10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2002

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission File No. 001-12392

NDCHealth Corporation

(Exact name of registrant as specified in its charter)

Delaware	58-0977458
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

NDC Plaza Atlanta, Georgia	30329-2010
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:    (404) 728-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, Par Value $.125 Per Share	New York Stock Exchange
Series A Junior Participating Preferred Stock Purchase Rights	New York Stock Exchange
5% Convertible Subordinated Notes due 2003	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    X    No          .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

The aggregate market value of the voting stock held by non-affiliates of the registrant was $704,973,267 based upon the last reported sale price on The New York Stock Exchange on August 20, 2002 using beneficial ownership of stock rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting stock owned by all directors and officers of the registrant, some of whom may not be held to be affiliates upon judicial determination.

The number of shares of the registrant’s common stock, par value $.125, outstanding as of August 20, 2002 was 34,695,313 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Document	Form 10-K
Portions of the Company’s Definitive Proxy Statement relating to the 2002 Annual Meeting of Stockholders to be held on October 24, 2002	Part III

NDCHEALTH CORPORATION

2002 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

		Page
Special Cautionary Notice Regarding Forward Looking Statements		2
Part I
Item 1.	Business	3
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Submission of Matters to a Vote of Security Holders Executive Officers of the Registrant	16
	Executive Officers of the Registrant	17
Part II
Item 5.	Market For Registrant’s Common Equity and Related Stockholder Matters	18
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	105
Part III
Item 10.	Directors and Executive Officers of the Registrant	106
Item 11.	Executive Compensation	106
Item 12.	Security Ownership of Certain Beneficial Owners and Management	106
Item 13.	Certain Relationships and Related Transactions	106
Part IV
Item 14.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	107
Signatures		114
Index to Exhibits		116

SPECIAL CAUTIONARY NOTICE REGARDING

FORWARD LOOKING STATEMENTS

When used in this report, the exhibits hereto, in documents incorporated herein and elsewhere by management of NDCHealth Corporation, the words “believes,” “anticipates,” “expects,” “intends,” “plans” and similar expressions and statements that are necessarily dependent on future events are intended to identify forward-looking statements concerning the Company’s business operations, economic performance and financial condition. These include, but are not limited to, statements regarding the Company’s business strategy and means to implement the strategy, the Company’s objectives, future capital expenditures, sources and cost of future financing, the effective tax rate, the likelihood of the Company’s success in developing and introducing new products and expanding its business, the timing of the introduction of new and modified products or services, the ability to consummate and integrate acquisitions, and the expected benefits and prospects for acquisitions and alliances. For such statements, the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 is applicable and invoked. Such statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, uncertainties and contingencies that are subject to change. Actual revenues, revenue growth and margins will be dependent upon all such factors and results subject to risks related to the performance of our various investments and alliances, including MedUnite, estimates of the valuation of these investments, the application of accounting standards, the implementation of changes by the Company, the failure to implement changes, customer acceptance of such changes or lack of change and the availability and cost of necessary financing. Actual results of events could differ materially from those anticipated in the Company’s forward-looking statements as a result of a variety of factors, including: (a) those set forth under the caption “Additional Factors That May Affect Future Performance” in Item 7 of this report; (b) those set forth elsewhere herein; (c) those set forth from time to time in the Company’s press releases and reports and other filings made with the Securities and Exchange Commission; and (d) those set forth from time to time in the Company’s analyst calls and discussions. In addition, the Company is currently unable to assess the impact, if any, on its financial performance that may result from the economic effects of the September 11, 2001 or any future terrorist attacks on the United States. The Company cautions that such factors are not exclusive. Consequently, all of the forward-looking statements made herein are qualified by these cautionary statements and readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update forward-looking or other statements or to publicly release the results of any revisions of such forward-looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of unanticipated events.

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PART I

Item 1.     BUSINESS

General

NDCHealth Corporation is a leading healthcare information services company that services pharmacies, hospitals, physicians, payers, and pharmaceutical manufacturers. It is a Delaware corporation incorporated in 1967. On October 25, 2001, our stockholders adopted a proposal to change our name from National Data Corporation to NDCHealth Corporation to create a strong brand identity in the healthcare marketplace.

Since the spin-off of Global Payments Inc. on January 31, 2001, we have operated solely as a network based healthcare information company. We are a leading provider of value-added electronic health information processing services for pharmacy, pharmaceutical manufacturer, hospital, physician, and payer markets. Today, NDCHealth is connected to over 90% of U.S. and Canadian pharmacies, more than 25% of the nation’s hospitals and over 1,000 healthcare payers. We provide services to more than 100 pharmaceutical manufacturers and have sold systems to more than 100,000 physicians and more than 25% of U.K. pharmacies. We are in the early phases of expanding internationally by establishing information services businesses in Germany and the United Kingdom. We believe that our connectivity and relationships across multiple segments of healthcare (pharmacy, pharmaceutical manufacturers, hospitals, physicians, payers, and distributors) positions us to provide integrated information solutions to improve the efficiency and effectiveness of healthcare.

As an integrated health information company, we are a leader in providing automated financial, administrative, and selective clinical healthcare transactions and in delivering innovative information solutions that generate value for our customers. We are executing a business strategy to evolve a value added intelligent network and information products provider to an integrated healthcare information solutions company. Our strategy is to continue to expand our markets connectivity and add new application content as we offer our customers high quality, quantifiable value-added information solutions in healthcare. We seek to achieve this strategy by leveraging the assets of our two business segments, Network Services and Systems and Information Management, and growing a sustainable business model with a consistent base of recurring revenues.

Our NDCHealth Intelligent Network is the cornerstone of our Network Services and Systems segment and transmits information from healthcare providers such as physicians, hospitals and pharmacies to third party payers including private insurance carriers, managed care organizations and government programs for reimbursement. We also link pharmaceutical manufacturers and wholesalers with providers and payers. We offer information processes including claims submission and adjudication, customized validation and proprietary message editing, eligibility verification, remittance advice, referral authorization, prescription ordering, and refill authorization. Our point-of-service systems in pharmacies, hospitals, and physician offices are the entry and exit points for information to and from our

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NDCHealth Intelligent Network. Through our network, we are partnering with our customers to improve efficiency and effectiveness in healthcare. Some examples include: real time eligibility verification, drug formulary and inventory management, and facilitation of prompt payment for products and services.

Our Information Management segment provides customers with solutions from our NDCHealth Information Repository, a database of healthcare business information which includes pharmaceutical distribution, pharmaceutical sales, and medical services information. We transform this large volume of drug sales, prescribing physician, and de-identified patient data into information solutions that can help our customers better analyze their markets, more effectively develop and position their product offerings, and ultimately better understand the effectiveness of drug therapies.

The integrated information solutions that we provide from our Network Services and Systems and Information Management segments enable us to partner with our customers to improve business performance and to enhance the quality of patient care. Our applications help customers better manage revenue and accelerate cash flow, reduce overhead costs, react quickly to changing market conditions, improve business operations and streamline administrative processes. Our integrated business model generates revenue consisting of recurring transaction processing fees, recurring maintenance and support fees, information management subscription fees, consulting services and software license revenue.

We believe that the healthcare market offers attractive opportunities for continued growth. As we execute our strategy, we seek to increase both our penetration of existing markets and to enter new, related markets through the development of new integrated information solutions. Additionally, we are expanding our distribution channels and, where appropriate, partnering with other companies with complementary products, services, development, and/or distribution capabilities to achieve our vision of being the leading integrated health information company.

Acquisitions, Investments and Strategic Alliances

From time to time, we have made acquisitions and investments and entered into strategic alliances in an effort to obtain a competitive advantage or an expanded presence in targeted markets.

During July 2001, in exchange for the assets of our physician network services business, we received an equity interest and became an investor in MedUnite, Inc. along with the following leading U.S. health insurance companies: Aetna, Anthem, CIGNA, Health Net, Oxford, PacifiCare, and Wellpoint Health Networks. MedUnite offers a nationwide EDI-based transaction system to connect providers and payers. We exclusively market MedUnite’s physician network services to customers who use our practice management systems. As a provider of physician practice management software, our objective in our alliance with MedUnite is to provide additional application capabilities for our physician customers.

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We continue to believe that our relationship with MedUnite provides important strategic value to NDCHealth. We believe that a recapitalized MedUnite will continue to offer us the ability to provide the additional application capabilities of MedUnite’s physician network services to our physician customers. Additionally, we continue to believe there is the potential to increase the number of U.S. physicians who submit claims electronically and that such an increase should allow us to receive a growing revenue stream from our association with MedUnite.

During the third quarter of fiscal year 2002, we entered into a joint venture with Cegedim, S. A. to create Infopharm Limited. Infopharm was created with the combination of NDC Pharma Services, Ltd., our United Kingdom informatics business, and Cegedim’s Infosante subsidiary, also a United Kingdom informatics business. Infopharm is headquartered in the United Kingdom and provides sales and marketing information services to U.K. pharmaceutical companies.

In May 2002, we acquired a controlling interest in TechRx Incorporated. TechRx is a leading provider of pharmacy software that automates the prescription fulfillment process. TechRx systems provide pharmacy customers with an integrated solution for in-store operations, centralized processing and connectivity to payers and physicians.

We were formerly a minority shareholder in TechRx and in the fourth quarter of fiscal 2002 entered into an Agreement and Plan of Merger under which we agreed to acquire the remaining stock in a two-step transaction. Under the first step, we acquired a controlling interest through the purchase of additional common stock and the conversion of non-voting convertible preferred stock for an additional investment in TechRx common stock of approximately $51.0 million. Under the second step, which would close in the fourth quarter of fiscal 2003, if certain conditions are met, we will acquire the remaining shares in TechRx from minority shareholders. The amount of the purchase price will be determined based upon the satisfaction of certain financial and operational milestones by TechRx and is expected to be in the range of $100 million to $200 million.

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Also in May 2002, we acquired selected ScriptLINE assets from Arclight Systems, LLC. ScriptLINE provides value-added edits for healthcare claims which enhance the profitability of pharmacies. ScriptLINE complements our existing pharmacy network services business and expands the comprehensive suite of edits available to customers. We intend to integrate ScriptLINE into our existing pharmacy network platform to provide for efficient processing, customer support and product development operations.

In conjunction with the acquisition of the ScriptLINE assets, we entered into a strategic alliance with the Pharmaceutical Distribution and Provider Services segment of Cardinal Health, Inc. to jointly market and develop products and services for the healthcare industry. Cardinal Health is a leading provider of products and services supporting the healthcare industry. As part of the alliance, NDCHealth editing services under the ScriptLINE brand will continue to be offered to pharmacies exclusively by Cardinal Health. This strategic alliance also provides for joint development of additional marketing programs, products and services.

For additional information regarding our acquisitions, please see Note 2 of the Notes to the Consolidated Financial Statements. We believe that selective acquisitions, investments and strategic alliances will continue to be important to our ability to compete effectively.

Products, Services and Distribution Channels

We conduct our business in two primary segments, Network Services and Systems, which we offer to healthcare providers and payers, and Information Management which we offer to pharmaceutical manufactures. More information concerning segments can be found in “Note 12—Segment Information” in the Notes to Consolidated Financial Statements.

Network Services and Systems Solutions

We believe our NDCHealth Intelligent Network and point-of-service systems offer opportunities to streamline our provider and payer customers’ workflow, improve their cash flow, provide real-time information to help providers better manage their practices, and give the healthcare industry methods to assure a higher quality of care at a lower cost. Our NDCHealth Intelligent Network connects pharmacies and over 1,000 hospitals to hundreds of benefit plans, using batch and online connectivity. We process over two billion healthcare transactions annually. The point-of-service systems that we offer help our customers improve efficiency and reduce costs while also serving as an additional source of transaction volume for our intelligent network.

We offer payers customized real-time electronic connectivity to our provider networks through the NDCHealth Intelligent Network for claims/encounter editing, submission and adjudication, eligibility verification, remittance advice, referral authorization, and claim status and tracking.

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We believe that with the growing acceptance of healthcare technology and the need to speed payment while reducing costs and improving the quality of care, there will be an increase in the number and types of electronic healthcare transactions. Many of the new transaction types may have broad impact across the healthcare continuum. For example, new solutions such as electronic prescriptions create new information management needs as well as directly impacting the way physicians, hospitals, pharmacies and payers practice and do business. Other examples include electronic referrals by physicians to hospitals and the increased use of medical data by physicians, hospitals and other providers to satisfy new types of healthcare information needs.

We are positioned to take advantage of these opportunities, and we have committed development resources to these emerging markets. Accordingly, we expect growth opportunities from further automating our existing customers. This will happen as a result of the continued increase in transactions as the population ages and increased use of electronic transmission for both existing and new transaction sets. We have developed and continue to expand distribution channels for our solutions through our direct sales force, alliance partners, value-added resellers, direct mail, and inside sales force.

Our primary competitors in providing Network Services and Systems solutions are providers’ own in-house solutions, WebMD, Misys, and Vitalworks.

Pharmacy Solutions

We offer solutions for the pharmacy industry which allow pharmacies to access customer service and marketing information, enhance the accuracy of reimbursements thereby reducing costs, efficiently and accurately handle claims and better manage risks. Our pharmacy solutions include transaction processing, information management services, value-added pre-and post- transaction edit processes, payer adjudication services and, through our majority interest in TechRx, in-store and chain-wide practice management systems.

We offer pharmacies transaction processing solutions through our core clearinghouse connectivity between pharmacies and third party payers. We offer real-time claim adjudication through our Rx Claim Management Services. Additionally, NDC Pre & Post Editing performs real-time validation and data management of pharmacy claim submission data to enhance the accuracy of claim pricing and minimize claim submission errors. These solutions will be enhanced with edits obtained from our ScriptLINE acquisition.

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Our NDC Market Share Services and NDC Pharmacy Market Analyzer products, along with our Prescription Price Analyzer and Prescription Sales Analyzer, allow retail pharmacies to optimize their profitability and remain competitive. These solutions offer features such as market share information, cause and effect analyses and the ability to effectively price prescription drugs and view prescription sales performance data.

Our Source ID and Consensus solutions enable pharmacies to determine that prescriber databases and call files are current and complete. Source ID and Consensus help eliminate prescriber information inaccuracies, reduce errors, and maintain a high level of reliable prescriber information on an ongoing basis.

Our recent agreements with TechRx, ScriptLINE and Cardinal Health should bring us additional customers, expand the comprehensive suite of edits available to our existing customers, and enhance our pharmacy market position. We will be able to provide pharmacies with software that automates the prescription fulfillment process, from order receipt and insurance adjudication to dispensing.

More than ninety percent of the pharmacies in North America and twenty-five percent of the pharmacies in the United Kingdom use our value added services, totaling over 65,000 chain, independent, mail order, managed care and institutional outlets.

Our pharmacy solutions are currently offered in the United States, Canada and the United Kingdom through our direct sales force and alliance partners. We compete with many companies; however, based on the number of pharmacies served, we believe that we are the largest provider of pharmacy systems and transaction processing solutions in North America, and a leading provider of pharmacy systems in the United Kingdom.

Hospital Solutions

We have over 1,000 hospital and health system customers. We offer our customers solutions that facilitate compliance maintenance and monitoring, contract and reimbursement management and administrative support.

Our solutions streamline the process for submitting hospital and physician professional fee claims, allow providers to electronically transmit patient statements, allow other statement types to be professionally printed and mailed, and offer automated online applications that address the specific document storage and retrieval needs of hospital and health system businesses. Over 80% of our hospital customers process claims through our NDCHealth Intelligent Network.

We recently began beta testing of ePremis, a new browser-based version of our hospital solution that helps ensure the accuracy and completeness of submitted claims. This new product offers our customers an enhanced set of editing services that can be accessed from any terminal in the hospital, providing maximum flexibility and personnel

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efficiency. ePremis will be available as both a turn-key system installed in the hospital or as a remotely hosted application centrally managed by NDCHealth.

We compete with many companies in offering hospital solutions; however, we believe that we are among the largest providers of network transaction solutions to hospitals in North America in terms of numbers of hospitals. Our hospital solutions are offered in the United States through our direct sales force as well as through multiple strategic alliances.

Physician Solutions

We provide physicians with the resources necessary to streamline both billing and other internal processes such as scheduling, increase productivity and optimize accurate reimbursement. We offer our physician customers the ability to electronically submit claims to payers through our alliance with MedUnite, confirm a patient’s eligibility status and transmit patient statements to be professionally printed and mailed.

Our MediSoft, Lytec and Concept Practice Management solutions are used for scheduling, patient demographics, insurance claim printing, electronic claim submission, accounts receivable tracking, and practice management reporting in healthcare practices and billing services.

Our physician solutions are offered in the United States through value-added resellers, direct mail, our inside telemarketing sales force, and alliance partners. Our major competitors in providing physician solutions are WebMD, Mysis, Vitalworks, and numerous smaller competitor solutions.

Information Management Solutions

We provide innovative decision-support solutions enabling pharmaceutical manufacturers to evaluate performance and develop strategies for improved marketing and sales efforts. We collect data from retail pharmacies, drug wholesalers, our NDCHealth Intelligent Network, and manufacturers to give our customers a complete source of information on which to base their business decisions.

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Sales Compensation, Targeting and Profiling Products and Services

Our sales compensation solutions empower pharmaceutical manufacturers to be more competitive and profitable. We offer a suite of products and services to monitor sales force performance, provide decision-support for sales compensation, sales force sizing and alignment, and improve sales detailing effectiveness through more accurate physician demographic information. The following products and services are offered for the domestic United States and may be delivered to customers in a variety of media, including electronically via email, the Internet, CD-ROM’s, magnetic tape, and paper reports.

Our sales compensation offerings include:

· NDC Territory Manager is our projected zip code-level prescription information service designed as a sales performance measurement tool. NDC Territory Manager reports projected, prescriber-linked retail prescription data for specific customer-defined markets and sales force alignments.

· NDC Territory Analyzer, an online subscription service, functions as a personal information management department for determining sales force compensation, identifying sales opportunities, allocating sales resources and measuring sales force performance for the customer defined markets and sales force alignments.

· NDC Sales & Marketing Analyzer is a web-enabled decision-support tool enabling detailed analysis of sales, marketing and managed care performance by customer-defined products and markets.

· NDC Mail Order provides a comprehensive retail prescription market view that enables effective marketing strategies by tracking the prescriptions dispensed by mail service pharmacies

· NDC Practitioner Address and NDC Address Consensus help pharmaceutical manufacturers maximize the effectiveness of sales call files by providing accurate up-to-date call file information to verify prescribers’ demographic information, and validate names and registration numbers as well as address information.

· NDC Practitioner Validation Service (PVS) is the most comprehensive and reliable compliance service validating whether or not a practitioner is eligible to receive samples in accordance with the Prescription Drug Marketing Act (PDMA).

· NDC Pharmaceutical Rx Q&A+ and NDC Pharmaceutical Non-Retail Q&A+ are web-based decision support tools that allow pharmaceutical manufacturers to access retail or non-retail sales information for their specific therapeutic markets from any web browser in the world.

Our Physician Targeting & Profiling suite includes:

· NDC Prescriber Offering allows pharmaceutical manufacturers to identify, target and understand their high-potential prescribers using the industry’s first projected prescriber level prescription database with products including NDC Prescriber, NDC Prescriber Profiles and NDC Prescriber Payer.

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· NDC LaunchTrac reports weekly prescribing activity for newly launched pharmaceutical products, line extensions and existing products. NDC eLaunchTrac provides the same market intelligence electronically.

· NDC Non-Retail is a comprehensive source for tracking wholesaler distribution sales data sold into non-retail institutions such as hospitals, clinics, long-term care facilities, and mail order pharmacies.

· NDC Institution Outflow provides information needed to measure and understand how hospital prescribing practices impact a pharmaceutical manufacturer’s retail prescription sales. NDC Institution Outflow’s detailed reports enable companies to target hospitals and prescribers more effectively and enhance the accuracy of retail sales performance measurements.

Our Managed Care Solutions link prescription information to the form of payment for targeting prescribers by their plan affiliations, evaluating sales performance by managed care plans and monitoring contract compliance.

· NDC Payer Rx links prescriptions to the form of payment, whether third party plan, Medicare or cash, for profiling and targeting managed care plans and prescribers, measuring territory sales performance by method of payment, and allocating sales and marketing resources.

· NDC Managed Care Analyzer is a web-enabled analysis and decision-support tool that provides multiple levels of information on prescription activity among third-party payers for pharmaceutical manufacturers to deploy sales resources, profile and target payers, or devise contract strategies and track plan performance.

Marketing Research & Consulting Services

Our Research & Consulting business provides information, solutions and industry expertise to help sales and marketing professionals transform market data into successful marketing strategies.

· The NDC Pharmaceutical Audit Suite (PHAST) allows healthcare market researchers and executives to view the most complete and timely source of pharmaceutical sales information across all therapeutic areas, geographies, classes of trade and manufacturers. PHAST is used for determining new market licensing, acquisition and R&D opportunities, evaluating co-promoting effectiveness, forecasting, and tracking new product launches

· NDC Patient Studies give researchers insight into patient behavior. Using comprehensive anonymized encrypted patient-linked longitudinal data, manufacturers can understand the dynamics of patient compliance, persistency, product switching, patient share and counts as well as measuring the impact of direct to consumer (DTC) campaigns on patient use.

· Market Segmentation and Product Positioning are custom studies that integrate prescribing information with primary research to determine physician beliefs and

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attitudes to provide the most actionable understanding of physician prescribing patterns.

· NDC DTC Planning and ROI Evaluation helps manufacturers predict and evaluate the effectiveness of promotions of all types.

· NDC AdoptRx helps manufacturers identify the prescribers who are most likely to adopt a new product, thus improving the effectiveness and accuracy of physician detailing.

· Outcomes Research provides customized research studies for providing a competitive advantage by investigating a wide range of disease treatment information by managed care, physician, and hospital claims data.

We provide information management solutions to more than 100 pharmaceutical manufacturers.

Our information solutions are offered in the United States and in early phase operations in the United Kingdom and Germany through our direct sales force. Our primary competitors in providing these solutions are IMS Health, Verispan, and Arclight.

Our Network Services and Systems solutions distributed to the pharmacy, hospital, physician, and payer markets have historically represented between 55% and 60% of our total revenues. Our Information Management solutions have historically represented between 40% and 45% of our total revenue.

Healthcare Market

We believe that the integrated services that we offer to the healthcare industry place us strategically in the center of a very dynamic marketplace. Because of our unique position, we manage healthcare related information from the point of patient contact through the point of payment and maintain the high standards required for patient confidentiality.

There is a growing worldwide need in healthcare for technology based services and comprehensive information solutions. We believe that our integrated solutions provide information and services useful in reducing administrative and other related healthcare costs and expenses and enhancing the quality of care. Additionally, the aging worldwide population is driving demand for improved information technology services relating to the healthcare industry. Because a high percentage of healthcare transactions are still handled using manual, paper-based methods, or are not being consistently performed, we believe that the healthcare industry is one of the largest untapped markets for providing integrated information solutions. Our solutions provide the tools to help providers and payers reduce administrative expense and improve the clinical experience, while at the same time providing a robust source for statistical and analytical information required by our customers.

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Government Regulation

The healthcare industry is highly regulated and is subject to changing political, regulatory and other influences. These factors affect the purchasing practices and operation of healthcare organizations including our customers. Federal and state legislatures and agencies periodically consider programs to reform or revise the U.S. healthcare system. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. In some instances, regulatory change has a positive impact on our business representing potential for new applications and services. However, we are unable to predict future proposals with any certainty or to predict the effect they would have on our business.

In addition, a number of recent legislative and regulatory changes may significantly impact our business. Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, Congress required, among other things, the adoption of rules to establish standards and requirements for the electronic transmission of certain health information. These rules also govern the use, disclosure, and security of patient-identifiable health information, and apply to certain of our operations as well as the operations of many of our customers. See a more detailed discussion in “Additional Factors That May Affect Future Performance.”

Operations and Systems Infrastructure

We operate multiple data and customer support facilities. The primary facilities are in Atlanta, Georgia; Phoenix and Gilbert, Arizona; Tulsa, Oklahoma; Pittsburgh, Pennsylvania; Toronto, Canada; the United Kingdom; and Germany. During fiscal 2002, management of all of our U.S. data centers and communication network was centralized under our Chief Technology Officer. This centralization allows us to ensure control and consistency in technology, procedures, and security throughout the Company.

Because of the large number and variety of our products and services, we do not rely on a single technology to satisfy our sophisticated computer systems needs but instead employ technology that is suitable for each particular processing requirement. Given this approach, we utilize (i) fault-tolerant computers for high volume, real-time transaction processing; (ii) client-server technology for end-user database applications; (iii) large scale transaction and batch data processing systems for central host system requirements; and (iv) HP, Compaq, SUN, IBM, UNIX, Dell, NT and Windows-based systems for specialized communication and database applications systems. The larger systems are linked via high speed, fiber-optic based networked backbones for file exchange and inter-system communication purposes; other systems use high speed LAN and WAN connections. The bulk of these system connections utilize the Internet TCP/IP architecture. We also maintain storage systems connected to the backbones, including robotic tape libraries and optical storage for archival purposes. Our systems are supported using advanced network control by our experienced systems, operations and production control staffs.

