) as of
the date of this Agreement (together referred to as the "PMSI Database
Contracts"). Except as set forth in Sections 2.2 and 2.3 of the PMSI Database
Disclosure Memorandum, with respect to each PMSI Database Contract and except
as disclosed in Section 2.15 of the PMSI Database Disclosure Memorandum: (i)
the Contract is in full force and effect; (ii) neither PMSI Database nor PMSI
is in Default thereunder; (iii) neither PMSI Database nor PMSI has repudiated
or waived any material provision of any such Contract; (iv) no other party to
any such Contract is, to the Knowledge of PMSI Database and PMSI, in Default
in any respect or has repudiated or waived any material provision thereunder;
(v) there exists no actual, or to the Knowledge of PMSI or PMSI Database,
threatened, cancellation, termination, or limitation of, or any material
amendment, modification, or change to any Contract; (vi) neither PMSI Database
nor PMSI has received formal notice that any party to a PMSI Database Contract
will not renew such Contract at the end of its existing term; and (vii) no
PMSI Database Contract requires consent for assignment in connection with the
transactions contemplated by this Agreement including the Contribution. All of
the indebtedness of PMSI Database for money borrowed is prepayable at any time
by PMSI Database without penalty or premium.
2.16 Real Property; Leased Real Property. PMSI Database does not own or
lease any real property that is used or will be used in the Acquired Business.
2.17 Personal Property.
(a) Section 2.17(a) of the PMSI Database Disclosure Memorandum contains a
substantially true and correct list of all equipment (excluding items of
equipment having a value of less than $50,000 individually) as of the date
hereof that will be included in the Acquired Assets.
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(b) Section 2.17(b) of the PMSI Database Disclosure Memorandum contains a
substantially true and correct list of all Acquired Personal Property (except
miscellaneous leases of property having a value of less than $20,000
individually) leased by PMSI or PMSI Database. True and correct copies of the
lease for each item listed in Section 2.17(b) of the PMSI Database Disclosure
Memorandum and any amendments, extensions, and renewals thereof have
heretofore been furnished to NDC. Each of such leases is in effect, and PMSI
and PMSI Database have neither received nor sent written notice or other
written correspondence that indicates the existence of Material default under
any such lease, except for defaults subsequently cured or waived prior to the
date of this Agreement. No rights of PMSI or PMSI Database under any of such
leases have been assigned or otherwise transferred as security for any
obligation of PMSI or PMSI Database other than to the lessor under a lease to
secure PMSI's or PMSI Database's obligations under such lease. Except as
described in Section 2.17(b) of the PMSI Database Disclosure Memorandum, all
such leases are fully assignable without the consent of any third party.
(c) Section 2.17(c) of the PMSI Database Disclosure Memorandum contains a
substantially true and correct list of all Acquired Personal Property (except
personal property having a value of less than $20,000 individually) owned by
PMSI Database. All Acquired Personal Property that is material to the conduct
of the Acquired Business is in good condition, reasonable wear and use
excepted, and are usable in the ordinary course of business consistent with
PMSI's past practices.
2.18 Legal Proceedings. There is no Litigation instituted or pending, or, to
the Knowledge of PMSI and PMSI Database, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against PMSI Database or
PMSI with respect to the Acquired Business, or against any director, employee
or employee benefit plan of PMSI or PMSI Database, or against any Acquired
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a PMSI Database Material Adverse Effect, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against PMSI Database or PMSI with
respect to the Acquired Business and Acquired Assets that are reasonably
likely to have, individually or in the aggregate, a PMSI Database Material
Adverse Effect. Section 2.18 of the PMSI Database Disclosure Memorandum
contains a summary of all Litigation as of the date of this Agreement to which
PMSI Database is a party, or to which PMSI with respect to the Acquired
Business is a party and which names such as a defendant or cross-defendant or
for which PMSI Database, the Acquired Business or the Acquired Assets has any
potential Liability.
2.19 Statements True And Correct. None of the information supplied or to be
supplied by PMSI or PMSI Database or any Affiliate thereof for inclusion in
the Registration Statement to be filed by NDC with the SEC will, when the
Registration Statement becomes effective, include any untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by PMSI or
PMSI Database or any Affiliate thereof for inclusion in any documents to be
filed by PMSI or PMSI Database or any Affiliate thereof with any Regulatory
Authority in connection with the transactions contemplated hereby, will, at
the respective time such documents are filed, include any untrue statement of
a material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that PMSI or PMSI Database or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
2.20 Regulatory Matters. Neither PMSI Database, PMSI nor any Affiliate
thereof has taken or agreed to take any action or has any Knowledge of any
fact or circumstance that is reasonably likely to materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in Section
6.1(b) or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section.
2.21 Charter Provisions. PMSI, as the sole stockholder of PMSI Database, and
PMSI Database have taken all reasonable action so that the entering into of
this Agreement and the consummation of the Stock Purchase and the other
transactions contemplated by this Agreement, except as set forth herein, do
not and will not result
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in the grant of any rights to any Person under the Certificate of
Incorporation, Bylaws or other governing instruments of PMSI Database or
restrict or impair the ability of NDC or any of its Subsidiaries to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of
PMSI Database that may be directly or indirectly acquired or controlled by
them.
2.22 Opinion Of Financial Advisor. PMSI or PMSI Database has received the
opinion of Cowen & Company, dated the date of this Agreement, to the effect
that the consideration to be received in the Stock Purchase and pursuant to
the Source Transfer Agreement by PMSI is fair, from a financial point of view,
to PMSI.
2.23 Board Recommendation. The Board of Directors of PMSI Database and PMSI,
at meetings duly called and held, have by unanimous vote of the directors
present and voting (who constituted all of the directors then in office other
than those directors who abstained from voting because of a conflict of
interest) (i) determined that this Agreement and the transactions contemplated
hereby, including the Stock Purchase and the transactions contemplated
thereby, taken together, are fair to and in the best interests of the
stockholders of PMSI, and PMSI, as the sole stockholder of PMSI Database, and
(ii) resolved to recommend that the holders of the shares of PMSI and PMSI, as
the sole stockholder of PMSI Database, adopt this Agreement.
2.24 Joint Venture Interest. The Amended and Restated Alphabase Data License
Agreement is in full force and effect and, subject to receipt by PMSI Database
of the Consents set forth in Sections 2.2 and 2.3 of the PMSI Database
Disclosure Memorandum, PMSI Database owns all right, title and interest in the
Joint Venture Interest free and clear of any Liens.
ARTICLE 3
Representations and Warranties of NDC
NDC hereby represents and warrants to PMSI Database and PMSI as follows:
3.1 Organization, Standing, And Power. DC is a corporation duly organized,
validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its material Assets. NDC is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a NDC Material Adverse Effect.
3.2 Authority; No Breach By Agreement.
(a) NDC has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Stock Purchase, have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of NDC. This
Agreement represents a legal, valid, and binding obligation of NDC,
enforceable against NDC in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought).
(b) Neither the execution and delivery of this Agreement by NDC, nor the
consummation by NDC of the transactions contemplated hereby, nor compliance by
NDC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of NDC's Certificate of Incorporation or Bylaws or any
resolution adopted by the Board of Directors or stockholders of NDC, or (ii)
subject to receipt of the requisite Consents
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referred to in Section 6.1(b), constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any NDC Entity under, any Contract or Permit of any NDC Entity.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under the HSR Act, no notice to, filing with, or Consent of, any
public body or authority is necessary for the consummation by NDC of the Stock
Purchase and the other transactions contemplated in this Agreement.
3.3 Capital Stock.
(a) The authorized capital stock of NDC consists of (i) 100,000,000 shares
of NDC Common Stock, of which 26,629,947 shares are issued and outstanding as
of August 18, 1997, and (ii) 1,000,000 shares of NDC Preferred Stock, of which
no shares are issued and outstanding. All of the issued and outstanding shares
of NDC Capital Stock are, and all of the shares of NDC Common Stock to be
issued in exchange for shares of PMSI Database Common Stock upon consummation
of the Stock Purchase, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the DGCL. None of the outstanding shares of NDC Capital
Stock has been, and none of the shares of NDC Common Stock to be issued in
exchange for shares of PMSI Database Common Stock upon consummation of the
Stock Purchase will be, issued in violation of any preemptive rights of the
current or past stockholders of NDC.
(b) Except as set forth in Section 3.3(a), or as provided pursuant to the
NDC Rights Agreement, or as disclosed in Section 3.3(b) of the NDC Disclosure
Memorandum, there are no shares of capital stock or other equity securities of
NDC outstanding and no outstanding Equity Rights relating to the capital stock
of NDC.
3.4 SEC Filings; Financial Statements.
(a) NDC has timely filed and made available to PMSI Database all SEC
Documents required to be filed by NDC since May 31, 1993 (the "NDC SEC
Reports"). The NDC SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended
or superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such NDC SEC Reports or
necessary in order to make the statements in such NDC SEC Reports, in light of
the circumstances under which they were made, not misleading. No NDC
Subsidiary is required to file any SEC Documents.
(b) Each of the NDC Financial Statements (including, in each case, any
related notes) contained in the NDC SEC Reports, including any NDC SEC Reports
filed after the date of this Agreement until the Closing Date, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and
fairly presented in all material respects the consolidated financial position
of NDC and its Subsidiaries as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year- end adjustments which were not or are not expected to be
material in amount or effect.
3.5 Absence Of Undisclosed Liabilities. No NDC Entity has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a NDC
Material Adverse Effect, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of NDC as of May 31, 1996 and
February 28, 1997, included in the NDC Financial Statements delivered prior to
the date of this Agreement or reflected in the notes thereto. No NDC Entity
has incurred or paid any Liability since February 28, 1997, except for such
Liabilities incurred
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or paid (i) in the ordinary course of business consistent with past business
practice and which are not reasonably likely to have, individually or in the
aggregate, a NDC Material Adverse Effect or (ii) in connection with the
transactions contemplated by this Agreement.
3.6 Absence Of Certain Changes Or Events. Since February 28, 1997, except as
disclosed in the NDC Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 3.6 of the NDC Disclosure Memorandum, (i)
there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a NDC Material
Adverse Effect, and (ii) the NDC Entities have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result
in a material breach or violation of any of the covenants and agreements of
NDC provided in Article 7.
3.7 Compliance With Laws. Each NDC Entity has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, and there has occurred no Default under any
such Permit. Except as disclosed in Section 3.7 of the NDC Disclosure
Memorandum, none of the NDC Entities:
(a) is in Default under its Certificate of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business; or
(c) since January 1, 1993, has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any NDC Entity
is not in compliance in any material respect with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, or
(iii) requiring any NDC Entity to enter into or consent to the issuance of
a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business.
3.8 Legal Proceedings. There is no Litigation instituted or pending, or, to
the Knowledge of NDC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any NDC Entity, or against any director,
employee or employee benefit plan of any NDC Entity, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any NDC Entity, that are reasonably likely to
have, individually or in the aggregate, a NDC Material Adverse Effect.
3.9 Statements True And Correct. None of the information supplied or to be
supplied by any NDC Entity or any Affiliate thereof for inclusion in the
Registration Statement to be filed by NDC or in the proxy statement to be
filed by PMSI with the SEC, will include an untrue statement of a material
fact, or omit to state any material fact necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, with respect to the Registration Statement, on the date such
Registration Statement becomes effective, and with respect to the proxy
statement as of its date. None of the information supplied or to be supplied
by any NDC Entity or any Affiliate thereof for inclusion in any documents to
be filed by any NDC Entity or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All documents that any NDC Entity or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
3.10 Regulatory Matters. No NDC Entity or any Affiliate thereof has taken or
agreed to take any action or has any Knowledge of any fact or circumstance
that is reasonably likely to materially impede or delay receipt of
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any Consents of Regulatory Authorities referred to in Section 6.1(b) or result
in the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
3.11 Rights Agreement. Execution of this Agreement and consummation of the
Stock Purchase and the other transactions contemplated by this Agreement will
not result in the grant of any rights to any Person under the NDC Rights
Agreement (other than as contemplated by Section 1.1) or enable or require the
NDC Rights to be exercised, distributed or triggered.
ARTICLE 4
Conduct of Business Pending Consummation
4.1 Affirmative Covenants Of PMSI Database And PMSI.
(a) Subject to the Consents set forth in Sections 2.3 and 2.4 of the PMSI
Database Disclosure Memorandum, PMSI has, or shall have prior to Closing,
assigned, transfered, conveyed, and delivered to PMSI Database, and PMSI
Database has, or shall have prior to Closing, acquired, and accepted from
PMSI, all of the right, title, and interest of PMSI in and to the Acquired
Assets and the Joint Venture Interest, free and clear of any and all Liens.
(b) The "Acquired Assets" shall consist of all of the right, title, and
interest of PMSI and PMSI Database in and to all of the following Assets, as
the same shall exist at the Closing Date, which shall be delivered free and
clear of any and all Liens:
(i) The Personal Property primarily utilized in the Acquired Business
(the "Acquired Personal Property");
(ii) The Intellectual Property primarily utilized in the Acquired
Business (the "Acquired Intellectual Property");
(iii) The Contracts primarily utilized in the Acquired Business (the
"Acquired Contracts");
(iv) The Accounts Receivable relating to the Acquired Business (the
"Acquired Accounts Receivable");
(v) The Permits primarily utilized in the Acquired Business (the
"Acquired Permits"); and
(vi) The Other Assets primarily utilized in the Acquired Business (the
"Acquired Other Assets").
(c) Prior to Closing, as partial consideration for the Contribution, PMSI
Database shall assume responsibility for the performance and satisfaction of
the Assumed Liabilities. PMSI Database shall not assume responsibility for,
and PMSI will remain obligated with respect to, the Retained Liabilities.
(d) From the date of this Agreement until the earlier of the Closing Date or
the termination of this Agreement, unless the prior written consent of NDC
shall have been obtained, and except as otherwise expressly contemplated
herein, either PMSI shall, or shall cause PMSI Database to, (i) operate the
Acquired Business and the Joint Venture Interest only in the usual, regular,
and ordinary course as previously operated by PMSI, (ii) use its reasonable
efforts to preserve intact the business organization of the Acquired Business
and the Acquired Assets and maintain its rights and franchises with respect to
the Acquired Business and the Joint Venture Interest; (iii) maintain the
Acquired Assets in their present order and condition, reasonable wear and use
excepted, and maintain all policies of insurance covering the Acquired Assets
in amounts and on terms substantially equivalent to those in effect on the
date hereof; (iv) take all steps reasonably necessary to maintain the Acquired
Intellectual Property and other intangible assets of the Acquired Business and
the Joint Venture Interest; (v) use reasonable best efforts to preserve the
goodwill and patronage of its customers, Employees, suppliers and others
having a business relationship with the Acquired Business and the Joint
Venture Interest; and (vi) take no action which would (A) materially adversely
affect the ability of any Party to obtain any Consents required for the
transactions
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contemplated hereby without imposition of a condition or restriction of the
type referred to in the last sentences of Section 6.1(b) or 6.1(c), or (ii)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
(e) Prior to or contemporaneous with the Closing, pursuant to the Source
Transfer Agreement, the terms and conditions of which will have been approved
by NDC, PMSI shall acquire (i) Source's business operated in Europe as of the
Closing Date (the "European Business"), (ii) all of the shares of PMSI held by
Source or any Subsidiary of Source (the "Divestiture"), and (iii) all of the
stock of the Source Divestiture Subsidiaries. In connection with the
Divestiture, PMSI shall obtain a release of all obligations of Source under
the European Contracts.
(f) Prior to Closing, PMSI Database and PMSI shall use commercially
reasonable efforts to obtain Consents to the assignment of the PMSI Database
Contracts and any other Contracts to which PMSI, SLA or PMSI Database is a
party as required by the Contract in connection with the Contribution and the
transactions contemplated hereby. If, on the Closing Date, PMSI Database, SLA
and PMSI have not obtained any Consent discussed above after having used
commercially reasonable efforts to obtain such Consent or an attempted
transfer of any of the PMSI Database Contracts and any other Contracts to
which PMSI or SLA is a party would be ineffective or the failure to have such
Consent would adversely affect PMSI's or SLA's ability to convey any such
Contract and the failure to transfer such asset, either individually or in the
aggregate, is not reasonably likely to have a PMSI Database Material Adverse
Effect, then such Contracts shall constitute "Deferred Contracts" and shall
not be transferred to PMSI Database. After the Closing: (a) PMSI will (i)
continue to use commercially reasonable efforts to obtain the Consent and/or
to remove any other impediments to the assignment and transfer of each
Deferred Contract and will assign and transfer or cause SLA to assign and
transfer each Deferred Contract to PMSI Database within five (5) business days
after the receipt of such Consent and/or removal of such impediment; (ii)
until the assignment and transfer with respect to any Deferred Contract is
accomplished, cooperate or cause SLA to cooperate with PMSI Database in any
lawful arrangement that is not unduly economically burdensome (including
performance by PMSI or SLA as agent) to provide that PMSI Database shall
receive the benefits of such Deferred Contract to the same extent as if it
were transferred to PMSI Database at Closing; and (iii) until the assignment
and transfer with respect to any Deferred Contract is accomplished, enforce,
at the request and for the account of PMSI Database, any of PMSI's or SLA's
rights thereto or interests therein against any other parties thereto
(including the right to terminate any such Deferred Contract in accordance
with its terms, provided that PMSI Database pays any cancellation or other fee
due upon such termination); and (b) if and only to the extent that PMSI
Database receives the benefits of a Deferred Contract, PMSI Database shall
perform the obligations of PMSI or SLA arising with respect to such Deferred
Contract to the extent that, by reason of consummation of the transactions
contemplated by this Agreement or the Source Agreement, PMSI Database has
control over the resources necessary to perform such obligations or, to the
extent that PMSI Database does not have such resources, to reimburse PMSI for
the reasonable cost of such performance. NDC shall notify PMSI on the Closing
Date as to the PMSI Database Contracts which will be performed by PMSI
Database pursuant to this Section. To the extent PMSI Database performs the
obligations of PMSI with respect to any Deferred Contract, any account
receivable created on account of such performance shall be deemed when created
to be a Acquired Contract conveyed hereunder. After the Closing, PMSI Database
and NDC will act with reasonable diligence and use commercially reasonable
efforts to assist, and cooperate with, PMSI or SLA in obtaining such Consents
and removing any such impediments to the transfer of the Deferred Contracts.
(g) Prior to Closing, all indebtedness or other obligations or accounts of
any kind between a PMSI Entity on the one hand and Source and its Subsidiaries
or PMSI Database on the other hand will have been paid in full and discharged.
4.2 Negative Covenants Of PMSI Database And PMSI. From the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement, unless the prior written consent of NDC shall have been obtained,
and except as otherwise expressly contemplated herein, PMSI and PMSI Database
covenant and agree that they will not do or agree or commit to do any of the
following with respect to the Acquired Business and the Acquired Assets:
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(a) amend the Certificate of Incorporation, Bylaws or other governing
instruments of PMSI Database; or
(b) except as provided in the budget set forth in Section 4.2(b) of the
PMSI Database Disclosure Memorandum and only for the purposes set forth
therein, PMSI Database shall not incur any additional debt obligation,
capital lease obligation or other obligation for borrowed money or make any
capital expenditures in excess of an aggregate of $50,000 or impose, or
suffer the imposition, on any Acquired Asset of any Lien or permit any such
Lien to exist (other than in connection with Liens in effect as of the date
hereof that are disclosed in the PMSI Database Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange, directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of PMSI Database, or declare or pay any dividend or make
any other distribution in respect of PMSI Database's capital stock; or
(d) except for this Agreement, issue, sell, pledge, encumber, authorize
the issuance of, enter into any Contract to issue, sell, pledge, encumber,
or authorize the issuance of, or otherwise permit to become outstanding,
any additional shares of PMSI Database Common Stock, or any stock
appreciation rights, or any option, warrant, or other Equity Right of PMSI
Database; or
(e) except for the Contribution, purchase or acquire any assets or
properties, whether real or personal, tangible or intangible, that if
acquired would be an Acquired Asset, and not sell, lease or otherwise
dispose of any real or personal property or asset (other than cash which
may be distributed or otherwise transferred out of PMSI Database to PMSI)
that would have been an Acquired Asset, in each case except in the ordinary
course of business and consistent with past practices; or
(f) adjust, split, combine or reclassify any capital stock of PMSI
Database or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of PMSI Database Common Stock; or
(g) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or
less, PMSI Database shall not purchase any securities or make any material
investment, either by purchase of stock of securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person, or
otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or
(ii) the creation of new wholly owned Subsidiaries organized to conduct or
continue activities otherwise permitted by this Agreement; or
(h) grant any increase in compensation or benefits to the Employees of
the Acquired Business, except in accordance with past practice disclosed in
Section 4.2(h) of the PMSI Database Disclosure Memorandum or as required by
Law; pay any severance or termination pay or any bonus other than pursuant
to written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 4.2(h) of the PMSI Database Disclosure
Memorandum; and enter into or amend any severance agreements with Employees
of the Acquired Business; grant any material increase in fees or other
increases in compensation or other benefits to directors of PMSI Database
except in accordance with past practice disclosed in Section 4.2(h) of the
PMSI Database Disclosure Memorandum; or
(i) enter into or amend any employment Contract with any Employee of the
Acquired Business that PMSI does not and PMSI Database will not have the
unconditional right to terminate without Liability (other than Liability
for services already rendered), at any time on or after the Closing Date;
or
(j) adopt any new employee benefit plan of PMSI Database; or
(k) make any significant change in any Tax or accounting methods or
systems of internal accounting controls with respect to PMSI Database or
the Acquired Business, except as may be appropriate to conform to changes
in Tax Laws or regulatory accounting requirements or GAAP; or
(l) commence any Litigation with respect to PMSI Database or the Acquired
Business other than in accordance with past practice, settle any Litigation
involving any Liability of the Acquired Business or the
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Acquired Assets for material money damages or restrictions upon the
operations of the Acquired Business or the Acquired Assets; or
(m) enter into, materially modify or amend, or terminate any PMSI
Database Contract or other material Contract with respect to PMSI Database
or the Acquired Business (including any loan Contract with an unpaid
balance exceeding $50,000) or waive, release, compromise or assign any
material rights or claims; or
(n) modify or amend, or waive any provision of, the Source Transfer
Agreement, a fully executed copy of which which with all attachments,
exhibits and schedules thereto is attached hereto as Schedule 4.2(n).
4.3 Covenants Of NDC. From the date of this Agreement until the earlier of
the Closing Date or the termination of this Agreement, unless the prior
written consent of PMSI shall have been obtained, and except as otherwise
expressly contemplated herein, NDC covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed, in its reasonable judgment, to enhance the long-term value of
the NDC Common Stock and the business prospects of the NDC Entities and to the
extent consistent therewith use all reasonable efforts to preserve intact the
NDC Entities' core businesses and goodwill with their respective employees and
the communities they serve, and (b) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 6.1(b) or
6.1(c), or (ii) materially adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement; provided, that the
foregoing shall not prevent any NDC Entity from acquiring any Assets or other
businesses or from discontinuing or disposing of any of its Assets or business
if such action is, in the judgment of NDC, desirable in the conduct of the
business of NDC and its Subsidiaries, provided that such actions shall not
materially delay the Closing Date or materially hinder consummation of the
Stock Purchase. NDC further covenants and agrees that it will not, without the
prior written consent of PMSI, which consent shall not be unreasonably
withheld, amend the Certificate of Incorporation or Bylaws of NDC or, except
as expressly contemplated by this Agreement, the NDC Rights Agreement, in each
case, in any manner adverse to the holders of PMSI Database Common Stock as
compared to rights of holders of NDC Common Stock generally as of the date of
this Agreement. In addition, NDC covenants and agrees that it shall maintain
PMSI Database as its Subsidiary and maintain substantially all of the Acquired
Assets in PMSI Database for a period of one year and will treat the Joint
Venture Interest as a partnership for federal income tax purposes during that
one-year period.
4.4 Adverse Changes In Condition. Each Party agrees to give written notice
promptly to the other Parties upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a PMSI Database Material Adverse Effect or a NDC Material Adverse
Effect, as applicable, or (ii) would cause or constitute a material breach of
any of its representations, warranties, or covenants contained herein, and to
use its reasonable efforts to prevent or promptly to remedy the same.
4.5 Reports. Each Party and its Subsidiaries shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Closing Date and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements
are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in stockholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
material). As of their respective dates, such reports filed with the SEC will
comply in all material respects with the Securities Laws and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
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ARTICLE 5
Additional Agreements
5.1 Registration Statement; PMSI Approval. As soon as reasonably practicable
after execution of this Agreement, NDC shall prepare and file the Registration
Statement with the SEC, and shall use its reasonable efforts to cause the
Registration Statement to become effective under the 1933 Act and take any
action required to be taken under the applicable state Blue Sky or securities
Laws in connection with the issuance of the shares of NDC Common Stock upon
consummation of the Stock Purchase. PMSI and PMSI Database shall cooperate in
the preparation and filing of the Registration Statement and shall furnish all
information concerning them and the holders of PMSI's capital stock as NDC may
reasonably request in connection with such action. PMSI shall call a
Stockholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon adoption of this Agreement, the Source Transfer Agreement and such
other related matters as it deems appropriate. In connection with the
Stockholders' Meeting, (i) PMSI shall prepare and file with the SEC a Proxy
Statement and mail such Proxy Statement to its stockholders, (ii) NDC shall
furnish to PMSI and PMSI Database all information that such may reasonably
request in preparation of such Proxy Statement and notice of meeting, (iii)
the Board of Directors of PMSI shall recommend to its stockholders the
approval of the matters submitted for approval, subject only to the Board of
Director's legal obligations (if any) as directors of PMSI, and (iv) the Board
of Directors and officers of PMSI shall use their reasonable efforts to obtain
such stockholders' approval. NDC and PMSI Database shall make all necessary
filings with respect to the Stock Purchase under the Securities Laws.
5.2 Exchange Listing. NDC shall use its reasonable efforts to list, prior to
the Closing Date, on the NYSE, subject to official notice of issuance, the
shares of NDC Common Stock to be issued to PMSI pursuant to the Stock
Purchase, and NDC shall give all notices and make all filings with the NYSE
required in connection with the transactions contemplated herein.
5.3 Applications; Antitrust Notification. NDC shall promptly prepare and
file, and PMSI Database and PMSI shall reasonably cooperate in the preparation
and, where appropriate, filing of, applications with all Regulatory
Authorities having jurisdiction over the transactions contemplated by this
Agreement seeking the requisite Consents necessary to consummate the
transactions contemplated by this Agreement. To the extent required by the HSR
Act, each of the Parties will promptly file with the United States Federal
Trade Commission and the United States Department of Justice the notification
and report form required for the transactions contemplated hereby and any
supplemental or additional information which may reasonably be requested in
connection therewith pursuant to the HSR Act and will comply in all material
respects with the requirements of the HSR Act. The Parties shall deliver to
each other copies of all filings, correspondence and orders to and from all
Regulatory Authorities in connection with the transactions contemplated
hereby.
5.4 Agreement As To Efforts To Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 6; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use,
and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
5.5 Investigation And Confidentiality.
(a) Prior to the Closing Date, NDC on the one hand and PMSI and PMSI
Database on the other hand shall keep each other advised of all material
developments relevant to their business and to consummation of the Stock
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Purchase and shall permit the other to make or cause to be made such
investigation of the business and properties of such and its Subsidiaries and
of their respective financial and legal conditions as the other reasonably
requests, provided that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere unnecessarily with
normal operations.
(b) NDC on the one hand and PMSI and PMSI Database on the other hand shall,
and shall cause its advisers and agents to, maintain the confidentiality of
all confidential information furnished to it by the other concerning its and
its Subsidiaries' businesses, operations, and financial positions except to
the extent such disclosure is required by law and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Closing Date, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other.
(c) NDC on the one hand and PMSI and PMSI Database on the other hand agrees
to give the other notice as soon as practicable after any determination by it
of any fact or occurrence relating to the other which it has discovered
through the course of its investigation and which represents, or is reasonably
likely to represent, either a material breach of any representation, warranty,
covenant or agreement of the other Party or which has had or is reasonably
likely to have a PMSI Database Material Adverse Effect or a NDC Material
Adverse Effect, as applicable.
5.6 Press Releases. Prior to the Closing Date, PMSI Database and NDC shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 5.6
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
5.7 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, PMSI and PMSI Database shall not, and shall
use their best efforts to cause any Affiliate or any Representatives thereof
retained by PMSI or PMSI Database not to, directly or indirectly solicit any
Acquisition Proposal by any Person that relates specifically to the Acquired
Business or the Acquired Assets. Except to the extent the Board of Directors
of PMSI and PMSI Database, after having consulted with and considered the
advice of outside counsel, reasonably determines in good faith that the
failure to take such actions would constitute a breach of fiduciary duties of
the members of such Board of Directors to the stockholders of PMSI under
applicable law, PMSI, PMSI Database, and any Affiliate or Representative
thereof shall not furnish any non-public information that it is not legally
obligated to furnish, negotiate with respect to, or enter into any Contract
with respect to, any such Acquisition Proposal. PMSI and PMSI Database shall
promptly advise NDC following the receipt of any such Acquisition Proposal and
the details thereof, and advise NDC of any developments with respect to such
Acquisition Proposal promptly upon the occurrence thereof. PMSI and PMSI
Database shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its Affiliates and Representatives not to engage in
any of the foregoing.
5.8 Charter Provisions. PMSI Database shall take all necessary action to
ensure that the entering into of this Agreement and the consummation of the
Stock Purchase and the other transactions contemplated hereby do not and will
not, except as set forth herein, result in the grant of any rights to any
Person under the Certificate of Incorporation, Bylaws or other governing
instruments of PMSI Database or restrict or impair the ability of NDC or any
of its Subsidiaries to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of PMSI Database that may be directly or
indirectly acquired or controlled by them.
5.9 Agreement Of Affiliates. PMSI will not sell, pledge, transfer, or
otherwise dispose of the shares of PMSI Database Common Stock held by PMSI
except as contemplated by this Agreement and will not sell, pledge, transfer,
or otherwise dispose of the shares of NDC Common Stock to be received by PMSI
upon consummation of the Stock Purchase except in compliance with applicable
provisions of the 1933 Act and the
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rules and regulations thereunder. NDC shall be entitled to place restrictive
legends upon certificates for shares of NDC Common Stock issued to PMSI
pursuant to this Agreement to enforce the applicable provisions of Law. NDC
shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of NDC Common Stock by
PMSI except as provided in the Registration Rights Agreement. With respect to
the NDC Common Stock to be received by PMSI upon consummation of the Stock
Purchase, NDC will provide PMSI with certain registration rights pursuant to a
registration rights agreement in substantially the form of Exhibit 1 hereto
(the "Registration Rights Agreement").
5.10 Employment Of Employees. On the Closing Date, NDC shall offer
employment to those Employees of the Acquired Business listed on Schedule 2.13
of the PMSI Database Disclosure Memorandum. PMSI agrees to use its
commercially reasonable efforts to assist NDC in hiring such Employees and
will use its commercially reasonable efforts to make such Employees available
to NDC. All such Employees accepting NDC's offer of employment are hereinafter
referred to as the "Hired Employees." Except as otherwise provided herein,
PMSI shall be responsible for the payment of all earned but unpaid salaries,
bonus, vacation pay, sick pay, holiday pay, severance pay and other like
obligations and payments to the Employees for all periods ending on or prior
to the Closing Date. PMSI shall be responsible for the payment of any amounts
due to its Employees (including the Hired Employees) pursuant to the PMSI
Benefit Plans as a result of the employment of its Employees, and, in
determining bonuses and other similar payments due to Hired Employees for any
period ended on or prior to the Closing Date, PMSI shall, if payment thereof
will occur after the Closing Date and the applicable performance period has
been completed prior to the Closing Date, waive any requirement that such
Employees be employees of PMSI on the date such bonuses or other similar
payments are paid. PMSI shall be responsible for all incurred but unreported
or unpaid medical claims occurring prior to the Closing Date and for the cost
associated with any hospital confinement which commences prior to the Closing
Date. NDC shall become responsible for all costs and liabilities attributable
to Hired Employees accruing on and after the Closing Date; provided, however,
that NDC shall not be responsible for (a) liabilities arising under the PMSI
Benefit Plans or (b) liabilities associated with any leaves taken prior to the
Closing Date in connection with the Family and Medical Leave Act of 1993.
