<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NATIONAL DATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389 58-0977458
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION) CLASSIFICATION CODE
NUMBER)
---------------
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
(404) 728-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
E. MICHAEL INGRAM
GENERAL COUNSEL AND SECRETARY
NATIONAL DATA CORPORATION
NATIONAL DATA PLAZA
ATLANTA, GEORGIA 30329-2010
(404) 728-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
JOEL J. HUGHEY DAVID S. GELLER SCOTT F. SMITH
MARK F. MCELREATH PHYSICIAN SUPPORT SYSTEMS, INC. KELLY VANCE
ALSTON & BIRD LLP ROUTE 230 AND EBY-CHIQUES ROAD HOWARD, DARBY & LEVIN
ONE ATLANTIC CENTER MT. JOY, PENNSYLVANIA 17552 1330 AVENUE OF THE
1201 WEST PEACHTREE (717) 653-5340 AMERICAS
STREET NEW YORK, NEW YORK 10019
ATLANTA, GEORGIA 30309- (212) 841-1000
3424
(404) 881-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE (2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (including
rights to purchase
shares of Common Stock
or Series A Junior
Participating
Preferred Stock)..... 4,572,159 shares Not Applicable Not Applicable $48,374
</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 merger (the "Merger") of a subsidiary of the
Registrant with and into Physician Support Systems, Inc. ("PSS"), assuming
exercise of all rights to purchase common stock, par value $.001 per
share, of PSS ("PSS Common Stock").
(2) Pursuant to Rules 457(c) and 457(f)(1), the registration fee was computed
on the basis of $15.1875 (the average of the high and low prices of PSS
Common Stock as reported on the Nasdaq National Market on November 10,
1997) multiplied by 10,510,708 (the maximum aggregate number of shares of
PSS Common Stock, including 776,998 shares subject to issuance pursuant to
outstanding stock options, to be converted and cancelled in the Merger)
and divided by 3300.
---------------
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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PHYSICIAN SUPPORT SYSTEMS, INC.
ROUTE 230 AND EBY-CHIQUES ROAD
MT. JOY, PENNSYLVANIA 17552
, 1997
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders
("Special Meeting") of Physician Support Systems, Inc. ("PSS") to be held at
The Harvard Club, 27 West 44th Street, New York, New York 10036, at 9:30 a.m.,
local time, on , 1997.
At this important meeting, you will be asked to consider and vote upon the
adoption of the Agreement and Plan of Merger, dated as of October 14, 1997
(the "Merger Agreement"), which provides for the merger (the "Merger") of a
wholly-owned subsidiary of National Data Corporation ("NDC") with and into
PSS. If the proposed Merger is consummated, PSS will become a wholly-owned
subsidiary of NDC and each outstanding share of PSS capital stock will be
converted into the right to receive 0.435 shares of NDC common stock, subject
to adjustment as set forth in the Merger Agreement and described in the
enclosed Proxy Statement/Prospectus (the "Exchange Ratio"). Adoption of the
Merger Agreement requires the affirmative vote of the holders of a majority of
the shares of PSS common stock present in person or represented by proxy at
the Special Meeting and entitled to vote on the subject matter presented.
Enclosed are the: (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, and (iii) Proxy for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the Merger Agreement and the
Merger, including a description of the conditions to consummation of the
Merger and the effects of the Merger on the rights of PSS stockholders, and
contains financial and other information about PSS. PLEASE GIVE THIS
INFORMATION YOUR CAREFUL ATTENTION.
The Board of Directors of PSS has carefully considered the terms and
conditions of the proposed Merger, and in connection with its approval of the
Merger, the Board of Directors of PSS has received a written opinion from its
financial advisor, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), to the effect that, based upon and subject to certain matters stated
therein, as of the date of such opinion, the Exchange Ratio was fair to the
stockholders of PSS from a financial point of view. The full text of the DLJ
opinion, which sets forth a description of the assumptions made, matters
considered and limitations on the review undertaken, is attached as Annex C to
the accompanying Proxy Statement/Prospectus and should be read carefully in
its entirety.
The Board of Directors has unanimously approved and adopted the Merger
Agreement and consummation of the transactions contemplated therein, and
unanimously recommends that you vote FOR adoption of the Merger Agreement.
In view of the importance of the action to be taken, we urge you to
complete, sign, and date the enclosed Proxy and to return it promptly in the
enclosed envelope, whether or not you plan to attend the Special Meeting (if
you attend the Special Meeting, you may vote in person, even if you previously
returned your Proxy).
We look forward to seeing you at the Special Meeting.
Sincerely,
Peter W. Gilson
Chief Executive Officer
<PAGE>
PHYSICIAN SUPPORT SYSTEMS, INC.
ROUTE 230 AND EBY-CHIQUES ROAD
MT. JOY, PENNSYLVANIA 17552
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT THE HARVARD CLUB, 27 WEST 44TH STREET, NEW YORK, NEW YORK ON
, 1997
, 1997
To the Stockholders of Physician Support Systems, Inc.:
NOTICE IS HEREBY GIVEN that the special meeting of stockholders (the
"Special Meeting") of Physician Support Systems, Inc. ("PSS") will be held at
The Harvard Club, 27 West 44th Street, New York, New York 10036, at 9:30 a.m.,
local time, on , 1997, for the following purposes:
1. The Merger. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of October 14, 1997 (the "Merger
Agreement"), among National Data Corporation ("NDC"), Universal Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of NDC ("Sub"),
and PSS, pursuant to which Sub will merge (the "Merger") with and into PSS.
As a result of the Merger, PSS will become a wholly-owned subsidiary of
NDC, and each share of common stock, par value $.001 per share, of PSS (the
"PSS Common Stock") issued and outstanding at the effective time of the
Merger shall be converted into the right to receive 0.435 (the "Exchange
Ratio") shares of NDC's common stock, par value $.125 per share (the "NDC
Common Stock"); provided, however, that if: (i) the average closing price
of NDC Common Stock on the New York Stock Exchange, Inc. (the "NYSE") for
all trading days beginning on the twenty-fifth trading day before the date
of the Special Meeting (the "Special Meeting Date") and ending on and
including the tenth trading day before the Special Meeting Date (the
"Average Closing Price") is greater than $47.126, the Exchange Ratio shall
be equal to the quotient of $20.50 divided by the Average Closing Price
(rounded to the nearest ten-thousandth of a share); or (ii) the Average
Closing Price is less than $36.782, the Exchange Ratio shall be equal to
the quotient of $16.00 divided by the Average Closing Price (rounded to the
nearest ten-thousandth of a share); provided, further, that if the Average
Closing Price is less than $36.782, NDC shall have the right to terminate
the Merger Agreement and to refuse to consummate the Merger, subject to the
option of PSS to revise the Exchange Ratio to equal 0.435. THE MERGER IS
MORE COMPLETELY DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS,
AND A COPY OF THE MERGER AGREEMENT IS ATTACHED AS ANNEX A THERETO.
Pursuant to the NDC Rights Agreement (hereinafter defined), each share of
NDC Common Stock issued in connection with the Merger upon conversion of
PSS Common Stock shall be accompanied by an NDC Right. See "Certain
Differences in the Rights of NDC and PSS Stockholders."
2. Other Business. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on November 12, 1997
(the "Record Date"), are entitled to receive notice of and to vote at the
Special Meeting or any adjournments or postponements thereof. Adoption of the
Merger Agreement requires the affirmative vote of the holders of a majority of
the shares of PSS Common Stock present in person or represented by proxy at
the Special Meeting at which a quorum is present. Certain stockholders of PSS
(including certain directors, executive officers and employees), who
beneficially owned approximately 29% of the shares of PSS Common Stock
outstanding at the Record Date, have agreed to, or given certain officers of
NDC a proxy to, vote their shares of PSS Common Stock in favor of the adoption
of the Merger Agreement.
HOLDERS OF PSS COMMON STOCK WILL NOT BE ENTITLED TO APPRAISAL RIGHTS AS A
RESULT OF THE MERGER. UNDER DELAWARE LAW, APPRAISAL RIGHTS ARE UNAVAILABLE TO
HOLDERS OF THE PSS COMMON STOCK BECAUSE THE PSS COMMON STOCK WAS, ON THE
RECORD DATE, TRADED ON THE NASDAQ NATIONAL MARKET AND WILL BE CONVERTED INTO
NDC COMMON STOCK, WHICH AT THE EFFECTIVE TIME OF THE MERGER WILL BE LISTED ON
THE NYSE.
<PAGE>
THE BOARD OF DIRECTORS OF PSS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" ADOPTION OF THE MERGER AGREEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
David S. Geller
Secretary
ALL PSS STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF
YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1997
PROXY STATEMENT
PHYSICIAN SUPPORT SYSTEMS, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
-----------
PROSPECTUS
NATIONAL DATA CORPORATION
COMMON STOCK
(PAR VALUE $.125 PER SHARE)
-----------
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.001 par value ("PSS Common Stock"), of Physician Support Systems,
Inc., a Delaware corporation ("PSS"), in connection with the solicitation of
proxies by the PSS Board of Directors for use at the special meeting of
stockholders to be held at 9:30 a.m., local time, on , 1997, at The
Harvard Club, located at 27 West 44th Street, New York, New York 10036, and any
adjournments or postponements thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon a proposal to
adopt the Agreement and Plan of Merger, dated as of October 14, 1997 (the
"Merger Agreement") by and among PSS, National Data Corporation ("NDC") and
Universal Acquisition Corp. ("Sub"), which provides for, among other things,
the merger of Sub with and into PSS (the "Merger") with PSS becoming a wholly-
owned subsidiary of NDC. See "Summary," "The Merger" and Annex A to this Proxy
Statement/Prospectus.
Upon consummation of the Merger, each outstanding share of PSS Common Stock
(excluding shares held by PSS or any of its subsidiaries or by NDC or any of
its subsidiaries) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive 0.435 (the "Exchange Ratio") shares of the
common stock, $.125 par value of NDC (the "NDC Common Stock"); provided,
however, that if (i) the average closing price of NDC Common Stock on the New
York Stock Exchange, Inc. (the "NYSE") for all trading days beginning on the
twenty-fifth trading day before the date of the Special Meeting (the "Special
Meeting Date") and ending on and including the tenth trading day before the
Special Meeting Date (the "Average Closing Price") is greater than $47.126, the
Exchange Ratio shall be equal to the quotient of $20.50 divided by the Average
Closing Price (rounded to the nearest ten-thousandth of a share); or (ii) the
Average Closing Price is less than $36.782, the Exchange Ratio shall be equal
to the quotient of $16.00 divided by the Average Closing Price (rounded to the
nearest ten-thousandth of a share); provided, further, that if the Average
Closing Price is less than $36.782, NDC shall have the right to terminate the
Merger Agreement and to refuse to consummate the Merger, subject to the option
of PSS to revise the Exchange Ratio to equal 0.435.
Pursuant to the NDC Rights Agreement (hereinafter defined), each share of NDC
Common Stock issued in connection with the Merger upon conversion of PSS Common
Stock shall be accompanied by an NDC Right. See "Certain Differences in the
Rights of NDC And PSS Stockholders."
This Proxy Statement/Prospectus also constitutes a Prospectus of NDC relating
to the shares of NDC Common Stock issuable to PSS stockholders in the Merger.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS IN
EVALUATING AN INVESTMENT IN NDC COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON
PAGE 19.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/ PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is , 1997, and it is first
being mailed or otherwise delivered to PSS stockholders on or about ,
1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 5
FORWARD-LOOKING STATEMENTS................................................ 5
SUMMARY................................................................... 6
Parties to the Merger................................................... 6
Special Meeting; Record Date............................................ 7
Votes Required.......................................................... 8
The Merger.............................................................. 8
Market Prices and Dividends............................................. 12
Comparison of Certain Unaudited Per Share Data.......................... 13
Recent Developments..................................................... 15
Selected Financial Data................................................. 16
SELECTED FINANCIAL DATA OF NDC (HISTORICAL)............................... 16
SELECTED FINANCIAL DATA OF PSS (HISTORICAL)............................... 17
SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF NDC AND PSS....... 18
RISK FACTORS.............................................................. 19
The Merger.............................................................. 19
Competition............................................................. 19
Markets and Applications................................................ 19
Health Care Information Services........................................ 20
Integrated Payment Systems Business..................................... 20
Acquisition Risks....................................................... 20
Anti-Takeover Provisions of Delaware Law, Certain Charter and By-Law
Provisions and Stockholder Rights Plan................................. 20
GENERAL INFORMATION....................................................... 22
Special Meeting......................................................... 22
Record Date............................................................. 22
Votes Required.......................................................... 22
Recommendation of PSS's Board of Directors.............................. 23
Proxy Solicitation...................................................... 23
THE MERGER................................................................ 24
General................................................................. 24
Background of the Merger................................................ 24
Reasons for the Merger.................................................. 25
Opinion of Financial Advisor............................................ 26
Exchange Ratio and Adjustment........................................... 31
Fractional Shares....................................................... 31
Treatment of Stock Options.............................................. 31
Effective Time.......................................................... 32
Distribution of NDC Certificates........................................ 32
Certain Federal Income Tax Consequences................................. 33
Interests of Certain Persons in the Merger.............................. 34
Management and Operations After the Merger.............................. 36
Conditions to Consummation.............................................. 36
Regulatory Approvals.................................................... 37
Conduct of Business Pending the Merger.................................. 37
Amendment, Waiver and Termination....................................... 38
Expenses and Fees....................................................... 40
Accounting Treatment.................................................... 40
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Resales of NDC Common Stock.............................................. 40
Voting Agreement......................................................... 40
CERTAIN DIFFERENCES IN THE RIGHTS OF NDC AND PSS STOCKHOLDERS.............. 42
Authorized Capital Stock................................................. 42
Directors and Classes of Directors....................................... 43
Stockholder Meetings..................................................... 44
Anti-Takeover Provisions................................................. 44
Stockholder Rights Plan.................................................. 45
EXPERTS.................................................................... 46
REPRESENTATION AT SPECIAL MEETING.......................................... 46
LEGAL MATTERS.............................................................. 46
INCORPORATION BY REFERENCE................................................. 46
STOCKHOLDER PROPOSALS...................................................... 47
</TABLE>
ANNEXES:
ANNEX A--Agreement and Plan of Merger, dated as of October 14, 1997, by and
among NDC, Sub and PSS
ANNEX B--Stockholder Voting Agreement, dated as of October 14, 1997, by and
among NDC, PSS, et al.
ANNEX C--Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
ANNEX D--Pro Forma Combined Financial Information
3
<PAGE>
AVAILABLE INFORMATION
NDC and PSS each are 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,
file 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 and PSS 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 NYSE,
20 Broad Street, New York, New York 10005.
This Proxy Statement/Prospectus constitutes a part of a Registration
Statement on Form S-4 (together with any amendments thereto, the "Registration
Statement"), which has been filed by NDC with the Commission under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"). This Proxy Statement/Prospectus omits certain
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits thereto for further
information with respect to NDC and PSS and the securities to which this Proxy
Statement/Prospectus relates. Statements contained in this Proxy
Statement/Prospectus concerning the provisions of certain documents filed as
exhibits to the Registration Statement are necessarily brief descriptions
thereof, and are not necessarily complete, and each such statement is
qualified in its entirety by reference to the full text of such document.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST FROM: NATIONAL DATA CORPORATION, NATIONAL DATA PLAZA, ATLANTA,
GEORGIA 30329-2010, ATTN: CORPORATE SECRETARY, (404) 728-2855, AS TO NDC
DOCUMENTS; AND FROM PHYSICIAN SUPPORT SYSTEMS, INC., ROUTE 230 AND EBY-CHIQUES
ROAD, MT. JOY, PENNSYLVANIA 17552, ATTN: CORPORATE SECRETARY, (717) 653-5340,
AS TO PSS DOCUMENTS. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUESTS SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR TO THE SPECIAL
MEETING.
All information contained herein with respect to NDC and its subsidiaries
has been supplied by NDC. All information with respect to PSS and its
subsidiaries has been supplied by PSS including, but not limited to, "The
Merger--Background of the Merger," "--Reasons for the Merger " and "--
Interests of Certain Persons in the Merger."
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus
and, if given or made, such information or representation should not be relied
upon as having been authorized by NDC or PSS. Neither the delivery of this
Proxy Statement/Prospectus nor any distribution of the securities to which
this Proxy Statement/Prospectus relates shall, under any circumstances, create
any implication that there has been no change in the affairs of NDC, PSS, or
any of their respective subsidiaries since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Proxy Statement/Prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, any securities other than the securities
to which it relates or an offer to sell or a solicitation of an offer to
purchase the securities offered by this Proxy Statement/Prospectus in any
jurisdiction in which such an offer or solicitation is not lawful.
4
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by NDC with the Commission (NDC File No. 001-
12392) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Proxy Statement/Prospectus:
NDC documents:
(i) NDC's Annual Report on Form 10-K for the fiscal year ended May 31,
1997, as amended;
(ii) NDC's Quarterly Report on Form 10-Q for the quarter ended August 31,
1997, as amended;
(iii) NDC's Registration Statement on Form S-4 (File No. 333-35995), as
amended;
(iv) 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
(v) 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.
PSS documents:
(i) PSS's Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1996;
(ii) PSS's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997; and
(iii) The description of PSS's Common Stock contained in PSS's
Registration Statement on Form S-1 (File No. 33-80731), as amended.
Any statement contained herein, in any amendment or supplement hereto or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement and this Proxy Statement/Prospectus to the extent that a statement
contained herein, in any amendment or supplement hereto or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement, this Proxy
Statement/Prospectus, or any amendment or supplement hereto. The information
contained in this Proxy Statement/Prospectus should be read in conjunction
with the foregoing materials.
FORWARD-LOOKING STATEMENTS
When used in this Proxy Statement/Prospectus and elsewhere by NDC, PSS or
the management of either company from time to time, the words "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements concerning the operations, economic performance and
financial condition of NDC or PSS, including, in particular, the likelihood of
NDC or PSS'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 or PSS, 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 or PSS's forward-
looking statements, some of which include competition in the market for NDC
and PSS'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 from time
to time in NDC or PSS's Commission reports and other filings and referred to
under the caption "Risk Factors" herein. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date they are made. NDC and PSS undertake 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.
5
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. This summary is not intended to be a complete
description of the matters covered in this Proxy Statement/Prospectus and is
subject to and qualified in its entirety by reference to the more detailed
information contained elsewhere in this Proxy Statement/Prospectus, including
the Annexes hereto, and in the documents incorporated by reference in this
Proxy Statement/Prospectus. The Merger Agreement is set forth in Annex A to
this Proxy Statement/Prospectus and reference is made thereto for a complete
description of the terms of the Merger. Stockholders are urged to read
carefully the entire Proxy Statement/Prospectus, including the Annexes. As used
in this Proxy Statement/Prospectus, the terms "NDC" and "PSS" refer to such
corporations, respectively, and, where the context requires, such corporations
and their respective subsidiaries.
PARTIES TO THE MERGER
NDC. NDC is a Delaware corporation that was incorporated in 1967. NDC is a
leading provider of high-volume information services and application systems to
the health care and payment systems markets. NDC serves a diverse customer base
comprised of almost 120,000 health care providers, 3,500 health care plans,
more than 750,000 merchant locations, 35,000 corporations and 400 banking
institutions, as well as federal and state government agencies. NDC markets its
services directly to merchants and health care providers and indirectly through
business alliances with a wide range of banks, insurance companies and
distributors.
NDC is one of the largest independent providers of health care information
services and integrated payment systems and services in the United States,
processing transactions at an annualized rate of approximately 3 billion at the
end of fiscal 1997. NDC provides electronic claims processing and adjudication
services, practice management systems, electronic data interchange ("EDI")
services, billing services, business office management services and clinical
data base information for pharmacies, dentists, physicians, hospitals, health
maintenance organizations, managed care companies, clinics and nursing homes,
as well as other health care providers. Management believes that NDC is the
largest independent processor of real-time health care transactions in the
country, and that it is well positioned to capitalize on the growing demand for
cost containment and improved patient care in the health care industry. By the
end of fiscal 1997, approximately 41% of NDC's total revenue was derived from
NDC's health care systems and services, which represent the fastest growing
portion of NDC's business.
NDC's Global Payment Systems LLC subsidiary ("Global Payment Systems" or
"Global") offers such services as authorization, equipment deployment, customer
support, back office processing, merchant accounting and card issuing services
on an outsourcing basis for banks and other participants in the payment systems
industry. Global also offers information reporting and EDI services, cash
management systems and services and electronic tax filing and payment services
to government and corporate customers. In recent years, NDC has expanded the
range of payment instruments services offered and distribution channels. NDC
recently introduced a purchase card processing program that provides electronic
payment capabilities for business-to-business purchasing transactions.
Approximately 29% of NDC's total revenue for fiscal 1997 was derived from
Global.
The Integrated Payment Systems business unit provides a broad range of
payment acceptance services primarily in partnership with banks. Under its Bank
Alliance Program, as well as through other distribution channels, it adds
sales, marketing and risk management services to the range of services provided
by Global Payment Systems. NDC's Integrated Payment Systems unit accounted for
approximately 30% of NDC's total revenue for fiscal 1997.
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.
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<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" and "--
Selected Financial Data."
PSS. PSS was formed as a Delaware corporation in 1991 as the successor to a
business founded in 1983. PSS is a leading provider of business management
services to health care providers, providing services to over 350 hospitals and
6,000 physicians throughout the United States. PSS's physician clients practice
medicine in an array of settings, including solo and group practices,
independent practice associations, specialty networks and other affiliated-
physician groups and practice various specialties, including radiology,
anesthesiology, emergency room medicine, pathology, cardiology, surgery and
primary care.
PSS offers its clients a broad variety of business management services,
ranging from accounts receivable management to financial, administrative and
strategic support, data management and information services. In addition, PSS
employs its proprietary technology and financial and patient encounter
databases to provide a comprehensive range of managed care services to its
clients, including contract review, contract negotiation, implementation and
administration, thereby enhancing its clients' ability to profitably
participate in managed care systems. For its services, PSS generally is
compensated with a management fee based upon a percentage of its clients' net
collections, which percentage is determined after considering a broad range of
factors, including the nature of the services to be provided and, in the case
of physician clients, the physician's medical specialty.
A key aspect of PSS's strategy in 1996 was the acquisition of other companies
providing business management services to hospitals and physicians. PSS
acquired 10 businesses in 1996 and another business in February 1997 for
aggregate consideration (including deferred payments) of approximately $37.2
million in cash and stock valued at the time of such acquisitions at
approximately $64.2 million.
In February 1996, PSS completed an initial public offering of 4,025,000
shares of PSS Common Stock, aggregating approximately $43.6 million in net
proceeds to PSS. For the year ended December 31, 1996 and the nine months ended
September 30, 1997, PSS reported total revenues of $75.2 million and $81.7
million, respectively, and net income of $1.2 million (excluding the effects of
restructuring and other charges) and $2.7 million, respectively. As of
September 30, 1997, PSS had total consolidated assets of $117.4 million and
consolidated stockholders' equity of $52.0 million.
The principal executive offices of PSS are located at Route 230 and Eby-
Chiques Road, Mt. Joy, Pennsylvania 17552, and its telephone number is (717)
653-5340. For additional information regarding PSS and its business, see
"Available Information," "Incorporation of Certain Information by Reference"
and "--Selected Financial Data."
SPECIAL MEETING; RECORD DATE
The Special Meeting will be held at 9:30 a.m., local time on ,
1997, at The Harvard Club, 27 West 44th Street, New York, New York, 10036. At
the Special Meeting, PSS's stockholders will consider and vote upon adoption of
the Merger Agreement and the consummation of the transactions contemplated
therein, and transact such other business as may properly come before the
Special Meeting. PSS's Board of Directors (the "PSS Board") has fixed the close
of business on November 12, 1997, as the record date for determining the PSS
stockholders entitled to receive notice of and to vote at the Special Meeting
(the "Record Date"). As of the Record Date, there were 9,733,710 shares of PSS
Common Stock issued and outstanding and entitled to be voted at the Special
Meeting. For additional information with respect to the Special Meeting,
including the Record Date and votes required for adoption, see "General
Information."
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<PAGE>
VOTES REQUIRED
Adoption of the Merger Agreement and consummation of the transactions
contemplated therein requires the affirmative vote of the holders of a majority
of the shares of PSS Common Stock present in person or represented by proxy and
entitled to vote on the subject matter presented at the Special Meeting at
which a quorum is present. As of the Record Date, PSS's directors and executive
officers, and their affiliates, beneficially owned approximately 27% of the
outstanding shares of PSS Common Stock entitled to vote at the Special Meeting.
Pursuant to the Voting Agreement (hereinafter defined), the holders of
approximately 29% of the outstanding shares of PSS Common Stock (including
certain PSS directors, executive officers and employees) have agreed to, or
given certain officers of NDC a proxy to, vote all of their shares of PSS
Common Stock in favor of adoption of the Merger Agreement. See "General
Information--Voting Agreement." As of the Record Date, NDC, its directors and
executive officers, and their affiliates, held no shares of PSS Common Stock.
THE MERGER
General. The Merger Agreement provides that Sub shall merge with and into
PSS, which shall be the surviving corporation of the Merger and, as a result
thereof, become a wholly-owned subsidiary of NDC. At the time the Merger
becomes effective, each outstanding share of PSS Common Stock (excluding shares
held by PSS or any of its subsidiaries or by NDC or any of its subsidiaries)
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive 0.435 shares of NDC Common Stock, subject to adjustment as
described under "--Exchange Ratio Adjustment." Pursuant to the NDC Rights
Agreement, each share of NDC Common Stock issued in connection with the Merger
upon conversion of the PSS Common Stock shall be accompanied by an NDC Right
(hereinafter defined). If the Merger Agreement is adopted at the Special
Meeting, all required consents and approvals are obtained, and all of the other
conditions to the obligations of the parties to consummate the Merger are
either satisfied or waived (as permitted), the Merger will be consummated. A
copy of the Merger Agreement is set forth in Annex A to this Proxy
Statement/Prospectus. See "The Merger."
Recommendation of the PSS Board of Directors. The PSS Board believes that the
Merger is in the best interests of PSS and its stockholders and has unanimously
approved the Merger Agreement and the consummation of the transactions
contemplated therein. The PSS Board unanimously recommends that the
stockholders vote FOR adoption of the Merger Agreement and the consummation of
the transactions contemplated therein. In deciding to approve the Merger
Agreement and the consummation of the transactions contemplated therein, the
PSS Board considered a number of factors, including the terms of the Merger,
the compatibility of the operations of PSS and NDC, and the financial
condition, results of operations, and future prospects of PSS and NDC. See "The
Merger--Reasons for the Merger."
Opinion of Financial Advisor. Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") has rendered an opinion to the PSS Board to the effect
that, as of October 14, 1997, and subject to the assumptions, limitations and
qualifications set forth in such opinion, the Exchange Ratio was fair to the
holders of PSS Common Stock from a financial point of view. A copy of the
opinion of DLJ, dated October 14, 1997, setting forth the assumptions made, the
matters considered and the limitations on the review undertaken in rendering
such opinion, is attached to this Proxy Statement/Prospectus as Annex C, and
should be read carefully in its entirety. See "The Merger--Opinion of Financial
Advisor for PSS."
Exchange Ratio Adjustment. If the Average Closing Price of NDC Common Stock
is greater than $47.126, the Exchange Ratio shall be adjusted to equal that
fraction of a share of NDC Common Stock (rounded to the nearest ten-thousandth
of a share) obtained by dividing $20.50 by the Average Closing Price. If the
Average Closing Price is less than $36.782, the Exchange Ratio shall be
adjusted to equal that fraction of a share of NDC Common Stock (rounded to the
nearest ten-thousandth of a share) obtained by dividing $16.00 by the Average
Closing Price. If the Average Closing Price is less than $36.782, NDC shall
have the right to terminate the Merger Agreement and to refuse to consummate
the Merger provided that NDC shall have given prompt
8
<PAGE>
written notice of such refusal to PSS (further provided that such notice of
election may be withdrawn at any time within five business days of PSS's
receipt of such notice). During the five-day period commencing with its receipt
of such notice, PSS shall have the option to elect to revise the Exchange Ratio
to equal 0.435. If PSS makes the election contemplated by the preceding
sentence within such five-day period, it shall give prompt written notice to
NDC of such election, whereupon the Merger Agreement shall remain in effect in
accordance with its terms (except that the Exchange Ratio shall have been so
modified).
Fractional Shares. No fractional shares of NDC Common Stock will be issued in
the Merger. In lieu of any such fractional shares, each holder of PSS Common
Stock who otherwise would be entitled to receive a fractional share of NDC
Common Stock pursuant to the Merger will be paid an amount in cash, without
interest, equal to such fractional share multiplied by the Average Closing
Price. See "The Merger--Fractional Shares."
Treatment of Stock Options. Upon consummation of the Merger: (i) all rights
with respect to PSS Common Stock pursuant to stock options ("PSS Options")
granted by PSS under its existing stock option plans (the "PSS Stock Plans")
and option agreements, which are outstanding at the Effective Time, whether or
not exercisable, shall be converted into and become rights with respect to NDC
Common Stock, and (ii) NDC shall assume each PSS Option, in accordance with the
terms of the PSS Stock Plan and stock option agreement by which it is
evidenced, after giving effect to the Exchange Ratio. See "The Merger--
Treatment of Stock Options."
Effective Time. If the Merger is adopted by the requisite vote of the PSS
stockholders, all required consents and approvals are obtained, and the other
conditions to the obligations of the parties to consummate the Merger are
either satisfied or waived (as permitted), the Merger will be consummated and
will become effective on the date and at the time that a Certificate of Merger,
reflecting the Merger, becomes effective with the Secretary of State of the
State of Delaware (the "Effective Time"). Assuming satisfaction of all
conditions to consummation, the Merger is expected to become effective during
the fourth quarter of calendar 1997. NDC and PSS each has the right, acting
unilaterally, to terminate the Merger Agreement should the Merger not be
consummated by March 31, 1998. The closing of the Merger shall take place on
the date the Effective Time occurs or such other date as the parties shall
agree (the "Closing Date"). See "The Merger--Effective Time" and "--Amendment,
Waiver, and Termination."
Delivery of NDC Certificates. Promptly after the Effective Time, each record
holder of shares of PSS Common Stock outstanding at the Effective Time will be
mailed a transmittal letter (with instructions) to use in effecting the
surrender and cancellation of PSS Common Stock certificates in exchange for NDC
Common Stock and cash in lieu of fractional shares. NDC shall not be obligated
to deliver the consideration to which any former holder of PSS Common Stock is
entitled until such holder surrenders such holder's certificate or certificates
representing such holder's shares of PSS Common Stock for exchange. The
certificate or certificates so surrendered shall be duly endorsed as the
exchange agent may require. See "The Merger--Distribution of NDC Certificates."
Listing of the NDC Common Stock on the NYSE. Authorization for the listing of
the NDC Common Stock to be issued pursuant to the Merger Agreement for trading
on the NYSE is a condition to the obligations of PSS to consummate the Merger.
Certain Federal Income Tax Consequences. The Merger is intended to be a tax-
free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Assuming the Merger qualifies as
a reorganization, no gain or loss should be recognized for federal income tax
purposes by PSS stockholders as a result of the Merger, except that gain or
loss will be recognized with respect to cash received in lieu of fractional
shares. If for any reason the Merger does not so qualify, exchanging
stockholders will recognize gain or loss on a sale of their stock. A condition
to consummation of the Merger is the receipt by each of NDC and PSS of an
opinion from their respective counsel as to the qualification of the Merger as
a tax-
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<PAGE>
free reorganization. A discussion of matters regarding qualification for tax-
free reorganization treatment is set forth below. See "The Merger--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, long-term capital gains recognized by
certain non-corporate holders of NDC Common Stock generally will be subject to
a maximum federal income tax rate of 20% if the shares sold or exchanged are
held for more than 18 months, and to a maximum federal income tax rate of 28%
if such shares are held for more than one year but are not held for more than
18 months. Tax consequences to dealers in NDC Common Stock, non-United States
holders of NDC Common Stock or others who have a special tax status or to
persons who received their shares through the exercise of employee stock
options or otherwise as compensation may be different and such persons should
consult their tax advisors as to the tax consequences of a sale or exchange of
NDC Common Stock.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER AND OTHER FACTORS, AND BECAUSE
VARIOUS FACTUAL MATTERS MUST BE RESOLVED FAVORABLY FOR TAX-FREE REORGANIZATION
TREATMENT TO APPLY, EACH HOLDER OF PSS COMMON STOCK IS URGED TO CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH
HOLDER OF THE MERGER (INCLUDING THE APPLICATION AND EFFECT OF FOREIGN, STATE
AND LOCAL INCOME AND OTHER TAX LAWS).
Interests of Certain Persons in the Merger. Certain members of PSS's
management and the PSS Board have interests in the Merger in addition to their
interests as stockholders of PSS generally. These include, among other things,
provisions in the Merger Agreement relating to indemnification and eligibility
for certain NDC employee benefits, acceleration of the vesting schedule for
stock options, the waiver of certain change of control provisions and
provisions regarding continued employment or bonuses in agreements between PSS
and certain of its senior management. See "The Merger--Management and
Operations After the Merger" and "--Interests of Certain Persons in the
Merger."
Conditions to Consummation. Consummation of the Merger is subject to various
conditions, including among other matters: (i) adoption of the Merger Agreement
by the requisite vote of PSS stockholders; (ii) receipt of all consents and
approvals necessary to permit consummation of the Merger, including expiration
or termination of the statutory waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act") (NDC and PSS received early
termination of the statutory waiting period on November 7, 1997); (iii) receipt
by NDC and PSS from NDC's independent auditors of letters to the effect that
the Merger will qualify for pooling-of-interests accounting treatment and from
PSS's independent auditors to the effect that such auditors are not aware of
any matters relating to PSS which would preclude the Company from entering into
a transaction to be accounted for as a pooling of interests transaction; and
(iv) satisfaction of certain other customary conditions. The foregoing are the
material conditions to the consummation of the Merger. See "The Merger--
Conditions to Consummation" and "--Amendment, Waiver, and Termination."
Regulatory Approvals. The consummation of the Merger is subject to the
expiration or early termination of the statutory waiting period under the HSR
Act (NDC and PSS received early termination of the statutory waiting period on
November 7, 1997). See "The Merger--Regulatory Approvals."
No Solicitation. PSS has agreed that, prior to the Effective Time or earlier
termination of the Merger Agreement, neither PSS nor any of its directors,
officers, employees, representatives, agents or affiliates will, directly or
indirectly, encourage, solicit or engage in discussions or negotiations with
any person (other than NDC) concerning any merger, consolidation, share
exchange or similar transaction, any purchase of a significant portion of the
assets or equity of PSS or its subsidiaries, or any other transaction that
would involve the transfer or potential transfer of control of PSS, other than
the transactions contemplated by the Merger Agreement.
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Conduct of Business Pending the Merger. Each of PSS and NDC has agreed that,
prior to the Effective Time or earlier termination of the Merger Agreement,
except as contemplated by the Merger Agreement, they and their respective
subsidiaries will each carry on their businesses in the usual, regular and
ordinary course. In addition, unless NDC agrees in writing or except as
otherwise permitted pursuant to the Merger Agreement or as previously disclosed
to NDC, prior to the Effective Time, neither PSS nor any of its subsidiaries is
permitted to engage in any of a number of actions specified in the Merger
Agreement. See "The Merger--Conduct of Business Pending the Merger."
Termination. The Merger Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time by mutual consent of the
Boards of Directors of PSS and NDC. In addition, the Merger Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time by either NDC
or PSS if (i) the other party materially breaches and does not timely cure any
representation, warranty, covenant or other agreement contained in the Merger
Agreement, (ii) the PSS stockholders fail to adopt the Merger Agreement and the
transactions contemplated thereby at the Special Meeting, (iii) any of the
conditions precedent to the obligations of the terminating party to consummate
the Merger cannot be satisfied or fulfilled by March 31, 1998, or (iv) the
Merger has not been consummated by March 31, 1998. In addition, NDC may
unilaterally terminate the Merger Agreement if the PSS Board withdraws or
modifies its approval or recommendation of the Merger or the Merger Agreement
or approves or recommends entering into a transaction other than the Merger.
PSS may also unilaterally terminate the Merger Agreement if, prior to the
approval and adoption of the Merger Agreement by the PSS stockholders, the PSS
Board shall have determined to enter into an agreement with respect to a
transaction other than the Merger, provided that at least two business days
prior to any such termination, PSS shall have engaged in negotiations with NDC
to make such adjustments in the terms and conditions of the Merger Agreement as
would enable PSS to proceed with the transactions contemplated therein, and
simultaneously with such termination, PSS shall have tendered to NDC a fee
equal to $6,490,000. Furthermore, NDC may unilaterally terminate the Merger
Agreement in the event that the Average Closing Price of the shares of NDC
Common Stock is less than $36.782, subject to PSS's right to revise the
Exchange Ratio by electing to fix the Exchange Ratio at 0.435. See "--Exchange
Ratio Adjustment" and "The Merger--Amendment, Waiver and Termination."