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Our communications network is made up of numerous discrete networks, each designed for a unique market requirement. We maintain four primary communications networks in addition to our support of the public Internet: a dial-up, short transaction network; a private line nationwide high bandwidth network; a frame relay network; and a dial-up voice/data network for interactive and voice traffic. We also maintain a number of support services offering wireless, Internet and ISDN connectivity. The network environment supports a diverse set of telecommunication protocols to respond to its diverse customer requirements.

Research and Development

During fiscal 2002, 2001, and 2000, we expended approximately $18.9 million, $17.5 million, and $20.7 million, respectively, on activities relating to the development and improvement of new and existing products and services. In fiscal 2000 we began a restructuring program, which included the consolidation of clearinghouses and elimination of obsolete and redundant products and services, as we focused on cost containment. The result was a decline in spending from 2000 to 2001 as we performed less maintenance on older products that had been eliminated. Instead, we focused on developing new products that would generate additional revenue which is reflected in the increase in spending from 2001 to 2002. Additionally, the divestiture of our Physician services business in the first quarter of fiscal 2002, where historically we had expended more on maintenance projects, allowed us to focus on the development of these new products.

We capitalize the cost of developing software held for sale to our customers as well as software used internally to provide services to our customers. In accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” and Statement of Position 98-1, “Accounting for the Cost of Computer Software Developed or Obtained for Internal Use,” capitalization of costs begins when technological feasibility has been established, or during the application development phase, and ends when the product is available for general release to customers. In accordance with these standards, approximately $12.0 million, $9.0 million, and $9.6 million of our total development expense were capitalized in fiscal 2002, 2001, and 2000, respectively, resulting in net development expenses of approximately $6.9 million, $8.5 million, and $11.1 million, respectively. The increased capitalization in 2002 resulted from the increased level of new product development as discussed below. Conversely, the reduction of spending on maintenance of older products resulted in lower net expense in 2002.

Newly Added Products and Services

We are committed to providing solutions that allow our customers to improve their efficiency, lower cost and enhance the overall quality and predictability of patient care outcomes. In keeping with this philosophy, this year we introduced several new products, some of which are described below.

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NDC Prescription Price Reporter enables retail pharmacies to optimize their cash prescription pricing in their regional market. This new product allows for the analysis of cash pricing for the top 250 multi-source brand/generic drugs for every dispensed quantity by geography. It also features web-delivery, providing an easily accessible solution for pharmacies of all sizes.

NDC Pharmaceutical Audit Suite (PHAST) is an audit tool that allows pharmaceutical manufacturers access to a combination of retail, institutional and mail order pharmaceutical sales data. This product is used for forecasting, competitive analysis, sales targeting and profiling and sales performance measurement.

Institution Sales Analyzer is a comprehensive web-based data resource that provides pharmaceutical manufacturers with capabilities to track and analyze sales information in U.S. non-retail institutions, including highly specific geographic and outlet-affiliated levels of detail. This data is important information for pharmaceutical product managers, market research analysts and sales management responsible for a variety of strategic planning, sales and performance evaluations.

With our recent acquisition of a majority interest in TechRx, we have commenced the roll-out of a beta version of T-Rex One, a next generation pharmacy system, to independent pharmacies. We expect to roll-out an enterprise version of T-Rex One to major chains in the Summer of 2003. The new system is designed to provide functionality to move certain processes from the individual pharmacy to central locations and chain headquarters. The new applications are known in the industry as “central patient management,” “central processing” and “central fill” applications.

We recently began beta testing of ePremis, a new browser-based version of our hospital solution that helps ensure the accuracy and completeness of submitted claims. This new product offers our customers an enhanced set of editing services that can be accessed from terminals throughout the hospital providing flexibility and personnel efficiency. ePremis will be available as both a turn-key system installed in the hospital or as a remotely hosted application centrally managed by NDCHealth.

Additional products developed in 2002 include new pharmacy information solutions to help reduce pharmacy inventory shrinkage and new sophisticated real-time edits to help our pharmacy customers grow their revenues and reduce their costs. We also introduced our “year in review” reference tool for the pharmaceutical industry; our weekly payor product; and a new syndicated medical repository which links physician diagnosis information to de-identified patient prescription information.

Employees

On May 31, 2002 we had approximately 1,790 employees. Many of our employees are professionals or are highly skilled in technical areas specific to the healthcare industry, and we believe that our current and future operations depend substantially on retaining such employees. Our employees are not represented by any labor union and we believe our employee relations to be good. We are very committed to sustaining a workplace that enables all employees to contribute their full skills, talents, and knowledge toward company goals.

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Item 2.     PROPERTIES

Our corporate headquarters are located in Atlanta, Georgia. We own and occupy a six-story, 120,000 square foot building at One NDC Plaza, Atlanta, Georgia. There is no outstanding debt on the facility. Additionally, we own a fully occupied four-story, 82,000 square foot building at Four Corporate Square in Atlanta. This facility is currently leased to Global Payments Inc. for a term ending January 31, 2004. There is an existing $2.9 million mortgage on this facility, which we assumed from the seller.

In addition to the above facilities, we lease or rent a total of 25 other facilities, including five we obtained with our recent acquisition of TechRx . Four facilities are primary locations in Phoenix, Arizona; Gilbert, Arizona; Tulsa, Oklahoma; and Pittsburgh, Pennsylvania. The remaining 21 are sales and support offices including foreign locations in Canada, Germany and the United Kingdom. Through our recent acquisition of a controlling interest in TechRx, we now have additional locations (included in the numbers above) in Atlanta; Birmingham, Alabama; Rockville, Maryland and Vancouver, Canada.

We believe that our properties are suitable and adequate for the business of NDCHealth as presently conducted. See Note 15 of the Notes to the Consolidated Financial Statements for more information about leased properties.

Item 3.     LEGAL PROCEEDINGS

We are involved in litigation related to our divested Physician and Hospital Support Services and Hospital Management Services (PHSS) units.

We are involved in litigation with IMS Health relating to the format in which prescription data is delivered to pharmaceutical companies. In a proceeding before the European Commission we are alleging that to the extent this format is copyrighted by IMS, the format constitutes an industry standard and an essential facility to competition and must be made available to competitors of IMS. We obtained a ruling from the European Commission ordering IMS Health to license its structure for organizing pharmaceutical sales data to us. However, subsequent to this decision the Court of First Instance and later the European Court Of Justice stayed this decision pending a complete review of the underlying substantive matters.

In a proceeding in the German courts, IMS has alleged copyright infringement against us and we are contesting the validity of IMS’s alleged copyright. In these proceedings, IMS Health obtained an injunction from the Frankfurt Regional Court to prevent us from distributing data in the contested format. On August 13, 2002, the Frankfurt Court of Appeals ruled in our favor by dismissing the preliminary injunction against our use of the industry standard data structure. This decision is final and is not subject to further appeal by IMS Health. The underlying copyright claim, however, asserted by IMS Health against us remains before the Frankfurt Court of Appeals for decision, and a hearing on the issue is scheduled for September 2002. We are unable to predict whether IMS Health may be successful in overturning the EC and Germany rulings or the timing of the final decisions.

Additionally, we are party to a number of other claims and lawsuits incidental to our business. We believe that the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on our financial position, liquidity or results of operations.

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of our security holders during the fourth quarter of the fiscal year ended May 31, 2002.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The names, titles, ages, and business experience of all present executive officers of the Company are listed below. All officers hold office at the pleasure of the Board of Directors, unless they earlier retire or resign.

Name	Business Experience	Age
Walter M. Hoff	President and Chief Executive Officer of NDCHealth since February 2001; Chief Executive Officer of NDC Health Information Services from August 1998 to January 2001; Executive Vice President of First Data Corporation from 1992 to 1998. Director of Metris Corporation.	50
Randolph L.M. Hutto	Executive Vice President and Chief Financial Officer of NDCHealth since November 2000; Executive Vice President and General Counsel of Per-Se Technologies from 1998 to 2000; Senior Vice President – Strategic Planning and Business Development of First Data Corporation from 1996 to 1998.	53
Charles W. Miller	Executive Vice President – Operations of NDCHealth since January 2000; various executive positions with McKesson from 1995 to 2000, most recently as Group President – Enterprise Operations.	57
Joseph J. Porfeli	Executive Vice President – Sales and Marketing of NDCHealth since May 2002; Chairman and Chief Executive Officer of TechRx Incorporated from 1999 to 2002; Chairman, President and Chief Executive Officer of REVIVE Technologies from 1997 to 1999.	54
E. Christine Rumsey	Vice President – Human Resources of NDCHealth since September 1999; Senior Vice President – Human Resources and Administration for McKesson from January to September 1999; Senior Vice President – Human Resources for McKesson, from 1995 to 1999.	51

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Name	Business Experience	Age
David H. Shenk	Vice President, Corporate Controller and Chief Accounting Officer of NDCHealth since January 1998; Corporate Controller of Rollins, Inc. from 1992 to 1997.	54
Patricia A. Wilson	General Counsel and Secretary of NDCHealth since October 2000; partner with Troutman Sanders LLP from 1988 to 2000.	51

PART II

Item 5.     MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the New York Stock Exchange under the ticker symbol “NDC.” The high and low sales prices and dividends declared per share of the Company’s common stock for each quarter during the last two fiscal years are listed below. The amount of our quarterly dividend was reduced in the third quarter of fiscal 2001 due to the spin-off of Global Payments. While we have historically paid dividends to holders of our common stock, the declaration and payment of future dividends will depend on many factors, including our earnings, financial condition, business needs, capital and surplus, and regulatory considerations, and is at the discretion of our Board of Directors.

	High		Low		Dividend Per Share
Fiscal Year 2002
First Quarter	$	38.99	$	29.00	$	.040
Second Quarter		38.98		30.43		.040
Third Quarter		34.90		28.20		.040
Fourth Quarter		37.24		27.74		.040
Fiscal Year 2001
First Quarter	$	31.38	$	20.75	$	.075
Second Quarter		38.94		27.31		.075
Third Quarter		38.90		23.90		.040
Fourth Quarter		30.80		21.20		.040

The number of stockholders of record as of August 20, 2002 was 3,348.

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On January 31, 2001, we completed the spin-off of Global Payments Inc. The Company’s stockholders received 0.8 share of Global Payments Inc. common stock for each share of common stock held as of the January 19, 2001 record date. In light of the spin-off and the resulting change in sales price of our common stock, the high and low sales prices of our common stock for the first three quarters of fiscal 2001 listed below have been adjusted to reflect the spin-off.

	High		Low
Fiscal Year 2002
First Quarter	$	38.99	$	29.00
Second Quarter		38.98		30.43
Third Quarter		34.90		28.20
Fourth Quarter		37.24		27.74
Fiscal Year 2001
First Quarter	$	19.17	$	12.65
Second Quarter		23.79		16.69
Third Quarter		27.46		17.45
Fourth Quarter		30.80		21.20

Issuance of Stock

We issued 402,982 unregistered shares of NDCHealth common stock valued at $12,000,000 to Cardinal Health Partners, L.P., a venture capital firm based in Princeton, N.J., on May 28, 2002. These shares were issued in a private placement pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The shares were issued in partial consideration for our acquisition of a controlling interest in TechRx Incorporated.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes our equity compensation plans as of May 31, 2002:

Plan Category	(a)	(b)		(c)
	Number of shares to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of shares remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by stockholders	3,606,006	$	20.07	1,480,448
Equity compensation plans not approved by stockholders (1)	—		—	—
Total	3,606,006	$	20.07	1,480,448

(1) During fiscal 2002 our Board of Directors adopted the 2002 Non-Employee Directors Compensation Plan (the “2002 Plan”). The 2002 Plan replaced the previously existing 1984 Non-Employee Directors Stock Option Plan and the 1995 Non-Employee Director Compensation Plan. The 2002 Plan is a formula plan pursuant to which our non-employee directors receive cash, shares of stock or deferred stock rights in payment of their annual retainer, plus an annual grant of stock options. Over a multi year period all equity awards made pursuant to the terms of the 2002 Plan are granted under our 2000 Long-Term Incentive Plan, which was approved by the stockholders at the 1999 annual meeting, or under any successor equity compensation plan that is approved by the stockholders. Under the terms of the 2002 Plan, an annual retainer of $30,000 is paid to each non-employee director, other than a non-employee Chairman of the Board who is paid $60,000. Unless the director elects to defer receipt of the annual retainer in the form of deferred stock rights, the retainer is paid 50% in cash and 50% in common stock. The number of shares to be issued is determined by dividing 50% of the retainer by the fair market value per share of common stock as of the close of business on the first day of the fiscal year. Alternatively, a director may elect to receive either 0%, 50%, or 100% of his or her annual retainer in the form of deferred stock rights that are payable in common stock at a designated future date. The 2002 Plan also provides that non-employee directors are annually awarded an option to purchase that number of shares of our common stock having a fair market value on the day immediately following the annual meeting of stockholders equal to $125,000. These options vest over a period of five years and expire 10 years after the date of grant, the same vesting period as employee options granted under the 2000 Long-Term Incentive Plan.

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Item 6.     SELECTED FINANCIAL DATA

The table below summarizes selected historical financial information of NDCHealth for each of the last five fiscal years. On January 31, 2001, we completed the spin-off of Global Payments Inc. Additionally, in the third quarter of fiscal 2000, we decided to pursue the divestiture of our management services business and account for the business as “discontinued operations.” As a result of the spin-off and divestiture, our financial statements have been prepared with Global Payments’ and the management services business’ net assets, results of operations, and cash flows displayed separately as “discontinued operations.” The selected financial information shown below summarizes certain items from our audited financial statements. This table should be read in conjunction with other financial information included in this report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements.

During fiscal 2002, we adopted the provisions of EITF 01-09, “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products.” Our adoption of EITF 01-09 resulted in a reclassification of revenues related to sales to physician systems vendors, requiring certain vendor allowances to be treated as deductions from revenue. As required by EITF 01-09, we have retroactively adjusted our results for fiscal years 2002 and 2001 to reflect this reclassification. The deductions were $18.0 million and $7.7 million in fiscal years 2002 and 2001, respectively. There were no changes to income as a result of this reclassification. The effect of our adoption of EITF 01-09 was not material prior to fiscal 2001.

Also during fiscal 2002, due to our acquisition of a controlling interest in TechRx, Accounting Principles Board Opinion No. 18, “Equity Method of Accounting for Investments in Common Stock,” required us to retroactively account for TechRx as if we had used the equity method, rather than the cost method, since our initial investment. The adjustments required by APB 18 were a reduction in revenue of $6.0 million and $5.1 million; net income of $5.4 million and $3.9 million; and diluted earnings per share of $0.15 and $0.11, in fiscal years 2002 and 2001, respectively.

Results for 2002 reflect the provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Based on information received from the financial advisors to the MedUnite Board of Directors, as well as an updated evaluation of MedUnite’s results and capital market conditions, we determined that the value of MedUnite had declined, and that the decline was not temporary. We reduced the carrying value of our investment in MedUnite to $12.2 million with a non-cash charge. This charge reduced our previously announced net income by $28.3 million to $15.1 million, and diluted earnings per share by $0.79 to $0.43 for fiscal 2002.

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	Fiscal Years Ended May 31,
	2002		2001		2000			1999		1998
	(In thousands, except per share data)
Revenue:
Information management	$	150,399	$	136,616	$	131,229		$	128,961	$	55,223
Network services and systems		198,622		176,015		139,626			121,336		110,876
Subtotal Revenue	$	349,021	$	312,631	$	270,855		$	250,297	$	166,099
Divested businesses		4,360		24,421		74,818			88,699		83,047
Total	$	353,381	$	337,052	$	345,673		$	338,996	$	249,146
Operating income (loss)	$	77,102	$	53,820	$	12,383		$	62,104	($	82,595	)
Income (loss) before discontinued operations	$	15,110	$	24,217	($	1,163	)	$	33,863	($	90,013	)
Net income (loss)	$	15,110	$	32,540	($	40,165	)	$	71,437	($	61,326	)
Diluted earnings (loss) per share before discontinued operations	$	0.43	$	0.71	($	0.03	)	$	0.97	($	2.80	)
Diluted earnings (loss) per share	$	0.43	$	0.95	($	1.21	)	$	2.02	($	1.90	)
Dividends declared per share	$	0.16	$	0.23	$	0.30		$	0.30	$	0.30
Total assets	$	658,184	$	484,361	$	653,632		$	534,723	$	482,961
Long-term obligations	$	155,948	$	155,431	$	160,250		$	165,013	$	160,040
Total stockholders’ equity	$	257,746	$	226,616	$	330,136		$	409,094	$	347,935

In fiscal 2002, we incurred a non-recurring charge of $41.0 million to reduce the value of our investment in MedUnite. Operating income was not affected by this charge. Net income excluding this charge was $43.4 million or $1.22 per share. We incurred restructuring and impairment charges of $2.2 million and $34.4 million in fiscal 2001 and 2000, respectively, and merger related non-recurring charges of $119.5 million in fiscal 1998. Operating income excluding these charges was $56.0 million, $46.8 million, and $36.9 million in fiscal 2001, 2000, and 1998, respectively. Income before discontinued operations excluding these charges was $25.6 million or $0.75 per share, $21.2 million or $0.64 per share, and $20.8 million or $0.64 per share in fiscal 2001, 2000, and 1998, respectively. Restructuring, impairment, and non-recurring charges are discussed more fully in the Notes to the Consolidated Financial Statements.

The amount of our quarterly dividend was reduced in the third quarter of fiscal 2001 due to the spin-off of Global Payments.

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Item 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Certain statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements. Actual results could differ materially from those encompassed within such forward-looking statements as a result of various factors, including those set forth herein under the caption “Additional Factors That May Affect Future Performance.”

For an understanding of the significant factors that influenced our results during the past three years, the following discussion should be read in conjunction with the consolidated financial statements and related notes.

Our fiscal years discussed in this annual report began on June 1 and ended on May 31. Unless otherwise noted, all references to a particular year refer to our fiscal year.

NDCHealth is a leading provider of health information services that add value to the pharmacy, hospital, physician, pharmaceutical and payer businesses.

Until 2001, NDCHealth, formerly known as National Data Corporation, provided both health information and electronic payment services. On January 31, 2001, Global Payments Inc. was spun off to the stockholders of NDCHealth. During fiscal years 2001 and 2000 we closed a number of locations, consolidated numerous clearinghouses, reduced overhead expenditures, rationalized our product lines, divested several operations and discontinued our management services business. As additional information, we have included Exhibit 99 (ii) and 99 (iii) which reconcile our historical GAAP results to historical results that have been normalized to reflect the core operation that remains from this restructuring program.

Since the spin-off of Global Payments, we have operated solely as a network based healthcare information company. As we entered 2002, our primary objectives were to:

· Continue to enhance our operating performance.

· Continue to strengthen our sales and marketing programs.

· Further optimize our product management function.

· Further strengthen the human resource talent in our organization.

We believe we have made great strides in accomplishing these objectives.

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Operating Performance

A comparison of 2002 to 2001 financial results shows the following:

· Revenue grew nearly 5% to $353.4 million from $337.1 million. Excluding divested businesses, revenue grew 11.6% to $349.0 million from $312.6 million.

· Operating income grew 43% to $77.1 million from $53.8 million. A portion of this increase was due to our adoption of SFAS 142 “Goodwill and Other Intangible Assets” (“SFAS 142”) which is more fully discussed below under “Financial Review.”

· Operating income margin increased 36% from 16.0% to 21.8%. A portion of this increase was due to our adoption of SFAS 142, which is more fully discussed below under “Financial Review.”

· Net income before discontinued operations declined 38% to $15.1 million from $24.2 million. Net income before discontinued operations excluding the non-cash valuation adjustment in our MedUnite investment grew 79% to $43.4 million from $24.2 million. A portion of this increase was due to our adoption of SFAS 142, which is more fully discussed below under “Financial Review.”

· Diluted EPS before discontinued operations declined 39% to $0.43 from $0.71. Diluted EPS before discontinued operations and excluding the non-cash valuation adjustment in our MedUnite investment grew 72% to $1.22 from $0.71. A portion of this increase was due to our adoption of SFAS 142, which is more fully discussed below under “Financial Review.”

· Return on equity, excluding shares issued in connection with the acquisition of a controlling interest in TechRx, declined to 6.4% from 11.7%. Return on equity excluding the non-cash valuation adjustment in our MedUnite investment and shares issued in connection with the acquisition of a controlling interest in TechRx grew to 17.3% from 11.7%.

· Previously issued results for 2002 and 2001 have been retroactively adjusted as the result of two accounting changes. EITF 01-09 resulted in a reclassification of revenues related to sales to physician systems vendors, requiring certain vendor allowances to be treated as deductions from revenue. Also, due to our acquisition of a controlling interest in TechRx, APB 18 required us to retroactively account for TechRx as if we had used the equity method, rather than the cost method, since our initial investment. Further discussion of these changes appears below under Application of Critical Accounting Policies.

· Results for 2002 have been impacted by the application of the provisions of SFAS 115. Based on information received from the financial advisors to the MedUnite Board of Directors, as well as an updated evaluation of MedUnite’s results and capital market conditions, we determined that the value of MedUnite had declined, and that the decline was not temporary. We reduced the carrying value of our investment in MedUnite to $12.2 million with a non-cash charge. This charge reduced net income by $28.3 million and diluted earnings per share by $0.79 for fiscal 2002.

Sales & Marketing Results

· We signed over 60 new Information Management customers over the last two years.

· Intelligent network transactions in 2002 grew by over 18 % due to new customers, growth from existing customers, and sales of new types of transactions to current customers, such as our pre- and post-editing services.

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· We increased our physician practice management systems unit distribution by 37% with our new upgraded versions of our Medisoft V7 and Lytec software.

Product Strategy

Most of our new products are developed with the objective to increase recurring revenue. New solutions which were developed in the current year included:

· We developed our new host based ePremis Solution that will help our hospital customers accelerate their cash flow.

· We developed new pharmacy information solutions to help reduce pharmacy inventory shrinkage and new sophisticated real-time edits to help our pharmacy customers grow their revenues and reduce their costs.

· In our Information Management segment, we introduced many new products, including: our new suite of PHAST Audit products; our “year in review” reference tool for the pharmaceutical industry; our weekly payer product; and a new syndicated medical repository which links physician diagnosis information to de-identified patient prescription information.

People

We believe we also had a successful year in strengthening all levels of our organization.

· We continue to upgrade our management development programs.

· We continue to strengthen our performance management programs.

· We continue to improve employee satisfaction as measured by our satisfaction survey.

· We implemented a new diversity program.

Our employees are the key to taking advantage of our opportunities and attaining our goals. We feel we have highly qualified and skilled employees who are committed to NDCHealth’s success and therefore to their own success.

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Looking Forward to FY2003

Our priorities for 2003 focus on leveraging our position across the spectrum of healthcare, and continuing to develop our sales and marketing excellence. We will also continue to improve our operational processes and strengthen the talent of our people.

On May 28, 2002 we completed three transactions that expanded our ability to create solutions through business agreements with TechRx, ScriptLINE, and Cardinal Health, as discussed in greater detail below. We believe these transactions will not only enhance our pharmacy market position but will also provide us with a broader platform for creating new healthcare solutions in the future.

Relationships and Alliances

TechRx Acquisition

In May 2002, we acquired a controlling interest in TechRx. TechRx was founded in 1992 to develop pharmacy information systems, and currently approximately 30% of pharmacies in North America use its solutions. Its systems provide customers with an integrated solution for in-store operations and connectivity to payers and physicians.

TechRx systems automate the entire prescription fulfillment process for the pharmacy. This process includes:

· Receipt of the prescription and physician interaction;

· Data entry and Drug Utilization Review;

· Dispensing, filling and labeling the prescription;

· Verification and validation;

· Delivery of the prescription and inventory management; and

· Counseling the patient and assisting with patient compliance

TechRx is completing the development of a first-of-its-kind next generation pharmacy system, T-Rex One. Roll-out of a beta version to independent pharmacies has begun, with roll-out of an enterprise version to major chain pharmacies planned in calendar year 2003. The new system is designed to address the acute shortage of pharmacists today and to provide functionality to move certain processes from the pharmacy to central locations and chain headquarters. The new applications are known in the industry as “central patient management,” “central processing” and “central fill.” These

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applications are designed to maximize workflow efficiency, reduce inventory carrying costs and allow for integrated processing of electronic prescriptions.

With the availability of the new TechRx technology, chain pharmacies will be able to implement enterprise-wide applications. As an example, one of the many immediate benefits to the patient will be the ability to quickly refill a prescription at any store within the chain, rather than only the store originally called by the physician.

By gaining a controlling interest in TechRx, we acquire a number of valuable assets including an extensive customer base, a premier application development team, and state-of-the-art next generation software. To TechRx, we will add operational efficiencies and our substantial sales and marketing resources, as well as our industry leadership position. We expect to gain immediate cost synergies from the leveraging of these assets.

ScriptLINE Acquisition

In May 2002, we acquired selected assets of ScriptLINE. ScriptLINE is a leading provider of value-added edits for healthcare claims which enhance the profitability of pharmacies. ScriptLINE complements our existing pharmacy network services business and expands the comprehensive suite of edits available to the combined pharmacy customer bases of both organizations.