Effective on the Closing Date, PMSI shall, and hereby does, release all Hired
Employees from any employment and/or confidentiality agreement previously
entered into between PMSI and such Hired Employees relating to the Acquired
Business to the extent (but only to the extent) necessary for NDC to operate
the Acquired Business in the same manner as operated by PMSI prior to the
Closing Date.
PMSI shall be responsible for complying with the requirements of Section
4980B of the Internal Revenue Code and Part VI of Title I of ERISA for the
Employees (including the Hired Employees, as defined in this Section 5.10) and
their "qualified beneficiaries" whose "qualifying event" (as such terms are
defined in Section 4980B of the Internal Revenue Code) occurs on or prior to
the Closing Date.
5.11 Tax Matters.
(a) PMSI and NDC shall make a timely election under (S) 338(h)(10) of the
Code and (S) 1.338(h)(10)-1 of the Treasury Regulations promulgated pursuant
to the Code, and any corresponding elections under state or local tax law.
PMSI and NDC shall (i) take, and cooperate with each other to take, all
actions necessary and appropriate (including, without limitation, the
preparation, completion and timely joint filing by PMSI and NDC of Form 8023-
A, and the preparation, completion and timely filing of such other forms,
returns, elections, schedules and other documents and instruments) to effect,
perfect and preserve a timely (S) 338(h)(10) election in accordance with
(S) 338(h)(10) of the Code and (S) 1.338(h)(10)-1 of the Treasury Regulations
promulgated pursuant to the Code, and (ii) report the purchase and sale of the
Shares consistent with the election pursuant to (S) 338(h)(10) and shall take
no position contrary thereto or inconsistent therewith in any Tax Return, or
in any discussion with or any proceeding before any taxing authority or other
governmental body or otherwise. In the event an election under (S) 338(h)(10)
is not available under the law of any state or locality but an election can be
made under Section 338(g) of the Code, such election shall be made in such
state or locality and PMSI shall bear the cost of any tax on PMSI Database
related thereto (other than the cost of any state tax for such election in the
following states: Arizona, California, Connecticut, Delaware, Illinois, New
Jersey, New York and Pennsylvania).
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(b) The Purchase Price and all other items that comprise the "modified
aggregate deemed sale price" (as defined in, and required to be allocated
pursuant to, Section 338(h)(10) of the Code) shall be allocated in accordance
with a schedule prepared by NDC and consented to by PMSI, which consent will
not be withheld or delayed unreasonably. Such allocation shall, for tax
purposes, be binding on PMSI Database, PMSI and NDC. PMSI Database, PMSI and
NDC shall file their respective Tax Returns in accordance with such allocation
and shall not take any position inconsistent with such allocation. In the
event that such allocation is disputed by any Tax authority, the party
receiving notice of such dispute shall promptly notify and consult with the
other parties hereto concerning resolution of such dispute and no such dispute
shall be finally settled or compromised without the mutual consent of the
parties, which consent will not be unreasonably withheld.
(c) NDC shall have the sole and exclusive authority to prepare, execute and
file on behalf of PMSI Database (A) the federal income tax returns to be filed
on behalf of PMSI Database for the period ending as of the close of business
on the Closing Date that will include the gain or loss resulting from the
"deemed sale" and "deemed liquidation" that will occur (pursuant to Treasury
Regulation (S) 1.338(h)(10)-1(e)(1) and (2) promulgated under the Code) by
reason of PMSI's and NDC's election pursuant to (S) 338(h)(10) of the Code and
(B) the corresponding state and local income tax returns to be filed on behalf
of PMSI Database for the period ending as of the close of business on the
Closing Date. PMSI, upon written notice of request to NDC, shall have the
right to review and consent to such returns prior to filing, which consent
shall not be unreasonably withheld or delayed.
5.12 Joint Marketing. The parties hereto agree that from the date of this
Agreement each will use its reasonable efforts to negotiate and enter into a
joint marketing arrangement for the purpose of jointly promoting their
respective businesses throughout the world.
ARTICLE 6
Conditions Precedent to Obligations to Consummate
6.1 Conditions To Obligations Of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Stock Purchase and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 9.6:
(A) Stockholder Approval. The stockholders of PMSI shall have adopted
this Agreement and the Source Transfer Agreement, and the consummation of
the transactions contemplated hereby and thereby, including the Stock
Purchase in the manner described in the Proxy Statement. PMSI, as the sole
stockholder of PMSI Database shall have adopted this Agreement and the
consummation of the transactions contemplated hereby.
(B) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the transactions contemplated under this Agreement shall
have been obtained or made and shall be in full force and effect and all
waiting periods required by Law shall have expired. No Consent obtained
from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a
manner (including requirements relating to the raising of additional
capital or the disposition of Assets) which in the reasonable judgment of
the Board of Directors of NDC would so materially adversely impact the
economic or business assumptions of the transactions contemplated by this
Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(C) Consents And Approvals. Each Party shall have obtained any and all
Consents required for consummation of the transactions contemplated under
this Agreement (other than those referred to in Section 6.1(b)), including
those Consents listed in Sections 2.2 and 2.3 of the PMSI Database
Disclosure Memorandum and Section 3.2 of the NDC Disclosure Memorandum or
for the preventing of any Default under any Contract or Permit of such
Party which, if not obtained or made, is reasonably likely to have,
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individually or in the aggregate, a PMSI Database Material Adverse Effect
or a NDC Material Adverse Effect, as applicable. No Consent so obtained
which is necessary to consummate the transactions contemplated hereby shall
be conditioned or restricted in a manner which in the reasonable judgment
of the Board of Directors of NDC would so materially adversely impact the
economic or business assumptions of the transactions contemplated by this
Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(D) Legal Proceedings. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any Law or Order (whether temporary, preliminary or permanent)
or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(E) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under state
securities Laws or the 1933 Act or 1934 Act relating to the issuance,
trading or resale of the shares of NDC Common Stock issuable pursuant to
the Stock Purchase shall have been received.
(F) Exchange Listing. The shares of NDC Common Stock issuable pursuant to
the Stock Purchase shall have been approved for listing on the NYSE,
subject to official notice of issuance.
6.2 Conditions To Obligations Of NDC. The obligations of NDC to perform this
Agreement and consummate the Stock Purchase and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by NDC pursuant to Section 9.6(a):
(A) Representations And Warranties. For purposes of this Section 6.2(a),
the accuracy of the representations and warranties of PMSI Database and
PMSI set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Closing Date with the same effect as though all
such representations and warranties had been made on and as of the Closing
Date (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties set forth in Section 2.4 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties set forth in Sections 2.20 and 2.21 shall be true and correct in
all material respects. There shall not exist inaccuracies in the
representations and warranties of PMSI Database and PMSI set forth in this
Agreement (including the representations and warranties set forth in
Sections 2.4, 2.20 and 2.21) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a PMSI Database Material
Adverse Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(B) Performance Of Agreements And Covenants. Each and all of the
agreements and covenants of PMSI Database and PMSI to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Closing Date shall have been duly
performed and complied with in all material respects.
(C) Certificates. Each of PMSI and PMSI Database shall have delivered to
NDC (i) a certificate, dated as of the Closing Date and signed on its
behalf by its chief executive officer and its chief financial officer, to
the effect that the conditions set forth in Section 6.1 as relates to PMSI
or PMSI Database, respectively, and in Section 6.2(a) and 6.2(b) have been
satisfied, and (ii) certified copies of resolutions duly adopted by each of
PMSI's and PMSI Database's Board of Directors and stockholders evidencing
the taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement by such Party, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as NDC and its counsel shall request.
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(D) Opinion Of Counsel. NDC shall have received an opinion of Willkie
Farr & Gallagher, counsel to PMSI, or the General Counsel of PMSI dated as
of the Closing, in form reasonably satisfactory to NDC, as to the matters
set forth in Exhibit 2.
(E) Noncompetition Agreement. PMSI shall have executed and delivered to
NDC a noncompetition agreement in substantially the form of Exhibit 3 (the
"Noncompetition Agreement").
(F) Source Agreement. All conditions to the closing of the transactions
contemplated under the Source Agreement shall have been satisfied or waived
and the consummation of such transaction shall have occurred concurrently
with the Closing.
(G) Source Transfer Agreement. All conditions to the closing of the
transactions contemplated under the Source Agreement shall have been
satisfied in all materials respects and the consummation of such
transaction shall have occurred concurrently with the Closing.
(H) European Contract Releases. Source shall have been released from any
and all obligations under the European Contracts to the reasonable
satisfaction of NDC.
(I) Consents. PMSI and any of its Subsidiaries which is a party thereto
shall have received the Consent of all third parties to the assignment of,
or the release of PMSI or under, those Contracts listed in Section 6.2(i)
of the NDC Disclosure Memorandum for the transactions contemplated herein.
(J) SLA Letter Agreement. SLA shall have executed and delivered to NDC a
letter agreement substantially in the form of Exhibit 4 hereto.
6.3 Conditions To Obligations Of PMSI Database And PMSI. The obligations of
PMSI Database and PMSI to perform this Agreement and consummate the Stock
Purchase and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by PMSI pursuant to
Section 9.6(b):
(A) Representations And Warranties. For purposes of this Section 6.3(a),
the accuracy of the representations and warranties of NDC set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of NDC set
forth in Sections 3.3, 3.4 and 3.10 shall be true and correct in all
material respects. There shall not exist inaccuracies in the
representations and warranties of NDC set forth in this Agreement
(including the representations and warranties discussed above and set forth
in Sections 3.3, 3.4 and 3.10) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a NDC Material Adverse
Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(B) Performance Of Agreements And Covenants. Each and all of the
agreements and covenants of NDC to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Closing Date shall have been duly performed and complied with in all
material respects.
(C) Certificates. NDC shall have delivered to PMSI (i) a certificate,
dated as of the Closing Date and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 6.1 as relates to NDC and in Section 6.3(a)
and 6.3(b) have been satisfied, and (ii) certified copies of resolutions
duly adopted by NDC's Board of Directors evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as PMSI and its counsel
shall request.
(D) Opinion Of Counsel. PMSI shall have received an opinion of the
General Counsel of NDC or Alston & Bird LLP, counsel to NDC, dated as of
the Closing Date, in form reasonably acceptable to PMSI Database, as to the
matters set forth in Exhibit 5.
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(E) Registration Rights Agreement. NDC shall have executed and delivered
to PMSI the Registration Rights Agreement.
(F) NDC Noncompetition Agreement. NDC shall have executed and delivered
to PMSI a noncompetition agreement substantially in the form of Exhibit 6
hereto.
ARTICLE 7
Indemnification
7.1 Indemnification.
(A) Agreement Of PMSI To Indemnify. Subject to the terms and conditions of
this Article 7, PMSI agrees to indemnify, defend, and hold harmless NDC and
its officers, directors, stockholders, controlling persons, Affiliates and
Representatives, and each of them, from, against, for and in respect of any
and all Losses asserted against, or paid, suffered or incurred by, an
Indemnitee and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of PMSI or PMSI Database contained in or made
pursuant to this Agreement or in any certificate, Schedule, or Exhibit
furnished by PMSI or PMSI Database in connection herewith (except that PMSI
shall not be obligated to indemnify NDC for Losses arising out of the
termination or cancellation of a PMSI Database Contract by a third party
prior to Closing; provided that such termination or cancellation was not
due to any breach of such Contract by PMSI Database or PMSI), and for
purposes of this Section 7.1(a)(i) any qualification of such
representations and warranties by reference to the materiality of matters
stated therein or as to matters having or not having a "Material Adverse
Effect,", and any limitation of such representations and warranties as
being "to the knowledge of," or "known to" or words of similar effect,
shall be disregarded, in determining any inaccuracy, untruth,
incompleteness or breach thereof;
(ii) a breach of or failure to perform any covenant or agreement of PMSI
or PMSI Database made in this Agreement;
(iii) any Retained Liability; and
(iv) the European business of Source, to be acquired by PMSI pursuant to
the Source Transfer Agreement.
(B) Agreement Of NDC To Indemnify. Subject to the terms and conditions of
this Article 7, NDC agrees to indemnify, defend, and hold harmless PMSI and
its officers, directors, stockholders, controlling persons, Affiliates and
Representatives, and each of them, from, against, for and in respect of any
and all Losses asserted against, or paid, suffered or incurred by, an
Indemnitee and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of NDC contained in or made pursuant to this
Agreement or in any certificate, Schedule, or Exhibit furnished by NDC in
connection herewith and for purposes of this Section 7.1(b)(i) any
qualification of such representations and warranties by reference to the
materiality of matters stated therein or as to matters having or not having
a "Material Adverse Effect,", and any limitation of such representations
and warranties as being "to the knowledge of," or "known to" or words of
similar effect, shall be disregarded, in determining any inaccuracy,
untruth, incompleteness or breach thereof;
(ii) a breach of or failure to perform any covenant or agreement of NDC
made in this Agreement;
(iii) any Assumed Liability.
7.2 Procedures For Indemnification. As used herein, the term "Indemnitor"
means the party against whom indemnification hereunder is entitled to be
sought, and the term "Indemnitee" means the party entitled to seek
indemnification hereunder.
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(a) An Indemnification Claim shall be made by an Indemnitee by delivery of a
written notice to the Indemnitor requesting indemnification and specifying the
basis on which indemnification is sought and the amount of asserted Losses
and, in the case of a Third Party Claim, containing (by attachment or
otherwise) such other information as such Indemnitee shall have concerning
such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the procedures
set forth in Section 7.3 shall be observed by the Indemnitee and the
Indemnitor.
(c) If the Indemnification Claim involves a matter other than a Third Party
Claim, the Indemnitor shall have 30 days to object to such Indemnification
Claim by delivery of a written notice of such objection to such Indemnitee
specifying in reasonable detail the basis for such objection. Failure to
timely so object shall constitute a final and binding acceptance of the
Indemnification Claim by the Indemnitor, and the Indemnification Claim shall
be paid in accordance with subsection (d) hereof. If an objection is timely
interposed by the Indemnitor and the dispute is not resolved by such
Indemnitee and the Indemnitor within 15 days from the date the Indemnitee
receives such objection, such dispute shall be resolved by arbitration as
provided in Section 7.9.
(d) Upon determination of the amount of an Indemnification Claim, whether by
agreement between the Indemnitor and the Indemnitee or by an arbitration award
or by any other final adjudication, shall be paid by the Indemnitor within ten
days of the date such amount is determined.
7.3 Third Party Claims. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the
following terms and conditions:
(a) The Indemnitee shall give the Indemnitor written notice of a Third
Party Claim promptly after receipt by the Indemnitee of notice thereof, and
the Indemnitor may undertake the defense, compromise and settlement thereof
by representatives of its own choosing reasonably acceptable to the
Indemnitee. The failure of the Indemnitee to notify the Indemnitor of such
claim shall not relieve the Indemnitor of any liability that it may have
with respect to such claim except to the extent the Indemnitor demonstrates
that the defense of such claim is prejudiced by such failure. The
assumption of the defense, compromise and settlement of any such Third
Party Claim by the Indemnitor shall be an acknowledgment of the obligation
of the Indemnitor to indemnify the Indemnitee with respect to such claim
hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at its sole cost
and expense. If, however, the Indemnitor fails or refuses to undertake the
defense of such Third Party Claim within ten (10) days after written notice
of such claim has been given to the Indemnitor by the Indemnitee, the
Indemnitee shall have the right to undertake the defense, compromise and
settlement of such claim with counsel of its own choosing. In the
circumstances described in the preceding sentence, the Indemnitee shall,
promptly upon its assumption of the defense of such claim, make an
Indemnification Claim as specified in Section 7.2 which shall be deemed an
Indemnification Claim that is not a Third Party Claim for the purposes of
the procedures set forth herein.
(b) If, in the reasonable opinion of the Indemnitee, any Third Party
Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations,
assets, properties or prospects of the Indemnitee (including, without
limitation, the administration of the tax returns and responsibilities
under the tax laws of the Indemnitee), the Indemnitee shall have the right
to control the defense, compromise and settlement of such Third Party Claim
undertaken by the Indemnitor, and the costs and expenses of the Indemnitee
in connection therewith shall be included as part of the indemnification
obligations of the Indemnitor hereunder. If the Indemnitee shall elect to
exercise such right, the Indemnitor shall have the right to participate in,
but not control, the defense, compromise and settlement of such Third Party
Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted liability
of an Indemnitor under this Article shall be made without the prior written
consent by or on behalf of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. Consent shall be presumed in the case of
settlements of $20,000 or less where the Indemnitor has not responded
within five business days of notice of a proposed
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settlement. If the Indemnitor assumes the defense of such a Third Party
Claim, (a) no compromise or settlement thereof may be effected by the
Indemnitor without the Indemnitee's consent unless (i) there is no finding
or admission of any violation of law or any violation of the rights of any
person and no effect on any other claim that may be made against the
Indemnitee, (ii) the sole relief provided is monetary damages that are paid
in full by the Indemnitor, and (iii) the compromise or settlement includes,
as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release, in form and substance
satisfactory to the Indemnitee, from all liability in respect of such Third
Party Claim, and (b) the Indemnitee shall have no liability with respect to
any compromise or settlement thereof effected without its consent.
(d) In connection with the defense, compromise or settlement of any Third
Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may
reasonably be related to any such claim or action, shall provide access to
the counsel, accountants and other representatives of each party during
normal business hours to all properties, personnel, books, tax records,
contracts, commitments and all other business records of such other party
and will furnish to such other party copies of all such documents as may
reasonably be requested (certified, if requested).
7.4 Survival. Subject to Section 7.5, all representations, warranties and
agreements contained in this Agreement or in any certificate delivered
pursuant to this Agreement shall survive the Closing notwithstanding any
investigation conducted with respect thereto or any knowledge acquired as to
the accuracy or inaccuracy of any such representation or warranty.
7.5 Time Limitations. PMSI and PMSI Database, on the one hand, and NDC, on
the other hand, will have no liability to the other party under or in
connection with: (a) a breach of any of the representations, warranties,
covenants or agreements made or to be performed by such party contained in
this Agreement unless written notice asserting an Indemnification Claim based
thereon is given to the other party prior to August 31, 1999; provided,
however, the liability of PMSI relating to, arising out of or based upon
Section 7.1(a)(iii), 7.1(a)(iv) hereof, and the liability of NDC relating to,
arising out of or based upon Section 7.1(b)(iii), may be asserted at any time.
7.6 Limitations As To Amount.
(a) Except as provided in Sections 1.2 and 1.4 herein, neither PMSI nor NDC
shall have any liability with respect to the matters described in clauses
(a)(i) or (a)(ii) with respect to PMSI and (b)(i) and (b)(ii) with respect to
NDC of Section 7.1 until the total of all Losses with respect thereto exceeds
$30,000 (the "Threshold Amount") in which event PMSI or NDC, as the case may
be, shall be obligated to indemnify as provided in this Article 7 for all such
Losses; provided, however, that each individual claim of $10,000 or less shall
not be indemnifiable, and shall not be includable in determining whether the
$30,000 threshold has been reached.
(b) The aggregate liability of PMSI under Sections 7.1(a)(i) and 7.1(a)(ii)
(other than Sections 1.2 and 1.4) and NDC under Sections 7.1(b)(i) and
7.1(b)(ii) (other than Sections 1.2 and 1.4) hereof shall not exceed
$1,000,000 (the "Maximum Amount").
(c) The Threshold Amount and Maximum Amount limitations shall not apply to
the indemnification rights of the parties hereto for any liability under
Sections 1.2, 1.4, 7.1(a)(iii), 7.1(a)(iv) and 7.1(b)(iii) hereof and the
payment of such amounts by PMSI or NDC shall not count toward the calculation
of the Maximum Amount.
7.7 Tax Effect And Insurance. The liability of an Indemnitor with respect to
any Indemnification Claim shall be reduced by the tax benefit actually
realized and any insurance proceeds received by the Indemnitee as a result of
any Losses upon which such Indemnification Claim is based, and shall include
any tax detriment actually suffered by the Indemnitee as a result of such
Losses or the claims hereunder. The amount of any such tax benefit or
detriment shall be determined by taking into account the effect, if any and to
the extent determinable, of timing differences resulting from the acceleration
or deferral of items of gain or loss resulting
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from such Losses and shall otherwise be determined so that payment by the
Indemnitor of the Indemnification Claim, as adjusted to give effect to any
such tax benefit or detriment, will make the Indemnitee as economically whole
as is reasonably practical with respect to the Losses upon which the
Indemnification Claim is based. Any dispute as to the amount of such tax
benefit or detriment shall be resolved by arbitration as provided in this
Section 7.9 of this Agreement.
7.8 Subrogation. Upon payment in full of any Indemnification Claim, whether
such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitor
shall be subrogated to the extent of such payment to the rights of the
Indemnitee against any person or entity with respect to the subject matter of
such Indemnification Claim or Third Party Claim.
7.9 Arbitration. All disputes arising under this Article 10 (other than
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at
issue and selected by PMSI and NDC in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
shall be held in such place in Washington, D.C., as may be specified by the
arbitrator (or any place agreed to by PMSI, NDC and the arbitrator). The
decision of the arbitrator shall be final and binding as to any matters
submitted under this Article 7; provided, however, if necessary, such decision
and satisfaction procedure may be enforced by either PMSI or NDC in any court
of record having jurisdiction over the subject matter or over any of the
parties to this Agreement. All costs and expenses incurred in connection with
any such arbitration proceeding (including reasonable attorneys fees) shall be
borne by the party against which the decision is rendered, or, if no decision
is rendered, such costs and expenses shall be borne equally by the Indemnitor
and the Indemnitee. If the arbitrator's decision is a compromise, the
determination of which party or parties bears the costs and expenses incurred
in connection with any such arbitration proceeding shall be made by the
arbitrator on the basis of the arbitrator's assessment of the relative merits
of the parties' positions.
ARTICLE 8
Termination
8.1 Termination. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the stockholders of PMSI and
PMSI Database, this Agreement may be terminated and the Stock Purchase
abandoned at any time prior to the Closing Date:
(a) By mutual consent of NDC and PMSI ; or
(b) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any representation or warranty contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach and which
breach is reasonably likely, in the opinion of the non-breaching Party, to
have, individually or in the aggregate, a PMSI Database Material Adverse
Effect or a NDC Material Adverse Effect, as applicable, on the breaching
Party; or
(c) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Stock Purchase and
the other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or
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if any action taken by such authority is not appealed within the time limit
for appeal, or (ii) the stockholders of PMSI or PMSI Database fail to vote
their approval of the matters relating to this Agreement and the Source
Transfer Agreement and the transactions contemplated hereby and thereby at
the Stockholders' Meeting where such matters were presented to such
stockholders for approval and voted upon in accordance with the procedure
set forth in the Proxy Statement; or
(e) By either Party in the event that the Stock Purchase shall not have
been consummated by January 31, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by the Party electing to terminate pursuant to
this Section 8.1(e); or
(f) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Stock Purchase cannot be satisfied or fulfilled by the date specified in
Section 8.1(e); or
(g) By NDC, in the event that the Board of Directors of PMSI or PMSI
Database shall have failed to reaffirm their approval of the Stock Purchase
and the transactions contemplated by this Agreement (to the exclusion of
any other Acquisition Proposal), or shall have resolved not to reaffirm the
Stock Purchase, or shall have affirmed, recommended or authorized entering
into any other Acquisition Proposal or other transaction involving a Stock
Purchase, share exchange, consolidation or transfer of substantially all of
the Acquired Assets; or
(h) By PMSI if the Average Closing Price on the Determination Date of
shares of NDC Common Stock shall be less than the Lower Threshold Price;
subject, however, to the following three sentences. If PMSI elects to
refuse to consummate the Stock Purchase pursuant to this Section 8.1(h), it
shall give written notice thereof to NDC not later than two trading days
following the Determination Date. During the five-day period commencing
with its receipt of such notice, NDC shall have the option, in its sole
discretion, to elect to revise the Base Amount to equal that number of
shares of NDC Common Stock (rounded to the nearest whole share) obtained by
dividing the product of the Base Amount and the Lower Threshold Price by
the Average Closing Price. If NDC makes an election contemplated by the
preceding sentence, within such five-day period, it shall give prompt
written notice to PMSI of such election and the revised Base Amount,
whereupon the condition to consummation provided in this Section 8.1(h)
shall be deemed to be satisfied and this Agreement shall remain in effect
in accordance with its terms (except as the Base Amount shall have been so
modified), and any references in this Agreement to "Base Amount" shall
thereafter be deemed to refer to the Base Amount as adjusted pursuant to
this Section 8.1(h).
8.2 Effect Of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 8.1, this Agreement shall become void
and have no effect, except that (i) the provisions of this Section 8.2 and
Article 9 and Section 5.5(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 8.1(b), 8.1(c) or
8.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving
rise to such termination.
ARTICLE 9
Miscellaneous
9.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
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"ACCOUNTS RECEIVABLE" shall mean all accounts, notes and other
receivables.
"ACCRUED BONUSES" shall mean the amount equal to that percentage of
budgeted annual bonuses which shall equal the ratio of the earnings of the
Joint Venture Interest through the Closing Date to budgeted earnings for
the full fiscal year. All budgeted amounts used herein to be as set forth
in Schedule 4.2(b) of the Source Disclosure Memorandum.
"ACQUIRED BUSINESS" shall mean the business and assets related to the
Over-the-Counter Business and the Research Solutions Group.
"ACQUISITION PROPOSAL" with respect to (x) PMSI Database, shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of
all of the stock or assets of, or other business combination involving the
acquisition of PMSI Database or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, PMSI Database and
(y) PMSI, shall mean any proposal for an acquisition of the Acquired Assets
or the Joint Venture Interest.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person or; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person.
"AGREEMENT" shall mean this Stock Purchase Agreement, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"AMENDED AND RESTATED ALPHA DATABASE LICENSE AGREEMENT" shall mean that
certain Amended and Restated Alpha Database License Agreement dated as of
July 1, 1994 by and among Walsh International Holdings Limited and Walsh
America Limited and PMSI and all customer, data provider and service
contracts, agreements or understandings relating thereto.
"ASSETS" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of
such Person or any Affiliate of such Person and wherever located.
"ASSUMED LIABILITIES" means (a) the liabilities of PMSI Database of the
type and in the amounts included in the Closing Balance Sheet and set forth
in Section 2.6 and 2.7 of the PMSI Database Disclosure Memorandum, (b) the
obligations arising after the Closing Date under the Acquired Contracts and
(c) the liabilities arising after and resulting from events following the
Closing Date with respect to the Acquired Business, the Acquired Assets and
the Joint Venture Interests.
"AVERAGE CLOSING PRICE" shall mean the average of the daily closing sales
prices of NDC Common Stock as reported on the NYSE Composite Transactions
reporting system (as reported by The Wall Street Journal or, if not
reported thereby, another authoritative source as chosen by NDC) for the
ten consecutive full trading days in which such shares are traded on the
NYSE ending at the close of trading on the Determination Date.
"CLOSING BALANCE SHEET" shall mean the balance sheet for PMSI Database as
of the Closing Date delivered by NDC to PMSI.
"CLOSING DATE" shall mean a date on which the parties mutually agree.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
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"CONTRIBUTION" shall mean the contribution of the Acquired Assets and the
Joint Venture Interest by PMSI and its Subsidiaries to PMSI Database as
contemplated herein.
"DEFAULT" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit,
(ii) any occurrence of any event that with the passage of time or the
giving of notice or both would constitute a breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right of any
Person to exercise any remedy or obtain any relief under, terminate or
revoke, suspend, cancel, or modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to
increase or impose any Liability under, any Contract, Law, Order, or
Permit, where, in any such event, such Default is reasonably likely to
have, individually or in the aggregate, a PMSI Database Material Adverse
Effect or a NDC Material Adverse Effect, as applicable.
"DETERMINATION DATE" shall mean the close of trading on the tenth trading
day immediately preceding the Closing Date.
"DGCL" shall mean the Delaware General Corporation Law.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares of
the capital stock of a Person or by which a Person is or may be bound to
issue additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EUROPEAN CONTRACTS" shall mean all material Contracts relating to the
European Business of Source to which a Source Entity is a party, or under
which a Source Entity has obligations contingent or otherwise.
"EXHIBITS" 1 through 6, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title II
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"INDEMNIFICATION CLAIM" shall mean a claim for indemnification under
Article 7.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefore,
technology rights and licenses, computer software (including any source or
object codes therefore or documentation relating thereto), trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"JOINT VENTURE INTEREST" means all right, title and interest of PMSI in
the Amended and Restated Alphabase Data License Agreement.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known after due inquiry by the
chairman, president, chief financial officer, chief accounting officer,
chief operating officer, general counsel, any assistant or deputy general
counsel, or any senior, executive or other vice president or general
manager of such Person and the knowledge of any such persons obtained or
which would have been obtained from a reasonable investigation.
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"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to
it), or the transactions contemplated by this Agreement.
"LOSSES" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including
special and consequential damages), liabilities, costs, and expenses,
including interest, penalties, cost of investigation and defense, and
reasonable attorneys' and other professional fees and expenses.
"MATERIAL" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the Nasdaq National Market, a
district tier of The Nasdaq Stock Market operated by The Nasdaq Stock
Market, Inc., a wholly-owned subsidiary of the National Association of
Securities Dealers Automated Quotations System.
"NDC CAPITAL STOCK" shall mean, collectively, the NDC Common Stock, the
NDC Preferred Stock and any other class or series of capital stock of NDC.
"NDC COMMON STOCK" shall mean the $0.125 par value common stock of NDC.
"NDC DISCLOSURE MEMORANDUM" shall mean the written information entitled
"NDC Corporation Disclosure Memorandum" delivered prior to the date of this
Agreement to PMSI Database describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made unless such disclosure is reasonably adequate to
inform the other party that each matter disclosed would be responsive to
another section of disclosure in the Disclosure Memorandum.
"NDC ENTITIES" shall mean, collectively, NDC and its Subsidiaries.
"NDC FINANCIAL STATEMENTS" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of NDC as of February 28,
1997, and as of May 31, 1996 and 1995, and the related statements of
income, changes in stockholders' equity, and cash flows (including related
notes and schedules, if any) for the nine months ended February 28, 1997,
and for each of the three fiscal years ended May 31, 1996, 1995 and 1994,
as filed by NDC in SEC Documents, and (ii) the consolidated balance sheets
of NDC (including related notes and schedules, if any) and related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) included in the SEC
Documents filed with respect to periods ended subsequent to February 28,
1997.
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"NDC MATERIAL ADVERSE EFFECT" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence,
has a material adverse impact on (i) the financial position, business, or
results of operations of NDC and its Subsidiaries, taken as a whole, or
(ii) the ability of NDC to perform its obligations under this Agreement or
to consummate the Stock Purchase or the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed
to include the impact of (a) actions and omissions of NDC (or any of its
Subsidiaries) taken with the prior informed written Consent of PMSI in
contemplation of the transactions contemplated hereby, and (b) the direct
effects of compliance with this Agreement on the operating performance of
NDC, including expenses incurred by NDC in consummating the transactions
contemplated by this Agreement.
"NDC PREFERRED STOCK" shall mean the $1.00 par value preferred stock of
NDC.
"NDC RIGHTS" shall mean the preferred stock purchase rights issued
pursuant to the NDC Rights Agreement.
"NDC RIGHTS AGREEMENT" shall mean that certain Rights Agreement, dated
January 18, 1991, between NDC and Wachovia Bank of North Carolina, N.A., as
Rights Agent.
"NDC SUBSIDIARIES" shall mean the Subsidiaries of NDC and any corporation
or other organization acquired as a Subsidiary of NDC in the future and
held as a Subsidiary by NDC at the Closing Date.
"NYSE" shall mean the New York Stock Exchange, Inc.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"OTC BALANCE SHEET" shall mean the balance sheet of the Acquired Business
as of March 31, 1997.
"OTC FINANCIAL STATEMENTS" shall mean the OTC Balance Sheet (including
related notes and schedules, if any), and the related statement of income
(including related notes and schedules, if any) with respect to period
ended March 31, 1997.
"OTHER ASSETS" shall mean all goods or assets of any kind or nature,
tangible or intangible, other than Personal Property, Contracts, Accounts
Receivable, Intellectual Property and Permits.
"OVER-THE-COUNTER BUSINESS" shall mean the business currently operated by
PMSI or any of its Subsidiaries relating to the development, use or
exploitation of over-the-counter medicine databases.
"PARTY" shall mean either PMSI, PMSI Database or NDC, and "PARTIES" shall
mean all of PMSI, PMSI Database and NDC.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may
be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PERSONAL PROPERTY" shall mean equipment, tools, computers, terminals,
point of sale terminals, computer equipment, office equipment, furniture,
business machines, telephones and telephone systems, parts, accessories and
other items of personal property.