Expenses and Fees. The Merger Agreement provides that each party shall be
responsible for its own costs and expenses incurred in connection with the
negotiation and consummation of the transactions contemplated by the Merger
Agreement.
If the Merger Agreement is terminated because (i) the PSS Board or a
committee thereof shall have withdrawn or modified in any matter materially
adverse to NDC its approval or recommendation of the Merger or the Merger
Agreement, or approved or recommended any offer or proposal for, or any written
indication of interest in, a merger or other business combination involving PSS
or the acquisition of any significant equity interest in, or significant
portion of the assets of, PSS, other than the transactions contemplated by the
Merger Agreement, and such proposal has been determined by the PSS Board in its
good faith judgment after consultation with PSS's financial advisors to be more
favorable to PSS's stockholders than the Merger and for which financing, to the
extent required, has been committed or which, in the good faith judgment of the
PSS Board, is reasonably capable of being financed, (ii) PSS shall have entered
into any binding agreement with respect to any such proposal, or (iii) the PSS
Board shall have resolved to do any of the foregoing, PSS shall pay to NDC a
fee equal to $6,490,000. Such payment shall be made in immediately available
funds, promptly, but in no event later than five business days, after the
termination of the Merger Agreement.
Accounting Treatment. It is anticipated that the Merger will qualify as a
"pooling-of-interests" transaction for accounting and financial reporting
purposes. See "The Merger--Accounting Treatment."
Resale of NDC Common Stock. The NDC Common Stock issued in connection with
the Merger will be freely transferable by the holders of such shares, except
for those holders who may be deemed to be "affiliates"
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(generally including directors, certain executive officers and holders of 10%
or more of the outstanding capital stock) of PSS or NDC under applicable
federal securities laws. See "The Merger--Resale of NDC Common Stock."
Voting Agreement. NDC and the holders of approximately 29% of the PSS Common
Stock, including certain PSS directors, executive officers and employees (the
"Stockholders"), have entered into a voting agreement (the "Voting Agreement")
pursuant to which the Stockholders have agreed to, or given certain officers of
NDC a proxy to, vote such Stockholder's shares of PSS Common Stock in favor of
the Merger, the execution and delivery by PSS of the Merger Agreement and the
approval of the terms thereof and each of the other transactions contemplated
by the Merger Agreement, provided that the Merger Agreement has not been
amended so as to reduce the consideration payable to the holders of PSS Common
Stock.
Pursuant to the Voting Agreement, the Stockholders also have agreed to, or
given certain officers of NDC a proxy to, vote such Stockholder's shares of PSS
Common Stock against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or winding
up of or by PSS or (ii) any amendment of PSS's certificate of incorporation or
bylaws or other proposal or transaction involving PSS or any of its
subsidiaries which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement
or any of the other transactions contemplated by the Merger Agreement (each of
the foregoing in clause (i) and (ii) a "Competing Transaction"). Each
Stockholder has further agreed that such Stockholder shall not (i) transfer, or
consent to any transfer of, any or all of such Stockholder's shares or any
interest therein, except in certain limited circumstances and pursuant to the
Merger; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such shares or any
interest therein, (iii) grant any proxy, power of attorney or other
authorization in or with respect to such shares, except for the Voting
Agreement, or (iv) deposit such shares into a voting trust or enter into a
voting agreement or arrangement with respect to such shares, subject to certain
limited exceptions.
The Voting Agreement will terminate upon the earlier of the Effective Time,
or the date upon which the Merger Agreement is terminated in accordance with
its terms; provided that, if any person (other than NDC) shall have made or
disclosed in writing an intention to make, a proposal for a Competing
Transaction, as of or prior to the termination of the Merger Agreement, then,
for a period of 180 days following such termination the rights and obligations
of the Stockholders to vote or direct a vote against a Competing Transaction
shall continue in full force and effect and no Stockholder shall transfer any
or all of such Stockholder's shares of PSS Common Stock in connection with any
Competing Transaction.
No Appraisal Rights. Holders of PSS Common Stock will not be entitled to
appraisal rights as a result of the Merger. Under Delaware law, appraisal
rights are unavailable to holders of the PSS Common Stock because the PSS
Common Stock was, on the Record Date, traded on the Nasdaq National Market and
will be converted into NDC Common Stock, which at the effective time of the
Merger will be listed on the NYSE.
MARKET PRICES AND DIVIDENDS
NDC Common Stock is traded on the NYSE under the symbol "NDC" and PSS Common
Stock is included in The Nasdaq Stock Market's National Market (the "Nasdaq
National Market") under the symbol "PHSS." The following table sets forth the
high and low sale prices per share of NDC Common Stock on the NYSE and per
share of PSS Common Stock on the Nasdaq National Market, and the dividends
declared per share of NDC Common Stock with respect to each of NDC's fiscal
quarters since June 1, 1995. No cash dividends have been declared or paid on
PSS Common Stock.
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<TABLE>
<CAPTION>
SALE PRICES SALE PRICES DIVIDENDS
PER SHARE OF PER SHARE OF DECLARED
NDC COMMON STOCK PSS COMMON STOCK PER SHARE
----------------- ----------------- OF NDC
HIGH LOW HIGH LOW COMMON STOCK
-------- -------- -------- -------- ------------
<S> <C> <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 $ 21.625 $ 14.50 .075
Quarter ending May 31,
1996......................... 40.25 29.88 25.75 16.25 .075
FISCAL 1997
Quarter ended August 31,
1996......................... 44.50 33.75 23.00 13.375 .075
Quarter ended November 30,
1996......................... 46.63 37.88 25.50 15.25 .075
Quarter ended February 28,
1997......................... 47.50 35.00 21.50 6.875 .075
Quarter ending May 31,
1997......................... 44.00 33.75 10.25 7.00 .075
FISCAL 1998
Quarter ended August 31,
1997......................... 46.50 36.3125 17.375 9.875 .075
Quarter ending November 30,
1997
(through November 10,
1997)........................ 43.875 34.50 19.125 14.625 --
</TABLE>
On October 13, 1997, the last trading day prior to public announcement that
NDC and PSS had executed the Merger Agreement, the last reported sale prices
per share of NDC Common Stock on the NYSE and PSS Common Stock on the Nasdaq
National Market were $41.25 and $18.25, respectively, and the equivalent pro
forma price of NDC Common Stock per share of PSS Common Stock (based on the
Exchange Ratio) was $17.94. On November 10, 1997, the last reported sale prices
per share of NDC Common Stock on the NYSE and PSS Common Stock on the Nasdaq
National Market were $36.625 and $15.125, respectively. PSS STOCKHOLDERS SHOULD
OBTAIN CURRENT MARKET QUOTATIONS FOR NDC COMMON STOCK AND PSS COMMON STOCK.
The Merger Agreement provides for the filing of a listing application with
the NYSE covering the shares of NDC Common Stock issuable pursuant to the
Merger. It is a condition to consummation of the Merger that NDC use its
reasonable efforts to ensure that such shares of NDC Common Stock be authorized
for listing on the NYSE effective upon official notice of issuance. See "The
Merger--Conditions to Consummation."
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following summary presents selected comparative unaudited per share data
for NDC and PSS on a historical basis and on a pro forma combined basis
assuming the Merger had been effective during the periods presented using the
Exchange Ratio. The Merger is reflected under the pooling-of-interests method
of accounting and pro forma data is derived accordingly. PSS's fiscal year end
is December 31 of each year; however all financial information related to PSS
as of August 31 and May 31 has been derived from financial information of PSS
as of June 30 and September 30, adjusted to reflect the results of operations
on a twelve months and three months basis, respectively, as appropriate. The
information shown below should be read in conjunction with the historical
financial statements of NDC and PSS, including the respective notes thereto,
incorporated by reference herein, and with the unaudited pro forma financial
information, including the respective notes thereto, appearing elsewhere
herein. See "Available Information," "Incorporation of Certain Information by
Reference," "The Merger--Accounting Treatment," "Selected Pro Forma Condensed
Combined Financial Data" and "Annex D--Pro Forma Condensed Combined Financial
Information."
13
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEARS ENDED MAY 31,
ENDED AUGUST 31, ---------------------------
1997 1997 1996 1995
---------------- -------- -------- --------
<S> <C> <C> <C> <C>
NDC COMMON STOCK
INCOME FROM CONTINUING OPERA-
TIONS PER SHARE: (1)
Historical.................... $ 0.38 $ 1.38 $ (0.31) $ 0.79
Pro forma combined (2)........ 0.31 1.23 0.58 0.51
DIVIDENDS PER SHARE:
Historical.................... 0.075 0.30 0.30 0.30
Pro forma combined (3)........ 0.075 0.30 0.30 0.30
BOOK VALUE PER SHARE:
Historical (4)................ 10.77 10.45 -- --
Pro forma combined (5)........ 10.64 9.81 -- --
PSS COMMON STOCK
INCOME FROM CONTINUING OPERA-
TIONS PER SHARE: (1)
Pro forma historical (6)...... $ 0.17 $ 0.21 $ (0.19) $ (0.15)
Equivalent pro forma combined
(7).......................... 0.14 0.54 0.25 0.22
DIVIDENDS PER SHARE:
Pro forma historical.......... -- -- -- --
Equivalent pro forma combined
(7).......................... 0.03 0.13 0.13 0.13
BOOK VALUE PER SHARE:
Pro forma historical (4)...... 5.35 5.18 -- --
Equivalent pro forma combined
(7).......................... 4.63 4.27 -- --
</TABLE>
- --------
(1) Represents income from continuing operations per share on a fully diluted
basis.
(2) Pro forma combined income from continuing operations per NDC common share
amounts represent the sum of pro forma combined amounts for NDC and PSS,
divided by pro forma combined weighted average common shares outstanding.
Pro forma combined income from continuing operations per share of NDC
Common Stock for the three months ended August 31, 1997 and the fiscal year
ended May 31, 1997 also includes the pro forma combined amounts for the
Source Transactions (hereinafter defined).
(3) Pro forma combined cash dividends paid per NDC common share amounts
represent historical dividends paid per share of NDC Common Stock. On an
equivalent pro forma basis, the $0.075 per share dividend paid by NDC on
August 29, 1997 would equate to approximately $0.033 per share of PSS
Common Stock, based on the Exchange Ratio. Future NDC and PSS dividends are
dependent upon their respective earnings and financial conditions,
statutory limitations and other factors. See "The Merger--Conduct of
Business Pending the Merger."
(4) Historical book value per share information for NDC and PSS as of the end
of each period presented is computed by dividing historical stockholders'
equity for each company by the number of shares of NDC Common Stock or PSS
Common Stock, as the case may be, outstanding at the end of each period
presented, excluding stock options.
(5) Pro forma combined book value per share information as of the end of the
period presented is computed by dividing pro forma stockholders' equity by
the number of shares of NDC Common Stock outstanding on such dates and the
shares of NDC stock to be issued in the Source Transactions and the Merger.
(6) Pro forma historical income from continuing operations per share data for
PSS assumes that all business acquisitions consummated subsequent to June
1, 1994 occurred on June 1, 1994.
(7) Equivalent pro forma combined amounts per share of PSS Common Stock
represent the pro forma combined per NDC common share amounts, multiplied
by the Exchange Ratio.
14
<PAGE>
RECENT DEVELOPMENTS
On August 20, 1997, NDC signed a definitive agreement to acquire Source
Informatics Inc., a privately-held Delaware corporation ("Source"), in exchange
for approximately 1,560,000 shares of NDC Common Stock and $31,750,000 in cash.
Source is a leading provider of proprietary health care information, technology
and consulting services, primarily to the pharmaceutical and retail pharmacy
markets. The Source transaction is subject to the approval of Source
stockholders as well as other customary closing conditions and is expected to
become effective during the fourth quarter of calendar 1997. For the year ended
June 30, 1997, and the quarter ended September 30, 1997, Source had total
revenues of $59.9 million and $15.3 million, respectively, and net income of
$6.5 million and $0.2 million, respectively. As of September 30, 1997, Source
had total assets of $24.3 million.
Also on August 20, 1997, NDC signed a definitive agreement to acquire PMSI
Database Holdings, Inc., a Delaware corporation ("PMSI Database"), in exchange
for approximately 1,059,829 shares of NDC Common Stock and $6,500,000 in cash.
PMSI Database was formed as a holding company by its parent, Pharmaceutical
Marketing Services Inc., a Delaware corporation ("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
proportionate share of an operating venture with Source to jointly offer a
range of services generated from a prescription database collected by Source
from retail and mail-order pharmacies in the United States and (ii) PMSI's
over-the-counter physician database business. The PMSI Database transaction is
subject to the approval of the PMSI stockholders as well as other customary
closing conditions and is expected to become effective during the fourth
quarter of calendar 1997. For the year ended June 30, 1997, and the quarter
ended September 30, 1997, PMSI Database had total revenues of $25.0 million and
$6.2 million, respectively, and net income of $3.5 million and $0.4 million,
respectively. As of September 30, 1997, PMSI Database had total assets of $13.5
million.
On November 6, 1997, NDC announced that Robert L. Walker will become chief
financial officer of NDC effective December 1, 1997. Mr. Walker previously
served as chief financial officer of Providian Corporation, a Louisville,
Kentucky based insurance and financial services company whose business includes
credit card and other consumer lending offerings.
15
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are certain unaudited historical consolidated selected
financial data relating to NDC and PSS and certain unaudited pro forma combined
selected financial data, giving effect to the Merger and the Source Transaction
(hereinafter defined). This information should be read in conjunction with the
historical financial statements of NDC and PSS, including the respective notes
thereto, and with the unaudited pro forma combined financial information,
appearing elsewhere in this Proxy Statement/Prospectus or incorporated by
reference herein. See "Available Information," "Incorporation of Certain
Information by Reference" and "Annex D--Pro Forma Combined Financial Data."
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." Interim unaudited historical data reflect, in the
opinion of management of NDC, 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 number of
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 obliga-
tions................ 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>
16
<PAGE>
SELECTED FINANCIAL DATA OF PSS (HISTORICAL)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth historical financial data of PSS and has been
derived from and should be read in conjunction with PSS's Annual Report on Form
10-K and Quarterly Reports on Form 10-Q, which are incorporated by reference
herein. See "Available Information" and "Incorporation of Certain Information
by Reference." Interim unaudited historical data reflect, in the opinion of
management of PSS, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of data. Unaudited results of
operations for the nine months ended September 30, 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>
NINE MONTHS ENDED FISCAL YEARS ENDED DECEMBER 31,
--------------------------- -----------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1996(1) 1995 1994 1993(2) 1992
------------- ------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $ 81,742 $54,045 $75,191 $59,514 $55,448 $44,311 $28,475
Pro forma net income
(loss)(3)............. 2,735 (3,430) (9,642) (941) 399 1,735 2,943
Preferred stock divi-
dends................. - 0 - 36 36 281 231 213 200
Pro forma net income
(loss) applicable to
common stock(3)....... 2,735 (3,466) (9,678) (1,222) 168 1,522 2,743
PER SHARE DATA:
Pro forma earnings
(loss) per share(3)... $ 0.28 $( 0.43) $ (1.17) $ (0.27) $ 0.04 $ 0.34 $ 0.61
Weighted average common
shares outstanding.... 9,641 8,007 8,270 4,527 4,527 4,527 4,527
BALANCE SHEET DATA
(AT PERIOD END):
Total assets........... $117,426 $87,253 $91,905 $43,115 $42,302 $43,508 $36,825
Long term obligations
(including related
party and current
portions, excluding
deferred income
taxes)................ 48,010 15,382 25,898 24,398 25,835 24,762 23,018
Total stockholders' eq-
uity.................. 51,995 50,446 45,713 4,073 5,859 6,891 3,951
</TABLE>
- --------
(1) Includes the results of the following companies from their dates of
acquisition: North Coast Health Care Management Group, February 15, 1996;
Medical Management Support, Inc., February 15, 1996; Data Processing
Systems, Inc., February 15, 1996; PBS Northwest, Inc., May 8, 1996; ALM,
Inc., May 31, 1996; MIS Group, September 3, 1996; and, MARS Group, December
16, 1996.
(2) Includes the results of Spring Anesthesia Group from the date of
acquisition, August 1, 1993.
(3) PSS acquired certain entities in merger transactions accounted for as
pooling-of-interests, which prior to the merger had elected "S" corporation
status for income tax purposes. As a result of the mergers, these acquired
entities terminated their "S" corporation elections. Pro forma net income
(loss), pro forma net income (loss) applicable to common stock and pro
forma earnings (loss) per share represent the pro forma net income (loss),
pro forma net income (loss) applicable to common stock and pro forma
earnings (loss) per share that would have been recognized for periods prior
to the mergers had the acquired entities been taxed as "C" corporations.
17
<PAGE>
SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF NDC AND PSS
(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 using the pooling-of-
interests method of accounting. The pro forma combined financial information
represents the historical operations of NDC and PSS adjusted for the effects of
the Merger as well as the effects of NDC's acquisition of NDC Health Care EDI
Services, Inc. ("EDI Services") consummated in October 1996, the proposed
merger of Source with and into a subsidiary of NDC, and the proposed merger of
PMSI Database with and into a subsidiary of NDC each of which is accounted for
under the "purchase" method of accounting. (The Source and PMSI Database
mergers hereinafter, the "Source Transactions"). This information has also been
adjusted to conform presentation format to that of NDC. In addition, this
information reflects the adjustment necessary to conform certain of NDC's
revenue recognition policies to those of PSS. For comparability purposes, PSS,
Source and PMSI Database's three and twelve months ended September 30, 1997 and
June 30, 1997, respectively, are used in conjunction with NDC's three and
twelve months ended August 31, 1997 and May 31, 1997, respectively. The
weighted average common shares outstanding and related per share data has been
adjusted to reflect the maximum number of shares of NDC Common Stock issuable
in the Merger and the Source Transactions.
The pro forma combined financial information is provided for informational
purposes only and is not necessarily indicative of actual results that would
have been achieved had the Merger, the acquisition of EDI Services and the
Source Transactions been consummated at the beginning of the period presented
or of future results. In addition, the financial results of the business to be
acquired in the Source Transaction ("Source US") have historically varied from
quarter to quarter. These fluctuations are principally due to the timing of
customer commitments to new products and services and the timing of delivery of
Source US services. Source US's fiscal year begins July 1. Source US typically
incurs expenses during the first half of its fiscal year (the last half of the
calendar year), in preparation for roll-out of new products and services to
meet customer requirements. As a result, during Source US's first quarter,
significant expense with respect to new products is incurred to generate
revenues that should be recognized in future quarters.
The selected pro forma combined financial information is derived from the Pro
Forma Combined Financial Information attached to this Proxy
Statement/Prospectus as Annex D. This information should be read in conjunction
with the historical financial statements of NDC, PSS, Source and PMSI Database,
including the respective notes thereto, incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FISCAL YEARS ENDED MAY 31,
AUGUST 31, --------------------------
1997 1997 1996 1995
------------ -------- -------- --------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................ $170,390 $626,862 $421,676 $363,295
Operating income.................... 22,392 76,916 31,389 28,433
Income from continuing operations... 10,993 42,887 18,301 16,494
PER SHARE DATA:
Income from continuing operations... $ 0.31 $ 1.23 $ 0.58 $ 0.51
Cash dividends...................... 0.075 0.30 0.30 0.30
Weighted average common shares out-
standing............................. 35,050 34,888 31,423 32,273
BALANCE SHEET DATA (AT AUGUST 31,
1997):
Total assets........................ $740,154
Long-term obligations............... 212,400
Total stockholders' equity.......... 356,338
</TABLE>
18
<PAGE>
RISK FACTORS
In addition to the other information contained in this Proxy
Statement/Prospectus, the following factors as well as the discussion under
"Forward-Looking Statements" on page 2 should be considered carefully in
evaluating an investment in NDC Common Stock.
THE MERGER
In considering whether to vote in favor of adoption of the Merger Agreement,
PSS stockholders should consider the following: (i) the Exchange Ratio will be
determined based on the average closing price of the NDC Common Stock over the
15 consecutive trading days ending on the tenth trading day prior to the
Special Meeting Date, and if that value is equal to or greater than $47.126
then PSS stockholders would receive $20.50 worth of NDC Common Stock for each
share of PSS Common Stock, assuming that the value of the NDC Common Stock at
the Effective Time equals the value used in calculating the Exchange Ratio;
(ii) if the value used in calculating the Exchange Ratio is equal to or less
than $36.782, then, assuming that the value of the NDC Common Stock at the
Effective Time equaled such value, the PSS stockholders would receive $16.00
worth of NDC Common Stock for each share of PSS Common Stock; however, NDC
may, but is not obligated to, terminate the Merger Agreement in such event,
subject to PSS's right to cancel such termination by agreeing that the
Exchange Ratio be fixed at 0.435 irrespective of the price of NDC Common
Stock; (iii) the price of the NDC Common Stock at the Effective Time can be
expected to vary from the value used in calculating the Exchange Ratio as well
as from its price as of the date of this Proxy Statement/Prospectus and the
date on which the PSS stockholders vote on the Merger Agreement due to changes
in the business, operations or prospects of NDC, market assessments of the
likelihood that the Merger will be consummated and the timing thereof, general
market and economic conditions, and other factors; (iv) the Merger involves
the integration of two companies that have previously operated independently,
and no assurance can be given that NDC will be able to integrate the
operations of PSS without encountering difficulties or experiencing the loss
of key PSS employees or customers, or that the benefits expected from such
integration will be realized; and (v) upon completion of the Merger, PSS
stockholders will become stockholders of NDC, and NDC's business is different
from that of PSS, and NDC's results of operations, as well as the price of NDC
Common Stock, will be affected by many factors different than those affecting
the results of operations of PSS and the price of PSS Common Stock. In
addition, PSS stockholders should consider that the proposed acquisitions
involved in the Source Transactions, the effect of which is included in the
pro forma financial information, may not be consummated.
COMPETITION
The markets for the applications systems and services offered by NDC are
highly competitive. Competition in the health care transaction processing and
payment systems markets affects NDC's ability to gain new customers and the
prices it can charge. The key competitive factors for NDC are functionality of
products, quality of service and price. Many of NDC's competitors have access
to significant capital and management, marketing and technological resources
that are equal to or greater than those of NDC, and there can be no assurance
that NDC will continue to be able to compete successfully with them. In
addition, NDC competes with businesses that internally perform data processing
or other services offered by NDC.
MARKETS AND APPLICATIONS
NDC's future growth and profitability will depend, in part, upon the further
expansion of the health care transaction processing and payment systems
markets, the emergence of other markets for electronic transaction processing
services and NDC's ability to penetrate such markets. Further expansion of
these markets is dependent upon the continued growth in the number of
transactions available to be processed and the continued automation of
traditional paper-based processing systems. NDC's ability to penetrate such
markets will depend, in turn, upon its ability to apply its existing
technology, or to develop new technology, to meet the particular service needs
of each new market. There can be no assurance that markets for NDC's services
will continue to expand and develop or that NDC will be successful in its
efforts, or have adequate financial, marketing and technological resources to
penetrate new markets.
19
<PAGE>
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 and PSS. Costs of compliance with changes in government
regulations may not be subject to recovery by NDC through price increases.
Significant media and public attention has recently been focused on the
health care industry due to ongoing federal and state investigations
purportedly related to certain referral and billing practices. The Office of
the Inspector General and the Department of Justice have initiated hospital
laboratory billing review projects in certain states and are expected to
extend such projects to additional states, including states in which PSS
operates. These projects increase the likelihood of governmental
investigations of hospitals, laboratories and other institutions for which NDC
and PSS perform services. Although PSS currently monitors, and upon the
consummation of the Merger, 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, including PSS's
practices.
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, which management believes are
adequate, for estimated losses on transactions processed. 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.
ACQUISITION RISKS
NDC completed five acquisitions in fiscal 1997, is currently proceeding to
consummate the Source Transactions 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 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
20
<PAGE>
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 (the "DGCL")
prohibits certain persons from engaging in business combinations with NDC,
which may also have the effect of delaying, deterring or preventing a change
of control of NDC.
21
<PAGE>
GENERAL INFORMATION
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished by PSS to its
stockholders in connection with the Special Meeting of the stockholders of PSS
to be held at 9:30 a.m., local time, on , 1997, at The Harvard Club, 27
West 44th Street, New York, New York 10036, and at any adjournments and
postponements thereof. The purpose of the Special Meeting is to consider and
vote upon a proposal to adopt the Merger Agreement and consummation of the
transactions contemplated therein, and to transact such other business as may
properly come before the Special Meeting. Any stockholder giving a proxy has
the power to revoke it at any time before it is voted. Revocation of a proxy
is effective upon receipt by the Secretary of PSS of either (i) an instrument
revoking such proxy or (ii) a duly executed proxy bearing a later date.
Furthermore, if a stockholder attends the meeting and elects to vote in
person, any previously executed proxy is thereby revoked.
This document is also being furnished by NDC to PSS stockholders as a
prospectus in connection with the issuance by NDC of shares of NDC Common
Stock upon consummation of the Merger.
The Merger Agreement provides for a transaction whereby a wholly-owned
subsidiary of NDC will merge with and into PSS, with PSS as the surviving
corporation of the Merger becoming a wholly-owned subsidiary of NDC. At the
Effective Time, each share of issued and outstanding PSS Common Stock
(excluding shares held by PSS or any of its subsidiaries or by NDC or any of
its subsidiaries) shall cease to be outstanding and shall be converted into
and exchanged for the right to receive 0.435 shares of NDC Common Stock,
subject to adjustment as provided in the Merger Agreement. Pursuant to the NDC
Rights Agreement, each share of NDC Common Stock issued in connection with the
Merger upon conversion of PSS Common Stock shall be accompanied by an NDC
Right. See "The Merger--Exchange Ratios" and "Certain Differences in the
Rights of NDC and PSS Stockholders."
If the Merger Agreement is adopted at the Special Meeting, all required
consents and approvals are obtained, and all of the other conditions to the
obligations of the parties to consummate the Merger are either satisfied or
waived (as permitted), the Merger will be consummated. See "The Merger--
Conditions to Consummation."
RECORD DATE
The PSS Board of Directors has fixed the close of business on November 12,
1997, as the record date for determining the PSS stockholders entitled to
receive notice of and to vote at the Special Meeting. Only holders of record
of PSS Common Stock as of the Record Date are entitled to notice of and to
vote at the Special Meeting. As of the Record Date, there were 9,733,710
shares of PSS Common Stock issued and outstanding and held by holders of
record. Holders of PSS Common Stock are entitled to one vote on each matter
considered and voted on at the Special Meeting for each share of PSS Common
Stock held of record at the close of business on the Record Date.
VOTES REQUIRED
The presence in person or by proxy of the holders of a majority of the
outstanding shares of PSS Common Stock entitled to vote on the subject matter
presented at the Special Meeting shall constitute a quorum at the Special
Meeting. Abstentions will be counted as present for the purposes of
determining a quorum. Broker "nonvotes" will not be counted for the purposes
of determining a quorum. A broker "nonvote" occurs when a broker holding
shares for a beneficial owner is present at the meeting, but does not vote on
a proposal because the broker has not received instructions to do so from the
beneficial owner and does not have discretionary power. Adoption of the Merger
Agreement and consummation of the transactions contemplated thereby requires
the presence of a quorum and the affirmative vote of a majority of the shares
of PSS Common Stock present in person or represented by proxy and entitled to
vote on the subject matter presented. Abstentions will have the effect of a
vote against adoption of the Merger Agreement. Broker "nonvotes" will have no
effect on the outcome of the vote.
22
<PAGE>
As of the Record Date, PSS directors and executive officers, and their
affiliates, beneficially owned approximately 27% of the outstanding shares of
PSS Common Stock entitled to vote at the Special Meeting. As of the Record
Date, NDC and its directors and executive officers, and their affiliates, held
no shares of PSS Common Stock. See "The Merger--Voting Agreement."
RECOMMENDATION OF PSS'S BOARD OF DIRECTORS
For the reasons described below, the Board of Directors of PSS has
unanimously adopted the Merger Agreement, believes the Merger is in the best
interests of PSS and its stockholders, and unanimously recommends that
stockholders of PSS vote FOR adoption of the Merger Agreement and the
consummation of the transactions contemplated therein. See "The Merger--
Reasons for the Merger."
PROXY SOLICITATION
PSS will bear the cost of soliciting proxies from its stockholders. In
addition to solicitation by mail, directors, officers and employees of PSS and
NDC may solicit proxies by telephone, telegram or otherwise. Such directors,
officers and employees of PSS and NDC will not be additionally compensated for
such solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Brokerage firms, fiduciaries and other custodians who
forward soliciting material to the beneficial owners of shares of PSS Common
Stock held of record by them will be reimbursed for their reasonable expenses
incurred in forwarding such material. PSS has retained D.F. King & Co., Inc.
to aid in soliciting proxies from its stockholders. The fees of such firm are
estimated to be $4,000 plus reimbursement of out-of-pocket expenses.
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THE MERGER
The following information describes certain information pertaining to the
Merger. This description does not purport to be complete and is qualified in
its entirety by reference to the Annexes hereto, including the Merger
Agreement, a copy of which is set forth in Annex A to this Proxy
Statement/Prospectus and is incorporated herein by reference. All stockholders
are urged to read the Annexes in their entirety.
GENERAL
The Merger Agreement provides that Sub will merge with and into PSS, which
shall be the surviving corporation of the Merger and, as a result thereof,
become a wholly-owned subsidiary of NDC. At the time the Merger becomes
effective, each outstanding share of PSS Common Stock (excluding shares held
by PSS or any of its subsidiaries or by NDC or any of its subsidiaries) shall
cease to be outstanding and shall be converted into and exchanged for the
right to receive 0.435 shares of NDC Common Stock, subject to adjustment
pursuant to the Merger Agreement. Pursuant to the NDC Rights Agreement, each
share of NDC Common Stock issued in connection with the Merger upon conversion
of the PSS Common Stock shall be accompanied by an NDC Right. If the Merger
Agreement is adopted at the Special Meeting, all required consents and
approvals are obtained, and all other conditions of the obligations of the
parties to consummate the Merger are either satisfied or waived (as
permitted), the Merger will be consummated.
BACKGROUND OF THE MERGER
During the second quarter of 1997, the PSS Board began considering
alternatives to maximize shareholder value. In May 1997, the PSS Board engaged
DLJ as financial advisor to assist the PSS Board in reviewing financial and
structural alternatives, including the evaluation of a sale, merger or other
business combination.
DLJ contacted a number of companies that it and PSS senior management had
identified as candidates for a possible business combination or strategic
alliance with PSS. As part of this process, DLJ contacted NDC on or about June
10, 1997.
On July 16, 1997, NDC expressed a preliminary interest in acquiring PSS in a
stock-for-stock acquisition valuing PSS Common Stock in the range of $14.00 to
$16.50 per share. DLJ discussed the indication of interest with NDC's
financial advisor, Lazard Freres & Co., LLC ("Lazard"), and advised Lazard
that PSS was interested in pursuing further discussions and due diligence with
NDC, while continuing to pursue other alternatives.
During July and August 1997, Mr. Robert A. Yellowlees, Chief Executive
Officer of NDC, and other members of NDC senior management met with PSS senior
management and undertook a due diligence review of PSS. On August 20, 1997,
PSS submitted a proposed form of merger agreement to NDC and requested that a
final proposal be submitted by mid-September.
On September 17, 1997, NDC submitted a proposal to acquire PSS at a value of
$18.00 per share, subject to a number of conditions, including satisfactory
completion of due diligence and a compliance audit of PSS and approval of the
Board of Directors of NDC. The value of $18.00 per share proposed by NDC also
was subject to adjustment downward if the price of NDC Common Stock declined,
without floor.
On September 17 and 18, 1997, members of PSS senior management and the PSS
Board discussed the proposal with its advisors, and DLJ held discussions with
Lazard to clarify certain issues in the proposal. On September 20, 1997,
members of PSS senior management met with NDC in Atlanta, Georgia to further
negotiate the terms of the proposal.
On the evening of September 21, 1997, Mr. Peter W. Gilson, Chief Executive
Officer, and Mr. Hamilton F. Potter III, Executive Vice President, of PSS
telephoned Mr. Yellowlees to invite NDC to negotiate the draft merger
agreement over the course of the next 10 days, while NDC completed its due
diligence of PSS and PSS conducted an operational, financial and legal due
diligence investigation of NDC.
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From September 22 through October 14, 1997, representatives of NDC and PSS
and their respective advisors completed their due diligence investigations and
proceeded to negotiate the terms of the final Merger Agreement.
On October 14, 1997, the PSS Board unanimously approved the Merger
Agreement. After the close of business that day, NDC and PSS executed the
Merger Agreement and issued a joint press release announcing the Merger.
REASONS FOR THE MERGER
At the meeting held by the PSS Board on October 14, 1997, the PSS Board, by
a unanimous vote of all directors, determined that the terms of the Merger are
fair to, and in the best interests of, PSS and its stockholders, approved the
Merger Agreement and authorized and directed certain executive officers to
execute the Merger Agreement on behalf of PSS.
PSS executed the Merger Agreement on October 14, 1997. After approval by the
Special Committee of the Board of Directors of NDC (the "NDC Board"), NDC
executed the Merger Agreement on October 14, 1997, and press releases
announcing the Merger Agreement and the transactions contemplated therein were
issued October 14, 1997.
ACCORDINGLY, THE PSS BOARD, HAVING UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, PSS
AND ITS STOCKHOLDERS, RECOMMENDS THAT THE PSS STOCKHOLDERS VOTE FOR ADOPTION
OF THE MERGER AGREEMENT.
The decision of the PSS Board to approve the Merger Agreement on October 14,
1997, followed almost four months of exploring and analyzing strategic and
financial alternatives available to PSS. During this period, the PSS Board met
numerous times, at which meetings the PSS Board reviewed in detail the
business, results of operations and prospects of PSS.
In making its recommendation to the PSS stockholders with respect to the
Merger, the PSS Board considered a number of factors. These factors, to which
no relative weights have been assigned, include the following:
(i) the investigation and review by the PSS Board of the Merger;
(ii) the knowledge and review by the PSS Board and its advisors of the
business, assets and prospects of PSS;
(iii) the information provided to the PSS Board by the officers of PSS
and representatives of DLJ with respect to the financial and other aspects
of the Merger, including the possibility and potential benefits of a
similar transaction with another entity and the prospects of PSS if the
Merger were not to be effected;
(iv) the presentation of DLJ delivered to the PSS Board at its meeting on
October 14, 1997, including DLJ's written opinion, dated October 14, 1997,
that, as of such date, and based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the Exchange
Ratio was fair to the PSS stockholders from a financial point of view (see
"--Opinion of Financial Advisor");
(v) the review of the material terms and conditions of the Merger as
reflected in the Merger Agreement, including the amount and form of
consideration, the proposed price protection range and the fact that each
holder of PSS Common Stock will receive the same consideration for his
shares which consideration the PSS Board believed represented the most
favorable transaction possible with NDC for the PSS stockholders;
(vi) the historical and prospective business of PSS, including, among
other things, the current financial condition and future prospects of PSS,
and the current financial condition and future prospects of NDC;
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(vii) the conditions precedent to the consummation of the Merger,
including regulatory approval and receipt of certain assurances that the
Merger will be accounted for as a pooling of interests, and the estimated
length of time necessary to consummate the Merger;
(viii) alternatives to the Merger, including a public equity offering,
and the relative merits of such alternatives, including the risks inherent
in continuing as an independent public company in an industry that is both
changing rapidly and consolidating, as compared to a combination between
NDC and PSS;
(ix) the structure of the Merger, which would permit holders of PSS
Common Stock to exchange all their shares of PSS Common Stock on a tax-free
basis; and
(x) such other matters as the PSS Board deemed appropriate or necessary
in considering the Merger.
OPINION OF FINANCIAL ADVISOR
PSS. PSS engaged DLJ to provide a fairness opinion in connection with the
transactions contemplated by the Merger Agreement based upon DLJ's
qualifications, expertise and reputation, as well as DLJ's prior investment
banking relationship and familiarity with PSS. On October 14, 1997, DLJ
delivered its written opinion (the "DLJ Opinion") to the PSS Board to the
effect that, as of such date, and based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the Exchange Ratio
was fair to the holders of PSS Common Stock from a financial point of view.
THE FULL TEXT OF THE DLJ OPINION IS SET FORTH AS APPENDIX C TO THIS PROXY
STATEMENT/PROSPECTUS AND SHOULD BE READ CAREFULLY IN ITS ENTIRETY FOR
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF
THE REVIEW BY DLJ.