One of the fastest growing facets of the pharmacy transaction market today is pre-and-post edits. The combined product offering will compliment our market leading position and increase our market presence in this rapidly growing editing market segment. ScriptLINE also adds volume and scale to our existing network operations, increasing our leverage and improving margins going forward. We intend to integrate ScriptLINE directly into our pharmacy network platform and we expect to gain immediate cost synergies in processing, marketing, customer support and product development.

Cardinal Health Alliance

In May 2002, we also entered into a strategic alliance with the Pharmaceutical Distribution and Provider Services segment of Cardinal Health to jointly market and develop products and services for the healthcare industry. As part of the alliance, NDCHealth editing services under the ScriptLINE brand will continue to be offered to pharmacies exclusively by Cardinal Health. The alliance also provides for joint development between NDCHealth and Cardinal of additional marketing programs, products and services.

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Cegedim Alliance

In December 2001, we announced a joint venture with Cegedim, S.A. in the United Kingdom. We have combined our informatics businesses to broaden the product offerings to pharmaceutical manufacturers in the UK under the name InfoPharm. The financial results of the joint venture are recorded on the income statement as Equity in losses of affiliated companies.

MedUnite Alliance

During July 2001, in exchange for the assets of our physician network services business, we received an equity interest and became an investor in MedUnite, Inc. along with the following leading U.S. health insurance companies: Aetna, Anthem, CIGNA, Health Net, Oxford, PacifiCare, and Wellpoint Health Networks. MedUnite offers a nationwide transaction network to connect providers and payers. We exclusively market MedUnite’s physician network services to customers using our practice management systems. As a provider of physician software, our objective in our alliance with MedUnite is to provide additional application capabilities for our physician customers.

As previously reported, we have continued to monitor our investment in MedUnite in light of MedUnite’s progress in executing on its business strategy and in seeking and evaluating proposals for its proposed recapitalization. As reflected in our financial statements included in this Form 10-K, we have taken a non-cash charge to write down the carrying value of our investment in MedUnite. On August 19, 2002, the financial advisors to MedUnite’s Board of Directors shared with us that they had evaluated several preliminary proposals and selected parties with which they intend to proceed with further evaluation discussions and negotiation of a potential recapitalization transaction. In addition, we understand that other parties have recently indicated their interest in potentially submitting a proposal to MedUnite. Based upon this information, as well as an updated evaluation of MedUnite’s results and of capital market conditions, we have determined that the carrying value of MedUnite has declined and that such decline is not temporary. Therefore, in accordance with the provisions of SFAS 115 “Accounting for Certain Investments in Debt and Equity Securities” we have reduced the carrying value of our investment in MedUnite to $12.2 million by way of a non-cash charge reflected in our financial statements for the year ended May 31, 2002. This charge is described more fully in Note 19 of the Notes to Consolidated Financial Statements.

We continue to believe that our relationship with MedUnite provides important strategic value to NDCHealth. We believe that a recapitalized MedUnite will continue to offer us the ability to provide the additional application capabilities of MedUnite’s physician network services to our physician customers. We continue to be optimistic with respect to the potential to increase the number of U.S. physicians who submit claims electronically and that such an increase should allow us to receive a growing revenue stream from our association with MedUnite.

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In fiscal year 2002, revenue related to MedUnite was approximately $8.0 million. Additionally, at May 31, 2002 we had a note receivable from MedUnite, including accrued interest, of approximately $2.4 million and a convertible note receivable, including accrued interest, of approximately $5.4 million.

Global Payments

Because of the nature of certain systems shared by Global Payments and ourselves prior to the spin-off, we jointly determined that it was in the best interest of both companies for us to continue to provide services to Global Payments utilizing these systems. Therefore, we entered into a network services agreement whereby we provide transaction processing services for Global Payments. Global Payments reimburses us for these services at a rate that approximates our costs and is established annually. The initial term of the agreement ends January 30, 2004 and is extendable for two additional years. In addition, Global Payments currently occupies an office building we own that is adjacent to our corporate headquarters. We maintain the building, which Global Payments occupied prior to the spin-off, as a part of our corporate campus. As part of the spin-off agreement, the building is currently leased to Global Payments at a rate that approximates our cost of maintaining the building for a term ending January 31, 2004.

Business Landscape and Competitive Forces

Overall Landscape of the Business

On a macro level, we grow as our customers grow. Our markets continue to be influenced by favorable macroeconomic trends such as:

· An aging population;

· Expected steady increase in prescription drug use as new drugs are made available;

· Increasing rates of conversion from manual to electronic systems;

· Growth in pharmacy sales among the largest U.S. pharmacy chains;

· Pending federal legislation to stimulate more electronic transaction processing; and

· Demand for increasingly sophisticated information products and market intelligence by pharmaceutical manufacturers and others in the healthcare industry.

There are also growth drivers that are specific to NDCHealth. The five major NDCHealth-specific categories of revenue growth that we visualize are:

· We have a large, under-penetrated customer base that uses only a small percentage of our existing products and services;

· We have broad distribution channels to add new customers;

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· We have a significant pipeline of new products to market to existing and prospective customers;

· We are expanding into new markets such as the international and the payer arenas; and

· Through acquisitions and alliances, we can selectively expand our service offerings, geographic reach and distribution channels.

Competitive Forces

As mentioned in Item 1 “Business” of this Annual Report on Form 10-K, we have a number of competitors. We compete with in-house capabilities of healthcare organizations. We compete with other vendors of information products and services in the healthcare information industry such as IMS Health, Verispan, and Arclight. We compete with other providers of transaction services such as WebMD and we compete with direct connections to payers. We also compete with a number of small vendors of pharmacy, physician, provider, and hospital solutions.

A key factor for our success in the competitive landscape is speed to market of innovative new products and product enhancements that provide benefit to our customers. Products added in 2002 include:

NDC Prescription Price Reporter enables retail pharmacies to optimize their cash prescription pricing in their regional market. This new product allows for the analysis of cash pricing for the top 250 multi-source brand/generic drugs for every dispensed quantity by geography. It also features web-delivery, an easily accessible solution for pharmacies of all sizes.

NDC Pharmaceutical Audit Suite (PHAST) is a powerful audit tool that allows pharmaceutical manufacturers access to a unique combination of retail, institutional and mail order pharmaceutical sales data. This robust product is used for forecasting, competitive analysis, sales targeting and profiling and sales performance measurement.

Institution Sales Analyzer is a comprehensive web-based data resource that provides pharmaceutical manufacturers with extensive capabilities to track and analyze sales information in U.S. non-retail institutions, including highly specific geographic and outlet-affiliated levels of detail. This data is essential information for pharmaceutical product managers, market research analysts and sales management responsible for a variety of strategic planning, sales and performance evaluations.

With our recent acquisition of a majority interest in TechRx, we have rolled-out a beta version of T-Rex One, a first-of-its kind next generation pharmacy system, to independent pharmacies. We expect to roll-out T-Rex One to major chains in calendar year 2003. The new system is designed to provide functionality to move certain processes from the individual pharmacy to central locations and chain headquarters. The

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new applications are known in the industry as “central patient management,” “central processing” and “central fill” applications.

We recently began beta testing of ePremis, a new browser-based version of our hospital solution that helps ensure the accuracy and completeness of submitted claims. This new product offers our customers an enhanced set of editing services that can be accessed from any terminal in the hospital giving maximum flexibility and personnel efficiency. ePremis will be available as both a turn-key system installed in the hospital or as a remotely hosted application centrally managed by NDCHealth.

Application of Critical Accounting Policies

Critical accounting policies are those policies that can have a significant impact on the presentation of our financial position and results of operations and demand the most significant use of subjective estimates and management judgment. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Specific risks inherent in our application of these critical policies are described below. For all of these policies, we caution that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment. These policies often require difficult judgments on complex matters that are often subject to multiple sources of authoritative guidance. Additional information concerning our accounting policies can be found in “Note 1—Summary of Significant Accounting Policies.”

Revenue

Although we have several sources of revenue, in all cases, we recognize revenue when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, delivery has occurred, and collectibility is probable. The most variable of these factors between our various businesses is determining when delivery has occurred.

In our Information Management segment, we have two primary sources of revenue: database information reporting and consulting services. Database information reporting typically involves the delivery of products providing pharmaceutical information. These include products where delivery is completed at one point in time and products where delivery is made over a period of time. Revenue for products involving a single delivery is recognized when obligations to the customer have been fulfilled, which is typically upon delivery. Products that are delivered over a period of time are generally unique in nature and therefore require more complex judgment to determine appropriate revenue recognition. In most cases, information of a similar type is delivered at equal intervals over a fixed period of time in which case revenue is recognized over the terms of the contract using a straight-line model. Because we must make estimates of the data and effort that will be required to deliver these types of products in the future, there are risks that more or less effort may actually be required at a future time and that the revenue recognized at that time may not correspond to the level of effort required for product delivery.

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Our consulting services are typically provided for a fixed fee over a specific period of time. Because the terms of these contracts are very specific, revenue for these services is recognized using the percentage-of-completion model over the term of the contract. If we determine that we will incur a loss on a contract, we recognize the loss at the time the determination is made. These contracts typically average 6 to 12 months.

In our Network Services and Systems segment, the primary source of revenue is transaction fees charged for network services. We provide these services to our pharmacy, hospital, physician, and payer customers. These fees are generally based on the volume of services we provide to each individual customer. In most instances, this fee is charged per transaction and type of transaction while in some instances, these services are provided to large customers for a fixed monthly fee, regardless of each month’s actual transaction volume. Revenue for these services is recognized each month as the services are rendered.

In our systems businesses, we also receive revenue from software licenses and related maintenance and support agreements. In October 1997, the American Institute of Certified Public Accountants issued Statement of Position (SOP) No. 97-2, “Software Revenue Recognition” as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” These SOP’s provide guidance on applying accounting principles generally accepted in the United States for software revenue recognition transactions.

Revenues from the sale of software licenses and implementation services are recognized upon the date that the software is in operation at the customer site where vendor specific objective evidence (VSOE) has been established for the undelivered elements of the customer contract, which typically is maintenance. In these cases, the maintenance revenue and associated costs are recognized over the term of the maintenance contract. Where VSOE cannot be established for undelivered elements within the contract, the revenue and associated costs for implementation services are deferred and recognized upon acceptance over the remaining term of the contract, typically two or three years.

The software we license to our customers is generally one of two types. The most common software type is used by our customers to manage their businesses and connect to our network. Because this type of software has stand alone functionality (meaning that connection to our network is not required for the software to be functional), we recognize revenue for sales of these products when the product is shipped, if it is installed by the customer, or when installed by us or one of our affiliates. The other type of software is software used by our customers to process transactions through our network. Because this software provides value to our customers only to the extent that they are utilizing our network services, revenue is recognized over the estimated life of the network services contract rather than when the software is shipped or installed.

We provide software maintenance and customer support to our customers on both an as needed and long term basis. Services provided outside a maintenance contract are

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on an as requested basis and revenue is recognized as the services are provided. Revenue for services provided on a long term basis is recognized ratably over the terms of the contract.

During 2002, we adopted the provisions of Emerging Issues Task Force Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products.” Many of our physician systems are sold indirectly through value added resellers (VARs). Because the VARs are providing many of the services that we would otherwise provide (such as contract support, advertising, etc.), we have historically provided them certain allowances to cover their cost of providing these services. Historically, we had recorded revenue relating to the sale of systems through VARs at full price (the same list price we sell directly to end users) and recorded the allowances as expense. We now record revenue in accordance with EITF 01-09 which generally requires that such allowances be treated as reductions in revenue. As required by EITF 01-09, fiscal 2002 and 2001 revenue was reduced by $18.0 million and $7.7 million, respectively.

Also during 2002, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with TechRx under which we agreed to acquire TechRx in a two-step transaction. Because we are now the controlling shareholder, our financial statements have been retroactively adjusted to account for TechRx as an equity investment since the initial investment as required by Accounting Principal Board Opinion No. 18, “Equity Method of Accounting for Investments in Common Stock” (“APB 18”). The adjustments required by APB 18 are a reduction in revenue of $6.0 million and $5.1 million in fiscal years 2002 and 2001, respectively.

Intangible assets

Intangible assets are created when the purchase price of an acquired business exceeds the value of its physical assets. For any significant business we acquire, we obtain a valuation from an independent specialist who identifies any specific intangibles and provides an estimated value and life for each. Goodwill exists where our purchase price exceeds the value of physical assets plus these specifically identified intangible assets.

Specified intangible assets primarily represent developed software and customer relationships. Identified intangibles are assigned a value, generally that which was estimated in the valuation, and amortized over the estimated life. Because of the complexity of assumptions and judgment used in estimating the value and life of these assets, there is significant risk that their actual value and life may vary from the original estimate. We periodically evaluate whether events and circumstances have occurred that indicate the carrying amount of intangibles may warrant revision or may not be recoverable. When factors indicate that an intangible should be evaluated for possible impairment, we estimate the present value of future cash flows associated with the asset over its remaining life. We may determine that an intangible asset has diminished or has no remaining value prior to it being fully amortized. In this instance, we would be required to incur a charge to earnings to impair the asset.

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In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, “Goodwill and Other Intangible Assets.” We adopted this new standard in the first quarter of 2002. One of the underlying assumptions of SFAS 142 is that goodwill doesn’t have a determinable useful life. However, it is possible to compare the carrying value of the goodwill to the underlying value of the business. As such, SFAS 142 requires that goodwill no longer be amortized but be reviewed for impairment on a regular basis. As part of our adoption of SFAS 142, we completed our initial impairment tests during the second quarter of 2002 by comparing the present value of the estimated future cash flows of each of our reporting units to the book value of that unit’s assets. Our reporting units are defined as our Pharmacy, Hospital, and Physician businesses in our Network Services and Systems segment plus our total Information Management segment. For each of our reporting units, we found that the present value of each unit’s estimated future cash flows exceeded the net book value of the unit and therefore no impairment was necessary. Due to the size of the TechRx and ScriptLINE acquisitions, we reviewed our test as of May 31, 2002 and found that no adjustments were required.

If the estimated current value of future cash flows of any unit had been lower than its book value, we would have performed additional tests to determine the magnitude of impairment. Any impairment would require a non-cash charge to earnings in the period in which the impairment was identified. We will conduct these same tests going forward at least annually to ensure that goodwill carried on our balance sheet is properly valued.

Capitalized software

Internally developed software held as property on our balance sheet consists of two types, software that we develop for sale to our customers and software that we develop that is used internally to provide services to our customers. The costs associated with developing this software are capitalized differently depending on whether the software is for sale or for internal use. In each instance, in accordance with SFAS 86 costs are capitalized only when the project has reached the point of technological feasibility or the application development stage. Costs incurred prior to this point are charged to earnings as research and development expense.

For software sold to our customers, in accordance with SFAS 86 we capitalize both direct and indirect development costs such as programmers’ salaries, outside contractor costs, computer time, and allocated facility costs. For software used internally, in accordance with SOP 98-1 direct development costs such as programmers’ salaries and fees paid to others for development are capitalized. In each instance, completed projects are amortized after reaching the point of general availability using the greater of the amount computed using the straight-line method or the ratio that current revenues bear to the total of current and anticipated revenues, based on the estimated useful life of the project, normally five years. This life is based on the projected period of time that we will either sell the product or use the product to provide services. The actual useful life of the product may be longer or shorter than the estimated useful life. If the actual life is longer, we

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would continue to realize value from the asset while no longer recognizing a corresponding expense. If the actual life is shorter and we determine that the investment will not be recovered through the future sales of products or services, a non-cash charge to earnings could be required. The net realizable value of capitalized software is monitored on a periodic basis to ensure that the investment will be recovered through the future sale of products or services.

Allowance for doubtful accounts

In the ordinary course of business, we extend credit to our customers for products and services they purchase from us. Monies due us are shown on our balance sheet as Accounts receivable. While we collect the vast majority of these receivables, we historically have been unable to collect a fraction of the accounts, or portions thereof. Allowance for doubtful accounts reflects our best estimate of the amounts that will be uncollectible and is determined by reviewing the aging of our accounts receivable. As we review our accounts as part of our collections process, accounts or portions thereof deemed to be uncollectible or to require excessive collection costs are written off to the allowance. Because our allowance is based on estimated uncollectibility, amounts that are actually uncollectible could be higher or lower. If the amounts are lower than expected, a credit to earnings could result whereas if the amounts are higher, an additional charge to earnings could be required. Our provision for bad debt expense over the past two years has been less than 0.5% of total revenue.

Data costs

We purchase data from a variety of sources primarily for use in our information products. This data is used in a variety of products and services as described above under “Revenue.” These data costs are typically held in inventory at the time of purchase with the majority expensed during one, or over several, months depending on the timing of payments for the data and as products utilizing the data are delivered to customers. Occasionally, we expand our product offerings by modifying our current products for a new market. In these cases, additional or new types of data costs may be incurred in developing the history database for these new products and we defer the additional data costs. These data costs are then amortized over the average life of the contracts for the new products, generally one to three years.

Investments

We consider and selectively enter into a variety of alliances, joint ventures and investments. As such, we maintain investments in both privately held and publicly traded entities.

Our investments in privately held entities are accounted for under either the cost, equity, or consolidation method, whichever is appropriate for the particular investment. The appropriate method is determined by our ability to exercise significant influence over the investee, through either quantity of voting stock or other means. We regularly review our investments for impairment issues and propriety of current accounting treatment. The primary method we use to determine whether or not an impairment issue exists is to

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compare the valuation of our investment with the underlying value of the entity in which we have an investment. We can determine the underlying value of the entity based on a number of factors, including the execution of business strategy and the steps that it has and is taking in the execution of that strategy, and the entity’s subsequent financing activity. If we determine that an impairment issue exists, we would realize the loss in Other income (expense) in accordance with SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.” If we determine that our accounting treatment should change from the cost to equity method, in accordance with the provisions of Accounting Principles Board Opinion No. 18, “Equity Method of Accounting for Investments in Common Stock” we would be required to retroactively restate our previously issued financial statements as if we had always accounted for the investment under the equity method. If our level of investment increased to a level such that we directly or indirectly controlled the entity, we would consolidate the entity’s results into our consolidated financial statements.

We have continued to monitor our investment in MedUnite in light of MedUnite’s progress in executing its business strategy and in seeking and evaluating proposals for its proposed recapitalization. As reflected in our financials statements, we have taken a non-cash charge writing down the carrying value of our investment in MedUnite. On August 19, 2002, the financial advisors to MedUnite’s Board of Directors shared with us that they had evaluated several preliminary proposals and selected parties with which they intend to proceed with further evaluation discussions and negotiation of a potential recapitalization transaction. In addition, we understand that other parties have recently indicated their interest in potentially submitting a proposal to MedUnite. Based upon this information, as well as an updated evaluation of MedUnite’s results and of capital market conditions, we determined that the carrying value of MedUnite had declined and that the decline was not temporary. Therefore, in accordance with the provisions of SFAS 115 “Accounting for Certain Investments in Debt and Equity Securities” we reduced the carrying value of our investment in MedUnite to $12.2 million by way of a non-cash charge reflected in our financial statements for the year ended May 31, 2002. This charge is described more fully in Note 13 and Note 19 of the Notes to Consolidated Financial Statements. The charge reduced our previously announced fiscal 2002 net income by $28.3 million, after application of a $12.7 million tax benefit, and reduced previously announced fiscal 2002 diluted earnings per share by $0.79.

Our investments in publicly traded entities are classified as available-for-sale securities and are reported at fair value and unrealized gains and losses are reported, net of taxes, as a component of stockholders’ equity. For example, if the market price of our investment has declined but we believe that the decline is only temporary because the underlying value of the business is higher than the market indicates, we will report the value of our investment at the price indicated by the market and report any change in the investment’s value as an unrealized holding loss. When a decline is determined to be other than temporary, we realize the gain or loss in Other income (expense).

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Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make other estimates and assumptions in addition to those discussed above. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates.

Recently Issued Accounting Pronouncements

In August 2001, the FASB issued SFAS 144. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. It supersedes Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and requires that discontinued operations be measured at the lower of the carrying amount or fair value less cost to sell. We have evaluated this statement, and it does not have a material impact on our results of operations or financial position.

In April 2002, the FASB issued SFAS 145, “Rescission of FASB statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections,” which clarifies the criteria under which extinguishments of debt can be considered as extraordinary and rescinds the related Statement Nos. 4, 44, and 64 and also makes technical corrections to other Statements of Financial Standards. We believe that the adoption of this statement will not have a material effect on our future results of operations.

In June 2002, the FASB issued SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred and nullifies EITF 94-3. We do not believe that this statement will have a material impact on our results of operations or financial position. However, the statement will likely change the timing of recognition of any future restructuring activity.

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Financial Review

We operate our business as two fundamental segments: Network Services and Systems; and Information Management. Network Services and Systems provides electronic connectivity to our NDCHealth Intelligent Network and system solutions throughout the healthcare industry. Information Management provides management information, research, and consulting services to pharmaceutical manufacturers, pharmacy chains and hospitals. Other includes results from divested businesses, restructuring and impairment charges, income related to gains from the sale of securities, income related to gains on business divestitures, and expense related to non-cash losses on investments in Medscape and MedUnite.

	2002			2001			2000			2002 vs. 2001 Change					2001 vs. 2000 Change
	(In millions, except per share data)
Revenue:
Information Management	$	150.4		$	136.6		$	131.3		$	13.8		10.1	%	$	5.3		4.0	%
Network Services and Systems		198.6			176.0			139.6			22.6		12.8	%		36.4		26.1	%
Subtotal Revenue	$	349.0		$	312.6		$	270.9		$	36.4		11.6	%	$	41.7		15.4	%
Other		4.4			24.5			74.8			(20.1	)	(82.0	%)		(50.3	)	(67.2	%)
Total Revenue	$	353.4		$	337.1		$	345.7		$	16.3		4.8	%	$	(8.6	)	(2.5	%)
Operating Income
Information Management	$	26.6		$	19.8		$	20.7		$	6.8		34.3	%	$	(0.9	)	(4.3	%)
Network Services and Systems		51.1			35.6			28.4			15.5		43.5	%		7.2		25.4	%
Subtotal Operating Income	$	77.7		$	55.4		$	49.1		$	22.3		40.3	%	$	6.3		12.8	%
Other		(0.6	)		(1.6	)		(36.7	)		1.0		62.5	%		35.1		95.6	%
Total Operating Income	$	77.1		$	53.8		$	12.4		$	23.3		43.3	%	$	41.4		333.9	%
Income (Loss) Before Discontinued Operations	$	15.1		$	24.2		$	(1.2	)	$	(9.1	)	(37.6	%)	$	25.4		n/m
Net Income (Loss)	$	15.1		$	32.5		$	(40.2	)	$	(17.4	)	(53.5	%)	$	72.7		n/m
Diluted Earnings (Loss) Per Share Before Discontinued Operations	$	0.43		$	0.71		$	(0.03	)	$	(0.28	)	(39.4	%)	$	0.74		n/m
Diluted Earnings (Loss) Per Share	$	0.43		$	0.95		$	(1.21	)	$	(0.52	)	(54.7	%)	$	2.16		n/m

Revenue

Total revenue increased $16.3 million, or 4.8%, from 2001 to 2002 and decreased $8.6 million, or 2.5%, from 2000 to 2001. On a segment basis, Information Management revenue grew 4.0% from $131.3 million in 2000 to $136.6 million in 2001 and 10.1% to $150.4 million in 2002. The increase from 2000 to 2001 was due to new products and

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services offered to new and existing customers and our start-up operations in Europe. The increase from 2001 to 2002 was due to increased sales in Europe and the U.S. of contracted projects. Network Services and Systems revenue grew 26.1% from $139.6 million in 2000 to $176.0 million in 2001 and 12.8% to $198.6 million in 2002. The growth from 2000 to 2001 was due to increased demand for our services in the pharmacy and hospital markets resulting from growth in customer base and transaction volume and the favorable impact of the Medisoft acquisition in April 2000. The increase from 2001 to 2002 was due to increased transaction volumes and growth in customer base in the pharmacy and hospital markets and increased revenue from our network adjudication for pharmacies. Revenue from divested businesses (Other) accounted for $4.4 million, $24.5 million and $74.8 million in 2002, 2001, and 2000 respectively.

Network Services and Systems revenue was negatively impacted by two accounting changes in 2002. As previously discussed, our adoption of EITF 01-09 in 2002 required the reclassification of $18.0 million and $7.7 million in fiscal years 2002 and 2001, respectively, from revenue to operating expense. Also, as a result of our increased equity investment in TechRx, APB 18 required a retroactive adjustment to account for TechRx as an equity investment since our initial investment. This adjustment required a reduction in revenue of $6.0 million and $5.1 million in fiscal years 2002 and 2001, respectively.

Operating Income

Operating income grew 333.9% from $12.4 million in 2000 to $53.8 million in 2001 and 43.3% to $77.1 million in 2002. A portion of the increase in operating income from 2001 to 2002 was due to our adoption of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 deals with, among other things, amortization of goodwill. Because goodwill was no longer amortized in 2002, amortization expense decreased $7.2 million from 2001. The remainder of the increase from 2001 to 2002 was due primarily to increased leverage of our infrastructure. Because of the fixed costs inherent in our business model, we have the ability to increase operating income at a higher rate than revenue. Excluding the impact of SFAS 142 in 2002, operating income increased 30% from 2001 versus the 4.8% increase in revenue.