"PMSI" shall mean PMSI, Inc., a Delaware corporation.
"PMSI BENEFIT PLAN" shall include any pension, retirement, profit-
sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, any other written
employee program, arrangement or agreement, any medical, vision, dental or
other health plan, any
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life insurance plan, and any other employee benefit plan or fringe benefit
plan, including any "employee benefit plan" as that term is defined in
Section 3(3) of ERISA, which is or, within the 6 years preceding the
Closing Date, has been adopted, maintained, sponsored in whole or in part
by or contributed to by PMSI Database or PMSI for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors or other
beneficiaries.
"PMSI DATABASE BALANCE SHEET" shall mean the balance sheet of the
Acquired Business and the Joint Venture Interest dated March 31, 1997.
"PMSI DATABASE COMMON STOCK" shall mean the $0.01 par value common stock
of PMSI Database.
"PMSI DATABASE DISCLOSURE MEMORANDUM" shall mean the written information
entitled "PMSI Database Disclosure Memorandum" delivered prior to the date
of this Agreement to NDC describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made unless such disclosure is reasonably adequate to
inform the other party that each matter disclosed would be responsive to
another section of disclosure in the Disclosure Memorandum.
"PMSI DATABASE FINANCIAL STATEMENTS" shall mean the PMSI Database Balance
Sheet (including related notes and schedules, if any) and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) with respect to period
ended March 31, 1997.
"PMSI DATABASE MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of PMSI Database and its Subsidiaries,
taken as a whole, or (ii) the ability of PMSI Database to perform its
obligations under this Agreement or to consummate the Stock Purchase or the
other transactions contemplated by this Agreement, provided that "Material
Adverse Effect" shall not be deemed to include the impact of (a) actions
and omissions of PMSI Database (or any of its Subsidiaries) taken with the
prior informed written Consent of NDC in contemplation of the transactions
contemplated hereby, and (b) the direct effects of compliance with this
Agreement on the operating performance of PMSI Database, including expenses
incurred by PMSI Database in consummating the transactions contemplated by
this Agreement.
"PMSI ENTITY" shall mean PMSI and its Subsidiaries.
"PRIME RATE" shall mean the rate of interest per annum publicly announced
from time to time in the Wall Street Journal.
"PROXY STATEMENT" shall mean the proxy statement used by PMSI to solicit
the approval of its stockholders of the transactions contemplated by this
Agreement and the Source Transfer Agreement.
"PURCHASE PRICE" shall mean the total consideration to be paid to PMSI by
NDC for the purchase of the PMSI Database Common Stock pursuant to Section
1.1 of this Agreement as adjusted pursuant to Sections 1.2 and 1.4 hereof.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-
4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by NDC under the 1933
Act with respect to the shares of NDC Common Stock to be issued to the
stockholders of PMSI Database in connection with the transactions
contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the NYSE, the
NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other governmental
or regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, commissions, boards or bodies having
jurisdiction over the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a
Person.
A-36
<PAGE>
"RETAINED LIABILITY" shall mean all Liabilities and obligations of PMSI
or its Affiliates whether known or unknown, absolute, contingent, or
otherwise, and whether or not related to the Acquired Business, the
Acquired Assets, and the Joint Venture Interest other than Assumed
Liabilities, including but not limited to (i) any Liability or obligation
arising or accruing under any Contract, including the Amended and Restated
Alpha Database License Agreement, prior to the Closing Date and any
Liability or obligation arising from or related to any breach or violation
by PMSI or its Affiliates under any provision of any Contract prior to the
Closing Date; (ii) any Liability of PMSI with respect to any claim or cause
of action, regardless of when made or asserted, which arises out of or in
connection with the operation of the Acquired Business by PMSI or PMSI
Database prior to the Closing Date; and (iii) any Liability of PMSI for the
payment of Taxes relating to the Acquired Business, the Joint Venture
Interest or the Acquired Assets relating to periods prior to the Closing
Date except to the extent reflected in the Closing Balance Sheet and
Schedules.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SLA" shall mean PMSI Scott-Levin, Inc., a New Jersey corporation.
"SOURCE ENTITY" shall mean Source and its Subsidiaries other than the
Source Divestiture Subsidiaries.
"SOURCE DIVESTITURE SUBSIDIARIES" shall mean the European Subsidiaries of
Source which are to be sold to PMSI under the Source Transfer Agreement.
"SOURCE TRANSFER AGREEMENT" means that certain Securities Transfer
Agreement, dated as of the date hereof, between Source and PMSI.
"STOCKHOLDERS' MEETING" shall mean the meeting of the stockholders of
PMSI to be held pursuant to Section 5.1, including any adjournment or
adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
PMSI (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii)
in the case of partnerships, serves as the sole general partner or the
managing general partner, (iii) in the case of a limited liability company,
serves as the sole managing member, or (iv) otherwise has the ability to
elect a majority of the directors, trustees or managing members (or Persons
performing similar functions) thereof.
"TAX RETURN" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary
group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposes or required to be withheld by the United States or any
state, county, local or foreign government or subdivision or agency
thereof, including any interest, penalties, and additions imposed thereon
or with respect thereto.
A-37
<PAGE>
"THIRD PARTY CLAIM" shall mean any Litigation (including, without
limitation, a binding arbitration or an audit by any taxing authority) that
is instituted against an Indemnitee by a Person other than an Indemnitor
and which, if prosecuted successfully, would result in a Loss for which
such Indemnitee is entitled to indemnification hereunder.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Base Amount...................................................... Section 1.1
Cash Amount...................................................... Section 1.1(a)
Closing.......................................................... Section 1.6
Closing Balance Sheet............................................ Section 1.3(a)
Closing Current Assets........................................... Section 1.3(a)
Closing Current Liabilities...................................... Section 1.3(a)
Closing Working Capital.......................................... Section 1.3(a)
Current Asset Allocation Amount.................................. Section 1.4(c)
Current Assets................................................... Section 1.2(a)
Current Liabilities.............................................. Section 1.2(a)
Disputed Amounts................................................. Section 1.3(c)
Divestiture...................................................... Section 4.1(e)
Employees........................................................ Section 2.13
Estimated Current Assets......................................... Section 1.2(a)
Estimated Current Liabilities.................................... Section 1.2(a)
Estimated Working Capital........................................ Section 1.2(a)
Estimated Working Capital Adjustment............................. Section 1.2(c)
ERISA Affiliate.................................................. Section 2.14
European Business................................................ Section 4.1(e)
European Contracts............................................... Section 2.15
Exchange Agent................................................... Section 4.1
Final Current Assets............................................. Section 1.4(a)
Final Current Liabilities........................................ Section 1.4(a)
Final Working Capital............................................ Section 1.4(a)
Final Working Capital Deficit.................................... Section 1.4(a)
Final Working Capital Surplus.................................... Section 1.4(a)
Hired Employees.................................................. Section 5.11
Indemnitee....................................................... Section 7.2
Indemnitor....................................................... Section 7.2
Lower Threshold Price............................................ Section 1.1(b)
Maximum Amount................................................... Section 7.6
NDC SEC Reports.................................................. Section 3.4(a)
Noncompetition Agreement......................................... Section 6.2(g)
PMSI Database Contracts.......................................... Section 2.15
Preliminary Balance Sheet........................................ Section 1.2(a)
Registration Rights Agreement.................................... Section 5.10
Shares........................................................... Preamble
Stock Purchase................................................... Section 1.1
Source........................................................... Preamble
Source Agreement................................................. Preamble
Threshold Amount................................................. Section 7.6
Threshold Prices................................................. Section 1.1(b)
Total Combined Assets............................................ Section 1.4(b)
Total Current Assets............................................. Section 1.4(b)
Total Current Liabilities........................................ Section 1.4(b)
</TABLE>
A-38
<PAGE>
<TABLE>
<S> <C>
Total Working Capital Deficit.................................... Section 1.4(b)
Total Working Capital Surplus.................................... Section 1.4(b)
Upper Threshold Price............................................ Section 1.1(b)
Working Capital.................................................. Section 1.2
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
9.2 Expenses.
(a) Except as otherwise provided in this Section 9.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that each of NDC and PMSIs shall bear and pay
one-half of the filing fees payable in connection with the HSR Act.
(b) Notwithstanding the foregoing, if this Agreement is terminated by NDC
pursuant to Section 8.1(d)(ii) (as relates to approval of PMSI or PMSI's
stockholders), then PMSI Database shall promptly pay NDC all the out-of-pocket
costs and expenses of NDC relating to this Agreement and the Source Agreement
not to exceed $750,000, including costs of counsel, investment bankers,
actuaries and accountants.
(c) Nothing contained in this Section 9.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
9.3 Brokers And Finders. Except For Cowen & Company As To Pmsi Database and
PMSI and except for Lazard Freres & Co. LLC as to NDC, each of the Parties
represents and warrants that neither it nor any of its officers, directors,
employees, or Affiliates has employed any broker or finder or incurred any
Liability for any financial advisory fees, investment bankers' fees, brokerage
fees, commissions, or finders' fees in connection with this Agreement or the
transactions contemplated hereby. In the event of a claim by any broker or
finder based upon his or its representing or being retained by or allegedly
representing or being retained by PMSI Database or PMSI or by NDC, each of
PMSI Database and PMSI and NDC, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
9.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied, is intended to confer upon any Person, other
than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than
as provided in Article 7 with respect to Indemnitees. This agreement does not
constitute an agreement between the parties nor shall it be used as evidence
of such agreement until this agreement has been executed by the parties.
9.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after stockholder approval
of this Agreement has been obtained; provided, that after any such approval
there shall be made no amendment that pursuant to Section 251 of the DGCL
requires further approval by such stockholders without the further approval of
such stockholders.
9.6 Waivers.
(a) Prior to or at the Closing Date, NDC, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this
A-39
<PAGE>
Agreement by PMSI Database or PMSI, to waive or extend the time for the
compliance or fulfillment by PMSI Database or PMSI of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of NDC under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized
officer of NDC.
(b) Prior to or at the Closing Date, PMSI, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
NDC, to waive or extend the time for the compliance or fulfillment by NDC of
any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of PMSI Database and the PMSI
under this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective unless
in writing signed by a duly authorized officer of PMSI.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
9.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
9.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid,
or by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:
PMSI Database or PMSI: Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
9th Floor
New York, New York 10111
Telecopy Number: (212) 841-5760
Attention: Warren Hauser, Esq.
Copy to Counsel: Willkie Farr & Gallagher
45th Floor, Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopy Number: (212) 821-8111
Attention: William Grant, Esq.
NDC: National Data Corporation
One National Data Plaza Atlanta, Georgia 30329
Telecopy Number: (404) 728-2990
Attention: E. Michael Ingram, Esq.
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: B. Harvey Hill, Jr., Esq.
A-40
<PAGE>
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
9.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
9.11 Captions; Articles And Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this
Agreement.
9.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. No party to this Agreement shall
be considered the draftsman. The parties acknowledge and agree that this
Agreement has been reviewed, negotiated, and accepted by all parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
9.13 Enforcement Of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
9.14 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
A-41
<PAGE>
In Witness Whereof, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
NATIONAL DATA CORPORATION
By: /s/ E. Michael Ingram
--------------------------------------
Name: E. Michael Ingram
Title: Senior Vice President
PMSI DATABASE HOLDINGS, INC.
By: /s/ Fred Kyle
--------------------------------------
Name: Fred Kyle
Title: Vice Chairman
PHARMACEUTICAL MARKETING SERVICES INC.
By: /s/ Fred Kyle
--------------------------------------
Name: Fred Kyle
Title: Vice Chairman
A-42
<PAGE>
ANNEX B
FINANCIAL STATEMENTS
OF
PMSI DATABASE HOLDINGS, INC.
B-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PMSI DATABASE HOLDINGS, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.................................. B-3
FINANCIAL STATEMENTS
Balance Sheets as of June 30, 1997 (Audited) and 1996 (Unaudited)....... B-4
Statements of Operations for the Years Ended June 30, 1997 (Audited),
1996 (Unaudited), and 1995 (Unaudited)................................. B-5
Statements of Stockholder's Equity for the Years Ended June 30, 1997
(Audited), 1996 (Unaudited), and 1995 (Unaudited)...................... B-6
Statements of Cash Flows for the Years Ended June 30, 1997 (Audited),
1996 (Unaudited), and 1995 (Unaudited)................................. B-7
NOTES TO FINANCIAL STATEMENTS............................................. B-8
</TABLE>
B-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PMSI Database Holdings, Inc.:
We have audited the accompanying balance sheet of PMSI DATABASE HOLDINGS,
INC. as of June 30, 1997 and the related statements of operations,
stockholder's equity, and cash flows for the year then ended. These financial
statements are the responsibility of PMSI Database Holdings, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PMSI Database Holdings,
Inc. as of June 30, 1997 and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
September 5, 1997
B-3
<PAGE>
PMSI DATABASE HOLDINGS, INC.
BALANCE SHEETS
JUNE 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................ $ 1,343 $ 169
Accounts receivable, less allowance for doubtful accounts
of $82 and $86 in 1997 and 1996, respectfully........... 6,784 5,805
Deferred data costs...................................... 887 252
Prepaid expenses......................................... 46 43
Deferred tax asset....................................... 306 360
Due from Scott Levin..................................... 1,409 297
Due from Source.......................................... 0 377
------- ------
Total current assets................................... 10,775 7,303
PROPERTY AND EQUIPMENT, NET................................ 3,428 858
OTHER ASSETS............................................... 6 52
------- ------
Total assets........................................... $14,209 $8,213
======= ======
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable......................................... $ 766 $ 359
Accrued liabilities...................................... 1,127 1,183
Unearned revenue......................................... 4,302 4,193
Current portion of capital lease obligations............. 298 7
Due to Parent............................................ 671 146
Due to Source............................................ 604 0
------- ------
Total current liabilities.............................. 7,768 5,888
LONG-TERM LIABILITIES:
Capital lease obligations................................ 513 0
Deferred tax liability................................... 263 189
------- ------
Total liabilities...................................... 8,544 6,077
======= ======
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 1,000 shares authorized,
100 shares issued and outstanding....................... 0 0
Retained earnings........................................ 5,665 2,136
------- ------
Total stockholder's equity............................. 5,665 2,136
------- ------
Total liabilities and stockholder's equity............. $14,209 $8,213
======= ======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
B-4
<PAGE>
PMSI DATABASE HOLDINGS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES............................................. $25,009 $19,801 $18,010
------- ------- -------
OPERATING EXPENSES:
Production costs................................... 6,494 5,639 4,778
Selling, general, and administrative............... 12,062 10,934 9,345
Depreciation and amortization...................... 535 203 94
------- ------- -------
Total operating expenses......................... 19,091 16,776 14,217
------- ------- -------
OPERATING INCOME..................................... 5,918 3,025 3,793
------- ------- -------
OTHER INCOME (EXPENSE):
Interest income.................................... 91 107 118
Interest expense................................... (42) (10) 0
Other.............................................. (105) (141) (5)
------- ------- -------
(56) (44) 113
NET INCOME BEFORE INCOME TAX......................... 5,862 2,981 3,906
INCOME TAX PROVISION................................. 2,333 1,192 1,562
------- ------- -------
NET INCOME........................................... $ 3,529 $ 1,789 $ 2,344
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
B-5
<PAGE>
PMSI DATABASE HOLDINGS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- -------
<S> <C> <C> <C> <C>
BALANCE, JUNE 30, 1994 (UNAUDITED)............. 100 $ 0 $ 3,403 $ 3,403
Net income................................... 0 0 2,344 2,344
Dividends paid to Parent..................... 0 0 (3,500) (3,500)
--- --- ------- -------
BALANCE, JUNE 30, 1995 (UNAUDITED)............. 100 0 2,247 2,247
Net income................................... 0 0 1,789 1,789
Dividends paid to Parent..................... 0 0 (1,900) (1,900)
--- --- ------- -------
BALANCE, JUNE 30, 1996 (UNAUDITED)............. 100 0 2,136 2,136
Net income................................... 0 0 3,529 3,529
--- --- ------- -------
BALANCE, JUNE 30, 1997......................... 100 $ 0 $ 5,665 $ 5,665
=== === ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
B-6
<PAGE>
PMSI DATABASE HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $3,529 $1,789 $2,344
------ ------ ------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization........................ 535 203 94
Deferred income tax expense.......................... 128 78 94
Changes in operating assets and liabilities:
Accounts receivable................................. (979) (2,257) 1,568
Deferred data costs................................. (635) 31 238
Prepaid expenses.................................... (3) (43) 100
Due from (to) Parent................................ 525 (3,790) 3,593
Due from (to) Source................................ 981 671 6
Due to Scott Levin.................................. 1,112) (143) (154)
Accounts payable.................................... 407 (263) 59
Accrued liabilities................................. (56) 704 (613)
Unearned revenue.................................... 109 2,922 1,469)
Other............................................... 46 (1) (44)
------ ------ ------
Total adjustments.................................. (54) 1,888) 3,472
------ ------ ------
Net cash provided by (used in) operating
activities........................................ 3,475 (99) 5,816
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................. (2,345) (749) (124)
Proceeds from sale of fixed assets.................... 44 4 2
------ ------ ------
Net cash used in investing activities.............. (2,301) (745) (122)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on capital leases................... 0 (24) (20)
Dividend to Parent.................................... 0 (1,900) (3,500)
------ ------ ------
Net cash used in financing activities.............. 0 (1,924) (3,520)
------ ------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... 1,174 (2,768) 2,174
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR........... 169 2,937 763
------ ------ ------
CASH AND CASH EQUIVALENTS, END OF YEAR................. $1,343 $ 169 $2,937
====== ====== ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the year................ $ 42 $ 10 $ 0
====== ====== ======
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Assets purchased under capital leases................. $ 804 $ 0 $ 0
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
B-7
<PAGE>
PMSI DATABASE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (AUDITED), 1996 (UNAUDITED), AND 1995 (UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS
Pharmaceutical Marketing Services, Inc. ("PMSI" or the "Parent") provides a
range of information services to the pharmaceutical and health care companies
in the United States, Europe, and Japan to enable them to optimize their sales
and marketing performance in a value-driven environment. On June 24, 1997,
PMSI formed PMSI Database Holdings, Inc. ("PMSI Database"), a wholly owned
subsidiary, to hold PMSI's interests in both the Alpha Database License
Agreement (Note 3) and its over-the-counter and research solutions lines of
business. The financial statements and related footnotes contained herein
reflect the operations related to the Alpha Database License agreement and the
over-the-counter and research solutions lines of business and have been
restated as if the formation of PMSI Database was accounted for as a pooling
of interest. As discussed in Note 9, PMSI and PMSI Database entered into a
stock purchase agreement with National Data Corporation ("NDC") in August
1997.
PMSI Database provides a range of data services, primarily based on a
proprietary database of prescriptions dispensed, which are used by
pharmaceutical companies in sales force compensation, territory realignment,
and focused promotion.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation
The balance sheet as of June 30, 1996 and the related statements of
operations, stockholder's equity, and cash flows for the two years ended June
30, 1996 are unaudited and, in the opinion of management, contain all
adjustments (consisting of only normal recurring items) necessary for the fair
presentation of the financial position and results of operations for such
periods.
Use Of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash And Cash Equivalents
PMSI Database considers all highly liquid investments with maturity dates of
three months or less from the date of acquisition by PMSI Database to be cash
equivalents.
Revenue Recognition
Revenue is recognized on the delivery of a product or as the service is
rendered. Prebillings for products that have not yet been delivered or for
services not yet rendered are classified as unearned revenue until the
earnings process is complete.
Credit Risk
Financial instruments which potentially subject PMSI Database to
concentrations of credit risk consist principally of cash balances and trade
receivables. PMSI Database invests its excess cash with major banks. PMSI
Database's customer base principally comprises companies within the
pharmaceutical industry. PMSI
B-8
<PAGE>
PMSI DATABASE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 (AUDITED), 1996 (UNAUDITED), AND 1995 (UNAUDITED)
Database maintains reserves for potential credit losses, and such losses have
been within management's expectations, given the generally strong credit
ratings of the customers. PMSI Database does not require collateral from its
customers.
Property And Equipment
Property and equipment are recorded at cost. All maintenance and repairs are
expensed as incurred. Depreciation is provided using the straight-line method.
Furniture, office equipment, and computer equipment are depreciated over five
years. Leasehold improvements are amortized over the estimated lives of the
assets or the lease terms, whichever are shorter.
Upon disposal, cost and accumulated depreciation are removed from the
accounts and gains (losses) are recognized in the statement of operations.
Databases And Software Costs
Costs associated with maintenance and updating of databases and all costs
associated with internally developed software are expensed as incurred.
Deferred Data Costs
Deferred data costs consist of costs incurred by PMSI Database to obtain
prescription data information used in PMSI Database's products. PMSI Database
purchases data monthly and delivers products based on this information in the
following month. In order to match the cost of these products with the
associated revenue, PMSI Database defers approximately one month's cost of
prescription data.
Income Taxes
The income tax returns of PMSI include the operations of PMSI Database. For
purposes of these financial statements, income taxes related to PMSI Database
have been computed and recorded on a separate return basis based on the
statutory rates in effect.
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for items when there is a temporary difference in recording such
items for financial reporting and income tax reporting.
Long-Lived Assets
PMSI Database periodically reviews the values assigned to long-lived assets
such as property and equipment to determine whether any impairments are other
than temporary. Management believes that the long-lived assets in the
accompanying balance sheets are appropriately valued.
Advertising Expense
PMSI Database expenses all advertising costs as they are incurred.
Concentration Of Revenues
PMSI Database derived approximately 32%, 36%, and 32% of its revenues from
two customers during fiscal 1997, 1996, and 1995, respectively. PMSI
Database's revenues consist primarily of those earned under the Alpha Database
License Agreement (Note 3).
B-9
<PAGE>
PMSI DATABASE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 (AUDITED), 1996 (UNAUDITED), AND 1995 (UNAUDITED)
3. RELATED-PARTY TRANSACTIONS
Transactions With Source
PMSI Database has a licensing agreement with the Source Informatics, Inc.
("Source"), a company that shares certain common management with PMSI, to
market certain services. Additionally, Source provides certain services to
PMSI Database. The principal agreements and terms are as follows:
Alpha (Prescription) Database License Agreement
The Alpha Database License Agreement, as amended and restated July 1, 1994,
grants PMSI the sharing of revenue and expenses with Source for a period of
three years through June 30, 1997. Thereafter, the agreement will be
automatically renewed for three additional five-year periods unless PMSI
Database or Source, for cause, terminates the agreement. The database license
fee amounts paid by PMSI Database were approximately $3,126,000, $3,094,000,
and $2,663,000 for the years ended June 30, 1997, 1996, and 1995,
respectively. Revenues earned under these agreements are allocated to both
parties based upon historical percentages of revenue derived from Alpha
Database.
Data Processing Agreement
Source provides specific data processing services to PMSI Database. Costs
charged to PMSI Database totaled approximately $711,000, $1,191,000, and
$1,883,000 for the years ended June 30, 1997, 1996, and 1995, respectively.
Facilities Agreement
PMSI Database sublets space to and from Source for facilities in Newtown,
Pennsylvania, and Phoenix, Arizona, respectively. The revenues associated with
the sublet agreement were approximately $222,000, $136,000, and $91,000 for
the years ended June 30, 1997, 1996, and 1995, respectively, and the expenses
associated with the Phoenix facilities were approximately $367,000, $492,000,
and $259,000 for the years ended June 30, 1997, 1996, and 1995, respectively.
Management And Executive Services Agreement
Source provides administrative, management, and executive services to PMSI
Database. The amounts charged under this agreement were approximately
$1,384,000, $2,240,000, and $1,299,000 for the years ended June 30, 1997,
1996, and 1995, respectively.
Transactions With Walsh America
PMSI Database provides facilities and computer services to Walsh America, a
company which, until the spinoff by Walsh International of Source in April
1996, had certain common management personnel with PMSI Database. The costs
charged by PMSI Database for these services were approximately $88,000,
$38,000, and $36,000 for the years ended June 30, 1997, 1996, and 1995,
respectively, and were treated as a reduction of the related expenses.
Transactions With Scott Levin
PMSI Database provides certain processed data to PMSI Scott Levin, Inc.
("Scott Levin"), a subsidiary of PMSI. Payment for services is required within
45 days of the invoice date. Amounts earned by PMSI Database for these
services were approximately $670,000, $504,000, and $0 for the years ended
June 30, 1997, 1996, and 1995, respectively. Amounts due for these services
are included in Due from Scott Levin in the accompanying balance sheets.
B-10
<PAGE>
PMSI DATABASE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 (AUDITED), 1996 (UNAUDITED), AND 1995 (UNAUDITED)
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ -----------
(UNAUDITED)
<S> <C> <C>
Assets under capital lease............................ $ 803 $ 82
Furniture and office equipment........................ 43 46
Computer equipment.................................... 3,482 1,114
Leasehold improvements................................ 48 48
------ ------
4,376 1,290
Less accumulated depreciation and amortization........ (948) (432)
------ ------
$3,428 $ 858
====== ======
</TABLE>
5. ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ -----------
(UNAUDITED)
<S> <C> <C>
Bonuses................................................ $ 371 $ 668
Accrued vacation....................................... 167 174
Other liabilities...................................... 589 341
------ ------
$1,127 $1,183
====== ======
</TABLE>
6. INCOME TAX
The provision for income tax includes the following:
<TABLE>
<CAPTION>
1997 1995 1996
------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Current tax expense.................................. $2,205 $1,114 $1,468
Deferred tax expense................................. 128 78 94
------ ------ ------
Total.............................................. $2,333 $1,192 $1,562
====== ====== ======
</TABLE>
Deferred tax assets (liabilities) at June 30, 1997 and 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996
----- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax liabilities............................... $(263) $(189)
Deferred tax assets:
Allowance for doubtful accounts...................... 33 34
Accrued expenses..................................... 266 319
Other................................................ 7 7
----- -----
Deferred tax assets.................................... 306 360
----- -----
Net deferred tax asset................................. $ 43 $ 171
===== =====
</TABLE>
B-11
<PAGE>
PMSI DATABASE HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1997 (AUDITED), 1996 (UNAUDITED), AND 1995 (UNAUDITED)
A reconciliation of federal statutory and effective income tax rates is as
follows as of June 30, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ----- -----
(UNAUDITED)
<S> <C> <C> <C>
U.S. statutory rate.................................. 34% 34% 34%
State taxes, net of federal benefit.................. 6 6 6
--- ----- -----
Provision for income taxes......................... 40% 40% 40%
=== ===== =====
</TABLE>
7. EMPLOYEE BENEFIT PLANS
PMSI Database operates a defined contribution profit-sharing plan. The
employer's contribution is a discretionary amount to match employee
contributions. The total cost associated with these plans for the years ended
June 30, 1997, 1996, and 1995 were approximately $65,000, $56,000, and
$15,000, respectively.
8. COMMITMENTS AND CONTINGENCIES
Leases
PMSI Database leases certain equipment and facilities under agreements which
are classified as capital leases and operating leases.
Obligations under long-term and noncancelable lease agreements at June 30,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998.................................................... $330 $189
1999.................................................... 290 197
2000.................................................... 248 81
2001.................................................... 0 0
Thereafter.............................................. 0 0
---- ----
Total minimum lease payments.......................... 868 $467
====
Less amount representing interest....................... (57)
Present value of minimum lease payment.................. 811
Less current portion.................................... 298)
----
$513
====
</TABLE>
Rent expense for the years ended June 30, 1997, 1996, and 1995 was
approximately $200,000, $201,000, and $215,000, respectively.
LEGAL PROCEEDINGS
PMSI Database is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
outcome of any pending matters will not have a material adverse effect on the
results of operations or financial position of PMSI Database operations.
9. SUBSEQUENT EVENT
In August 1997, PMSI Database entered into a stock purchase agreement with
NDC to sell the stock of PMSI Database to NDC, subject to PMSI stockholder
approval, in exchange for a combination of cash and NDC common stock. The
transaction is expected to close in November 1997.
B-12
<PAGE>
ANNEX C
PRO FORMA FINANCIAL DATA
C-1
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table sets forth selected pro forma condensed consolidated
financial information as of August 31, 1997 and for the year ended May 31,
1997 and the three months ended August 31, 1997, giving effect to the Merger
and the consummation of the Stock Purchase using the purchase method of
accounting. The pro forma condensed consolidated financial information
represents the historical operations of NDC, Source and PMSI Database adjusted
for the effects of the Stock Purchase and the Merger as well as the effects of
the acquisition of Health EDI completed in October 1997. This information has
also been adjusted to conform to the presentation format and accounting policy
of NDC. For comparability purposes, Source and PMSI Database's twelve months
ended June 30, 1997 and three months ended June 30, 1997 are used in
conjunction with the NDC twelve months ended May 31, 1997 and three months
ended August 31, 1997.
C-2
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PMSI
NDC SOURCE DATABASE PRO FORMA PRO FORMA
ASSETS HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------ ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equiva-
lents.................. $ 18,224 $ 2,108 $ 1,343 $ (1,343)(a) $ 7,108
(13,224)(b)
Accounts receivable, net
of allowance........... 81,484 11,426 6,784 0 99,694
Other current assets.... 12,367 2,982 2,648 (1,409)(c) 16,588
-------- -------- ------- -------- --------
Total current
assets............. 112,075 16,516 10,775 (15,976) 123,390
PROPERTY, PLANT, AND
EQUIPMENT, NET......... 50,829 10,761 3,428 0 65,018
INTANGIBLE ASSETS, NET.. 352,102 0 0 73,816 (d) 425,918
OTHER................... 14,397 364 6 0 14,767
-------- -------- ------- -------- --------
Total assets........ $529,403 $ 27,641 $14,209 $ 57,840 $629,093
======== ======== ======= ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
<S> <C> <C> <C> <C> <C>
Accounts payable and ac-
crued liabilities...... $ 49,768 $ 10,613 $ 2,497 $ (1,812)(c) $ 61,066
Due to Parent........... 0 38,904 671 (39,575)(c) 0
Line of credit payable.. 0 0 0 29,026 (b) 29,026
Notes and earn-out pay-
able................... 298 96 0 0 394
Income taxes payable.... 6,904 0 0 0 6,904
Obligations under capi-
tal leases............. 2,484 4,533 298 0 7,315
Deferred income......... 6,090 11,056 4,302 0 21,448
-------- -------- ------- -------- --------
Total current
liabilities........ 65,544 65,202 7,768 (12,361) 126,153
Long-Term Debt.......... 150,048 0 0 0 150,048
Obligations under capi-
tal leases............. 2,890 5,510 513 0 8,913
Other long-term liabili-
ties................... 3,469 1,980 263 0 5,712
-------- -------- ------- -------- --------
Total liabilities... 221,951 72,692 8,544 (12,361) 290,826
MINORITY INTEREST....... 20,540 0 0 0 20,540
Common and preferred
stock................ 3,329 0 0 327 (e) 3,656
Additional paid-in
capital.............. 183,813 0 0 97,488 (e) 281,301
Retained earnings
(accumulated
deficit)............. 101,759 (45,051) 5,665 (67,000)(d) 34,759
39,386 (f)
Equity adjustments.... (1,989) 0 0 0 (1,989)
-------- -------- ------- -------- --------
Total stockholder's eq-
uity................... 286,912 (45,051) 5,665 70,201 317,727
-------- -------- ------- -------- --------
Total liabilities
and stockholders'
equity............. $529,403 $ 27,641 $14,209 $ 57,840 $629,093
======== ======== ======= ======== ========
</TABLE>
- --------
Adjustments:
(a) Reflects the PMSI Database cash, after the effects of settling all
intercompany and affiliate accounts in (c), that is not being acquired by
NDC under the terms of the Merger and Stock Purchase Agreements.
(b) Reflects borrowings on NDC's line of credit to fund the cash portion of
the purchase price ($38.25 million) and the payment of estimated
acquisition costs of $4 million less the portion paid out of operating
cash of $13.2 million.
(c) Reflects the repayment and/or forgiveness of all intercompany and
affiliate accounts.
(d) Reflects the excess of the purchase price over the net assets
(liabilities) acquired in the acquisitions, net of a projected non-
recurring charge based on preliminary results of a valuation study of
approximately $67 million ($60.6 million after-tax) related to purchased
in-process research and development. The purchase price equals $92 million
and $48 million for Source and PMSI Database, respectively, based on
1,555,556 shares for Source and 1,059,829 shares for PMSI Database at
$37.40 stock price plus $31.8 million and $6.5 million of cash for Source
and PMSI Database, respectively, and $4 million in acquisition related
expenses. Approximately $5.5 million in net liabilities are assumed
acquired in the purchase of Source. Approximately $4.7 million of assets
are assumed to be acquired in the purchase of PMSI Database. The
intangibles and the related lives based on the preliminary results of the
valuation study are as follows:
<TABLE>
<S> <C> <C>
Product technology $17.3 million 5 years
Assembled work force 3.0 7
Customer relations/Goodwill 53.5 20
</TABLE>
(e) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC stock to Source and PMSI Database, respectively,
under the terms of the Stock Purchase Agreement.