The DLJ Opinion was prepared for the PSS Board and addresses only the
fairness of the Exchange Ratio to the holders of PSS Common Stock from a
financial point of view and does not constitute a recommendation to any
stockholder of PSS as to how such stockholder should vote at the Special
Meeting. The DLJ Opinion does not constitute an opinion as to the price at
which NDC Common Stock will actually trade at any time. The type and amount of
consideration was determined in arm's length negotiations between PSS and NDC
in which negotiations DLJ advised PSS. No restrictions or limitations were
imposed upon DLJ with respect to the investigations made or procedures
followed by DLJ in rendering its opinion.
In arriving at the DLJ Opinion, DLJ reviewed the Merger Agreement, including
the exhibits thereto, as well as financial and other information that was
publicly available or furnished to it by PSS and NDC, including information
provided during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain financial projections for PSS prepared by the management of PSS and
certain research analyst financial projections for NDC provided by the
management of NDC. In addition, DLJ compared certain financial and securities
data of PSS and NDC with that of various other companies whose securities are
traded in public markets, reviewed the historical stock prices and trading
volumes of the NDC Common Stock and PSS Common Stock, reviewed prices and
premiums paid in certain other business combinations and conducted such other
financial studies, analyses and investigations as DLJ deemed appropriate for
purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to it from public sources or that was provided to it by PSS and NDC or their
respective representatives. DLJ also assumed that the financial projections
supplied to it were reasonably prepared and, with respect to the financial
projections provided by the management of NDC, DLJ assumed that they were
prepared on a basis reflecting the best currently available estimates which
the management of NDC believed reasonable as to the future operating and
financial performance of NDC.
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The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on information made available to DLJ
as of, the date of its opinion. DLJ does not have any obligation to update,
revise or reaffirm the DLJ Opinion.
The following is a summary of the analyses presented by DLJ to the PSS Board
at its October 14, 1997 meeting. All analyses discussed below, unless
otherwise indicated, assume the Exchange Ratio of 0.435 is calculated using an
NDC Common Stock price of $41.38, based on the average of the closing prices
of the NDC Common Stock on October 10, 1997 and October 13, 1997 (the "NDC
Stock Price").
COMMON STOCK PERFORMANCE ANALYSIS. DLJ's analysis of the performance of PSS
Common Stock consisted of an historical analysis of closing prices and trading
volumes for the period from October 14, 1996 through October 14, 1997. During
this time period, PSS Common Stock underperformed the S&P 500 and an index
comprised of selected health care information services ("HCIS") companies
deemed by DLJ to be similar in nature to PSS (the "Selected HCIS Companies").
The Selected HCIS Companies are Cerner Corporation, HBO & Company, HCIA Inc.,
Health Management Systems Inc., IDX Systems Corporation, Medaphis Corporation,
Medical Manager Corporation, Physician Computer Network, Inc. and Shared
Medical Systems Corporation. During the above period, PSS Common Stock reached
a high of $22.25 per share and a low of $7.06 per share. On October 14, 1997,
the closing price of PSS Common Stock was $17.88 per share.
DLJ's analysis of the performance of NDC Common Stock consisted of an
historical analysis of closing prices and trading volumes for the period from
October 14, 1996 through October 14, 1997. During this time period, NDC Common
Stock underperformed the S&P 500 but outperformed an index comprised of
selected companies deemed by DLJ to be similar in nature to NDC (the "NDC
Selected Companies"). The NDC Selected Companies are Envoy Corporation, First
Data Corporation, Medaphis Corporation, SPS Transaction Services, Inc.,
Physician Support Systems, Inc., First USA Paymentech, Inc., Total System
Services, Inc. and PMT Services, Inc. During the above period, NDC Common
Stock reached a high of $47.13 per share and a low of $34.63 per share. On
October 14, 1997, the closing price of NDC Common Stock was $41.69 per share.
No company utilized in the common stock performance analysis is identical to
NDC or PSS. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of the Selected HCIS
Companies and PSS, and the NDC Selected Companies and NDC, and other factors
that could affect the public trading value of NDC Common Stock and PSS Common
Stock.
DLJ also analyzed the historical relationship between the trading prices of
PSS Common Stock and NDC Common Stock for the period from February 16, 1996
through October 14, 1997 and for the period from February 7, 1997 through
October 14, 1997. The average ratio of the closing price of PSS Common Stock
to that of NDC Common Stock for the period from February 16, 1996 through
October 14, 1997 was 0.416, with a minimum ratio of 0.188 and a maximum ratio
of 0.736. The average of the same ratio for the period from February 7, 1997
through October 14, 1997 was 0.303, with a minimum ratio of 0.188 and a
maximum ratio of 0.466.
SELECTED COMPANY ANALYSIS. To provide contextual data and comparative market
information, DLJ analyzed the operating performance of PSS relative to the
Selected HCIS Companies and NDC relative to the operating performance of the
NDC Selected Companies. Historical financial information used in connection
with the ratios provided below with respect to PSS and the Selected HCIS
Companies and NDC and the NDC Selected Companies is as of the most recent
financial statements publicly available for each company as of October 14,
1997.
DLJ performed a valuation analysis of PSS by applying certain market trading
statistics for the Selected HCIS Companies to PSS's historical and estimated
financial results. DLJ examined certain publicly available financial data of
the Selected HCIS Companies, including enterprise value (defined as market
value of common equity plus book value of total debt and preferred stock less
cash) as a multiple of (i) latest 12 months ("LTM") revenues, earnings before
interest, taxes, depreciation and amortization ("EBITDA") and earnings before
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interest and taxes ("EBIT"); and (ii) estimated calendar year 1997 and 1998
price to earnings ratio based on estimated calendar year 1997 and 1998
earnings per share ("EPS"). DLJ noted that as of October 14, 1997, the
Selected HCIS Companies were trading at implied multiples of enterprise value
and earnings, as the case may be, in (i) a range of 1.3x to 7.4x (with an
average, excluding the high and low (the "Trimmed Average"), of 3.1x) LTM
revenues; (ii) a range of 6.9x to 29.6x (with a Trimmed Average of 16.5x) LTM
EBITDA; (iii) a range of 7.8x to 32.9x (with a Trimmed Average of 21.3x) LTM
EBIT; (iv) a range of 22.9x to 47.6x (with a Trimmed Average of 32.0x)
estimated calendar year 1997 EPS; and (v) a range of 16.1x to 34.9x (with a
Trimmed Average of 25.8x) estimated calendar year 1998 EPS. Based on the
Trimmed Average valuation multiples of the Selected HCIS Companies discussed
above, DLJ derived a summary valuation range for PSS Common Stock of $9.11 to
$25.52 per share or an implied ratio of PSS value per share to NDC value per
share ranging from 0.220 to 0.617 based on the NDC Stock Price. The calendar
year 1997 and 1998 EPS estimates for the Selected HCIS Companies were based on
estimates provided by First Call Research Direct.
DLJ performed a valuation analysis of NDC relative to certain market trading
statistics for the NDC Selected Companies. DLJ examined certain publicly
available financial data of the NDC Selected Companies, including enterprise
value as a multiple of (i) LTM revenues, EBITDA and EBIT; and (ii) estimated
calendar year 1997 and 1998 price to earnings ratio based on estimated
calendar year 1997 and 1998 EPS. DLJ noted that as of October 14, 1997, the
NDC Selected Companies were trading at implied multiples of enterprise value
and earnings, as the case may be, in (i) a range of 1.4x to 11.2x (with a
Trimmed Average, of 3.1x) LTM revenues; (ii) a range of 10.0x to 65.5x (with a
Trimmed Average of 21.0x) LTM EBITDA; (iii) a range of 14.1x to 61.0x (with a
Trimmed Average of 32.1x) LTM EBIT; (iv) a range of 18.3x to 63.9x (with a
Trimmed Average of 29.4x) estimated calendar year 1997 EPS; and (v) a range of
17.0x to 50.9x (with a Trimmed Average of 22.4x) estimated calendar year 1998
EPS. DLJ also noted that on the same basis, NDC traded at 2.8x, 11.5x and
33.8x LTM revenues, LTM EBITDA and LTM EBIT, respectively, and 26.6x and 21.8x
estimated calendar 1997 and 1998 EPS, respectively.
No company utilized in the comparable company analysis is identical to
either PSS or NDC, as the case may be. Accordingly, an analysis of the results
of the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
Selected HCIS Companies and PSS and the NDC Selected Companies and NDC and
other factors that could affect the public trading value of the Selected HCIS
Companies and the NDC Selected Companies. Mathematical analysis such as
determining the average is not in itself a meaningful method of using
comparable company data.
SELECTED TRANSACTION ANALYSIS. DLJ also performed an analysis of selected
merger and acquisition transactions (the "Selected Transactions") in the
health care information services industry deemed by DLJ to be similar in
nature to the Merger. Multiples reviewed in the Selected Transactions
consisted of (i) aggregate transaction value (defined as the equity value of
the offer plus book value of total debt and preferred stock less cash) to
(where available) LTM revenues, LTM EBITDA, LTM EBIT and (ii) aggregate
purchase price (defined as the equity value of the offer) to estimated current
year net income as estimated at the time of the announcement of the
acquisition. The Selected Transactions were comprised of the following eleven
transactions announced during the period September 1, 1994 through October 14,
1997: Serving Software, Inc. and HBO & Company; AdvaCare, Inc. and Medaphis
Corporation; Medstat Group and Thomson Corporation; CliniCom, Inc. and HBO &
Company; C.I.S. Technologies, Inc. and National Data Corporation; CyCare
Systems, Inc. and HBO & Company; GMIS, Inc. and HBO & Company; AMISYS Managed
Care Systems and HBO & Company; Enterprise Systems, Inc. and HBO & Company;
Phamis, Inc. and IDX Systems Corporation; and Medic Computer Systems, Inc. and
Misys plc (pending). DLJ noted that the implied multiples of aggregate
transaction value and aggregate purchase price, as the case may be, for these
transactions were in a range of (i) 1.5x to 5.8x (with a Trimmed Average of
3.8x) LTM revenues; (ii) 10.4x to 31.6x (with a Trimmed Average of 22.2x) LTM
EBITDA; (iii) 13.4x to 67.3x (with a Trimmed Average of 35.6x) LTM EBIT; and
(iv) 20.5x to 36.8x (with an average of 27.6x) estimated current year net
income. Based on the Trimmed Average multiples paid in the Selected
Transactions discussed above, DLJ derived a summary valuation range for PSS
Common Stock of $16.43 to $32.19 per share or an implied ratio of NDC value
per share to PSS value per share of 0.397 to 0.778
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based on the NDC Stock Price. The current year estimates of financial
performance for the Selected Transactions used to derive the multiples above
were based on publicly available research reports available at the time of the
announcement of each transaction.
No transaction utilized in the selected transaction analysis is identical to
the Merger. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of PSS and other
factors that could affect the acquisition value of the companies to which it
is being compared. Mathematical analysis such as determining the average is
not in itself a meaningful method of using comparable transaction data.
PREMIUMS PAID ANALYSIS. DLJ determined the percentage premium of the offer
price over the trading prices one day, one week and four weeks prior to the
announcement date of 138 selected stock-for-stock merger or acquisition
transactions involving companies not necessarily comparable to PSS. These
transactions ranged in enterprise value from $100 million to $500 million and
occurred since January 1, 1994. The average premiums for the selected
transactions over the trading prices, one day, one week, and four weeks prior
to the announcement dates were 32.8%, 36.4% and 43.2%, respectively. For the
proposed transaction, the premiums derived from the NDC Stock Price, based on
the implied purchase price of PSS's stock price one day, one week, and four
weeks prior to August 13, 1996 were (0.7)%, 0.0% and 12.5%, respectively.
DISCOUNTED CASH FLOW ANALYSIS. In addition, DLJ performed a discounted cash
flow analysis for the four-year period commencing January 1, 1998 and ending
December 31, 2001 based on the stand-alone unlevered free cash flows of PSS,
both including and excluding PSS's assumptions for acquiring other health care
information services companies. Unlevered free cash flows were calculated as
the after-tax operating earnings of PSS, plus depreciation and amortization
and other non-cash items, plus (or minus) net changes in working capital;
minus projected capital expenditures. DLJ calculated terminal values by
applying a range of estimated EBITDA multiples of 5.0x to 8.0x to the
projected EBITDA of PSS in 2001, excluding PSS's assumptions with respect to
acquisitions (the "Without Acquisitions Scenario"), and applying a range of
estimated EBITDA multiples of 7.0x to 10.0x to the projected EBITDA of PSS in
2001, including PSS's assumptions with respect to acquisitions (the "With
Acquisitions Scenario"). The unlevered free cash flows and terminal values
were then discounted to the present using a range of discount rates of 14% to
18% in the Without Acquisitions Scenario and 16% to 20% in the With
Acquisitions Scenario, in each case, representing an estimated range of the
weighted average cost of capital of PSS. Based on this analysis, DLJ
calculated per share equity values of PSS ranging from $9.99 to $18.92 in the
Without Acquisitions Scenario, and per share equity values of PSS ranging from
$16.69 to $33.46 in the With Acquisitions Scenario and ratios of NDC value per
share to PSS value per share ranging from 0.241 to 0.457 in the Without
Acquisitions Scenario and ranging from 0.403 to 0.809 in the With Acquisitions
Scenario, based on the NDC Stock Price.
DLJ also performed a discounted cash flow analysis for the five-year period
commencing June 1, 1998 and ending May 31, 2003 based on the stand-alone
unlevered free cash flows of NDC. Unlevered free cash flows were calculated as
the after-tax operating earnings of NDC, plus depreciation and amortization
and other non-cash items, plus (or minus) net changes in working capital minus
capital expenditures. DLJ calculated terminal values by applying a range of
estimated EBITDA multiples of 10.0x to 14.0x to the projected EBITDA of NDC in
2003. The unlevered free cash flows and terminal values were then discounted
to the present using a range of discount rates of 14% to 18% representing an
estimated range of the weighted average cost of capital of NDC. Based on this
analysis, DLJ calculated per share equity values of NDC ranging from $39.30 to
$69.43. Projected unlevered free cash flows for NDC were based upon equity
research analysts' projections for the company and guidance from NDC
management.
EPS IMPACT ANALYSIS. DLJ also analyzed the pro forma effects on the
projected EPS of PSS resulting from the Merger, under both the With
Acquisitions and Without Acquisitions Scenarios and including, without
independent verification, the synergies projected by the management of PSS,
for each of NDC's fiscal years ending May 31, 1998, and 1999, assuming an
exchange ratio of 0.435. The analysis indicated that the Merger, accounted for
as a pooling-of-interests transaction, including the benefit of the synergies
and including projected
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acquisitions, would be accretive to NDC's stand-alone EPS estimates by 4.3%
and 9.6% for the fiscal years ending May 31, 1998 and 1999, respectively. A
similar analysis excluding the benefit of projected acquisitions would be
accretive to NDC's stand-alone EPS estimates by 2.5% and 4.4% for the fiscal
years ending May 31, 1998 and 1999, respectively.
RELATIVE CONTRIBUTION ANALYSIS. DLJ analyzed the relative contributions of
NDC and PSS to the revenues, EBIT, pre-tax income and net income of the pro
forma combined entity for the LTM period and NDC's projected fiscal years 1998
and 1999, both including and excluding projected acquisitions. Based on LTM
financial information for NDC and PSS, PSS's net sales, EBIT, pre-tax income,
and net income would represent 17.1%, 7.7%, 6.5% and 5.9%, respectively, of
the pro forma combined entity. Based on the projected financial information
for NDC and PSS, including projected acquisitions and adjusted to conform to
NDC's fiscal year end, PSS's net sales, EBIT, pre-tax income, and net income
would represent 18.0%, 15.6%, 14.4% and 13.6%, respectively, of the projected
1998 pro forma combined entity, and 17.5%, 16.3%, 15.5% and 14.9%,
respectively, of the projected 1999 pro forma combined entity. Based on the
projected financial information for NDC and PSS, including projected
acquisitions and adjusted to conform to NDC's fiscal year end, PSS's net
sales, EBIT, pre-tax income, and net income would represent 19.7%, 17.4%,
16.1% and 15.2%, respectively, of the projected 1998 pro forma combined entity
and 22.9%, 21.5%, 20.0% and 19.0%, respectively, of the projected 1999 pro
forma combined entity. The shares of NDC Common Stock to be issued to the
holders of PSS Common Stock on a fully diluted basis would represent
approximately 13.6% of the fully diluted shares of NDC Common Stock after
giving effect to the Merger at an exchange ratio of 0.435.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ, but describes, in summary form, the principal
elements of the analyses contained in the materials presented by DLJ to the
PSS Board in connection with DLJ rendering its opinions. The preparation of a
fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Each of the analyses conducted by
DLJ was carried out in order to provide a different perspective on the
transaction and add to the total mix of information available. DLJ did not
form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to fairness from a
financial point of view. Rather, in reaching its conclusion, DLJ considered
the results of the analyses in light of each other and ultimately reached its
opinion based on the results of the analyses taken as a whole. DLJ did not
place particular reliance or weight on any individual factor, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, DLJ
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete or misleading view of the
evaluation process underlying its opinion.
DLJ was selected to render an opinion in connection with the Merger based
upon DLJ's qualifications, expertise and reputation, including the fact that
DLJ, as part of its investment banking business, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes.
Pursuant to a letter agreement between PSS and DLJ, dated May 22, 1997 (the
"DLJ Engagement Letter"), DLJ is entitled to (i) a retainer fee of $100,000
payable promptly upon execution of the DLJ Engagement Letter, (ii) a fee of
$400,000 payable at the time DLJ notified PSS that it was prepared to deliver
an opinion with respect to the Merger, irrespective of the conclusion reached
therein, and (iii) a fee of approximately $2.7 million (against which amounts
payable pursuant to (i) and (ii) above will be credited) assuming an exchange
ratio of 0.435 and the NDC Stock Price, upon completion of the Merger. In
addition, PSS has agreed to reimburse DLJ for all out-of-pocket expenses
(including the reasonable fees and expenses of its counsel) incurred by DLJ in
connection with its engagement thereunder, whether or not the Merger is
consummated, and to indemnify DLJ for certain liabilities and expenses arising
out of the Merger or the transactions in connection therewith, including
liabilities under federal securities laws. The terms of the fee arrangement
with DLJ, which DLJ and PSS believe
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are customary in transactions of this nature, were negotiated at arm's length
between PSS and DLJ and the PSS Board was aware of such arrangement.
DLJ provides a full range of financial, advisory and brokerage services and
in the course of its normal trading activities may from time to time effect
transactions and hold positions in the securities or options in the securities
of PSS and/or NDC for its own account and for the accounts of customers.
EXCHANGE RATIO AND ADJUSTMENT
At the Effective Time, each outstanding share of PSS Common Stock (excluding
shares held by PSS or any of its subsidiaries or by NDC or any of its
subsidiaries) shall cease to be outstanding and shall be converted into and
exchanged for the right to receive 0.435 shares of NDC Common Stock.
If the Average Closing Price of NDC Common Stock is greater than $47.126,
the Exchange Ratio shall be adjusted to equal that fraction of a share of NDC
Common Stock (rounded to the nearest ten-thousandth of a share) obtained by
dividing $20.50 by the Average Closing Price. If the Average Closing Price is
less than $36.782, the Exchange Ratio shall be adjusted to equal that fraction
of a share of NDC Common Stock (rounded to the nearest ten-thousandth of a
share) obtained by dividing $16.00 by the Average Closing Price. If the
Average Closing Price is less than $36.782, NDC shall have the right to
terminate the Merger Agreement and to refuse to consummate the Merger provided
that NDC shall have given prompt written notice of such refusal to PSS
(further provided that such notice of election may be withdrawn at any time
within five business days of PSS's receipt of such notice). During the five-
day period commencing with its receipt of such notice, PSS shall have the
option to elect to revise the Exchange Ratio to equal 0.435. If PSS makes the
election contemplated by the preceding sentence within such five-day period,
it shall give prompt written notice to NDC of such election, whereupon the
Merger Agreement shall remain in effect in accordance with its terms (except
that the Exchange Ratio shall have been so modified). Pursuant to the NDC
Rights Agreement, each share of NDC Common Stock issued in connection with the
Merger upon conversion of the PSS Common Stock shall be accompanied by an NDC
Right.
FRACTIONAL SHARES
Pursuant to the terms of the Merger Agreement, each holder of shares of PSS
Common Stock exchanged pursuant to the Merger, who would otherwise have been
entitled to receive a fraction of a share of NDC Common Stock, shall receive,
in lieu thereof, cash (without interest) in an amount equal to such fractional
part of a share of NDC Common Stock multiplied by the Average Closing Price.
No such holder will be entitled to dividends, voting rights, or any other
rights as a stockholder in respect of any fractional shares.
TREATMENT OF STOCK OPTIONS
The Merger Agreement provides that, at the Effective Time, all rights with
respect to PSS Common Stock pursuant to PSS Options granted under the PSS
Stock Plans or any other contract or agreement entered into by PSS, which are
outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to NDC Common Stock, and NDC
shall assume each PSS Stock Plan and each PSS Option, in accordance with the
terms of the applicable PSS Stock Plan and option agreement by which it is
evidenced. From and after the Effective Time: (i) NDC or the Compensation
Committee of its Board of Directors, as appropriate, shall be substituted as
the administrator of the PSS Stock Plans, (ii) each PSS Option assumed by NDC
may be exercised solely for shares of NDC Common Stock, (iii) the number of
shares of NDC Common Stock subject to such PSS Option shall be equal to the
number of shares of PSS Common Stock subject to such PSS Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (iv) the per
share exercise price under each such PSS Option shall be adjusted by dividing
the per share exercise price under each such PSS Option by the Exchange Ratio.
It is intended that the foregoing assumption be undertaken in a manner that
will not prejudice the rights of any holder of a PSS Option under the terms of
the PSS Option, any PSS Stock Plan, contract and/or agreement or constitute a
"modification" as defined in Section 424 of the Code, as
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<PAGE>
to any stock option which is an "incentive stock option." Under the PSS Stock
Plans and related stock option agreements, unless otherwise agreed by the
optionee, all PSS Options outstanding at the time the PSS stockholders adopt
the Merger Agreement will accelerate and become fully exercisable according to
their terms.
EFFECTIVE TIME
If the Merger Agreement is adopted by the requisite vote of PSS
stockholders, and all other required consents and approvals are received, and
if the other conditions to the obligations of the parties to consummate the
Merger are satisfied or waived (as permitted), the Merger will be consummated
and effected on the date and at the time a Certificate of Merger, reflecting
the Merger, becomes effective with the Secretary of State of the State of
Delaware. Assuming satisfaction of all conditions to consummation of the
Merger, the Merger is expected to be made effective during the fourth quarter
of calendar 1997. Either NDC or PSS may terminate the Merger Agreement if the
Merger has not been consummated by March 31, 1998. The closing of the Merger
shall take place on the date the Effective Time occurs or such other date as
the parties shall agree. See "--Conditions to Consummation" and "--Amendment,
Waiver, and Termination."
DISTRIBUTION OF NDC CERTIFICATES
Promptly after the Effective Time, NDC and PSS shall cause the exchange
agent selected by NDC to mail appropriate transmittal materials to each record
holder of PSS Common Stock for use in effecting the surrender and cancellation
of those certificates in exchange for NDC Common Stock, any cash in lieu of
fractional shares of NDC Common Stock and any dividends or other distributions
to which such holder is entitled (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of PSS Common Stock shall pass, only upon proper delivery
of such certificates to the exchange agent by the former stockholders of PSS).
PSS STOCKHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL
THEY RECEIVE SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS. After the Effective
Time, each holder of shares of PSS Common Stock issued and outstanding at the
Effective Time (excluding shares held by PSS or any of its subsidiaries or by
NDC or any of its subsidiaries) shall surrender the certificate or
certificates representing such shares to the exchange agent, and the
certificates thus surrendered will be canceled. Unless otherwise designated by
a PSS stockholder on the transmittal letter, certificates representing shares
of NDC Common Stock and cash in lieu of fractional shares issued or
deliverable to PSS stockholders in connection with the Merger will be issued
and delivered to the tendering PSS stockholder at the address on record with
PSS. NDC shall not be obligated to deliver the consideration to which any
former holder of PSS Common Stock is entitled until such holder surrenders for
exchange such holder's certificate or certificates representing such holder's
shares. The certificate or certificates so surrendered shall be duly endorsed
as the exchange agent may require. No party shall be liable to a holder of PSS
Common Stock for any property delivered in good faith to a public official
pursuant to any applicable abandoned property law.
After the Effective Time, holders of PSS certificates will have no rights
with respect to the shares of PSS Common Stock represented thereby other than
the right to surrender such certificates and receive in exchange therefor the
shares of NDC Common Stock and cash in lieu of fractional shares to which such
holders are entitled, as described above. In addition, no dividend or other
distribution payable to holders of record of NDC Common Stock will be paid to
the holder of any PSS certificates until such holder surrenders such
certificates for exchange as instructed. Subject to applicable law, upon
surrender of the certificates, such holder will receive the certificates
representing the shares of NDC Common Stock and cash in lieu of fractional
shares issuable or deliverable upon the exchange of such shares of PSS Common
Stock, all withheld dividends or other distributions (without interest), and
any withheld cash payments (without interest) to which such stockholder is
entitled.
If any certificate for NDC Common Stock is to be issued in a name other than
that in which the PSS certificate surrendered for exchange is issued, the PSS
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person requesting such exchange shall affix any
requisite stock
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transfer tax stamps to the certificates surrendered, shall provide funds for
their purchase, or shall establish to the exchange agent's satisfaction that
such taxes are not payable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger. This discussion is based on provisions of the
Code, the Treasury Regulations promulgated thereunder and rulings and court
decisions as of the date hereof, all of which are subject to change, possibly
retroactively. The discussion is included for general information purposes
only, applies only to PSS stockholders, if any, who hold their stock as a
capital asset, and may not apply to PSS stockholders, if any, who received
their stock upon the exercise of employee stock options or otherwise as
compensation or who have a special tax status. NDC and PSS have not requested
a ruling from the Service; however, as a condition to consummation of the
Merger, each of NDC and PSS will receive an opinion of its respective counsels
Alston & Bird LLP and Howard, Darby & Levin, respectively, as to the
qualification of the Merger as a tax-free reorganization within the meaning of
Section 368(a) of the Code.
It is intended that the Merger will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code. The above-mentioned opinions
of Alston & Bird LLP and Howard, Darby & Levin will be based on, among other
things, current law and certain representations as to factual matters made by,
among others, NDC and PSS; if such representations were incorrect in certain
material respects, the conclusions reached by counsel in their opinions would
be jeopardized. Neither NDC nor PSS is currently aware of any facts and
circumstances that would cause any representations of such party to Alston &
Bird LLP and Howard, Darby & Levin to be untrue or incorrect in any material
respect.
If the Merger were not to qualify as a tax-free reorganization, the
principal federal income tax consequences, under currently applicable law,
would be as follows: (i) no gain or loss would be recognized by NDC or PSS as
a result of the Merger, (ii) a gain or loss would be recognized by the holders
of PSS Common Stock upon the exchange of such shares in the Merger for shares
of NDC Common Stock; (iii) the tax basis of the NDC Common Stock to be
received by the holders of PSS Common Stock in the Merger would be the fair
market value of such shares of NDC Common Stock as of the Effective Time; and
(iv) the holding period of such shares of NDC Common Stock to be received by
PSS stockholders pursuant to the Merger would begin the day after the
Effective Time.
Upon the sale or exchange of NDC Common Stock, a holder of such stock
generally will recognize capital gain or loss equal to the difference between
the amount of cash and the fair market value of any property received upon the
sale or exchange and such holder's adjusted tax basis in the NDC Common Stock.
Under recently enacted legislation, long-term capital gains recognized by
certain non-corporate holders of NDC Common Stock generally will be subject to
a maximum federal income tax rate of 20% if the shares sold or exchanged are
held for more than 18 months, and to a maximum federal income tax rate of 28%
if such shares are held for more than one year but are not held for more than
18 months. Tax consequences to dealers in NDC Common Stock, non-United States
holders of NDC Common Stock or others who have a special tax status or to
persons who received their shares through the exercise of employee stock
options or otherwise as compensation may be different and such persons should
consult their tax advisors as to the tax consequences of a sale or exchange of
NDC Common Stock.
Assuming, as is anticipated, that the Merger is treated as a reorganization
as defined in Section 368(a) of the Code, the following will be the material
federal income tax consequences to the PSS stockholders:
(i) No gain or loss will be recognized for federal income tax purposes by
PSS stockholders upon the exchange of their shares of PSS Common Stock for
shares of NDC Common Stock. In addition, no gain or loss will be recognized
by the PSS stockholders upon the receipt of the NDC Rights attached to the
NDC Common Stock.
(ii) The basis of the shares of NDC Common Stock to be received by PSS
stockholders will be the same as the basis of the PSS Common Stock
surrendered in exchange therefor.
(iii) The holding period of the NDC Common Stock to be received by PSS
stockholders will include the period during which the shares of PSS Common
Stock surrendered in exchange therefor had been held, provided such shares
were held by such stockholders as a capital asset at the Effective Time.
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<PAGE>
(iv) The payment of cash in lieu of fractional shares of NDC Common Stock
will be treated as if the fractional shares were issued as part of the
exchange and then redeemed by NDC. These cash payments will be treated as
having been received as distributions in full payment in exchange for the
fractional shares of NDC Common Stock redeemed as provided in Section
302(a) of the Code. Generally, any gain or loss recognized upon such
exchange will be capital gain or loss, provided the fractional share would
constitute a capital asset in the hands of the exchanging stockholder.
EACH HOLDER OF PSS COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE
MERGER (INCLUDING THE APPLICATION AND EFFECT OF FOREIGN, STATE AND LOCAL
INCOME AND OTHER TAX LAWS).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Other than as described herein, no director or executive officer of NDC or
PSS, and no associate of any such person, has any substantial interest, direct
or indirect, in the Merger, other than an interest arising from the ownership
of PSS Common Stock, in which case the director or officer receives no extra
or special benefit not shared on a pro rata basis by all other holders of PSS
Common Stock.
Certain members of PSS's management and Board of Directors may be deemed to
have interests in the Merger in addition to their interests as stockholders of
PSS generally. In each case, the PSS Board either was aware of these factors
or, with respect to interests that arose subsequent to the Merger Agreement,
was aware of their potential, and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
Indemnification. The Merger Agreement provides that NDC shall for a period
of six years after the Effective Time indemnify the present and former
directors, officers, employees and agents of PSS or any of its subsidiaries to
the extent provided under PSS's or such subsidiaries' certificate of
incorporation and bylaws, as in effect on the date of the Merger Agreement,
with respect to matters occurring at or prior to the Effective Time. NDC shall
maintain PSS's existing directors' and officers' liability insurance policy
(or a policy providing terms substantially similar to the existing policy) for
a period of three years after the Effective Time of the Merger; provided, that
NDC shall not be obligated to make aggregate premium payments in respect of
such policy which exceed 150% of the amount paid in PSS's last full fiscal
year.
Post-Acquisition Compensation and Benefits. The Merger Agreement provides
that, after the Effective Time, NDC will provide generally to officers and
employees of PSS and its subsidiaries, employee benefits under employee
benefit plans, on terms and conditions that, when taken as a whole, are no
less favorable than those in effect on the date of the Merger Agreement. For
purposes of participation, vesting and benefit accrual (other than benefit
accrual under retirement plans) under such employee benefit plans, service
with PSS or its subsidiaries prior to the Effective Time will be treated as
service with NDC or its subsidiaries. NDC will honor, in accordance with their
respective terms, all employment, severance, consulting and other compensation
contracts previously disclosed to NDC between PSS or any of its subsidiaries
and any current or former director, officer or employee, and all provisions
for vested amounts earned or accrued through the Effective Time under PSS's
benefit plans.
Under the terms of their employment agreements with PSS, following a change
of control of PSS (which will include the Merger) each of Mr. J. Michael
Drinkwater, President and Chief Operating Officer of PSS, and Mr. David S.
Geller, Senior Vice President, Chief Financial Officer and Secretary of PSS,
will automatically be entitled to receive, on the dates set forth in such
employment agreements, certain bonuses that otherwise would have been
discretionary to PSS. Neither Mr. Drinkwater nor Mr. Geller can be required to
assume responsibilities under his respective employment agreement that are
materially different from his responsibilities before the Merger and cannot be
required, without his consent, to relocate. In addition, pursuant to his
employment agreement, following the Merger, Mr. Geller's term of employment
with PSS (which otherwise would have terminated on February 14, 1998) will be
extended by one year.
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Under the terms of his employment agreement, Mr. Peter D. Cooper, President
of EE&C Financial Services, Inc. (a subsidiary of PSS) and a director of PSS,
was entitled to terminate his employment agreement and receive severance
payments following a change of control of PSS if certain other conditions were
met. Mr. Cooper waived his right to terminate his employment agreement in
connection with the Merger.
Security Ownership of Certain Beneficial Owners and Management of PSS. The
following table sets forth as of October 31, 1997, certain information
regarding the beneficial ownership of the PSS Common Stock by (i) all those
known by PSS to be beneficial owners of more than 5% of the outstanding shares
of PSS Common Stock, (ii) certain of PSS's executive officers and each of
PSS's directors and (iii) all executive officers and directors of PSS as a
group. Except as indicated in the notes to the table, each person named has
sole voting and investment power with respect to the shares indicated. On the
Record Date, PSS had outstanding 9,733,710 shares of PSS Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
BENEFICIAL OWNER(1) OWNED TOTAL
- ------------------- ---------------- ----------
<S> <C> <C>
Peter W. Gilson.................................. 840,000 8.6%
Hamilton F. Potter III........................... 504,000 5.2
J. Michael Drinkwater............................ 50,000 (2) *
David S. Geller.................................. 50,000 (3) *
Peter D. Cooper.................................. 947,649 (4) 9.7
Hamid Mirafzali.................................. 585,932 (5) 6.0
Mortimer Berkowitz III........................... 346,000 (6) 3.6
Richard W. Vague................................. 20,000 (7) *
Elaine Scialo.................................... 947,649 (8) 9.7
John N. Irwin III................................ 498,400 (9) 5.1
All executive officers and directors as a group
(7 Persons)..................................... 2,757,649(10) 28.0
</TABLE>
- --------
* Less than 1%.
(1) The address for each beneficial owner is in care of the Company, Route
230 and Eby-Chiques Road, Mt. Joy, Pennsylvania 17552 (U.S. mail address:
P.O. Box 127, Landisville, Pennsylvania 17538).
(2) Represents shares issuable upon the exercise of options granted to Mr.
Drinkwater under the Company's Amended and Restated 1996 Stock Option
Plan (the "Stock Option Plan") at an exercise price of $10.125 per share.
Pursuant to the terms of Mr. Drinkwater's related stock option agreement,
the vesting of these options will accelerate upon the adoption of the
Merger Agreement by the PSS stockholders. The percentage of shares
beneficially owned by Mr. Drinkwater was calculated by adding to the
number of outstanding shares 50,000 shares deemed to be issued pursuant
to Securities Exchange Act Rule 13d-3(d)(1).
(3) Represents 25,000 shares issuable upon the exercise of options granted to
Mr. Geller under the Stock Option Plan at an exercise price of $15.00 per
share and 25,000 shares issuable upon the exercise of options granted to
Mr. Geller at $21.125 per share. An aggregate of 10,000 of these options
are currently vested and, in accordance with the terms of Mr. Geller's
stock option agreement, the vesting of the remaining 40,000 will
accelerate upon the adoption of the Merger Agreement by the PSS
stockholders. The percentage of shares beneficially owned by Mr. Geller
was calculated by adding to the number of outstanding shares 50,000
shares deemed to be issued pursuant to Securities Exchange Act Rule
13d-3(d)(1).
(4) Includes 779,820 shares owned of record by Mr. Cooper's wife, Ms. Elaine
Scialo, and 90,376 shares owned of record by the law firm of Eltman,
Eltman & Cooper, P.C., of which Mr. Cooper is the sole stockholder. Mr.
Cooper disclaims beneficial ownership with respect to all shares not
owned by him of record.
(5) Includes 234,032 shares owned of record by Mr. Mirafzali's wife, Shadan
Mirafzali, an aggregate of 95,868 shares owned in trust for the benefit
of Mr. and Mrs. Mirafzali's children and 15,000 shares issuable upon the
exercise of options granted to Mr. Mirafzali under the Stock Option Plan
at an exercise price of
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$8.00 per share, the vesting of which will accelerate, in accordance with
the terms of Mr. Mirafzali's stock option agreement, upon the adoption of
the Merger Agreement by the PSS stockholders. The percentage of shares
beneficially owned by Mr. Mirafzali was calculated by adding to the number
of outstanding shares 15,000 shares deemed to be issued pursuant to
Securities Exchange Act Rule 13d-3(d)(1). Mr. Mirafzali disclaims
beneficial ownership with respect to all shares not owned or record by
him.