Operating income in both 2000 and 2001 was negatively impacted by Restructuring and impairment charges. During the second quarter of 2000, executive management decided to focus attention on our core Information Management and Network Services and Systems businesses and actions were initiated to eliminate non-core as well as obsolete and redundant product and service offerings. In addition, we accelerated clearinghouse integration, consolidation of locations, and associated staff and expense reductions. As a result, a Restructuring and impairment charge of $34.4 million was recorded in the second quarter of 2000 and categorized as follows:

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	Total		Cash		Non-cash
	(In millions)
Impairment of goodwill and other intangibles	$	16.0	$	—	$	16.0
Impairment of property and equipment		6.9		—		6.9
Closed or planned closings of facilities		6.1		6.1		—
Estimated costs for settlements on contracts		3.2		2.2		1.0
Severance and related costs		2.2		2.2		—
Total	$	34.4	$	10.5	$	23.9

Approximately $10.5 million were cash items that were accrued at the time the charges were incurred. The charges relating to facilities represent the locations that were either already closed or had management approved plans to close within the next six months. The severance and related costs arose from actions to reduce personnel staffing in areas of redundant operations and activities. The charges reflect specifically identified executives and employees who were informed during the second quarter of 2000 that their employment would be terminated. There were approximately 115 employees terminated in the consolidation efforts and approximately 35 employees terminated as a part of reductions related to project completions or phase-outs.

As these actions were finalized and implemented, an additional $2.2 million of restructuring and impairment charges were incurred during the second quarter of 2001 when both our Salt Lake City operations and a portion of our Cleveland operations were closed. Of this total, approximately $1.2 million were cash items that were accrued at the time the charges were incurred. These cash items include severance and related costs of $1.1 million and facility exit costs of $0.1 million. The severance and related costs arose from actions to reduce personnel staffing in areas of redundant operations and activities. These charges reflect 58 specifically identified executives and employees who were informed of their termination during the second quarter of 2001. The facility costs relate to a location that was closed during the quarter. The remaining $1.0 million impairment charge was the result of the write down and divestiture of a non-core operation. These restructuring and impairment charges are included in the Other segment. More detailed discussion of these charges is contained in Note 13 of the Notes to the Consolidated Financial Statements.

Operating income in 2000 was also negatively impacted by unusual expenses of $11.1 million which resulted from the programs discussed above but were not a component of the Restructuring and impairment charges. These expenses amounted to $5.3 million in Information Management, $4.8 million in Network Services and Systems, and $1.0 million in Other. Excluding these charges, Information Management operating income decreased 23.8% from $26.0 million in 2000 to $19.8 million in 2001 primarily due to the consolidation of four of our largest pharmaceutical customers and losses incurred in our start-up operations in Europe. Including these charges, Information Management operating income decreased 4.3% from $20.7 million in 2000 to $19.8 million in 2001 and increased 34.3% to $26.6 million in 2002. The increase from 2001 to 2002 was due to increased revenue, which allows us to leverage our infrastructure, our adoption of SFAS 142, and cost savings discussed below. Excluding the charges,

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Network Services and Systems operating income increased 7.2% from $33.2 million in 2000 to $35.6 million in 2001. Including the charges, Network Services and Systems operating income increased 25.4% from $28.4 million in 2000 to $35.6 million in 2001 and 43.5% to $51.1 million in 2002. The increase of 43.5% from 2001 to 2002 was due to increased revenue and cost savings efforts.

More information concerning segments can be found in Note 12 of the Notes to the Consolidated Financial Statements.

Operating Expenses

Our most significant expenses are compensation, data costs, depreciation and amortization, and communications expense. Together these expenses represented over 70% of our operating expenses in 2002.

Expenses that we classify as cost of service include compensation, computer operations, data costs, consulting services, telecommunications, customer support, and application maintenance expenses. In Sales, general and administrative we include compensation, sales, marketing, administration, and corporate overhead expenses.

Compensation Expense

As a service organization, compensation is our largest expense and we must continue to monitor it closely. In general, we are not always able to pass our inflationary cost increases on to our customers. As our costs go up, we must find new ways to operate our business in order to reduce costs and improve productivity. This includes addressing under-performing projects, products and people.

As a percent of revenue, compensation expense, which includes incentive pay, commissions, and related fringe benefits, has been decreasing. This decrease is due to increased productivity as a result of our training initiatives and cost control efforts, divestiture of less productive businesses, and the scalability of our business model. We will continue to look for ways to improve efficiencies, including centralization, in our businesses.

	2002			2001			2000
	(In millions)
Compensation Expense	$	101.7		$	114.3		$	118.4
Revenue	$	353.4		$	337.1		$	345.7
Percent of Revenue		28.8	%		33.9	%		34.2	%

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Data Costs

We buy data from various sources to supplement our own data collection efforts. As a percent of revenue, data costs have been increasing due to increasing cost to purchase data. We are actively pursuing programs to contain the increase in data costs.

	2002			2001			2000
	(In millions)
Data Cost	$	47.1		$	37.1		$	32.1
Revenue	$	353.4		$	337.1		$	345.7
Percent of Revenue		13.3	%		11.0	%		9.3	%

Depreciation and Amortization

Depreciation and amortization expense decreased significantly in 2002 due to our adoption of SFAS No. 142. Because goodwill was no longer amortized in 2002, amortization expense decreased $7.2 million from 2001. We expect Depreciation and amortization expense to increase in 2003 as a result of the TechRx and ScriptLINE acquisitions.

	2002			2001			2000
	(In millions)
Depreciation and Amortization	$	24.4		$	34.7		$	31.8
Revenue	$	353.4		$	337.1		$	345.7
Percent of Revenue		6.9	%		10.3	%		9.2	%

Communications Costs

Communications costs have been declining in terms of dollars and as a percent of revenue. From 2000 to 2001 we consolidated our clearinghouses, and between 2001 and 2002 a number of customers moved to a frame network. The frame network provides a secure and reliable form of communications at a lower cost than private lines. We also negotiated new contracts with our vendors under more favorable terms. We expect that communications costs will continue to decline as a percentage of revenue but may not decrease at the rate we experienced over the last year. We continue to look at new technologies that will allow us to provide superior service to our customers at reduced cost.

	2002			2001			2000
	(In millions)
Communication Cost	$	14.6		$	19.8		$	20.7
Revenue	$	353.4		$	337.1		$	345.7
Percent of Revenue		4.1	%		5.9	%		6.0	%

Sales, General and Administrative Expense

Sales, general and administrative (SG&A) expense consists primarily of salaries, wages and expenses relating to sales, marketing, administrative and management

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employees, employee training costs, and occupancy of leased space directly related to these functions. As a percentage of revenue, during 2002, 2001, and 2000, SG&A expense was 21.8%, 23.0%, and 24.9%, respectively. This decline in expense margin is due to centralization efforts and cost containments. We expect that SG&A expense will continue to decline as a percentage of revenue but may not decrease at the rate we experienced over the last year

Liquidity and Capital Resources

Payments from our customers are our greatest source of liquidity. Additional sources of liquidity include our revolving line of credit, issuances of common stock and other instruments, financing under capital lease arrangements, and vendor financing. The cash provided by these sources has a variety of uses. Most importantly, we must pay our employees and vendors for the services and materials they supply. Additional uses include expenditures for new capital equipment, development of additional products, investments in alliances, business acquisitions, payment of taxes, payment of dividends, and extension of credit to our customers.

Our operating cash requirements are generally satisfied with our customer receipts because revenue from our customers exceeds our operating expenses. We receive a higher level of cash from our customers than we expend for payments of salaries and other recurring operating costs, and we manage our receivables and payables effectively. Excess cash that we generate after satisfying all of our continuing operating requirements is shown on our Statement of Cash Flows as Net cash provided by operating activities. Net cash provided by operating activities was $62.7 million in 2002, a slight decrease from $63.1 million in 2001. This measure takes into account items such as non-cash expenses included in our operating income, the cash payment of taxes, cash used to extend credit to our customers, and cash provided by our vendors extending credit to us. The most significant difference in this measure between 2001 and 2002 was the source of deferred tax assets used to reduce current tax payments. Deferred tax assets used in 2001 were related to Restructuring and impairment charges in 2000 and as such the cash provided by the use of the assets is displayed in Cash flows from operating activities. The deferred tax assets used in 2002 were primarily related to discontinued operations; therefore, the cash provided by the use of these assets is displayed in Cash flows from discontinued operations. This measure provides us an indication of the internally generated funds that we have available to invest in the growth of our business.

During the past three years, we have undertaken a significant initiative to centralize our finance support functions to ensure that Cash flow from operating activities is optimized. In 2000, we consolidated our purchasing and accounts payable functions. This has allowed us to leverage the buying power of all of our businesses and obtain the best pricing from our vendors and also ensure that payment to these vendors provides us with the best possible terms. During the latter half of 2002, we centralized our billing and accounts receivable functions. Although this resulted in a temporary increase in accounts receivable at May 31, 2002, we expect that in 2003 the benefits of this initiative will be faster billing to our customers and improved collections of accounts receivable.

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Net cash provided by operating activities is expected to be in the range of $80 to $85 million in 2003.

The nature of an information services business is such that it requires a substantial continuing investment in technology equipment and product development in order to expand the business. We are generally able to internally fund these investments from excess cash generated from operations. Additionally, historically we have also expanded our business through acquisitions and strategic investments in other businesses. The cash we use to expand our business is shown as Net cash used in investing activities. Capital expenditures, which reflect our investment in equipment and product development, were $31.0 million in 2002 and $32.9 million in 2001. These investments were funded from cash from operations in both years. Due to the inclusion of TechRx in 2003, we expect that these capital investments will be in the range of $40 to $45 million in 2003. This increase represents the continuing investment in T-Rex One, a first-of-its kind next generation pharmacy system.

During 2002, we acquired a controlling interest in TechRx and select assets of ScriptLINE from Arclight Systems. These acquisitions used cash totaling $119.6 million in 2002 compared to $23.2 million for acquisitions in 2001. Acquisitions in 2001 included our German informatics business and a printing services business in the U.S. The 2001 acquisitions were funded with excess cash from operations whereas the 2002 acquisitions were funded with both borrowings under our line of credit and cash from operations.

The acquisition of a controlling interest in TechRx in 2002 was the first step of an agreement to acquire all outstanding shares of TechRx in a two-step transaction. Under the second step, which would close on or about May 31, 2003, if certain conditions are met, we will acquire the remaining shares in TechRx from minority shareholders for cash, NDCHealth shares or a combination of cash and NDCHealth shares. The amount of the payment to TechRx shareholders will be determined based upon the satisfaction of certain financial and operational milestones by TechRx. The expected purchase price for the balance of the TechRx shares outstanding ranges from approximately $100 million to $200 million.

As previously mentioned, borrowings under our line of credit also provide us an additional source of liquidity. At the time of the spin-off of Global Payments, we obtained a credit facility with a one-year term providing a $50 million unsecured revolving line of credit and an option for us to convert any outstanding borrowings at the maturity date to a term loan repayable at the first anniversary of the initial maturity date. We exercised this option during the third quarter of 2002 and converted $50 million outstanding under the unsecured line of credit to a term loan. During the fourth quarter of 2002, we obtained a new credit facility providing a $150 million unsecured revolving line of credit and repaid the $50 million term loan. This new credit facility has a variable interest rate based on market rates and has a three-year term. The credit agreement contains certain financial and non-financial covenants customary for financings of this nature, such as requiring us to maintain a certain leverage ratio of debt to Adjusted

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EBITDA. Adjusted EBITDA is defined in the credit agreement as Net income plus income taxes, interest expense, and non-cash charges. If by May 1, 2003, our obligations under our Convertible Subordinated Notes (discussed below) have not been paid in full or amended such that they mature after May 1, 2005, the facility will expire on May 1, 2003. We borrowed $91 million under our new facility in 2002 in order to partially fund the acquisitions described above. In 2001, we used $68.5 million of the $77.6 million cash dividend from Global Payments to pay the balance outstanding under our previous line of credit at the time of the spin-off.

Stock activities provide us an additional source of liquidity. Stock activities are primarily related to the exercises of employee stock options and issues under the employee stock purchase plan. In 2002, issuance of common shares of NDCHealth generated $6.6 million versus $7.4 million in 2001. Although the issuance of additional shares provides us with liquidity, it results in a dilution of each individual stockholder’s equity in the Company. We may choose to use cash to repurchase shares to reduce the number of our shares outstanding in order to counteract this dilution. As mentioned above, the acquisition of the remaining shares of TechRx may be paid in cash, NDCHealth shares, or a combination of both. The number of shares issued will depend on the acquisition price, the trading price of NDCHealth shares at the time of the transaction, and the form of payment made to TechRx shareholders. We intend to register shares to be used in the second step of the acquisition during fiscal 2003. Another use of cash is the payment of dividends. Because the amount of our quarterly dividend was reduced in the third quarter of 2001 following the spin-off of Global Payments, cash used for payment of dividends decreased to $5.5 million in 2002 from $8.8 million in 2001.

As mentioned above, deferred tax assets related to our discontinued operations allowed us to reduce our current cash tax payments by $21.2 million in 2002. We expect these deferred assets to be depleted in the first quarter of 2003. Discontinued operations also used $6.8 million in 2002, primarily in the settling of liabilities, versus $5.4 million in 2001. In addition, in 2001 we received a Cash dividend from Global Payments Inc. totaling $77.6 million.

We currently have $143.8 million of Convertible Subordinated Notes outstanding that will mature on November 1, 2003. The notes bear interest at 5% per annum and are convertible into approximately 4,140,000 shares of common stock at $34.72 per share at any time prior to maturity. We continue to evaluate several options to replace these notes including either, or a combination of, issuing new convertible notes or other equity linked securities or issuing senior debt, and we continue to monitor the capital markets. The actual effect of any refinancing will depend upon the refinancing option that we select, the timing of the refinancing and the rate that we must pay at that time. For example, should we refinance the notes in fiscal year 2003 by issuing a debt instrument of $150 million, we currently estimate that diluted earnings per share would be negatively impacted by approximately $0.00 to $0.04 in fiscal year 2003, plus a one-time charge relating to extinguishment of debt of approximately $0.02 to $0.03 per diluted share.

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As of May 31, 2002, we have a working capital deficit which means that our Current liabilities exceed our Current assets. We believe that our current level of cash on hand, future cash flows from operations, and our revolving line of credit are sufficient to meet our operating needs in 2003. As described above, we are evaluating various options for replacing our convertible notes including the issuance of new convertible notes or other equity linked securities or senior debt.

A summary of our contractual obligations are presented below:

	Payments Due by Period
	1-3 years		4-5 years		After 5 years		Total
	(In millions)
Contractual Obligations
Long term debt	$	164.8	$	—	$	—	$	164.8
Line of Credit		91.0		—		—		91.0
Capital lease obligations		3.4		—		—		3.4
Operating leases		24.5		7.5		15.4		47.4
Total contractual obligations	$	283.7	$	7.5	$	15.4	$	306.6

Outlook

For the 2003 fiscal year, we estimate that annual revenue will be approximately $445 to $455 million and diluted earnings per share in the range of $1.55 to $1.57, including approximately $11 to $12 million of MedUnite related revenue. For the first quarter of 2003, we expect revenue to be in the range of $99 to $102 million, with diluted earnings per share in the range of $0.31 to $0.33. As previously disclosed, if we elect to refinance our Convertible Subordinated Notes prior to May 31, 2003, we currently estimate that diluted earnings per share would be negatively impacted by approximately $0.00 to $0.04 in fiscal 2003, plus a one-time charge relating to extinguishment of debt of approximately $0.02 to $0.03 per diluted share.

We expect that both of our business segments will continue to benefit from improved operating efficiencies. For fiscal 2003, we expect that revenue for the Information Management segment will be in the range of $160 to $165 million. For Network Services and Systems, we expect that revenue will be in the range of $285 to $290 million, including approximately $11 to $12 million of MedUnite related revenue.

Our markets have significant untapped potential providing us the opportunity to grow our business and generate significant cash flow.

Additional Factors That May Affect Future Performance

In addition to the other information provided in our reports, including this Annual Report on Form 10-K, the following additional risk factors may affect the Company’s results. We have provided the following risk factor disclosure in conjunction with our continuing effort to qualify our written and oral forward-looking statements for the protection of any safe harbor provision that protects companies from securities law liability in connection with such forward-looking statements. We undertake no

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obligation to update or revise our forward-looking statements or these risk factors to reflect future developments, changed assumptions, the occurrence of unanticipated events or changes to future operating results. Important factors currently known to our management that could cause actual results to differ materially from those in forward-looking statements include the disclosures contained in the Annual Report on Form 10-K and also include the following:

We may experience volatility in our stock price.

The market price of our common stock may experience significant volatility from time to time. Such volatility may be affected by factors such as our quarterly operating results or changes in the economy, financial markets or the healthcare information and transaction processing industries, specifically, or the healthcare industry in general. In recent years, the stock market has experienced extreme price and volume fluctuations which has sometimes affected the market price of the securities issued by a particular company which may be unrelated to the operational performance of the company. This type of market effect could impact our common stock price as well. In addition, we may be subject to securities class action litigation if the market price of our stock experiences significant volatility. Our management’s attention and resources may be diverted from normal operations if we would become subject to any securities class action, which may have a material adverse effect on our business.

Intense competition could damage our sales and profitability.

If we are unable to compete successfully with providers of systems and services similar to ours, we may lose significant revenue. We compete not only with independent providers of similar systems and services, but also with unrelated businesses’ internal divisions that provide similar services. The markets in which we offer our systems and services are highly competitive with respect to functionality of products and services, price, quality and innovation. Competition in the markets in which we offer our systems and services affects our ability to attract new customers and keep existing ones, hire quality employees, and charge prices for our products and services that will maximize our profitability. Some of our competitors have greater access to capital and marketing and technological resources, and we cannot guarantee that we will be able to compete successfully with them.

We may not be able to replace our existing convertible debt on financially attractive terms.

We currently have $143.8 million of 5% Convertible Subordinated Notes outstanding that will mature on November 1, 2003. We continually monitor the capital markets, and anticipate replacing these notes on favorable terms. If we refinance in fiscal year 2003 by issuing a debt instrument of $150 million, we presently estimate that diluted earnings per share in that year could be reduced by up to $0.04, plus a one-time charge relating to extinguishment of debt of up to $0.03 per share. However, the actual effect of

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any refinancing will depend upon the refinancing option that we select, the timing of the refinancing, and the rate that we must pay at the time.

Adverse rulings in litigation could reduce our results of operations.

Our profitability could be affected by the outcome of litigation in Europe and in the United States. Our complaint filed before the European Commission against IMS Health, a competitor to our information business, seeking to compel the issuance of a license to allegedly proprietary data structures is presently before the European Commission, as well as its Courts, and is awaiting a decision. Further, we are currently awaiting judicial determination in Germany as to whether or not IMS Health holds a copyright in this structure. We are also involved in litigation related to our former Physician and Hospital Support Services and Hospital Management Services (PHSS) units. We are unable to predict either the outcome before the European Commission or the German courts, or whether we may incur liability stemming from the PHSS litigation. Liability resulting from adverse rulings could reduce our results of operation and profitability.

We may lose customers or revenue due to consolidation in the healthcare industry.

There has been and continues to be significant consolidation in the healthcare industry, which may reduce the number of existing customers for our services and may reduce the price we are able to charge those customers. In addition, this consolidation of healthcare providers and pharmaceutical suppliers may reduce the number of our potential customers. The increased purchasing power of larger consolidated organizations could also lead to reductions in the amounts these organizations are willing to pay for our services. We cannot predict the overall impact of consolidation in the healthcare industries, and it could have a material adverse effect on our business, financial condition and results of operations.

The value of our strategic investment in MedUnite may change with business conditions.

Our investment in MedUnite Corporation is presently accounted for under the cost method. MedUnite is an early stage venture among a number of leading health service payors and NDCHealth. MedUnite is currently evaluating several preliminary proposals in conjunction with a potential recapitalization transaction and has selected parties for additional negotiations. In addition, we understand that other parties have indicated their interest in potentially submitting a proposal to MedUnite. The valuation of MedUnite is dependent upon execution of its business strategy, transactions pursued in the execution of its strategy, and the results of its recapitalization transaction. Reduced growth, underperformance by MedUnite, or the outcome of the recapitalization transaction could cause us to reassess the carrying value of our investment in MedUnite and our continued use of the cost method. A reduced valuation or change in accounting method could reduce our profitability.

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Changes in the United States healthcare environment could have a material negative impact on our revenues.

In recent years, the healthcare industry, including the healthcare financing and reimbursement system, has changed significantly in an effort to reduce costs. These changes include increased use of managed care, cuts in Medicare and Medicaid payment and reimbursement levels, consolidation of pharmaceutical and medical-surgical supply distributors, and the development of large, sophisticated purchasing groups. We expect the healthcare industry to continue to change significantly in the future. Some of these changes, such as a reduction in governmental support of healthcare services or adverse changes in the delivery or pricing of pharmaceuticals and healthcare services or mandated benefits, may cause healthcare industry participants to reduce the price they are willing to pay for our products and services. Changes in pharmaceutical manufacturers’ research and distribution policies could also reduce our income. We are unable to predict the effect of such changes on our operations and profitability.

Complex state and federal regulations could depress the demand for information products and we could incur redesign costs or be subject to penalties.

The healthcare industry is highly regulated and is subject to changing political, regulatory and other influences. These factors affect the purchasing practices and operation of healthcare organizations. Federal and state legislatures and agencies periodically consider programs to reform or revise the U.S. healthcare system. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. We are unable to predict future proposals with any certainty or to predict the effect they would have on our business.

HIPAA Administrative Simplification

Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, Congress required the adoption of rules to establish standards and requirements for the electronic transmission of certain health information. Published rules include Standards for Electronic Transactions, published August 17, 2000, Standards for Privacy of Individually Identifiable Health Information, published December 28, 2000, and Standards for Unique Employer Identifiers, published May 31, 2002. These rules generally restrict the use and disclosure, and mandate security, of personally identifiable health information. The HIPAA rules apply to healthcare providers, health plans, including employer-sponsored group health plans, and healthcare clearinghouses, as well as indirectly, in certain instances, to those who provide services on behalf of these entities which involve the receipt of disclosure of health information. Certain of our operations will be subject to the HIPAA rules. Compliance with these final rules will be costly and could require complex changes in our systems.

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Transaction Standards

The Standards for Electronic Transactions rule requires format standards for eight of the most common healthcare transactions, using technical standards issued by certain recognized standards publishing organizations. Healthcare providers, plans and clearinghouses transmitting or receiving any of these eight health transactions electronically must send and receive data using a common format, rather than the large number of different data formats currently used. The initial compliance date for most entities was October 16, 2002; however, Congress recently enacted a process allowing providers, payers and clearinghouses to file for an extension of one year.

The transaction standards are applicable to that portion of our business involving the processing of healthcare transactions among providers, payers and other healthcare industry participants. The transaction standards apply to many of our customers and to our relationships with those customers. We intend to comply with the transaction standards by the compliance dates, but our customers and business partners may elect to file extensions. Compliance may require costly modifications to some of our systems, products and services. We believe that we are well-positioned to make these changes and assist our customers and strategic partners with compliance. However, there can be no assurance that we or our customers or strategic partners will be able to do so in a timely manner, or that we will be able to take advantage of any business opportunities or react to changes that may result from implementation of the transaction standards.

Other state and federal statutes and regulations governing transmission of healthcare information may affect our operations. For example, Medicaid rules require some processing services and eligibility verification to be maintained as separate and distinct operations. We carefully review our practices in an effort to ensure that we are in compliance with all applicable state and federal laws. These laws, though, are complex and changing, and the courts and other governmental authorities may take positions that are inconsistent with our practices thereby increasing our costs of complying or otherwise adversely affecting our operations.

Privacy Standards

The Standards for Privacy of Individually Identifiable Health Information rule establishes a set of national privacy standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses, healthcare providers and their business associates. This rule governs the use and disclosure of such information, and establishes procedures for access to and amendment of information in designated record sets. The compliance date for most entities is April 14, 2003. The privacy standards rule applies to the portions of our business that process healthcare transactions and provide technical services to other participants in the healthcare industry. This rule provides for civil and criminal liability for violations, and requires us, our customers and our partners to use health information in a highly restricted manner, to establish policies and procedures to safeguard the information, and may require us to obtain individual authorizations and acknowledgements in some cases, and to provide certain access rights to individuals. This rule may require us to incur significant costs to change our systems and services, and may restrict the manner in which we transmit and

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use the information. In addition, our provider or payer customers may elect to transmit information directly without using a clearinghouse, or may restrict our access to information needed to support our information services business. Each of these events could adversely affect our ability to generate revenues.

Numerous state and federal laws other than HIPAA govern the collection, dissemination, use, access to and confidentiality of patient health information. Many states are considering new laws and regulations that further protect the confidentiality of medical records or medical information. These state laws are not in all cases preempted by the HIPAA privacy standard and may be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us, our customers and business partners. Regulations governing electronic health data transmissions are evolving rapidly and are often unclear and difficult to apply. These other privacy laws at a state or federal level, or new interpretations of these laws, could create liability for us, could impose additional operational requirements on our business, could affect the manner in which we use and transmit information and could increase our cost of doing business. In addition, determining whether data has been sufficiently de-identified may require complex factual and statistical analyses.