(f) Reflects the elimination of Source and PMSI Database's historical equity
balances.
C-3
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MAY 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
EQUIFAX
HEALTH EDI
FOUR MONTHS
PMSI ENDED
NDC SOURCE DATABASE SEPTEMBER 30, PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL 1996 ADJUSTMENTS (A) CONSOLIDATED (A)
---------- ---------- ---------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................ $433,860 59,885 25,009 $4,851 $ 0 $523,605
COST OF SERVICE......... 207,754 20,005 7,029 2,218 6,564 (b) 243,570
SALES, GENERAL AND
ADMINISTRATIVE......... 159,450 33,200 12,062 2,262 206,974
-------- ------ ------ ------ ------- --------
367,204 53,205 19,091 4,480 6,564 450,544
-------- ------ ------ ------ ------- --------
OPERATING INCOME........ 66,656 6,680 5,918 371 (6,564) 73,061
OTHER INCOME (EXPENSE):
Interest and other
income............... 2,403 780 91 0 (688)(c) 2,586
Interest and other
expense.............. (6,814) (981) (147) 0 (1,191)(d) (9,133)
Minority interest..... (1,694) 0 0 0 0 (1,694)
-------- ------ ------ ------ ------- --------
Total other income
(expense)............ (6,105) (201) (56) 0 (1,879) (8,241)
-------- ------ ------ ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE IN-
COME TAXES............. 60,551 6,479 5,862 371 (8,443) 64,820
PROVISION FOR INCOME
TAXES.................. (21,798) -- (2,333) (141) 1,562 (e) (22,710)
-------- ------ ------ ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS............. $ 38,753 6,479 3,529 $ 230 $(6,881) $ 42,110
-------- ------ ------ ------ ------- --------
FULLY DILUTED WEIGHTED
AVERAGE NUMBER OF COM-
MON AND COMMON EQUIVA-
LENT SHARES OUTSTAND-
ING.................... 28,039 0 0 0 2,615 (f) 30,654
INCOME FROM CONTINUING
OPERATIONS PER SHARE... $ 1.38 $ 1.37
</TABLE>
- --------
Adjustments (in thousands):
(a) Excludes the impact of the non-recurring charge related to purchased in-
process research and development costs of $67.0 million, or $(2.19) per
share.
(b) Reflects the additional amortization of intangibles resulting from the
Stock Purchase and Merger. See note (d) to the pro forma balance sheet for
further discussion.
(c) Represents reduction in interest income using the Company's weighted
average rate (5.2%) from reduced funds available for investment as a
result of cash used in association with the acquisition. See Note (b) to
the pro forma balance sheet for further discussion.
(d) Represents additional interest expense on the borrowings on NDC's line of
credit using NDC's weighted average interest rate of 5.75% for fiscal
1997, offset by the elimination of interest on Source and PMSI
intercompany borrowing of approximately $.5 million.
(e) Reflects the income tax effects of the pro forma adjustments above.
(f) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC stock to Source and PMSI Database, respectively,
under the terms of the Stock Purchase Agreement.
C-4
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED AUGUST 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PMSI
NDC SOURCE DATABASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS (A) CONSOLIDATED (A)
---------- ---------- ---------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
REVENUES................ $120,102 $17,366 $7,756 $ 0 $145,224
COST OF SERVICE......... 58,970 4,251 2,218 1,641 (b) 67,080
SALES, GENERAL AND
ADMINISTRATIVE......... 41,499 11,038 3,849 0 56,386
-------- ------- ------ ------- --------
100,469 15,289 6,067 1,641 123,466
-------- ------- ------ ------- --------
OPERATING INCOME........ 19,633 2,077 1,689 (1,641) 21,758
OTHER INCOME (EXPENSE):
Interest and other
income............... 485 218 0 (172)(c) 531
Interest and other
expense.............. (2,314) (354) (14) (292)(d) (2,974)
Minority interest..... (701) 0 0 0 (701)
-------- ------- ------ ------- --------
Total other income
(expense).......... (2,530) (137) (14) (464) (3,145)
-------- ------- ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE IN-
COME TAXES............. 17,103 1,940 1,675 (2,105) 18,613
PROVISION FOR INCOME
TAXES.................. (6,499) 0 (670) 338 (e) (6,781)
-------- ------- ------ ------- --------
INCOME FROM CONTINUING
OPERATIONS............. $ 10,604 $ 1,940 $1,005 $(1,717) $ 11,832
-------- ------- ------ ------- --------
FULLY DILUTED WEIGHTED
AVERAGE NUMBER OF COM-
MON AND COMMON EQUIVA-
LENT SHARES OUTSTAND-
ING.................... 28,201 0 0 2,615 (f) 30,816
INCOME FROM CONTINUING
OPERATIONS PER SHARE... $ 0.38 $ 0.38
</TABLE>
- --------
Adjustments
(a) Excludes the impact of the non-recurring charge related to purchased in-
process research and development costs of $67.0 million or $(2.17) per
share.
(b) Reflects the additional amortization of intangibles resulting from the
Stock Purchase and Merger. See note (d) to the pro forma balance sheet for
further discussion.
(c) Represents reduction in interest income using the Company's weighted
average rate (5.2%) from reduced funds available for investment as a
result of cash used in association with the acquisition. See Note (b) to
the pro forma balance sheet for further discussion.
(d) Represents additional interest expense on the borrowings on NDC's line of
credit using an estimated interest rate of 5.75% for the quarter ended
August 1997, offset by the elimination of interest on Source and PMSI
intercompany borrowing of approximately $.1 million.
(e) Reflects the income tax effects of the pro forma adjustments above.
(f) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC stock to Source and PMSI Database, respectively,
under the terms of the Stock Purchase Agreement.
C-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Bylaws provide for indemnification of directors and
officers of the Registrant to the full extent permitted by Delaware law.
Section 145 of the General Corporation Law of the State of Delaware provides
generally that a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at its request in
such capacity in another corporation or business association, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
In addition, pursuant to the authority of Delaware law, the Certificate of
Incorporation of the Registrant also eliminates the monetary liability of
directors to the fullest extent permitted by Delaware law. Although the
Certificate of Incorporation of the Registrant does not specifically address
indemnification of directors for liabilities arising under federal securities
laws, indemnification and any limitations on indemnification for such
liabilities would be determined based upon the authority of Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 Stock Purchase Agreement, dated as of August 20, 1997, by and among
NDC, PMSI and PMSI Database) Pursuant to the regulations (the
"Regulations") under the Securities Act of 1933, as amended, the
Registrant has omitted all schedules and similar attachments to the
Stock Purchase Agreement. The Registrant agrees to furnish upon the
request of the Commission and in accordance with the Regulations,
copies of all such schedules and similar attachments.
3.1 Certificate of Incorporation, as amended (included as Exhibit 4(a) to
the Registrant's Registration Statement on Form S-8 (Registration No.
333-05427), previously filed with the Commission and incorporated by
reference herein)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant, dated October 28, 1996 (filed as Exhibit 3.1 to the
Registrant's Current Report on Form 8-K dated October 29, 1996, file
No. 001-12392, and incorporated herein by reference).
3.3 Amended Certificate of Designations of the Registrant, dated October
28, 1996 (filed as Exhibit 3.2 to the Registrant's Current Report on
Form 8-K dated October 29, 1996, file No. 001- 12392, and incorporated
herein by reference).
3.4 Bylaws, as amended (included as Exhibit 3(ii) to the Registrant's Form
10-K for the fiscal year ended May 31, 1991, previously filed with the
Commission and incorporated by reference herein)
3.5 Amendment to Bylaws (included as Exhibit 3(iii) to the Registrant's
Form 10-K for the fiscal year ended May 31, 1996, previously filed
with the Commission and incorporated by reference herein)
4.1 See Exhibits 3.1 through 3.5 for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining rights of holders
of Common Stock of the Registrant
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.2 Rights Agreement (included as Exhibit 1 to the Registrant's Form 8-A
filed with the Commission on January 22, 1991, as amended on October
5, 1993 (file No. 001-12392) and incorporated by reference herein)
5.1 Opinion of Alston & Bird LLP
11.1 Statement regarding computation of per share earnings (included as
Exhibit 11 to the Registrant's Form 10-Q for the fiscal quarter ended
August 31, 1997, previously filed with the Commission and incorporated
by reference herein)
21.1 Subsidiaries of the Registrant (included as Exhibit 21 to the
Registrant's Form 10-K for the fiscal year ended May 31, 1997,
previously filed with the Commission and incorporated by reference
herein)
23.1 Consent of Alston & Bird LLP (included in Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
24.1* Powers of Attorney (included on signature page hereof)
</TABLE>
- --------
* Previously filed.
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the Registrant's Certificate of Incorporation or
Bylaws, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment for the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on October 27, 1997.
NATIONAL DATA CORPORATION
/s/ Robert A. Yellowlees
By:__________________________________
Robert A. Yellowlees
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 27, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Robert A. Yellowlees Chairman of the Board and Chief
____________________________________ Executive Officer (principal
Robert A. Yellowlees executive officer)
/s/ M.P. Stevenson Chief Financial Officer (principal
____________________________________ financial and accounting officer)
M.P. Stevenson
/s/ Edward L. Barlow* Director
____________________________________
Edward L. Barlow
/s/ J. Veronica Biggins* Director
____________________________________
J. Veronica Biggins
/s/ James B. Edwards* Director
____________________________________
James B. Edwards
/s/ Don W. Sands* Director
____________________________________
Don W. Sands
/s/ Neil Williams* Director
____________________________________
Neil Williams
</TABLE>
- --------
* Signed by E. Michael Ingram as attorney-in-fact for such person.
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S> <C>
2.1 Stock Purchase Agreement, dated as of August 20, 1997, by and
among NDC, PMSI and PMSI Database). Pursuant to the regulations
(the "Regulations") under the Securities Act of 1933, as
amended, the Registrant has omitted all schedules and similar
attachments to the Stock Purchase Agreement. The Registrant
agrees to furnish upon the request of the Commission and in
accordance with the Regulations, copies of all such schedules
and similar attachments.
3.1 Certificate of Incorporation, as amended (included as Exhibit
4(a) to the Registrant's Registration Statement on Form S-8
(Registration No. 333-05427), previously filed with the
Commission and incorporated by reference herein)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant, dated October 28, 1996 (filed as Exhibit 3.1 to the
Registrant's Current Report on Form 8-K dated October 29, 1996,
file No. 001-12392, and incorporated herein by reference)
3.3 Amended Certificate of Designations of the Registrant, dated
October 28, 1996 (filed as Exhibit 3.2 to the Registrant's
Current Report on Form 8-K dated October 29, 1996, file No. 001-
12392, and incorporated herein by reference)
3.4 Bylaws, as amended (included as Exhibit 3(ii) to the
Registrant's Form 10-K for the fiscal year ended May 31, 1991,
previously filed with the Commission and incorporated by
reference herein)
3.5 Amendment to Bylaws (included as Exhibit 3(iii) to the
Registrant's Form 10-K for the fiscal year ended May 31, 1996,
previously filed with the Commission and incorporated by
reference herein)
4.1 See Exhibits 3.1 through 3.5 for provisions of the Certificate
of Incorporation and Bylaws of the Registrant defining rights of
holders of Common Stock of the Registrant
4.2 Rights Agreement (included as Exhibit 1 to the Registrant's Form
8-A filed with the Commission on January 22, 1991, as amended on
October 5, 1993 (file No. 001-12392) and incorporated by
reference herein)
5.1 Opinion of Alston & Bird LLP
11.1 Statement regarding computation of per share earnings (included
as Exhibit 11 to the Registrant's Form 10-Q for the fiscal
quarter ended August 31, 1997, previously filed with the
Commission and incorporated by reference herein)
21.1 Subsidiaries of the Registrant (included as Exhibit 21 to the
Registrant's Form 10-K for the fiscal year ended May 31, 1997,
previously filed with the Commission and incorporated by
reference herein)
23.1 Consent of Alston & Bird LLP (included in Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
24.1* Powers of Attorney (included on signature page hereof)
</TABLE>
- --------
* Previously filed.
<PAGE>
EXHIBIT 2
EXECUTION VERSION
STOCK PURCHASE AGREEMENT
BY AND AMONG
NATIONAL DATA CORPORATION,
PMSI DATABASE HOLDINGS, INC.
AND
PHARMACEUTICAL MARKETING SERVICES INC.,
THE SOLE STOCKHOLDER OF PMSI DATABASE HOLDINGS, INC.
Dated as of August 20, 1997
<PAGE>
TABLE OF CONTENTS
Page
CONTENTS ----
PARTIES................................................................... 1
PREAMBLE.................................................................. 1
ARTICLE 1 - PURCHASE AND SALE............................................. 1
1.1 Purchase and Sale........................................... 1
1.2 Preliminary Balance Sheet................................... 2
1.3 Closing Balance Sheet....................................... 3
1.4 Adjustment of Purchase Price................................ 4
1.5 Anti-Dilution Provisions.................................... 6
1.6 Time and Place of Closing................................... 6
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF PMSI DATABASE AND PMSI...... 6
2.1 Organization, Standing, and Power........................... 6
2.2 Authority of PMSI Database; No Breach By Agreement.......... 7
2.3 Authority of PMSI; No Breach By Agreement................... 7
2.4 Capital Stock............................................... 8
2.5 PMSI Database Subsidiaries.................................. 9
2.6 Financial Statements........................................ 9
2.7 Absence of Undisclosed Liabilities.......................... 9
2.8 Absence of Certain Changes or Events........................ 9
2.9 Tax Matters................................................. 9
2.10 Assets...................................................... 10
2.11 Intellectual Property....................................... 11
2.12 Compliance with Laws........................................ 12
2.13 Labor Relations............................................. 12
2.14 Employees and Employee Benefit Plans........................ 13
2.15 Material Contracts.......................................... 13
2.16 Real Property; Leased Real Property......................... 14
2.17 Personal Property........................................... 14
2.18 Legal Proceedings........................................... 15
2.19 Statements True and Correct................................. 15
2.20 Regulatory Matters.......................................... 15
2.21 Charter Provisions.......................................... 15
2.22 Opinion of Financial Advisor................................ 16
2.23 Board Recommendation........................................ 16
2.24 Joint Venture Interest...................................... 16
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF NDC......................... 16
3.1 Organization, Standing, and Power........................... 16
3.2 Authority; No Breach By Agreement........................... 16
3.3 Capital Stock............................................... 17
3.4 SEC Filings; Financial Statements........................... 18
-i-
<PAGE>
3.5 Absence of Undisclosed Liabilities.......................... 18
3.6 Absence of Certain Changes or Events........................ 18
3.7 Compliance with Laws........................................ 18
3.8 Legal Proceedings........................................... 19
3.9 Statements True and Correct................................. 19
3.10 Regulatory Matters.......................................... 20
3.11 Rights Agreement............................................ 20
ARTICLE 4 - CONDUCT OF BUSINESS PENDING CONSUMMATION...................... 20
4.1 Affirmative Covenants of PMSI Database and PMSI............. 20
4.2 Negative Covenants of PMSI Database and PMSI................ 22
4.3 Covenants of NDC............................................ 24
4.4 Adverse Changes in Condition................................ 25
4.5 Reports..................................................... 25
ARTICLE 5 - ADDITIONAL AGREEMENTS......................................... 25
5.1 Registration Statement; PMSI Approval....................... 25
5.2 Exchange Listing............................................ 26
5.3 Applications; Antitrust Notification........................ 26
5.4 Agreement as to Efforts to Consummate....................... 26
5.5 Investigation and Confidentiality........................... 26
5.6 Press Releases.............................................. 27
5.7 Certain Actions............................................. 27
5.8 Charter Provisions.......................................... 28
5.9 Agreement of Affiliates..................................... 28
5.10 Employment of Employees..................................... 28
5.11 Tax Matters................................................. 29
5.12 Joint Marketing............................................. 30
ARTICLE 6 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE............. 30
6.1 Conditions to Obligations of Each Party..................... 30
6.2 Conditions to Obligations of NDC............................ 31
6.3 Conditions to Obligations of PMSI Database and PMSI......... 33
ARTICLE 7 - INDEMNIFICATION............................................... 34
7.1 Indemnification............................................. 34
7.2 Procedures for Indemnification.............................. 35
7.3 Third Party Claims.......................................... 35
7.4 Survival.................................................... 37
7.5 Time Limitations............................................ 37
7.6 Limitations as to Amount.................................... 37
7.7 Tax Effect and Insurance.................................... 37
7.8 Subrogation................................................. 38
7.9 Arbitration................................................. 38
ARTICLE 8 - TERMINATION................................................... 38
8.1 Termination................................................. 38
8.2 Effect of Termination....................................... 40
-ii-
<PAGE>
ARTICLE 9 - MISCELLANEOUS................................................. 40
9.1 Definitions................................................. 40
9.2 Expenses.................................................... 50
9.3 Brokers and Finders......................................... 51
9.4 Entire Agreement............................................ 51
9.5 Amendments.................................................. 51
9.6 Waivers..................................................... 52
9.7 Assignment.................................................. 52
9.8 Notices..................................................... 52
9.9 Governing Law............................................... 53
9.10 Counterparts................................................ 53
9.11 Captions; Articles and Sections............................. 53
9.12 Interpretations............................................. 54
9.13 Enforcement of Agreement.................................... 54
9.14 Severability................................................ 54
SIGNATURES................................................................ 55
-iii-
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit Number Description
- -------------- -----------
1. Form of Registration Rights Agreement.
2. Matters as to which Willkie Farr & Gallagher will opine.
3. Form of Noncompetition Agreement.
4. Form of SLA Letter Agreement.
5. Matters as to which counsel to NDC will opine.
6. Form of NDC Noncompetition Agreement.
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August 20, 1997, by and among NATIONAL DATA CORPORATION ("NDC"), a
Delaware corporation; PMSI DATABASE HOLDINGS, INC. ("PMSI Database"), a Delaware
corporation; and PHARMACEUTICAL MARKETING SERVICES INC., a Delaware corporation
and the sole stockholder of PMSI Database ("PMSI").
Preamble
--------
The respective Boards of Directors of PMSI Database, PMSI and NDC are of
the opinion that the transactions described herein are in the best interests of
the parties to this Agreement and their respective stockholders. PMSI is the
record and beneficial owner of all of the issued and outstanding shares of PMSI
Database Common Stock (the "Shares"). PMSI desires to sell all of the Shares to
NDC, and NDC desires to purchase the Shares from PMSI, upon the terms and
subject to the conditions set forth in this Agreement. The transactions
described in this Agreement are subject to the approvals of the stockholders of
PMSI and PMSI Database, expiration of the required waiting period under the HSR
Act, the consummation of the Agreement and Plan of Merger dated as of even date
herewith by and among Source Informatics Inc. ("Source"), Dunkirk, Inc. and NDC
(the "Source Agreement"), the consummation of the Source Transfer Agreement and
the satisfaction of certain other conditions described in this Agreement.
Certain terms used in this Agreement are defined in Section 9.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale. Upon the terms and subject to the conditions of
-----------------
this Agreement, PMSI shall sell to NDC, and NDC shall purchase from PMSI, the
Shares at the Closing (the "Stock Purchase"). The aggregate purchase price for
the Shares is equal to (i) the Cash Amount and (ii)1,059,829 shares of NDC
Common Stock (the "Base Amount");
(a) At the Closing Date, the "Cash Amount" shall be equal to $6,500,000
less the adjustment, if any, made pursuant to Section 1.2(c) hereof.
(b) In the event that the Average Closing Price at the close of trading
on the tenth trading day immediately preceding the Closing Date (the
"Determination Date") shall be greater than $50.50 (the "Upper Threshold
Price"), the Base Amount shall be adjusted to equal that
<PAGE>
number of shares of NDC Common Stock (rounded to the nearest whole share)
obtained by dividing the product of the Base Amount and the Upper Threshold
Price by the Average Closing Price as of the Determination Date; provided
further, that, in the event that the Average Closing Price on the Determination
Date shall be less than $37.25 (the "Lower Threshold Price" and, together with
the Upper Threshold Price, the "Threshold Prices"), the Base Amount may, at the
sole discretion of NDC, and in accordance with the provisions of Section 8.1(h),
be adjusted to equal that number of shares of NDC Common Stock (rounded to the
nearest whole share) obtained by dividing the product of the Base Amount and the
Lower Threshold Price by the Average Closing Price as of the Determination Date.
(c) Pursuant to the NDC Rights Agreement, each share of NDC Common Stock
issued in connection with the Stock Purchase shall be accompanied by a NDC
Right.
1.2 Preliminary Balance Sheet.
-------------------------
(a) PMSI will cause to be prepared and delivered to NDC a balance
sheet for PMSI Database as of the most recent month ending more than ten days
prior to the Closing Date (the "Preliminary Balance Sheet") and a certificate
based on such Preliminary Balance Sheet setting forth PMSI's calculation of
Working Capital, Current Assets and Current Liabilities as of such date
("Estimated Working Capital," "Estimated Current Assets" and "Estimated Current
Liabilities", respectively). The Preliminary Balance Sheet shall (v) include
only the assets, liabilities and stockholders' equity of the Acquired Business
and the Joint Venture Interest, (x) fairly present the financial position of
PMSI Database as at the close of business on such date in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the balance sheet of PMSI Database dated March
31, 1997 (the "PMSI Database Balance Sheet") previously delivered to NDC, (y)
include no material increase in long-term indebtedness and include line items
substantially consistent with those in the PMSI Database Balance Sheet, and (z)
subject to the provisions of clause (x) above, be prepared in accordance with
accounting policies and practices consistent with those used in the preparation
of the PMSI Database Balance Sheet. As used herein, "Working Capital" shall
mean the amount equal to Current Assets less Current Liabilities; "Current
Assets" shall mean the amount equal to the sum of cash, accounts receivable (net
of any reserves), inventories, prepaid expenses and work-in-process and any
other assets classified as current assets under GAAP; and "Current Liabilities"
shall mean the amount equal to the sum of accounts payable, accrued current
liabilities of PMSI Database (other than the current portion of capitalized
lease obligations), accrued sales commissions (but only as to revenues realized
and included in the PMSI Database statements of income prior to such date),
Accrued Bonuses, accrued vacation pay, current portion of long-term indebtedness
and pre-billed revenues and any other liabilities classified as current
liabilities under GAAP.
(b) NDC shall have five (5) business days from the receipt of the
Preliminary Balance Sheet and the calculation of Estimated Working Capital,
Estimated Current Assets and Estimated Current Liabilities delivered pursuant to
Section 1.2(a) to review such statement and calculations and following such
review such shall be final and binding upon the parties hereto.
- 2 -
<PAGE>
(c) If Estimated Current Assets are less than the product of 1.1659
times Estimated Current Liabilities (the amount of such difference referred to
as, the "Estimated Working Capital Adjustment") as of the date of the
Preliminary Balance Sheet, the Cash Amount payable by NDC pursuant to Section
1.1 shall be decreased by the Estimated Working Capital Adjustment.
1.3 Closing Balance Sheet.
---------------------
(a) As promptly as practicable, but not later than 30 days after the
Closing Date, NDC will cause to be prepared and delivered to PMSI a balance
sheet for PMSI Database as of the Closing Date (the "Closing Balance Sheet")
setting forth NDC's calculation of Working Capital, Current Assets and Current
Liabilities as of the Closing Date (the "Closing Working Capital," "Closing
Current Assets" and "Closing Current Liabilities," respectively). The Closing
Balance Sheet shall (v) include only the assets, liabilities and stockholders'
equity of the Acquired Business and the Joint Venture Interest (x) fairly
present the financial position of PMSI Database as at the close of business on
the Closing Date in accordance with generally accepted accounting principles
applied on a basis consistent with those used in the preparation of the PMSI
Database Balance Sheet, (y) include no material increase in long-term
indebtedness and include line items substantially consistent with those in the
PMSI Database Balance Sheet, and (z) subject to the provisions of clause (x)
above, be prepared in accordance with accounting policies and practices
consistent with those used in the preparation of the PMSI Database Balance
Sheet.
(b) The Closing Balance Sheet and the calculation of Closing Working
Capital, Closing Current Assets and Closing Current Liabilities delivered
pursuant to Section 1.3(a) shall be deemed final upon the earliest of (i) the
date on which NDC and PMSI jointly agree that such documents are final, (ii) the
30th day after delivery of such documents pursuant to Section 1.3(a), if PMSI
has not delivered a notice to NDC expressing disagreement with such calculations
and setting forth its calculation of such amount(s), and (iii) the date on which
all disputes relating to such statements and calculations between the parties
are resolved in accordance with Section 1.3(c). If PMSI delivers a notice of
disagreement pursuant to this Section 1.3(b) it shall specify those items or
amounts as to which it disagrees, and it shall be deemed to have agreed with all
other items and amounts contained in the Closing Balance Sheet and the
calculation of Closing Working Capital delivered pursuant to Section 1.3(a)
(except to the extent resolution of the items or amounts to which it expresses
disagreement requires conforming changes to other items and amounts contained in
the Closing Balance Sheet or the calculation of Closing Working Capital).
(c) If PMSI shall deliver a notice of disagreement pursuant to
Section 1.3(b), PMSI and NDC shall, during the 30 days following such delivery,
use their reasonable efforts to reach agreement on the disputed items or amounts
(the "Disputed Amounts"). If, during such period, PMSI and NDC are unable to
reach such agreement, they shall promptly thereafter cause Price Waterhouse LLP
(or if said firm shall have a conflict due to a relationship with NDC, PMSI, or
any of their respective Subsidiaries or shall be unwilling to act thereunder,
such other independent accountants of nationally recognized standing reasonably
satisfactory to NDC and PMSI who shall not have any material relationship with
NDC or PMSI), promptly to review this Agreement, the documents delivered
pursuant to Section 1.3(a) and any other documents
- 3 -
<PAGE>
necessary to calculate the Disputed Amounts (including all work papers of the
parties used in calculating the Disputed Amounts). In making such calculation,
such independent accountants shall act as experts and not arbitrators and shall
consider only the Disputed Amounts, solely in accordance with the terms of this
Agreement. Such independent accountants shall deliver to PMSI and NDC, as
promptly as practicable, a report setting forth such calculation. Such report
shall be final and binding upon PMSI and NDC. The cost of such review and report
shall be borne (i) by PMSI if the difference between Closing Working Capital
shown in the independent accountant's calculation and PMSI's calculation of
Closing Working Capital delivered pursuant to Section 1.3(b) is greater than the
difference between Closing Working Capital shown in the independent accountant's
calculation and NDC's calculation of Closing Working Capital delivered pursuant
to Section 1.3(a), (ii) by NDC if the difference between Closing Working Capital
shown in the independent accountant's calculation and PMSI's calculation of
Closing Working Capital delivered pursuant to Section 1.3(b) is less than the
difference between Closing Working Capital shown in the independent accountant's
calculation and NDC's calculation of Closing Working Capital delivered pursuant
to Section 1.3(a), and (iii) otherwise equally by PMSI and NDC.
(d) PMSI and NDC agree that they will, and will cause their
respective independent accountants and PMSI Database to, cooperate and assist in
the preparation of the Closing Balance Sheet and the calculation of Closing
Working Capital, Closing Current Assets and Closing Current Liabilities and in
the conduct of the reviews referred to in this Section 1.3, including, without
limitation, making available, to the extent necessary, relevant books, records,
working papers, analyses and schedules, and permitting representatives of the
parties to consult with the respective employees, auditors, actuaries, attorneys
and agents of PMSI Database.
1.4 Adjustment of Purchase Price.
-----------------------------
(a) Subject to Section 1.4(c) below,
(i) If Final Current Assets are less than the product of 1.1659
times Final Current Liabilities (the amount of such shortfall referred to as,
the "Final Working Capital Deficit"), then PMSI shall pay to NDC in cash, as an
adjustment to the Purchase Price, the Final Working Capital Deficit, plus any
amount owing to NDC pursuant to Section 1.4(b) below.
(ii) If Final Current Assets are greater than the product of
1.1659 times Final Current Liabilities (the amount of such surplus referred to
as, the "Final Working Capital Surplus"), then NDC shall pay to PMSI in cash, as
an adjustment to the Purchase Price, the Final Working Capital Surplus.
(iii) "Final Working Capital," "Final Current Assets" and "Final
Current Liabilities" mean such amounts (A) as shown in NDC's calculation
delivered pursuant to Section 1.3(a), if no notice of disagreement with respect
thereto is duly delivered pursuant to Section 1.3(b); or (B) if such a notice of
disagreement is delivered, (1) as agreed by NDC and PMSI pursuant to Section
1.3(b) or (2) in the absence of such agreement, as shown in the independent
accountant's calculation delivered pursuant to Section 1.3(c); provided that, in
no event shall Final Working Capital be (A) more than PMSI's calculation of
Closing Working Capital delivered
- 4 -
<PAGE>
pursuant to Section 1.3(b), if any, or (B) less than the lesser of NDC's
calculation of Closing Working Capital delivered pursuant to Section 1.3(a) or
PMSI's calculation of Closing Working Capital delivered pursuant to Section
1.3(b), if any.
(b) (i) If Total Current Assets are less than the product of 0.9975
times Total Current Liabilities (the "Total Working Capital Deficit"), then PMSI
shall pay to NDC in cash, as a further adjustment to the Purchase Price, an
amount equal to the Current Asset Allocation Amount.
(ii) If Total Current Assets are greater than the product of
0.9975 times Total Current Liabilities (the "Total Working Capital Surplus"),
then NDC shall pay to PMSI in cash, as a further adjustment to the Purchase
Price, an amount equal to the Current Asset Allocation Amount.
(iii) As used herein, "Total Current Assets" shall mean the
amount equal to the sum of Final Current Assets in this Agreement and Final
Current Assets calculated pursuant to the Source Agreement; "Total Current
Liabilities" shall mean the amount equal to the sum of Final Current Liabilities
in this Agreement and Final Current Liabilities calculated pursuant to the
Source Agreement; "Current Asset Allocation Amount" shall mean the amount equal
to the product of (A) the quotient of Final Current Assets in this Agreement
divided by Total Combined Assets multiplied by (B) the Total Working Capital
Deficit or Total Working Capital Surplus, as the case may be; and "Total
Combined Assets" shall mean the amount equal to the sum of Final Current Assets
in this Agreement and Final Current Assets calculated pursuant to the Source
Agreement
(c) For purposes of any adjustments to the Purchase Price made
pursuant to this Section, the parties shall take into account any adjustment
made to the Purchase Price at Closing pursuant to Section 1.2(c) hereof.
(d) Any payment pursuant to Section 1.4(a) shall be made at a mutually
convenient time and place within ten days after Final Working Capital, Final
Current Assets and Final Current Liabilities have been determined by delivery by
NDC or PMSI, as the case may be, of one or more certified or official bank
checks payable in immediately available funds to the appropriate party or
parties or by causing such payments to be credited to such account of the
appropriate party or parties as may be designated by such other party or
parties.
(e) Any payment pursuant to Section 1.4(b) shall be made at a mutually
convenient time and place within ten days after Current Asset Allocation Amount
has been determined by delivery by NDC or PMSI, as the case may be, of one or
more certified or official bank checks payable in immediately available funds to
the appropriate party or parties or by causing such payments to be credited to
such account of the appropriate party or parties as may be designated by such
other party or parties.
(f) The amount of any payment to be made pursuant to Sections 1.4(a)
and (b) shall bear interest from and including the Closing Date to but excluding
the date of payment at a
- 5 -
<PAGE>
rate per annum equal to the Prime Rate determined as of the Closing Date. Such
interest shall be payable at the same time as the payment to which it relates
and shall be calculated daily on the basis of a year of 365 days and the actual
number of days elapsed.
1.5 Anti-Dilution Provisions. In the event NDC changes the number of
-------------------------
shares of NDC Common Stock issued and outstanding prior to the Closing Date as a
result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Closing Date, the Base Amount shall be proportionately adjusted.