(6) Includes 10,000 shares issuable upon the exercise of options granted to
Mr. Berkowitz under the Stock Option Plan at an exercise price of $20.75
per share, all of which are currently vested. The percentage of shares
beneficially owned by Mr. Berkowitz was calculated by adding to the
number of outstanding shares 10,000 shares deemed to be issued pursuant
to Securities Exchange Act Rule 13d-3(d)(1).
(7) Includes 10,000 shares issuable upon the exercise of options granted to
Mr. Vague under the Stock Option Plan at an exercise price of $15.50 per
share, all of which are currently vested. The percentage of shares
beneficially owned by Mr. Vague was calculated by adding to the number of
outstanding shares 10,000 shares deemed to be issued pursuant to
Securities Exchange Act Rule 13d-3(d)(1).
(8) Includes 77,453 shares owned of record by Ms. Scialo's husband, Mr.
Cooper, and 90,376 shares owned of record by the law firm of Eltman,
Eltman & Cooper, P.C., of which Mr. Cooper is the sole stockholder. Ms.
Scialo disclaims beneficial ownership with respect to all shares not
owned by her of record.
(9) Includes 92,400 shares owned of record by Mr. Irwin's wife, 177,800
shares owned of record for a trust of which Mr. Irwin's children are the
beneficiaries and 226,800 shares owned of record by Hillside Capital
Incorporated, a corporation in which Mr. Irwin holds a controlling equity
interest. Mr. Irwin disclaims beneficial ownership with respect to all
shares not owned by him or record.
(10) Includes 120,000 shares subject to exercisable stock options, including
stock options for 90,000 shares the vesting of which will accelerate upon
the adoption of the Merger Agreement by the PSS stockholders. The
percentage of total shares beneficially owned by all executive officers
and directors as a group was calculated by adding to the number of
outstanding shares 120,000 shares deemed to be issued pursuant to
Securities Exchange Act Rule 13d-3(d)(1).
Pursuant to the Voting Agreement, Mr. Gilson, Mr. Potter, Mr. Cooper, Ms.
Scialo, Eltman, Eltman & Cooper, P.C., Mr. Mirafzali, Ms. Mirafzali, and Mr.
Samii, as independent trustee of the Neda Mirafzali and Leela Mirafzali family
trusts, have agreed to, or have given certain officers of NDC a proxy to, vote
their shares of PSS Common Stock in favor of the Merger, the execution and
delivery by PSS of the Merger Agreement and the approval of the terms thereof
and each of the other transactions contemplated by the Merger Agreement. See
"--Voting Agreement."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
PSS will be the surviving corporation resulting from the Merger and will
become a wholly-owned subsidiary of NDC. The Merger Agreement provides that
from and after the Effective Time, the Board of Directors of PSS shall consist
of the directors of Sub immediately prior to the Effective Time. The Merger
Agreement further provides that the officers of Sub in office immediately
prior to the Effective Time, together with such additional persons as may be
elected, shall serve as the officers of PSS from and after the Effective Time
in accordance with the bylaws of PSS. It is not expected that consummation of
the Merger will result in any change in the Board of Directors or management
of NDC or any of its other subsidiaries.
CONDITIONS TO CONSUMMATION
The obligations of PSS and NDC to consummate the Merger are subject to the
satisfaction or waiver (to the extent permitted) of the following conditions:
(i) the stockholders of PSS shall have adopted the Merger Agreement and the
consummation of the transactions contemplated therein by the requisite vote;
(ii) the required regulatory approvals and clearances described under "--
Regulatory Approvals" shall have been received and shall be in full force and
effect with all waiting periods required by law having expired or terminated
early (NDC and PSS received early termination of the HSR Act statutory waiting
period on November 7, 1997); (iii) the absence of any law or order or any
action taken by any court, governmental, or regulatory authority prohibiting,
restricting, or making illegal the consummation of the Merger; (iv) the
Registration Statement of which this Proxy Statement/Prospectus is a part
shall have been declared effective by the Commission and shall not be
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<PAGE>
subject to a stop order or any threatened stop order; (v) the shares of NDC
Common Stock issuable pursuant to the Merger shall have been approved for
listing on the NYSE, subject to effective notice of issuance; (vi) the
accuracy, as of the date of the Merger Agreement and as of the Effective Time,
of the representations and warranties of the other party as set forth in the
Merger Agreement; (vii) prior to the Effective Time, the other party shall
have performed in all material respects all of the agreements, covenants, acts
and undertakings to be performed by it pursuant to the Merger Agreement;
(xiii) NDC and PSS shall have received from NDC's independent auditors letters
to the effect that the Merger will qualify for pooling-of-interests accounting
treatment and from PSS's independent auditors letters to the effect that such
auditors are not aware of any matters relating to PSS which would preclude the
Merger from qualifying for pooling-of-interests accounting treatment; (ix)
each of NDC and PSS shall have received an opinion from their respective
counsel as to the qualification of the Merger as a tax-free reorganization;
and (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.
No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. As of the date of this Proxy Statement/Prospectus, the parties have no
reason to believe that any of the conditions set forth above will not be
satisfied.
The conditions to consummation of the Merger may be waived, in whole or in
part, to the extent permissible under applicable law, by the party for whose
benefit the condition has been imposed, without the approval of the PSS
stockholders. See "--Amendment, Waiver, and Termination."
REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the applicable waiting period has expired or been terminated early. NDC and
PSS filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on October 31, 1997, and received early termination on
November 7, 1997. At any time before or after consummation of the Merger, the
Antitrust Division or the FTC could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking
to enjoin the consummation of the Merger or seeking divestiture of substantial
assets of NDC or PSS. At any time before or after the Effective Time, and
notwithstanding that the waiting period under the HSR Act has expired, any
state could take such action under the antitrust laws as it deems necessary or
desirable in the public interest. Such action could include seeking to enjoin
the consummation of the Merger or seeking divestiture of substantial assets of
NDC or PSS. Private parties may also seek to take legal action under the
antitrust laws under certain circumstances.
NDC and PSS believe that the Merger can be effected in compliance with
federal and state antitrust laws; however, there can be no assurance that a
challenge to the consummation of the Merger on antitrust grounds will not be
made or that, if such a challenge were made, NDC and PSS would prevail or
would not be required to accept certain adverse conditions in order to
consummate the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, PSS has agreed, among other things, to
operate its business in the usual, regular and ordinary course and to take no
action that would adversely affect its ability to perform its covenants and
agreements under the Merger Agreement. In addition, PSS has agreed not to take
certain actions relating to the operation of PSS pending consummation of the
Merger, except as otherwise permitted by the Merger Agreement, including with
certain exceptions: (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock; split,
combine or reclassify any of its capital stock; issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or purchase, redeem, or otherwise acquire any
shares of capital stock of PSS or any other securities, rights, warrants, or
options to acquire any such shares or other securities; (ii) issue, deliver,
sell, pledge or otherwise encumber any shares of its capital stock, or any
other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities; (iii) amend its certificate of incorporation, bylaws
or other comparable charter or organizational documents; (iv) acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
portion of the assets of, any
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<PAGE>
business or any corporation, partnership, joint venture, association or other
business organization or division thereof or any assets that are material to
PSS; (v) mortgage or otherwise encumber or subject to any lien or sale, lease,
or otherwise dispose of any of PSS's material properties or assets; (vi) incur
any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other rights
to acquire any debt securities of PSS; guarantee any debt securities of
another person; or make any loans, advances or capital contributions to, or
investments in, any other person; (vii) make or agree to make any new capital
expenditures which, individually or in the aggregate, are in excess of
$500,000 (other than capital expenditures made or agreed to be made consistent
with the capital budget for PSS and its subsidiaries); (viii) make any
material tax election or settle or compromise any material income tax
liability; (ix) pay, discharge or satisfy any claims, liabilities or
obligations or liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements of PSS; or waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement; (x) grant any increase in compensation or benefits to
the employees or officers of PSS; pay any severance or termination pay or any
bonus; enter into or amend any severance agreements with officers of PSS;
grant any increase in fees or other compensation or other benefits to
directors of PSS; or voluntarily accelerate the vesting of any stock options,
other stock-based compensation or employee benefits or any rights; (xi) enter
into or amend any employment contract between PSS or its subsidiaries and any
person that PSS does not have the unconditional right to terminate without
liability at any time on or after the Effective Time; (xii) adopt any new
employee benefit plan of PSS or terminate or withdraw from, or make any
material change in or to, any existing employee benefit plans of PSS or make
any distributions from such employee benefit plans; (xiii) make any
significant change in any tax or accounting methods or systems of internal
accounting controls; (xiv) commence any litigation other than in the ordinary
course of business consistent with past practice, or settle any litigation
involving any liability of PSS for material money damages or restrictions upon
the operations of PSS; (xv) enter into, modify, amend or terminate any PSS
contract or waive, release, compromise or sign any material rights or claims;
or (xvi) authorize any of, or commit or agree to take any of, the foregoing
actions.
Pursuant to the Merger Agreement, NDC has agreed, among other things, to
operate its business in the usual, regular and ordinary course and continue to
conduct its business and the business of its subsidiaries in a manner
designed, in NDC's reasonable judgment, to enhance the long-term value of NDC
Common Stock and the business prospects of NDC and its subsidiaries. In
addition, NDC has agreed not to take certain actions relating to the operation
of NDC pending consummation of the Merger, except as otherwise permitted by
the Merger Agreement including with certain exceptions: (i) except for regular
quarterly dividends not in excess of $0.075 per share of NDC Common Stock with
customary record and payment dates, declare, set aside or pay any dividends,
or make any other distributions in respect of any capital stock; (ii) amend
NDC's Certificate of Incorporation, By-laws, or other comparable charter or
organization documents in any matter adverse to the holders of NDC Common
Stock; or (iii) authorize any of, or commit or agree to take any of, the
foregoing actions.
AMENDMENT, WAIVER AND TERMINATION
To the extent permitted by law, PSS and NDC may amend the Merger Agreement
by written agreement at any time without the approval of the stockholders of
PSS, provided that after the adoption of the Merger Agreement by the PSS
stockholders, no amendment can be made that, pursuant to Section 251 of the
DGCL, requires further approval by the PSS stockholders without the further
approval of such stockholders.
Prior to or at the Effective Time, either PSS or NDC may extend the time for
the performance by the other party of any of its obligations under the Merger
Agreement, may waive any inaccuracies in the representations and warranties in
the Merger Agreement, and may waive any of the conditions precedent to the
Merger Agreement, except any condition that, if not satisfied, would result in
the violation of an applicable law or governmental regulation.
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time (a) by the mutual consent of PSS and NDC (b)
by either party in the event of any inaccuracy of any representation or
warranty of the other party contained in the Merger Agreement which cannot be
or has not been cured within 30 days after giving written notice to the
breaching party of such inaccuracy and which
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inaccuracy would provide the terminating party the ability to refuse to
consummate the Merger under the applicable standards set forth in the Merger
Agreement (provided that the terminating party is not then in breach of any
representation or warranty contained in the Merger Agreement under the
applicable standards set forth in the Merger Agreement or in material breach
of any covenant or other agreement contained in the Merger Agreement), (c) by
either party in the event of a material breach by the other party of any
covenant or agreement contained in the Merger Agreement which cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach (provided that the terminating party is not
then in breach of any representation or warranty contained in the Merger
Agreement under the applicable standards set forth in the Merger Agreement or
in material breach of any covenant or other agreement contained in the Merger
Agreement), (d) by either party in the event the stockholders of PSS fail to
vote their approval of the matters submitted for the approval by such
stockholders at the Special Meeting (provided that the terminating party is
not then in breach of any representation or warranty contained in the Merger
Agreement under the applicable standards set forth in the Merger Agreement or
in material breach of any covenant or other agreement contained in the Merger
Agreement), (e) by either party if the Merger is not consummated by March 31,
1998, provided that the failure to consummate is not due to the breach of the
Merger Agreement by the party electing to terminate, or (f) by either party if
any of the conditions precedent to the obligations of such party to consummate
the Merger cannot be satisfied, fulfilled, or waived by the appropriate party
by March 31, 1998 (provided that the terminating party is not then in breach
of any representation or warranty contained in the Merger Agreement under the
applicable standards set forth in the Merger Agreement or in material breach
of any covenant or other agreement contained in the Merger Agreement). See "--
Expenses and Fees."
In addition, NDC may unilaterally terminate the Merger Agreement if (i) the
PSS Board or any committee thereof shall withdraw or modify in a manner
materially adverse to NDC or Sub, its approval or recommendation of the Merger
or the Merger Agreement, or approve or recommend any offer or proposal for, or
any written indication of interest in, a merger or other business combination
involving PSS or any of its significant subsidiaries or the acquisition of any
significant equity interest in, or a significant portion of the assets of, PSS
or any of its significant subsidiaries, other than the transactions
contemplated by the Merger Agreement, and the PSS Board determines in its good
faith judgment after consultation with its financial advisors that such
transaction is more favorable to the PSS stockholders than the Merger, and for
which financing, to the extent required, is then committed or which, in the
good faith judgment of the PSS Board, is reasonably capable of being financed
(a "Terminating Transaction"), (ii) PSS shall have entered into any binding
agreement with respect to any Terminating Transaction, or (iii) the PSS Board
or any committee thereof shall resolve to do any of the foregoing.
PSS may unilaterally terminate the Merger Agreement if, prior to the
approval and adoption of the Merger Agreement by the PSS stockholders, the PSS
Board shall have determined to enter into an agreement with respect to a
Terminating Transaction; provided, however, that at least two business days
prior to any such termination, PSS shall have engaged in negotiations with NDC
to make such adjustments in the terms and conditions of the Merger Agreement
as would enable PSS to proceed with the transactions contemplated therein on
such adjusted terms in a manner consistent with the fiduciary obligations of
the PSS Board under applicable law, as determined in good faith by the PSS
Board, and simultaneously with such termination, PSS shall have tendered to
NDC payment in full of a fee in the amount of $6,490,000.
Further, NDC may unilaterally terminate the Merger Agreement at any time
during the three business day period commencing on the next succeeding
business day after the tenth trading day before the Special Meeting Date if
the Average Closing Price of NDC Common Stock is less than $36.782; provided,
however, that if NDC elects to exercise such termination right it shall give
prompt written notice thereof to PSS (which notice of election may be
withdrawn at any time within the five business day period following the
receipt by PSS of such notice); provided further, that during the five
business day period commencing with its receipt of such notice, PSS shall have
the option, in its sole discretion, to elect to fix the Exchange Ratio at
0.435. If PSS makes an election contemplated by the immediately preceding
sentence within such five business day period, it shall give written notice to
NDC of such election, whereupon the Merger Agreement shall remain in effect in
accordance with its terms (except that the Exchange Ratio shall have been so
modified).
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EXPENSES AND FEES
The Merger Agreement provides that each party shall be responsible for its
own costs and expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by the Merger Agreement.
If the Merger Agreement is terminated because (i) the PSS Board or a
committee thereof shall have withdrawn or modified in any matter materially
adverse to NDC its approval or recommendation of the Merger or the Merger
Agreement, or approved or recommended any offer or proposal for, or any
written indication of interest in, a merger or other business combination
involving PSS or the acquisition of any significant equity interest in, or
significant portion of the assets of, PSS, other than the transactions
contemplated by the Merger Agreement, and such proposal has been determined by
the PSS Board in its good faith judgment after consultation with PSS's
financial advisors to be more favorable to PSS's stockholders than the Merger
and for which financing, to the extent required, has been committed or which,
in the good faith judgment of the PSS Board, is reasonably capable of being
financed, (ii) PSS shall have entered into any binding agreement with respect
to any such proposal, or (iii) the PSS Board shall have resolved to do any of
the foregoing, PSS shall pay to NDC a fee equal to $6,490,000. Such payment
shall be made in immediately available funds, promptly, but in no event later
than five business days, after the termination of the Merger Agreement.
ACCOUNTING TREATMENT
The Merger is anticipated to be accounted for on a pooling-of-interests
accounting basis. Under this method of accounting, as of the Effective Time,
the assets and liabilities of PSS would be added to those of NDC at the
recorded book values and the stockholders' equity accounts of NDC and PSS
would be combined on NDC's consolidated balance sheet. Consummation of the
Merger is conditioned on, among other things, receipt by NDC and PSS of
letters from NDC's independent auditors to the effect that the Merger will
qualify for pooling-of-interests accounting treatment and letters from PSS's
independent auditors to the effect that such firm is not aware of any matters
relating to PSS which would preclude the Merger from qualifying for pooling-
of-interests accounting treatment.
RESALES OF NDC COMMON STOCK
The shares of NDC Common Stock issued in connection with the Merger will be
freely transferable under the Securities Act, except for shares issued to any
stockholder who may be deemed to be an "affiliate" (generally including,
without limitation, directors, certain executive officers, and beneficial
owners of 10% or more of any class of capital stock) of PSS for purposes of
Rule 145 under the Securities Act as of the date of the Special Meeting. Such
affiliates may not sell their shares of NDC Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act or other applicable exemption from the
registration requirements of the Securities Act. NDC may place restrictive
legends on certificates representing NDC Common Stock issued to all persons
who are deemed to be "affiliates" of PSS under Rule 145. In addition, PSS has
agreed to use its reasonable efforts to cause each person or entity that is an
"affiliate" to enter into a written agreement in substantially the form
attached to the Merger Agreement relating to such restrictions on sale or
other transfer. This Proxy Statement/Prospectus does not cover resales of NDC
Common Stock received by any person who may be deemed to be an affiliate of
PSS.
VOTING AGREEMENT
NDC and Mr. Gilson, Mr. Potter, Mr. Cooper, Ms. Scialo, Eltman, Eltman &
Cooper, P.C., Mr. Mirafzali, Ms. Mirafzali, and Mr. Samii, as independent
trustee of the Neda Mirafzali and Leela Mirafzali family trusts, collectively
the holders of approximately 29% of the PSS Common Stock (the "Stockholders"),
have entered into a voting agreement (the "Voting Agreement") pursuant to
which the Stockholders have agreed to, or have given certain officers of NDC a
proxy to, vote such Stockholder's shares of PSS Common Stock in favor of the
Merger, the execution and delivery by PSS of the Merger Agreement and the
approval of the terms thereof and each of the other transactions contemplated
by the Merger Agreement, provided that the Merger Agreement has not been
amended so as to reduce the consideration payable to the holders of PSS Common
Stock.
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Pursuant to the Voting Agreement, the Stockholders also have agreed to, or
given certain officers of NDC a proxy to, vote such Stockholder's shares of
PSS Common Stock against any Competing Transaction. Each Stockholder has also
agreed that such Stockholder shall not (i) transfer, or consent to any
transfer of, any or all of the such Stockholder's shares or any interest
therein, except pursuant to the Merger; (ii) enter into any contract, option
or other agreement or understanding with respect to any transfer of any or all
of such shares or any interest therein, (iii) grant any proxy, power of
attorney or other authorization in or with respect to such shares, except for
the Voting Agreement, or (iv) deposit such shares into a voting trust or enter
into a voting agreement or arrangement with respect to such shares, subject to
certain limited exceptions.
The Voting Agreement will terminate upon the earlier of the Effective Time,
or the date upon which the Merger Agreement is terminated in accordance with
its terms; provided that, if any person (other than NDC or a subsidiary of
NDC) shall have made or disclosed in writing an intention to make, a proposal
for a Competing Transaction, as of or prior to the termination of the Merger
Agreement, then, for a period of 180 days following such termination the
rights and obligations of the Stockholders to vote or direct a vote against a
Competing Transaction shall continue in full force and effect and no
Stockholder shall transfer any or all of such Stockholder's shares of PSS
Common Stock in connection with any Competing Transaction.
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CERTAIN DIFFERENCES IN THE RIGHTS OF NDC AND PSS STOCKHOLDERS
At the Effective Time, PSS stockholders automatically will become
stockholders of NDC, and their rights as stockholders will be determined by
NDC's Certificate of Incorporation and Bylaws. The following is a summary of
the material differences in the rights of stockholders of NDC and PSS. Both
NDC and PSS 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 PSS stockholder
under PSS'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 NDC one one-
hundredth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $1.00 per share (the "NDC Participating Preferred"), at a
purchase price of $45.00 per Unit, subject to adjustment. Until the Separation
Date (as hereinafter defined, see "--Stockholder Rights Plan"), the NDC Rights
are unexercisable and attach to and transfer with the NDC Common Stock
certificates.
The NDC Rights may have certain anti-takeover effects because the rights
will cause substantial dilution to a person or group that attempts to acquire
NDC on terms not approved by the Board of Directors of NDC unless the offer is
conditioned on a substantial number of NDC Rights being acquired. However, the
NDC Rights should not interfere with the Merger or any other business
combination approved by a majority of the directors since the NDC Rights may
be redeemed by NDC at $.01 per NDC Right at any time on or prior to a stock
acquisition. Thus, the NDC Rights are intended to encourage persons who may
seek to acquire control of NDC to initiate such an acquisition through
negotiations with the Board of Directors. However, the effect of the NDC
Rights may be to discourage a third party from making a partial tender offer
or otherwise attempting to obtain a substantial equity position in the equity
securities of, or seeking to obtain control of, NDC. To the extent any
potential acquirers are deterred by the NDC Rights, the NDC Rights may have
the effect of preserving incumbent management in office.
NDC Preferred Stock. NDC is authorized to issue 1,000,000 shares of
Preferred Stock, par value $1.00 per share, none of which is outstanding,
although 300,000 shares of Preferred Stock have been reserved for issuance
pursuant to the NDC Rights described above. NDC Preferred Stock may be issued
from time to time by the Board of Directors of NDC, without stockholder
approval, in such series and with such voting powers, full or limited, and
such designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions as may be fixed by
the Board of Directors. The issuance of NDC Preferred Stock by the Board of
Directors could adversely affect the rights of holders of shares of NDC Common
Stock since NDC Preferred Stock may be issued having preference over the NDC
Common Stock with respect to dividends and in liquidation, and have voting
rights, contingent or otherwise, that could dilute the voting
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rights, net income per share and net book value of the NDC Common Stock. In
addition, while the Board of Directors has no current intention of doing so,
the ability of the Board of Directors to issue shares of NDC Preferred Stock
and to set the voting powers and such designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations
or restrictions thereof without further stockholder action could help to
perpetuate incumbent management of NDC or prevent a business combination
involving NDC that is favored by NDC's stockholders. As of the date of this
Proxy Statement/Prospectus, other than in connection with the NDC Rights
described above, the Board of Directors has not authorized the issuance of any
shares of NDC Preferred Stock, and NDC has no agreements, arrangements or
understandings with respect to the issuance of any shares of NDC Preferred
Stock.
PSS. The authorized capital stock of PSS consists of 100,000,000 shares of
PSS Common Stock, $.001 par value, and 10,000,000 shares of PSS Preferred
Stock, $.01 par value (the "PSS Capital Stock"). The following description of
PSS Capital Stock is qualified in all respects by reference to the Certificate
of Incorporation, as amended, and Bylaws, as amended, of PSS, copies of which
are on file at PSS's principal executive offices.
PSS Common Stock. The holders of PSS Common Stock are entitled to one vote
per share on all matters submitted to the stockholders for a vote. Subject to
the preferences of the PSS Preferred Stock, all shares of PSS 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 PSS
Preferred Stock, in net assets on dissolution. The shares of PSS Common Stock
outstanding are duly authorized, validly issued, fully paid and nonassessable.
The shares of PSS Common Stock have no preference, conversion, exchange,
preemptive or cumulative voting rights.
PSS Preferred Stock. The PSS Board is authorized, subject to certain
limitations prescribed by applicable law, from time to time to issue up to an
aggregate of 10,000,000 shares of Preferred Stock in one or more series and to
fix or alter the designations, the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the
designation of such series, in each case without further vote or action by the
stockholders. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of PSS without further action by
the stockholders and may adversely affect the voting and other rights of the
holders of PSS Common Stock. The issuance of Preferred Stock with voting and
conversion rights may adversely affect the voting power of the holders of PSS
Common Stock, including the loss of voting control to others. At present, PSS
has no plans to issue any of the Preferred Stock.
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.
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PSS. The Board of Directors of PSS shall consist of one or more members
serving as a single class, the number to be determined from time to time by
the Board. The Board of Directors currently consists of five members. Each
director shall hold office until a successor is elected and qualified or until
the earlier resignation or removal of a director. Directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at a meeting of stockholders entitled to vote on the election of
directors. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class or from any other
cause may be filled by a majority of the directors then in office, although
less than a quorum, or by the sole remaining director. Whenever the holders of
any class of classes of stock or series thereof are entitled to elect one or
more directors by the PSS certificate of incorporation, vacancies and newly
created directorships of such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series thereof
then in office or by the sole remaining director so elected. Any director of
the entire Board of Directors may be removed, with or without cause, by the
holders of the majority of the shares then entitled to vote at an election of
directors.
STOCKHOLDER MEETINGS
NDC. NDC's Bylaws provide for annual meetings of stockholders to be held on
the fourth Thursday of October and for special meetings to be held on call of
the Chairman or President or at the request of a majority of the members of
the Board of Directors. The NDC Bylaws do not permit stockholders to call a
special meeting of stockholders. Stockholders entitled to vote are entitled to
written notice stating the place, date, hour and, in the case of a special
meeting, the purpose of the meeting, not less than 10 nor more than 50 days
before the date of the meeting. The holders of a majority of the stock issued
and outstanding and entitled to vote at a meeting, present in person or
represented by proxy, constitutes a quorum. When a quorum is present at 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.
PSS. PSS'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. Special
meetings of stockholders may be called at any time by the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the President or by any
two directors. 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 presence in person or represented by proxy of the holders
of a majority of the stock outstanding and entitled to vote at a meeting,
constitutes a quorum. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at a meeting and entitled to
vote on the subject matter shall be the act of the stockholders. Where a
separate vote by class or classes is required, the affirmative vote of the
holders of a majority of the shares of such class or classes present in person
or represented by proxy at the meeting shall be the act of such class, except
as otherwise provided by law or by the certificate of incorporation or bylaws.
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
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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."
PSS. PSS's certificate of incorporation provides that all stockholder action
must be effected at a duly called meeting and not by a consent in writing. In
addition, the bylaws do not permit stockholders to call a special meeting of
stockholders. These provisions of the certificate of incorporation and bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of PSS. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the PSS Board and
in the policies formulated by the PSS Board and to discourage certain types of
transactions that may involve an actual or threatened change of control of
PSS. These provisions are further designed to reduce the vulnerability of PSS
to an unsolicited acquisition proposal. The provisions also are intended to
discourage certain tactics that may be used in proxy fights. However, such
provisions could have the effect of discouraging others from making tender
offers for PSS Common Stock and, as a consequence, they also may inhibit
fluctuations in the market price of PSS Common Stock that could result from
actual or rumored takeover attempts. Finally, such provisions may have the
effect of preventing changes in the management of PSS. The provision of PSS's
certificate of incorporation granting the PSS Board of Directors the authority
to provide for the issuance of PSS Preferred Stock in series may discourage
certain acquisition proposals, which may deprive PSS's stockholders of certain
opportunities to sell their shares at a premium over prevailing market prices.
STOCKHOLDER RIGHTS PLAN
NDC. Each share of NDC Common Stock has attached to it an NDC Right issued
pursuant to a Rights Agreement between NDC and Wachovia Bank of North
Carolina, N.A., as Rights Agent (the "NDC Rights Agreement"). Each NDC Right
entitles its registered holder to purchase one one-hundredth of a share of NDC
Participating Preferred at a price of $45.00 (the "Rights Purchase Price"), as
adjusted from time to time under certain circumstances, after the earlier of
(i) the tenth day following the commencement of, or first public announcement
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
45
<PAGE>
be entitled to purchase shares of stock of the other party to the business
combination with a market value of two times the Rights Purchase Price.
Prior to the Stock Acquisition Date the NDC Rights are redeemable for one
cent per NDC Right at the option of the Board of Directors. The NDC Rights
will expire on January 18, 2001 or at an earlier date under certain
circumstances.
The NDC Rights will not prevent a takeover of NDC. The NDC Rights, however,
may cause substantial dilution to a person or group that acquires 20% or more
of the NDC Common Stock unless the NDC Rights are first redeemed or terminated
by the Board of Directors of NDC. Nevertheless, the NDC Rights should not
interfere with a transaction that is, in the opinion of NDC's Board of
Directors, in the best interests of NDC and its stockholders because the NDC
Rights can be redeemed or terminated, as hereinbefore described, before the
consummation of such a transaction.
PSS. PSS 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 three years in the 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 report given on the authority of said firm as
experts in accounting and auditing.
The financial statements of PSS at December 31, 1995 and 1996, and for each
of the three years in the period ended December 31, 1996, incorporated by
reference from PSS's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, have been audited by Deloitte & Touche LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference in reliance upon such report given on the
authority of said firm as experts in accounting and auditing.
REPRESENTATION AT SPECIAL MEETING
A representative of Deloitte & Touche LLP will be present at the Special
Meeting, will have an opportunity to make a statement if he or she so desires
and will be available to respond to appropriate questions.
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.
INCORPORATION BY REFERENCE
In addition to the documents incorporated herein by reference, all documents
filed by PSS and NDC in accordance with Sections 13(a), 13(c), 14, or 15(d) of
the Exchange Act after the date of this Proxy Statement/Prospectus and before
the date of the Special Meeting are hereby incorporated by reference into this
Proxy Statement/Prospectus and shall be deemed a part hereof from the date of
filing of such document. See "Available Information" and "Incorporation Of
Certain Information By Reference."
46
<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder proposals intended to be presented at the Company's 1998
annual meeting of stockholders (which will only be held if the Merger has not
been consummated prior thereto) must be received by PSS at its principal
offices no later than January 10, 1998 in order to be considered for inclusion
in the Proxy Statement and form of proxy to be distributed by the PSS Board in
connection with such meeting, if any.
47
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 14, 1997
AMONG
NATIONAL DATA CORPORATION,
UNIVERSAL ACQUISITION CORP.
AND
PHYSICIAN SUPPORT SYSTEMS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INTRODUCTION......................................................................... A-1
ARTICLE I............................................................................ A-1
THE MERGER........................................................................... A-1
SECTION 1.1. The Merger........................................................... A-1
SECTION 1.2. Closing.............................................................. A-1
SECTION 1.3. Effective Time....................................................... A-1
SECTION 1.4. Effects of the Merger................................................ A-1
SECTION 1.5. Certificate of Incorporation and By-Laws............................. A-1
SECTION 1.6. Directors............................................................ A-2
SECTION 1.7. Officers............................................................. A-2
SECTION 1.8. Tax-Free Reorganization.............................................. A-2
SECTION 1.9. Accounting Treatment................................................. A-2
ARTICLE II........................................................................... A-2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE
OF CERTIFICATES..................................................................... A-2
SECTION 2.1. Effect on Capital Stock.............................................. A-2
(a)Capital Stock of Merger Subsidiary................................ A-2
(b)Cancellation of Treasury Stock and Parent-Owned Stock............. A-2
(c)Conversion of Common Stock........................................ A-2
(d)Adjustment of Exchange Ratio...................................... A-3
SECTION 2.2. Exchange of Certificates............................................. A-3
(a)Exchange Agent.................................................... A-3
(b)Parent To Provide Merger Consideration............................ A-3
(c)Exchange Procedure................................................ A-3
(d)Distributions with Respect to Unexchanged Shares.................. A-3
(e)No Further Ownership Rights in Common Stock....................... A-4
(f)Return to Parent; No Liability.................................... A-4
(g)No Fractional Shares.............................................. A-4
SECTION 2.3. Company Options...................................................... A-4
ARTICLE III.......................................................................... A-5
REPRESENTATIONS AND WARRANTIES....................................................... A-5
SECTION 3.1. Representations and Warranties of the Company........................ A-5
(a)Organization, Standing and Corporate Power........................ A-5
(b)Subsidiaries...................................................... A-5
(c)Capital Structure................................................. A-6
(d)Authority; Noncontravention....................................... A-6
(e)SEC Documents; Financial Statements; No Undisclosed Liabilities... A-7
(f)Information Supplied.............................................. A-8
(g)Absence of Certain Changes or Events.............................. A-8
(h)Litigation........................................................ A-9
(i)Absence of Changes in Benefit Plans............................... A-9
(j)ERISA Compliance.................................................. A-9
(k)Taxes............................................................. A-10
(l)Voting Requirements............................................... A-11
(m)State Takeover Statutes........................................... A-11
(n)Brokers........................................................... A-11
(o)Permits; Compliance with Laws..................................... A-11
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(p)Contracts; Debt Instruments........................................... A-12
(q)Title to Properties................................................... A-13
(r)Opinion of Financial Advisor.......................................... A-13
(s)Technology............................................................ A-13
(t)Billing and Collection Practices...................................... A-13
(u)Insurance on Assets................................................... A-14
(v)Accounting and Tax Matters............................................ A-14
(w)Stockholder Voting Agreement.......................................... A-14
SECTION 3.2. Representations and Warranties of Parent and Merger Subsidiary........... A-14
(a)Organization, Standing and Corporate Power............................ A-14
(b)Capital Structure..................................................... A-14
(c)Authority; Noncontravention........................................... A-15
(d)SEC Documents; Financial Statements; No Undisclosed Liabilities....... A-16
(e)Information Supplied.................................................. A-16
(f)Absence of Certain Changes or Events.................................. A-17
(g)Litigation............................................................ A-17
(h)Taxes................................................................. A-17
(i)Brokers............................................................... A-17
(j)Permits; Compliance with Laws......................................... A-18
(k)Accounting and Tax Matters............................................ A-18
ARTICLE IV.............................................................................. A-18
CONDUCT OF BUSINESS..................................................................... A-18
SECTION 4.1. Conduct of Business...................................................... A-18
(a)Conduct of Business by the Company.................................... A-18
(b)Conduct of Business by Parent......................................... A-20
(c)Other Actions......................................................... A-20
ARTICLE V............................................................................... A-21
COVENANTS OF THE COMPANY................................................................ A-21
SECTION 5.1. Affiliates............................................................... A-21
SECTION 5.2. Other Offers............................................................. A-21
SECTION 5.3. Company Board Actions.................................................... A-21
ARTICLE VI.............................................................................. A-22
COVENANTS OF PARENT AND MERGER SUBSIDIARY............................................... A-22
SECTION 6.1. Listing.................................................................. A-22
SECTION 6.2. Agreements of Parent Affiliates.......................................... A-22
SECTION 6.3. Indemnification.......................................................... A-22
SECTION 6.4. Employees................................................................ A-22
ARTICLE VII............................................................................. A-22
ADDITIONAL AGREEMENTS................................................................... A-22
SECTION 7.1. Shareholder Approval; Preparation of S-4 and Proxy Statement/Prospectus.. A-22
SECTION 7.2. HSR Act Filings; Reasonable Efforts; Notification........................ A-23
SECTION 7.3. Public Announcements..................................................... A-24
SECTION 7.4. Access to Information.................................................... A-24
SECTION 7.5. Confidentiality.......................................................... A-25
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VIII............................................................. A-25
CONDITIONS PRECEDENT..................................................... A-25
SECTION 8.1. Conditions to Each Party's Obligation To Effect the
Merger................................................. A-25
(a) Shareholder Approval............................... A-25
(b) HSR Act............................................ A-25
(c) No Injunctions or Restraints....................... A-25
(d) Form S-4........................................... A-25
(e) Tax Opinion........................................ A-25
(f) Pooling Letters.................................... A-25
SECTION 8.2. Conditions to Obligations of Parent and Merger
Subsidiary............................................. A-26
(a) Representations and Warranties..................... A-26
(b) Performance of Obligations of the Company.......... A-26
(c) Opinion............................................ A-26
(d) Affiliates Agreements.............................. A-26
(e) Consents........................................... A-26
SECTION 8.3. Conditions to Obligation of the Company................ A-26
(a) Representations and Warranties..................... A-26
(b) Performance of Obligations of Parent and Merger
Subsidiary......................................... A-27
(c) Opinion............................................ A-27
(d) Listing............................................ A-27
ARTICLE IX.............................................................. A-27
TERMINATION, AMENDMENT AND WAIVER, FEES AND EXPENSES.................... A-27
SECTION 9.1. Termination.......................................... A-28
SECTION 9.2. Effect of Termination................................ A-28
SECTION 9.3. Amendment............................................ A-28
SECTION 9.4. Extension; Waiver.................................... A-28
SECTION 9.5. Procedure for Termination, Amendment, Extension or
Waiver............................................... A-29
SECTION 9.6. Fees and Expenses.................................... A-29
ARTICLE X............................................................... A-29
GENERAL PROVISIONS...................................................... A-29
SECTION 10.1. Nonsurvival of Representations and Warranties........ A-29
SECTION 10.2. Notices.............................................. A-29
SECTION 10.3. Interpretation....................................... A-30
SECTION 10.4. Counterparts......................................... A-30
SECTION 10.5. Entire Agreement; No Third-Party Beneficiaries....... A-30
SECTION 10.6. Governing Law........................................ A-30
SECTION 10.7. Assignment........................................... A-30
SECTION 10.8. Enforcement.......................................... A-30
SECTION 10.9. Submission to Jurisdiction........................... A-30
SECTION 10.10. Waiver of Jury Trial................................. A-31
</TABLE>
EXHIBITS
EXHIBIT AStockholder Voting Agreement
EXHIBIT BAffiliates Agreement
EXHIBIT COpinion of Company Counsel
EXHIBIT DOpinions of Parent Counsel
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 14, 1997 AMONG NATIONAL
DATA CORPORATION, A DELAWARE CORPORATION ("PARENT"), UNIVERSAL ACQUISITION
CORP., A DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF PARENT ("MERGER
SUBSIDIARY"), AND PHYSICIAN SUPPORT SYSTEMS, INC., A DELAWARE CORPORATION (THE
"COMPANY").