The security rules promulgated pursuant to HIPAA have been proposed but have not been finalized. The purpose of the proposed security rules is to establish a minimum standard for the protection of individual health information that is stored or transmitted electronically. The rules provide administrative procedures, physical safeguards, and technical mechanisms that may be implemented to satisfy the regulations. When, and if, the proposed security regulations are finalized, they could result in significant financial obligations for us and will pose increased regulatory risk.

International Data Regulation

Other countries also have, or are developing, their own laws governing the collection, use, storage and dissemination of personal information or patient data. These laws could create liability for our international operations, impose additional operations requirements or restrictions on our business, affect the manner in which we use or transmit data and increase our cost of doing business.

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Regulation of Healthcare Relationships

Federal and state laws govern patient referrals, physician financial relationships and inducements to beneficiaries of federal healthcare programs. The federal anti-kickback law prohibits any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. The anti-kickback law is broad and may apply to some of our activities or our relationships with our customers, or business partners. Penalties for violating the anti-kickback law include imprisonment, fines and exclusion from participating, directly or indirectly, in Medicare, Medicaid and other federal healthcare programs. Many states have similar anti-kickback laws that are not necessarily limited to items or services for which payment is made by a federal healthcare program. We carefully review our practices in an effort to ensure that we comply with all applicable laws. However, the laws in this area are both broad and vague and it is often difficult or impossible to determine precisely how the laws will be applied. Any determination by a state or federal regulatory agency that any of our practices violate any of these laws could subject us to civil or criminal penalties and require us to change or terminate some portions of our business.

In addition, federal and state agencies have been conducting investigations purportedly related to referral and billing practices of hospitals, laboratories and similar institutions. Although we currently monitor our arrangements with healthcare institutions to ensure compliance with prevailing industry practices and applicable law, we cannot guarantee that governmental investigators will not take positions that are inconsistent with our practices.

In order to remain competitive and satisfy the requirements and needs of our clients, we must remain informed of and adapt to new regulations governing the transmission, use and processing of personal information in electronic commerce and over the Internet. Although many of these regulations may not apply directly to our business, we expect that these regulations and any new laws regulating the solicitation, collection or processing of personal or consumer information could indirectly affect our business. Our efforts to remain competitive and profitable and ensure compliance, and our customer’s compliance, with these regulations may require the expenditure of significant sums in research and development and investments in new technology and processes and will require significant attention from senior management.

Unanticipated changes in our accounting policies may be required because of mandates by standards setting organizations and could have a material impact on our financial statements.

In the process of managing our business and reporting financial results we rely on estimates and judgments made by management in the reporting and comparison of financial results. These judgments are based on the standards in place at that time.

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Standards setting organizations are continuously reviewing the methodology and application of standards previously set and adjusting them as they deem appropriate. In addition, new accounting standards may be formulated and released that could affect our reporting of actual results or outlook for anticipated future results. If these revised or new standards cause us to restate financial results from prior accounting periods it could have a negative impact on our previously reported results. Similarly, if revised or new standards affect reporting of results in the current or future periods the comparison to prior results under the old accounting standards may not be favorable. The investor is urged to use caution in this area in light of the current focus by regulatory agencies on accounting standards.

Our profitability may suffer if we are unable to continue our expansion in new and existing markets.

Our future growth and profitability depends, in part, upon our continued expansion within the healthcare electronic transaction processing and information services markets in which we currently operate, the further expansion of these markets, the emergence of other markets for electronic transaction processing and healthcare information services and our ability to penetrate these markets. As part of our strategy to expand into new and existing markets, we seek selective acquisition opportunities and alliance relationships with other businesses that will allow us to increase our market penetration, technological capabilities, product offerings and distribution capabilities. We cannot predict whether we will successfully identify suitable acquisition candidates in the future, or whether any acquisition will provide us with the ability to expand into new markets.

Expansion of the healthcare information services and electronic transaction processing markets is dependent upon the continued automation of traditional paper-based processing systems and demand for new decision support applications. Our ability to penetrate these markets depends upon our ability to apply our existing technology, or to develop new technology, to meet the particular service needs of each new or expanded market. We cannot guarantee that markets for our services will continue to expand and develop, that we will be successful in our efforts to meet the demands of these markets, or that we will have adequate financial, marketing and technological resources to penetrate new markets.

Defaults in payment or a material reduction in purchases of the company’s products by large customers could have a significant negative impact on our financial condition, results of operations and liquidity.

We have significant relationships with a limited number of large customers in our electronic processing and information services businesses that are achieving rapid growth. As a result, our sales concentration has increased. Any defaults in payment or a material reduction in purchases from us by these large customers could have a significant negative impact on our financial condition, results of operations and liquidity.

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Recent and future combinations and strategic relationships may not be profitable.

We are currently devoting significant management resources and other resources toward the integration of our recent strategic combinations and relationships. We have made substantial investments in HealthTran, LLC, a provider of pharmacy benefit administration, and in MedUnite, Inc. We recently acquired a majority interest in TechRx Incorporated, and we purchased the ScriptLINE claim processing assets of Arclight Systems, LLC. Entities in which we hold interests may, under certain conditions, require further investment by us. We may not be able to successfully integrate our existing operations with these business partners. Even if integration occurs successfully, failure of these relationships to achieve levels of revenue growth, profitability or productivity comparable with those achieved by our existing operations, or otherwise not perform as expected, may adversely impact our revenue and profitability.

We may spend significant resources developing and promoting new products or solutions that may not be profitable.

The market for our products and services is characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing customer needs. We cannot ensure that we will be successful in developing and marketing new products and services or that our products and services will adequately meet the quickly changing demands of our customers. In addition, in order to meet our customers’ demands, we are continually involved in a number of development projects, including our effort to update our core mainframe-based products for the healthcare information services markets. Because we cannot predict the time and cost required in reaching certain research, development and engineering objectives, the costs of product development initiatives could significantly exceed our estimates, and project development schedules could require extensions. In either of these events, our profitability and overall results of operations could be adversely affected. We believe that the future success of our business will depend in large part upon our ability to maintain and enhance our current product and service offerings and to continually develop and introduce new products and services that will keep pace with technological advances and satisfy evolving customer requirements. Further, we cannot ensure that we will not experience difficulties that could delay or prevent the successful development, introduction and marketing of these products and services. An inability to develop and introduce new products and services in a timely manner, or an unsuccessful new or updated product could materially adversely affect our financial condition and results of operations.

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Proprietary technology protections may not be adequate and proprietary rights may infringe on rights of third parties.

We rely on a combination of trade secret, patent, copyright and trademark laws, nondisclosure and other contractual provisions and technical measures to protect our proprietary rights in our products and processes. There can be no assurance that these protections will be adequate or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. Although we believe that our products and other proprietary rights do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against us in the future. Additionally, we may find it necessary to initiate litigation to protect our trade secrets, to enforce our patent, copyright and trademark rights, and to determine the scope and validity of the proprietary rights of others. Litigation can be costly and time consuming. Litigation expenses or any damage payments resulting from adverse determinations of third party claims could be significant and result in material losses to us.

We may need additional capital to continue our growth and expansion.

We may incur additional indebtedness in the future, including borrowings under a credit facility, if a credit facility is available, to finance acquisitions. As a result, we may be subject to risks associated with debt financing, including increased interest rate expense, insufficient cash flow to meet required payments on our debt, inability to meet credit facility covenants, and inability to refinance or repay the debt as it comes due.

Our anti-takeover provisions may limit stockholder value.

Certain provisions of our Certificate of Incorporation and By-laws, our stockholder protection rights agreement, and Delaware law may delay, defer or prevent a takeover attempt that a stockholder might consider in its best interest. A stockholder may not receive as much in exchange for his or her shares as they could without these provisions. The following is a description of the provisions that may reduce the market prices for our shares of common stock.

Our Certificate of Incorporation and our By-laws separate our Board of Directors into three classes of directors, with each class as nearly equal in number as the total number of directors permits. Each class serves for three-year terms, and each class’ term expires in different successive years. In addition, our Certificate of Incorporation authorizes the Board of Directors to issue preferred stock in one or more classes or series and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any action on the part of the stockholders. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect

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of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

Our stockholder rights plan issues rights to our common stockholders, which entitle them to purchase preferred stock upon the happening of certain events. These rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors unless the offer contains certain conditions. In addition, Section 203 of the Delaware General Corporation Law prohibits certain persons from engaging in business combinations, which may also have the effect of delaying, deterring or preventing a change of control.

If we lose the tax-free status of the recent spinoff, you and NDC could be subject to substantial tax liability.

As part of our spinoff of Global Payments, Inc., we received a tax ruling relating to the qualification of the distribution as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code. The continuing validity of a tax ruling is subject to certain factual representations and assumptions. If the distribution were to lose its status as a tax-free distribution, we would recognize taxable gain equal to the excess of the fair market value of our common stock distributed to our stockholders over our tax basis in the stock. In addition, each NDCHealth stockholder who received Global Payments, Inc. common stock in the distribution would generally be treated as receiving a taxable distribution in an amount equal to the fair market value of the stock.

If the distribution is disqualified as tax-free to NDCHealth because of certain post distribution circumstances, such as an acquisition of Global Payments, Inc. within two years after the distribution that, together with the distribution, is treated as a single plan, we would recognize taxable gain but the distribution would generally remain tax-free to each NDCHealth stockholder.

Under the tax-sharing and indemnification agreement between us and Global Payments, Inc., if the distribution fails to qualify as a tax-free distribution because of an acquisition of their stock or assets, or some other action of theirs, then Global Payments, Inc. would be solely liable for any resulting corporate taxes. However, if Global Payments, Inc. fails to indemnify us, we would be jointly and severally liable for federal income taxes resulting from the distribution being taxable.

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Item 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have performed sensitivity analyses over the near term regarding the risks listed below. Based on these sensitivity analyses, we are not exposed to material market risk from changes in interest rates, foreign currency rates and/or NDCHealth equity prices. We also do not anticipate any material risk from changes in interest rates, foreign currency rates and/or NDCHealth equity prices.

Interest Rate

We have a line of credit which has variable interest rates for Eurodollar and other floating rate advances based on the London Interbank Offered Rates, Prime Rate, or Federal Funds plus applicable margin. Accordingly, we are exposed to the impact of interest rate movement. We have performed an interest rate sensitivity analysis over the near term with a 10% change in interest rates. Based on this analysis, our Net income would be impacted by approximately $0.3, million which is not material. We do not anticipate any material interest rate risk from changes in interest rates.

Foreign Currency Risk

We generate a percentage of our Net income from our foreign operations. We have performed a foreign exchange sensitivity analysis over the near term with a 10% change in foreign exchange rates. Based on this analysis, our Net income would be impacted by approximately $0.2 million, which is not material. We also do not anticipate any material foreign exchange rate risk from changes in foreign currency rates.

Convertible Debt

We have outstanding debt which is convertible into NDCHealth common stock at a certain level. We have performed an equity price sensitivity analysis over the near term with a 10% change in our equity price. Based on this analysis, there is no effect on our Net income from the change in our equity price. Our Diluted earnings per share incorporates the effect of this debt conversion, where applicable.

As of May 31, 2002, the fair value of our 5% Convertible Subordinated Notes is approximately $148.8. Because of the notes’ conversion feature, the fair value of these securities is primarily based upon the market price of our common stock.

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Item 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Financial Statement Schedule

	Page
Report of Ernst & Young LLP, Independent Auditors	59
Report of Arthur Andersen, Independent Public Accountants	60
Consolidated Statements of Operations for each of the three fiscal years ended May 31, 2002	61
Consolidated Statements of Cash Flows for each of the three fiscal years ended May 31, 2002	62
Consolidated Balance Sheets at May 31, 2002 and 2001	63
Consolidated Statements of Changes in Stockholders’ Equity for each of the three fiscal years ended May 31, 2002	64
Notes to Consolidated Financial Statements	65
Consolidated Schedule II — Valuation and Qualifying Accounts for the two fiscal years ended May 31, 2002	102
Report of Arthur Andersen, Independent Public Accountants As to Schedule	103
Consolidated Schedule II — Valuation and Qualifying Accounts for the fiscal year ended May 31, 2000	104

58

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders of NDCHealth Corporation.

We have audited the accompanying consolidated balance sheets of NDCHealth Corporation and subsidiaries as of May 31, 2002 and 2001, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the two years in the period ended May 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 14(a) for 2002 and 2001. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule as of May 31, 2002 and 2001, based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NDCHealth Corporation and subsidiaries at May 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the two years in the period ended May 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/    ERNST & YOUNG LLP

Atlanta, Georgia

July 23, 2002, except for

note 19, as to which

the date is August 19, 2002

59

{This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with consolidated balance sheets of National Data Corporation as of May 31, 2001 and 2000, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended May 31, 2001. This audit report has not been reissued by Arthur Andersen in connection with this filing on Form 10-K. Although this audit report includes the consolidated balance sheet of National Data Corporation as of May 31, 2001, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the year ended May 31, 2001, Ernst & Young LLP has expressed an opinion on these financial statements and you should rely on their opinion rather than the opinion of Arthur Andersen. See Exhibit 23(ii) for further discussion.}

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To National Data Corporation:

We have audited the accompanying consolidated balance sheets of National Data Corporation (a Delaware corporation) and subsidiaries as of May 31, 2001 and 2000 and the related consolidated statements of income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended May 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Data Corporation and subsidiaries as of May 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2001, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 3 to the consolidated financial statements, effective June 1, 1999, the Company changed the method of revenue recognition in its Physicians Management Services business.

/S/    ARTHUR ANDERSEN LLP

Atlanta, Georgia

July 13, 2001

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CONSOLIDATED STATEMENTS OF OPERATIONS

NDCHealth Corporation and Subsidiaries

	Year Ended May 31,
	2002			2001			2000
	(In thousands, except per share data)
Revenues	$	353,381		$	337,052		$	345,673
Operating expenses:
Cost of service		174,944			168,691			181,001
Sales, general and administrative		76,961			77,640			86,062
Depreciation and amortization		24,374			34,745			31,834
Restructuring and impairment charges		—			2,156			34,393
		276,279			283,232			333,290
Operating income		77,102			53,820			12,383
Other income (expense):
Interest and other income		1,779			755			4,549
Interest and other expense		(9,693	)		(8,038	)		(6,532	)
Valuation adjustments		(41,000	)		(6,953	)		(9,738	)
Minority interest in losses		1,863			1,137			—
		(47,051	)		(13,099	)		(11,721	)
Income before income taxes, equity in losses of affiliated companies and discontinued operations		30,051			40,721			662
Provision for income taxes		12,877			15,753			1,825
Income (loss) before equity in losses of affiliated companies and discontinued operations		17,174			24,968			(1,163	)
Equity in losses of affiliated companies		(2,064	)		(751	)		—
Income (loss) before discontinued operations		15,110			24,217			(1,163	)
Discontinued operations, net of income taxes		—			8,323			(39,002	)
Net income (loss)	$	15,110		$	32,540		$	(40,165	)
Basic earnings (loss) per share:
Income (loss) before discontinued operations	$	0.44		$	0.73		$	(0.03	)
Discontinued operations	$	—		$	0.25		$	(1.17	)
Basic earnings (loss) per share	$	0.44		$	0.99		$	(1.21	)
Diluted earnings (loss) per share:
Income (loss) before discontinued operations	$	0.43		$	0.71		$	(0.03	)
Discontinued operations	$	—		$	0.24		$	(1.17	)
Diluted earnings (loss) per share	$	0.43		$	0.95		$	(1.21	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

NDCHealth Corporation and Subsidiaries

	Year Ended May 31,
	2002			2001			2000
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	15,110		$	32,540		$	(40,165	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Equity in losses of affiliated companies		2,064			751			—
Non-cash restructuring and impairment charges		—			930			23,880
(Income) loss from discontinued operations		—			(8,323	)		39,002
Depreciation and amortization		24,374			34,745			31,834
Deferred income taxes		(8,620	)		10,977			(33,106	)
Provision for bad debts		1,619			1,322			10,198
Valuation adjustments		41,000			6,953			9,738
Other, net		269			54			137
Changes in assets and liabilities which provided (used) cash, net of the effects of acquisitions:
Accounts receivable, net		(6,429	)		(4,121	)		4,789
Prepaid expenses and other assets		(3,492	)		(15,539	)		(325	)
Accounts payable and accrued liabilities		(1,812	)		10,018			16,712
Deferred income		636			(9,114	)		(2,685	)
Income taxes		(2,067	)		1,857			(1,968	)
Net cash provided by operating activities		62,652			63,050			58,041
Cash flows from investing activities:
Capital expenditures		(30,985	)		(32,915	)		(26,517	)
Business acquisitions, net of acquired cash		(119,626	)		(23,224	)		(38,098	)
Business divestiture		—			20,000			6,474
Investments and other non-current assets		(14,310	)		(13,789	)		(10,045	)
Net cash used in investing activities		(164,921	)		(49,928	)		(68,186	)
Cash flows from financing activities:
Net (repayments) borrowings under lines of credit		91,000			(68,500	)		26,750
Credit facility fee		(889	)		—			—
Net principal payments under capital lease arrangements and other long-term debt		(2,371	)		(4,814	)		(11,469	)
Net issuances (purchases) related to stock activities		6,559			7,360			(25,680	)
Dividends paid		(5,457	)		(8,762	)		(9,937	)
Net cash provided by (used in) financing activities		88,842			(74,716	)		(20,336	)
Cash flows from discontinued operations:
Cash provided by tax benefits of discontinued operations		21,233			—			—
Cash (used in) provided by discontinued operations		(6,779	)		(5,375	)		30,212
Cash dividend from Global Payments Inc.		—			77,600			—
Net cash provided by discontinued operations		14,454			72,225			30,212
Increase (decrease) in cash and cash equivalents		1,027			10,631			(269	)
Cash and cash equivalents, beginning of period		12,420			1,789			2,058
Cash and cash equivalents, end of period	$	13,447		$	12,420		$	1,789

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEETS

NDCHealth Corporation and Subsidiaries

	May 31, 2002			May 31, 2001
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	13,447		$	12,420
Accounts receivable		76,161			70,648
Allowance for doubtful accounts		(5,710	)		(6,628	)
Accounts receivable, net		70,451			64,020
Income tax receivable		2,229			2,265
Deferred income taxes		19,987			29,539
Prepaid expenses and other current assets		23,258			18,788
Total current assets		129,372			127,032
Property and equipment, net		101,566			82,956
Intangible assets, net		377,322			221,757
Deferred income taxes		21,403			11,828
Investments		13,497			29,798
Other		15,024			10,990
Total Assets	$	658,184		$	484,361
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	91,000		$	—
Short-term borrowings		11,906			—
Current portion of long-term debt		963			170
Current portion of obligations under capital leases		1,296			2,586
Accounts payable and accrued liabilities		76,047			53,228
Deferred income		21,089			13,624
Total current liabilities		202,301			69,608
Long-term debt		151,910			151,567
Obligations under capital leases		1,779			1,108
Other long-term liabilities		22,592			23,044
Total liabilities		378,582			245,327
Commitments and contingencies
Minority interest in equity of subsidiaries		21,856			12,418
Stockholders’ equity:
Preferred stock, par value $1.00 per share; 1,000,000 shares authorized, none issued		—			—
Common stock, par value $.125 per share; 200,000,000 shares authorized; 34,643,922 and 33,875,235 shares issued in 2002 and 2001, respectively.		4,330			4,234
Capital in excess of par value		212,026			188,636
Retained earnings		54,194			44,541
Deferred compensation and other		(6,743	)		(7,101	)
Accumulated other comprehensive loss		(6,061	)		(3,694	)
Total stockholders’ equity		257,746			226,616
Total Liabilities and Stockholders’ Equity	$	658,184		$	484,361

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

NDCHealth Corporation and Subsidiaries

	Common Stock					Capital in Excess of Par Value			Treasury Stock			Retained Earnings			Deferred Compensation and Other			Accumulated Other Comprehensive Income (Loss)									Total Stockholders’ Equity
	Number of Shares		Amount															Unrealized Holding Gain (Loss)			Cumulative Translation Adjustment			Pension Liability Adjustment
	(In thousands, except per share data)
Balance at May 31, 1999	33,953		$	4,244		$	345,639		$	(5,857	)	$	70,865		$	(3,215	)	$	—		$	(2,582	)	$	—		$	409,094
Comprehensive loss
Net loss													(40,165	)														(40,165	)
Cumulative translation adjustment																						(657	)					(657	)
Unrealized holding loss																			(1,727	)								(1,727	)
Total comprehensive loss																												(42,549	)
Cash dividends ($0.27 per share)													(9,937	)														(9,937	)
Treasury shares purchased										(42,844	)																	(42,844	)
Stock issued under employee stock plans							(1,615	)		12,657																		11,042
Stock issued under non-employee stock plans							(329	)		329																		—
Stock issued under restricted stock plans							3,682			3,755						(7,437	)											—
Tax benefit from exercise of stock options							2,010																					2,010
Amortization of deferred compensation																3,320												3,320
Balance at May 31, 2000	33,953			4,244			349,387			(31,960	)		20,763			(7,332	)		(1,727	)		(3,239	)		—			330,136
Comprehensive income
Net income													32,540															32,540
Cumulative translation adjustment																						(1,387	)					(1,387	)
Unrealized holding gain																			1,616									1,616
Total comprehensive income																												32,769
Cash dividends ($0.23 per share)													(8,762	)														(8,762	)
Spin-off dividend							(141,572	)								3,421						1,043						(137,108	)
Stock issued under employee stock plans	47			6			(19,394	)		28,684						(4,287	)											5,009
Stock issued under non-employee stock plans							(7	)		67																		60
Stock issued under restricted stock plans	(125	)		(16	)		(839	)		3,209						(2,354	)											—
Tax benefit from exercise of stock options							1,061																					1,061
Amortization of deferred compensation																3,451												3,451
Balance at May 31, 2001	33,875			4,234			188,636			—			44,541			(7,101	)		(111	)		(3,583	)		—			226,616
Comprehensive income
Net income													15,110															15,110
Cumulative translation adjustment																						678						678
Pension liability adjustment																									(3,027	)		(3,027	)
Unrealized holding loss																			(18	)								(18	)
Total comprehensive income																												12,743
Cash dividends ($0.16 per share)													(5,457	)														(5,457	)
Stock issued for acquisition	403			50			11,950																					12,000
Stock issued under employee stock plans	291			36			5,211									1,128												6,375
Stock issued under non-employee stock plans	4			1			74																					75
Stock issued under restricted stock plans	71			9			2,080									(2,089	)											—
Tax benefit from exercise of stock options							4,075																					4,075
Amortization of deferred compensation																1,319												1,319
Balance at May 31, 2002	34,644		$	4,330		$	212,026		$	—		$	54,194		$	(6,743	)	$	(129	)	$	(2,905	)	$	(3,027	)	$	257,746

The accompanying notes are an integral part of these Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of Business and Summary of Significant Accounting Policies

Nature of operations—NDCHealth Corporation (the “Company” or “NDCHealth”) provides network based information processing services and systems to healthcare providers and payers; and information management products and solutions to pharmacuetical manufacturers. NDCHealth classifies its business into two reportable segments: Information Management and Network Services and Systems.

On January 31, 2001, the Company completed the spin-off of its eCommerce business segment, Global Payments Inc. (“Global Payments”). Additionally, in the third quarter of fiscal 2000, the Company decided to pursue the divestiture of its management services business and account for the business as “discontinued operations.” As a result of the spin-off and divestiture, the Company’s financial statements have been prepared with Global Payments’ and the management services business’ net assets, results of operations, and cash flows displayed separately as “discontinued operations” with all historical financial statements restated to conform to this presentation, in accordance with Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations.”

Because the former healthcare information business segment is the remaining stand-alone business after the spin-off of Global Payments, at the 2001 Annual Meeting of Stockholders held on October 25, 2001, stockholders adopted a proposal to amend the Certificate of Incorporation of National Data Corporation to change its name to NDCHealth Corporation.

Additionally, in the first quarter of fiscal 2002, the Company adopted a revised fiscal calendar. Previously, each fiscal year began June 1 and ended May 31 with interim quarters ending the last calendar day of every third month. Under the new fiscal calendar, the fiscal year will begin on the Saturday closest to June 1, except for fiscal 2002 which began Friday, June 1, and end on the Friday closest to May 31. Interim quarters will typically consist of thirteen weeks ending the Friday closest to the last calendar day of August, November, and February. Because the revised fiscal calendar differs only slightly from the previous calendar, the change created no significant differences in operating results or financial position between periods in this report. Unless otherwise noted, all references in this document to a particular year means the Company’s fiscal year.

Basis of presentation—The consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries. Significant inter-company transactions have been eliminated in consolidation. Certain reclassifications have been made to the 2001 consolidated financial statements to conform with the 2002 presentation. The financial statements have been adjusted to reflect the Company’s adoption of the provisions of Emerging Issues Task Force Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products” (“EITF 01-09”). Our adoption of EITF 01-09 resulted in certain vendor allowances, related to sales to physician systems vendors, previously recorded as expense to be reclassified as deductions

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from revenue. The deductions were $18.0 million and $7.7 million in fiscal years 2002 and 2001, respectively. There were no changes to income as a result of this reclassification. The effect of our adoption of EITF 01-09 was not material prior to fiscal 2001.