1.6 Time and Place of Closing. The closing of the transactions
-------------------------
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Closing Date occurs (or the immediately preceding day if the Closing
Date is earlier than 9:00 A.M.), or at such other time as the Parties, acting
through their authorized officers, may mutually agree. The Closing shall be
held at such location as may be mutually agreed upon by the Parties.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PMSI DATABASE AND PMSI
--------------------------------------------------------
PMSI and PMSI Database, jointly and severally, hereby represent and
warrant to NDC as follows:
2.1 Organization, Standing, and Power. PMSI Database is a corporation
----------------------------------
duly organized, validly existing, and in good standing under the Laws of the
State of Delaware, and has the corporate power and authority to carry on the
Acquired Business as now and previously conducted by PMSI and to own, lease and
operate the Acquired Assets. PMSI Database is, or will be prior to Closing,
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of the Acquired Assets or the nature or conduct of the Acquired
Business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a PMSI Database
Material Adverse Effect. The minute book and other organizational documents for
PMSI Database have been made available to NDC for its review and, except as
disclosed in Section 2.1 of the PMSI Database Disclosure Memorandum, are true
and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and stockholders thereof. The
minute books of PMSI as such relate to PMSI Database, the Acquired Business, the
Acquired Assets and the Joint Venture Interest have been made available to NDC
for its review.
- 6 -
<PAGE>
2.2 Authority of PMSI Database; No Breach By Agreement.
---------------------------------------------------
(a) PMSI Database has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and, subject
to receipt of stockholder approval, to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Stock
Purchase, have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of PMSI Database, subject to the adoption
of this Agreement by PMSI, as the sole stockholder of PMSI Database. Subject to
such requisite stockholder approval, this Agreement represents a legal, valid,
and binding obligation of PMSI Database, enforceable against PMSI Database in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by PMSI
Database, nor the consummation by PMSI Database of the transactions contemplated
hereby, nor compliance by PMSI Database with any of the provisions hereof, will
(i) conflict with or result in a breach of any provision of PMSI Database's
Certificate of Incorporation or Bylaws or any resolution adopted by the board of
directors or stockholder of PMSI Database, or (ii) except as disclosed in
Section 2.2 of the PMSI Database Disclosure Memorandum and, subject to receipt
of the requisite Consents referred to in Sections 6.1(b) and 6.1(c), constitute
or result in a Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any Acquired Asset under, any Acquired Contract or
Acquired Permit.
(c) Other than in connection or compliance with the provisions of
applicable state corporate and securities Laws and other than Consents required
from Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, no notice to,
filing with, or Consent of, any Regulating Authority is necessary for the
consummation by PMSI Database of the Stock Purchase and the other transactions
contemplated in this Agreement, or necessary for the consummation by PMSI
Database and PMSI of the Contribution.
2.3 Authority of PMSI; No Breach By Agreement.
------------------------------------------
(a) PMSI has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and, subject to
receipt of stockholder approval, to consummate the transactions contemplated
hereby. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Stock
Purchase, have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of PMSI, subject to the adoption of this
Agreement by the stockholders of PMSI. Subject to such requisite stockholder
approval, this Agreement represents a legal, valid,
- 7 -
<PAGE>
and binding obligation of PMSI, enforceable against PMSI in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by PMSI, nor
the consummation by PMSI of the transactions contemplated hereby, nor compliance
by PMSI with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of PMSI Database's Certificate of Incorporation or
Bylaws, or (ii) conflict with or result in a breach of any provision of PMSI's
Certificate of Incorporation or Bylaws or the certificate or articles of
incorporation or bylaws of any Subsidiary of PMSI, or (iii) except as disclosed
in Section 2.3 of the PMSI Database Disclosure Memorandum and, subject to
receipt of the requisite Consents referred to in Sections 6.1(b) and 6.1(c),
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Acquired Asset under, any Acquired
Contract or Acquired Permit.
(c) Other than in connection or compliance with the provisions of the
applicable state corporate and securities Laws and other than Consents required
from Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, no notice to,
filing with, or Consent of, any Regulatory Authority is necessary for the
consummation by PMSI of the transactions contemplated in this Agreement.
2.4 Capital Stock.
--------------
(a) The authorized capital stock of PMSI Database consists of 1,000
shares of PMSI Database Common Stock, of which 100 shares are issued and
outstanding as of the date of this Agreement and at the Closing Date. All of
the issued and outstanding shares of capital stock of PMSI Database are duly and
validly issued and outstanding and are fully paid and nonassessable under the
DGCL. None of the outstanding shares of capital stock of PMSI Database has been
issued in violation of any preemptive rights of the current or past stockholders
of PMSI Database.
(b) Except as set forth in Section 2.4(a), there are no shares of
capital stock or other equity securities of PMSI Database outstanding and no
outstanding Equity Rights relating to the capital stock of PMSI Database. As of
the date of this Agreement, a Subsidiary of PMSI owns, and, as of the Closing
Date, PMSI will own, all right, title and interest (legal and beneficial) in and
to all of the issued and outstanding shares of PMSI Database's capital stock
free and clear of all Liens. Except as specifically contemplated by this
Agreement, no Person has any Contract or any right or privilege (whether pre-
emptive or contractual) capable of becoming a Contract for the purchase from
PMSI of any of the shares of PMSI Database's capital stock, or any Contract or
Equity Right for the purchase, subscription or issuance of any securities of
PMSI Database.
- 8 -
<PAGE>
2.5 PMSI Database Subsidiaries. PMSI Database has no Subsidiaries.
---------------------------
2.6 Financial Statements. Each of the OTC Financial Statements
---------------------
(including, in each case, any related notes) was prepared in accordance with
GAAP applied on a consistent basis as of and for the periods involved (except as
may be indicated in the notes to such financial statements), and fairly
presented in all material respects the financial position of the Acquired
Business as of their respective dates and the results of operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect. Except
as set forth on Section 2.6 of the PMSI Database Disclosure Memorandum, the
Acquired Business has no liabilities or obligations (secured or unsecured,
whether accrued, absolute, direct, indirect, contingent or otherwise, and
whether due or to become due) which are not fully and adequately accrued or
reserved against in the OTC Financial Statements, as of their respective dates,
in accordance with GAAP consistently applied. Further, the OTC Balance Sheet
only includes the Acquired Assets and the Assumed Liabilities relating to the
Acquired Business and does not include (i) Retained Liabilities, (ii) domestic
income tax assets or liabilities, (iii) recorded goodwill, and (iv) deferred
gains on sale and lease-back transactions. The Statements of Income are those
of the Acquired Business and the Acquired Assets and do not include revenue,
expenses or income tax of PMSI or any other Assets of PMSI or the Joint Venture
Interest.
2.7 Absence of Undisclosed Liabilities. At the Closing, PMSI Database
-----------------------------------
will have no Liabilities other than the Assumed Liabilities and the Liabilities
set forth in Section 2.7 of the PMSI Database Disclosure Memorandum. None of
the Assumed Liabilities or those Liabilities set forth in Section 2.7 of the
PMSI Database Disclosure Memorandum are reasonably likely to have, individually
or in the aggregate, a PMSI Database Material Adverse Effect.
2.8 Absence of Certain Changes or Events. Since March 31, 1997, except
-------------------------------------
as disclosed in the OTC Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 2.8 of the PMSI Database Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a PMSI
Database Material Adverse Effect, (ii) neither PMSI Database nor PMSI has taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of PMSI Database and PMSI provided in Article 4.
2.9 Tax Matters.
------------
(a) All Tax Returns required to be filed by or on behalf of PMSI
Database or PMSI on behalf of or including the Acquired Business have been
timely filed or requests for extensions have been timely filed, granted, and
have not expired for periods ended on or before June 30, 1996, and on or before
the date of the most recent fiscal year end immediately preceding the Closing
Date, and all such Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. There is no
audit examination or deficiency or refund Litigation with respect to any Taxes,
except as reserved against in the PMSI
- 9 -
<PAGE>
Database Financial Statements or as disclosed in Section 2.9 of the PMSI
Database Disclosure Memorandum for which PMSI Database could be found
responsible. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid. There are no Liens
with respect to Taxes upon any of the Acquired Assets, except for any such Liens
which are not reasonably likely to have a PMSI Database Material Adverse Effect.
(b) PMSI has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due with respect to the
Acquired Business or the Acquired Assets (excluding such statutes that relate to
years currently under examination by the Internal Revenue Service or other
applicable taxing authorities) or with respect to the filing of any Tax Return
including the Acquired Business that is currently in effect.
(c) The provision for any Taxes due or to become due for the Acquired
Business and the Acquired Assets for the period or periods through and including
the date of the respective PMSI Database Financial Statements that has been made
and is reflected on such PMSI Database Financial Statements is sufficient to
cover all such Taxes.
(d) Deferred Taxes of PMSI Database reflected on the PMSI Database
Financial Statements have been provided for in accordance with GAAP.
(e) PMSI Database is not a party to any Tax allocation or sharing
agreement and PMSI Database has not been a member of an affiliated group filing
a consolidated federal income Tax Return (other than a group the common PMSI of
which was PMSI Database or PMSI) that has any Liability for Taxes of any Person
(other than PMSI Database) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law) as a transferee or successor
or by Contract or otherwise.
(f) PMSI Database and PMSI with respect to the Acquired Business and
the Acquired Assets are in compliance with, and its records contain all
information and documents (including properly completed IRS Forms W-9) necessary
to comply with in all material respects, all applicable information reporting
and Tax withholding requirements under federal, state, and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 2.9 of the PMSI Database Disclosure
Memorandum, PMSI Database and PMSI with respect to the Acquired Business and the
Acquired Assets have not made any payments, are not obligated to make any
payments, and are not a party to any Contract that could obligate either of them
to make any payments that would be disallowed as a deduction under Section 280G
or 162(m) of the Internal Revenue Code.
2.10 Assets.
-------
(a) Except as disclosed in Section 2.10 of the PMSI Database
Disclosure Memorandum or as disclosed or reserved against in the OTC Financial
Statements delivered prior to the date of this Agreement and except for the
Contracts set forth in Sections 2.2 and 2.3 of the
-10-
<PAGE>
PMSI Database Disclosure Memorandum, PMSI Database currently has, good, valid
and marketable title, free and clear of all Liens, to all of the Acquired
Assets. All tangible properties that are material to the conduct of the Acquired
Business are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with PMSI's past practices
with respect to the Acquired Business.
(b) The Acquired Assets and the Acquired Business are insured under
various policies of general liability and other forms of insurance, which
policies are in amounts adequate in the reasonable judgment of PMSI and PMSI
Database. Neither PMSI nor PMSI Database has been refused any insurance, with
respect to the Acquired Assets or the Acquired Business, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five (5) years. There are no outstanding requirements
or recommendations by any current insurer or underwriter with respect to the
Acquired Business or the Acquired Assets which require or recommend changes in
the conduct of the Acquired Business, or require any repairs or other work to be
done with respect to any of the Acquired Assets or operations of the Acquired
Business.
(c) The Acquired Assets include all rights, properties, interests in
properties, and assets necessary to permit NDC to carry on the Acquired Business
as presently conducted by PMSI and PMSI Database.
2.11 Intellectual Property. Section 2.11 of the PMSI Database
----------------------
Disclosure Memorandum is a complete and accurate list of all Acquired
Intellectual Property, containing a brief description of all governmental
registrations or applications for governmental registrations of each such item
and the nature of PMSI Database's interest therein. PMSI Database owns or has a
license to use all of the Acquired Intellectual Property. PMSI Database is the
owner of or has a license to any Acquired Intellectual Property sold or licensed
to a third party by PMSI Database, and PMSI Database has the right to convey by
sale or license any Acquired Intellectual Property so conveyed. PMSI Database
is not in Default under any of its Acquired Intellectual Property licenses. No
proceedings have been instituted, or are pending or to the Knowledge of PMSI
Database and PMSI threatened, which challenge the rights of PMSI or PMSI
Database with respect to Acquired Intellectual Property used, sold or licensed
by PMSI or PMSI Database in the course of the Acquired Business, nor has any
person claimed or alleged any rights to such Acquired Intellectual Property.
The conduct of the Acquired Business does not infringe any Intellectual Property
of any other person. Except as disclosed in Section 2.11 of the PMSI Database
Disclosure Memorandum, neither PMSI nor PMSI Database is obligated to pay any
recurring royalties to any Person with respect to any Acquired Intellectual
Property. Except as disclosed in Section 2.11 of the PMSI Database Disclosure
Memorandum, every Employee is a party to a Contract which requires such Person
to assign any interest in any Intellectual Property to PMSI which rights have
been assigned to PMSI Database and to keep confidential any trade secrets,
proprietary data, customer information, or other business information of the
Acquired Business, and no such Employee is party to any Contract with any Person
other than PMSI which requires such Employee to assign any interest in any
Intellectual Property developed while in the employ of PMSI to any Person other
than PMSI or to keep confidential any trade secrets, proprietary data, customer
information, or other business information of any Person other than
-11-
<PAGE>
PMSI. Except as disclosed in Section 2.11 of the PMSI Database Disclosure
Memorandum, no Employee is party to any Contract which restricts or prohibits
such Employee from engaging in activities competitive with any Person, including
PMSI and PMSI Database, in each case with respect to the Acquired Business. All
material items of the Acquired Intellectual Property and the material
registrations, applications, and agreements related thereto will be legally
assigned to PMSI Database, subject to the consent of any third party as set
forth in Section 2.11 of the PMSI Database Disclosure Memorandum.
2.12 Compliance with Laws. PMSI or PMSI Database has in effect all
---------------------
Acquired Permits. The Acquired Permits include all Permits necessary for PMSI
Database to own, lease, or operate the Acquired Assets and to carry on the
Acquired Business as now conducted, and there has occurred no Default under any
such Acquired Permit and, except as set forth in Section 2.12 of the PMSI
Database Disclosure Memorandum, all right in and to such Acquired Permits has
been legally transferred to PMSI Database and did not require the consent of
any third party. Except as disclosed in Section 2.12 of the PMSI Database
Disclosure Memorandum, neither PMSI nor PMSI Database:
(a) is in Default under any of the provisions of its Certificate of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Acquired Permits
applicable to the Acquired Business or the Employees; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that PMSI Database or PMSI with respect to the Acquired Business is not in
compliance in any material respect with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, (ii) threatening to
revoke any Acquired Permits, or (iii) requiring PMSI with respect to the
Acquired Business or PMSI Database to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority relating to the Acquired Business
or the Acquired Assets have been made available to NDC.
2.13 Labor Relations. PMSI Database and PMSI have disclosed in Section
----------------
2.13 of the PMSI Database Disclosure Memorandum all employees of the Acquired
Business (the "Employees"). With respect to the Acquired Business, PMSI and
PMSI Database are not the subject of any Litigation asserting that they have
committed an unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel them to bargain with
any labor organization as to wages or conditions of employment, nor is PMSI
Database, or PMSI with respect to the Acquired Business, a party to any
collective bargaining
-12-
<PAGE>
agreement, nor is there any strike or other labor dispute involving the Acquired
Business, pending or threatened, or to the Knowledge of PMSI and PMSI Database,
is there any activity involving the Employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
2.14 Employees and Employee Benefit Plans.
-------------------------------------
(a) Neither PMSI Database nor any ERISA Affiliate of PMSI Database
currently or within the 6 years preceding the Closing Date, has maintained,
sponsored in whole or in part, or contributed to any plan or arrangement which
is a "defined benefit plan" (as defined in Section 414(j) of the Internal
Revenue Code) or which is a multiemployer plan within the meaning of Section
3(37) of ERISA. For purposes of this Section 2.14, "ERISA Affiliate" shall mean
any entity which is considered one employer with PMSI Database under Section
4001 of ERISA or Section 414 of the Internal Revenue Code.
(b) All PMSI Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a PMSI Database Material Adverse Effect.
(c) PMSI Database will not have had any employees prior to Closing.
2.15 Material Contracts. Section 2.15 of the PMSI Database Disclosure
-------------------
Memorandum contains a true and correct list, and (if oral) summary description,
of all PMSI Database Contracts (as defined below). Except as contemplated
hereunder and except as disclosed in Section 2.15 of the PMSI Database
Disclosure Memorandum or otherwise reflected in the OTC Financial Statements or
the PMSI Database Balance Sheet, neither PMSI Database, nor PMSI with respect to
the Acquired Business and the Joint Venture Interest, nor any of the Acquired
Assets, the Acquired Business, or the related operations, is a party to, or is
bound or affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract, (ii) any Contract relating to
the borrowing of money by PMSI Database, or PMSI with respect to the Acquired
Business or the Joint Venture Interest, or the guarantee by PMSI Database, or
PMSI with respect to the Acquired Business or the Joint Venture Interest, of any
such obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts PMSI Database, or PMSI with
respect to the Acquired Business or the Joint Venture Interest, from engaging in
any business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among PMSI
Database and PMSI or any Affiliate of PMSI Database or PMSI, (v) any Contract
involving Intellectual Property (other than Contracts entered into in the
ordinary course with customers and "shrink-wrap" software licenses), (vi) any
Contract relating to the provision of data processing, network communication, or
other technical services to or by PMSI Database, or PMSI with respect to the
Acquired Business or the Joint Venture Interest, (vii) any Contract relating to
the purchase or sale of any goods or services including customer contracts
(other than Contracts entered into in the ordinary course of business and
involving payments under any individual
-13-
<PAGE>
Contract not in excess of $50,000), (viii) real property leases and (ix) all
Contracts referred to in Section 2.17(b) as of the date of this Agreement
(together referred to as the "PMSI Database Contracts"). Except as set forth in
Sections 2.2 and 2.3 of the PMSI Database Disclosure Memorandum, with respect to
each PMSI Database Contract and except as disclosed in Section 2.15 of the PMSI
Database Disclosure Memorandum: (i) the Contract is in full force and effect;
(ii) neither PMSI Database nor PMSI is in Default thereunder; (iii) neither PMSI
Database nor PMSI has repudiated or waived any material provision of any such
Contract; (iv) no other party to any such Contract is, to the Knowledge of PMSI
Database and PMSI, in Default in any respect or has repudiated or waived any
material provision thereunder; (v) there exists no actual, or to the Knowledge
of PMSI or PMSI Database, threatened, cancellation, termination, or limitation
of, or any material amendment, modification, or change to any Contract; (vi)
neither PMSI Database nor PMSI has received formal notice that any party to a
PMSI Database Contract will not renew such Contract at the end of its existing
term; and (vii) no PMSI Database Contract requires consent for assignment in
connection with the transactions contemplated by this Agreement including the
Contribution. All of the indebtedness of PMSI Database for money borrowed is
prepayable at any time by PMSI Database without penalty or premium.
2.16 Real Property; Leased Real Property. PMSI Database does not own or
-----------------------------------
lease any real property that is used or will be used in the Acquired Business.
2.17 Personal Property.
-----------------
(a) Section 2.17(a) of the PMSI Database Disclosure Memorandum contains a
substantially true and correct list of all equipment (excluding items of
equipment having a value of less than $50,000 individually) as of the date
hereof that will be included in the Acquired Assets.
(b) Section 2.17(b) of the PMSI Database Disclosure Memorandum contains a
substantially true and correct list of all Acquired Personal Property (except
miscellaneous leases of property having a value of less than $20,000
individually) leased by PMSI or PMSI Database. True and correct copies of the
lease for each item listed in Section 2.17(b) of the PMSI Database Disclosure
Memorandum and any amendments, extensions, and renewals thereof have heretofore
been furnished to NDC. Each of such leases is in effect, and PMSI and PMSI
Database have neither received nor sent written notice or other written
correspondence that indicates the existence of Material default under any such
lease, except for defaults subsequently cured or waived prior to the date of
this Agreement. No rights of PMSI or PMSI Database under any of such leases
have been assigned or otherwise transferred as security for any obligation of
PMSI or PMSI Database other than to the lessor under a lease to secure PMSI's or
PMSI Database's obligations under such lease. Except as described in Section
2.17(b) of the PMSI Database Disclosure Memorandum, all such leases are fully
assignable without the consent of any third party.
(c) Section 2.17(c) of the PMSI Database Disclosure Memorandum contains a
substantially true and correct list of all Acquired Personal Property (except
personal property having a value of less than $20,000 individually) owned by
PMSI Database. All Acquired Personal Property that is material to the conduct
of the Acquired Business is in good condition,
-14-
<PAGE>
reasonable wear and use excepted, and are usable in the ordinary course of
business consistent with PMSI's past practices.
2.18 Legal Proceedings. There is no Litigation instituted or pending,
-----------------
or, to the Knowledge of PMSI and PMSI Database, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against PMSI Database or PMSI
with respect to the Acquired Business, or against any director, employee or
employee benefit plan of PMSI or PMSI Database, or against any Acquired Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a PMSI Database Material Adverse Effect, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against PMSI Database or PMSI with
respect to the Acquired Business and Acquired Assets that are reasonably likely
to have, individually or in the aggregate, a PMSI Database Material Adverse
Effect. Section 2.18 of the PMSI Database Disclosure Memorandum contains a
summary of all Litigation as of the date of this Agreement to which PMSI
Database is a party, or to which PMSI with respect to the Acquired Business is a
party and which names such as a defendant or cross-defendant or for which PMSI
Database, the Acquired Business or the Acquired Assets has any potential
Liability.
2.19 Statements True and Correct. None of the information supplied or
----------------------------
to be supplied by PMSI or PMSI Database or any Affiliate thereof for inclusion
in the Registration Statement to be filed by NDC with the SEC will, when the
Registration Statement becomes effective, include any untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by PMSI or
PMSI Database or any Affiliate thereof for inclusion in any documents to be
filed by PMSI or PMSI Database or any Affiliate thereof with any Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, include any untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that PMSI or PMSI Database or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
2.20 Regulatory Matters. Neither PMSI Database, PMSI nor any Affiliate
-------------------
thereof has taken or agreed to take any action or has any Knowledge of any fact
or circumstance that is reasonably likely to materially impede or delay receipt
of any Consents of Regulatory Authorities referred to in Section 6.1(b) or
result in the imposition of a condition or restriction of the type referred to
in the last sentence of such Section.
2.21 Charter Provisions. PMSI, as the sole stockholder of PMSI
-------------------
Database, and PMSI Database have taken all reasonable action so that the
entering into of this Agreement and the consummation of the Stock Purchase and
the other transactions contemplated by this Agreement, except as set forth
herein, do not and will not result in the grant of any rights to any Person
under the Certificate of Incorporation, Bylaws or other governing instruments of
PMSI Database or restrict or impair the ability of NDC or any of its
Subsidiaries to vote, or otherwise to
-15-
<PAGE>
exercise the rights of a stockholder with respect to, shares of PMSI Database
that may be directly or indirectly acquired or controlled by them.
2.22 Opinion of Financial Advisor. PMSI or PMSI Database has received
-----------------------------
the opinion of Cowen & Company, dated the date of this Agreement, to the effect
that the consideration to be received in the Stock Purchase and pursuant to the
Source Transfer Agreement by PMSI is fair, from a financial point of view, to
PMSI.
2.23 Board Recommendation. The Board of Directors of PMSI Database and
---------------------
PMSI, at meetings duly called and held, have by unanimous vote of the directors
present and voting (who constituted all of the directors then in office other
than those directors who abstained from voting because of a conflict of
interest) (i) determined that this Agreement and the transactions contemplated
hereby, including the Stock Purchase and the transactions contemplated thereby,
taken together, are fair to and in the best interests of the stockholders of
PMSI, and PMSI, as the sole stockholder of PMSI Database, and (ii) resolved to
recommend that the holders of the shares of PMSI and PMSI, as the sole
stockholder of PMSI Database, adopt this Agreement.
2.24 Joint Venture Interest. The Amended and Restated Alphabase Data
-----------------------
License Agreement is in full force and effect and, subject to receipt by PMSI
Database of the Consents set forth in Sections 2.2 and 2.3 of the PMSI Database
Disclosure Memorandum, PMSI Database owns all right, title and interest in the
Joint Venture Interest free and clear of any Liens.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NDC
-------------------------------------
NDC hereby represents and warrants to PMSI Database and PMSI as follows:
3.1 Organization, Standing, and Power. NDC is a corporation duly
----------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. NDC is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a NDC Material Adverse Effect.
3.2 Authority; No Breach By Agreement.
----------------------------------
(a) NDC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Stock Purchase, have been
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duly and validly authorized by all necessary corporate action in respect thereof
on the part of NDC. This Agreement represents a legal, valid, and binding
obligation of NDC, enforceable against NDC in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by NDC, nor
the consummation by NDC of the transactions contemplated hereby, nor compliance
by NDC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of NDC's Certificate of Incorporation or Bylaws or any
resolution adopted by the Board of Directors or stockholders of NDC, or (ii)
subject to receipt of the requisite Consents referred to in Section 6.1(b),
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any NDC Entity under, any
Contract or Permit of any NDC Entity.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, no notice to, filing with, or Consent of, any public body
or authority is necessary for the consummation by NDC of the Stock Purchase and
the other transactions contemplated in this Agreement.
3.3 Capital Stock.
--------------
(a) The authorized capital stock of NDC consists of (i) 100,000,000
shares of NDC Common Stock, of which 26,629,947 shares are issued and
outstanding as of August 18, 1997, and (ii) 1,000,000 shares of NDC Preferred
Stock, of which no shares are issued and outstanding. All of the issued and
outstanding shares of NDC Capital Stock are, and all of the shares of NDC Common
Stock to be issued in exchange for shares of PMSI Database Common Stock upon
consummation of the Stock Purchase, when issued in accordance with the terms of
this Agreement, will be, duly and validly issued and outstanding and fully paid
and nonassessable under the DGCL. None of the outstanding shares of NDC Capital
Stock has been, and none of the shares of NDC Common Stock to be issued in
exchange for shares of PMSI Database Common Stock upon consummation of the Stock
Purchase will be, issued in violation of any preemptive rights of the current or
past stockholders of NDC.
(b) Except as set forth in Section 3.3(a), or as provided pursuant to
the NDC Rights Agreement, or as disclosed in Section 3.3(b) of the NDC
Disclosure Memorandum, there are no shares of capital stock or other equity
securities of NDC outstanding and no outstanding Equity Rights relating to the
capital stock of NDC.
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<PAGE>
3.4 SEC Filings; Financial Statements.
----------------------------------
(a) NDC has timely filed and made available to PMSI Database all SEC
Documents required to be filed by NDC since May 31, 1993 (the "NDC SEC
Reports"). The NDC SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such NDC SEC Reports or necessary in
order to make the statements in such NDC SEC Reports, in light of the
circumstances under which they were made, not misleading. No NDC Subsidiary is
required to file any SEC Documents.
(b) Each of the NDC Financial Statements (including, in each case, any
related notes) contained in the NDC SEC Reports, including any NDC SEC Reports
filed after the date of this Agreement until the Closing Date, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of NDC
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount or
effect.
3.5 Absence of Undisclosed Liabilities. No NDC Entity has any
-----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a NDC Material Adverse Effect, except Liabilities which are accrued
or reserved against in the consolidated balance sheets of NDC as of May 31, 1996
and February 28, 1997, included in the NDC Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. No NDC Entity
has incurred or paid any Liability since February 28, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement.
3.6 Absence of Certain Changes or Events. Since February 28, 1997,
-------------------------------------
except as disclosed in the NDC Financial Statements delivered prior to the date
of this Agreement or as disclosed in Section 3.6 of the NDC Disclosure
Memorandum, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a NDC
Material Adverse Effect, and (ii) the NDC Entities have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of NDC
provided in Article 7.
3.7 Compliance with Laws. Each NDC Entity has in effect all Permits
---------------------
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted,
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<PAGE>
and there has occurred no Default under any such Permit. Except as disclosed in
Section 3.7 of the NDC Disclosure Memorandum, none of the NDC Entities:
(a) is in Default under its Certificate of Incorporation or Bylaws
(or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any NDC Entity is not in compliance in any material respect with any of
the Laws or Orders which such governmental authority or Regulatory Authority
enforces, or (iii) requiring any NDC Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment
or memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business.
3.8 Legal Proceedings. There is no Litigation instituted or pending, or,
------------------
to the Knowledge of NDC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any NDC Entity, or against any director,
employee or employee benefit plan of any NDC Entity, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a NDC Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any NDC Entity, that are reasonably likely to
have, individually or in the aggregate, a NDC Material Adverse Effect.
3.9 Statements True and Correct. None of the information supplied or to
----------------------------
be supplied by any NDC Entity or any Affiliate thereof for inclusion in the
Registration Statement to be filed by NDC or in the proxy statement to be filed
by PMSI with the SEC, will include an untrue statement of a material fact, or
omit to state any material fact necessary to make the statements therein in
light of the circumstances under which they were made, not misleading, with
respect to the Registration Statement, on the date such Registration Statement
becomes effective, and with respect to the proxy statement as of its date. None
of the information supplied or to be supplied by any NDC Entity or any Affiliate
thereof for inclusion in any documents to be filed by any NDC Entity or any
Affiliate thereof with the SEC or any other Regulatory Authority in connection
with the transactions contemplated hereby, will, at the respective time such
documents are filed, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. All
documents that any NDC Entity or any Affiliate thereof is responsible for filing
with any Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable Law.
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<PAGE>
3.10 Regulatory Matters. No NDC Entity or any Affiliate thereof has
-------------------
taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 6.1(b) or result
in the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
3.11 Rights Agreement. Execution of this Agreement and consummation of
-----------------
the Stock Purchase and the other transactions contemplated by this Agreement
will not result in the grant of any rights to any Person under the NDC Rights
Agreement (other than as contemplated by Section 1.1) or enable or require the
NDC Rights to be exercised, distributed or triggered.
ARTICLE 4
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
4.1 Affirmative Covenants of PMSI Database and PMSI.
------------------------------------------------
(a) Subject to the Consents set forth in Sections 2.3 and 2.4 of the PMSI
Database Disclosure Memorandum, PMSI has, or shall have prior to Closing,
assigned, transferred, conveyed, and delivered to PMSI Database, and PMSI
Database has, or shall have prior to Closing, acquired, and accepted from PMSI,
all of the right, title, and interest of PMSI in and to the Acquired Assets and
the Joint Venture Interest, free and clear of any and all Liens.
(b) The "Acquired Assets" shall consist of all of the right, title, and
interest of PMSI and PMSI Database in and to all of the following Assets, as the
same shall exist at the Closing Date, which shall be delivered free and clear of
any and all Liens:
(i) The Personal Property primarily utilized in the Acquired
Business (the "Acquired Personal Property");
(ii) The Intellectual Property primarily utilized in the Acquired
Business (the "Acquired Intellectual Property");
(iii) The Contracts primarily utilized in the Acquired Business (the
"Acquired Contracts");
(iv) The Accounts Receivable relating to the Acquired Business (the
"Acquired Accounts Receivable");
(v) The Permits primarily utilized in the Acquired Business (the
"Acquired Permits"); and
(vi) The Other Assets primarily utilized in the Acquired Business
(the "Acquired Other Assets").
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<PAGE>
(c) Prior to Closing, as partial consideration for the Contribution,
PMSI Database shall assume responsibility for the performance and satisfaction
of the Assumed Liabilities. PMSI Database shall not assume responsibility for,
and PMSI will remain obligated with respect to, the Retained Liabilities.
(d) From the date of this Agreement until the earlier of the Closing Date
or the termination of this Agreement, unless the prior written consent of NDC
shall have been obtained, and except as otherwise expressly contemplated herein,
either PMSI shall, or shall cause PMSI Database to, (i) operate the Acquired
Business and the Joint Venture Interest only in the usual, regular, and ordinary
course as previously operated by PMSI, (ii) use its reasonable efforts to
preserve intact the business organization of the Acquired Business and the
Acquired Assets and maintain its rights and franchises with respect to the
Acquired Business and the Joint Venture Interest; (iii) maintain the Acquired
Assets in their present order and condition, reasonable wear and use excepted,
and maintain all policies of insurance covering the Acquired Assets in amounts
and on terms substantially equivalent to those in effect on the date hereof;
(iv) take all steps reasonably necessary to maintain the Acquired Intellectual
Property and other intangible assets of the Acquired Business and the Joint
Venture Interest; (v) use reasonable best efforts to preserve the goodwill and
patronage of its customers, Employees, suppliers and others having a business
relationship with the Acquired Business and the Joint Venture Interest; and (vi)
take no action which would (A) materially adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated hereby
without imposition of a condition or restriction of the type referred to in the
last sentences of Section 6.1(b) or 6.1(c), or (ii) materially adversely affect
the ability of any Party to perform its covenants and agreements under this
Agreement.