INTRODUCTION
The Board of Directors of each of Parent, Merger Subsidiary and the Company
have unanimously approved the merger of Merger Subsidiary into the Company
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement. As a result of the Merger, each issued and outstanding share of the
Common Stock, par value $.001 per share (the "Common Stock"), of the Company
not owned directly or indirectly by Parent or the Company will be converted
into the right to receive the consideration provided in this Agreement.
The parties to this Agreement intend that the Merger qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
Parent, Merger Subsidiary and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
The parties agree as follows:
ARTICLE I
The Merger
Section 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General
Corporation Law ("Delaware Law"), Merger Subsidiary shall be merged with and
into the Company at the Effective Time (defined below in Section 1.3).
Following the Merger, the separate corporate existence of Merger Subsidiary
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Merger Subsidiary in accordance with Delaware Law.
Section 1.2. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties, which (subject
to satisfaction or waiver of the conditions set forth in Sections 8.2 and 8.3)
shall be no later than the second business day after satisfaction or waiver of
the conditions set forth in Section 8.1, at the offices of Howard, Darby &
Levin, 1330 Avenue of the Americas, New York, New York 10019, unless another
date or place is agreed to in writing by the parties hereto (such date upon
which the Closing occurs, the "Closing Date").
Section 1.3. Effective Time. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VIII, the
parties shall file a certificate of merger or other appropriate documents (in
any such case, the "Certificate of Merger") executed in accordance with the
relevant provisions of Delaware Law and shall make all other filings or
recordings required under Delaware Law. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State, or at such other time as Merger Subsidiary and the Company
shall specify in the Certificate of Merger (the time the Merger becomes
effective, the "Effective Time").
Section 1.4. Effects of the Merger. The Merger shall have the effects set
forth in the Delaware Law.
Section 1.5. Certificate of Incorporation and By-Laws. (a) The Certificate
of Incorporation of the Company as in effect at the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation, until changed
or amended.
A-1
<PAGE>
(b) The By-Laws of the Company as in effect at the Effective Time shall be
the By-Laws of the Surviving Corporation, until changed or amended.
Section 1.6. Directors. The directors of Merger Subsidiary at the Effective
Time shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their successors are duly elected and
qualified.
Section 1.7. Officers. The officers of Merger Subsidiary at the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their successors are duly elected and
qualified.
Section 1.8. Tax-Free Reorganization. The Merger is intended to be a
reorganization within the meaning of Section 368 of the Code, and this
Agreement is intended to be a "plan of reorganization" within the meaning of
the regulations promulgated under Section 368 of the Code.
Section 1.9. Accounting Treatment. The business combination to be effected
by the Merger is intended to be treated for accounting purposes as a "pooling
of interests."
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
Section 2.1. Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Common Stock or any shares of capital stock of Merger Subsidiary:
(a) Capital Stock of Merger Subsidiary. Each issued and outstanding share
of the capital stock of Merger Subsidiary shall be converted into and
become one fully paid and nonassessable share of Common Stock, par value
$.001 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Common Stock that is owned by the Company or by any subsidiary (defined
below in Section 3.1(a)) of the Company and each share of Common Stock that
is owned by Parent, Merger Subsidiary or any other subsidiary of Parent
shall automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(c) Conversion of Common Stock. Subject to Section 2.2(g), each issued
and outstanding share of Common Stock (other than shares to be canceled in
accordance with Section 2.1(b)) shall be converted into and exchanged for
the right to receive from Parent (the "Merger Consideration") 0.435 (the
"Exchange Ratio") fully paid and non-assessable shares of Common Stock, par
value $0.125 per share, of Parent ("Parent Common Stock"); provided that
(i) if the average closing price of Parent Common Stock on the New York
Stock Exchange, Inc. (the "NYSE") for all trading days beginning on the
twenty-fifth trading day before the date of the Company Shareholders
Meeting (the "Company Shareholders Meeting Date") and ending on and
including the tenth trading day before the Company Shareholders Meeting
Date (such tenth trading day, the "Determination Date") (as calculated for
such period, the "Average Closing Price") is greater than $47.126, the
Exchange Ratio shall be equal to the quotient of $20.50 divided by the
Average Closing Price (rounded to the nearest ten-thousandth of a share) or
(ii) if the Average Closing Price is less than $36.782, the Exchange Ratio
shall be equal to the quotient of $16.00 divided by the Average Closing
Price (rounded to the nearest ten-thousandth of a share). A "trading day"
shall be any date on which the NYSE is open for business. As of the
Effective Time, all such shares of Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Common Stock shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration and any cash in lieu of
fractional shares of Parent
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<PAGE>
Common Stock to be issued in exchange therefor upon surrender of such
certificate in accordance with Section 2.2(g) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(d),
in each case, without interest. Pursuant to the Rights Agreement dated
January 18, 1991, as amended, between Parent and Wachovia Bank of North
Carolina, N.A., as Rights Agent (the "Rights Agreement"), each share of
Parent Common Stock issued in connection with the Merger shall be
accompanied by a preferred stock purchase right issued pursuant to the
Rights Agreement.
(A) Adjustment of Exchange Ratio. If after the date of this Agreement and
prior to the Effective Time, Parent shall have declared a stock split
(including a reverse split) of Parent Common Stock or a dividend payable in
Parent Common Stock, or any other distribution of securities or
extraordinary dividend (in cash or otherwise) to holders of Parent Common
Stock with respect to their Parent Common Stock (including such a
distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction), then the Exchange Ratio shall be appropriately adjusted to
reflect such stock split or dividend or other distribution of securities.
Section 2.2. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall select a bank
or trust company to act as exchange agent (the "Exchange Agent") for the
exchange of the Merger Consideration upon surrender of certificates
representing Common Stock.
(b) Parent To Provide Merger Consideration. Parent shall take all necessary
steps to provide to the Exchange Agent on or before the Effective Time the
certificates representing the shares of Parent Common Stock issuable in
exchange for the outstanding shares of Common Stock pursuant to Section 2.1
and, from time to time, cash for payment in lieu of fractional shares pursuant
to Section 2.2(g).
(c) Exchange Procedure. As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Common Stock (the "Certificates") whose shares were
converted into the right to receive the Merger Consideration pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in a
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Exchange Agent
or such other agent, the holder of such Certificate shall be entitled to
receive in exchange for such Certificate the Merger Consideration into which
the shares of Common Stock shall have been converted pursuant to Section 2.1,
cash in lieu of fractional shares of Parent Common Stock to which such holder
is entitled pursuant to Section 2.2(g) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(d), and
the Certificate so surrendered shall be canceled. In the event of a transfer
of ownership of Common Stock which is not registered in the transfer records
of the Company, payment may be made to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required
by reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. At any time after the Effective
Time, each Certificate shall be deemed to represent only the right to receive
upon surrender the Merger Consideration into which the shares of Common Stock
shall have been converted pursuant to Section 2.1, cash in lieu of any
fractional shares of Parent Common Stock as contemplated by Section 2.2(g) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.2(d), in each case, without interest thereon.
(d) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any
A-3
<PAGE>
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(g), in each case until the
surrender of such Certificate in accordance with this Article II. Subject to
the effect of applicable escheat laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificate representing
whole shares of Parent Common Stock issued in exchange for such Certificate,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(g) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and with a
payment date subsequent to such surrender payable with respect to such whole
shares of Parent Common Stock.
(e) No Further Ownership Rights in Common Stock. All Merger Consideration
paid upon the surrender of Certificates in accordance with the terms of this
Article II (including any cash paid pursuant to Section 2.2(d) or (g)) shall
be deemed to have been paid in full satisfaction of all rights pertaining to
the shares of Common Stock represented by such Certificates, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(f) Return to Parent; No Liability. If any Certificates shall not have been
surrendered prior to six months after the Effective Time, the Merger
Consideration (and any cash payable pursuant to Section 2.2(d) or 2.2(g))
payable in respect of such Certificates shall be returned by the Exchange
Agent to Parent, after which time any holders of such Certificates shall look
only to Parent for such Merger Consideration (and such cash) in respect of
such Certificates. None of Parent, Merger Subsidiary, the Company or the
Exchange Agent shall be liable to any person in respect of any Merger
Consideration (or any cash payable pursuant to Section 2.2(d) or 2.2(g))
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) No Fractional Shares. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
Notwithstanding any other provision of this Agreement, each holder of shares
of Common Stock exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Certificates delivered by such holder) shall receive, in lieu
of such fraction of a share, cash (without interest) in an amount equal to
such fractional part of a share of Parent Common Stock multiplied by the
Average Closing Price.
Section 2.3. Company Options. (a) At the Effective Time, each of the then
outstanding Company Options (defined below) shall be (i) assumed by Parent, in
accordance with the terms of the applicable Stock Plan (defined below) and
option agreement by which it is evidenced, except that from and after the
Effective Time, Parent and its Compensation Committee shall be substituted for
the Company and its subsidiaries and their respective Boards of Directors
(including if applicable the entire Board of Directors) administering any such
Stock Plan, and (ii) converted into an option to purchase that number of
shares of Parent Common Stock determined by multiplying the number of shares
of Common Stock subject to such Company Option at the Effective Time by the
Exchange Ratio, at an exercise price per share of Parent Common Stock equal to
the exercise price per share of such Company Option immediately prior to the
Effective Time divided by the Exchange Ratio; except that, in the case of a
Company Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the conversion formula shall be
adjusted, if the Company determines that such adjustment is necessary, to
comply with Section 424(a) of the Code. If the foregoing calculation results
in an assumed Company Option being exercisable for a fraction of a share of
Parent Common Stock, then the number of shares of Parent Common Stock subject
to such option shall be rounded down to the nearest whole number of shares.
Except as otherwise set forth in this Section 2.3, the term, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
other terms and conditions of
A-4
<PAGE>
Company Options will to the extent permitted by law and otherwise reasonably
practicable be unchanged. "Company Options" means any option granted, and not
exercised, expired or terminated, to a current or former employee, director or
independent contractor of the Company or any of its subsidiaries or any
predecessor thereof to purchase shares of Common Stock pursuant to any stock
option, stock bonus, stock award, or stock purchase plan, program, or
arrangement of the Company or any of its subsidiaries or any predecessor
thereof (collectively, the "Stock Plans") or any other contract or agreement
entered into by the Company or any of its subsidiaries.
(b) Parent shall cause the shares of Parent Common Stock issuable upon
exercise of the assumed Company Options to be registered, effective as of the
Effective Time, on Form S-8 (or any successor form) promulgated by the
Securities and Exchange Commission (the "SEC"), and shall use its commercially
reasonable efforts to maintain the effectiveness of such registration
statement for so long as such assumed Company Options remain outstanding. With
respect to those individuals who subsequent to the Merger will be subject to
the reporting requirements under Section 16(a) of the Exchange Act, Parent
shall administer the Company Options assumed pursuant to this Section 2.3 in a
manner that complies with Rule 16b-3 promulgated by the SEC under the
Securities Exchange Act of 1934 (the "Exchange Act"), but shall have no
responsibility for such compliance by the Company or its predecessors.
(c) As soon as reasonably practicable after the Effective Time, Parent shall
deliver to each holder of an assumed Company Option an appropriate notice
setting forth such holder's rights pursuant to such Company Option. Parent
shall take all commercially reasonable actions which are necessary in order to
effect the foregoing provisions of this Section 2.3 as of the Effective Time.
ARTICLE III
Representations and Warranties
Section 3.1. Representations and Warranties of the Company. Except as set
forth on the disclosure memorandum delivered by the Company to Parent prior to
the execution of this Agreement (the "Company Disclosure Memorandum"), the
Company represents and warrants to Parent and Merger Subsidiary as follows:
(a) Organization, Standing and Corporate Power. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry
on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power (individually
or in the aggregate) could not reasonably be expected to have a material
adverse effect on the financial condition, business or results of
operations of the Company and its subsidiaries taken as a whole (a "Company
Material Adverse Effect"). Each of the Company and each of its subsidiaries
is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) could not reasonably be
expected to have a Company Material Adverse Effect. The Company has
delivered to Parent complete and correct copies of its Certificate of
Incorporation and By-Laws and the certificates of incorporation and by-laws
of its subsidiaries, in each case as amended to the date of this Agreement.
For purposes of this Agreement, a "subsidiary" of any person means another
person, an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which)
is owned directly or indirectly by such first person; and a "person" means
an individual, corporation, partnership, joint venture, association, trust,
unincorporated organization, limited liability company or other entity.
(b) Subsidiaries. The Company Disclosure Memorandum lists each subsidiary
of the Company and its respective jurisdiction of incorporation. All the
outstanding shares of capital stock of each such subsidiary have been
validly issued and are fully paid and nonassessable and are owned by the
Company,
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by another subsidiary of the Company or by the Company and another such
subsidiary, free and clear of all pledges, hypothecations, mortgages,
encroachments, easements, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and free
of any other limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock). Except for
the capital stock of its subsidiaries, the Company does not own, directly
or indirectly, any capital stock or other ownership interest in any person.
(c) Capital Structure. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock. At the close of business on October 10, 1997, (i)
9,720,033 shares of Common Stock were issued and outstanding, (ii) no
shares of Common Stock were held by the Company in its treasury or by any
of the Company's subsidiaries, (iii) 761,998 shares of Common Stock were
reserved for issuance upon exercise of outstanding employee stock options
to purchase shares of Common Stock and (iv) 177,752 shares of Common Stock
were reserved for issuance upon exercise of employee stock options that are
not outstanding but may be issued in the future under the Stock Plans.
Except as set forth above, at the time of execution of this Agreement, no
shares of capital stock or other voting securities of the Company are
issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of the Company are, and all shares which may be issued
pursuant to the Stock Plans will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness or securities
of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which shareholders of the Company may vote. Except as set forth above,
there are not any securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
the Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or of any
of its subsidiaries or obligating the Company or any of its subsidiaries to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. There are
no outstanding rights, commitments, agreements, arrangements or
undertakings of any kind obligating the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock or
other voting securities of the Company or any of its subsidiaries or any
securities of the type described in the two immediately preceding
sentences.
(d) Authority; Noncontravention. The Company has the requisite corporate
power and authority to enter into this Agreement and, subject to approval
of this Agreement by the affirmative votes of holders of a majority of the
outstanding shares of Common Stock (the "Required Company Shareholder
Vote"), to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of the Company, subject to approval of this Agreement by
the Required Company Shareholder Vote. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company or any of its subsidiaries under,
(i) the Certificate of Incorporation or By-Laws of the Company or the
comparable charter or organizational documents of any of its subsidiaries,
(ii) except as set forth in the Company Disclosure Memorandum, any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to the Company or any of its subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other
than, in the case of clause (ii) or (iii)
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above, any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate could not reasonably be expected to (x)
have a Company Material Adverse Effect, (y) materially impair the ability
of the Company to perform its obligations under this Agreement or (z)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with or exemption
by (collectively, "Consents") any Federal, state or local government or any
court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental
Entity") is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form by the Company under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (ii) the filing
with the SEC of (A) a Registration Statement on Form S-4 by Parent (as
amended or supplemented from time to time, the "S-4"), including a proxy
statement/prospectus relating to the issuance of the Parent Common Stock in
connection with the Merger and the approval by the Company's shareholders
of the transactions contemplated by this Agreement (as amended or
supplemented from time to time, the "Proxy Statement/Prospectus"), and (B)
such reports under Section 13 of the Exchange Act, as may be required in
connection with this Agreement and the transactions contemplated hereby,
(iii) the filing of the Certificate of Merger with the Delaware Secretary
of State and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations
and filings as to which the failure to obtain or make could not reasonably
be expected to (1) have a Company Material Adverse Effect, (2) materially
impair the ability of the Company to perform its obligations under this
Agreement or (3) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities. The
Company has timely filed all required reports, schedules, forms, statements
and other documents with the SEC since the filing of the Company's
Registration Statement on Form S-1 on December 21, 1995 in connection with
the initial public offering of the Common Stock (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and none of the
Company SEC Documents as of the time they were filed (or, if amended or
superseded by a subsequent filing, as of the date of such subsequent
filing) contained any untrue statement of a material fact or omitted 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. None of the Company's subsidiaries is
required to file reports with the SEC under the Exchange Act. The financial
statements of the Company included in the Company SEC Documents comply as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments which were not or are not expected to be material in
the aggregate in amount or effect); provided that any pro forma financial
statements contained in the Company SEC Documents are not necessarily
indicative of the consolidated financial position of the Company and its
subsidiaries as of the respective dates thereof and the consolidated
results of operation and cash flows of the Company and its subsidiaries for
the periods indicated. Except as set forth in the Company Disclosure
Memorandum or in the consolidated financial statements of the Company
(including the notes thereto) included in the Company's most recent Annual
Report on Form 10-K and Quarterly Report on Form 10-Q, in each case as
filed with the SEC prior to the date of this Agreement, neither the Company
nor any of its subsidiaries has any liabilities or obligations of any
nature (whether accrued,
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absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of
the Company and its consolidated subsidiaries or in the notes thereto and
which, individually or in the aggregate, could reasonably be expected to
have a Company Material Adverse Effect.
(f) Information Supplied. No statement, certificate, instrument, or other
writing furnished or to be furnished by the Company or its subsidiaries to
Parent pursuant to this Agreement or any other document, agreement or
instrument furnished by or on behalf of the Company or its subsidiaries and
referred to herein contains any untrue statement of material fact or will
omit to state a 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 the Company for inclusion
or incorporation by reference in (i) the Proxy Statement/Prospectus will,
at the time the Proxy Statement/Prospectus is filed with the SEC, at the
time the Proxy Statement/Prospectus is first mailed to the Company's
shareholders or at the time of the meeting of the Company's shareholders
held to vote on approval and adoption of this Agreement, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, and
(ii) the S-4 will, at the time the S-4 is filed with the SEC, at the time
the S-4 becomes effective, at the time of any post-effective amendment
thereto or at the time of the meeting of the Company's shareholders held to
vote on approval and adoption of this Agreement, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Merger Subsidiary for
inclusion or incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Company Disclosure Memorandum, since the date of the most recent financial
statements included in the Company SEC Documents filed and publicly
available prior to the date of this Agreement (the "Company Filed SEC
Documents"), the Company has conducted its business only in the ordinary
course consistent with past practice, and there has not been (i) any event,
change, occurrence or development of a state of circumstances which has had
or could reasonably be expected to have a Company Material Adverse Effect,
other than changes after the date hereof relating to (x) the economy in
general or to the Company's industry in general and not exclusively or
principally relating to the Company or any of its subsidiaries or (y) any
violation of or default under the Company Finance Documents (as defined in
the Company Disclosure Memorandum) arising out of or relating to the
execution by the Company of this Agreement or the consummation of the
transactions contemplated by this Agreement, (ii) any action or failure to
take action by the Company or any of its subsidiaries, 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 the Company provided herein, (iii)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any outstanding
shares of capital stock or other securities of the Company or any of its
subsidiaries, (iv) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (v) (A) any granting by the Company or any of its
subsidiaries to any executive officer of the Company or any of its
subsidiaries of any increase in compensation, except in the ordinary course
of business consistent with past practice or as was required under
employment agreements then in effect, (B) any granting by the Company or
any of its subsidiaries to any such executive officer of any increase in
severance or termination pay, except as was required under employment,
severance or termination agreements or plans then in effect, or (C) any
entry by the Company or any of its subsidiaries into any employment,
deferred compensation, severance or termination agreement with any such
executive officer, (vi) any damage, destruction or loss, whether or not
covered by insurance, that has had or could reasonably be expected to have
a Company
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Material Adverse Effect or (vii) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a
change in generally accepted accounting principles.
(h) Litigation. Except as disclosed in the Company Disclosure Memorandum,
there is no suit, action or proceeding pending or, to the knowledge of the
Company or its subsidiaries, threatened and, to the knowledge of the
Company or its subsidiaries, there is no investigation pending or
threatened, in each case against or affecting the Company or any of its
subsidiaries (and the Company is not aware of any basis for any such suit,
action or proceeding) that, individually or in the aggregate, could
reasonably be expected to (i) have a Company Material Adverse Effect, (ii)
materially impair the ability of the Company to perform its obligations
under this Agreement or (iii) prevent the consummation of any of the
transactions contemplated by this Agreement, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the
Company Disclosure Memorandum and except as contemplated by this Agreement,
since December 31, 1996, there has not been any adoption or amendment in
any material respect by the Company or any of its subsidiaries of any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, stock appreciation right,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical, workers' compensation, supplementary unemployment
benefits or other plan, arrangement or understanding (whether or not
legally binding) providing benefits to any current or former employee,
officer or director of the Company or any of its subsidiaries or any
beneficiary thereof entered into, maintained or contributed to, as the case
may be, by the Company or any of its subsidiaries (collectively, "Benefit
Plans") which, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect. Except as disclosed in
the Company Disclosure Memorandum, there exist no employment, consulting,
severance, termination or indemnification agreements, arrangements or
understanding between the Company or any of its subsidiaries and any
current or former officer or director of the Company or any of its
subsidiaries which require aggregate annual payments or total payments over
the life of such agreement, arrangement or understanding to such officer or
director in excess of $100,000 or $200,000, respectively. For purposes of
this Section 3.1, in the case of an employee pension benefit plan (defined
in Section 3(2) of ERISA (defined below)), "Benefit Plan" shall include any
employee pension benefit plan that was at any time subject to Title IV of
ERISA and was maintained or contributed to by the Company or any of its
ERISA Affiliates (whether before or after the date such entity became an
ERISA Affiliate of the Company) at any time during the six year period
preceding the Closing Date. For purposes of this Section 3.1, an "ERISA
Affiliate" of any entity means any other entity which together with such
entity would be treated as a single employer under Section 414 of the Code.
(j) ERISA Compliance. (i) The Company Disclosure Memorandum contains a
list and brief description of all "employee pension benefit plans" (defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), "employee welfare benefit plans" (defined in Section
3(l) of ERISA) and all other Benefit Plans which are or have been
maintained, or contributed to, by the Company or any of its subsidiaries
for the benefit of any current or former employees, officers or directors
of the Company or any of its subsidiaries. The Company has delivered to
Parent complete and correct copies of (A) each Benefit Plan (or, in the
case of any unwritten Benefit Plans, descriptions thereof), (B) the most
recent annual report on Form 5500 filed with the Internal Revenue Service
with respect to each Benefit Plan (if such report was required), (C) the
most recent summary plan description for each Benefit Plan for which such
summary plan description is required, (D) each trust agreement and group
annuity or insurance contract relating to any Benefit Plan, (E) the most
recent determination letter, if any, for each Benefit Plan, and (F)
actuarial reports for any Benefit Plan subject to Title IV of ERISA. The
only Benefit Plans described in clause (A) of the preceding sentence which
constitute an "employee pension benefit plan" defined in Section 3(2) of
ERISA (the "Pension Plans") are identified as such in the Company
Disclosure Memorandum.
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(ii) Each Benefit Plan has been maintained, administered and funded in
compliance in all material respects with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules
and regulations, and is, to the extent required by applicable law or
contract, fully funded without having any material deficit or material
unfunded actuarial liability. No Benefit Plan has exceeded its full funding
limitation (within the meaning of Section 412 of the Code). Any Benefit
Plan intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and nothing
has occurred to cause the loss of such qualified status except where such
occurrence could reasonably be expected to be cured without the incurrence
by the Company of any liability or expense that could reasonably be
expected to cause or result in a Company Material Adverse Effect. Each
Benefit Plan which is required to satisfy Section 401(a), 401(k), 401(m),
419, 419A, 505, 501(c)(9), 105(h), 125 or 129 of the Code or any other
applicable Section of the Code dealing with discrimination rules applicable
to such Benefit Plan has been tested for compliance with, and has satisfied
the requirements of, such provisions for each of the last six plan years
which end prior to the Closing Date. All filings and reports as to each
Benefit Plan which are required to have been made on or before the Closing
Date to the U.S. Internal Revenue Service, U.S. Department of Labor or
Pension Benefit Guaranty Corporation, have been timely made.
(iii) No Benefit Plan is or has been covered by Title IV of ERISA or
Section 412 of the Code. Neither the Company nor any of its subsidiaries
has incurred or expects to incur any liability under Title IV of ERISA that
has not already been satisfied or any liability or penalty under Section
4975 or 4980B of the Code or Section 502(i) of ERISA that has not already
been satisfied. Neither the Company nor any of its ERISA Affiliates
(whether before or after the date of such affiliation) has at any time had
an "obligation to contribute" (as defined in ERISA Section 4212) to a
"multi-employer plan" (as defined in ERISA Section 4001(a)(3) and 3(30)(A))
on or after September 26, 1980.
(iv) There are no pending or anticipated claims, governmental
proceedings, inquiries or investigations against or otherwise involving any
of the Benefit Plans and no suit, action or other litigation has been
brought against or with respect to any Benefit Plan (excluding claims for
benefits incurred in the ordinary course of Benefit Plan activities) which
could reasonably be expected to have a Company Material Adverse Effect.
(v) All material contributions, reserves or premium payments, required to
be made as of the date hereof to or with respect to the Benefit Plans have
been made or provided for.
(vi) Except as required by law or as disclosed in the Company Disclosure
Memorandum, neither the Company nor any of its subsidiaries has any
obligations for post-retirement or post-termination health or life benefits
under any Benefit Plan.
(vii) The consummation of the transactions contemplated by this Agreement
will not accelerate or increase any liability under any Benefit Plan
because of an acceleration or increase of any of the rights or benefits to
which Benefit Plan participants or beneficiaries may be entitled
thereunder, and will not entitle any individual employed by or associated
with the Company or any of its subsidiaries to any severance pay under any
formal, informal, written or unwritten severance pay plan, program,
arrangement or agreement.
(k) Taxes. (i) The Company and each of its subsidiaries has filed all tax
returns and reports required to be filed by it and has paid (or the Company
has paid on its behalf) all taxes shown on such tax returns to be due and
payable by it, and the most recent financial statements contained in the
Company Filed SEC Documents reflect an adequate reserve for all material
taxes payable by the Company and its subsidiaries for all taxable periods
and portions thereof through the date of such financial statements
including amounts, if any, owed with respect to the examination of any tax
returns that have been settled but not yet paid in full. No deficiencies
for any taxes have been proposed, asserted or assessed against the Company
or any of its subsidiaries, and no waivers or requests for waivers of the
time to assess any such taxes are pending. The Federal income tax returns
of the Company and each of its subsidiaries consolidated in such returns
have been examined by and settled with the United States Internal Revenue
Service for all years through the Company's fiscal year ended August 31,
1993. As used in this Agreement, "taxes" shall include all Federal, state,
local and foreign income, property, sales, excise and other taxes, tariffs
or governmental charges of any nature whatsoever.
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(ii) Any amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of the
Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(iii) None of the Company or any of its subsidiaries is a party to any
tax allocation or sharing agreement (other than between or among the
Company and its subsidiaries), and none of such companies has been a member
of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was the Company) or has any
liability for taxes of any person (other than Company and its subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor or by contract or
otherwise.
(iv) Each of the Company and its subsidiaries is in compliance with, and
its records contain all information and documents ( including properly
completed IRS Forms W-9) necessary to comply, in all material respects,
with all applicable information reporting and tax withholding requirements
under Federal, state, and local tax laws, and such records identify with
specificity all accounts subject to back-up withholding under Section 3406
of the Code.
(v) None of the Company or any of its subsidiaries has made an election
under Section 341(f) of the Code, and none of such companies has agreed or
is required to make any adjustment under Section 481(a) of the Code or
corresponding provisions of state, local or foreign tax law.
(l) Voting Requirements. The Required Company Shareholder Vote is the
only vote of the holders of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
(m) State Takeover Statutes. The Board of Directors of the Company has
approved the Merger, this Agreement and the transactions contemplated by
this Agreement (including the stockholder voting agreement referred to in
Section 3.1(w)), and such approval is sufficient to render inapplicable to
the Merger and this Agreement and the other transactions contemplated
hereby, the provisions of Section 203 of Delaware Law. To the knowledge of
the Company, no other "fair price", "moratorium", "control share
acquisition", "business combination" or other anti-takeover statute or
similar statute or regulation, applies or purports to apply to the Merger,
this Agreement or any of the other transactions contemplated hereby.
(n) Brokers. No broker, investment banker, financial advisor or other
person, other than Donaldson, Lufkin & Jenrette Securities Corporation, the
fees and expenses of which will be paid by the Company (and a copy of whose
engagement letter has been provided to Parent), is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company or any of its
subsidiaries.
(o) Permits; Compliance with Laws. (i) Each of the Company and its
subsidiaries has in effect all Federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Permits") necessary for it to own,
lease or operate its properties and assets and to carry on its business as
now conducted, and there has occurred no default under any such Permit,
except for the absence of Permits and for defaults under Permits which
absence or defaults, individually or in the aggregate, could not reasonably
be expected to have a Company Material Adverse Effect. The Company and its
subsidiaries are in compliance with all applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees or orders of any
Governmental Entity, except for possible noncompliances which, individually
or in the aggregate, could not reasonably be expected to have a Company
Material Adverse Effect.
(ii) There are no conditions relating to the Company or relating to the
Company's ownership, use or maintenance of any real property owned or
operated, or previously owned or operated, by the Company or any of its
affiliates, and the Company does not know of any such condition in respect
of such real property not related to the ownership, use or maintenance,
that could lead to any liability for violation of any Federal,
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state, county or local laws, regulations, orders or judgments relating to
pollution or protection of the environment or any other applicable
environmental, health or safety statutes, ordinances, orders, rules,
regulations or requirements which liability could reasonably be expected to
have a Company Material Adverse Effect. The Company has received, handled,
used, stored, treated, shipped and disposed of all hazardous or toxic
materials, substances and wastes (whether or not on its properties or
properties owned or operated by others) in compliance with all applicable
environmental, health or safety statutes, ordinances, orders, rules,
regulations or requirements, except for possible noncompliances which,
individually or in the aggregate, could not reasonably be expected to have
a Company Material Adverse Effect.
(p) Contracts; Debt Instruments. (i) Except as disclosed in the Company
Disclosure Memorandum, neither the Company nor any of its subsidiaries, nor
any of their respective assets, businesses, or operations, is a party to,
or is bound by, (1) any employment, severance, termination, consulting, or
retirement contract providing for aggregate payments to any person in any
calendar year in excess of $100,000, (2) any contract which prohibits or
restricts the Company or its subsidiaries from engaging in any business
activities in any geographic area, line of business or otherwise in
competition with any other Person, (3) any lease of real property as lessee
or lessor, (4) any material contract involving Company Intellectual
Property Rights (defined below), other than (x) Company Intellectual
Property contracts with customers or payors entered into in the ordinary
course of the Company's business and (y) "shrink-wrap" licenses or licenses
for software that are commercially available for $10,000 or less, (5) any
customer contract which, when considered in the aggregate with all other
customer contracts with the same customer, constitute in excess of five
percent (5.0%) of the Company's total consolidated revenues for the fiscal
year ended December 31, 1996, (6) any network and communication systems or
services contract, (7) any capital lease, and (8) any other contract or
amendment thereto that would be required to be filed by the Company with
the SEC as an exhibit pursuant to the requirements of the Exchange Act as
of the date of this Agreement, other than as have been so filed (together
with all contracts referred to in Sections 3.1(i) and 3.1(p)(ii) of this
Agreement, the "Company Contracts"). The Company has provided Parent with
copies of each of its forms of customer contract, as well as a list of its
substantial customers as of a recent practicable date. Neither the Company
nor any of its subsidiaries is in violation of or in default under (nor
does there exist any condition which upon the passage of time or the giving
of notice would cause such a violation of or default under) any Company
Contract or similar arrangement or understanding, to which it is a party or
by which it or any of its properties or assets is bound, except for
violations or defaults that (a) could not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect or (b) in the case of the Company Finance Documents, arise out of or
relate to the consummation of the transactions contemplated by this
Agreement.
(ii) Set forth in the Company Disclosure Memorandum is (A) a list of all
loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the
Company or any of its subsidiaries in an aggregate principal amount in
excess of $500,000 is outstanding or may be incurred and (B) the respective
principal amounts currently outstanding thereunder. For purposes of this
Section 3.1(p)(ii), "indebtedness" shall mean, with respect to any person,
without duplication, (A) all obligations of such person for borrowed money,
or with respect to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person upon which interest charges
are customarily paid, (D) all obligations of such person under conditional
sale or other title retention agreements relating to property purchased by
such person, (E) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and
supplies incurred in the ordinary course of such person's business), (F)
all capitalized lease obligations of such person, (G) all obligations of
others secured by any Lien on property or assets owned or acquired by such
person, whether or not the obligations secured thereby have been assumed,
(H) all obligations of such person under interest rate or currency swap
transactions (valued at the termination value thereof), (I) all letters of
credit issued for the account of such person (excluding letters of credit
issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary
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course of business) and (J) all guarantees and arrangements having the
economic effect of a guarantee of such person of any indebtedness of any
other person.
(q) Title to Properties. (i) Each of the Company and its subsidiaries has
good and marketable title to, or valid leasehold interests in, all its
properties and assets, free and clear of all Liens, except for defects in
title, easements, restrictive covenants and similar encumbrances or
impediments that, in the aggregate, do not and will not materially
interfere with the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties.
(ii) Each of the Company and its subsidiaries has complied with the terms
of all leases to which it is a party and under which it is in occupancy,
except for possible noncompliances which, individually or in the aggregate,
could not reasonably be expected to have a Company Material Adverse Effect.
Each of the Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such leases.
(r) Opinion of Financial Advisor. The Company has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation dated the date of this
Agreement, a copy of which has been provided to Parent, to the effect that,
as of such date, the exchange ratio set forth in Section 2.1 is fair to the
Company's stockholders from a financial point of view.
(s) Technology. (i) The Company and its subsidiaries own, or have a valid
license to use, the rights to all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, technology, trade secrets,
know-how and any other intellectual property rights (the "Company
Intellectual Property Rights") that are material to the conduct of the
business of the Company and its subsidiaries taken as a whole. No claims
are pending or, to the knowledge of the Company, threatened that the
Company or any of its subsidiaries is infringing or otherwise adversely
affecting the rights of any person with regard to any material Company
Intellectual Property Right. To the Company's knowledge, no person is
infringing the rights of the Company or any of its subsidiaries with
respect to any material Company Intellectual Property Right.
(ii) Except with respect to the software system described in Section
3.1(s)(ii) of the Company Disclosure Schedule, all of the software systems
otherwise described in the Company Disclosure Memorandum include design,
performance and functionality so that, with respect to such systems, there
is no basis upon which the Company should reasonably expect that the
Company or its subsidiaries will experience invalid or incorrect results or
abnormal software operation related to calendar year 2000. Except with
respect to the software system described in Section 3.1(s)(ii) of the
Company Disclosure Schedule, all of such software systems include calendar
year 2000 date conversion and compatibility, including, but not limited to,
date data century recognition, same century and multiple century formula
and date value calculation, and user interface date data values that
reflect the century.
(t) Billing and Collection Practices. (i) The current and past practices
and procedures of the Company and its subsidiaries with respect to (A)
billing on behalf of customers, (B) receiving and processing Medicare and
Medicaid payments due to customers, (C) holding and transfer of such
payments and (D) the method of determining and collecting the fees received
by the Company and its subsidiaries for services provided by providers and
physicians participating in the Medicare and Medicaid programs were not and
are not in violation of the restriction on assignment as set forth in 42
U.S.C. Section 1395g(c), 42 U.S.C. Section 1395u(b)(6) and 42 U.S.C.
Section 1396a(a)(32), and the regulations promulgated thereunder or similar
provisions of any state Medicaid program, except for possible violations
which, individually or in the aggregate, could not reasonably be expected
to have a Company Material Adverse Effect.