Also during the year, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with TechRx under which the Company agreed to acquire TechRx in a two-step transaction. As NDCHealth is now the controlling shareholder, TechRx’s results have been consolidated into the Company’s financial statements as of May 28, 2002, the date of acquisition, and the Company’s financial statements have been retroactively adjusted to account for TechRx as an equity investment since the initial investment as required by Accounting Principals Board Opinion No. 18, “Equity Method of Accounting for Investments in Common Stock” (“APB 18”). The adjustments required by APB 18 are a reduction in Revenues of $6.0 million and $5.1 million in fiscal years 2002 and 2001, respectively, and an addition to equity in losses of affiliated companies of $1.5 million and $0.7 million in fiscal years 2002 and 2001, respectively.

In accordance with recent Securities and Exchange Commission guidance, those accounting policies that management believes are the most critical and require complex management judgment are discussed first below. Further discussion of the application of the Company’s critical accounting policies can be found under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Critical Accounting Policies

Revenue—In accordance with criteria set forth in Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” and Statement of Position No. 97-2, “Software Revenue Recognition” the Company recognizes revenue when persuasive evidence of an agreement exists, delivery and performance has occurred, there is a fixed and determinable sales price, and collectibility is reasonably assured.

Within the Information Management segment, the Company has two primary sources of revenue: database information reporting and consulting services. Database information reporting typically involves the delivery of data providing pharmaceutical information. Revenue for products and services delivered over a period of time with multiple deliverables is recognized ratably over the term of the contract using a straight-line model. Revenue for single deliverable products and services is recognized when obligations to the customer have been fulfilled, which is typically upon delivery. Consulting services are typically structured as fixed price service contracts. Revenue for these services is recognized ratably over the contract term based on the percentage-of-completion model. If it is determined that the Company will incur a loss on a contract, the loss is recognized at the time of determination. Typically, these contracts average 6 to 12 months.

Within the Network Services and Systems segment, the primary source of revenue is per transaction fees charged for network services. This revenue is recognized at the time services are rendered. Additionally, the Company receives revenue from software licenses

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and related maintenance and support agreements. Revenue related to software utilized by the customer to process transactions through the Company’s network is recognized ratably over the estimated life of the network services relationship beginning on the date of customer acceptance of the software. Revenue related to software with stand alone functionality is recognized upon the date that the software is in operation at the customer site where vendor specific objective evidence (VSOE) has been established for the undelivered elements of the customer contract, which typically is maintenance and customer support. In these cases, the maintenance and customer support revenue is recognized over the term of the contract. Where VSOE cannot be established for undelivered elements within the contract, the revenue is recognized upon acceptance over the remaining term of the contract.

Intangible assets—Intangible assets primarily represent goodwill and customer base associated with the Company’s acquisitions. Customer base acquired is amortized over the estimated useful life ranging from 5 to 15 years. Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets.

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS 141 eliminates pooling of interests accounting and requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. SFAS 142 deals with, among other things, the elimination of amortization of goodwill. The Company adopted these new standards in the first quarter of 2002. SFAS 142 requires that goodwill no longer be amortized but be reviewed for impairment at least annually. As part of its adoption of SFAS 142, the Company completed its initial impairment tests during the second quarter of 2002 and these tests resulted in no impairment. The adoption of SFAS 142 eliminated certain differences between book and tax expense.

The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of intangibles may warrant revision or may not be recoverable. When factors indicate that intangibles with finite lives should be evaluated for possible impairment, the Company uses an estimate of the future undiscounted net cash flows associated with the asset over the remaining life of the asset in measuring whether the asset is recoverable. If such evaluation indicates a potential impairment, cash flows discounted using the Company’s cost of equity are used to measure fair value in determining the amount of these assets that should be written off. In management’s opinion, the goodwill and identifiable intangible assets are appropriately valued at May 31, 2002 and 2001.

Capitalized software—Capitalized software consists of development costs for software held for sale to our customers as well as software used internally to provide services to our customers. In accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” and Statement of Position 98-1, “Accounting for the Cost of Computer Software Developed or Obtained for Internal Use” (“SOP 98-1”), capitalization of costs begins when technological feasibility has been

67

established, or during the application development phase, and ends when the product is available for general release to customers. Completed projects are amortized after reaching the point of general availability using the greater of the amount computed using the straight-line method or the ratio that current revenues bear to the total of current and anticipated revenues, based on the estimated useful life of the software, normally five years. The net realizable value of capitalized software is monitored to ensure that the investment will be recovered through the future sales of products or services.

Allowance for doubtful accounts—Allowance for doubtful accounts reflects management’s best estimate of probable losses based principally on historical experience and specific review and analysis. All accounts or portions thereof deemed to be uncollectible or to require excessive collection costs are written off against the allowance.

Data costs—The Company purchases data from a variety of sources primarily for use in its information products and services. These costs are typically held in inventory at the time of purchase and expensed the following months as products utilizing the data are delivered to customers. Occasionally product offerings are expanded by modifying current products for a new market. In these cases, additional or new types of data costs may be incurred in developing the history database for these new products and the additional data costs are deferred. These data costs are then amortized over the average life of the contracts for the new products, generally one to three years.

Investments—In a rapidly changing technology industry, the Company considers and selectively enters into a variety of alliances, joint ventures and investments. The Company maintains investments in both publicly traded and privately held entities. The investments in publicly traded entities are classified as available-for-sale securities and are reported at fair value. Unrealized gains and losses are reported, net of taxes, as a component of stockholders’ equity. In accordance with SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” unrealized losses are charged against income when a decline in fair value is determined to be other than temporary. The specific identification method is used to determine the cost of securities sold. Realized gains and losses on investments are included in Other income/expense when realized.

Investments in privately held entities are accounted for under either the cost, equity, or consolidation method, whichever is appropriate for the particular investment. The appropriate method is determined by the Company’s ability to exercise significant influence over the investee, through either voting stock or other means. These investments are regularly reviewed for impairment issues and propriety of current accounting treatment. In accordance with the provisions of APB 18, transition from the cost to equity method, due to changes in the Company’s ability to influence the investee or the level of investment, would require retroactive restatement of previously issued financial statements as if the Company had always accounted for the investment under the equity method. If the Company’s level of investment increases to a level such that it directly or indirectly controls the entity, the entity’s results would be consolidated into the Company’s consolidated financial statements.

Use of estimates—The preparation of financial statements in conformity with accounting

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principles generally accepted in the United States requires management to make other estimates and assumptions in addition to those discussed above. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates.

Key Accounting Policies

Property and equipment—Property and equipment, including equipment under capital leases, are stated at cost. Depreciation and amortization are calculated using the straight-line method for financial reporting purposes, whereas accelerated methods are used for income tax reporting purposes. Data center and technology equipment is depreciated over three to five year lives, other equipment that supports our data centers is depreciated over 10 to 15 year lives, and buildings are depreciated over 20 to 40 year lives. Leasehold improvements and property acquired under capital leases are amortized over the shorter of the useful life of the asset or the term of the lease. The costs of purchased software are capitalized and amortized on a straight-line basis over their estimated useful lives, not to exceed five years. Maintenance and repairs are charged to operations as incurred.

Impairment of long-lived assets—The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of long-lived assets, including property and equipment, may warrant revision or may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the future undiscounted net cash flows associated with the asset over the remaining life of the asset in measuring whether the long-lived asset is recoverable. If such evaluation indicates a potential impairment, the Company uses undiscounted cash flows to measure fair value in determining the amount of these assets that should be written off. In management’s opinion, the long-lived assets, including property and equipment, are appropriately valued at May 31, 2002 and 2001 and any necessary adjustments have been made.

Income taxes—The Company uses the asset and liability method of accounting for income taxes in accordance with SFAS No. 109. Under this method, deferred income taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax laws and rates (see Note 9.)

Other Accounting Policies

Cash and cash equivalents—Cash and cash equivalents includes cash on hand and all investments with a maturity of three months or less when purchased.

Fair value of financial instruments—The carrying amounts of financial instruments, including cash, cash equivalents, receivables, accounts payable and accrued expenses, and current maturities of long-term obligations, approximate fair value. Interest on long-term debt is primarily payable at fixed rates, which approximate market rates at May 31, 2002

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and 2001 (see Note 10). Cash equivalents consist primarily of funds held in short-term money market accounts.

Foreign currency translation—The Company maintains subsidiaries in Western Europe, the United Kingdom, and Canada. The functional currency of these subsidiaries is their local currency. The assets and liabilities of foreign subsidiaries are translated at the year-end rate of exchange, and income statement items are translated at the average rates prevailing during the year. The resulting translation adjustments are recorded as a component of stockholders’ equity. The effects of foreign currency gains and losses arising from these translations of assets and liabilities are included as a component of other comprehensive income.

Earnings per share—Basic earnings per share is computed by dividing reported earnings available to common stockholders by weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing reported earnings available to common stockholders by weighted average shares outstanding during the period and the impact of securities that, if exercised, and convertible debt that, if converted, would have a dilutive effect on earnings per share. All options with an exercise price less than the average market share price for the period have a dilutive effect on earnings per share. The following table sets forth the computation of basic and diluted earnings for the fiscal years ending May 31:

	Fiscal Year Ended (Before Discontinued Operations)
	2002					2001					2000
	Income		Shares	Per Share		Income		Shares	Per Share		Loss			Shares	Per Share
	(In thousands, except per share data)
Basic EPS:
Income (loss) before discontinued operations	$	15,110	34,087	$	0.44	$	24,217	33,009	$	0.73	$	(1,163	)	33,232	$	(0.03	)
Effect of dilutive securities:
Stock options		—	1,409				—	1,144				—		—
		15,110	35,496				24,217	34,153				(1,163	)	33,232
Convertible debt		—	—				—	—				—		—
Diluted EPS:
Income (loss) before discontinued operations available to common stockholders plus assumed conversions	$	15,110	35,496	$	0.43	$	24,217	34,153	$	0.71	$	(1,163	)	33,232	$	(0.03	)

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	Fiscal Year Ended (Net Income)
	2002					2001					2000
	Income		Shares	Per Share		Income		Shares	Per Share		Loss			Shares	Per Share
	(In thousands, except per share data)
Basic EPS:
Net income (loss)	$	15,110	34,087	$	0.44	$	32,540	33,009	$	0.99	$	(40,165	)	33,232	$	(1.21	)
Effect of dilutive securities:
Stock options		—	1,409				—	1,144				—		—
		15,110	35,496				32,540	34,153				(40,165	)	33,232
Convertible debt		—	—				—	—				—		—
Diluted EPS:
Net income (loss) available to common stockholders plus assumed conversions	$	15,110	35,496	$	0.43	$	32,540	34,153	$	0.95	$	(40,165	)	33,232	$	(1.21	)

Basic and diluted earnings per share for the fiscal year ended May 31, 2000 is the same as the effect of any potentially dilutive securities and convertible debt is antidilutive due to the loss generated by the restructuring and non-recurring charges and discontinued operations.

Outstanding options to purchase 38,000 and 753,000 shares of the Company’s common stock were not included in the computation of diluted earnings per share in fiscal years 2002 and 2001, respectively, because the options’ exercise prices were greater than the average market price of the Company’s common stock. Additionally, the impact of the convertible debt, if converted, did not have a dilutive effect on earnings per share for all three fiscal years.

Recently Issued Accounting Pronouncements—In August 2001, the FASB issued SFAS 144. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. It supersedes Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and requires that discontinued operations be measured at the lower of the carrying amount or fair value less cost to sell. The Company has evaluated this statement, and it does not have a material impact on its results of operations or financial position.

In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections,” which clarifies the criteria under which extinguishments of debt can be considered as extraordinary and rescinds the related Statement Nos. 4, 44, and 64 and also makes technical corrections to other Statements of Financial Standards. Management believes that the adoption of this statement will not have a material effect on the Company’s future results of operations.

In June 2002, the FASB issued SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred and nullifies  EITF 94-3.

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Management believes that the adoption of this statement will not have a material effect on the Company’s future results of operations. However, the statement will likely change the timing of recognition of any future restructuring activity.

Note 2—Business Acquisitions and Investments

During fiscal 2002, 2001, and 2000, the Company completed the following acquisitions:

Business	Date Acquired	Ownership Percentage
2002
TechRx, Inc.	May 2002	63	%
ScriptLINE	May 2002	100	%
2001
Source Dispenser UK, LTD.	August 2000	100	%
Medprint, Inc.	August 2000	100	%
Pharma Intranet Information AG	October 2000	51	%
2000
The Computer Place, Inc. (“Medisoft”)	April 2000	100	%

Each of the above acquisitions has been recorded using the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. The operating results of the acquired businesses are included in the Company’s consolidated statements of operations from their respective dates of acquisition.

During fiscal year 2002, the FASB issued SFAS 141, “Business Combinations.” The Company adopted the provisions of SFAS 141 effective June 1, 2001. This standard requires that all business combinations be accounted for using the purchase method of accounting. Under the purchase method of accounting the acquiring company records at fair value the assets and liabilities of the company to be acquired. The difference between the purchase price and the fair value of the assets purchased and liabilities assumed is recorded as goodwill. SFAS 141 also sets forth the additional disclosure requirements for business combinations initiated after June 30, 2001.

In July 2000 NDCHealth sold its pharmacy systems business to, and received a minority equity interest in, TechRx Incorporated. This cost method investment was valued at $35.1 million. In May 2002 NDCHealth entered into an Agreement and Plan of Merger (“Merger Agreement”) with TechRx under which the Company agreed to acquire TechRx in a two-step transaction. Under the first step, the Company acquired a controlling interest through the purchase of additional common stock and the conversion of non-voting convertible preferred stock for an additional investment in TechRx common stock of approximately $51.0 million. The purchase price consisted of approximately $39.0 million in cash and approximately $12.0 million in unregistered shares of NDCHealth Corporation’s common stock. The Company intends to register these shares, and additional shares to be used in the second step of the acquisition discussed below, during fiscal 2003. The purchase price paid for the Company’s increased

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interest in TechRx was determined by the enterprise value of TechRx and verified as appropriate with an independent fairness opinion.

Under the second step, which would close on or about May 31, 2003, if certain conditions are met, NDCHealth will acquire the remaining shares in TechRx from minority shareholders for cash, NDCHealth shares or a combination of cash and NDCHealth shares. The amount of the payment to TechRx shareholders will be determined based upon the satisfaction of certain financial and operational milestones by TechRx as set forth in the Merger Agreement. The purchase price for the balance of the TechRx equity outstanding ranges from approximately $100 million to $200 million. Under the terms of the Merger Agreement, the Company also agreed to pay or reimburse TechRx for transaction costs associated with the merger ($0.6 million) and personnel related restructuring costs caused as a result of combining certain activities with the Company ($1.4 million).

As NDCHealth is now the controlling shareholder, TechRx’s results have been consolidated into the Company’s financial statements as of May 28, 2002, the date of acquisition, and the Company’s financial statements have been retroactively adjusted to account for TechRx as an equity investment since the initial investment as required by APB 18. As a result of this acquisition and change in accounting method, the Company has recorded non-tax deductible goodwill in the amount of $74.2 million in its Network Services and Systems segment. Approximately $9.4 million of transaction costs are included in goodwill. Identifiable intangible assets recorded include customer base of $13.2 million and software of $12.2 million.

For fiscal 2002 and 2001, the Company recorded revenue of approximately $7.3 million and $9.2 million from TechRx, respectively, primarily for network claims processing services. Additionally, the Company recorded expenses of approximately $1.1 million and $1.0 million to TechRx in fiscal 2002 and 2001, respectively, primarily to purchase data.

Also in May 2002, the Company acquired selected ScriptLINE assets from Arclight Systems, LLC for total cash consideration of approximately $81.0 million. ScriptLINE provides value-added edits for healthcare claims which enhance the profitability of pharmacies. ScriptLINE complements the Company’s existing pharmacy network services business and expands the comprehensive suite of edits available to customers. The Company expects to integrate ScriptLINE into its existing pharmacy network platform to provide for efficient processing, customer support and product development operations. As a result of the acquisition, the Company has recorded tax deductible goodwill in the amount of $75.2 million in its Network Services and Systems segment. Approximately $1.2 million of transaction costs are included in goodwill. Identifiable intangible assets recorded include customer base of $8.5 million and non-compete agreement of $0.7 million to be fully amortized over 10 years and 5 years, respectively.

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The purchase prices for the fiscal 2002 acquisitions were allocated based on independent appraisals as follows. The purchase price allocation of 2002 acquisitions is preliminary and subject to change.

	TechRx			ScriptLINE
	(In thousands)
Assets:
Cash and cash equivalents	$	7,349		$	—
Accounts receivable, net		3,974			—
Deferred income taxes		3,311			—
Prepaid and other current assets		783			—
Property and equipment		12,626			—
Intangible assets		99,633			84,400
Investments		(22,199	)		—
Other long-term assets		(5,430	)		—
Total Assets	$	100,047		$	84,400
Liabilities:
Short-term borrowings	$	11,906		$	—
Accounts payable and accrued liabilities		8,502			2,200
Deferred income		6,604
Other long-term liabilities		1,382
Minority interest		11,227
Total Liabilities	$	39,621		$	2,200
Net purchase price (including transaction costs)	$	60,426		$	82,200

The following unaudited pro forma information for the fiscal 2002 purchase acquisitions has been prepared as if the acquisitions had occurred on June 1, 2000. The information is based on historical results of the separate companies and may not necessarily be indicative of the results that would have been achieved or of results that may occur in the future. The pro forma information includes the expense for amortization of intangible assets, other than goodwill, resulting from the transactions and interest expense related to financing costs but does not reflect any synergies or operating cost reductions that may be achieved from the combined operations. In addition, the unaudited pro forma information includes restructuring charges (net of minority interest) of approximately $0.9 million in fiscal 2002 and $5.7 million in fiscal 2001 previously recorded by TechRx. Pro forma information for the fiscal 2001 purchase acquisitions is not included due to immateriality.

	2002		2001
	(In thousands, except per share data)
Revenue	$	402,405	$	380,383
Net income	$	5,279	$	6,407
Diluted earnings per share	$	0.15	$	0.19

During the first quarter of fiscal 2002, the Company became an investor in MedUnite along with the following U.S. health insurance companies: Aetna, Anthem, CIGNA, Health Net, Oxford, PacifiCare, and Wellpoint Health Networks. MedUnite offers a

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nationwide EDI-based transaction system to connect providers and payers. In exchange for the assets of its physician network services business valued at $37.5 million, the Company received a 17.9% equity interest in MedUnite and the right to nominate a representative to its board. As further explained in Note-19 Subsequent events in these Notes to Consolidated Financial Statements, the Company recorded a non-cash charge reducing the carrying value of the investment in MedUnite to $12.2 million.

Also during fiscal 2002, the Company contributed Source Dispenser UK, LTD. to a joint venture entered into with Cegedim, S.A. in exchange for a 50% interest in the newly created Infopharm Limited. The Company’s investment in Infopharm Limited is now being accounted for under the equity method of accounting, effective January 1, 2002.

The recorded purchase price of Pharma Intranet Information AG increased by $8.3 million in fiscal 2002, due to a working capital adjustment and assumed pre-acquisition liabilities. This purchase price adjustment was recorded as additional goodwill. The customer base intangible asset of Pharma Intranet Information AG is being amortized over its useful life of 10 years.

The aggregate price paid for the 2001 purchase acquisitions was $23.2 million, consisting entirely of cash. The excess of cost over tangible assets, acquired in fiscal 2001, of $20.2 million was allocated to goodwill and other intangible assets. The aggregate price paid for the 2000 purchase acquisition was $44.1 million, consisting of $38.1 million cash and $6.0 million deferred purchase price. The excess of cost over tangible assets, acquired in fiscal 2000, of $42.3 million was allocated to goodwill and other intangible assets. The other intangible assets of this acquisition are being amortized over a 10 year period.

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Note 3—Discontinued Operations

On December 20, 1999, the Company announced its intention to spin-off its eCommerce business segment, encompassed in the newly formed Global Payments Inc. subsidiary. This spin-off was contingent on receiving a favorable opinion from outside counsel regarding the tax-free status of the dividend. On November 15, 2000 the Company received a favorable opinion from counsel based on an IRS ruling and completed the spin-off on January 31, 2001. The spin-off was accomplished by distributing all of the shares of common stock of Global Payments Inc. to the Company stockholders. The Company stockholders received 0.8 share of Global Payments Inc. common stock for each share of the Company common stock held as of the January 19, 2001 record date. Certain network and other services are provided to Global Payments Inc. under the Company’s services agreements.

As a result of the spin-off, the Company’s financial statements have been prepared with Global Payments Inc.’s net assets, results of operations, and cash flows displayed separately as “discontinued operations.” During the second quarter of fiscal 2001, the Company recorded an expense of $10.0 million to reflect the net costs associated with the spin-off ($8.7 million after tax, or $0.26 per share). These costs include legal and investment banker fees, severance, duplicate software licenses, and other related costs partially offset by the projected income for Global Payments Inc. for the period from the measurement date through January 31, 2001.

Additionally, in the third quarter of fiscal 2000, the Company decided to pursue the divestiture of its management services business and accordingly, the Company’s financial statements have been prepared with the net assets, results of operations, and cash flows of this business displayed separately as “discontinued operations.” The Company successfully completed the sale of this management services business for total cash consideration of $20.0 million in the first quarter of fiscal 2001. The Company is involved in continuing litigation related to the management services business and believes its exposures are sufficiently reserved.

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The operating results of the discontinued operations are summarized as follows for the fiscal years ending May 31:

	2001
	Global Payments Inc.			Management Services			Total
	(In thousands, except per share data):
Revenue	$	223,592		$	21,905		$	245,497
Operating income	$	40,801		$	168		$	40,969
Income from operations, net of tax	$	17,056			—		$	17,056
Spin-off special charge, net of tax		(8,733	)		—			(8,733	)
Net income from discontinued operations	$	8,323		$	—		$	8,323
Diluted earnings (loss) per share:
From operations	$	0.50		$	—		$	0.50
Spin-off special charge	$	(0.26	)	$	—		$	(0.26	)
Total	$	0.24		$	—		$	0.24
Share count		34,153						34,153
	2000
	Global Payments Inc.			Management Services			Total
	(In thousands, except per share data):
Revenue	$	340,033		$	107,051		$	447,084
Operating income (loss)	$	63,212		$	(26,587	)	$	36,625
Income (loss) from operations, net of tax	$	33,047		$	(16,848	)	$	16,199
Projected phase-out loss from operations, net of tax		—			(10,381	)		(10,381	)
Projected loss on disposal, net of tax		—			(31,060	)		(31,060	)
Income (loss) from discontinued operations before cumulative effect of change in accounting principle		33,047			(58,289	)		(25,242	)
Cumulative effect of change in accounting principle, net of tax		—			(13,760	)		(13,760	)
Net income (loss) from discontinued operations	$	33,047		$	(72,049	)	$	(39,002	)
Diluted earnings (loss) per share:
From operations	$	0.96		$	(0.51	)	$	0.47
Projected phase-out loss from operations	$	—		$	(0.31	)	$	(0.31	)
Projected loss on disposal	$	—		$	(0.94	)	$	(0.94	)
Cumulative effect of change in accounting principle	$	—		$	(0.41	)	$	(0.41	)
Total	$	0.96		$	(2.17	)	$	(1.17	)
Share count		34,448			33,232			33,232

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The net income (loss) from discontinued operations for fiscal 2001 and 2000 is net of tax expense (benefit) of $13.1 million and $(17.2) million, respectively.

For the Physician Management Services component of the discontinued operations, the Company continued a revenue recognition accounting policy followed by this business prior to its acquisition by the Company. The Company maintained this generally accepted policy after the acquisition for Physician Management Services offerings for which the Company invoiced and collected amounts on its customers’ behalf. Previously, for customers where the amount and timing of collection of their accounts receivable could be reasonably estimated, the Company estimated the fees that it expected to invoice upon collection of their accounts receivable. It recognized such revenues when substantially all services performed by the Company had been completed. The estimated costs to complete were accrued separately.

Effective June 1, 1999, the Company elected to change its revenue recognition policy. Effective with the change in policy, the Company recognized revenue when the services were billed to the customer, at which point all services performed by the Company were completed. The impact of this change resulted in the elimination of estimated or unbilled receivables and related accrued collection costs. Management believes that this change was appropriate and was consistent with recent authoritative literature, specifically SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” issued December 3, 1999.