(e) Prior to or contemporaneous with the Closing, pursuant to the Source
Transfer Agreement, the terms and conditions of which will have been approved by
NDC, PMSI shall acquire (i) Source's business operated in Europe as of the
Closing Date (the "European Business"), (ii) all of the shares of PMSI held by
Source or any Subsidiary of Source (the "Divestiture"), and (iii) all of the
stock of the Source Divestiture Subsidiaries. In connection with the
Divestiture, PMSI shall obtain a release of all obligations of Source under the
European Contracts.
(f) Prior to Closing, PMSI Database and PMSI shall use commercially
reasonable efforts to obtain Consents to the assignment of the PMSI Database
Contracts and any other Contracts to which PMSI, SLA or PMSI Database is a party
as required by the Contract in connection with the Contribution and the
transactions contemplated hereby. If, on the Closing Date, PMSI Database, SLA
and PMSI have not obtained any Consent discussed above after having used
commercially reasonable efforts to obtain such Consent or an attempted transfer
of any of the PMSI Database Contracts and any other Contracts to which PMSI or
SLA is a party would be ineffective or the failure to have such Consent would
adversely affect PMSI's or SLA's ability to convey any such Contract and the
failure to transfer such asset, either individually or in the aggregate, is not
reasonably likely to have a PMSI Database Material Adverse Effect, then
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<PAGE>
such Contracts shall constitute "Deferred Contracts" and shall not be
transferred to PMSI Database. After the Closing: (a) PMSI will (i) continue to
use commercially reasonable efforts to obtain the Consent and/or to remove any
other impediments to the assignment and transfer of each Deferred Contract and
will assign and transfer or cause SLA to assign and transfer each Deferred
Contract to PMSI Database within five (5) business days after the receipt of
such Consent and/or removal of such impediment; (ii) until the assignment and
transfer with respect to any Deferred Contract is accomplished, cooperate or
cause SLA to cooperate with PMSI Database in any lawful arrangement that is not
unduly economically burdensome (including performance by PMSI or SLA as agent)
to provide that PMSI Database shall receive the benefits of such Deferred
Contract to the same extent as if it were transferred to PMSI Database at
Closing; and (iii) until the assignment and transfer with respect to any
Deferred Contract is accomplished, enforce, at the request and for the account
of PMSI Database, any of PMSI's or SLA's rights thereto or interests therein
against any other parties thereto (including the right to terminate any such
Deferred Contract in accordance with its terms, provided that PMSI Database pays
any cancellation or other fee due upon such termination); and (b) if and only to
the extent that PMSI Database receives the benefits of a Deferred Contract, PMSI
Database shall perform the obligations of PMSI or SLA arising with respect to
such Deferred Contract to the extent that, by reason of consummation of the
transactions contemplated by this Agreement or the Source Agreement, PMSI
Database has control over the resources necessary to perform such obligations
or, to the extent that PMSI Database does not have such resources, to reimburse
PMSI for the reasonable cost of such performance. NDC shall notify PMSI on the
Closing Date as to the PMSI Database Contracts which will be performed by PMSI
Database pursuant to this Section. To the extent PMSI Database performs the
obligations of PMSI with respect to any Deferred Contract, any account
receivable created on account of such performance shall be deemed when created
to be a Acquired Contract conveyed hereunder. After the Closing, PMSI Database
and NDC will act with reasonable diligence and use commercially reasonable
efforts to assist, and cooperate with, PMSI or SLA in obtaining such Consents
and removing any such impediments to the transfer of the Deferred Contracts.
(g) Prior to Closing, all indebtedness or other obligations or accounts
of any kind between a PMSI Entity on the one hand and Source and its
Subsidiaries or PMSI Database on the other hand will have been paid in full and
discharged.
4.2 Negative Covenants of PMSI Database and PMSI. From the date of this
---------------------------------------------
Agreement until the earlier of the Closing Date or the termination of this
Agreement, unless the prior written consent of NDC shall have been obtained, and
except as otherwise expressly contemplated herein, PMSI and PMSI Database
covenant and agree that they will not do or agree or commit to do any of the
following with respect to the Acquired Business and the Acquired Assets:
(a) amend the Certificate of Incorporation, Bylaws or other governing
instruments of PMSI Database, or
(b) except as provided in the budget set forth in Section 4.2(b) of
the PMSI Database Disclosure Memorandum and only for the purposes set forth
therein, PMSI
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<PAGE>
Database shall not incur any additional debt obligation, capital lease
obligation or other obligation for borrowed money or make any capital
expenditures in excess of an aggregate of $50,000 or impose, or suffer the
imposition, on any Acquired Asset of any Lien or permit any such Lien to
exist (other than in connection with Liens in effect as of the date hereof
that are disclosed in the PMSI Database Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange, directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of PMSI Database, or declare or pay any dividend or make any
other distribution in respect of PMSI Database's capital stock; or
(d) except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of PMSI Database Common Stock, or any
stock appreciation rights, or any option, warrant, or other Equity Right of
PMSI Database; or
(e) except for the Contribution, purchase or acquire any assets or
properties, whether real or personal, tangible or intangible, that if
acquired would be an Acquired Asset, and not sell, lease or otherwise dispose
of any real or personal property or asset (other than cash which may be
distributed or otherwise transferred out of PMSI Database to PMSI) that would
have been an Acquired Asset, in each case except in the ordinary course of
business and consistent with past practices; or
(f) adjust, split, combine or reclassify any capital stock of PMSI
Database or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of PMSI Database Common Stock; or
(g) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, PMSI Database shall not purchase any securities or make any
material investment, either by purchase of stock of securities, contributions
to capital, Asset transfers, or purchase of any Assets, in any Person, or
otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or (ii)
the creation of new wholly owned Subsidiaries organized to conduct or
continue activities otherwise permitted by this Agreement; or
(h) grant any increase in compensation or benefits to the Employees
of the Acquired Business, except in accordance with past practice disclosed
in Section 4.2(h) of the PMSI Database Disclosure Memorandum or as required
by Law; pay any severance or termination pay or any bonus other than pursuant
to written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 4.2(h) of the PMSI Database Disclosure
Memorandum; and enter into or amend any severance agreements with Employees
of the Acquired Business; grant any material increase in fees or other
increases in
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<PAGE>
compensation or other benefits to directors of PMSI Database except in
accordance with past practice disclosed in Section 4.2(h) of the PMSI
Database Disclosure Memorandum; or
(i) enter into or amend any employment Contract with any Employee of
the Acquired Business that PMSI does not and PMSI Database will not have the
unconditional right to terminate without Liability (other than Liability for
services already rendered), at any time on or after the Closing Date; or
(j) adopt any new employee benefit plan of PMSI Database; or
(k) make any significant change in any Tax or accounting methods or
systems of internal accounting controls with respect to PMSI Database or the
Acquired Business, except as may be appropriate to conform to changes in Tax
Laws or regulatory accounting requirements or GAAP; or
(l) commence any Litigation with respect to PMSI Database or the
Acquired Business other than in accordance with past practice, settle any
Litigation involving any Liability of the Acquired Business or the Acquired
Assets for material money damages or restrictions upon the operations of the
Acquired Business or the Acquired Assets ; or
(m) enter into, materially modify or amend, or terminate any PMSI
Database Contract or other material Contract with respect to PMSI Database or
the Acquired Business (including any loan Contract with an unpaid balance
exceeding $50,000) or waive, release, compromise or assign any material
rights or claims; or
(n) modify or amend, or waive any provision of, the Source Transfer
Agreement, a fully executed copy of which with all attachments,
exhibits and schedules thereto is attached hereto as Schedule 4.2(n).
4.3 Covenants of NDC. From the date of this Agreement until the earlier
-----------------
of the Closing Date or the termination of this Agreement, unless the prior
written consent of PMSI shall have been obtained, and except as otherwise
expressly contemplated herein, NDC covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed, in its reasonable judgment, to enhance the long-term value of
the NDC Common Stock and the business prospects of the NDC Entities and to the
extent consistent therewith use all reasonable efforts to preserve intact the
NDC Entities' core businesses and goodwill with their respective employees and
the communities they serve, and (b) take no action which would (i) materially
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 6.1(b) or
6.1(c), or (ii) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement; provided, that the foregoing
shall not prevent any NDC Entity from acquiring any Assets or other businesses
or from discontinuing or disposing of any of its Assets or business if such
action is, in the judgment of NDC, desirable in the conduct of the business of
NDC and its Subsidiaries, provided that such actions shall not materially delay
the Closing Date or materially hinder consummation of
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<PAGE>
the Stock Purchase. NDC further covenants and agrees that it will not, without
the prior written consent of PMSI, which consent shall not be unreasonably
withheld, amend the Certificate of Incorporation or Bylaws of NDC or, except as
expressly contemplated by this Agreement, the NDC Rights Agreement, in each
case, in any manner adverse to the holders of PMSI Database Common Stock as
compared to rights of holders of NDC Common Stock generally as of the date of
this Agreement. In addition, NDC covenants and agrees that it shall maintain
PMSI Database as its Subsidiary and maintain substantially all of the Acquired
Assets in PMSI Database for a period of one year and will treat the Joint
Venture Interest as a partnership for federal income tax purposes during that
one-year period.
4.4 Adverse Changes in Condition. Each Party agrees to give written
-----------------------------
notice promptly to the other Parties upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a PMSI Database Material Adverse Effect or a NDC Material Adverse
Effect, as applicable, or (ii) would cause or constitute a material breach of
any of its representations, warranties, or covenants contained herein, and to
use its reasonable efforts to prevent or promptly to remedy the same.
4.5 Reports. Each Party and its Subsidiaries shall file all reports
--------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Closing Date and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 5
ADDITIONAL AGREEMENTS
---------------------
5.1 Registration Statement; PMSI Approval. As soon as reasonably
--------------------------------------
practicable after execution of this Agreement, NDC shall prepare and file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state Blue Sky or
securities Laws in connection with the issuance of the shares of NDC Common
Stock upon consummation of the Stock Purchase. PMSI and PMSI Database shall
cooperate in the preparation and filing of the Registration Statement and shall
furnish all information concerning
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<PAGE>
them and the holders of PMSI's capital stock as NDC may reasonably request in
connection with such action. PMSI shall call a Stockholders' Meeting, to be held
as soon as reasonably practicable after the Registration Statement is declared
effective by the SEC, for the purpose of voting upon adoption of this Agreement,
the Source Transfer Agreement and such other related matters as it deems
appropriate. In connection with the Stockholders' Meeting, (i) PMSI shall
prepare and file with the SEC a Proxy Statement and mail such Proxy Statement to
its stockholders, (ii) NDC shall furnish to PMSI and PMSI Database all
information that such may reasonably request in preparation of such Proxy
Statement and notice of meeting, (iii) the Board of Directors of PMSI shall
recommend to its stockholders the approval of the matters submitted for
approval, subject only to the Board of Director's legal obligations (if any) as
directors of PMSI, and (iv) the Board of Directors and officers of PMSI shall
use their reasonable efforts to obtain such stockholders' approval. NDC and PMSI
Database shall make all necessary filings with respect to the Stock Purchase
under the Securities Laws.
5.2 Exchange Listing. NDC shall use its reasonable efforts to list,
-----------------
prior to the Closing Date, on the NYSE, subject to official notice of issuance,
the shares of NDC Common Stock to be issued to PMSI pursuant to the Stock
Purchase, and NDC shall give all notices and make all filings with the NYSE
required in connection with the transactions contemplated herein.
5.3 Applications; Antitrust Notification. NDC shall promptly prepare and
-------------------------------------
file, and PMSI Database and PMSI shall reasonably cooperate in the preparation
and, where appropriate, filing of, applications with all Regulatory Authorities
having jurisdiction over the transactions contemplated by this Agreement seeking
the requisite Consents necessary to consummate the transactions contemplated by
this Agreement. To the extent required by the HSR Act, each of the Parties will
promptly file with the United States Federal Trade Commission and the United
States Department of Justice the notification and report form required for the
transactions contemplated hereby and any supplemental or additional information
which may reasonably be requested in connection therewith pursuant to the HSR
Act and will comply in all material respects with the requirements of the HSR
Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
5.4 Agreement as to Efforts to Consummate. Subject to the terms and
--------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 6; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use,
and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
5.5 Investigation and Confidentiality.
----------------------------------
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(a) Prior to the Closing Date, NDC on the one hand and PMSI and PMSI
Database on the other hand shall keep each other advised of all material
developments relevant to their business and to consummation of the Stock
Purchase and shall permit the other to make or cause to be made such
investigation of the business and properties of such and its Subsidiaries and of
their respective financial and legal conditions as the other reasonably
requests, provided that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere unnecessarily with
normal operations.
(b) NDC on the one hand and PMSI and PMSI Database on the other hand
shall, and shall cause its advisers and agents to, maintain the confidentiality
of all confidential information furnished to it by the other concerning its and
its Subsidiaries' businesses, operations, and financial positions except to the
extent such disclosure is required by law and shall not use such information for
any purpose except in furtherance of the transactions contemplated by this
Agreement. If this Agreement is terminated prior to the Closing Date, each
Party shall promptly return or certify the destruction of all documents and
copies thereof, and all work papers containing confidential information received
from the other.
(c) NDC on the one hand and PMSI and PMSI Database on the other hand
agrees to give the other notice as soon as practicable after any determination
by it of any fact or occurrence relating to the other which it has discovered
through the course of its investigation and which represents, or is reasonably
likely to represent, either a material breach of any representation, warranty,
covenant or agreement of the other Party or which has had or is reasonably
likely to have a PMSI Database Material Adverse Effect or a NDC Material Adverse
Effect, as applicable.
5.6 Press Releases. Prior to the Closing Date, PMSI Database and NDC
---------------
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 5.6
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
5.7 Certain Actions. Except with respect to this Agreement and the
----------------
transactions contemplated hereby, PMSI and PMSI Database shall not, and shall
use their best efforts to cause any Affiliate or any Representatives thereof
retained by PMSI or PMSI Database not to, directly or indirectly solicit any
Acquisition Proposal by any Person that relates specifically to the Acquired
Business or the Acquired Assets. Except to the extent the Board of Directors of
PMSI and PMSI Database, after having consulted with and considered the advice of
outside counsel, reasonably determines in good faith that the failure to take
such actions would constitute a breach of fiduciary duties of the members of
such Board of Directors to the stockholders of PMSI under applicable law, PMSI,
PMSI Database, and any Affiliate or Representative thereof shall not furnish any
non-public information that it is not legally obligated to furnish, negotiate
with respect to, or enter into any Contract with respect to, any such
Acquisition Proposal. PMSI and PMSI Database shall promptly advise NDC
following the receipt of any such Acquisition Proposal and
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the details thereof, and advise NDC of any developments with respect to such
Acquisition Proposal promptly upon the occurrence thereof. PMSI and PMSI
Database shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its Affiliates and Representatives not to engage in any
of the foregoing.
5.8 Charter Provisions. PMSI Database shall take all necessary action to
-------------------
ensure that the entering into of this Agreement and the consummation of the
Stock Purchase and the other transactions contemplated hereby do not and will
not, except as set forth herein, result in the grant of any rights to any Person
under the Certificate of Incorporation, Bylaws or other governing instruments of
PMSI Database or restrict or impair the ability of NDC or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a stockholder with
respect to, shares of PMSI Database that may be directly or indirectly acquired
or controlled by them.
5.9 Agreement of Affiliates. PMSI will not sell, pledge, transfer, or
------------------------
otherwise dispose of the shares of PMSI Database Common Stock held by PMSI
except as contemplated by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of NDC Common Stock to be received by PMSI upon
consummation of the Stock Purchase except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder. NDC shall
be entitled to place restrictive legends upon certificates for shares of NDC
Common Stock issued to PMSI pursuant to this Agreement to enforce the applicable
provisions of Law. NDC shall not be required to maintain the effectiveness of
the Registration Statement under the 1933 Act for the purposes of resale of NDC
Common Stock by PMSI except as provided in the Registration Rights Agreement.
With respect to the NDC Common Stock to be received by PMSI upon consummation of
the Stock Purchase, NDC will provide PMSI with certain registration rights
pursuant to a registration rights agreement in substantially the form of Exhibit
1 hereto (the "Registration Rights Agreement").
5.10 Employment of Employees. On the Closing Date, NDC shall offer
------------------------
employment to those Employees of the Acquired Business listed on Schedule 2.13
of the PMSI Database Disclosure Memorandum. PMSI agrees to use its commercially
reasonable efforts to assist NDC in hiring such Employees and will use its
commercially reasonable efforts to make such Employees available to NDC. All
such Employees accepting NDC's offer of employment are hereinafter referred to
as the "Hired Employees." Except as otherwise provided herein, PMSI shall be
responsible for the payment of all earned but unpaid salaries, bonus, vacation
pay, sick pay, holiday pay, severance pay and other like obligations and
payments to the Employees for all periods ending on or prior to the Closing
Date. PMSI shall be responsible for the payment of any amounts due to its
Employees (including the Hired Employees) pursuant to the PMSI Benefit Plans as
a result of the employment of its Employees, and, in determining bonuses and
other similar payments due to Hired Employees for any period ended on or prior
to the Closing Date, PMSI shall, if payment thereof will occur after the Closing
Date and the applicable performance period has been completed prior to the
Closing Date, waive any requirement that such Employees be employees of PMSI on
the date such bonuses or other similar payments are paid. PMSI shall be
responsible for all incurred but unreported or unpaid medical claims occurring
prior to the
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Closing Date and for the cost associated with any hospital confinement which
commences prior to the Closing Date. NDC shall become responsible for all costs
and liabilities attributable to Hired Employees accruing on and after the
Closing Date; provided, however, that NDC shall not be responsible for (a)
liabilities arising under the PMSI Benefit Plans or (b) liabilities associated
with any leaves taken prior to the Closing Date in connection with the Family
and Medical Leave Act of 1993. Effective on the Closing Date, PMSI shall, and
hereby does, release all Hired Employees from any employment and/or
confidentiality agreement previously entered into between PMSI and such Hired
Employees relating to the Acquired Business to the extent (but only to the
extent) necessary for NDC to operate the Acquired Business in the same manner as
operated by PMSI prior to the Closing Date.
PMSI shall be responsible for complying with the requirements of Section
4980B of the Internal Revenue Code and Part VI of Title I of ERISA for the
Employees (including the Hired Employees, as defined in this Section 5.10) and
their "qualified beneficiaries" whose "qualifying event" (as such terms are
defined in Section 4980B of the Internal Revenue Code) occurs on or prior to the
Closing Date.
5.11 Tax Matters.
-----------
(a) PMSI and NDC shall make a timely election under (S)338(h)(10) of
the Code and (S)1.338(h)(10)-1 of the Treasury Regulations promulgated pursuant
to the Code, and any corresponding elections under state or local tax law. PMSI
and NDC shall (i) take, and cooperate with each other to take, all actions
necessary and appropriate (including, without limitation, the preparation,
completion and timely joint filing by PMSI and NDC of Form 8023-A, and the
preparation, completion and timely filing of such other forms, returns,
elections, schedules and other documents and instruments) to effect, perfect and
preserve a timely (S)338(h)(10) election in accordance with (S)338(h)(10) of the
Code and (S)1.338(h)(10)-1 of the Treasury Regulations promulgated pursuant to
the Code, and (ii) report the purchase and sale of the Shares consistent with
the election pursuant to (S)338(h)(10) and shall take no position contrary
thereto or inconsistent therewith in any Tax Return, or in any discussion with
or any proceeding before any taxing authority or other governmental body or
otherwise. In the event an election under (S)338(h)(10) is not available under
the law of any state or locality but an election can be made under Section
338(g) of the Code, such election shall be made in such state or locality and
PMSI shall bear the cost of any tax on PMSI Database related thereto (other than
the cost of any state tax for such election in the following states: Arizona,
California, Connecticut, Delaware, Illinois, New Jersey, New York and
Pennsylvania).
(b) The Purchase Price and all other items that comprise the "modified
aggregate deemed sale price" (as defined in, and required to be allocated
pursuant to, Section 338(h)(10) of the Code) shall be allocated in accordance
with a schedule prepared by NDC and consented to by PMSI, which consent will not
be withheld or delayed unreasonably. Such allocation shall, for tax purposes,
be binding on PMSI Database, PMSI and NDC. PMSI Database, PMSI and NDC shall
file their respective Tax Returns in accordance with such allocation and shall
not take any position inconsistent with such allocation. In the event that such
allocation is disputed by any Tax authority, the party receiving notice of such
dispute shall
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promptly notify and consult with the other parties hereto concerning resolution
of such dispute and no such dispute shall be finally settled or compromised
without the mutual consent of the parties, which consent will not be
unreasonably withheld.
(c) NDC shall have the sole and exclusive authority to prepare,
execute and file on behalf of PMSI Database (A) the federal income tax returns
to be filed on behalf of PMSI Database for the period ending as of the close of
business on the Closing Date that will include the gain or loss resulting from
the "deemed sale" and "deemed liquidation" that will occur (pursuant to Treasury
Regulation (S)1.338(h)(10)-1(e)(1) and (2) promulgated under the Code) by reason
of PMSI's and NDC's election pursuant to (S)338(h)(10) of the Code and (B) the
corresponding state and local income tax returns to be filed on behalf of PMSI
Database for the period ending as of the close of business on the Closing Date.
PMSI, upon written notice of request to NDC, shall have the right to review and
consent to such returns prior to filing, which consent shall not be unreasonably
withheld or delayed.
5.12 Joint Marketing. The parties hereto agree that from the date of this
---------------
Agreement each will use its reasonable efforts to negotiate and enter into a
joint marketing arrangement for the purpose of jointly promoting their
respective businesses throughout the world.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
6.1 Conditions to Obligations of Each Party. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Stock Purchase and
the other transactions contemplated hereby are subject to the satisfaction of
the following conditions, unless waived by both Parties pursuant to Section 9.6:
(a) Stockholder Approval. The stockholders of PMSI shall have
--------------------
adopted this Agreement and the Source Transfer Agreement, and the
consummation of the transactions contemplated hereby and thereby, including
the Stock Purchase in the manner described in the Proxy Statement. PMSI, as
the sole stockholder of PMSI Database shall have adopted this Agreement and
the consummation of the transactions contemplated hereby.
(b) Regulatory Approvals. All Consents of, filings and registrations
--------------------
with, and notifications to, all Regulatory Authorities required for
consummation of the transactions contemplated under this Agreement shall have
been obtained or made and shall be in full force and effect and all waiting
periods required by Law shall have expired. No Consent obtained from any
Regulatory Authority which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner (including
requirements relating to the raising of additional capital or the disposition
of Assets) which in the reasonable judgment of the Board of Directors of NDC
would so materially adversely impact the economic or business assumptions of
the transactions contemplated by this
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Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the transactions contemplated under
this Agreement (other than those referred to in Section 6.1(b)), including
those Consents listed in Sections 2.2 and 2.3 of the PMSI Database Disclosure
Memorandum and Section 3.2 of the NDC Disclosure Memorandum or for the
preventing of any Default under any Contract or Permit of such Party which,
if not obtained or made, is reasonably likely to have, individually or in the
aggregate, a PMSI Database Material Adverse Effect or a NDC Material Adverse
Effect, as applicable. No Consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the Board of
Directors of NDC would so materially adversely impact the economic or
business assumptions of the transactions contemplated by this Agreement that,
had such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(d) Legal Proceedings. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes
illegal consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
issuance, trading or resale of the shares of NDC Common Stock issuable
pursuant to the Stock Purchase shall have been received.
(f) Exchange Listing. The shares of NDC Common Stock issuable
----------------
pursuant to the Stock Purchase shall have been approved for listing on the
NYSE, subject to official notice of issuance.
6.2 Conditions to Obligations of NDC. The obligations of NDC to perform
--------------------------------
this Agreement and consummate the Stock Purchase and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by NDC pursuant to Section 9.6(a):
(a) Representations and Warranties. For purposes of this Section
------------------------------
6.2(a), the accuracy of the representations and warranties of PMSI Database
and PMSI set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Closing Date with the same effect as though all such
representations and warranties had been made on
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and as of the Closing Date (provided that representations and warranties
which are confined to a specified date shall speak only as of such date). The
representations and warranties set forth in Section 2.4 shall be true and
correct (except for inaccuracies which are de minimus in amount). The
representations and warranties set forth in Sections 2.20 and 2.21 shall be
true and correct in all material respects. There shall not exist inaccuracies
in the representations and warranties of PMSI Database and PMSI set forth in
this Agreement (including the representations and warranties set forth in
Sections 2.4, 2.20 and 2.21) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a PMSI Database Material
Adverse Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of PMSI Database and PMSI to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Closing Date shall have been duly performed
and complied with in all material respects.
(c) Certificates. Each of PMSI and PMSI Database shall have
------------
delivered to NDC (i) a certificate, dated as of the Closing Date and signed
on its behalf by its chief executive officer and its chief financial officer,
to the effect that the conditions set forth in Section 6.1 as relates to PMSI
or PMSI Database, respectively, and in Section 6.2(a) and 6.2(b) have been
satisfied, and (ii) certified copies of resolutions duly adopted by each of
PMSI's and PMSI Database's Board of Directors and stockholders evidencing the
taking of all corporate action necessary to authorize the execution, delivery
and performance of this Agreement by such Party, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as NDC and
its counsel shall request.
(d) Opinion of Counsel. NDC shall have received an opinion of
------------------
Willkie Farr & Gallagher, counsel to PMSI, or the General Counsel of PMSI
dated as of the Closing, in form reasonably satisfactory to NDC, as to the
matters set forth in Exhibit 2.
(e) Noncompetition Agreement. PMSI shall have executed and delivered
------------------------
to NDC a noncompetition agreement in substantially the form of Exhibit 3 (the
"Noncompetition Agreement").
(f) Source Agreement. All conditions to the closing of the
----------------
transactions contemplated under the Source Agreement shall have been
satisfied or waived and the consummation of such transaction shall have
occurred concurrently with the Closing.
(g) Source Transfer Agreement. All conditions to the closing of the
-------------------------
transactions contemplated under the Source Agreement shall have been
satisfied in all materials respects and the consummation of such transaction
shall have occurred concurrently with the Closing.
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(h) European Contract Releases. Source shall have been released from
--------------------------
any and all obligations under the European Contracts to the reasonable
satisfaction of NDC.
(i) Consents. PMSI and any of its Subsidiaries which is a party
--------
thereto shall have received the Consent of all third parties to the
assignment of, or the release of PMSI or under, those Contracts listed in
Section 6.2(i) of the NDC Disclosure Memorandum for the transactions
contemplated herein.
(j) SLA Letter Agreement. SLA shall have executed and delivered to
--------------------
NDC a letter agreement substantially in the form of Exhibit 4 hereto.
6.3 Conditions to Obligations of PMSI Database and PMSI. The obligations
---------------------------------------------------
of PMSI Database and PMSI to perform this Agreement and consummate the Stock
Purchase and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by PMSI pursuant to
Section 9.6(b):
(a) Representations and Warranties. For purposes of this Section
------------------------------
6.3(a), the accuracy of the representations and warranties of NDC set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Closing Date with the same effect as though all such representations
and warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of NDC set
forth in Sections 3.3, 3.4 and 3.10 shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of NDC set forth in this Agreement (including the representations
and warranties discussed above and set forth in Sections 3.3, 3.4 and 3.10)
such that the aggregate effect of such inaccuracies has, or is reasonably
likely to have, a NDC Material Adverse Effect; provided that, for purposes of
this sentence only, those representations and warranties which are qualified
by references to "material" or "Material Adverse Effect" or to the
"Knowledge" of any Person shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of NDC to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Closing Date shall have been duly performed and complied with in all material
respects.
(c) Certificates. NDC shall have delivered to PMSI (i) a
------------
certificate, dated as of the Closing Date and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Section 6.1 as relates to NDC and in Section
6.3(a) and 6.3(b) have been satisfied, and (ii) certified copies of
resolutions duly adopted by NDC's Board of Directors evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as PMSI and its counsel
shall request.
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(d) Opinion of Counsel. PMSI shall have received an opinion of the
------------------
General Counsel of NDC or Alston & Bird LLP, counsel to NDC, dated as of the
Closing Date, in form reasonably acceptable to PMSI Database, as to the
matters set forth in Exhibit 5.
(e) Registration Rights Agreement. NDC shall have executed and
-----------------------------
delivered to PMSI the Registration Rights Agreement.
(f) NDC Noncompetition Agreement. NDC shall have executed and
----------------------------
delivered to PMSI a noncompetition agreement substantially in the form of
Exhibit 6 hereto.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 Indemnification.
---------------
(a) Agreement of PMSI to Indemnify. Subject to the terms and
------------------------------
conditions of this Article 7, PMSI agrees to indemnify, defend, and hold
harmless NDC and its officers, directors, stockholders, controlling persons,
Affiliates and Representatives, and each of them, from, against, for and in
respect of any and all Losses asserted against, or paid, suffered or incurred
by, an Indemnitee and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of PMSI or PMSI Database contained in or made
pursuant to this Agreement or in any certificate, Schedule, or Exhibit
furnished by PMSI or PMSI Database in connection herewith (except that PMSI
shall not be obligated to indemnify NDC for Losses arising out of the
termination or cancellation of a PMSI Database Contract by a third party
prior to Closing; provided that such termination or cancellation was not due
to any breach of such Contract by PMSI Database or PMSI), and for purposes of
this Section 7.1(a)(i) any qualification of such representations and
warranties by reference to the materiality of matters stated therein or as to
matters having or not having a "Material Adverse Effect,", and any limitation
of such representations and warranties as being "to the knowledge of," or
"known to" or words of similar effect, shall be disregarded, in determining
any inaccuracy, untruth, incompleteness or breach thereof;
(ii) a breach of or failure to perform any covenant or agreement of
PMSI or PMSI Database made in this Agreement;
(iii) any Retained Liability; and
(iv) the European business of Source, to be acquired by PMSI pursuant
to the Source Transfer Agreement.
(b) Agreement of NDC to Indemnify. Subject to the terms and conditions
------------------------------
of this Article 7, NDC agrees to indemnify, defend, and hold harmless PMSI and
its officers, directors, stockholders, controlling persons, Affiliates and
Representatives, and each of them, from, against,
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for and in respect of any and all Losses asserted against, or paid, suffered or
incurred by, an Indemnitee and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of NDC contained in or made pursuant to this
Agreement or in any certificate, Schedule, or Exhibit furnished by NDC in
connection herewith and for purposes of this Section 7.1(b)(i) any
qualification of such representations and warranties by reference to the
materiality of matters stated therein or as to matters having or not having a
"Material Adverse Effect,", and any limitation of such representations and
warranties as being "to the knowledge of," or "known to" or words of similar
effect, shall be disregarded, in determining any inaccuracy, untruth,
incompleteness or breach thereof;
(ii) a breach of or failure to perform any covenant or agreement of
NDC made in this Agreement;
(iii) any Assumed Liability.
7.2 Procedures for Indemnification. As used herein, the term
------------------------------
"Indemnitor" means the party against whom indemnification hereunder is entitled
to be sought, and the term "Indemnitee" means the party entitled to seek
indemnification hereunder.
(a) An Indemnification Claim shall be made by an Indemnitee by
delivery of a written notice to the Indemnitor requesting indemnification and
specifying the basis on which indemnification is sought and the amount of
asserted Losses and, in the case of a Third Party Claim, containing (by
attachment or otherwise) such other information as such Indemnitee shall have
concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 7.3 shall be observed by the Indemnitee and the
Indemnitor.
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor shall have 30 days to object to such
Indemnification Claim by delivery of a written notice of such objection to such
Indemnitee specifying in reasonable detail the basis for such objection. Failure
to timely so object shall constitute a final and binding acceptance of the
Indemnification Claim by the Indemnitor, and the Indemnification Claim shall be
paid in accordance with subsection (d) hereof. If an objection is timely
interposed by the Indemnitor and the dispute is not resolved by such Indemnitee
and the Indemnitor within 15 days from the date the Indemnitee receives such
objection, such dispute shall be resolved by arbitration as provided in
Section 7.9.
(d) Upon determination of the amount of an Indemnification Claim,
whether by agreement between the Indemnitor and the Indemnitee or by an
arbitration award or by any other final adjudication, shall be paid by the
Indemnitor within ten days of the date such amount is determined.