(ii) Neither the Company nor any of its subsidiaries is engaged or has
been engaged in any activity, whether alone or in concert with one or more
of its clients, which would constitute a violation of any Federal laws or
of the laws of any state where the Company or its subsidiaries do business
or otherwise applicable to the Company and its subsidiaries (including (A)
Federal antifraud and abuse or similar laws pertaining to Medicare,
Medicaid, or any other Federal health or insurance program, (B) state laws
pertaining to Medicaid or any other state health or insurance program, (C)
state or Federal laws pertaining to billings to insurance companies, health
maintenance organizations, and other managed care plans or to insurance
fraud,
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(D) Federal and state laws relating to collection agencies and the
performance of collection services, and (E) the false claim acts)
prohibiting fraudulent, abusive or unlawful practices connected in any way
with the provision of health care services, the billing for such services
provided to a beneficiary of any state, Federal or health or insurance
program or credit collection services, except for possible violations
which, individually or in the aggregate, could not reasonably be expected
to have a Company Material Adverse Effect. Without limiting the generality
of the foregoing, neither the Company nor any of its subsidiaries has,
directly or indirectly, paid, offered to pay or agreed to pay, or solicited
or received, any fee, commission, sum of money, property or other
remuneration to or from any person which the Company knows or has reason to
believe to have been illegal under 42 U.S.C. Section 1320a-7b(b) or any
similar state law.
(u) Insurance on Assets. The Company and its subsidiaries currently
maintain insurance policies in amounts, scope, and coverage as the Company
believes is adequate to conduct its business. Except as disclosed in the
Company Disclosure Memorandum, there are presently no claims for amounts
exceeding in any individual case $500,000 pending under such insurance
policies and no notices of claims in excess of such amount have been given
by the Company or its subsidiaries under such policies.
(v) Accounting and Tax Matters. Neither the Company nor, to the knowledge
of the Company, any subsidiary or affiliate thereof has taken or agreed to
take any action or has any knowledge of any fact or circumstance concerning
the Company or any subsidiary or affiliate thereof that, without giving
effect to any action taken or agreed to be taken by Parent or any of its
subsidiaries or affiliates or any fact or circumstance concerning Parent or
any subsidiary or affiliate thereof, is reasonably likely to prevent the
Merger from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368 of the Code.
(w) Stockholder Voting Agreement. Each of the stockholders of the Company
named therein has executed and delivered to Parent the Stockholder Voting
Agreement, substantially in the form of Exhibit A attached to this
Agreement (the "Voting Agreement").
Section 3.2. Representations and Warranties of Parent and Merger
Subsidiary. Except as set forth on the disclosure memorandum delivered by
Parent to the Company prior to the execution of this Agreement (the "Parent
Disclosure Memorandum"), Parent and Merger Subsidiary represent and warrant to
the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and Merger
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and
has the requisite corporate power and authority to carry on its business as
now being conducted, except where the failure to be so organized, existing
or in good standing or to have such power (individually or in the
aggregate) could not reasonably be expected to have a material adverse
effect on the financial condition, business or results of operations of
Parent and its subsidiaries taken as a whole (a "Parent Material Adverse
Effect"). Each of Parent and each of its subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) could not reasonably be expected to have
a Parent Material Adverse Effect. Parent has delivered to the Company
complete and correct copies of its Certificate of Incorporation and By-Laws
and the certificate of incorporation and by-laws of Merger Subsidiary, in
each case as amended to the date of this Agreement.
(b) Capital Structure. The authorized capital stock of Parent consists of
100,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred
stock. At the close of business on October 10, 1997, (i) 26,657,540 shares
of Parent Common Stock were issued and outstanding, (ii) no shares of
Parent Common Stock were held by Parent in its treasury or by any of
Parent's subsidiaries, (iii) 2,994,647 shares of Parent Common Stock were
reserved for issuance upon exercise of outstanding employee stock options
to purchase shares of Parent Common Stock and (iv) 1,686,004 shares of
Parent Common Stock were reserved for issuance upon exercise of employee
stock options that are not outstanding but may be issued in the future
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pursuant to existing Parent stock plans and stock option plans. Except as
set forth above, at the time of execution of this Agreement, no shares of
capital stock or other voting securities of Parent are issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of Parent
are, and all shares which may be issued pursuant to this Agreement will be,
when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as disclosed in the Parent
Filed SEC Documents (defined in Section 3.2(f)), there are no bonds,
debentures, notes or other indebtedness or securities of Parent having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which shareholders of Parent may vote.
Except as set forth above and as disclosed in the Parent Filed SEC
Documents, there are not any securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Parent or any of its subsidiaries is a party or by which any of them is
bound obligating Parent or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Parent or of any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. Except as
disclosed in the Parent Filed SEC Documents, there are no outstanding
rights, commitments, agreements, arrangements or undertakings of any kind
obligating Parent or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock or other voting securities of
Parent or any of its subsidiaries or any securities of the type described
in the two immediately preceding sentences. As of the date of this
Agreement, the authorized capital stock of Merger Subsidiary consists of
1,000 shares of common stock, par value $.01 per share, 100 shares of which
are validly issued and fully paid and nonassessable and are owned by Parent
free and clear of any Liens.
(c) Authority; Noncontravention. Parent and Merger Subsidiary have all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Subsidiary.
This Agreement has been duly executed and delivered by Parent and Merger
Subsidiary and constitutes a legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of Parent, Merger
Subsidiary or any other subsidiary of Parent under, (i) the certificate of
incorporation or by-laws of Parent or Merger Subsidiary or the comparable
charter or organizational documents of any other subsidiary of Parent, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Parent, Merger Subsidiary, or any other subsidiary of Parent
or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent, Merger Subsidiary or any other subsidiary
of Parent or their respective properties or assets, other than, in the case
of clause (ii) or (iii) above, any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate could not reasonably
be expected to (x) have a Parent Material Adverse Effect, (y) materially
impair the ability of Parent and Merger Subsidiary to perform their
respective obligations under this Agreement or (z) prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement. No Consent by any Governmental Entity is required by or with
respect to Parent, Merger Subsidiary or any other subsidiary of Parent in
connection with the execution and delivery of this Agreement or the
consummation by Parent or Merger Subsidiary as the case may be, of the
transactions contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form by Parent under the HSR Act, (ii)
the filing with the SEC of the S-4 and such reports under Section 13 of the
Exchange Act, as may be required in connection with this Agreement and the
transactions contemplated hereby, (iii) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate documents with
the relevant
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authorities of other states in which the Company is qualified to do
business, (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the
"takeover" or "blue sky" laws of various states and (v) such other
consents, approvals, orders, authorizations, registrations, declarations
and filings as to which the failure to obtain or make could not reasonably
be expected to (1) have a Parent Material Adverse Effect, (2) materially
impair the ability of Parent or Merger Subsidiary to perform its
obligations under this Agreement or (3) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
Neither Parent nor its Affiliates or Associates (as each such term is
defined in Section 203 of Delaware Law) is, at the date of execution and
delivery of this Agreement and without taking into consideration this
Agreement, the Voting Agreement and the transactions contemplated hereby
and thereby, an Interested Stockholder (as such term is defined in Section
203 of Delaware Law) of the Company.
(d) SEC Documents; Financial Statements; No Undisclosed
Liabilities. Parent has timely filed all required reports, schedules,
forms, statements and other documents with the SEC since May 31, 1993 (the
"Parent SEC Documents"). As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents as of the time they were
filed (or, if amended or superseded by a subsequent filing, as of the date
of such subsequent filing) contained any untrue statement of a material
fact or omitted 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. The financial
statements of Parent included in the Parent SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of Parent and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which were not or are not expected to be material in the
aggregate in amount or effect); provided that any pro forma financial
statements contained in the Parent SEC Documents are not necessarily
indicative of the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated
results of operation and cash flows of Parent and its subsidiaries for the
periods indicated. Except as set forth in the Parent Disclosure Memorandum
or in the consolidated financial statements of Parent (including the notes
thereto) included in Parent's most recent Annual Report on Form 10-K and
Quarterly Report on Form 10-Q, in each case as filed with the SEC prior to
the date of this Agreement, neither Parent nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance sheet of Parent and
its consolidated subsidiaries or in the notes thereto and which,
individually or in the aggregate, could reasonably be expected to have a
Parent Material Adverse Effect.
(e) Information Supplied. No statement, certificate, instrument, or other
writing furnished or to be furnished by Parent or its subsidiaries to the
Company pursuant to this Agreement or any other document, agreement or
instrument furnished by or on behalf of Parent or its subsidiaries and
referred to herein contains any untrue statement of material fact or will
omit to state a 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 Parent or Merger
Subsidiary for inclusion or incorporation by reference in (i) the Proxy
Statement/Prospectus will, at the time the Proxy Statement/Prospectus is
filed with the SEC, at the time the Proxy Statement/Prospectus is first
mailed to the Company's shareholders or at the time of the meeting of the
Company's shareholders held to vote on approval and adoption of this
Agreement, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading, and (ii) the S-4 will, at the time the S-4 is
filed with the SEC, at the time the
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S-4 becomes effective, at the time of any post-effective amendment thereto
or at the time of the meeting of the Company's shareholders held to vote on
approval and adoption of this Agreement, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The S-4 and the
Proxy Statement/Prospectus will comply as to form in all material respects
with the requirements of the Securities Act and the Exchange Act,
respectively, and the rules and regulations thereunder, except that no
representation or warranty is made by Parent or Merger Subsidiary with
respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or
incorporation by reference therein.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Parent Disclosure Memorandum, since the date of the most recent financial
statements included in the Parent SEC Documents filed and publicly
available prior to the date of this Agreement (the "Parent Filed SEC
Documents"), there has not been (i) any event, change, occurrence or
development of a state of circumstances which has had or could reasonably
be expected to have a Parent Material Adverse Effect, other than changes
after the date hereof relating to the economy in general or to Parent's
industry in general and not exclusively or principally relating to Parent
and its subsidiaries, (ii) except as permitted by Section 4.1(b)(i), any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Parent's
capital stock or any repurchase, redemption or other acquisition by Parent
or any of its subsidiaries of any outstanding shares of capital stock or
other securities of Parent or any of its subsidiaries, (iii) any action or
failure to take action by Parent or any of its subsidiaries, 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 Parent provided herein, (iv) any
split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock
or (v) any change in accounting methods, principles or practices by Parent
materially affecting its assets, liabilities or business, except insofar as
may have been required by a change in generally accepted accounting
principles.
(g) Litigation. There is no suit, action or proceeding pending or, to the
knowledge of Parent or its subsidiaries, threatened and, to the knowledge
of Parent or its subsidiaries, there is no investigation pending or
threatened, in each case against or affecting Parent or any of its
subsidiaries (and Parent is not aware of any basis for any such suit,
action or proceeding) that, individually or in the aggregate, could
reasonably be expected to (i) have a Parent Material Adverse Effect, (ii)
materially impair the ability of Parent or Merger Subsidiary to perform its
obligations under this Agreement or (iii) prevent the consummation of any
of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any of its subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
(h) Taxes. Parent and each of its subsidiaries has filed all tax returns
and reports required to be filed by it (except where the failure to so
file, individually or in the aggregate, could not reasonably be expected to
have a Parent Material Adverse Effect) and has paid (or Parent has paid on
its behalf) all taxes shown on such tax returns to be due and payable by
it, and the most recent financial statements contained in Parent Filed SEC
Documents reflect an adequate reserve for all material taxes payable by
Parent and its subsidiaries for all taxable periods and portions thereof
through the date of such financial statements including amounts, if any,
owed with respect to the examination of any tax returns that have been
settled but not yet paid in full. No deficiencies for any taxes have been
proposed, asserted or assessed against Parent or any of its subsidiaries,
and no waivers or requests for waivers of the time to assess any such taxes
are pending.
(i) Brokers. No broker, investment banker, financial advisor or other
person, other than Lazard Freres & Co., LLC, the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or any of its subsidiaries.
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(j) Permits; Compliance with Laws. (i) Each of Parent and its
subsidiaries has in effect all Permits necessary for it to own, lease or
operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under any such Permit, except
for the absence of Permits and for defaults under Permits which absence or
defaults, individually or in the aggregate, could not reasonably be
expected to have a Parent Material Adverse Effect. Parent and its
subsidiaries are in compliance with all applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees or orders of any
Governmental Entity, except for possible noncompliances which, individually
or in the aggregate, could not reasonably be expected to have a Parent
Material Adverse Effect.
(ii) There are no conditions relating to Parent or relating to Parent's
ownership, use or maintenance of any real property owned or operated, or
previously owned or operated, by Parent or any of its affiliates, and
Parent does not know of any such condition in respect of such real property
not related to the ownership, use or maintenance, that could lead to any
liability for violation of any Federal, state, county or local laws,
regulations, orders or judgments relating to pollution or protection of the
environment or any other applicable environmental, health or safety
statutes, ordinances, orders, rules, regulations or requirements which
liability could reasonably be expected to have a Parent Material Adverse
Effect. Parent has received, handled, used, stored, treated, shipped and
disposed of all hazardous or toxic materials, substances and wastes
(whether or not on its properties or properties owned or operated by
others) in compliance with all applicable environmental, health or safety
statutes, ordinances, orders, rules, regulations or requirements, except
for possible noncompliances which, individually or in the aggregate, could
not reasonably be expected to have a Parent Material Adverse Effect.
(k) Accounting and Tax Matters. Neither Parent nor, to the knowledge of
Parent, any subsidiary or affiliate thereof has taken or agreed to take any
action or has any knowledge of any fact or circumstance concerning Parent
or any subsidiary or affiliate thereof that, without giving effect to any
action taken or agreed to be taken by the Company or any of its
subsidiaries or affiliates or any fact or circumstance concerning the
Company or any subsidiary or affiliate thereof, is reasonably likely to
prevent the Merger from qualifying for pooling-of-interests accounting
treatment or as a reorganization within the meaning of Section 368 of the
Code.
ARTICLE IV
Conduct of Business
Section 4.1. Conduct of Business.
(a) Conduct of Business by the Company. During the period from the date of
this Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and, to the extent consistent therewith, use all reasonable efforts to
preserve intact their current business organizations and assets, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them to the end that
their goodwill and ongoing businesses shall not be materially impaired at the
Effective Time. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, except as set
forth in the Company Disclosure Memorandum or as required pursuant to this
Agreement, the Company shall not, and shall not permit any of its subsidiaries
to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by any direct or indirect wholly owned subsidiary of the
Company to its parent, (y) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (z)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities
(other than in connection with the exercise of Company Options);
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(ii) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities (other than the issuance of
Common Stock upon the exercise of Company Options outstanding on the date
of this Agreement in accordance with their terms on such date);
(iii) amend its certificate of incorporation, by-laws or other comparable
charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, except purchases of inventory and
other assets in the ordinary course of business consistent with past
practice;
(v) except as required by the Company Finance Documents (as in effect on
the date hereof) in the case of any property of the Company in which the
Company is obligated to deliver to the secured party thereunder a security
interest or mortgage or except as permitted by the Company Finance
Documents (as in effect on the date hereof) with respect to capitalized
lease obligations or purchase money debt, mortgage or otherwise encumber or
subject to any Lien or, except in the ordinary course of business
consistent with past practice or pursuant to existing contracts or
commitments, sell, lease or otherwise dispose of any of material properties
or assets;
(vi) (x) except as permitted by the Company Finance Documents (as in
effect on the date hereof), incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice, or (y) make any loans, advances or capital
contributions to, or investments in, any other person, other than to the
Company or any direct or indirect wholly owned subsidiary of the Company;
(vii) make or agree to make any new capital expenditures which,
individually or in the aggregate, are in excess of $500,000 (other than
capital expenditures made or agreed to be made in the ordinary course of
business consistent with the capital budget for the Company and its
subsidiaries);
(viii) make any material tax election (unless required by law) or settle
or compromise any material income tax liability;
(ix) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms,
of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company Filed SEC Documents or incurred in the
ordinary course of business consistent with past practice, or waive the
benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any of its
subsidiaries is a party;
(x) grant any increase in compensation or benefits to the employees or
officers of the Company or its subsidiaries, except in the ordinary course
of business consistent with past practice or as required by law, pay any
severance or termination pay or any bonus other than in the ordinary course
of business consistent with past practice or pursuant to written policies
or written contracts in effect on the date of this Agreement and disclosed
in the Company Disclosure Memorandum, enter into or amend any severance
agreements with officers of the Company or its subsidiaries, grant any
increase in fees or other compensation or other benefits to directors of
the Company or its subsidiaries, except in the ordinary course of business
consistent with past practice as disclosed in the Company Disclosure
Memorandum, or voluntarily accelerate the vesting of any stock options,
other stock-based compensation or employee benefits or any rights;
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(xi) enter into or amend any employment contract between the Company or
its subsidiaries and any person (unless such amendment is required by law)
that the Company does not have the unconditional right to terminate without
liability (other than liability for services already rendered) at any time
on or after the Effective Time;
(xii) adopt any new employee benefit plan of the Company or its
subsidiaries or terminate or withdraw from, or make any material change in
or to, any existing employee benefit plans of the Company or its
subsidiaries other than any such change that is required by law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax
qualified status of any such plan, or make any distributions from such
employee benefit plans, except as required by law, the terms of such plans
or consistent with past practice;
(xiii) make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in tax laws or generally accepted accounting principles;
(xiv) commence any litigation other than in the ordinary course of
business consistent with past practice, or settle any litigation involving
any liability of the Company or its subsidiaries for material money damages
or restrictions upon the operations of the Company or its subsidiaries;
(xv) enter into, modify, amend or terminate any Company Contract or
waive, release, compromise or assign any material rights or claims; or
(xvi) authorize any of, or commit or agree to take any of, the foregoing
actions.
(b) Conduct of Business by Parent. During the period from the date of this
Agreement to the Effective Time, Parent shall, and shall cause its
subsidiaries to, (i) carry on their respective businesses in the usual,
regular and ordinary course and (ii) continue to conduct its business and the
business of its subsidiaries in a manner designed, in Parent's reasonable
judgment, to enhance the long-term value of the Parent Common Stock and the
business prospects of Parent and its subsidiaries. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, except as set forth in the Parent Disclosure
Memorandum, Parent shall not, and shall not permit any of its subsidiaries to:
(i) except for regular quarterly dividends not in excess of $0.075 per
share of Parent Common Stock with customary record and payment dates,
declare, set aside or pay any dividends on, or make any other distributions
in respect of, any capital stock other than dividends and distributions by
any direct or indirect majority owned or wholly owned subsidiary of Parent
to its parent;
(ii) amend its certificate of incorporation, by-laws or other comparable
charter or organization documents in any manner adverse to the holders of
Parent Common Stock; or
(iii) authorize any of, or commit or agree to take any of, the foregoing
actions.
(c) Other Actions. The Company and Parent shall not, and shall not permit
any of their respective subsidiaries to, take any action that would result in
(i) any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of
such representations and warranties that are not so qualified becoming untrue
in any material respect, or (iii) except as contemplated by Section 5.3, any
of the conditions to the Merger set forth in Article VIII not being satisfied;
provided that the foregoing shall not prevent Parent 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 Parent, desirable in the
conduct of the business of Parent and its subsidiaries if any such
acquisition, discontinuance or disposition could not reasonably be expected to
(1) have a Parent Material Adverse Effect, (2) materially impair the ability
of Parent or Merger Subsidiary to perform its obligations under this Agreement
or (3) materially delay or prevent the consummation of any of the transactions
contemplated by this Agreement.
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ARTICLE V
Covenants of the Company
Section 5.1. Affiliates. Immediately prior to the Effective Time, the
Company shall deliver to Parent a letter identifying all persons who are to
the Company's knowledge "affiliates" of the Company for purposes of Rule 145
under the Securities Act or for purposes of the SEC's Accounting Series
Releases concerning "pooling of interests" treatment for business
combinations. The Company shall use its reasonable efforts to cause each such
person to deliver to Parent on or before the Closing Date a written agreement
(an "Affiliates Agreement") substantially in the form attached as Exhibit B to
this Agreement. Parent shall be entitled to place appropriate legends on the
certificate evidencing any shares of Parent Common Stock to be received by
such persons and to issue appropriate stop transfer instructions to the
transfer agent for shares of Parent Common Stock consistent with the terms of
such Affiliates Agreements.
Section 5.2. Other Offers. Until the termination of this Agreement, the
Company and its subsidiaries will not, and will not authorize the officers,
directors, employees, representatives or other agents of the Company and its
subsidiaries to, directly or indirectly, (i) take any action to solicit or
initiate any Acquisition Proposal (defined below) or (ii) except as
contemplated by Section 5.3, engage in negotiations with, or disclose any
nonpublic information relating to the Company or any of its subsidiaries or
afford access to the properties, books or records of the Company or any of its
subsidiaries to, any person that has advised the Company or otherwise
publicized the fact that such person may be considering making, or that has
made, an Acquisition Proposal; provided that nothing herein shall prohibit the
Company from making an election under and complying with Section 14d-5
promulgated under the Exchange Act or prohibit the Company's Board of
Directors from taking and disclosing to the Company's shareholders a position
with respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act. The Company will promptly notify Parent orally and in
writing after receipt of any Acquisition Proposal or any notice that any
person is considering making an Acquisition Proposal or any request for
nonpublic information relating to the Company or any of its subsidiaries or
for access to the properties, books or records of the Company or any of its
subsidiaries by any person that has advised the Company or otherwise
publicized the fact that such person may be considering making, or that has
made, an Acquisition Proposal and will promptly disclose to Parent the status
and details of any such Acquisition Proposal, indication or request. The
Company shall (i) immediately cease and cause to be terminated as of the date
of this Agreement any ongoing discussions or negotiations with any third
parties concerning an Acquisition Proposal, and (ii) direct and use its
commercially reasonable efforts to cause all of its representatives to cease
engaging in the foregoing; provided that nothing herein shall prohibit the
Company from acting in accordance with Section 5.3. For purposes of this
Agreement, "Acquisition Proposal" means any offer or proposal for, or any
written indication of interest in, a merger or other business combination
involving the Company or any of its Significant Subsidiaries or the
acquisition of any significant equity interest in, or a significant portion of
the assets of, the Company or any of its Significant Subsidiaries, other than
the transactions contemplated by this Agreement.
Section 5.3. Company Board Actions. Notwithstanding any other provision of
this Agreement to the contrary, to the extent required by the fiduciary
obligations of the Board of Directors of the Company under applicable law, as
determined in good faith by such Board, the Company may:
(i) in response to an unsolicited request therefor, participate in
discussions or negotiations with, or furnish information relating to the
Company or any of its subsidiaries (including providing access to the
properties, books or records of the Company or any of its subsidiaries)
pursuant to a customary confidentiality agreement (as determined by the
Company) to, any person that has advised the Company or otherwise
publicized the fact that such person may be considering making, or that has
made, an Acquisition Proposal; and
(ii) approve or recommend (and, in connection with such approval or
recommendation, withdraw or modify its approval or recommendation of this
Agreement or the Merger) a Superior Acquisition Proposal or enter into an
agreement with respect to such Superior Acquisition Proposal. For purposes
of this Agreement, "Superior Acquisition Proposal" means a bona fide
Acquisition Proposal which the Board of
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Directors of the Company determines in its good faith judgment after
consultation with the Company's financial advisors to be more favorable to
the Company's stockholders than the Merger, and for which financing, to the
extent required, is then committed or which, in the good faith judgment of
the Company's Board of Directors, is reasonably capable of being financed.
ARTICLE VI
Covenants of Parent and Merger Subsidiary
Section 6.1. Listing. Prior to the Effective Time, Parent shall use its
commercially reasonable efforts to have the Parent Common Stock to be issued
in the Merger approved for listing on the NYSE, subject to official notice of
issuance.
Section 6.2. Agreements of Parent Affiliates. Prior to the Effective Time,
Parent will use its reasonable efforts to obtain the execution of agreements
with respect to the sale of Parent Common Stock with each person who is an
"affiliate" of Paren for purposes of compliance with "pooling" restrictions.
Section 6.3. Indemnification. For six years after the Effective Time, Parent
will indemnify and hold harmless the present and former officers, directors,
employees and agents of the Company and its subsidiaries (the "Indemnified
Parties") in respect of acts or omissions occurring on or prior to the
Effective Time to the extent provided under the Company's or such subsidiary's
certificate of incorporation and bylaws in effect on the date of this
Agreement; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. For three years
after the Effective Time, Parent will cause to be maintained officers' and
directors' liability insurance in respect of acts or omissions occurring on or
prior to the Effective Time covering each such person currently covered by the
Company's officers' and directors' liability insurance policy on terms
substantially similar to those of such policy in effect on the date of this
Agreement, provided that in satisfying its obligation under this Section 6.3,
Parent shall not be obligated to pay premiums in excess of 150% of the amount
per annum the Company paid in its last full fiscal year, which amount has been
disclosed to Parent and if Parent is unable to obtain the insurance required
by this Section 6.3, it shall obtain as much comparable insurance as possible
for an annual premium equal to such maximum amount.
Section 6.4. Employees. Following the Effective Time, Parent shall provide,
or cause to be provided, generally to officers and employees of the Company
and its subsidiaries employee benefits which when taken as a whole are no less
favorable to such officers and employees than those in effect on the date of
this Agreement. For purposes of participation, vesting and (except in the case
of Parent retirement plans) benefit accrual under such employee benefit plans,
the service of the employees of the Company and its subsidiaries prior to the
Effective Time shall be treated as service with Parent and its subsidiaries
for participating in such employee benefit plans. Parent also shall cause the
Surviving Corporation and its subsidiaries to honor in accordance with their
respective terms all employment, severance, consulting and other compensation
contracts disclosed in the Company Disclosure Memorandum between the Company
or any of its subsidiaries and any current or former director, officer or
employee thereof, and all provisions for vested benefits or other vested
amounts earned or accrued through the Effective Time under the Company Benefit
Plans.
ARTICLE VII
Additional Agreements
Section 7.1. Shareholder Approval; Preparation of S-4 and Proxy
Statement/Prospectus. (a) The Company, at Parent's request, will duly call,
give notice of, convene and hold a meeting of its shareholders (the "Company
Shareholders Meeting") for the purpose of approving this Agreement and the
transactions contemplated by this Agreement. The Company will, through its
Board of Directors, recommend to its shareholders approval of this Agreement
and the transactions contemplated by this Agreement, except to the
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extent that the Company's Board of Directors shall have withdrawn or modified
its approval or recommendation of this Agreement or the Merger as contemplated
by Section 5.3.
(b) As promptly as practicable, Parent and the Company shall prepare and
file with the SEC the Proxy Statement/Prospectus and Parent shall prepare and
file with the SEC the S-4, in which the Proxy Statement/Prospectus will be
included as a prospectus. Each of Parent and the Company shall use its
commercially reasonable efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing. The Company will
use its commercially reasonable efforts to cause the Proxy
Statement/Prospectus to be mailed to the Company's shareholders as promptly as
practicable after the S-4 is declared effective under the Securities Act.
Parent shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under
any applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger and the Company shall furnish all information
concerning the Company and the holders of the Common Stock as may be
reasonably requested in connection with any such action.
(c) The Company shall use its commercially reasonable efforts to cause to be
delivered to Parent letters (each, a "Company Comfort Letter") addressed to
Parent and the Company of Deloitte & Touche LLP, the Company's independent
auditors, dated the date on which the S-4 shall become effective, the date of
the Company Shareholders Meeting, and within two business days prior to the
Closing Date, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4.
(d) Parent shall use its commercially reasonable efforts to cause to be
delivered to the Company letters (each, a "Parent Comfort Letter") addressed
to the Company and Parent of Arthur Andersen LLP, Parent's independent
auditors, dated the date on which the S-4 shall become effective, the date of
the Company Shareholders Meeting, and within two business days prior to the
Closing Date in form and substance reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4.
Section 7.2. HSR Act Filings; Reasonable Efforts; Notification. (a) Each of
Parent and the Company shall (i) promptly make or cause to be made the filings
required of such party or any of its subsidiaries under the HSR Act with
respect to the Merger and the other transactions provided for in this
Agreement, (ii) comply at the earliest practicable date with any request under
the HSR Act for additional information, documents, or other material received
by such party or any of its subsidiaries from the Federal Trade Commission or
the Department of Justice or any other Governmental Entity in respect of such
filings, the Merger or such other transactions, and (iii) cooperate with the
other party in connection with any such filing and in connection with
resolving any investigation or other inquiry of any such agency or other
Governmental Entity under any Antitrust Laws (defined below) with respect to
any such filing, the Merger or any such other transaction. Each party shall
promptly inform the other party of any communication with, and any proposed
understanding, undertaking, or agreement with, any Governmental Entity
regarding any such filings, the Merger or any such other transactions. Neither
party shall participate in any meeting with any Governmental Entity in respect
of any such filings, investigation, or other inquiry without giving the other
party notice of the meeting and, to the extent permitted by such Governmental
Entity, the opportunity to attend and participate.
(b) Each of Parent and the Company shall use all reasonable efforts to
resolve such objections, if any, as may be asserted by any Governmental Entity
with respect to the Merger or any other transactions provided for in this
Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade (collectively, "Antitrust
Laws"). In connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging the
Merger or any other transactions provided for in this Agreement as violative
of any Antitrust Law, and, if by mutual agreement, Parent and the
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Company decide that litigation is in their best interest each of Parent and
the Company shall cooperate and use all reasonable efforts vigorously to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent (each an "Order"), that is in
effect and that prohibits, prevents, or restricts consummation of the Merger
or any such other transactions. Each of Parent and the Company shall use all
reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under the HSR Act or other Antitrust Laws
with respect to the Merger and such other transactions as promptly as possible
after the execution of this Agreement.
(c) Upon the terms and subject to the conditions set forth in this
Agreement, unless, as contemplated by Section 5.3, the Board of Directors of
the Company approves or recommends a Superior Acquisition Proposal, each of
the parties agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all other necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all other necessary registrations and filings (including other
filings with Governmental Entities, if any), (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, and (iii) the
execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
(d) The Company shall give prompt written and oral notice to Parent, and
Parent or Merger Subsidiary shall give prompt written and oral notice to the
Company, of (i) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any material respect or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(e) The Company shall give prompt written and oral notice to Parent, and
Parent or Merger Subsidiary shall give prompt written and oral notice to the
Company, of:
(i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge, threatened against, relating to or
involving or otherwise affecting it or any of its subsidiaries which, if
pending on the date of this Agreement would have been required to have been
disclosed pursuant to Section 3.1(g), 3.1(h), 3.1(j), 3.1(k), 3.2(g) or
3.2(h) or which relate to the consummation of the transactions contemplated
by this Agreement.
Section 7.3. Public Announcements. Parent and Merger Subsidiary, on the one
hand, and the Company, on the other hand, will consult with each other before
issuing, and provide each other the opportunity to review and comment upon,
any press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or interdealer quotation system. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by
this Agreement will be in the form previously agreed to by the parties.
Section 7.4. Access to Information. (a) The Company shall, and shall cause
each of its subsidiaries to, afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisers and other
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representatives, full access during normal business hours during the period
prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall, and shall cause each of its subsidiaries to, furnish promptly
to Parent (i) a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements of
Federal or state securities laws, (ii) a copy of each tax return, report and
information statement filed by it during such period, and (iii) all other
information concerning its business, assets, properties and personnel as
Parent may reasonably request; provided that no investigation pursuant to this
Section 7.4(a) shall affect any representation or warranty given by the
Company to Parent hereunder.
(b) Parent shall, and shall cause each of its subsidiaries to, afford to the
Company, and to the Company's officers, employees, accountants, counsel,
financial advisers and other representatives, full access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records;
provided that no investigation pursuant to this Section 7.4(b) shall affect
any representation or warranty given by Parent to the Company hereunder.
Section 7.5. Confidentiality. Parent and Merger Subsidiary will hold, and
will cause their respective Representatives (defined in the Confidentiality
Agreement, dated June 30, 1997 (the "Confidentiality Agreement"), between
Parent and the Company) to hold, any Evaluation Material (defined in the
Confidentiality Agreement) in confidence in accordance with the terms of the
Confidentiality Agreement.
ARTICLE VIII
Conditions Precedent
Section 8.1. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the Required
Company Shareholder Vote.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger and the transactions contemplated by this Agreement under the
HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
or making illegal the consummation of the Merger shall be in effect;
provided that each of the parties shall have used its reasonable
commercially reasonable efforts to prevent the entry of any such injunction
or other order and to appeal as promptly as possible any injunction or
other order that may be entered.
(d) Form S-4. The S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceedings seeking a
stop order and all necessary approvals under state securities laws or the
Securities Act or Exchange Act relating to the issuance or trading of the
shares of Parent Common Stock issuable pursuant to the Merger shall have
been received.
(e) Tax Opinion. Each of the Company and Parent shall have received a
written opinion from their respective counsel to the effect that the Merger
will constitute a reorganization within the meaning of Section 368 of the
Code, and that Parent, Merger Subsidiary and the Company will each be a
party to that reorganization. In preparing the Company and Parent tax
opinions, counsel may rely on reasonable representations of the officers of
the Company and Parent related thereto.
(f) Pooling Letters. Parent and the Company shall have received letters,
dated as of the date of filing of the S-4 with the SEC and as of the
Effective Time, addressed to Parent and the Company, in form and substance
reasonably acceptable to Parent and the Company, from Arthur Andersen LLP
to the effect that
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the Merger will qualify for pooling-of-interests accounting treatment.
Parent and the Company also shall have received letters, dated as of the
date of filing of the S-4 with the SEC and as of the Effective Time,
addressed to Parent and the Company, in form and substance reasonably
acceptable to Parent and the Company, from Deloitte & Touche LLP to the
effect that such firm is not aware of any matters relating to the Company
and its subsidiaries which would preclude the Merger from qualifying for
pooling-of-interests accounting treatment.
Section 8.2. Conditions to Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to effect the Merger are further
subject to the following conditions:
(a) Representations and Warranties. For purposes of this Section 8.2(a),
the accuracy of the representations and warranties of the Company 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 the
Company set forth in Section 3.1(c) of this Agreement shall be true and
correct (except for inaccuracies which are de minimus in amount). The
representations and warranties of the Company set forth in Sections 3.1(m)
and 3.1(v) of this Agreement shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of the Company set forth in this Agreement (including the
representations and warranties set forth in Sections 3.1(c), 3.1(m) and
3.1(v)) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Company Material Adverse Effect, and Parent
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
such effect. For purposes of this Section 8.2(a) only, those
representations and warranties which are qualified by references to
"material" or "Company Material Adverse Effect" shall be deemed not to
include such qualifications.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certific signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such
effect.
(c) Opinion. Parent shall have received on the Closing Date an opinion
dated the Closing Date from Howard, Darby & Levin, counsel to the Company,
as to the matters set forth in Exhibit C attached to this Agreement.
(d) Affiliates Agreements. Parent shall have received from each person
who may be deemed pursuant to Section 5.1 to be an affiliate of the Company
a duly executed Affiliates Agreement.
(e) Consents. The Company shall have obtained any necessary consents with
respect to the consummation of the Merger under the contracts listed as
items 3(A) and (B) in Section 3.1(d) of the Disclosure Schedule.
Section 8.3. Conditions to Obligation of the Company. The obligations of the
Company to effect the Merger are further subject to the following conditions:
(a) Representations and Warranties. For purposes of this Section 8.3(a),
the accuracy of the representations and warranties of Parent and Merger
Subsidiary 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 Parent and Merger Subsidiary set forth in
Section 3.2(b) of this Agreement shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties of Parent and Merger Subsidiary set forth in Section 3.2(k) of
this Agreement shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of
Parent and Merger Subsidiary set forth in this Agreement (including the
representations and warranties set forth in Sections 3.2(b) and 3.2(k))
such that the aggregate effect of such inaccuracies has, or is reasonably
likely to
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have, a Parent Material Adverse Effect, and the Company shall have received
a certificate signed on behalf of Parent and Merger Subsidiary by the chief
executive officer and the chief financial officer of such entity to such
effect. For purposes of this Section 8.3(a) only, those representations and
warranties which are qualified by references to "material" or "Parent
Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) Performance of Obligations of Parent and Merger Subsidiary. Each of
Parent and Merger Subsidiary shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of each of Parent and Merger Subsidiary by the
chief executive officer and the chief financial officer of such entity to
such effect.
(c) Opinion. The Company shall have received on the Closing Date opinions
dated the Closing Date from Alston & Bird, LLP, counsel to Parent, or E.
Michael Ingram, General Counsel to Parent, as to the matters set forth in
Exhibit D attached to this Agreement.
(d) Listing. The Shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on the NYSE, subject to official
notice of issuance.