The cumulative after-tax effect of this change in accounting principle was $13.8 million, net of income taxes of $8.6 million, at June 1, 1999. The cumulative after-tax effect on both the basic and diluted earnings per share was $(0.41). The following unaudited pro forma information assumes the new revenue recognition policy was retroactively applied:

	2000
	(In thousands, except per share data)
Net loss	$	(26,405	)
Basic loss per share	$	(0.79	)
Diluted loss per share	$	(0.79	)

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Note 4—Property and Equipment

As of May 31, 2002 and 2001, property and equipment consisted of the following:

	2002		2001
	(In thousands)
Land	$	1,602	$	1,602
Buildings		11,805		11,792
Equipment		61,857		49,834
Software		56,064		38,240
Leasehold improvements		6,501		3,654
Furniture and fixtures		6,302		4,081
Work in progress		26,883		24,936
		171,014		134,139
Less: accumulated depreciation and amortization		69,448		51,183
	$	101,566	$	82,956

Note 5—Software Costs

The following table sets forth information regarding the Company’s costs associated with software development for the years ended May 31, 2002, 2001 and 2000:

	2002		2001		2000
	(In thousands)
Total costs associated with software development	$	18,899	$	17,501	$	20,725
Less: capitalization of internally developed software		11,990		8,999		9,609
Net research and development expense	$	6,909	$	8,502	$	11,116

In fiscal 2000 the Company began a restructuring program, which included the consolidation of clearinghouses and elimination of obsolete and redundant products and services, as it focused on cost containment. The result was a decline in spending from 2000 to 2001 as less maintenance was performed on older products that had been eliminated. Instead, the focus was on developing new products that would generate additional revenue which is reflected in the increase in spending from 2001 to 2002. Additionally, the divestiture of the Physician services business in the first quarter of fiscal 2002, where historically more had been expended on maintenance projects, allowed increased focus on the development of these new products.

The Company capitalizes costs related to the development of certain software products. In accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,” capitalization of costs begins when technological feasibility has been established and ends when the product is available for general release to customers. Amortization is computed on an individual product basis and has been recognized for those products available for market based on the products’ estimated economic lives, not to exceed five years.

Additionally, the Company capitalizes costs related to the development of computer software developed or obtained for internal use in accordance with the AICPA Statement of Position (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Costs incurred in the application development phase are capitalized by the Company and amortized over the useful life, not to exceed five years. The increased capitalization in 2002 resulted from the increased level of new product development discussed above. Conversely, the reduction of spending on maintenance of older products resulted in lower net expense in 2002.

Total unamortized capitalized software costs (purchased and internally developed) were approximately $33.3 million and $24.6 million as of May 31, 2002 and 2001, respectively,

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and are included in Property and equipment. Total software amortization expense was approximately $8.8 million, $6.9 million and $6.4 million in fiscal 2002, 2001 and 2000, respectively.

Note 6—Intangible Assets

In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” This standard addresses the financial accounting and reporting for acquired goodwill and other intangible assets. As required by the standard, goodwill and certain other indefinite life intangible assets will no longer be amortized. These assets will be tested for impairment, at least annually, and impairment losses recognized as needed. Intangible assets, readily identifiable with determinable useful lives, will be amortized using the straight-line method over their useful lives. The impact of the implementation of SFAS No. 142 was an additional $0.20 to diluted earnings per share in fiscal 2002.

Upon implementation of this standard, the Company tested the previously recorded goodwill assets for impairment by comparing the fair value of the assets with their carrying value. This test did not indicate any impairment losses. The Company also reassessed the remaining useful lives of the amortizable intangible assets and found no adjustments to the remaining periods necessary.

The table below presents goodwill and intangible assets by asset class. During fiscal year 2002, the Company acquired $21.7 million in intangible customer base assets. These assets have no residual value and will be amortized over 10 years. The Company acquired $12.2 million in intangible software assets with no residual value. The Company also acquired other intangible assets of $0.7 million which will be fully amortized over 5 years.

	As of May 31, 2002
	Gross Carrying Amount		Accumulated Amortization			Total
	(In thousands)
Amortized intangible assets
Customer base	$	55,892	$	(11,085	)	$	44,807
Developed technology		13,200		(9,114	)		4,086
Software		12,907		(702	)		12,205
Other		900		(17	)		883
Total		82,899		(20,918	)		61,981
Unamortized intangible assets
Goodwill and other indefinite life unamortized intangibles		315,341		—			315,341
Total Intangible Assets	$	398,240	$	(20,918	)	$	377,322

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The aggregate amortization expense for fiscal year 2002 and estimated amortization expense for the five fiscal years thereafter is as follows:

Aggregate Amortization Expense (In thousands)
For the year ended May 31, 2002	$	4,509
Estimated Amortization Expense
For year Ending May 30, 2003	$	7,903
For year Ending May 28, 2004		7,903
For year Ending May 27, 2005		6,331
For year Ending June 02, 2006		6,017
For year Ending June 01, 2007		6,017

The changes in the carrying amount of goodwill for the year ended May 31, 2002, are as follows:

	Information Management			Network Services and Systems			Total
	(In thousands)
Goodwill
Balance as of June 1, 2001	$	59,452		$	114,394		$	173,846
Goodwill acquired during year		—			149,412			149,412
Goodwill written off due to sale of business		(1,042	)		(16,240	)		(17,282	)
Purchase price adjustments		8,251			1,114			9,365
Balance as of May 31, 2002	$	66,661		$	248,680		$	315,341

The table below shows the effects the adoption of this standard would have had on prior period earnings:

	For the year ended May 31,
	2002		2001		2000
	(In thousands, except per share data)
Transition
Reported net income (loss)	$	15,110	$	32,540	$	(40,165	)
Add back: Goodwill amortization, net of tax		—		7,168		5,354
Adjusted net income (loss)	$	15,110	$	39,708	$	(34,811	)
Basic earnings per share
Reported net income (loss)	$	0.44	$	0.99	$	(1.21	)
Add back: Goodwill amortization, net of tax		—		0.21		0.16
Adjusted net income (loss)	$	0.44	$	1.20	$	(1.05	)
Diluted earnings per share
Reported net income (loss)	$	0.43	$	0.95	$	(1.21	)
Add back: Goodwill amortization, net of tax		—		0.21		0.16
Adjusted net income (loss)	$	0.43	$	1.16	$	(1.05	)

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Note 7—Accounts Payable and Accrued Liabilities

As of May 31, 2002 and 2001, accounts payable and accrued liabilities consisted of the following:

	2002		2001
	(In thousands)
Trade accounts payable	$	27,522	$	26,816
Accrued compensation and benefits		15,787		13,361
Accrued restructuring		—		420
Merger related costs		14,817		—
Other accrued liabilities		17,921		12,631
	$	76,047	$	53,228

Note 8—Retirement Benefits

The Company provides a variety of retirement benefits for its employees. During fiscal year 1998, the Company made an evaluation of its current retirement plan offerings and decided to provide its employees with a greater emphasis on its deferred compensation 401(k) plan by substantially increasing the Company’s match of participants’ contributions.

The Company’s noncontributory defined benefit pension plan (the “Plan”) covers substantially all of its United States employees who have met the eligibility provisions of the Plan as of May 31, 1998. Benefits are based on years of service and the employee’s compensation during the highest five consecutive years of earnings of the last ten years of service. Plan provisions and funding meet the requirements of the Employee Retirement Income Security Act of 1974, as amended. At the same time, the Company closed the defined benefit pension plan to new participants beginning June 1, 1998.

The following table provides a reconciliation of the changes in the Plan’s benefit obligations and fair value of assets over the two-year period ending May 31, 2002 and a statement of funded status at May 31 for each year:

	2002			2001
	(In thousands)
Changes in benefit obligations
Balance at beginning of year	$	25,509		$	24,012
Interest cost		1,879			1,831
Amendments		—			32
Benefits paid		(1,004	)		(1,223	)
Actuarial loss		89			857
Balance at end of year	$	26,473		$	25,509

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	2002			2001
	(In thousands)
Changes in plan assets
Balance at beginning of year	$	22,385		$	24,277
Actual return on plan assets		(2,215	)		(669	)
Employer contributions		—			—
Benefits paid		(1,004	)		(1,223	)
Balance at end of year	$	19,166		$	22,385

The accrued pension costs recognized in the Consolidated Balance Sheets were as follows:

	2002			2001
	(In thousands)
Funded status	$	(7,307	)	$	(3,124	)
Unrecognized net loss		6,877			2,379
Unrecognized prior service cost		47			121
Additional pension accrual		(4,883	)		—
Unrecognized net asset at June 1, 1985, being amortized over 17 years		—			(164	)
Accrued pension cost	$	(5,266	)	$	(788	)

Net pension income included the following components for the fiscal years ending May 31:

	2002			2001			2000
	(In thousands)
Service cost	$	—		$	—		$	—
Interest cost on projected benefit obligation		1,879			1,831			1,750
Expected return on plan assets		(2,193	)		(2,389	)		(2,225	)
Net amortization and deferral		(90	)		(117	)		(117	)
Net pension income	$	(404	)	$	(675	)	$	(592	)

Significant assumptions used in determining net pension expense and related obligations were as follows:

	2002		2001		2000
Discount rate	7.50	%	7.50	%	7.75	%
Rate of increase in compensation levels	4.33	%	4.33	%	4.33	%
Expected long-term rate of return on assets	10.00	%	10.00	%	10.00	%

Because of poor asset performance during the past two years, at May 31, 2002 the Company had an unfunded accumulated benefit obligation that exceeds the accrued pension cost of its noncontributory defined benefit pension plan. SFAS No. 87, “Employers’ Accounting for Pensions” requires that this liability be recognized on the Company’s consolidated balance sheet. Because this liability is assumed to be only temporary, a charge to earnings is not appropriate but instead a charge to other comprehensive income is required. At May 31, 2002, the Company has recognized $4.9

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million in Other long-term liabilities, $3.0 million in Accumulated other comprehensive income, and $1.9 million in Deferred income taxes to reflect this obligation.

The Company has a retirement plan for non-employee directors of the Company elected prior to January 1, 1995 with five or more years of service (the “Directors’ Plan”). The Directors’ Plan benefits are based on 50% of the annual director retainer amount in effect on the date of a director’s retirement plus 10% for each year of service for a combined total of up to 100% of the base amount for 10 years’ service. The benefits are payable upon retirement, at or after age 70, for a period equal to the number of years of service as a director, but not more than 15 years for participants with 15 or more years of board service as of the effective date of the Directors’ Plan and not more than 10 years for all other participants. The expense related to the Directors’ Plan was immaterial in 2002, 2001 and 2000. The projected benefit obligation for the plan was $0.7 million and $0.7 million as of May 31, 2002 and 2001, respectively.

On June 1, 1997, the Company adopted a pilot Supplemental Executive Retirement Plan (“SERP”) for certain key executives. Benefits payable under this plan are based upon the participant’s highest three consecutive years of earnings of the last ten years of service. Retirement benefits are reduced by a portion of the participant’s annual social security benefits and any retirement benefits under the Company’s tax-qualified or non-qualified defined benefit plans. Benefits earned under the SERP are fully vested after five years of service. Expense related to the plan was $0.5 million, $1.0 million and $0.7 million in 2002, 2001, and 2000, respectively. The projected benefit obligation for the plan was $6.4 million and $6.4 million as of May 31, 2002 and 2001, respectively.

The Company sponsors a deferred compensation 401(k) plan that is available to substantially all employees. The charges to expense for the Company match were $1.4 million in 2002, $1.9 million in 2001, and $1.1 million in 2000.

Note 9—Income Taxes

The provision for income taxes for continuing operations includes:

	2002		2001			2000
	(In thousands)
Current tax expense:
Federal	$	—	$	15,215		$	15,175
State		145		1,080			1,197
		145		16,295			16,372
Deferred (prepaid) tax expense:
Federal		12,447		(476	)		(13,399	)
State		285		(66	)		(1,148	)
		12,732		(542	)		(14,547	)
Total	$	12,877	$	15,753		$	1,825

The Company’s effective tax rates differ from federal statutory rates as follows:

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	2002		2001		2000
Federal statutory rate	35.0	%	35.0	%	35.0	%
Valuation adjustment	8.5	%	—		—
State income taxes, net of federal income tax benefit	3.4	%	4.6	%	4.7	%
Other	(4.0	%)	(0.9	%)	235.9	%
Total	42.9	%	38.7	%	275.6	%

Deferred income taxes as of May 31, 2002 and 2001 reflect the impact of temporary differences between the amounts of assets and liabilities for financial accounting and income tax purposes. As of May 31, 2002 and 2001, principal components of deferred tax items were as follows:

	2002		2001
	(In thousands)
Deferred tax assets:
Net operating loss and credit carryforwards	$	21,936	$	27,918
Valuation adjustment		18,667		6,993
Accrued non-recurring charges		4,466		5,944
Accrued expenses		6,049		5,871
Other		441		3,782
Employee benefit plans		4,704		2,218
Acquired intangibles		—		2,011
		56,263		54,737
Deferred tax liabilities:
Property and equipment		11,274		12,600
Acquired intangibles		3,136		—
Prepaid expenses and other		463		770
		14,873		13,370
Net deferred tax asset		41,390		41,367
Less: current deferred tax asset		19,987		29,539
Non-current deferred tax asset	$	21,403	$	11,828

Net operating loss and credit carryforwards expire between the years 2003 and 2021.

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Note 10—Debt

The Company has obtained a credit facility providing a $150 million unsecured revolving line of credit. The weighted average interest rate on the line of credit is approximately 3.59%. This credit facility replaced the Company’s $50 million line of credit and became effective on May 1, 2002 with a three-year term. However, if by May 1, 2003, the Company’s obligations under its Convertible Subordinated Notes have not been paid in full or amended such that they mature after May 1, 2005, the facility will expire on May 1, 2003. The facility is available for working capital and general corporate purposes and has a variable interest rate based on market rates. The credit agreement contains certain financial and non-financial covenants customary for financings of this nature. As of May 31, 2002, there was $91.0 million outstanding under this line of credit and the Company was in compliance with all restrictive covenants.

As of May 31, 2002 and 2001, long-term debt consisted of the following:

	2002		2001
	(In thousands)
Note Payable—Silicon Valley Bank Prime—Various 36 month maturities at Bank Prime Rate Plus 1%	$	1,256	$	—
Third Party Note—Due February 1, 2003		11,906		—
TechRx Note Payable—Due 2004		45		—
Mortgage payable—due in monthly installments until May 15, 2005 with interest at 6.87%		2,886		3,056
Convertible notes—mature on November 1, 2003		143,750		143,750
Promissory notes issued in consideration for acquisitions:
Spring Anesthesia Group, Inc.—7.6% due August 2003		4,831		4,831
Hadley Hutt Computing Ltd.—6.97% due June 2003		105		100
		164,779		151,737
Less: Short-term borrowings		11,906		—
Less: Current maturities		963		170
Long-term debt	$	151,910	$	151,567

In September 1999, a subsidiary of the Company (TechRx) entered into a borrowing arrangement with Silicon Valley Bank (SVB). Under the SVB Borrowing, the Subsidiary may borrow up to $3.0 million for working capital needs at the bank’s prime rate plus 1%, and up to an additional $2.0 million for equipment purchases at a rate equal to the 36-month treasury yield plus 300 basis points plus a final payment equal to 5% of the amount borrowed. Borrowings under the equipment facility portion of the SVB Borrowing totaling approximately $1.3 million were converted into 36-month term loans. The SVB Borrowing contains covenants customary with notes of this nature. Total amounts available under the SVB Borrowing are limited by a borrowing base consisting of qualified accounts receivable and are secured by all tangible assets and a negative pledge on the intellectual property assets of the Company. The working capital facility expires in April 2003.

On October 31, 2001, a Subsidiary (TechRx) of the Company entered into a loan agreement with a chain customer for up to $22.75 million. Tranche A, consisting of

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$11.375 million of the loan amount was advanced on October 31, 2001 with the remainder (Tranche B) to be advanced upon completion of certain development milestones with respect to product development (T-Rex One software). The loan carries an interest rate of 8%. In conjunction with this loan, the Subsidiary issued contingently exercisable TechRx warrants to purchase 4,550,000 shares of its common stock at $5 per share. The loan can be converted at the option of the holder into prepayment credits for the Company’s T-Rex One product upon implementation. If the loan is converted to prepayment credits, thewarrants will become exercisable. In addition, the warrants contain a put feature that becomes operative two years from the conversion date. If the put feature is exercised, the redemption price for the warrants is the greater of the intrinsic value of the warrants or $41 million. The obligation of the chain customer to make Tranche B of the loan expires on September 30, 2002, subject to the chain customer’s right to extend, at its sole discretion. The chain customer has the option, subject to certain requirements, not to make Tranche B of the loan and to require mandatory repayment on the Tranche A loan with six months notice. Interest and principal are payable in a single installment on the maturity date of February 1, 2003.

On November 6, 1996, the Company issued convertible notes (the “Notes”), providing $139.7 million in proceeds, net of $4.1 million in debt issuance costs. The issuance costs are included in other assets and are being amortized over the life of the Notes. The Notes are unsecured subordinated obligations of the Company, $143.8 million aggregate principal amount, and will mature on November 1, 2003, and are classified as fixed rate borrowings. As of May 31, 2002, the fair market value of the Company’s 5% Convertible Subordinate Notes is approximately $148.8 million. The Notes bear interest at 5% per annum. When originally issued, the Notes were convertible into approximately 2,752,000 shares of common stock at $52.23 per share at any time prior to maturity. On January 22, 2001, in anticipation of the spin-off of Global Payments Inc., the conversion rate of the Notes was adjusted as provided for in the indenture governing the Notes. As a result of this adjustment, the Notes are now convertible into approximately 4,140,000 shares of common stock at $34.72 per share at any time prior to maturity. Subsequent to November 1, 1999, the Notes are redeemable at the option of the Company, in whole or in part, initially at 102.857% and thereafter at prices declining to 100% at maturity, together with accrued interest. Because of the Notes’ conversion feature, the fair value of these securities is primarily based upon the market price of the Company’s common stock. The Company continues to evaluate several options to replace these Notes including either, or a combination of, issuing new convertible notes or other equity linked securities, or issuing senior debt, and continues to monitor the capital markets.

On April 29, 1999, the Company assumed a mortgage payable in connection with the purchase of an office building. The mortgage is due in monthly installments with a fixed rate of 6.87% per annum with the final installment due on May 15, 2005. This final installment includes a balloon payment of $2.4 million.

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Scheduled maturities of the Company’s long-term debt during the fiscal years subsequent to May 31, 2002 are as follows: $12.9 million in 2003; $149.4 million in 2004; $2.5 million in 2005; and $0 in 2006.

Note 11—Stockholders’ Equity

Stock Option Plans—During fiscal 2002 the Company adopted the 2002 Non-Employee Directors Compensation Plan (the “2002 Plan”). The 2002 Plan is a formula plan pursuant to which the non-employee directors receive cash, shares of stock or deferred stock rights in payment of their annual retainer, plus an annual grant of stock options. All equity awards made pursuant to the terms of the 2002 Plan will be granted under the 2000 Long-Term Incentive Plan, which was approved by the stockholders at the 1999 annual meeting, or under any successor equity compensation plan that is approved by the stockholders. Under the terms of the 2002 Plan, an annual retainer of $30,000 is paid to each non-employee director, other than a non-employee Chairman of the Board who is paid $60,000. Unless the director elects to defer receipt of the annual retainer in the form of deferred stock rights, the retainer is paid 50% in cash and 50% in common stock. The shares to be issued are determined by dividing 50% of the retainer by the fair market value per share of common stock as of the close of business on the first day of the fiscal year.

The 2002 Plan also provides that non-employee directors are annually awarded an option to purchase that number of shares of the Company’s common stock having a fair market value on the day immediately following the annual meeting of the Company’s stockholders equal to $125,000. The options granted under the 2002 Plan vest over a period of five years and expire 10 years after the date of grant. Options under the 2002 plan will be issued over a 10 year period.

On October 28, 1999, the Company adopted a stock-based compensation plan, the 2000 Long-Term Incentive Plan (the “2000 Plan”). The aggregate number of shares of common stock of the Company reserved and available for awards at May 31, 2002 was 1,480,448 shares. The number of shares available for awards will be adjusted annually on the last day of the Company’s fiscal year through fiscal 2004. The 2000 Plan authorizes the granting of awards to employees, officers and directors of the Company or its subsidiaries in the following forms: (i) options to purchase shares of common stock, which may be incentive stock options or nonqualified stock options, (ii) stock appreciation rights; (iii) performance shares; (iv) restricted stock; (v) dividend equivalents; (vi) other stock-based awards; or (vii) any other right or interest relating to common stock or cash. During fiscal 2002, 2001 and 2000, the Company has only granted awards in the forms of options and restricted stock. Not more than 15% of the total authorized shares may be granted as awards of restricted stock or unrestricted stock awards. Shares awarded as restricted stock under the plan are held in escrow and released to the grantee upon the grantee’s satisfaction of conditions set forth in the grantee’s restricted stock agreement. Such awards are recorded as deferred compensation, a reduction of stockholders’ equity, based on the quoted fair market value of the Company’s common stock at the award date. Compensation expense is recognized ratably during the escrow period of the award. Options may be issued at, below, or above the fair market value of the common stock at the time of grant. No awards have been granted below the fair market value since the 2000 Plan’s inception. Options granted become exercisable in various annual increments and terminate over a

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period not to exceed 10 years.

The Company has two other employee stock option plans, the 1997 Stock Option Plan (the “1997 Plan”) and the 1987 Stock Option Plan (the “1987 Plan”), that provide for the granting of options to certain officers and key employees to purchase the Company’s common stock. No additional options will be granted under the 1997 and 1987 Plans. Options granted under such plans become exercisable in various annual increments and terminate over a period not to exceed 10 years.

The Company’s 1984 Non-Employee Directors Stock Option Plan (the “1984 Plan”) provided for annual grants of options (each to purchase 5,000 shares of common stock of the Company), to directors who are not employees of the Company. The maximum number of shares for which options may be granted is 545,000. No additional options will be granted under the 1984 Plan. Options granted prior to October 26, 1995 are exercisable immediately at the current market value on the date of grant. Options granted on or after October 26, 1995 vest 20% two years after the date of grant, an additional 25% after three years, another 25% after four years, and the remaining 30% after five years.

Other Stock Plans—On October 26, 2000, the Company adopted an Employee Stock Purchase Plan under which the sale of 1,500,000 shares of its common stock has been authorized. During each quarterly offering period under the plan, employees may authorize payroll deductions of up to 20% of compensation, which funds are used to purchase shares of the Company’s common stock at the end of the offering period at a price equal to the lower of 85% of market value on the first day or the last day of the offering period, subject to an annual purchase limit of $25,000. At May 31, 2002, 160,895 shares have been issued under this plan, with 1,339,105 shares reserved for future issuance.

Under the 2000 Plan, there were 73,070; 122,962; and 311,850 shares of the Company’s common stock awarded as restricted stock during fiscal years 2002, 2001 and 2000, respectively. These awards have restriction periods of one to four years. As of May 31, 2002, 195,568 restricted shares remained in escrow. The Company expensed $1.3 million, $1.8 million and $2.2 million in 2002, 2001 and 2000, respectively, in connection with restricted stock awards granted under these two plans.

On January 31, 2001, as a result of the spin-off of Global Payments Inc., options and restricted stock held by Global Payments Inc. employees were cancelled and replaced with grants of Global Payments Inc. options. The number of options outstanding and the exercise prices for options held by employees that remained with the Company have been adjusted pursuant to a formula. This was accomplished by canceling each option and replacing them with newly issued options. Each replacement stock option had an aggregate intrinsic value and term equal to the aggregate intrinsic value of the original option. In accordance with FASB Interpretation 44, ‘Accounting for Certain Transactions Involving Stock Compensation,” replacement stock options and restricted stock granted in conjunction with such an equity transaction, assuming the intrinsic values remain the same, do not give rise to variable accounting.

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Summarized transactions under all the stock option plans are as follows:

	Shares Under Option		Weighted Average Option Price Per Share
Outstanding at May 31, 1999	3,233,704		$	24.77
Granted	1,175,725			25.56
Exercised	(357,619	)		10.95
Expired or terminated	(428,175	)		35.41
Outstanding at May 31, 2000	3,623,635			25.14
Option adjustment due to spinoff	4,194,436			—
Granted	913,333			18.82
Exercised	(1,046,712	)		8.29
Expired or terminated	(4,336,711	)		24.67
Outstanding at May 31, 2001	3,347,981			17.25
Granted	767,372			30.22
Exercised	(222,211	)		14.45
Expired or terminated	(287,136	)		20.89
Outstanding at May 31, 2002	3,606,006			20.07
Exercisable at May 31, 2002	1,337,919		$	16.84
Available for future grants	1,480,448			—

As of May 31, 2002, shares reserved for future issuance under all option plans are 5,086,454. The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives by groups of similar price and grant dates:

Exercise Price Range		Number of Shares	Weighted Average Price		Weighted Average Contractual Life	Number of Shares Exercisable	Weighted Average Exercise Price
$	4.12-$13.91	970,749	$	12.55	5.5 years	480,421	$	11.40
$	14.74-$19.75	819,655		16.61	5.8 years	434,259		17.06
$	20.06-$24.05	829,365		21.40	7.2 years	297,316		21.14
$	25.07-$42.67	986,237		29.24	8.4 years	125,923		26.71
		3,606,006	$	20.07	6.8 years	1,337,919	$	16.84

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The Company has chosen the disclosure option under SFAS No. 123, “Accounting for Stock Based Compensation” and continues to apply APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for options granted under the plans. The weighted average fair value of options granted in fiscal 2002, 2001, and 2000 was approximately $14.97, $12.01, and $15.06, respectively. Had compensation cost for these plans been recognized based on the fair value of the options at the grant dates for awards under the plans consistent with the method of SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

	2002		2001		2000
	(In thousands, except per share data)
Net income (loss):
As reported	$	15,110	$	32,540	$	(40,165	)
Pro forma		9,897		25,007		(44,461	)
Basic earnings (loss) per share:
As reported		0.44		0.99		(1.21	)
Pro forma		0.29		0.76		(1.34	)
Diluted earnings (loss) per share:
As reported		0.43		0.95		(1.21	)
Pro forma		0.28		0.73		(1.34	)

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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for the grants during the respective fiscal year:

	2002	2001	2000
Non-employee Directors Plan
Risk-free interest rates	4.1%	6.3%	6.6%
Expected dividend yields	0.4%	1.1%	1.3%
Expected lives	7 years	10 years	10 years
1997 Plan
Risk-free interest rates	—	—	6.3%
Expected dividend yields	—	—	1.1%
Expected lives	—	—	7 years
2000 Plan
Risk-free interest rates	4.8%	5.8%	6.5%
Expected dividend yields	0.5%	0.9%	1.0%
Expected lives	7 years	7 years	7 years
Employee Stock Purchase Plan
Risk-free interest rates	3.0%	5.4%	5.5%
Expected dividend yields	0.5%	0.8%	1.4%
Expected lives	0.25 year	1 year	1 year
Expected volatility-all plans	49%	47%	50%

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Note 12—Segment Information

SFAS 131, “Disclosures about Segments of an Enterprise and Related Information,” defines operating segments as components of an enterprise whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and to assess performance. The chief operating decision making group for NDCHealth consists of the Chief Executive Officer, the Chief Financial Officer, the Executive Vice President – Operations, and certain senior executive officers.