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7.3 Third Party Claims. The obligations and liabilities of the parties
------------------
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Indemnitor written notice of a
Third Party Claim promptly after receipt by the Indemnitee of notice thereof,
and the Indemnitor may undertake the defense, compromise and settlement
thereof by representatives of its own choosing reasonably acceptable to the
Indemnitee. The failure of the Indemnitee to notify the Indemnitor of such
claim shall not relieve the Indemnitor of any liability that it may have with
respect to such claim except to the extent the Indemnitor demonstrates that
the defense of such claim is prejudiced by such failure. The assumption of
the defense, compromise and settlement of any such Third Party Claim by the
Indemnitor shall be an acknowledgment of the obligation of the Indemnitor to
indemnify the Indemnitee with respect to such claim hereunder. If the
Indemnitee desires to participate in, but not control, any such defense,
compromise and settlement, it may do so at its sole cost and expense. If,
however, the Indemnitor fails or refuses to undertake the defense of such
Third Party Claim within ten (10) days after written notice of such claim has
been given to the Indemnitor by the Indemnitee, the Indemnitee shall have the
right to undertake the defense, compromise and settlement of such claim with
counsel of its own choosing. In the circumstances described in the preceding
sentence, the Indemnitee shall, promptly upon its assumption of the defense
of such claim, make an Indemnification Claim as specified in Section 7.2
which shall be deemed an Indemnification Claim that is not a Third Party
Claim for the purposes of the procedures set forth herein.
(b) If, in the reasonable opinion of the Indemnitee, any Third Party
Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations,
assets, properties or prospects of the Indemnitee (including, without
limitation, the administration of the tax returns and responsibilities under
the tax laws of the Indemnitee), the Indemnitee shall have the right to
control the defense, compromise and settlement of such Third Party Claim
undertaken by the Indemnitor, and the costs and expenses of the Indemnitee in
connection therewith shall be included as part of the indemnification
obligations of the Indemnitor hereunder. If the Indemnitee shall elect to
exercise such right, the Indemnitor shall have the right to participate in,
but not control, the defense, compromise and settlement of such Third Party
Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of an Indemnitor under this Article shall be made without the prior
written consent by or on behalf of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. Consent shall be presumed in the case of
settlements of $20,000 or less where the Indemnitor has not responded within
five business days of notice of a proposed settlement. If the Indemnitor
assumes the defense of such a Third Party Claim, (a) no compromise or
settlement thereof may be effected by the Indemnitor without the Indemnitee's
consent unless (i) there is no finding or admission of any violation of law
or any violation of the rights of any person and no effect on any other claim
that may be made against the Indemnitee, (ii) the sole relief provided is
monetary damages that are paid in full by the Indemnitor, and (iii) the
compromise or settlement includes, as an unconditional term thereof, the
giving by the
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claimant or the plaintiff to the Indemnitee of a release, in form and
substance satisfactory to the Indemnitee, from all liability in respect of
such Third Party Claim, and (b) the Indemnitee shall have no liability with
respect to any compromise or settlement thereof effected without its consent.
(d) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may reasonably
be related to any such claim or action, shall provide access to the counsel,
accountants and other representatives of each party during normal business
hours to all properties, personnel, books, tax records, contracts,
commitments and all other business records of such other party and will
furnish to such other party copies of all such documents as may reasonably be
requested (certified, if requested).
7.4 Survival. Subject to Section 7.5, all representations, warranties
--------
and agreements contained in this Agreement or in any certificate delivered
pursuant to this Agreement shall survive the Closing notwithstanding any
investigation conducted with respect thereto or any knowledge acquired as to the
accuracy or inaccuracy of any such representation or warranty.
7.5 Time Limitations. PMSI and PMSI Database, on the one hand, and NDC,
----------------
on the other hand, will have no liability to the other party under or in
connection with: (a) a breach of any of the representations, warranties,
covenants or agreements made or to be performed by such party contained in this
Agreement unless written notice asserting an Indemnification Claim based thereon
is given to the other party prior to August 31, 1999; provided, however, the
liability of PMSI relating to, arising out of or based upon Section 7.1(a)(iii),
7.1(a)(iv) hereof, and the liability of NDC relating to, arising out of or based
upon Section 7.1(b)(iii), may be asserted at any time.
7.6 Limitations as to Amount.
------------------------
(a) Except as provided in Sections 1.2 and 1.4 herein, neither PMSI
nor NDC shall have any liability with respect to the matters described in
clauses (a)(i) or (a)(ii) with respect to PMSI and (b)(i) and (b)(ii) with
respect to NDC of Section 7.1 until the total of all Losses with respect thereto
exceeds $30,000 (the "Threshold Amount") in which event PMSI or NDC, as the case
may be, shall be obligated to indemnify as provided in this Article 7 for all
such Losses; provided, however, that each individual claim of $10,000 or less
shall not be indemnifiable, and shall not be includable in determining whether
the $30,000 threshold has been reached.
(b) The aggregate liability of PMSI under Sections 7.1(a)(i) and
7.1(a)(ii) (other than Sections 1.2 and 1.4) and NDC under Sections 7.1(b)(i)
and 7.1(b)(ii) (other than Sections 1.2 and 1.4) hereof shall not exceed
$1,000,000 (the "Maximum Amount").
(c) The Threshold Amount and Maximum Amount limitations shall not
apply to the indemnification rights of the parties hereto for any liability
under Sections 1.2, 1.4,
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7.1(a)(iii), 7.1(a)(iv) and 7.1(b)(iii) hereof and the payment of such amounts
by PMSI or NDC shall not count toward the calculation of the Maximum Amount.
7.7 Tax Effect and Insurance. The liability of an Indemnitor with
------------------------
respect to any Indemnification Claim shall be reduced by the tax benefit
actually realized and any insurance proceeds received by the Indemnitee as a
result of any Losses upon which such Indemnification Claim is based, and shall
include any tax detriment actually suffered by the Indemnitee as a result of
such Losses or the claims hereunder. The amount of any such tax benefit or
detriment shall be determined by taking into account the effect, if any and to
the extent determinable, of timing differences resulting from the acceleration
or deferral of items of gain or loss resulting from such Losses and shall
otherwise be determined so that payment by the Indemnitor of the Indemnification
Claim, as adjusted to give effect to any such tax benefit or detriment, will
make the Indemnitee as economically whole as is reasonably practical with
respect to the Losses upon which the Indemnification Claim is based. Any
dispute as to the amount of such tax benefit or detriment shall be resolved by
arbitration as provided in this Section 7.9 of this Agreement.
7.8 Subrogation. Upon payment in full of any Indemnification Claim,
-----------
whether such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitor shall
be subrogated to the extent of such payment to the rights of the Indemnitee
against any person or entity with respect to the subject matter of such
Indemnification Claim or Third Party Claim.
7.9 Arbitration. All disputes arising under this Article 10 (other than
-----------
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by a single arbitrator experienced in the matters at issue
and selected by PMSI and NDC in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall be held in such
place in Washington, D.C., as may be specified by the arbitrator (or any place
agreed to by PMSI, NDC and the arbitrator). The decision of the arbitrator
shall be final and binding as to any matters submitted under this Article 7;
provided, however, if necessary, such decision and satisfaction procedure may be
enforced by either PMSI or NDC in any court of record having jurisdiction over
the subject matter or over any of the parties to this Agreement. All costs and
expenses incurred in connection with any such arbitration proceeding (including
reasonable attorneys fees) shall be borne by the party against which the
decision is rendered, or, if no decision is rendered, such costs and expenses
shall be borne equally by the Indemnitor and the Indemnitee. If the
arbitrator's decision is a compromise, the determination of which party or
parties bears the costs and expenses incurred in connection with any such
arbitration proceeding shall be made by the arbitrator on the basis of the
arbitrator's assessment of the relative merits of the parties' positions.
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ARTICLE 8
TERMINATION
-----------
8.1 Termination. Notwithstanding any other provision of this
-----------
Agreement, and notwithstanding the approval of this Agreement by the
stockholders of PMSI and PMSI Database, this Agreement may be terminated and the
Stock Purchase abandoned at any time prior to the Closing Date:
(a) By mutual consent of NDC and PMSI ; or
(b) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any representation or warranty contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach and which breach is
reasonably likely, in the opinion of the non-breaching Party, to have,
individually or in the aggregate, a PMSI Database Material Adverse Effect or
a NDC Material Adverse Effect, as applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Stock Purchase and the
other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
stockholders of PMSI or PMSI Database fail to vote their approval of the
matters relating to this Agreement and the Source Transfer Agreement and the
transactions contemplated hereby and thereby at the Stockholders' Meeting
where such matters were presented to such stockholders for approval and voted
upon in accordance with the procedure set forth in the Proxy Statement; or
(e) By either Party in the event that the Stock Purchase shall not
have been consummated by January 31, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
Section 8.1(e); or
(f) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this
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Agreement) in the event that any of the conditions precedent to the
obligations of such Party to consummate the Stock Purchase cannot be
satisfied or fulfilled by the date specified in Section 8.1(e); or
(g) By NDC, in the event that the Board of Directors of PMSI or PMSI
Database shall have failed to reaffirm their approval of the Stock Purchase
and the transactions contemplated by this Agreement (to the exclusion of any
other Acquisition Proposal), or shall have resolved not to reaffirm the Stock
Purchase, or shall have affirmed, recommended or authorized entering into any
other Acquisition Proposal or other transaction involving a Stock Purchase,
share exchange, consolidation or transfer of substantially all of the
Acquired Assets; or
(h) By PMSI if the Average Closing Price on the Determination Date of
shares of NDC Common Stock shall be less than the Lower Threshold Price;
subject, however, to the following three sentences. If PMSI elects to refuse
to consummate the Stock Purchase pursuant to this Section 8.1(h), it shall
give written notice thereof to NDC not later than two trading days following
the Determination Date. During the five-day period commencing with its
receipt of such notice, NDC shall have the option, in its sole discretion, to
elect to revise the Base Amount to equal that number of shares of NDC Common
Stock (rounded to the nearest whole share) obtained by dividing the product
of the Base Amount and the Lower Threshold Price by the Average Closing
Price. If NDC makes an election contemplated by the preceding sentence,
within such five-day period, it shall give prompt written notice to PMSI of
such election and the revised Base Amount, whereupon the condition to
consummation provided in this Section 8.1(h) shall be deemed to be satisfied
and this Agreement shall remain in effect in accordance with its terms
(except as the Base Amount shall have been so modified), and any references
in this Agreement to "Base Amount" shall thereafter be deemed to refer to the
Base Amount as adjusted pursuant to this Section 8.1(h).
8.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
8.2 and Article 9 and Section 5.5(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 8.1(b), 8.1(c) or
8.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
ARTICLE 9
MISCELLANEOUS
-------------
9.1 Definitions.
-----------
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
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"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Accounts Receivable" shall mean all accounts, notes and other
receivables.
"Accrued Bonuses" shall mean the amount equal to that percentage of
budgeted annual bonuses which shall equal the ratio of the earnings of the
Joint Venture Interest through the Closing Date to budgeted earnings for the
full fiscal year. All budgeted amounts used herein to be as set forth in
Schedule 4.2(b) of the Source Disclosure Memorandum.
"Acquired Business" shall mean the business and assets related to the
Over-the-Counter Business and the Research Solutions Group.
"Acquisition Proposal" with respect to (X) PMSI Database, shall mean
any tender offer or exchange offer or any proposal for a merger, acquisition
of all of the stock or assets of, or other business combination involving the
acquisition of PMSI Database or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, PMSI Database and (y)
PMSI, shall mean any proposal for an acquisition of the Acquired Assets or
the Joint Venture Interest.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person or; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person.
"Agreement" shall mean this Stock Purchase Agreement, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"Amended and Restated Alpha Database License Agreement" shall mean
that certain Amended and Restated Alpha Database License Agreement dated as
of July 1, 1994 by and among Walsh International Holdings Limited and Walsh
America Limited and PMSI and all customer, data provider and service
contracts, agreements or understandings relating thereto.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not carried
on the books and records of such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and wherever located.
"Assumed Liabilities" means (a) the liabilities of PMSI Database of
the type and in the amounts included in the Closing Balance Sheet and set
forth in Section 2.6 and 2.7 of the PMSI Database Disclosure Memorandum, (b)
the obligations arising after the
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Closing Date under the Acquired Contracts and (c) the liabilities arising
after and resulting from events following the Closing Date with respect to
the Acquired Business, the Acquired Assets and the Joint Venture Interests.
"Average Closing Price" shall mean the average of the daily closing
sales prices of NDC Common Stock as reported on the NYSE Composite
Transactions reporting system (as reported by The Wall Street Journal or, if
not reported thereby, another authoritative source as chosen by NDC) for the
ten consecutive full trading days in which such shares are traded on the NYSE
ending at the close of trading on the Determination Date.
"Closing Balance Sheet" shall mean the balance sheet for PMSI
Database as of the Closing Date delivered by NDC to PMSI.
"Closing Date" shall mean a date on which the parties mutually agree.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that
is binding on any Person or its capital stock, Assets or business.
"Contribution" shall mean the contribution of the Acquired Assets and
the Joint Venture Interest by PMSI and its Subsidiaries to PMSI Database as
contemplated herein.
"Default" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a PMSI Database
Material Adverse Effect or a NDC Material Adverse Effect, as applicable.
"Determination Date" shall mean the close of trading on the tenth
trading day immediately preceding the Closing Date.
"DGCL" shall mean the Delaware General Corporation Law.
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"Equity Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"European Contracts" shall mean all material Contracts relating to
the European Business of Source to which a Source Entity is a party, or under
which a Source Entity has obligations contingent or otherwise.
"Exhibits" 1 through 6, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred
to in this Agreement and any other related instrument or document without
being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Indemnification Claim" shall mean a claim for indemnification under
Article 7.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises, know-
how, inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Joint Venture Interest" means all right, title and interest of PMSI
in the Amended and Restated Alphabase Data License Agreement.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known or should reasonably have been known after due inquiry by the
chairman, president, chief financial officer, chief accounting officer, chief
operating officer, general counsel, any assistant or deputy general counsel,
or any senior, executive or other vice president or general manager
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of such Person and the knowledge of any such persons obtained or which would
have been obtained from a reasonable investigation.
"Law" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency, guaranty
or endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially impair
the use of or title to the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to
it), or the transactions contemplated by this Agreement.
"Losses" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including special
and consequential damages), liabilities, costs, and expenses, including
interest, penalties, cost of investigation and defense, and reasonable
attorneys' and other professional fees and expenses.
"Material" for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question; provided that
any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Nasdaq National Market" shall mean the Nasdaq National Market, a
district tier of The Nasdaq Stock Market operated by The Nasdaq Stock Market,
Inc., a wholly-owned subsidiary of the National Association of Securities
Dealers Automated Quotations System.
"NDC Capital Stock" shall mean, collectively, the NDC Common Stock,
the NDC Preferred Stock and any other class or series of capital stock of
NDC.
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"NDC Common Stock" shall mean the $0.125 par value common stock of
NDC.
"NDC Disclosure Memorandum" shall mean the written information
entitled "NDC Corporation Disclosure Memorandum" delivered prior to the date
of this Agreement to PMSI Database describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made unless such disclosure is reasonably adequate to
inform the other party that each matter disclosed would be responsive to
another section of disclosure in the Disclosure Memorandum.
"NDC Entities" shall mean, collectively, NDC and its Subsidiaries.
"NDC Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of NDC as of February
28, 1997, and as of May 31, 1996 and 1995, and the related statements of
income, changes in stockholders' equity, and cash flows (including related
notes and schedules, if any) for the nine months ended February 28, 1997, and
for each of the three fiscal years ended May 31, 1996, 1995 and 1994, as
filed by NDC in SEC Documents, and (ii) the consolidated balance sheets of
NDC (including related notes and schedules, if any) and related statements of
income, changes in stockholders' equity, and cash flows (including related
notes and schedules, if any) included in the SEC Documents filed with respect
to periods ended subsequent to February 28, 1997.
"NDC Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of NDC and its Subsidiaries, taken as a
whole, or (ii) the ability of NDC to perform its obligations under this
Agreement or to consummate the Stock Purchase or the other transactions
contemplated by this Agreement, provided that "Material Adverse Effect" shall
not be deemed to include the impact of (a) actions and omissions of NDC (or
any of its Subsidiaries) taken with the prior informed written Consent of
PMSI in contemplation of the transactions contemplated hereby, and (b) the
direct effects of compliance with this Agreement on the operating performance
of NDC, including expenses incurred by NDC in consummating the transactions
contemplated by this Agreement.
"NDC Preferred Stock" shall mean the $1.00 par value preferred stock
of NDC.
"NDC Rights" shall mean the preferred stock purchase rights issued
pursuant to the NDC Rights Agreement.
"NDC Rights Agreement" shall mean that certain Rights Agreement,
dated January 18, 1991, between NDC and Wachovia Bank of North Carolina,
N.A., as Rights Agent.
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"NDC Subsidiaries" shall mean the Subsidiaries of NDC and any
corporation or other organization acquired as a Subsidiary of NDC in the
future and held as a Subsidiary by NDC at the Closing Date.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"OTC Balance Sheet" shall mean the balance sheet of the Acquired
Business as of March 31, 1997.
"OTC Financial Statements" shall mean the OTC Balance Sheet
(including related notes and schedules, if any), and the related statement of
income (including related notes and schedules, if any) with respect to period
ended March 31, 1997.
"Other Assets" shall mean all goods or assets of any kind or nature,
tangible or intangible, other than Personal Property, Contracts, Accounts
Receivable, Intellectual Property and Permits.
"Over-the-Counter Business" shall mean the business currently
operated by PMSI or any of its Subsidiaries relating to the development, use
or exploitation of over-the-counter medicine databases.
"Party" shall mean either PMSI, PMSI Database or NDC, and "Parties"
shall mean all of PMSI, PMSI Database and NDC.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in
a representative capacity.
"Personal Property" shall mean equipment, tools, computers,
terminals, point of sale terminals, computer equipment, office equipment,
furniture, business machines, telephones and telephone systems, parts,
accessories and other items of personal property.
"PMSI" shall mean PMSI, Inc., a Delaware corporation.
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"PMSI Benefit Plan" shall include any pension, retirement, profit-
sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, any other written
employee program, arrangement or agreement, any medical, vision, dental or
other health plan, any life insurance plan, and any other employee benefit
plan or fringe benefit plan, including any "employee benefit plan" as that
term is defined in Section 3(3) of ERISA, which is or, within the 6 years
preceding the Closing Date, has been adopted, maintained, sponsored in whole
or in part by or contributed to by PMSI Database or PMSI for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors
or other beneficiaries.
"PMSI Database Balance Sheet" shall mean the balance sheet of the
Acquired Business and the Joint Venture Interest dated March 31, 1997.
"PMSI Database Common Stock" shall mean the $0.01 par value common
stock of PMSI Database.
"PMSI Database Disclosure Memorandum" shall mean the written
information entitled "PMSI Database Disclosure Memorandum" delivered prior to
the date of this Agreement to NDC describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made unless such disclosure is reasonably adequate to
inform the other party that each matter disclosed would be responsive to
another section of disclosure in the Disclosure Memorandum.
"PMSI Database Financial Statements" shall mean the PMSI Database
Balance Sheet (including related notes and schedules, if any) and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) with respect to period ended
March 31, 1997.
"PMSI Database Material Adverse Effect" shall mean an event, change
or occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of PMSI Database and its Subsidiaries,
taken as a whole, or (ii) the ability of PMSI Database to perform its
obligations under this Agreement or to consummate the Stock Purchase or the
other transactions contemplated by this Agreement, provided that "Material
Adverse Effect" shall not be deemed to include the impact of (a) actions and
omissions of PMSI Database (or any of its Subsidiaries) taken with the prior
informed written Consent of NDC in contemplation of the transactions
contemplated hereby, and (b) the direct effects of compliance with this
Agreement on the operating performance of PMSI Database, including expenses
incurred by PMSI Database in consummating the transactions contemplated by
this Agreement.
"PMSI Entity" shall mean PMSI and its Subsidiaries.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time in the Wall Street Journal.
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"Proxy Statement" shall mean the proxy statement used by PMSI to
solicit the approval of its stockholders of the transactions contemplated by
this Agreement and the Source Transfer Agreement.
"Purchase Price" shall mean the total consideration to be paid to
PMSI by NDC for the purchase of the PMSI Database Common Stock pursuant to
Section 1.1 of this Agreement as adjusted pursuant to Sections 1.2 and 1.4
hereof.
"Registration Statement" shall mean the Registration Statement on
Form S-4, or other appropriate form, including any pre-effective or post-
effective amendments or supplements thereto, filed with the SEC by NDC under
the 1933 Act with respect to the shares of NDC Common Stock to be issued to
the stockholders of PMSI Database in connection with the transactions
contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the SEC, the NYSE,
the NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other governmental or
regulatory agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a
Person.
"Retained Liability" shall mean all Liabilities and obligations of
PMSI or its Affiliates whether known or unknown, absolute, contingent, or
otherwise, and whether or not related to the Acquired Business, the Acquired
Assets, and the Joint Venture Interest other than Assumed Liabilities,
including but not limited to (i) any Liability or obligation arising or
accruing under any Contract, including the Amended and Restated Alpha
Database License Agreement, prior to the Closing Date and any Liability or
obligation arising from or related to any breach or violation by PMSI or its
Affiliates under any provision of any Contract prior to the Closing Date;
(ii) any Liability of PMSI with respect to any claim or cause of action,
regardless of when made or asserted, which arises out of or in connection
with the operation of the Acquired Business by PMSI or PMSI Database prior to
the Closing Date; and (iii) any Liability of PMSI for the payment of Taxes
relating to the Acquired Business, the Joint Venture Interest or the Acquired
Assets relating to periods prior to the Closing Date except to the extent
reflected in the Closing Balance Sheet and Schedules.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of any Regulatory Authority promulgated thereunder.
-48-
<PAGE>
"SLA" shall mean PMSI Scott-Levin, Inc., a New Jersey corporation.
"Source Entity" shall mean Source and its Subsidiaries other than the
Source Divestiture Subsidiaries.
"Source Divestiture Subsidiaries" shall mean the European
Subsidiaries of Source which are to be sold to PMSI under the Source Transfer
Agreement.
"Source Transfer Agreement" means that certain Securities Transfer
Agreement, dated as of the date hereof, between Source and PMSI.
"Stockholders' Meeting" shall mean the meeting of the stockholders of
PMSI to be held pursuant to Section 5.1, including any adjournment or
adjournments thereof.
"Subsidiaries" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its PMSI
(provided, there shall not be included any such entity the equity securities
of which are owned or controlled in a fiduciary capacity), (ii) in the case
of partnerships, serves as the sole general partner or the managing general
partner, (iii) in the case of a limited liability company, serves as the sole
managing member, or (iv) otherwise has the ability to elect a majority of the
directors, trustees or managing members (or Persons performing similar
functions) thereof.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary
group that includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single
business and unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum,
estimated, or other tax or governmental fee of any kind whatsoever, imposes
or required to be withheld by the United States or any state, county, local
or foreign government or subdivision or agency thereof, including any
interest, penalties, and additions imposed thereon or with respect thereto.
"Third Party Claim" shall mean any Litigation (including, without
limitation, a binding arbitration or an audit by any taxing authority) that
is instituted against an Indemnitee by a Person other than an Indemnitor and
which, if prosecuted successfully, would result in a Loss for which such
Indemnitee is entitled to indemnification hereunder.
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<PAGE>
(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
<TABLE>
<S> <C>
Base Amount Section 1.1
Cash Amount Section 1.1(a)
Closing Section 1.6
Closing Balance Sheet Section 1.3(a)
Closing Current Assets Section 1.3(a)
Closing Current Liabilities Section 1.3(a)
Closing Working Capital Section 1.3(a)
Current Asset Allocation Amount Section 1.4(c)
Current Assets Section 1.2(a)
Current Liabilities Section 1.2(a)
Disputed Amounts Section 1.3(c)
Divestiture Section 4.1(e)
Employees Section 2.13
Estimated Current Assets Section 1.2(a)
Estimated Current Liabilities Section 1.2(a)
Estimated Working Capital Section 1.2(a)
Estimated Working Capital Adjustment Section 1.2(c)
ERISA Affiliate Section 2.14
European Business Section 4.1(e)
European Contracts Section 2.15
Exchange Agent Section 4.1
Final Current Assets Section 1.4(a)
Final Current Liabilities Section 1.4(a)
Final Working Capital Section 1.4(a)
Final Working Capital Deficit Section 1.4(a)
Final Working Capital Surplus Section 1.4(a)
Hired Employees Section 5.11
Indemnitee Section 7.2
Indemnitor Section 7.2
Lower Threshold Price Section 1.1(b)
Maximum Amount Section 7.6
NDC SEC Reports Section 3.4(a)
Noncompetition Agreement Section 6.2(g)
PMSI Database Contracts Section 2.15
Preliminary Balance Sheet Section 1.2(a)
Registration Rights Agreement Section 5.10
Shares Preamble
Stock Purchase Section 1.1
Source Preamble
Source Agreement Preamble
Threshold Amount Section 7.6
Threshold Prices Section 1.1(b)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Total Combined Assets Section 1.4(b)
Total Current Assets Section 1.4(b)
Total Current Liabilities Section 1.4(b)
Total Working Capital Deficit Section 1.4(b)
Total Working Capital Surplus Section 1.4(b)
Upper Threshold Price Section 1.1(b)
Working Capital Section 1.2
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
9.2 Expenses.
--------
(a) Except as otherwise provided in this Section 9.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that each of NDC and PMSIs shall bear and pay one-half of the
filing fees payable in connection with the HSR Act.
(b) Notwithstanding the foregoing, if this Agreement is
terminated by NDC pursuant to Section 8.1(d)(ii) (as relates to approval of
PMSI or PMSI's stockholders) ,
then PMSI Database shall promptly pay NDC all the out-of-pocket costs and
expenses of NDC relating to this Agreement and the Source Agreement not to
exceed $750,000, including costs of counsel, investment bankers, actuaries and
accountants.
(c) Nothing contained in this Section 9.2 shall constitute or shall
be deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
9.3 Brokers and Finders. Except for Cowen & Company as to PMSI Database
--------------------
and PMSI and except for Lazard Freres & Co. LLC as to NDC, each of the Parties
represents and warrants that neither it nor any of its officers, directors,
employees, or Affiliates has employed any broker or finder or incurred any
Liability for any financial advisory fees, investment bankers' fees, brokerage
fees, commissions, or finders' fees in connection with this Agreement or the
transactions contemplated hereby. In the event of a claim by any broker or
finder based upon his or its representing or being retained by or allegedly
representing or being retained by PMSI Database or PMSI or by NDC, each of PMSI
Database and PMSI and NDC, as the case may be, agrees to indemnify and hold the
other Party harmless of and from any Liability in respect of any such claim.
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<PAGE>
9.4 Entire Agreement. Except as otherwise expressly provided herein,
-----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Article 7 with respect to Indemnitees. This Agreement does not constitute an
agreement between the Parties nor shall it be used as evidence of such agreement
until this Agreement has been executed by the Parties.
9.5 Amendments. To the extent permitted by Law, this Agreement may be
-----------
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after stockholder approval of this
Agreement has been obtained; provided, that after any such approval there shall
be made no amendment that pursuant to Section 251 of the DGCL requires further
approval by such stockholders without the further approval of such stockholders.
9.6 Waivers.
-------
(a) Prior to or at the Closing Date, NDC, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by PMSI Database or PMSI, to waive or extend the time for the compliance or
fulfillment by PMSI Database or PMSI of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of NDC under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of NDC.
(b) Prior to or at the Closing Date, PMSI, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by NDC, to waive or extend the time for the compliance or fulfillment by NDC of
any and all of its obligations under this Agreement, and to waive any or all of
the conditions precedent to the obligations of PMSI Database and the PMSI under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of PMSI.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
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<PAGE>
9.7 Assignment. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
9.8 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
PMSI Database or
PMSI: Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
9th Floor
New York, New York 10111
Telecopy Number: (212) 841-5760
Attention: Warren Hauser, Esq.
Copy to Counsel: Willkie Farr & Gallagher
45th Floor, Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopy Number: (212) 821-8111
Attention: William Grant, Esq.
NDC: National Data Corporation
One National Data Plaza
Atlanta, Georgia 30329
Telecopy Number: (404) 728-2990
Attention: E. Michael Ingram, Esq.
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: B. Harvey Hill, Jr., Esq.
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<PAGE>
9.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
9.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
9.11 Captions; Articles and Sections. The captions contained in this
-------------------------------
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
9.12 Interpretations. Neither this Agreement nor any uncertainty or
---------------
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
9.13 Enforcement of Agreement. The Parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
NATIONAL DATA CORPORATION
By: /s/ E. Michael Ingram
----------------------------
Name: E. Michael Ingram
Title: Senior Vice President
PMSI DATABASE HOLDINGS, INC.
By: /s/ Fred Kyle
----------------------------
Name: Fred Kyle
Title: Vice Chairman
PHARMACEUTICAL MARKETING
SERVICES INC.
By: /s/ Fred Kyle
----------------------------
Name: Fred Kyle
Title: Vice Chairman
-55-
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit Number Description
- -------------- -----------
1. Form of Registration Rights Agreement.
2. Matters as to which Willkie Farr & Gallagher will opine.
3. Form of Noncompetition Agreement.
4. Form of SLA Letter Agreement.
5. Matters as to which counsel to NDC will opine.
6. Form of NDC Noncompetition Agreement.
56
<PAGE>
FORM OF
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of ______________, 1997,
between Pharmaceutical Marketing Services Inc., a Delaware corporation ("PMSI"),
and National Data Corporation, a Delaware Corporation (the "Company").
RECITALS
--------
WHEREAS, PMSI is the holder of all of the outstanding capital stock of
PMSI Database Holdings, Inc., a Delaware corporation ("PMSI Database");
WHEREAS, the Company has agreed to purchase, and PMSI has agreed to
sell, all of the outstanding capital stock of PMSI Database pursuant to the
terms and conditions of a Stock Purchase Agreement (the "Stock Purchase
Agreement"), and as partial consideration for such, PMSI will receive shares of
the $.125 par value common stock ("Common Stock") of the Company (the "Shares");
-----------
WHEREAS, the Company, as a condition precedent to PMSI's obligations
under the Stock Purchase Agreement, has agreed to grant PMSI certain
registration rights with respect to the Shares;
WHEREAS, the Company and PMSI desire to define the registration rights
of PMSI on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and for the
consideration in the Stock Purchase Agreement and other good and valuable
consideration, the parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have their respective meanings set forth in the Stock Purchase Agreement.
As used in this Agreement, the following capitalized defined terms shall have
the following meanings:
"Affiliate" of any specified person means (i) any other person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person or (ii) any other person who is a
director or executive officer of (a) such specified person or (b) any person
described in the preceding clause (i). For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities, by agreement or otherwise.
"Commission" means the United States Securities and Exchange
----------
Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
<PAGE>
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Shares covered by such Registration
Statement, and all amendments and supplements to the Prospectus, including post-
effective amendments.
"Registration" means a registration effected pursuant to Section 2
------------
hereof.
"Registration Statement" means a registration statement of the Company
----------------------
on Form S-3 filed pursuant to the provisions of Section 2 hereof or a
registration statement filed pursuant to the Stock Purchase Agreement and made
available for resales of the Shares pursuant to the provisions of Section 3
hereof, amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission promulgated thereunder.
2. Requested Registration. Subject to the terms and conditions set
----------------------
forth herein, PMSI shall have the right, on one occasion only, by written notice
(the "Demand Notice") not later than one year from the Closing Date, __________,
1997 (the "Demand Period"), given to the Company to request the Company to
register all or part of the Shares under and in accordance with the provisions
of the Securities Act.
(a) The Company shall, as promptly as practicable (but in no event
more than 30 days after so required or requested pursuant to this Section 2),
file with the Commission a Registration Statement relating to the offer and sale
of the Shares by PMSI.
(b) The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act on or prior to 45
days after filing such Registration Statement pursuant to this Section 2 and to
keep such Registration Statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Shares until the
earlier of (i) such time as all of such Shares have been disposed of in
accordance with the intended methods of disposition by PMSI set forth in such
Registration Statement or (ii) the expiration of 90 days after such Registration
Statement becomes effective.
(c) PMSI may not include any Shares in a Registration Statement and
will forfeit its right under this Agreement unless PMSI furnishes to the Company
in writing, within 10 business days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
Registration Statement or Prospectus or preliminary Prospectus included therein.
PMSI agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by PMSI not misleading.
-2-
<PAGE>
3. Shelf Registration.
------------------
(a) The Company shall use its reasonable efforts to cause the
Registration Statement filed on Form S-4 in connection with the issuance of
shares pursuant to the Stock Purchase Agreement to be available for the offer
and sale of the Shares by PMSI (the "S-4 Registration Statement"), and shall use
its best efforts to keep such Registration Statement continuously effective from
the date such S-4 Registration Statement is declared effective for a period (the
"S-4 Effective Period") of 90 days from the Closing Date of the Stock Purchase
Agreement or until PMSI has completed the distribution described in the S-4
Registration Statement, whichever is earlier, in order to permit the Prospectus
forming a part thereof to be usable by PMSI during such period.