ARTICLE IX
Termination, Amendment and Waiver, Fees and Expenses
Section 9.1. Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the Merger and the
transactions contemplated by this Agreement by the shareholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by the Board of Directors of either party (provided that the
terminating party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of the Company and Section
8.3(a) in the case of Parent or in material breach of any covenant or other
agreement contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other party 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 inaccuracy and which
inaccuracy would provide the terminating party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section
8.2(a) of this Agreement in the case of Parent and Section 8.3(a) of this
Agreement in the case of the Company;
(c) by the Board of Directors of either party (provided that the
terminating party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of the Company and Section
8.3(a) in the case of Parent or in material breach of any 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;
(d) by the Board of Directors of either party (provided that the
terminating party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of the Company and Section
8.3(a) in the case of Parent or in material breach of any covenant or other
agreement contained in this Agreement) in the event, upon a vote at a duly
held Company Shareholders Meeting or any adjournment thereof, the required
approval of the shareholders of the Company shall not have been obtained as
contemplated by Section 7.1(a);
(e) by the Board of Directors of either party in the event that the
Merger shall not have been consummated by March 31, 1998, if the failure to
consummate the Merger on or before such date is not caused by any willful
breach of this Agreement by the party electing to terminate pursuant to
this Section 9.1(e);
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(f) by the Board of Directors of either party (provided that the
terminating party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 8.2(a) of this Agreement in the case of the Company and Section
8.3(a) in the case of Parent or in material breach of any covenant or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
9.1(e) of this Agreement;
(g) by Parent if (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner materially
adverse to Parent or Merger Subsidiary its approval or recommendation of
the Merger or this Agreement, or approved or recommended any Superior
Acquisition Proposal, (ii) the Company shall have entered into any binding
agreement with respect to any Superior Acquisition Proposal (other than a
confidentiality agreement as contemplated by Section 5.3) or (iii) the
Board of Directors of the Company or any committee thereof shall have
resolved to do any of the foregoing;
(h) by the Company if, prior to the approval and adoption of this
Agreement by the Required Company Shareholder Vote, the Board of Directors
of the Company shall have determined to enter into an agreement with
respect to a Superior Acquisition Proposal as contemplated by Section 5.3;
provided that (1) at least two business days prior to any such termination,
the Company shall have engaged in negotiations with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable
the Company to proceed with the transactions contemplated herein on such
adjusted terms in a manner consistent with the fiduciary obligations of the
Company's Board of Directors under applicable law, as determined in good
faith by such Board, and (2) simultaneously with such termination, the
Company shall have tendered to Parent payment in full of the amount
specified in Section 9.6(b); or
(i) by Parent, at any time during the three business day period
commencing on the next succeeding business day after the Determination Date
if the Average Closing Price of Parent Common Stock is less than $36.782;
subject, however, to the provisions set forth in the following three
sentences. If Parent elects to exercise its termination right pursuant to
this Section 9.1(i), it shall give prompt written notice thereof to the
Company (provided that such notice of election may be withdrawn at any time
within the five business day period referred to in the next succeeding
sentence). During the five business day period commencing with its receipt
of such notice, the Company shall have the option, in its sole discretion,
to elect to fix the Exchange Ratio (as then in effect) to equal 0.435. If
the Company makes an election contemplated by the immediately preceding
sentence within such five business day period, it shall give prompt written
notice to Parent of such election, whereupon no termination of this
Agreement shall have occurred pursuant to this Section 9.1(i), and this
Agreement shall remain in effect in accordance with its terms (except that
the Exchange Ratio shall have been so modified) and any reference in this
Agreement to the Exchange Ratio shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 9.1(i).
Section 9.2. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Merger Subsidiary or the
Company, other than the provisions of Section 3.1(n), Section 3.2(i), Section
7.5, this Section 9.2, Section 9.6, Section 10.6, Section 10.9 and Section
10.10 and except to the extent that such termination results from the breach
by a party of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
Section 9.3. Amendment. This Agreement may be amended by the parties at any
time before or after any required approval of the transactions contemplated by
this Agreement by the shareholders of the Company; provided that, after any
such approval, there shall not be made any amendment that by law requires
further approval by such shareholders without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
Section 9.4. Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this
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Agreement or (c) subject to the proviso of Section 9.3, waive compliance with
any of the agreements or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by each of the parties hereto. No failure or delay by any party
in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
Section 9.5. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.3 or an extension or waiver pursuant to
Section 9.4 shall, in order to be effective, require (a) in the case of
Parent, Merger Subsidiary or the Company, action by its Board of Directors or
the duly authorized committee or designee of its Board of Directors and (b) in
the case of the Company, action by a majority of the members of the Board of
Directors of the Company who were members of such Board on the date of this
Agreement and remain as such after the date of this Agreement or the duly
authorized designee of such members.
Section 9.6. Fees and Expenses. (a) Except in the case of a breach of this
Agreement by the other party, all fees and expenses incurred in connection
with the Merger, this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses, whether
or not the Merger is consummated.
(b) If this Agreement is terminated pursuant to Section 9.1(g) or 9.1(h),
the Company shall pay to Parent a fee equal to $6,490,000. Except as otherwise
set forth in Section 9.1(h), such payment and reimbursement shall be made in
immediately available funds, promptly, but in no event later than five
business days, after the termination of this Agreement.
ARTICLE X
General Provisions
Section 10.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 10.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
Section 10.2. Notices. All notices, requests and other communications under
this Agreement shall be in writing and shall be deemed given if delivered by
hand, by registered or certified mail postage prepaid, by overnight courier
(providing proof of delivery) or by telecopy (with copies by overnight
courier) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Merger Subsidiary, to
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attention: E. Michael Ingram
Fax: 404-728-2990
with a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Joel J. Hughey
Fax: 404-881-7777
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(b) if to the Company, to
Physician Support Systems, Inc.
60 Park Place
9th Floor
Newark, New Jersey 07102
Attention: Hamilton F. Potter III
Fax: 201-624-6499
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Scott F. Smith
Fax: 212-841-1010
Section 10.3. Interpretation. When a reference is made in this Agreement to
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation".
Section 10.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 10.5. Entire Agreement; No Third-Party Beneficiaries. This Agreement
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article
II and Section 6.3 with respect to the intended third party beneficiaries
thereof is not intended to confer upon any person other than the parties any
rights or remedies hereunder.
Section 10.6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
Section 10.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or
in part, by operation of law or otherwise by any of the parties without the
prior written consent of the other parties; any instrument purporting to make
such assignment shall be void. 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.
Section 10.8. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement.
Section 10.9. Submission to Jurisdiction. Each of the parties hereto hereby
submits to the exclusive jurisdiction of the United States District Court for
the District of Delaware and of any Delaware State court sitting in Delaware
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
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Section 10.10 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.
Parent, Merger Subsidiary and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
National Data Corporation
/s/ E. Michael Ingram
By: _________________________________
Name:E. Michael Ingram
Title:Senior Vice President and
Secretary
Universal Acquisition Corp.
/s/ E. Michael Ingram
By: _________________________________
Name:E. Michael Ingram
Title:Secretary
Physician Support Systems, Inc.
/s/ Peter W. Gilson
By: _________________________________
Name:Peter W. Gilson
Title:Chairman and Chief Executive
Officer
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EXHIBIT A
STOCKHOLDER VOTING AGREEMENT
THIS STOCKHOLDER VOTING AGREEMENT (this "Agreement") is made and entered
into as of October 14, 1997, by and among National Data Corporation, a
Delaware corporation ("Parent"), Physician Support Systems, Inc., a Delaware
corporation ("Company"), and each of the undersigned persons or entities (each
a "Stockholder");
WHEREAS, each Stockholder desires that Parent, Universal Acquisition Corp.,
a wholly owned subsidiary of Parent ("Merger Sub"), and Company, enter into an
Agreement and Plan of Merger dated the date hereof (as the same may be amended
or supplemented, the "Merger Agreement") with respect to the merger of Merger
Sub with and into Company (the "Merger"); and
WHEREAS, each Stockholder is executing this Agreement as an inducement to
Parent to enter into and execute, and to cause Merger Sub to enter into and
execute, the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by Parent and
Merger Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder, severally and not
jointly, represents and warrants to Parent as follows:
(a) Such Stockholder is the record or beneficial owner of the number of
shares of common stock, $0.001 par value, of Company ("Company Stock") and
has rights by option or otherwise to acquire the number of additional
shares of Company Stock as set forth below such Stockholder's name on the
signature page hereof (such Stockholder's "Shares"). Except for such
Stockholder's Shares, such Stockholder is not the record or beneficial
owner of any shares of Company Stock. This Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, such Stockholder, enforceable against such Stockholder in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation by such Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which such Stockholder is a party or bound or to
which such Stockholder's Shares are subject. If such Stockholder is married
and such Stockholder's Shares constitute community property, this Agreement
has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, such Stockholder's spouse, enforceable
against such person in accordance with its terms. Consummation by the
Stockholder of the transactions contemplated hereby will not violate, or
require any consent, approval, or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to the
Stockholder or such Stockholder's Shares.
(c) Such Stockholder's Shares and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by
such Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, except as indicated on the signature page hereof, free and
clear of all liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances. proxies or agreements arising
hereunder, and if such Stockholder's Shares are the subject of a bona fide
pledge to a bank, financial institution or other entity, no default exists
under such pledge as of the date hereof.
(d) Such Stockholder understands and acknowledges that Parent is entering
into, and causing Merger Sub to enter into, the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
Such Stockholder acknowledges that the irrevocable proxy set forth in
Section 4 is granted in consideration for the execution and delivery of the
Merger Agreement by Parent and Merger Sub.
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2. Voting Agreements. Each Stockholder agrees with, and covenants to, Parent
as follows:
(a) At any meeting of stockholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought (the
"Stockholders' Meeting"), such Stockholder shall vote (or cause to be
voted) such Stockholder's Shares (other than such Stockholder's Shares with
respect to which a valid proxy has been granted pursuant to Section 4
hereof) in favor of the Merger, the execution and delivery by Company of
the Merger Agreement, and the approval of the terms thereof and each of the
other transactions contemplated by the Merger Agreement, provided that the
terms of the Merger Agreement shall not have been amended to reduce the
consideration payable in the Merger to a lesser amount of Parent Common
Stock.
(b) At any meeting of stockholders of Company or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, such Stockholder shall vote (or cause to be
voted) such Stockholder's Shares (other than such Stockholder's Shares with
respect to which a valid proxy has been granted pursuant to Section 4
hereof) against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or
winding up of or by Company or (ii) any amendment of Company's Certificate
of Incorporation or Bylaws or other proposal or transaction involving
Company or any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify the
Merger, the Merger Agreement or any of the other transactions contemplated
by the Merger Agreement (each of the foregoing in clause (i) or (ii) above,
a "Competing Transaction").
3. Covenants. Each Stockholder agrees with, and covenants to, Parent that,
except as otherwise provided herein, such Stockholder shall not (i) transfer
(which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge (other than Permitted Liens (as defined
below)) or other disposition), or consent to any transfer of, any or all of
such Stockholder's Shares or any interest therein, except pursuant to the
Merger; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares or any
interest therein, (iii) grant any proxy, power of attorney or other similar
authorization in or with respect to such Shares, except for this Agreement, or
(iv) deposit such Shares into a voting trust or enter into a voting agreement
or arrangement with respect to such Shares, except for this Agreement;
provided, that such Stockholder may transfer (as defined above) any of such
Stockholder's Shares to any other person who is on the date hereof, or to any
family member of a person or charitable institution which prior to the
Stockholders' Meeting and prior to such transfer becomes, a party to this
Agreement bound by all the obligations of a "Stockholder" hereunder; provided,
that such Stockholder shall not transfer any of such Stockholder's Shares
pursuant to the preceding proviso and shall not transfer any other shares of
Company Stock if any such transfer, either alone or in the aggregate with
other transfers by other persons who may be affiliates of Company, would
preclude Parent's ability to account for the business combination to be
effected by the Merger as a pooling of interests. Exercise of rights or
remedies pursuant to bona fide pledges of shares of Company Stock to banks or
other financial institutions, which pledges were made prior to the date hereof
("Permitted Liens"), are not restricted by this Agreement.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each Stockholder, by this Agreement with respect to such
Stockholder's Shares that such Stockholder owns of record, hereby
irrevocably grants to, and appoints, Parent and Robert A. Yellowlees,
President of Parent, and E. Michael Ingram, Secretary of Parent, in their
respective capacities as officers of Parent, and any individual who shall
hereafter succeed to any such office of Parent, and each of them
individually, such Stockholder's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of such
Stockholder, to vote such Stockholder's Shares, or grant a consent or
approval in respect of such Shares (i) in favor of the Merger, the
execution and delivery of the Merger Agreement and approval of the terms
thereof and each of the other transactions contemplated by the Merger
Agreement, provided that the terms of the Merger Agreement shall not have
been amended to reduce the consideration
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payable in the Merger to a lesser amount of Parent Common Stock, and (ii)
against any Competing Transaction.
(b) Each Stockholder represents, severally and not jointly, that any
proxies heretofore given in respect of such Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked.
(c) Each Stockholder hereby affirms that the irrevocable proxy set forth
in this Section 4 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Stockholder under this Agreement. Each
Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. Each
Stockholder hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 212 of the Delaware Code.
5. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of
such Shares shall pass, whether by operation of law or otherwise, including
without limitation such Stockholder's successors or assigns. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of Company affecting the Company Stock,
or the acquisition of additional shares of Company Stock or other voting
securities of Company by any Stockholder, the number of Shares subject to the
terms of this Agreement shall be adjusted appropriately and this Agreement and
the obligations hereunder shall attach to any additional shares of Company
Stock or other voting securities of Company issued to or acquired by such
Stockholder.
6. Legends. The Company agrees with, and covenants to, Parent that the
Company shall not register the transfer of any certificate representing any of
the shares of Company Stock owned of record or beneficially by any
Stockholder, unless such transfer is made to Parent or Merger Subsidiary or
otherwise in compliance with this Agreement.
7. Regulatory Approvals. Each of the provisions of this Agreement is subject
to compliance with applicable regulatory conditions and receipt of any
required regulatory approvals.
8. Further Assurances. Each Stockholder shall, upon request and at the
expense of Parent, execute and deliver any additional documents and take such
further actions as may reasonably be deemed by Parent to be necessary or
desirable to carry out the provisions hereof and to vest the power to vote
such Stockholder's Shares as contemplated by Section 4 in Parent and the other
irrevocable proxies described therein.
9. Termination. This Agreement, and all rights and obligations of the
parties hereunder, shall terminate upon the first to occur of (x) the
Effective Time or (y) the date upon which the Merger Agreement is terminated
in accordance with its terms; provided that, if an "Extension Event" shall
have occurred as of or prior to termination of the Merger Agreement, then, for
a period of 180 days following such termination, (i) the rights and
obligations of the parties hereto under Sections 2(b) and 4(a)(ii) hereof
shall continue in full force and effect and (ii) no Stockholder shall transfer
any or all of such Stockholder's Shares in connection with any Competing
Transaction. For purposes of the foregoing, an "Extension Event" shall mean
any person (other than Parent or any subsidiary of Parent) shall have made, or
disclosed in writing an intention to make, a proposal for a Competing
Transaction.
10. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in this Agreement shall
have the respective meanings assigned to them in the Merger Agreement.
(b) All notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by
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like notice): (i) if to Parent, to the address provided in the Merger
Agreement; and (ii) if to the Stockholder, to its address shown below its
signature on the last page hereof.
(c) The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(d) This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement.
(e) This Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of
law or otherwise, by any of the parties without the prior written consent of
the other parties, except as expressly contemplated by Section 3(a). Any
assignment in violation of the foregoing shall be void.
(h) Each Stockholder agrees that irreparable damage would occur and that
Parent would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
Parent shall be entitled to an injunction or injunctions to prevent breaches
by such Stockholder of this Agreement and to enforce specifically the terms
and provisions of this Agreement. Each of the parties hereto hereby submits to
the exclusive jurisdiction of the United States District Court for the
District of Delaware and of any Delaware state court sitting in Delaware for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
(i) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall
be enforced to the fullest extent permitted by law.
(j) No amendment, modification or waiver in respect of this Agreement shall
be effective against any party unless it shall be in writing and signed by
such party.
(k) Each of the parties to this Stockholder Voting Agreement acknowledges
and agrees that the obligations of the Stockholders are several and not joint.
[SIGNATURES ON NEXT PAGE]
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<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed and delivered this
Stockholder Voting Agreement as of the day and year first above written.
National Data Corporation
By: _________________________________
Senior Vice President and
Secretary
Physician Support Systems, Inc.
By: _________________________________
President
STOCKHOLDER:
_____________________________________
Name: Peter W. Gilson
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
_____________________________________
Name: Hamilton F. Potter III
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
5
<PAGE>
_____________________________________
Name: Peter D. Cooper
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
_____________________________________
Name: Elaine Scialo
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
_____________________________________
Name: Eltman, Eltman & Cooper, PC
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
6
<PAGE>
_____________________________________
Name: Hamid Mirafzali
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
_____________________________________
Name: Shadan Mirafzali
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
By __________________________________
Name: Nader J. Samii, as
Independent Trustee of
the Neda Mirafzali Family
Trust U/A, dated
November 4, 1996
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
7
<PAGE>
By __________________________________
Name: Nader J. Samii, as
Independent Trustee of
the Leela Mirafzali
Family Trust U/A, dated
November 4, 1996
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: _________________
Number of Shares
Owned of Record: ____________________
Number of Shares
Subject to Pledge: __________________
8
<PAGE>
EXHIBIT B
FORM OF AFFILIATES AGREEMENT
, 1997
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Ladies and Gentlemen:
The undersigned has been advised that, as of the date of this Letter, the
undersigned may be deemed to be an "affiliate" of Physician Support Systems,
Inc., a Delaware corporation (the "Company"), (i) for purposes of Rule 145 of
the General Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Act"), or (ii) for purposes of the SEC's Accounting
Series Releases concerning "pooling of interests" treatment for business
combinations. Pursuant to the Agreement and Plan of Merger, dated as of
October 14, 1997 (the "Agreement"), among National Data Corporation, a
Delaware corporation ("Parent"), Universal Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Subsidiary"), and
the Company, Merger Subsidiary will be merged with and into the Company (the
"Merger"). As a result of the Merger, the undersigned may receive shares of
Common Stock, par value $0.125 per share (the "Parent Common Stock"), of
Parent in exchange for shares of common stock, par value $.001 per share, of
the Company.
The undersigned has been advised that the issuance of the Parent Common
Stock to the undersigned in connection with the Merger will be registered with
the SEC under the Act on a Registration Statement on Form S-4. However, the
undersigned has also been advised that, because at the time the Merger is
submitted for a vote of the stockholders of the Company, (i) the undersigned
may be deemed to have been an affiliate of the Company within the meaning of
Rule 145 and (ii) the distribution by the undersigned of the Parent Common
Stock has not been registered under the Act, the undersigned's ability to
sell, assign or transfer the Parent Common Stock received by the undersigned
in connection with the Merger may be restricted unless such transaction is
registered under the Act or an exemption from such registration is available.
The undersigned understands that such exemptions are limited, and the
undersigned has (to the extent the undersigned felt necessary) obtained advice
of counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities
of Rules 144 and Rule 145(d) of the Rules and Regulations.
The undersigned hereby represents and warrants to, and covenants with,
Parent that the undersigned will not sell, assign or transfer any of the
Parent Common Stock received by the undersigned in connection with the Merger
except (i) pursuant to an effective registration statement under the Act, (ii)
in conformity with the volume and other limitations of Rule 145 or (iii) in a
transaction which, in the opinion of independent counsel satisfactory to
Parent, is not required to be registered under the Act. In the event of a sale
or other disposition by the undersigned of Parent Common Stock pursuant to
subsection (d)(1), (2) or (3) of Rule 145, the undersigned will supply Parent
with evidence of compliance with such Rule in form and substance satisfactory
to Parent.
The undersigned understands that stop transfer instructions will be given to
Parent's transfer agent with respect to the Parent Common Stock received by
the undersigned in connection with the Merger to ensure compliance with the
restrictions contained in the immediately preceding paragraph. The undersigned
also acknowledges and agrees that appropriate legends noting such restrictions
will be placed on certificates representing the Parent Common Stock received
by the undersigned in connection with the Merger or held by a transferee
thereof, which legends will only be removed by delivery of substitute
certificates upon receipt of an opinion in form and substance satisfactory to
Parent from independent counsel satisfactory to Parent to the effect that such
legends are no longer required for purposes of the Act.
1
<PAGE>
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and the requirements hereof and the limitations imposed upon the
distribution, sale or other disposition of Parent Common Stock, (ii) Parent is
under no obligation to register the sale, transfer or other disposition of the
Parent Common Stock by the undersigned or to take any other action necessary
to make compliance with an exemption from registration available solely as a
result of the Merger and (iii) the receipt by Parent of this letter is an
inducement and a condition to Parent's obligation to consummate the Merger.
The undersigned further represents to, and covenants with, Parent that the
undersigned has not, within the 30 days prior to the Effective Time (defined
in the Agreement), sold, transferred or otherwise disposed of, or in any other
way reduced the undersigned's risk with respect to, any shares of Parent
Common Stock or other shares of the capital stock of Parent or shares of the
capital stock of the Company held by the undersigned, and that the undersigned
will not sell, transfer or otherwise dispose of, or in any other way reduce
the undersigned's risk with respect to, any shares of Parent Common Stock
received by the undersigned in the Merger or other shares of the capital stock
of Parent until after such time as results covering at least 30 days of
combined operations of Parent and the Company have been published by Parent,
in the form of a quarterly earnings report, an effective registration
statement filed with the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement which includes the combined results
of operations.
Very truly yours,
[Name of Affiliate]
Accepted.
National Data Corporation
By: _________________________________
Name:
Title:
2
<PAGE>
EXHIBIT C
MATTERS AS TO WHICH
HOWARD, DARBY & LEVIN
WILL OPINE
1. The Company 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 own and use its assets and to conduct its business as and
where now owned and conducted.
2. The execution and delivery of the Agreement by the Company and the
consummation by the Company of the transactions contemplated thereby do not
and will not violate or contravene any provision of the Certificate of
Incorporation or Bylaws of the Company.
3. The Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other laws of
general applicability relating to or affecting creditors' rights and to
general equitable principles.
1
<PAGE>
EXHIBIT D
MATTERS AS TO WHICH
ALSTON & BIRD LLP OR GENERAL COUNSEL TO PARENT
WILL OPINE
1. Parent 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. Merger Subsidiary is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware with full
corporate power and authority to carry on the business in which it is engaged,
and to own and use its assets.
3. The execution and delivery of the Agreement and compliance with its terms
do not and will not violate or contravene any provision of the Certificate of
Incorporation or Bylaws of Parent. The adoption of the Agreement and
compliance with its terms do not and will not violate or contravene any
provision of the Certificate of Incorporation or Bylaws of Merger Subsidiary.
4. The Agreement has been duly executed and delivered by Parent and Merger
Subsidiary and, assuming valid authorization, execution and delivery by
Company and assuming that the applicable laws of Delaware are the same in all
relevant respects as the applicable laws of Georgia, constitutes a valid and
binding obligation of Parent and Merger Subsidiary enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, provided, however, that we express no opinion as to the
availability of the equitable remedy of specific performance.
5. The shares of Parent Common Stock to be issued to the stockholders of the
Company in connection with the Merger as contemplated by the Agreement have
been registered under the Securities Act of 1933, as amended, and have been
duly authorized and will be, when issued following consummation of the Merger,
fully paid and nonassessable under the Delaware General Corporation Law.
1
<PAGE>
ANNEX B
STOCKHOLDER VOTING AGREEMENT
<PAGE>
STOCKHOLDER VOTING AGREEMENT
THIS STOCKHOLDER VOTING AGREEMENT (this "Agreement") is made and entered
into as of October 14, 1997, by and among National Data Corporation, a
Delaware corporation ("Parent"), Physician Support Systems, Inc., a Delaware
corporation ("Company"), and each of the undersigned persons or entities (each
a "Stockholder");
WHEREAS, each Stockholder desires that Parent, Universal Acquisition Corp.,
a wholly owned subsidiary of Parent ("Merger Sub"), and Company, enter into an
Agreement and Plan of Merger dated the date hereof (as the same may be amended
or supplemented, the "Merger Agreement") with respect to the merger of Merger
Sub with and into Company (the "Merger"); and
WHEREAS, each Stockholder is executing this Agreement as an inducement to
Parent to enter into and execute, and to cause Merger Sub to enter into and
execute, the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by Parent and
Merger Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
1. Representations and Warranties. Each Stockholder, severally and not
jointly, represents and warrants to Parent as follows:
(a) Such Stockholder is the record or beneficial owner of the number of
shares of common stock, $0.001 par value, of Company ("Company Stock") and
has rights by option or otherwise to acquire the number of additional
shares of Company Stock as set forth below such Stockholder's name on the
signature page hereof (such Stockholder's "Shares"). Except for such
Stockholder's Shares, such Stockholder is not the record or beneficial
owner of any shares of Company Stock. This Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, such Stockholder, enforceable against such Stockholder in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation by such Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with, any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which such Stockholder is a party or bound or to
which such Stockholder's Shares are subject. If such Stockholder is married
and such Stockholder's Shares constitute community property, this Agreement
has been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, such Stockholder's spouse, enforceable
against such person in accordance with its terms. Consummation by the
Stockholder of the transactions contemplated hereby will not violate, or
require any consent, approval, or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to the
Stockholder or such Stockholder's Shares.
(c) Such Stockholder's Shares and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by
such Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, except as indicated on the signature page hereof, free and
clear of all liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances, proxies or agreements arising
hereunder, and if such Stockholder's Shares are the subject of a bona fide
pledge to a bank, financial institution or other entity, no default exists
under such pledge as of the date hereof.
(d) Such Stockholder understands and acknowledges that Parent is entering
into, and causing Merger Sub to enter into, the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
Such Stockholder acknowledges that the irrevocable proxy set forth in
Section 4 is granted in consideration for the execution and delivery of the
Merger Agreement by Parent and Merger Sub.
B-1
<PAGE>
2. Voting Agreements. Each Stockholder agrees with, and covenants to, Parent
as follows:
(a) At any meeting of stockholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought (the
"Stockholders' Meeting"), such Stockholder shall vote (or cause to be
voted) such Stockholder's Shares (other than such Stockholder's Shares with
respect to which a valid proxy has been granted pursuant to Section 4
hereof) in favor of the Merger, the execution and delivery by Company of
the Merger Agreement, and the approval of the terms thereof and each of the
other transactions contemplated by the Merger Agreement, provided that the
terms of the Merger Agreement shall not have been amended to reduce the
consideration payable in the Merger to a lesser amount of Parent Common
Stock.
(b) At any meeting of stockholders of Company or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, such Stockholder shall vote (or cause to be
voted) such Stockholder's Shares (other than such Stockholder's Shares with
respect to which a valid proxy has been granted pursuant to Section 4
hereof) against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or
winding up of or by Company or (ii) any amendment of Company's Certificate
of Incorporation or Bylaws or other proposal or transaction involving
Company or any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify the
Merger, the Merger Agreement or any of the other transactions contemplated
by the Merger Agreement (each of the foregoing in clause (i) or (ii) above,
a "Competing Transaction").
3. Covenants. Each Stockholder agrees with, and covenants to, Parent that,
except as otherwise provided herein, such Stockholder shall not (i) transfer
(which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge (other than Permitted Liens (as defined
below)) or other disposition), or consent to any transfer of, any or all of
such Stockholder's Shares or any interest therein, except pursuant to the
Merger; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares or any
interest therein, (iii) grant any proxy, power of attorney or other similar
authorization in or with respect to such Shares, except for this Agreement, or
(iv) deposit such Shares into a voting trust or enter into a voting agreement
or arrangement with respect to such Shares, except for this Agreement;
provided, that such Stockholder may transfer (as defined above) any of such
Stockholder's Shares to any other person who is on the date hereof, or to any
family member of a person or charitable institution which prior to the
Stockholders' Meeting and prior to such transfer becomes, a party to this
Agreement bound by all the obligations of a "Stockholder" hereunder; provided,
that such Stockholder shall not transfer any of such Stockholder's Shares
pursuant to the preceding proviso and shall not transfer any other shares of
Company Stock if any such transfer, either alone or in the aggregate with
other transfers by other persons who may be affiliates of Company, would
preclude Parent's ability to account for the business combination to be
effected by the Merger as a pooling of interests. Exercise of rights or
remedies pursuant to bona fide pledges of shares of Company Stock to banks or
other financial institutions, which pledges were made prior to the date hereof
("Permitted Liens"), are not restricted by this Agreement.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each Stockholder, by this Agreement with respect to such
Stockholder's Shares that such Stockholder owns of record, hereby
irrevocably grants to, and appoints, Parent and Robert A. Yellowlees,
President of Parent, and E. Michael Ingram, Secretary of Parent, in their
respective capacities as officers of Parent, and any individual who shall
hereafter succeed to any such office of Parent, and each of them
individually, such Stockholder's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of such
Stockholder, to vote such Stockholder's Shares, or grant a consent or
approval in respect of such Shares (i) in favor of the Merger, the
execution and delivery of the Merger Agreement and approval of the terms
thereof and each of the other transactions contemplated by the Merger
Agreement, provided that the terms of the Merger Agreement shall not have
been amended to reduce the consideration
B-2
<PAGE>
payable in the Merger to a lesser amount of Parent Common Stock, and (ii)
against any Competing Transaction.
(b) Each Stockholder represents, severally and not jointly, that any
proxies heretofore given in respect of such Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked.
(c) Each Stockholder hereby affirms that the irrevocable proxy set forth
in this Section 4 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Stockholder under this Agreement. Each
Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. Each
Stockholder hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 212 of the Delaware Code.
5. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of
such Shares shall pass, whether by operation of law or otherwise, including
without limitation such Stockholder's successors or assigns. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of Company affecting the Company Stock,
or the acquisition of additional shares of Company Stock or other voting
securities of Company by any Stockholder, the number of Shares subject to the
terms of this Agreement shall be adjusted appropriately and this Agreement and
the obligations hereunder shall attach to any additional shares of Company
Stock or other voting securities of Company issued to or acquired by such
Stockholder.
6. Legends. The Company agrees with, and covenants to, Parent that the
Company shall not register the transfer of any certificate representing any of
the shares of Company Stock owned of record or beneficially by any
Stockholder, unless such transfer is made to Parent or Merger Subsidiary or
otherwise in compliance with this Agreement.
7. Regulatory Approvals. Each of the provisions of this Agreement is subject
to compliance with applicable regulatory conditions and receipt of any
required regulatory approvals.
8. Further Assurances. Each Stockholder shall, upon request and at the
expense of Parent, execute and deliver any additional documents and take such
further actions as may reasonably be deemed by Parent to be necessary or
desirable to carry out the provisions hereof and to vest the power to vote
such Stockholder's Shares as contemplated by Section 4 in Parent and the other
irrevocable proxies described therein.
9. Termination. This Agreement, and all rights and obligations of the
parties hereunder, shall terminate upon the first to occur of (x) the
Effective Time or (y) the date upon which the Merger Agreement is terminated
in accordance with its terms; provided that, if an "Extension Event" shall
have occurred as of or prior to termination of the Merger Agreement, then, for
a period of 180 days following such termination, (i) the rights and
obligations of the parties hereto under Sections 2(b)and 4(a)(ii) hereof shall
continue in full force and effect and (ii) no Stockholder shall transfer any
or all of such Stockholder's Shares in connection with any Competing
Transaction. For purposes of the foregoing, an "Extension Event" shall mean
any person (other than Parent or any subsidiary of Parent) shall have made, or
disclosed in writing an intention to make, a proposal for a Competing
Transaction.
10. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in this Agreement shall
have the respective meanings assigned to them in the Merger Agreement.
(b) All notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of
B-3
<PAGE>
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Parent, to the
address provided in the Merger Agreement; and (ii) if to the Stockholder, to
its address shown below its signature on the last page hereof.
(c) The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(d) This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement.
(e) This Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of
law or otherwise, by any of the parties without the prior written consent of
the other parties, except as expressly contemplated by Section 3(a). Any
assignment in violation of the foregoing shall be void.
(h) Each Stockholder agrees that irreparable damage would occur and that
Parent would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
Parent shall be entitled to an injunction or injunctions to prevent breaches
by such Stockholder of this Agreement and to enforce specifically the terms
and provisions of this Agreement. Each of the parties hereto hereby submits to
the exclusive jurisdiction of the United States District Court for the
District of Delaware and of any Delaware state court sitting in Delaware for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
(i) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall
be enforced to the fullest extent permitted by law.
(j) No amendment, modification or waiver in respect of this Agreement shall
be effective against any party unless it shall be in writing and signed by
such party.
(k) Each of the parties to this Stockholder Voting Agreement acknowledges
and agrees that the obligations of the Stockholders are several and not joint.
[SIGNATURES ON NEXT PAGE]
B-4
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed and delivered this
Stockholder Voting Agreement as of the day and year first above written.
National Data Corporation
/s/ E. Michael Ingram
By: _________________________________
Senior Vice President and
Secretary
Physician Support Systems, Inc.
/s/ J. Michael Drinkwater
By: _________________________________
President
STOCKHOLDER:
/s/ Peter W. Gilson
-------------------------------------
Name: Peter W. Gilson
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 840,000
Number of Shares
Owned of Record: 840,000
Number of Shares
Subject to Pledge: 40,000
/s/ Hamilton F. Potter III
-------------------------------------
Name: Hamilton F. Potter III
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 504,000
Number of Shares
Owned of Record: 504,000
Number of Shares
Subject to Pledge: 504,000
B-5
<PAGE>
/s/ Peter D. Cooper
-------------------------------------
Name: Peter D. Cooper
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 77,453
Number of Shares
Owned of Record: 77,453
Number of Shares
Subject to Pledge: 0
/s/ Elaine Scialo
-------------------------------------
Name: Elaine Scialo
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 779,820
Number of Shares
Owned of Record: 779,820
Number of Shares
Subject to Pledge: 0
/s/ Peter D. Cooper
-------------------------------------
Name: Eltman, Eltman & Cooper, PC
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 90,376
Number of Shares
Owned of Record: 90,376
Number of Shares
Subject to Pledge: 0
B-6
<PAGE>
/s/ Hamid Mirafzali
-------------------------------------
Name: Hamid Mirafzali
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 241,032
Number of Shares
Owned of Record: 234,032
Number of Shares
Subject to Pledge: 0
/s/ Shadan Mirafzali
-------------------------------------
Name: Shadan Mirafzali
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 241,032
Number of Shares
Owned of Record: 234,032
Number of Shares
Subject to Pledge: 0
/s/ Nader J. Samii
By: _________________________________
Name: Nader J. Samii, as
Independent Trustee of
the Neda Mirafzali Family
Trust U/A, dated
November 4, 1996
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 47,934
Number of Shares
Owned of Record: 47,934
Number of Shares
Subject to Pledge: 0
/s/ Nader J. Samii
By: _________________________________
Name: Nader J. Samii, as
Independent Trustee of
the Leela Mirafzali
Family Trust U/A, dated
November 4, 1996
Address: __________________________
__________________________
Number of Shares
Beneficially Owned: 47,934
Number of Shares
Owned of Record: 47,934
Number of Shares
Subject to Pledge: 0
B-7
<PAGE>
ANNEX C
OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE>
OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
October 14, 1997
PRIVATE AND CONFIDENTIAL
The Board of Directors
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
Mt. Joy, Pennsylvania 17552
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, par value $.001 per share ("Company
Common Stock"), of Physician Support Systems, Inc. (the "Company") of the
Exchange Ratio (as defined below) pursuant to the terms of the Agreement and
Plan of Merger, dated as of October 14, 1997 (the "Agreement"), by and among
National Data Corporation ("NDC"), Universal Acquisition Corp., a wholly owned
subsidiary of NDC, and the Company, pursuant to which Universal Acquisition
Corp. will be merged (the "Merger") with and into the Company.
Pursuant to the Agreement, each share of Company Common Stock will be
converted, subject to certain exceptions, into the right to receive 0.435
shares (the "Exchange Ratio") of common stock, $0.125 par value per share
("NDC Common Stock"), of NDC, provided that (i) if the average closing price
of NDC Common Stock on the New York Stock Exchange, Inc. (the "NYSE") for all
trading days beginning on the twenty-fifth trading day before the date of the
Company shareholder meeting to vote on the Merger (the "Company Shareholder
Meeting Date") and ending on and including the tenth trading day before the
Company Shareholder Meeting Date (such tenth trading day, the "Determination
Date") (as calculated for such period, the "Average Closing Price") is greater
than $47.126, the Exchange Ratio will be equal to the quotient of $20.50
divided by the Average Closing Price or (ii) if the Average Closing Price is
less than $36.782, the Exchange Ratio will be equal to the quotient of $16.00
divided by the Average Closing Price.