(b) Subject to Section 4 hereof, the Company shall supplement or amend
the S-4 Registration Statement, as required by Form S-4 or by the instructions
applicable to such registration form or by the Securities Act or the rules and
regulations promulgated thereunder. The Company shall furnish to PMSI copies of
any such supplement or amendment sufficiently in advance (but in no event less
than five business days in advance) of its use and/or filing with the Commission
to allow PMSI a meaningful opportunity to comment thereon.
4. Holdback Agreement; Postponement. The Company shall be entitled to
--------------------------------
postpone the filing of any Registration Statement otherwise required to be
prepared and filed by the Company pursuant to Section 2 or 3, or to cause such a
Registration Statement that has previously been filed and declared effective to
be withdrawn and the effectiveness thereof to be terminated, for a reasonable
period of time, but not in excess of 90 days (a "Delay Period"), if the Board of
Directors of the Company determines in good faith that (i) the required
financial statements are unavailable for reasons beyond the Company's control,
(ii) the registration and distribution of the Shares covered or to be covered by
such Registration Statement would materially interfere with any pending or
contemplated material public offering of equity securities by the Company, or
(iii) the registration and distribution of the Shares covered or to be covered
by the Registration Statement would require premature disclosure by the Company
of any material corporate development (including potential material business
combination and merger and acquisition transactions) affecting the Company and
the Company promptly gives PMSI written notice of such determination, containing
a general statement of the reasons for such postponement or withdrawal and an
approximation of the period of the anticipated delay; provided, however, that
(x) PMSI will not disclose the information contained in such statement and will
not buy or sell shares of any publicly traded class of the Company's capital
stock until such information is publicly disclosed by the Company and (y) the
Company may not utilize this right more than twice in any twelve (12) month
period. If the Company shall so postpone the filing of a Registration
Statement, PMSI shall have the right to withdraw the request for registration by
giving written notice to the Company within 30 days after receipt of the notice
of postponement. Should PMSI withdraw its request for registration pursuant to
Section 4, PMSI shall continue to have the right to request that the Company
register the Shares pursuant to Section 2. Should the Company initiate a Delay
Period with regard to the S-4 Registration Statement, then the S-4 Effective
Period, if the Delay Period shall occur during the S-4 Effective Period, shall
be extended for a number of days equal to the number of days in the Delay Period
-3-
<PAGE>
and the Demand Period, if the Delay Period shall occur after the expiration of
the S-4 Effective Period, shall be extended for a period equal to the Delay
Period.
5. Registration Procedures. In connection with any Registration
-----------------------
Statement the following provisions shall apply:
(a) The Company shall furnish to PMSI, prior to the filing
thereof with the Commission, a copy of any Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the Prospectus
included therein.
(b) The Company shall use its best efforts to provide that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Securities Act and the
Exchange Act and the rules and regulations thereunder;
(ii) any Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and
(iii) any Prospectus forming part of any Registration Statement,
including any amendment or supplement to such Prospectus, does not
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c)(1) The Company shall advise PMSI:
(i) when a Registration Statement and any amendment thereto has
been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) The Company shall promptly advise PMSI:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceedings for that purpose;
-4-
<PAGE>
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares included
therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of
such date, the Registration Statement or the Prospectus does not
include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were
made) not misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite
changes have been made).
PMSI agrees that upon receipt of any notice from the Company of the existence of
any fact of the kind described in paragraph (iii) above, PMSI will forthwith
discontinue disposition of Shares pursuant to the Registration Statement until
PMSI's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(i) hereof, or until it is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Company, PMSI will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies then in
PMSI's possession, of the Prospectus concerning such Shares that was current at
the time of receipt of such notice.
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement.
(e) The Company shall furnish to PMSI, without charge, at least
one copy of such Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if PMSI so requests
in writing, all exhibits thereto (including those incorporated by reference).
(f) The Company shall deliver to PMSI, without charge, as many
copies of the Prospectus (including each preliminary Prospectus) included in
such Registration Statement and any amendment or supplement thereto as PMSI may
reasonably request; and the Company consents to the use of the Prospectus or any
amendment or supplement thereto by PMSI in connection with the offering and sale
of the Shares covered by the Prospectus or any amendment or supplement thereto.
(g) Prior to any offering of Shares pursuant to a Registration
Statement, the Company shall register or qualify the Shares for offer and sale
under the securities or blue sky laws of such states as PMSI reasonably requests
in writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such states of the Shares covered by such
Registration Statement; provided however, that the Company will not be required
to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not then so qualified, to file any general consent
to service of process or to take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
to subject
-5-
<PAGE>
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject.
(h) The Company shall cooperate with PMSI to facilitate the
timely preparation and delivery of certificates representing Shares to be sold
pursuant to a Registration Statement free of any restrictive legends and
registered in such names as PMSI may request prior to sales of Shares pursuant
to such Registration Statement.
(i) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 5, the Company shall use its best efforts to
promptly prepare and file a post-effective amendment to any Registration
Statement or an amendment or supplement to the related Prospectus or any other
required document so that, as thereafter delivered to purchasers of the Shares,
the Prospectus will not include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(j) The Company shall use its best efforts to cause the Shares
included in a Registration Statement to be listed on the New York Stock Exchange
or on such other securities exchange or national quotation system on which any
of the Common Stock is then listed.
(k) The Company shall enter into customary agreements (including
without limitation, an underwriting agreement in customary form if PMSI shall
have informed the Company that it intends to distribute the Shares by means of
an underwriting) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Shares included in the
Registration Statement.
(l) The Company shall make available for inspection by any
managing underwriter participating in any disposition pursuant to any
Registration Statement, and any attorney, accountant or other agent retained by
PMSI or any managing underwriter (collectively, the "Agents") all financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause the
officer, directors and employees of the Company and its subsidiaries to supply
all information reasonably requested by any such Agent in connection with such
registration; provided that (i) Records and information obtained herein shall be
used by such persons only to fulfill their due diligence responsibility and (ii)
Records or information which the Company determines in good faith to be
confidential shall not be disclosed by the Agents unless (x) the Company
determines that the disclosure of such Records of information is necessary to
avoid or correct a material misstatement or omission in the Registration
Statement or (y) the release of such Records or information is required by law.
(m) The Company shall use its best efforts to furnish to the
underwriters, if any, in an offering of Shares (i) at the effective date of such
Registration Statement and the date of the closing of the sale of the Shares to
the underwriters in such offering, if any, a "comfort letter" signed by the
independent certified public accountants who have certified the financial
statements included or incorporated by reference in such registration statement,
covering such matters as are customarily covered in "comfort letters" for
similar offerings and (ii) at the date of the closing of
-6-
<PAGE>
the sale of the Shares to the underwriters in such offering, a signed opinion of
counsel for the Company, dated the closing date of such offering, covering such
matters are customarily covered in opinion letters for similar offerings.
(n) The Company may require PMSI to furnish to the Company such
information regarding PMSI and the distribution of the Shares as the Company may
from time to time reasonably require for inclusion in such Registration
Statement and such other information as may be necessary or advisable in the
reasonable opinion of the Company and its counsel, in connection with any
Registration Statement. PMSI shall not be entitled to use a Prospectus unless
and until PMSI shall have furnished the reasonably requested information
required by this Section 5(n), and shall have committed to notify the Company
promptly of any change in such information.
(o) Notwithstanding the foregoing, the Company will not be
required to undertake those actions discussed in Sections 4(k), (l) and (m) and
PMSI will not be permitted to effect an underwritten offering, unless the total
aggregate value of the Shares to be offered in such proposed offering as of the
date that PMSI notifies the Company requesting an underwritten offering shall be
in excess of $10,000,000.
5. Registration Expenses. The Company shall bear all expenses
---------------------
incurred by the Company in connection with the performance of its obligations
under Sections 2, 3 and 5 hereof, provided however, that the Company shall have
no obligation to bear any expenses incurred by PMSI and provided further that
the Company shall not bear any expenses comprising underwriters' commissions or
brokerage fees.
6. Indemnification and Contribution. (a) In connection with a
--------------------------------
Registration Statement, the Company agrees to indemnify and hold harmless to the
fullest extent lawful PMSI, the directors, officers, employees and agents of
PMSI and each person who controls PMSI within the meaning of either the
Securities Act or the Exchange Act, against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability (or action
in respect thereof); provided however, that the Company will not be liable in
any case to the extent that any such loss, claim, damage or liability (A) arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of PMSI
specifically for inclusion therein or (B) are caused by an untrue statement or
omission that was contained or made in any preliminary
-7-
<PAGE>
prospectus and corrected in the related Prospectus or any supplement or
amendment thereto and (1) any such losses, claims, damages, liabilities or
expenses suffered or incurred by any indemnified party resulted from an action,
claim or suit by any person who purchased Shares from PMSI in the offering to
which such Prospectus relates, (2) PMSI failed to deliver or provide a copy of
such Prospectus or any such supplement or amendment thereto to such person at or
prior to the confirmation of the sale of such Shares in any case where such
delivery is required by the Securities Act and (3) such Prospectus (as so
amended and supplemented) would have cured the defect giving rise to such loss,
liability, claim, damage or expense. The indemnification provided herein will be
in addition to any liability that the Company may otherwise have.
(b) PMSI agrees to indemnify and hold harmless the Company, its
directors, officers, employees, agents and each person who controls the Company
within the meaning of either the Securities Act or the Exchange Act to the same
extent as the foregoing indemnity from the Company to PMSI, but only with
respect to written information furnished to the Company by or on behalf of PMSI
specifically for inclusion in the documents referred to in the foregoing
indemnity and provided further that the obligation of PMSI hereunder shall be
limited to an amount equal to the proceeds to PMSI of Shares sold pursuant to
any such Registration Statement to which this indemnity relates. This indemnity
agreement will be in addition to any liability that PMSI may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of rights and
defenses, and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel (including local counsel) of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided however, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense
-8-
<PAGE>
of the indemnifying party (it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any time for such
indemnified persons). An indemnifying party or an indemnified party will not,
without the prior written consent of the indemnified parties or the indemnifying
parties, as the case may be, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties or the indemnifying parties,
as the case may be, are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party or indemnifying party, as the case may be, from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall have an obligation to contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending the
same) (collectively "Losses") to which such indemnified party may be subject in
such proportion as is appropriate to reflect the relative benefits received by
such indemnifying party, on the one hand, and such indemnified party, on the
other hand, from the Registration Statement that resulted in such Losses. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission relates to information
provided by the indemnifying party, on the one hand, or by the indemnified
party, on the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities, expenses or judgments referred to above shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified person in connection with investigating or defending any such action
or claim. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that did not take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 7(d), notify such
party or parties from whom contribution may be sought, but the failure to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 7(d) or otherwise. No party shall be liable for contribution with
respect to any
-9-
<PAGE>
action or claim settled without its prior written consent; provided however,
that such written consent was not unreasonably withheld.
(e) The provisions of this Section 7 will remain in full force
and effect, regardless of any investigation made by or on behalf of PMSI or the
Company or any of the officers, directors or controlling persons referred to in
Section 7 hereof, and will survive the sale by PMSI of Shares covered by a
Registration Statement.
7. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of restricted securities to the public without registration, the Company
agrees to:
(i) make and keep public information available as those terms are
understood and defined in Rule 144;
(ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(iii) for a period of two years from the Closing Date, furnish to
PMSI upon request, a written statement by the Company as to its compliance with
the reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as PMSI may reasonably
request in availing itself of any rule or regulation of the Commission allowing
PMSI to sell any such securities without registration.
8. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not, as of the
--------------------------
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement that conflicts with the rights granted to PMSI herein or
otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
agreement of PMSI.
(c) Notices. All notices and other communications provided for
-------
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
-10-
<PAGE>
(i) If to PMSI:
Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
9th Floor
New York, New York 10111
Attn: Warren Hauser
with a copy to:
Willkie Farr & Gallagher
45th Floor, Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: William Grant, Esq.
If to the Company:
National Data Corporation
One National Data Plaza
Atlanta, Georgia 30329
Attn: E. Michael Ingram, Esq.
with a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: B. Harvey Hill, Esq.
All such notices and communications shall be deemed to have been
duly given when received. PMSI, on the one hand, or the Company, on the other,
by notice to the other party or parties may designate additional or different
addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties. PMSI may not assign its rights under this Agreement without the prior
written consent of the Company.
(e) Counterparts. This agreement may be executed in any number
------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
-11-
<PAGE>
(f) Headings. The headings in this agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
(h) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the Company and PMSI with respect to the subject matter
hereof, superseding all prior or contemporaneous negotiations, communications,
discussions and correspondence concerning the subject matter hereof.
NATIONAL DATA CORPORATION
By:
---------------------------------
Name:
Title:
PHARMACEUTICAL MARKETING
SERVICES INC.
By:
---------------------------------
Name:
Title:
-12-
<PAGE>
Exhibit 2
<PAGE>
MATTERS AS TO WHICH WILLKIE FARR & GALLAGHER OR GENERAL
COUNSEL TO PHARMACEUTICAL MARKETING SERVICES INC. WILL OPINE
1. PMSI Database is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full corporate
power and authority to carry on the business in which it is engaged, and to own
and use its Assets.
2. PMSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to carry on the business in which it is engaged, and to own and use
its Assets.
3. The authorized capital stock of PMSI Database consists of 1,000
shares of PMSI Database Common Stock, of which 100 shares were issued and
outstanding as of _________, 1997. PMSI owns all right, title and interest
(legal and beneficial) in and to all of the issued and outstanding shares of the
PMSI Database Common Stock free and clear of all Liens. The shares of PMSI
Database Common Stock that are issued and outstanding were not issued in
violation of any statutory preemptive rights of stockholders, were duly issued
and are fully paid and nonassessable under the Delaware General Corporation
Law.To our knowledge, except as set forth above, or as disclosed in Section 2.4
of the PMSI Database Disclosure Memorandum, as of _________, 1997, there were no
shares of capital stock or other equity securities of PMSI Database outstanding
and no outstanding Equity Rights relating to the capital stock of PMSI Database.
4. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Certificate
of Incorporation or Bylaws of PMSI Database or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default or
acceleration under any Contract, Law, Order or Permit to which PMSI Database is
a party or by which PMSI Database is bound.
5. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Certificate
of Incorporation or Bylaws of PMSI or, to our knowledge but without any
independent investigation, result in any conflict with, breach of, or default or
acceleration under any Contract, Law, Order or Permit to which PMSI is a party
or by which PMSI is bound.
6. The Agreement has been duly and validly executed and delivered by
PMSI Database and PMSI and, assuming valid authorization, execution and delivery
by Dunkirk and Sub, constitutes a valid and binding agreement of PMSI Database
and PMSI enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, provided, however, that we express no opinion as to
the availability of the equitable remedy of specific performance.
<PAGE>
Exhibit 3
<PAGE>
NON COMPETITION AND NON SOLICITATION AGREEMENT
THIS AGREEMENT is made and effective on this ___ day of ________, 1997 (the
"Effective Date"), between National Data Corporation, a Delaware corporation
("NDC"), and Pharmaceutical Marketing Services Inc., a Delaware corporation
("Seller") and PMSI Scott-Levin Inc., a New Jersey Corporation ("SLA")
W I T N E S S E T H:
--------------------
WHEREAS, the undersigned is the sole stockholder of PMSI Database Holdings,
Inc., a corporation organized and existing under the laws of the State of
Delaware ("PMSI Database"), and will become a stockholder of NDC pursuant to
transactions described in the Stock Purchase Agreement, dated as of August 19,
1997 (the "Stock Purchase Agreement"), by and among NDC, PMSI and PMSI
Database.
WHEREAS, the parties hereto have agreed to execute and deliver this
Agreement contemporaneously with the consummation of the transactions
contemplated by the Stock Purchase Agreement.
WHEREAS, PMSI Database is engaged in and throughout the United States in
the Business.
AGREEMENT
---------
In consideration of the consummation of the transactions contemplated by
the Stock Purchase Agreement and the above premises and the mutual agreements
hereinafter set forth, the parties agree as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have the meanings assigned to those terms in the Stock Purchase Agreement.
Other capitalized terms shall be defined as follows:
(a) "Area" shall mean the following States and/or territories: Alabama,
----
Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware,
District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire,
New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio,
Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia,
Wisconsin, Wyoming.
<PAGE>
(b) "Competing Business" shall mean any business organization of
------------------
whatever form engaged, either directly or indirectly, in any business or
enterprise which is the same as, or substantially the same as, any of the
Business.
(c) "Business" shall mean (x) the development, use or exploitation of
--------
prescription databases for one or more of the following activities: (i)
management of sales force, (ii) measurement of sales force performance or
product performance, or (iii) the creation of physician profiles for targeting
purposes or (y) the survey of physicians to develop profiles of over-the-
counter drug use .
(d) "Proprietary Information" shall mean information related to PMSI
-----------------------
Database (i) which derives economic value, actual or potential, from not being
generally known to, or readily ascertainable by, other Persons who can obtain
economic value from its disclosure or use and, (ii) which is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
Assuming the foregoing criteria are met, Proprietary Information includes, but
is not limited to, the financial affairs, processes, services, customers,
employees, employees' compensation, research, development, inventions,
existing and future products and services, product and service plans and
designs, manufacturing, purchasing, accounting, engineering, distribution
systems, marketing, formulae, patterns, compilations, programs, methods,
techniques, drawings, and suppliers of PMSI Database.
(f) Restricted Period" shall mean the period commencing with the
-----------------
Effective Time and ending on the fifth (5th) anniversary thereof.
2. Agreement Not to Compete.
------------------------
Unless otherwise consented to in writing by NDC, Seller agrees that during
the Restricted Period neither it nor any Affiliate will, within the Area,
either directly or indirectly, on its own behalf or in the service or on
behalf of others, engage in any Competing Business, or own a beneficial
interest in any Competing Business (other than a passive investment in a
Competing Entity not to exceed 5% of the outstanding voting securities of such
entity); provided, however, that the foregoing restriction shall not apply to
activities or businesses in which PMSI Scott-Levin, Inc. ("SL") is engaged as
of the closing date of the Stock Purchase Agreement. The parties hereto
further agree that the use by SL of databases obtained from Source Informatics
America Inc. ("SIA") pursuant to that certain Services Agreement, dated as of
the date of this Agreement, by and between SL and SIA (the "SL Agreement") or
from any third party, in accordance with the parameters set forth in the SL
Agreement, shall not constitute Business within the meaning of this Agreement.
3. Agreement Not to Solicit Customers.
----------------------------------
Seller agrees that during the Restricted Period, neither it nor any
Affiliate will, without the prior written consent of NDC, either directly or
indirectly, on its own behalf
-2-
<PAGE>
or in the service or on behalf of others, (i) solicit, divert or appropriate
to or for a Competing Business any Person or entity which is a customer of the
Business at the Effective Time or was such a customer during the two (2) year
period preceding the Effective Time, or (ii) attempt to solicit, divert or
appropriate to or for a Competing Business, any such Person or entity.
4. Agreement Not to Solicit Employees.
----------------------------------
Seller agrees that during the Restricted Period, neither it nor any
Affiliate will, without the prior written consent of NDC, either directly or
indirectly, on its own behalf or in the service or on behalf of others,
solicit, divert, or hire away, or attempt to solicit, divert, or hire away,
from the employment of PMSI Database or other NDC Entity conducting the
Business, any Person employed by such entity, whether or not such employee is
a full-time employee or temporary employee of such entity, and whether or not
such employment is pursuant to written agreement and whether or not such
employment is for determined period or is at will.
5. PMSI Scott-Levin
----------------
SLA agrees that it shall be bound by the provisions of this Agreement,
regardless of whether it is or is not an Affiliate of PMSI, until the earlier
of the (i) the expiration of the Restricted Period and (ii) the termination by
both SLA and Source Informatics Inc. of that certain Service Agreement dated
as of the date hereof between SLA and Source Informatics Inc. The provisions
of this Section 5 shall not supersede any other provisions of this Agreement
6. Confidentiality.
---------------
(a) Seller (i) will hold the Proprietary Information in strictest
confidence, and (ii) will not use, duplicate, reproduce, distribute, disclose
or otherwise disseminate the Proprietary Information for a period of five (5)
years immediately following the Effective Date. Seller will not make any
disclosure of Proprietary Information during such period unless (and then only
to the extent that) (i) Seller has been advised by independent legal counsel
that such disclosure is required by law and then only after prior written
notice is given to NDC when Seller becomes aware that such disclosure has been
requested and is required by law, (ii) such Proprietary Information relates to
other properties or business of Parent and its Affiliates, (iii) is necessary
for tax or securities laws filings, or (iv) becomes generally known to and
available for use to the public.
(b) Any and all reproductions of the Proprietary Information in the
custody or control of Seller will prominently display a confidentiality
legend.
(c) Seller warrants and represents that on or before the date hereof,
and except for such information permitted to be disclosed under Section 5(a)
above, Seller has
-3-
<PAGE>
destroyed or has delivered to NDC all tangible copies and embodiments of the
Proprietary Information in its possession or control.
7. Remedies.
--------
(a) Seller acknowledges and agrees that, by virtue of its relationship
with NDC, great loss and irreparable damage would be suffered by NDC and its
Affiliates, including, without limitation, damage to the goodwill and
proprietary interests of NDC and its Affiliates, if Seller or any of its
Affiliates should breach or violate any of the terms or provisions of the
covenants and agreements set forth in Sections 2, 3, 4, and 5 hereof. Seller
further acknowledges and agrees that each such covenant and agreement is
reasonable and necessary to protect and preserve the interests of NDC.
(b) The parties acknowledge and agree that any breach of Sections 2, 3,
4, or 5 of this agreement by Seller or any of its Affiliates would result in
irreparable injury to NDC, and therefore Seller agrees and consents that NDC
shall be entitled to a temporary restraining order and a permanent injunction
to prevent a breach or contemplated breach of any of the covenants or
agreements of Seller and its Affiliates contained herein.
(c) The parties further agree that the remedies provided for in Sections
6(a) and (b) above shall not be the exclusive remedies of NDC for a breach of
any of the provisions hereunder.
8. Severability.
------------
Seller agrees that the covenants and agreements contained in Sections 2, 3,
4, 5 and 6 of this Agreement are of the essence of this Agreement; that each
such covenant was agreed to by NDC and Seller as part of the transactions
contemplated by the Stock Purchase Agreement; that Seller has received good,
adequate and valuable consideration for each of such covenants; that each of
such covenants is reasonable and necessary to protect and preserve the
interests and properties of NDC; that PMSI Database is engaged in the Business
throughout the Area; that irreparable loss and damage will be suffered by NDC
should Seller or any Affiliate breach any of such covenants and agreements;
that each of such covenants and agreements is separate, distinct and severable
not only from the other of such covenants and agreements but also from other
and remaining provisions of this Agreement; and, that the invalidity or
unenforceability of any such covenant or agreement shall not effect the
validity or enforceability of any other such covenants or agreements or any
other provision or provisions of this Agreement. Further, if any provision of
this Agreement is ruled invalid or unenforceable by a court of competent
jurisdiction because of a conflict between such provision and any applicable
law or public policy, such provision shall be redrawn by such court to the
extent required to make such provision consistent with, and valid and
enforceable under, such law or public policy, and as redrawn may be enforced
against Seller or any Affiliate.
-4-
<PAGE>
9. Consideration.
-------------
In consideration for the execution of this Agreement, and as part of the
transactions contemplated by the Stock Purchase Agreement, Seller shall
receive from NDC $1,000. Further, Seller acknowledges and agrees that the
terms of this Agreement contained herein are reasonable in light of the good,
adequate and valuable consideration which Seller shall receive pursuant to the
Stock Purchase Agreement.
10. Assignment.
----------
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
and the rights and obligations of the parties hereunder may not be assigned by
any party, except that NDC may assign this Agreement (or any portion thereof)
to NDC or any successor to any of the Business.
11. Waiver.
------
The waiver by NDC of any breach of this Agreement by Seller shall not be
effective unless in writing, and no such waiver shall operate or be construed
as the waiver of the same or another breach on a subsequent occasion.
12. Governing Law.
-------------
This Agreement and the rights of the parties hereunder shall be governed
by, and construed in accordance with, the laws of the State of _____________.
13. Amendment.
---------
No amendment or modification of this Agreement shall be valid or binding
upon NDC or Seller unless made in writing and signed by the parties hereto.
14. Captions and Section Headings.
-----------------------------
Captions and section headings used herein are for convenience only and are
not a part of this Agreement and shall not be used in construing it.
-5-
<PAGE>
15. Notices.
-------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have duly been given if delivered or if
mailed, by United States certified or registered mail, prepaid to the parties
or their assignees at the following addresses (or at such other addresses as
shall be given in writing by the parties to one another):
PMSI: Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
9th Floor
New York, New York 10111
Telecopy Number: (212) 841-5760
Attention: Warren Hauser, Esq.
Copy to Counsel: Willkie Farr & Gallagher
45th Floor, Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopy Number: (212) 821-8111
Attention: William Grant, Esq.
NDC: National Data Corporation
One National Data Plaza
Atlanta, Georgia 30329 Corporation
Telecopy Number: (404) 728-2900
Attention: E. Michael Ingram, Esq.
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: B. Harvey Hill, Jr., Esq.
16. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which
will be deemed original, but all of which together shall constitute one and
the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, NDC and SELLER have each executed and delivered this
Agreement as of the date first written above.
NATIONAL DATA CORPORATION
By:
------------------------------
Title:
---------------------------
PHARMACEUTICAL MARKETING
SERVICES INC.
By:
------------------------------
Title:
---------------------------
PMSI SCOTT-LEVIN INC.
By:
------------------------------
Title:
---------------------------
-7-
<PAGE>
Exhibit 4
<PAGE>
________________, 1997
National Data Corporation
One National Data Plaza
Atlanta, Georgia 30329
Ladies and Gentlemen:
Reference is made to that certain Stock Purchase Agreement by and among
National Data Corporation ("NDC"), PMSI Database Holdings, Inc. ("PMSI
Database") and Pharmaceutical Marketing Services Inc. ("PMSI") dated as of
even date herewith pursuant to which NDC has agreed to purchase from PMSI all
of the issued and outstanding capital stock of PMSI Database and that certain
Service Agreement (the "Glaxo Contract") dated May 3, 1996 among Source
Informatics America Inc., PMSI Scott Levin Inc. ("SLA") and Glaxo Wellcome
Inc. ("Glaxo").
The undersigned hereby agrees that it shall, unless notified otherwise in
writing by NDC, continue to provide services to Glaxo in accordance with and
pursuant to the terms of the Glaxo Contract. NDC hereby agrees by signing
below that it shall pay to SLA fees and revenues from the Glaxo Contract in
such amounts (or percentages) and manner as is consistent with past
practices. [Further detail regarding fees and revenues in definitive
version].
NDC hereby agrees that in connection with the foregoing, it shall afford to
SLA audit rights substantially similar to that afforded by SLA to Source
Informatics Inc. ("SI") as set forth in Schedule A-2 to that certain Service
Agreement, dated the date hereof, between SLA and SI with the same to be
specified in more detail in the definitive version.
PMSI SCOTT-LEVIN INC.
By:
---------------------------
Name:
-----------------------
Title:
----------------------
ACCEPTED AND AGREED
NATIONAL DATA CORPORATION
By:
----------------------
Name:
------------------
Title:
-----------------
<PAGE>
Exhibit 5
<PAGE>
MATTERS AS TO WHICH GENERAL COUNSEL OF NATIONAL DATA
CORPORATION OR ALSTON & BIRD LLP WILL OPINE
1. NDC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate
power and authority to carry on the business in which it is engaged, and to
own and use it Assets.
2. The execution and delivery of the Agreement and compliance with
its terms do not and will not violate or contravene any provision of the
Certificate of Incorporation or Bylaws of NDC or, to our knowledge but without
any independent investigation, any Law or Order to which NDC is a party or by
which NDC is bound.
3. The Agreement has been duly and validly executed and delivered
by NDC, and assuming valid authorization, execution and delivery by PMSI
Database and PMSI, constitutes a valid and binding agreement of Dunkirk
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or similar laws affecting
creditors' rights generally, provided, however, that we express no opinion as
to the availability of the equitable remedy of specific performance.
4. The shares of NDC Common Stock to be issued to PMSI as
contemplated by the Agreement have been registered under the Securities Action
of 1933, as amended, have been duly authorized and, when properly issued and
delivered following consummation of the Stock Purchase, will be validly
issued, fully paid and non-assessable under the Delaware General Corporation
Law and will not be issued in violation of any statutory preemptive rights of
stockholders.
<PAGE>
Exhibit 6
<PAGE>
FORM OF NDC NONCOMPETITION AGREEMENT
_________________, 1997
Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
New York, New York 10111
Ladies and Gentlemen:
Reference is hereby made to that certain Stock Purchase Agreement (the "Stock
Purchase Agreement") dated as of August 20, 1997, by and among National Data
Corporation, a Delaware corporation ("NDC"), Pharmaceutical Marketing Services
Inc., a Delaware corporation ("PMSI") and PMSI Database Holdings, Inc., a
Delaware corporation and that certain Securities Transfer Agreement (the
"Securities Transfer Agreement") dated as of August 20, 1997 by and between
PMSI and Source Informatics Inc., a Delaware corporation. Capitalized terms
used herein without definition shall have the meanings set forth in the form
of Software License Agreement attached as Exhibit A to the Securities Transfer
Agreement.
In consideration of the consummation of the transactions contemplated by the
Stock Purchase Agreement and the Securities Transfer Agreement, the
undersigned hereby agrees that it will be bound by the provisions of Section
9.2 of the Software License Agreement as fully as if it had been a party
thereto. The undersigned further agrees that for so long as Licensor would
have been bound under the provisions of Section 9.2 of the Software License
Agreement, the undersigned shall not, directly or indirectly, solicit, divert
or appropriate any Person who is a customer of the Business in the Territory
for the benefit of competing Business in the Territory or any person employed
in the Business by PMSI or its Subsidiaries in the Territory.
The undersigned acknowledges the reasonableness of the geographic area and
duration of time which are part of the covenant set forth above. The
undersigned further agrees that if any provision of this letter agreement is
ruled invalid or unenforceable by a court of competent jurisdiction because of
a conflict between said provision and any applicable law or policy, such
provision shall be redrawn by such court to the extent required to make such
provision consistent with, and valid and enforceable under, such law or
public policy, and as redrawn may be enforced against the undersigned.
Very truly yours,
NATIONAL DATA CORPORATION
By:
----------------------
Name:
------------------
Title:
-----------------
<PAGE>
Exhibit 5.1
[LETTERHEAD OF ALSTON & BIRD LLP APPEARS HERE]
October 28, 1997
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329-2010
Re: Registration Statement on Form S-4 Covering a
Maximum of 1,059,829 Shares of Common Stock
Registration No. 333-35991
-------------------------------------------
Ladies and Gentlemen:
This opinion is being rendered in connection with that certain Stock
Purchase Agreement, dated as of August 20, 1997 (the "Stock Purchase
Agreement"), by and among PMSI Database Holdings, Inc. ("PMSI Database"), a
wholly-owned subsidiary of Pharmaceutical Marketing Services, Inc. ("PMSI"),
PMSI, and National Data Corporation (the "Company"), in which the Company will
issue up to 1,059,829 shares of its $.125 par value per share common stock (the
"Shares"), upon the terms and conditions set forth in its Registration Statement
on Form S-4 (the "Registration Statement"), as filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
on September 19, 1997 as amended.
As counsel for the Company, we have examined such corporate records and
documents as we have deemed relevant and necessary as the basis for this
opinion, and we are familiar with the actions taken by the Company in connection
with the authorization, registration, issuance, and sale of the Shares.
Based upon the foregoing, it is our opinion that the Shares will, upon
their issuance in accordance with the terms and conditions set forth in the
Stock Purchase Agreement, be duly authorized and validly issued, fully paid and
non-assessable under the Delaware General Corporation Law as in effect on this
date.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and the reference to our firm in the section entitled
"Legal Matters."
Very truly yours,
ALSTON & BIRD LLP
By: /s/ Joel J. Hughey
--------------------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the use of our report
included herein and to the incorporation by reference of our reports dated July
16, 1997 (except with respect to Note 18, for which the date is August 20, 1997)
included in National Data Corporation's Annual Report on Form 10-K for the year
ending May 31, 1997 (and to all references to our Firm) included in or made a
part of this registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
October 28, 1997