In arriving at our opinion, we have reviewed the draft dated October 14,
1997 of the Agreement and the exhibits thereto. We also have reviewed
financial and other information that was publicly available or furnished to us
by the Company and NDC including information provided during discussions with
their respective managements. Included in the information provided during
discussions with the respective managements were certain financial projections
of the Company for the period beginning January 1, 1997 and ending December
31, 2001 prepared by the management of the Company and certain research
analyst financial projections for NDC for the period beginning June 1, 1997
and ending May 31, 1999 provided by the management of NDC. In addition, we
have compared certain financial and securities data of the Company and NDC
with various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of Company Common
Stock and NDC Common Stock, reviewed prices and premiums paid in certain other
business combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by the Company and NDC or
their respective representatives, or that was otherwise reviewed by us. With
respect to the financial projections supplied to us, we have assumed that they
have been reasonably prepared and, with respect to the financial projections
provided by the management of NDC, we have assumed that they have been
prepared on the basis reflecting the best currently available estimates and
judgments of the management of NDC as to the future operating and financial
performance of NDC. We have not assumed any responsibility for making an
independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
C-1
<PAGE>
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which NDC Common Stock will actually trade at any time. Our opinion
does not address the relative merits of the Merger and the other business
strategies being considered by the Company's Board of Directors, nor does it
address the Board's decision to proceed with the Merger. Our opinion does not
constitute a recommendation to any stockholder as to how such stockholder
should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the holders of Company
Common Stock from a financial point of view.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
/s/ John W. Patterson
By: _________________________________
Name: John W. Patterson
Title: Senior Vice President
C-2
<PAGE>
ANNEX D
PRO FORMA COMBINED FINANCIAL INFORMATION
<PAGE>
UNAUDITED CONDENSED COMBINED PRO FORMA
FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
are based on the historical presentation of the consolidated financial
statements of NDC and PSS. The Unaudited Pro Forma Statements of Operations
for the years ended May 31, 1997, 1996 and 1995 and the three months ended
August 31, 1997 give effect to the Merger as if it had occurred on June 1,
1994 and to pro forma adjustments related to the Source Transactions and the
EDI Services transaction as if they had occurred on June 1, 1996. For
comparability purposes, PSS's and Source/PMSI's three and twelve months ended
September 30 and June 30, 1997, respectively, are used in conjunction with
NDC's three and twelve months ended August 31 and May 31, 1997, respectively,
and PSS's twelve months ended June 30, 1996 and 1995, respectively, are used
in conjunction with NDC's twelve months ended May 31, 1996 and 1995,
respectively. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of August 31, 1997 gives effect to the Merger as if it had occurred on August
31, 1997. The Condensed Consolidated Financial Statements do not include the
effects of certain other acquisitions by NDC. The unaudited pro forma combined
financial statements should be read in conjunction with the historical
financial statements, including notes thereto, of NDC and PSS, incorporated by
reference herein, and the pro forma financial information relating to the
Source Transactions and the EDI Services transaction, incorporated by
reference herein. See "Available Information," "Incorporation of Certain
Information by Reference," "Summary--Recent Developments" and "Accounting
Treatment."
The Merger is expected to be accounted for under the pooling-of-interests
method of accounting. The Source Transactions and the EDI Services transaction
have been accounted for under the purchase method of accounting. The total
purchase price of these acquisitions has been allocated to tangible and
intangible assets and liabilities based upon either an independent valuation
or management's estimate of their respective fair market values with the
excess of cost over net assets acquired allocated to goodwill.
The pro forma statements may not be indicative of the results that actually
would have occurred if the transactions had been in effect on the dates
indicated or which may be obtained in the future. These combined pro forma
statements do not reflect any potential savings which may result from the
combined operations of NDC, Source/PMSI, PSS, or EDI Services nor certain
Merger-related expenses as disclosed in Note (g) to the Unaudited Pro Forma
Condensed Consolidated Balance Sheet. In addition, the financial results of
the business to be acquired in the Source Transaction ("Source US") have
historically varied from quarter to quarter. These fluctuations are
principally due to the timing of customer commitments to new products and
services and the timing of delivery of Source US services. Source US's fiscal
year begins July 1. Source US typically incurs expenses during the first half
of its fiscal year (the last half of the calendar year), in preparation for
roll-out of new products and services to meet customer requirements.
Consequently, during Source US's first quarter, significant expense with
respect to new products is incurred to generate revenues that should be
recognized in future quarters.
D-1
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SOURCE/PMSI
DATABASE
NDC HISTORICAL PRO FORMA PRO FORMA PSS PRO FORMA PRO FORMA
HISTORICAL COMBINED ADJUSTMENTS CONSOLIDATED HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ----------- ----------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equiva-
lents.................. $ 18,224 $ 4,541 $ (219)(a) $ 9,321 $ 643 $ 0 $ 9,964
(13,225)(b)
Accounts receivable, net
of allowance........... 81,484 15,314 0 96,798 41,557 (7,036)(h) 131,319
Other current assets.... 12,367 2,265 0 14,632 2,906 0 17,538
-------- ------- -------- -------- -------- -------- --------
Total current assets... 112,075 22,120 (13,444) 120,751 45,106 (7,036) 158,821
Property, plant and
equipment, net......... 50,829 14,861 0 65,690 10,038 0 75,728
Intangible assets, net.. 352,102 0 73,816 (d) 425,918 58,061 0 483,979
Other................... 14,397 333 0 14,730 4,222 2,674 (h) 21,626
-------- ------- -------- -------- -------- -------- --------
Total assets........... $529,403 $37,314 $ 60,372 $627,089 $117,427 $ (4,362) $740,154
======== ======= ======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQ-
UITY
Accounts payable and
accrued liabilities.... $ 49,768 $10,985 $ (3,479)(c) $ 57,274 $ 16,206 $ 9,023 (g) $ 82,503
Due to Parent........... 0 36,556 (36,556)(c) 0 0 0 0
Line of credit payable.. 0 0 29,026 (b) 29,026 0 0 29,026
Notes and earn-out pay-
able................... 298 61 0 359 1,153 0 1,512
Income taxes payable.... 6,904 0 0 6,904 31 0 6,935
Obligations under capi-
tal leases............. 2,484 5,500 0 7,984 0 0 7,984
Deferred income......... 6,090 16,826 0 22,916 0 0 22,916
-------- ------- -------- -------- -------- -------- --------
Total current liabili-
ties.................. 65,544 69,928 (11,009) 124,463 17,390 9,023 150,876
Long-term debt.......... 150,048 0 0 150,048 43,058 0 193,106
Obligations under capi-
tal leases............. 2,890 5,975 0 8,865 0 0 8,865
Other long-term liabili-
ties................... 3,469 1,977 0 5,446 4,983 0 10,429
-------- ------- -------- -------- -------- -------- --------
Total long-term liabil-
ities................. 156,407 7,952 0 164,359 48,041 0 212,400
-------- ------- -------- -------- -------- -------- --------
Total liabilities...... 221,951 77,880 (11,009) 288,822 65,431 9,023 363,276
-------- ------- -------- -------- -------- -------- --------
Minority interest....... 20,540 0 0 20,540 0 0 20,540
-------- ------- -------- -------- -------- -------- --------
Common and preferred
stock.................. 3,329 0 327 (e) 3,656 10 519 (f) 4,185
Additional paid-in capi-
tal.................... 183,813 0 97,488 (e) 281,301 58,741 (519)(f) 339,523
Retained earnings
(accumulated deficit).. 101,759 (40,566) (67,000)(d) 34,759 (6,755) (9,023)(g) 14,619
40,566 (f) (4,362)(h)
Equity adjustments...... (1,989) 0 0 (1,989) 0 0 (1,989)
-------- ------- -------- -------- -------- -------- --------
Total stockholders' eq-
uity.................. 286,912 (40,566) 71,381 317,727 51,996 (13,385) 356,338
-------- ------- -------- -------- -------- -------- --------
Total liabilities and
stockholders' equity.. $529,403 $37,314 $ 60,372 $627,089 $117,427 $ (4,362) $740,154
======== ======= ======== ======== ======== ======== ========
</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 Agreement.
(b) Reflects borrowings on NDC's line of credit to fund the cash portion of the
purchase price for the Source Transactions ($38.25 million) and the payment
of estimated acquisition costs for the Source Transactions of $4 million
less the portion paid out of operating cash of $13.2 million.
(c) Reflects the repayment and/or forgiveness of all Source/PMSI intercompany
and affiliate accounts.
(d) Reflects the excess of the purchase price over the net assets (liabilities)
acquired in the acquisitions, net of a projected non-recurring charge based
on preliminary results of a valuation study of approximately $67 million
($60.6 million after-tax) related to purchased in-process research and
development. This charge relates entirely to the operations of Source U.S.
Based on the allocation model of
D-2
<PAGE>
Source U.S. operations (76% to Source and 24% to PMSI), approximately $51
million of the charge can be attributable to Source and $16 million to
PMSI. The purchase price equals $92 million and $48 million for Source and
PMSI Database, respectively, based on 1,555,556 shares for Source and
1,059,829 shares for PMSI Database at a $37.40 per share stock price plus
$31.8 million and $6.5 million of cash for Source and PMSI Database,
respectively, and $4 million in acquisition related expenses. Approximately
$5.5 million in net liabilities are assumed to be acquired in the purchase
of Source. Approximately $4.7 million of assets are assumed to be acquired
in the purchase of PMSI Database. The intangibles and the related lives
based on the preliminary results of the valuation study are as follows:
<TABLE>
<S> <C> <C>
Product technology................................ $17.3 million 5 years
Assembled work force.............................. 3.0 7
Customer relations/Goodwill....................... 53.5 20
</TABLE>
The respective breakdown of the above identified components of the
intangible asset can be attributed 76% to Source and 24% to PMSI based upon
the aforementioned allocation model.
(e) Reflects (1) the issuance of 1,555,556 (including 455,840 escrowed shares)
and 1,059,829 shares of NDC Common Stock to Source and PMSI Database,
respectively, in accordance with the terms of the Source Transactions and
(2) the elimination of Source and PMSI Database's historical equity
balances.
(f) Reflects the issuance of approximately 4,234,164 shares of NDC Common
Stock in exchange for the outstanding shares of PSS Common Stock, assuming
the Exchange Ratio.
(g) The pro forma condensed statements of operations do not reflect non-
recurring costs resulting from the Merger. The management of NDC estimates
that the direct out-of-pocket costs associated with the Merger, consisting
primarily of investment banking and other professional fees, will
approximate $9.0 million and will be charged to operations in the quarter
in which the Merger is consummated. These costs are considered capital
transactions for tax purposes and, accordingly, no tax benefit has been
reflected. The amount excludes all other costs to merge the two companies.
Following the closing of the Merger, NDC expects to take a charge for
these other Merger-related costs. This estimated expense has been charged
to retained earnings in the accompanying pro forma balance sheet.
(h) Reflects the adjustment necessary to conform NDC's accrual method of
revenue recognition for contingent billings related to its commercial care
and managed care audit businesses to the method utilized by PSS for
certain of its clients, where revenues are recognized upon collection of
the clients' accounts receivables, and the associated tax benefits.
(i) The dilution in earnings per share reflects the seasonality of the Source
US business.
D-3
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SOURCE/PMSI
DATABASE
NDC COMBINED PRO FORMA PRO FORMA PSS PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(A) CONSOLIDATED(A) HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ----------- -------------- --------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $120,102 $21,535 $ 0 $141,637 $28,996 $(243)(h) $170,390
Cost of service......... 58,970 5,298 1,641 (b) 65,909 16,360 0 82,269
Sales, general and
administrative......... 41,499 15,173 0 56,672 9,057 0 65,729
-------- ------- ------- -------- ------- ----- --------
100,469 20,471 1,641 122,581 25,417 0 147,998
-------- ------- ------- -------- ------- ----- --------
Operating income........ 19,633 1,064 (1,641) 19,056 3,579 (243) 22,392
Other income (expense):
Interest and other
income................ 485 98 (172)(c) 411 0 0 411
Interest and other
expense............... (2,314) (266) (292)(d) (2,872) (756) 0 (3,628)
Minority interest...... (701) 0 0 (701) 0 0 (701)
-------- ------- ------- -------- ------- ----- --------
Total other income
(expense)........... (2,530) (168) (464) (3,162) (756) 0 (3,918)
-------- ------- ------- -------- ------- ----- --------
Income from continuing
operations before
income taxes........... 17,103 896 (2,105) 15,894 2,823 (243) 18,474
Provision for income
taxes.................. 6,499 277 (388)(e) 6,388 1,185 (92)(e) 7,481
-------- ------- ------- -------- ------- ----- --------
Income from continuing
operations............. $ 10,604 $ 619 $(1,717) $ 9,506 $ 1,638 $(151) $ 10,993
======== ======= ======= ======== ======= ===== ========
Fully diluted weighted
average number of
common and common
equivalent shares
outstanding............ 28,201 2,615 (f) 30,816 4,234 (g) 35,050
Income from continuing
operations per
share(i)............... $ 0.38 $ 0.31 $ 0.31
</TABLE>
- --------
Adjustments:
(a) Excludes the impact of the non-recurring charge related to purchased in-
process research and development costs of $67.0 million or $(2.17) per
share. This charge relates entirely to the operations of Source U.S. Based
on the allocation model of Source U.S. operations (76% to Source and 24%
to PMSI), approximately $51 million of the charge can be attributable to
Source and $16 million to PMSI.
(b) Reflects the additional amortization of intangibles resulting from the
Source Transactions. See Note (d) to the Pro Forma Condensed Consolidated
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 Source Transactions. See Note
(b) to the Pro Forma Condensed Consolidated Balance Sheet for further
discussion.
(d) Represents additional interest expense on the borrowings on NDC's line of
credit in conjunction with the Source Transactions, 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 and
Note (h) below.
(f) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC Common Stock to Source and PMSI Database,
respectively, pursuant to the Source Transactions.
(g) Reflects the issuance of 4,234,164 shares of NDC Common Stock in exchange
for the outstanding shares of PSS Common Stock, assuming the Exchange
Ratio is 0.435.
(h) Reflects the adjustment necessary to conform NDC's accrual method of
revenue recognition for contingent billings related to its commercial care
and managed care audit businesses to the method utilized by PSS for
certain of its clients, where revenues are recognized upon collection of
the clients' accounts receivables, and the associated tax benefits.
D-4
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MAY 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EQUIFAX
HEALTH EDI
SOURCE/PMSI 4 MONTHS
DATABASE ENDED
NDC COMBINED SEPTEMBER 30, PRO FORMA PRO FORMA PSS PRO FORMA PRO FORMA
HISTORICAL HISTORICAL 1997 ADJUSTMENTS(A) CONSOLIDATED(A) HISTORICAL(J) ADJUSTMENTS CONSOLIDATED
---------- ----------- ------------- -------------- --------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $433,860 $84,894 $4,851 $ 0 $523,605 $105,119 $(1,862)(h) $626,862
Cost of service.. 207,754 27,034 2,218 6,564 (b) 243,570 64,225 0 307,795
Sales, general
and
administrative.. 159,450 45,262 2,262 0 206,974 35,177 0 242,151
Non-recurring
charges......... 0 0 0 0 0 9,503 (9,503)(i) 0
-------- ------- ------ ------- -------- -------- ------- --------
367,204 72,296 4,480 6,564 450,544 108,905 (9,503) 549,946
-------- ------- ------ ------- -------- -------- ------- --------
Operating in-
come............ 66,656 12,598 371 (6,564) 73,061 (3,786) 7,641 76,916
Other income (ex-
pense):
Interest and
other income... 2,403 871 0 (688)(c) 2,586 323 0 2,909
Interest and
other expense.. (6,814) (1,128) 0 (1,191)(d) (9,133) (2,577) 0 (11,710)
Minority
interest....... (1,694) 0 0 0 (1,694) 0 0 (1,694)
-------- ------- ------ ------- -------- -------- ------- --------
Total other
income
(expense)....... (6,105) (257) 0 (1,879) (8,241) (2,254) 0 (10,495)
-------- ------- ------ ------- -------- -------- ------- --------
Income from
continuing
operations
before income
taxes........... 60,551 12,341 371 (8,443) 64,820 (6,040) 7,641 66,421
Provision for
income taxes.... 21,798 2,333 141 (1,562)(e) 22,710 1,139 (315)(e) 23,534
-------- ------- ------ ------- -------- -------- ------- --------
Income from
continuing
operations...... $ 38,753 $10,008 $ 230 $(6,881) $ 42,110 $ (7,179) $ 7,956 $ 42,887
======== ======= ====== ======= ======== ======== ======= ========
Fully diluted
weighted average
number of common
and common
equivalent
shares
outstanding..... 28,039 2,615 (f) 30,654 4,234 (g) 34,888
Income from
continuing
operations per
share........... $ 1.38 $ 1.37 $ 1.23
</TABLE>
- -------
Adjustments:
(a) Excludes the impact of the non-recurring charge related to purchased in-
process research and development costs of $67.0 million, or $(2.19) per
share. This charge relates entirely to the operations of Source U.S. Based
on the allocation model of Source U.S. operations (76% to Source and 24%
to PMSI), approximately $51 million of the charge can be attributable to
Source and $16 million to PMSI.
(b) Reflects the amortization of intangibles resulting from the Source
Transactions. See Note (d) to the Pro Forma Condensed Consolidated 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 Source Transactions. See Note
(b) to the Pro Forma Condensed Consolidated Balance Sheet for further
discussion.
(d) Represents additional interest expense on the borrowings on NDC's line of
credit, in conjunction with the Source Transactions, 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 and
Notes (h) and (i).
(f) Reflects the issuance of 1,555,556 (including 455,840 escrowed shares) and
1,059,829 shares of NDC Common Stock to Source and PMSI Database,
respectively, in accordance with the terms of the Source Transactions .
(g) Reflects the issuance of 4,234,164 shares of NDC Common Stock in exchange
for the outstanding shares of PSS Common Stock, assuming the Exchange
Ratio is 0.435.
(h) Reflects the adjustment necessary to conform NDC's accrual method of
revenue recognition for contingent billings related to its commerical care
and managed care audit businesses to the method utilized by PSS for
certain of its clients, where revenues are recognized upon collection of
the clients' accounts receivables, and the associated tax benefits.
(i) Reflects the elimination of non-recurring charges of approximately $9.5
million related to PSS merger costs, restructuring charges and the write-
off of certain impaired identifiable intangible assets and goodwill.
(j) Assumes that all business acquisitions consummated subsequent to June 1,
1994 occurred on June 1, 1994.
D-5
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MAY 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NDC HISTORICAL PSS HISTORICAL(F) ADJUSTMENTS CONSOLIDATED
-------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues................ $325,803 $96,237 $ (364)(b) $421,676
Cost of service......... 163,323 62,991 0 226,314
Sales, general and ad-
ministrative........... 130,246 33,727 0 163,973
Non-recurring charges... 44,068 3,650 (47,718)(c)(d) 0
-------- ------- ------- --------
337,637 100,368 (47,718) 390,287
-------- ------- ------- --------
Operating income
(loss)................. (11,834) (4,131) 47,354 31,389
Other income (expense):
Interest and other
income............... 4,476 789 0 5,265
Interest and other
expense.............. (3,750) (3,377) 0 (7,127)
Minority interest..... (628) 0 0 (628)
-------- ------- ------- --------
Total other income
(expense).......... 98 (2,588) 0 (2,490)
-------- ------- ------- --------
Income from continuing
operations before
income taxes........... (11,736) (6,719) 47,354 28,899
Provision for income
taxes.................. (3,278) (2,227) 16,103 (e) 10,598
-------- ------- ------- --------
Income (loss) from
continuing operations.. $ (8,458) $(4,492) $31,251 $ 18,301
======== ======= ======= ========
Fully diluted weighted
average number of
common and common
equivalent shares
outstanding............ 27,189 4,234 (a) 31,423
Income (loss) from
continuing operations
per share.............. $ (0.31) $ 0.58
</TABLE>
- --------
Adjustments:
(a) Reflects the issuance of 4,234,164 of NDC Common Stock, in exchange for
the outstanding shares of PSS Common Stock, assuming the Exchange Ratio is
0.435.
(b) Reflects the adjustment necessary to conform NDC's accrual method of
revenue recognition for contingent billings related to its commercial care
and managed care audit businesses to the method utilized by PSS for
certain of its clients, where revenues are recognized upon collection of
the clients' accounts receivables, and the associated tax benefits.
(c) Reflects the elimination of non-recurring charges of approximately $44.1
million related to NDC merger costs and restructuring charges.
(d) Reflects the elimination of non-recurring charges of approximately $3.7
million related to PSS merger costs and restructuring charges.
(e) Reflects the income tax effects of the pro forma adjustments above.
(f) Assumes that all business acquisitions consummated subsequent to June 1,
1994 occurred on June 1, 1994.
D-6
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MAY 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NDC HISTORICAL PSS HISTORICAL(D) ADJUSTMENTS CONSOLIDATED
-------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues................ $278,083 $85,963 $(751)(b) $ 363,295
Cost of service......... 153,410 55,768 0 209,178
Sales, general and ad-
ministrative........... 96,247 29,437 0 125,684
-------- ------- ----- ---------
249,657 85,205 0 334,862
-------- ------- ----- ---------
Operating income........ 28,426 758 (751) 28,433
Other income (expense):
Interest and other
income............... 2,079 296 0 2,375
Interest and other
expense.............. (2,635) (3,489) 0 (6,124)
Minority interest..... (393) 0 0 (393)
-------- ------- ----- ---------
Total other income
(expense).......... (949) (3,193) 0 (4,142)
-------- ------- ----- ---------
Income from continuing
operations before
income taxes........... 27,477 (2,435) (751) 24,291
Provision for income
taxes.................. 9,056 (974) (285)(c) 7,797
-------- ------- ----- ---------
Income (loss) from
continuing operations.. $ 18,421 $(1,461) $(466) $ 16,494
======== ======= ===== =========
Fully diluted weighted
average number of
common and common
equivalent shares
outstanding............ 28,039 4,234 (a) 32,273
Income from continuing
operations per share... $ 0.79 $ 0.51
</TABLE>
- --------
Adjustments:
(a) Reflects the issuance of 4,234,164 of NDC Common Stock, in exchange for
the shares of PSS Common Stock, assuming the Exchange Ratio is 0.435.
(b) Reflects the adjustment necessary to conform NDC's accrual method of
revenue recognition for contingent billings related to its commercial care
and managed care audit businesses to the method utilized by PSS for
certain of its clients, where revenues are recognized upon collection of
the clients' accounts receivables, and the associated tax benefits.
(c) Reflects the income tax effects of the pro forma adjustments above.
(d) Assumes that all business acquisitions consummated subsequent to June 1,
1994 occurred on June 1, 1994.
D-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Bylaws provide for indemnification of directors and
officers of the Registrant to the full extent permitted by Delaware law.
Section 145 of the General Corporation Law of the State of Delaware provides
generally that a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at its request in
such capacity in another corporation or business association, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
In addition, pursuant to the authority of Delaware law, the Certificate of
Incorporation of the Registrant also eliminates the monetary liability of
directors to the fullest extent permitted by Delaware law. Although the
Certificate of Incorporation of the Registrant does not specifically address
indemnification of directors for liabilities arising under federal securities
laws, indemnification, and any limitations 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.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 14, 1997, by and
among NDC, PSS, and Sub (included in Annex A to the Proxy
Statement/Prospectus and incorporated by reference herein). Pursuant
to the regulations under the Securities Act of 1933, as amended (the
"Regulations"), the Registrant has omitted all schedules and similar
attachments to the Merger Agreement. The Registrant agrees to furnish
upon the request of the Commission and in accordance with the
Regulations, copies of all such schedules and similar attachments.
3.1 Certificate of Incorporation, as amended (included as Exhibit 4(a) to
the Registrant's Registration Statement on Form S-8 (Registration No.
333-05427), previously filed with the Commission and incorporated by
reference herein)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant, dated October 28, 1996 (filed as Exhibit 3.1 to the
Registrant's Current Report on Form 8-K dated October 29, 1996, file
No. 001-12392, and incorporated herein by reference)
3.3 Amended Certificate of Designations of the Registrant, dated October
28, 1996 (filed as Exhibit 3.2 to the Registrant's Current Report on
Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated
herein by reference).
3.4 Bylaws, as amended (included as Exhibit 3(ii) to the Registrant's Form
10-K for the fiscal year ended May 31, 1991, previously filed with the
Commission and incorporated by reference herein)
3.5 Amendment to Bylaws (included as Exhibit 3(iii) to the Registrant's
Form 10-K for the fiscal year ended May 31, 1996, previously filed
with the Commission and incorporated by reference herein)
4.1 See Exhibits 3.1 through 3.5 for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining rights of holders
of Common Stock of the Registrant
4.2 Rights Agreement (included as Exhibit 1 to the Registrant's Form 8-A
filed with the Commission on January 22, 1991, as amended on October
5, 1993 (file No. 001-12392) and incorporated by reference herein)
5.1 Opinion of Alston & Bird LLP
8.1 Tax Opinion of Alston & Bird LLP
8.2 Tax Opinion of Howard, Darby & Levin
11.1 Statement regarding computation of per share earnings (included as
Exhibit 11 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)
21 Subsidiaries of the Registrant (included as Exhibit 21 to the
Registrant's Form 10-K for the fiscal year ended May 31, 1997,
previously filed with the Commission and incorporated by reference
herein).
23.1 Consent of Alston & Bird LLP (included in Exhibits 5.1 and 8.1 hereto)
23.2 Consent of Howard, Darby & Levin (included in Exhibit 8.2 hereto)
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Deloitte & Touche LLP
24.1 Powers of Attorney (included on signature page hereof)
99.1 Form of Proxy for PSS Common Stock
</TABLE>
II-2
<PAGE>
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;"
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-3
<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, therefor,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment for the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on November 12, 1997.
National Data Corporation
/s/ Robert A. Yellowlees
By: _________________________________
ROBERT A. YELLOWLEES
CHAIRMAN OF THE BOARD
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Robert A. Yellowlees and E. Michael Ingram, and
either of them (with full power in each to act alone), as true and lawful
attorneys-in-fact, with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any amendments to this
Registration Statement and to file the same, with all exhibits thereto and
other documents in connection therewith, including a Registration Statement
filed under Rule 462(b) of the Securities Act of 1933, as amended, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes may lawfully do or
cause to be done by virtue thereof on November 12, 1997.
SIGNATURE TITLE
/s/ Robert A. Yellowlees Chairman of the Board and
- ------------------------------------- Chief Executive Officer
ROBERT A. YELLOWLEES (principal executive
officer)
/s/ M. P. Stevenson Chief Financial Officer
- ------------------------------------- (principal financial and
M. P. STEVENSON accounting officer)
/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
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------- DESCRIPTION OF EXHIBITS
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 14, 1997, by and among
NDC, PSS, and Sub (included in Annex A to the Proxy Statement/Prospectus
and incorporated by reference herein). Pursuant to the regulations under
the Securities Act of 1933, as amended (the "Regulations"), the
Registrant has omitted all schedules and similar attachments to the
Merger Agreement. The Registrant agrees to furnish upon the request of
the Commission and in accordance with the Regulations, copies of all such
schedules and similar attachments (included in Annex A to the Proxy
Statement/ Prospectus and incorporated by reference herein).
3.1 Certificate of Incorporation, as amended (included as Exhibit 4(a) to the
Registrant's Registration Statement on Form S-8 (Registration No. 333-
05427), previously filed with the Commission and incorporated by
reference herein)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant, dated October 28, 1996 (filed as Exhibit 3.1 to the
Registrant's Current Report on Form 8-K dated October 29, 1996, file
No. 001-12392, and incorporated herein by reference).
3.3 Amended Certificate of Designations of the Registrant, dated October 28,
1996 (filed as Exhibit 3.2 to the Registrant's Current Report on Form 8-K
dated October 29, 1996, file No. 001-12392, and incorporated herein by
reference).
3.4 Bylaws, as amended (included as Exhibit 3(ii) to the Registrant's Form
10-K for the fiscal year ended May 31, 1991, previously filed with the
Commission and incorporated by reference herein)
3.5 Amendment to Bylaws (included as Exhibit 3(iii) to the Registrant's Form
10-K for the fiscal year ended May 31, 1996, previously filed with the
Commission and incorporated by reference herein)
4.1 See Exhibits 3.1 through 3.5 for provisions of the Certificate of
Incorporation and Bylaws of the Registrant defining rights of holders of
Common Stock of the Registrant
4.2 Rights Agreement (included as Exhibit 1 to the Registrant's Form 8-A
filed with the Commission on January 22, 1991, as amended on October 5,
1993 (file No. 001-12392) and incorporated by reference herein)
5.1 Opinion of Alston & Bird LLP
8.1 Tax Opinion of Alston & Bird LLP
8.2 Tax Opinion of Howard, Darby & Levin
11.1 Statement regarding computation of per share earnings (included as
Exhibit 11 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)
21 Subsidiaries of the Registrant (included as Exhibit 21 to the
Registrant's Form 10-K for the fiscal year ended May 31, 1997, previously
filed with the Commission and incorporated by reference herein).
23.1 Consent of Alston & Bird LLP (included in Exhibits 5.1 and 8.1 hereto)
23.2 Consent of Howard, Darby & Levin (included in Exhibit 8.2 hereto)
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Deloitte & Touche LLP
24.1 Powers of Attorney (included on signature page hereof)
99.1 Form of Proxy for PSS Common Stock
</TABLE>
<PAGE>
Exhibit 5.1
[LETTERHEAD OF ALSTON & BIRD LLP APPEARS HERE]
November 12, 1997
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329-2010
Re: Registration Statement on Form S-4 Covering a
Maximum of 4,234,164 Shares of Common Stock
-------------------------------------------
Ladies and Gentlemen:
This opinion is being rendered in connection with that certain Agreement
and Plan of Merger, dated as of October 14, 1997 (the "Merger Agreement"), by
and among National Data Corporation (the "Company"), Universal Acquisition
Corp., and Physician Support Systems, Inc., in which the Company will issue up
to 4,234,164 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 November 13, 1997.
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
Merger 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 8.1
[LETTERHEAD OF ALSTON & BIRD LLP APPEARS HERE]
November 7, 1997
National Data Corporation
National Data Corporation Plaza
Atlanta, Georgia 30329-2010
Re: Agreement and Plan of Merger by and Between National Data
Corporation, Universal Acquisition Corp., and Physician Support
Systems, Inc.
-------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to National Data Corporation ("NDC"), a
corporation organized and existing under the laws of the State of Delaware, in
connection with the proposed merger of Universal Acquisition Corp., a wholly-
owned subsidiary of NDC ("Sub"), with and into Physician Support Systems, Inc.
("PSS"), a corporation organized and existing under the laws of the State of
Delaware, with PSS as the surviving corporation (the "Merger"). The Merger will
be effected pursuant to the Agreement and Plan of Merger among NDC, Sub, and PSS
dated as of October 14, 1997 (the "Agreement"). In our capacity as counsel to
NDC, our opinion has been requested with respect to the accuracy of the material
under the heading "Certain Federal Income Tax Consequences" in the registration
statement on Form S-4 to be filed by NDC on November 13, 1997, with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
(the "Registration Statement").
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
examined such documents as we have deemed appropriate, including the Agreement
and the Registration Statement. In our examination of such documents, we have
assumed, with your consent, that all documents submitted to us as photocopies
faithfully reproduce the originals thereof, that such originals are authentic,
that all such documents have been or will be duly executed to the extent
required, and that all statements set forth in such documents are accurate.
<PAGE>
National Data Corporation
November 7,1997
Page 2
We have participated in the preparation of the material under the
heading "Certain Federal Income Tax Consequences" of the Registration Statement
and, assuming the Merger will be consummated in accordance with the terms of the
Agreement and will be valid under applicable Delaware law, we are of the opinion
that the federal income tax treatment described under such heading of the
Registration Statement is accurate in all material respects.
The opinion expressed herein is based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined. Our opinion cannot be relied upon if any of the facts
contained in such documents or if such additional information is, or later
becomes, inaccurate, or if any of the statements set out herein is, or later
becomes, inaccurate. Finally, this opinion is furnished only to you, is solely
for your use in connection with the Registration Statement, and is limited to
the specific matters covered hereby.
We hereby consent to the use of this opinion and to the references made
to the firm under the heading "Certain Federal Income Tax Consequences" and
"Legal Matters" in the Proxy Statement/Prospectus constituting part of the
Registration Statement.
Very truly yours,
ALSTON & BIRD
By: /s/ Pinney L. Allen
-------------------
Pinney L. Allen
PLA: mmh
<PAGE>
EXHIBIT 8.2
[Letterhead of Howard, Darby & Levin Appears Here]
November 12, 1997
Physician Support Systems, Inc.
Route 230 and Eby-Chiques Road
Mt Joy, Pennsylvania 17552
Ladies and Gentlemen:
We have acted as counsel to Physician Support Systems, Inc., a Delaware
corporation ("PSS"), in connection with the Agreement and Plan of Merger, dated
as of October 14, 1997 (the "Merger Agreement"), by and among National Data
Corporation, a Delaware corporation ("NDC"), Universal Acquisition Corp., a
Delaware corporation and a subsidiary of NDC ("Sub"), and PSS, pursuant to which
Sub will be merged with and into PSS with PSS being the surviving corporation
and a subsidiary of NDC (the "Merger").
In connection with this opinion, we have examined the Merger Agreement, the
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission with respect to, among other things, the shares of common stock of
NDC, par value $.125 per share, to be issued in connection with the Merger (the
"Registration Statement"), and such other documents and corporate records as
we have deemed necessary or appropriate for purposes of this opinion. In
addition we have assumed that the Merger will be consummated as described in the
Registration Statement and in accordance with the terms of the Merger Agreement.
Based upon the foregoing, and assuming that the Merger is a valid merger under
applicable Delaware law, we confirm our opinion set forth under the heading
"Certain Federal Income Tax Consequences" in the Registration Statement, subject
to the qualifications in the first and second paragraphs under that heading.
<PAGE>
Physician Support Systems, Inc.
November 12, 1997
Page 2
We hereby consent to the use of our name in the Registration Statement
and to the filing of this letter as an exhibit to the Registration Statement. In
giving this consent, however, we do not hereby admit that we are in the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 and the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Howard, Darby & Levin
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent 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 our report
dated September 5, 1997 included in National Data Corporation's Registration
Statement No. 333-35995 and to all references to our firm included in, or made
a part of, this registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
November 10, 1997
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
To the Board of Directors and Shareholders of Physician Support Systems, Inc.:
We consent to the incorporation by references in this Registration Statement of
National Data Corporation on Form S-4 of our report dated March 20, 1997 as to
the Physician Support Systems, Inc. consolidated financial statements appearing
in the Annual Report on Form 10-K of Physician Support Systems, Inc. for the
year ended December 31, 1996, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
New York, New York
November 10, 1997
<PAGE>
LOGO
PHYSICIAN SUPPORT SYSTEMS, INC.
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PHYSICIAN
SUPPORT SYSTEMS, INC. FOR THE SPECIAL MEETING ON , 1997
The undersigned appoints Peter W. Gilson, Hamilton F. Potter III and David S.
Geller, and each of them, with full power of substitution in each, the proxies
of the undersigned, to represent the undersigned and vote all shares of
Physician Support Systems, Inc. Common Stock which the undersigned may be
entitled to vote at the Special Meeting of Stockholders to be held on
, 1997, and at any adjournment or postponement thereof, as indicated on the
reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL NOT BE VOTED EVEN IF THE PROXY IS SIGNED BY YOU AND RETURNED. PLEASE BE
SURE TO INDICATE VOTING INSTRUCTIONS ON REVERSE SIDE OF CARD.
(Continued, and to be signed and dated on the reverse side.)
PHYSICIAN SUPPORT SYSTEMS, INC.
P.O. BOX 11286
NEW YORK, N.Y. 10203-0286
<PAGE>
1. To approve and adopt the Agreement and Plan of Merger, dated as of October
14, 1997, among Physician Support Systems, Inc., National Data Corporation
("NDC") and Universal Acquisition Corp., a wholly owned subsidiary of NDC.
FOR [_] AGAINST [_] ABSTAIN [_]
THIS PROXY WILL NOT BE VOTED AND WILL HAVE NO EFFECT ON THE OUTCOME OF THE VOTE
UNLESS YOU MARK ONE OF THE BOXES ABOVE.
In their discretion the Proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment or postponement
thereof.
CHANGE OF ADDRESS AND/OR COMMENTS
MARK HERE [_]
THE SIGNATURE ON THIS PROXY SHOULD
CORRESPOND EXACTLY WITH
STOCKHOLDER'S NAME AS PRINTED TO
THE LEFT. IN THE CASE OF JOINT
TENANCIES, CO-EXECUTORS, OR CO-
TRUSTEES, BOTH SHOULD SIGN. PERSONS
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, OR GUARDIAN SHOULD
GIVE THEIR FULL TITLE.
DATED: _____________________________
------------------------------------
Signature
------------------------------------
Signature
VOTES MUST BE INDICATED (X) IN
BLACK OR BLUE INK
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED PREPAID ENVELOPE.