NDCHealth operates its business as two fundamental reportable segments: Network Services and Systems which we offer to healthcare providers and payers; and Information Management which we offer to pharmaceutical manufacturers. Network Services and Systems provides electronic connectivity to the NDCHealth intelligent network and system solutions throughout the healthcare industry. Information Management provides management information, research, and consulting services to pharmaceutical manufacturers, pharmacy chains and hospitals. Other includes results from divested businesses, restructuring and impairment charges, income related to gains from the sale of securities, income related to gains on business divestitures, and expense related to non-cash losses on an investments in Medscape and MedUnite.

The accounting policies of the reportable segments are generally the same as those described in the summary of significant accounting policies. Corporate overhead is allocated to the segments based on various methodologies (i.e., percentage of revenue, square footage, headcount, etc.). These various methodologies allow the Company to equitably allocate overhead costs based on the demands of the segment. Income taxes are not allocated to the segments incurring them for internal evaluation purposes. Revenues are attributed to geographic region based on the location of the business unit processing the transactions. No individual foreign country accounted for more than 10% of consolidated revenues in any period presented, however the Company has two customers that each provide more than 10% of the revenue reported in the Information Management segment.

Year Ended May 31, 2002	Information Management		Network Services and Systems		Other			Totals
	(In thousands)
Revenues	$	150,399	$	198,622	$	4,360		$	353,381
Income (loss) before income taxes, equity in losses of affiliated companies, and discontinued operations		25,315		46,306		(41,570	)		30,051
Depreciation and Amortization		11,072		12,879		423			24,374
Segment assets		147,952		508,312		1,920			658,184

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Year Ended May 31, 2001	Information Management		Network Services and Systems		Other			Totals
	(In thousands)
Revenues	$	136,616	$	176,015	$	24,421		$	337,052
Income (loss) before income taxes, equity in losses of affiliated companies, and discontinued operations		18,225		31,068		(8,572	)		40,721
Depreciation and amortization		15,238		16,378		3,129			34,745
Segment assets		133,817		313,796		36,748			484,361

Year Ended May 31, 2000	Information Management		Network Services and Systems		Other			Totals
	(In thousands)
Revenues	$	131,229	$	158,051	$	56,393		$	345,673
Income (loss) before income taxes, equity in losses of affiliated companies, and discontinued operations		17,728		24,781		(41,847	)		662
Depreciation and Amortization		14,875		14,320		2,639			31,834
Segment assets		98,966		303,484		30,870			433,320

A reconciliation of reportable segment assets to the Company’s consolidated assets is as follows:

	2002		2001		2000
	(In thousands)
Assets:
Information Management	$	147,952	$	133,817	$	98,966
Network Services and Systems		508,312		313,796		303,484
Other		1,920		36,748		30,870
Total reportable segment assets		658,184		484,361		433,320
Net assets of discontinued operations		—		—		220,312
Consolidated total assets	$	658,184	$	484,361	$	653,632

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The following table presents information about the Company’s operations in different geographic regions for and as of the years ended May 31, 2002, 2001, and 2000:

	2002		2001		2000
	(In thousands)
Revenues:
United States	$	335,794	$	321,790	$	330,562
All other		17,587		15,262		15,111
Total revenues	$	353,381	$	337,052	$	345,673
Long-lived assets:
United States	$	98,938	$	79,586	$	66,433
All other		2,628		3,370		2,832
Total long-lived assets	$	101,566	$	82,956	$	69,265

Note 13—Non-recurring, Restructuring and Impairment Charges and Other Unusual Expenses:

Fiscal years 2001 and 2000 represented a major transition period for the Company. The decision was made to focus management attention on the core information management and network services and systems businesses. Accordingly, actions were initiated to eliminate non-core as well as obsolete and redundant product and service offerings. In addition, the Company accelerated clearinghouse integration, consolidation of locations, and associated staff and expense reductions.

The Company evaluated whether events and circumstances had occurred that indicated the carrying amount of property and equipment or goodwill and other intangibles warranted revision or might not be recoverable. Consistent with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” the Company used an estimate of the future undiscounted net cash flows associated with the asset over its remaining life to measure whether the long-lived asset was recoverable. As a result, it was determined that impairment losses of approximately $22.9 million should be recognized in the second quarter of fiscal 2000.

Total restructuring and asset impairment charges during fiscal 2000 were $34.4 million and were categorized as follows:

	Total		Cash		Non-cash
	(in thousands)
Impairment of goodwill and other intangibles	$	15,972	$	—	$	15,972
Impairment of property and equipment		6,908		—		6,908
Closed or planned closings of facilities		6,100		6,100		—
Estimated costs for settlements on contracts		3,236		2,236		1,000
Severance and related costs		2,177		2,177		—
Total	$	34,393	$	10,513	$	23,880

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Approximately $10.5 million were cash items that were accrued at the time the charges were incurred. The charges relating to facilities represent the locations that were either already closed or had management approved plans to close within the next six months. The severance and related costs arose from the Company’s actions to reduce personnel staffing in areas of redundant operations and activities. The charges reflect specifically identified executives and employees who were informed during the second quarter of fiscal 2000 that their employment would be terminated. There were approximately 115 employees terminated in the consolidation efforts and approximately 35 employees terminated as a part of reductions related to project completions or phase-outs.

As these actions were finalized and implemented, an additional $2.2 million of restructuring and impairment charges were incurred during the second quarter of fiscal 2001. Of this total, approximately $1.2 million were cash items that were accrued at the time the charges were incurred. These cash items include severance and related costs of $1.1 million and facility exit costs of $0.1 million. The severance and related costs arose from the Company’s actions to reduce personnel staffing in areas of redundant operations and activities. These charges reflect 58 specifically identified executives and employees who were informed of their termination during the second quarter of fiscal 2001. The facility costs relate to a location that was closed during the quarter. The remaining $1.0 million impairment charge was the result of the write down and divestiture of a non-core operation. At May 31, 2001, $0.4 million of the cash portion of the restructuring charges remained accrued as a current liability in the liabilities section of the balance sheet as follows:

	Original Total		FY00 Payments		FY01 Additions		FY01 Payments		Balance at May 31, 2001
	(in thousands)
Closed or planned closings of facilities	$	6,100	$	1,768	$	160	$	4,372	$	120
Estimated costs for settlements on contracts		2,236		498		—		1,738		—
Severance and related costs		2,177		1,621		1,066		1,322		300
Total	$	10,513	$	3,887	$	1,226	$	7,432	$	420

As of May 31, 2002, all payments relating to the cash portion of the restructuring charges were complete.

In accordance with the Company’s policy regarding investments in publicly traded entities, losses in the amounts of $7.0 million and $9.7 million were recognized in fiscal 2001 and fiscal 2000, respectively, to mark to fair value its investment in Medscape, Inc. as these losses were determined to be other than temporary. Additionally, the Company recorded a non-cash charge in fiscal 2002 reducing the carrying value of its investment in MedUnite to $12.2 million as further explained in Note-19 Subsequent events in these Notes to Consolidated Financial Statements.

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Note 14—Related Party Transactions

Executive recruiting services of approximately $0.1 million and $0.2 million for the years ended May 31, 2002 and 2001, respectively, were provided by a firm of which a Director of the Company is a Senior Partner. These services were provided by an office other than that of the Director.

Promissory notes totaling approximately $4.3 million were issued to the Company in fiscal 2001 by a partnership, of which a director of the Company is sole partner, for the exercise of stock options previously granted to the director and transferred to the partnership. Treasury shares held at the time were issued as a result of the exercise of these options. The interest rates on these notes range from 4.63% to 4.77%, payable at the maturity date. The notes mature on various dates between July 2002 and June 2004. The notes, with full recourse, are secured by stock in the company owned by the partnership. The outstanding balance of these notes was $3.2 million (due in two payments in June 2003 and June 2004) and $4.3 million as of May 31, 2002 and 2001, respectively, and is included in Deferred compensation and other as a reduction of stockholders’ equity.

During fiscal 2002, the Company became an investor in MedUnite with a 17.9% equity interest. As a provider of physician software, the Company’s objective in its alliance with MedUnite is to provide transactions services performed by MedUnite to its physician customers. In fiscal year 2002, revenue related to MedUnite was approximately $8.0 million. Additionally, at May 31, 2002 the Company had a note receivable from MedUnite, including accrued interest, of approximately $2.4 million and a convertible note receivable, including accrued interest, of approximately $5.4 million.

Note 15—Lease Obligations

The Company conducts a major part of its operations using leased facilities and equipment. Many of these leases have renewal and purchase options and provide that the Company pay the cost of property taxes, insurance and maintenance.

Rent expense on all operating leases for fiscal 2002, 2001 and 2000 was approximately $7.3 million, $8.5 million and $10.2 million, respectively.

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Future minimum lease payments for all non-cancelable leases at May 31, 2002 were as follows:

	Capital Leases		Operating Leases
	(In thousands)
2003	$	1,789	$	8,572
2004		1,052		8,664
2005		570		7,254
2006		—		4,089
2007		—		3,364
Thereafter		—		15,404
Total future minimum lease payments		3,411	$	47,347
Less: amount representing interest		336
Present value of net minimum lease payments		3,075
Less: current portion		1,296
Long-term obligations under capital leases at May 31, 2002	$	1,779

Global Payments currently occupies an office building owned by the Company that is adjacent to the Company’s corporate headquarters. The Company maintains the building, which Global Payments occupied prior to the spin-off, as a part of its corporate campus. As part of the spin-off agreement, the building is currently leased to Global Payments at a rate that approximates the Company’s cost of maintaining the building for a term ending January 31, 2004.

Note 16—Commitments and Contingencies

In May 2002 NDCHealth entered into an Agreement and Plan of Merger (“Merger Agreement”) with TechRx under which the Company agreed to acquire TechRx in a two-step transaction. Under the first step, the Company acquired a controlling interest through the purchase of additional common stock and the conversation of non-voting convertible preferred stock for an additional investment in TechRx common stock of approximately $51.0 million. Under the second step, which would close on or about May 31, 2003, if certain conditions are met, NDCHealth will acquire the remaining shares in TechRx from minority shareholders for cash, NDCHealth shares or a combination of cash and NDCHealth shares. The amount of the payment to TechRx shareholders will be determined based upon the satisfaction of certain financial and operational milestones by TechRx as set forth in the Merger Agreement. The purchase price of the balance of the TechRx equity outstanding ranges from approximately $100 million to $200 million.

The Company is involved in litigation related to its divested Physician and Hospital Support Services and Hospital Management Services (PHSS) units.

The Company is involved in litigation with IMS Health relating to the format in which prescription data is delivered to pharmaceutical companies. In a proceeding before the European Commission the Company is alleging that to the extent this format is copyrighted by IMS, the format constitutes an industry standard and an essential facility to competition and must be made available to competitors of IMS. The Company obtained a ruling from the European Commission ordering IMS Health to license its structure for organizing pharmaceutical sales data to the Company however, subsequent to this decision the Court of First Instance and later the European Court Of Justice stayed this decision pending a complete review of the underlying substantive matters.

In a proceeding in the Germany courts, IMS has alleged copyright infringement against the Company and the Company is contesting the validity of IMS’s alleged copyright. In these proceedings, IMS Health obtained an injunction from the Frankfurt Regional Court to prevent the Company from distributing data in the contested format. Recently, the Frankfurt Court of Appeals ruled in NDCHealth’s favor by dismissing this preliminary injunction against NDCHealth’s use of the industry standard data structure. This decision is final and is not subject to further appeal by IMS Health. The underlying copyright claim, however, asserted by IMS Health against NDCHealth remains before the Frankfurt Court of Appeals for decision, and a hearing on this issue is scheduled for September 2002. The Company is unable to predict whether IMS Health may be successful in overturning the EC and Germany rulings.

Additionally, the Company is party to a number of other claims and lawsuits incidental to its business. In the opinion of management, the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on the Company’s financial position, liquidity or results of operations.

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Note 17—Supplemental Cash Flow Information

Supplemental cash flow disclosures and non-cash investing and financing activities for the years ended May 31, 2002, 2001 and 2000 are as follows:

	2002		2001		2000
	(In thousands)
Supplemental cash flow information:
Net income taxes paid (refunded)	$	986	$	1,174	$	(754	)
Interest paid		8,306		7,327		8,506
Supplemental non-cash investing and financing activities:
Capital leases entered into in exchange for property and equipment		2,151		—		1,197
Non-cash investment in MedUnite, Inc		37,458		—		—
Non-cash investment in TechRx		—		15,306		—
Non-cash investment in Infopharm Limited		2,368		—		—
Investment in MedicaLogic/Medscape, Inc.		—		—		7,000

In fiscal 2002, 2001 and 2000, the Company acquired various businesses that were accounted for as purchases (see Notes 2 and 6):

	2002			2001			2000
	(In thousands)
Fair value of assets acquired	$	193,489		$	23,624		$	46,160
Notes and deferred payments		(520	)		—			(6,000	)
Stock issued		(12,000	)		—			—
Cash acquired		(7,349	)		—			(902	)
Liabilities assumed		(53,994	)		(400	)		(1,160	)
Cash paid for acquisitions	$	119,626		$	23,224		$	38,098

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Note 18—Quarterly Consolidated Financial Information (Unaudited)

	Quarter Ended
	August 31		November 30			March 1		May 31
	(In thousands, except per share data)
Fiscal Year 2002
Revenue	$	84,156	$	85,453		$	89,268	$	94,504
Operating income		17,495		18,442			19,566		21,599
Net income (loss)		9,031		10,721			11,245		(15,887	)
Basic earnings (loss) per share		0.27		0.31			0.33		(0.46	)
Diluted earnings (loss) per share		0.25		0.30			0.31		(0.46	)
	Quarter Ended
	August 31		November 30			February 28		May 31
Fiscal Year 2001
Revenue	$	83,426	$	80,533		$	84,654	$	88,439
Restructuring and impairment charge		—		2,156			—		—
Operating income		13,271		11,405			13,800		15,344
Income before discontinued operations		6,901		5,704			7,556		4,056
Discontinued operations		8,649		(326	)		—		—
Net income	$	15,550	$	5,378		$	7,556	$	4,056
Basic earnings per share:
Income before discontinued operations		0.21		0.17			0.23		0.12
Discontinued operations		0.26		(0.01	)		—		—
Basic earnings per share		0.47		0.16			0.23		0.12
Diluted earnings per share:
Income before discontinued operations		0.21		0.17			0.22		0.11
Discontinued operations		0.25		(0.01	)		—		—
Diluted earnings per share		0.46		0.16			0.22		0.11

During the fourth quarter of fiscal 2002, the Company adopted the provisions of EITF 01-09, “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products,” which was issued during the Company’s third fiscal quarter. NDCHealth’s adoption of EITF 01-09 resulted in a reclassification of revenues related to sales to physician systems vendors, requiring certain vendor allowances to be treated as deductions from revenue. As required by EITF 01-09, the Company has retroactively adjusted its results for fiscal years 2002 and 2001. Due to the offsetting nature of the reclassifications, there was no impact on net income or earnings per share in fiscal 2002 or 2001.

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On May 28, 2002, NDCHealth acquired a controlling interest in TechRx Incorporated, a provider of practice management systems to pharmacy. As required by APB 18, due to the increase in the Company’s equity position in TechRx, its financial results have been retroactively adjusted to account for TechRx as if NDCHealth had used the equity method commencing with its initial investment rather than the cost method.

Note 19—Subsequent event

On August 19, 2002, the financial advisors to the MedUnite Board of Directors reported verbally to the Company that MedUnite had evaluated several preliminary proposals in conjunction with a potential recapitalization transaction and had selected parties for additional negotiations. Additionally, the Company understands that other parties have indicated their interest in potentially submitting a proposal to MedUnite. Based upon this information, as well as an updated evaluation of MedUnite’s results and of capital market conditions, the Company has determined that the value of MedUnite has declined, and that such decline is not temporary. Therefore, for the year ended May 31, 2002, in accordance with the provisions of SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” the Company recorded a non-cash charge reducing the carrying value of the investment in MedUnite to $12.2 million. This charge reduced the Company’s previously announced net income by $28.3 million, and diluted earnings per share by $0.79 for fiscal 2002.

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NDCHealth Corporation

CONSOLIDATED SCHEDULE II 

Valuation & Qualifying Accounts

Column A	Column B		Column C					Column D		Column E
			1		2
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Acquired/ (Divested) Balances			Uncollectable Accounts Write-Off		Balance at End of Period
	(In thousands)
Trade Receivable Allowances
May 31, 2001	$	7,316	$	5,189	$	(1,113	)	$	4,764	$	6,628
May 31, 2002		6,628		3,139		239			4,296		5,710

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{This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with the Consolidated Schedule II on the following page. This audit report has not been reissued by Arthur Andersen in connection with this filing on Form 10-K. See Exhibit 23(ii) for further discussion.}

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE

We have audited, in accordance with auditing standards generally accepted in the United States, the financial statements included in National Data Corporation’s annual report to shareholders in this Form 10-K and have issued our report thereon dated July 13, 2001. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index on page 35 is the responsibility of the Company’s management and is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

/S/    ARTHUR ANDERSEN LLP

Atlanta, Georgia

July 13, 2001

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NDCHealth Corporation

CONSOLIDATED SCHEDULE II-A

Valuation & Qualifying Accounts

Column A	Column B		Column C				Column D		Column E
			1		2
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Acquired/ (Divested) Balances		Uncollectable Accounts Write-Off		Balance at End of Period
	(In thousands)
Trade Receivable Allowances
May 31, 2000	$	3,982	$	14,165	$	—	$	10,831	$	7,316

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Item 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The Audit Committee of the Board of Directors of NDCHealth Corporation (the “Company”) annually considers and recommends to the Board the selection of the Company’s independent public accountants. As recommended by the Company’s Audit Committee, the Board of Directors directed management to notify Arthur Andersen LLP (“Andersen”) that it had decided to no longer engage Andersen as the Company’s independent public accountant. Andersen’s services were terminated on March 27, 2002.

During the Company’s two most recent fiscal years and through the date of its termination of Andersen, there were no disagreements with Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Andersen’s satisfaction, would have caused them to make reference to the subject matter in connection with their report on the Company’s consolidated financial statements for such years; and there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.

Following a thorough evaluation process, and on the recommendation of its Audit Committee, the Board of Directors has appointed Ernst & Young LLP as our independent auditors.

During our two most recent fiscal years and through April 12, 2002, the date of the appointment, we did not consult Ernst & Young with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, or any other matters or reportable events listed in Items 304(a) (2) (i) and (ii) of Regulation S-K.

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PART III

Item 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company hereby incorporates by reference the information contained under the heading “Election of Directors—Certain Information Concerning the Nominees and Other Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” from its definitive Proxy Statement (the “2002 Proxy Statement”) to be delivered to the stockholders of the Company in connection with the 2002 Annual Meeting of Stockholders to be held on October 24, 2002. Certain information relating to executive officers of the Company appears in Part I of this Annual Report on Form 10-K.

Item 11.     EXECUTIVE COMPENSATION

The Company hereby incorporates by reference the information contained under the heading “Election of Directors—Compensation and Other Benefits” from the 2002 Proxy Statement. In no event shall the information contained in the 2002 Proxy Statement under the sections entitled “Stockholder Return Analysis” and “Report of the Compensation Committee” be included herein by this reference.

Item 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company hereby incorporates by reference the information contained under the headings “Election of Directors—Common Stock Ownership of Management” and “—Common Stock Ownership by Certain Other Persons” from the 2002 Proxy Statement.

Item 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company hereby incorporates by reference the information contained under the headings “Transactions with Related Parties” and “Compensation Committee Interlocks and Insider Participation” from the 2002 Proxy Statement.

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PART IV

Item 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)  Listing of Financial Statements

The following consolidated financial statements for the Registrant and its subsidiaries are included in Part II, Item 8 of this report and are filed as a part hereof:

Report of Ernst & Young LLP, Independent Auditors

Report of Arthur Andersen, Independent Public Accountants

Consolidated Statements of Operations for each of the three fiscal years ended May 31, 2002, 2001 and 2000.

Consolidated Statements of Cash Flows for each of the three fiscal years ended

May 31, 2002, 2001 and 2000.

Consolidated Balance Sheets at May 31, 2002 and 2001.

Consolidated Statements of Changes in Stockholders’ Equity for each of the three fiscal years ended May 31, 2002, 2001 and 2000.

Notes to Consolidated Financial Statements

(a)(2)  Listing of Financial Statement Schedules

Other than as described below, Financial Statement Schedules are not filed with this Report because the Schedules are either inapplicable or the required information is presented in the Financial Statements or Notes thereto.

Consolidated Schedule II—Valuation and Qualifying Accounts for the two fiscal years ended May 31, 2002

Report of Arthur Andersen, Independent Public Accountants as to Schedule

Consolidated Schedule II-A—Valuation and Qualifying Accounts for the fiscal year ended May 31, 2000

(a)(3)  Exhibits

2(i)  Distribution Agreement, Plan of Distribution and Reorganization, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc.

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(filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

3(i)  Restated Certificate of Incorporation of the Registrant, dated November 28, 2001 (filed as Exhibit 3(i) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2001, file No. 001-12392, and incorporated herein by reference.)

(ii)  By-laws of the Registrant, as amended.

4(i)  Form of Indenture between the Registrant and The First National Bank of Chicago, as Trustee, relating to Registrant’s 5% Convertible Subordinated Notes due 2003 (filed as Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated herein by reference.)

(ii)  Form of the Registrant’s 5% Convertible Subordinated Note due 2003 (filed as Exhibit 4.2 to Registrant’s Current Report on Form 8-K dated October 29, 1996, file No. 001-12392, and incorporated herein by reference.)

(iii)  Stockholder Protection Rights Agreement, dated March 26, 2001, between the Registrant and the Rights Agent (filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated March 26, 2001, file No. 001-12392, and incorporated herein by reference.)

10(i)  Tax Sharing and Indemnification Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(ii)  Employee Benefits Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(iii)  Transition Support Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(iv)  Intercompany Systems/Network Services Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(v)  Services Agreement (Batch Processing), dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.5 to

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the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(vi)  Amendment to Services Agreement (Batch Processing), dated as of May 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10(vi) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

(vii)  Headquarters Lease Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Inc. (filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(viii)  Sublease Agreement, dated as of January 31, 2001 by and between National Data Corporation and Global Payments Systems LLC. (filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(ix)  Sublease Agreement, dated as of January 31, 2001 by and between National Data Corporation and National Data Payment Systems, Inc. (filed as Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on February 14, 2001, file No. 001-12392, and incorporated herein by reference.)

(x)  Revolving Credit Agreement dated as of May 1, 2002, among the Registrant, SunTrust Bank, as Administrative Agent, Bank of America, N.A., as Syndication Agent, Wachovia Bank, National Association, as Co-Documentation Agent, U.S. Bank National Association, as Co-Documentation Agent, SunTrust Robinson Humphrey Capital Markets, as Lead Arranger, and the Lenders named therein.

(xi)  Promissory Notes dated April 3, 2001 and May 14, 2001 between MRY Partners, L.P. and the Registrant (filed as Exhibit 10(xiii) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

(xii)  Stock Pledge Agreement dated as of April 3, 2001 by and between MRY Partners, L.P. and the registrant (filed as Exhibit 10(xiv) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

(xiii)  Agreement and Plan of Merger dated as of May 28, 2002 by and among TechRx Incorporated, the Registrant, and NDC Acquisition Corp. (NDCHealth Corporation has requested confidential treatment with respect to certain portions of this Exhibit.)

(xiv)  Asset Purchase Agreement dated as of May 29, 2002 by and between Arclight Systems LLC and the Registrant. (NDCHealth Corporation has requested confidential treatment with respect to certain portions of this Exhibit.)

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(xv)  First Amendment to Stock Pledge Agreement dated as of January 9, 2002 by and between MRY Partners, L.P. and the Registrant.

(xvi)  First Amendment to Revolving Credit Agreement dated as of May 24, 2002 by and among the Registrant, SunTrust Bank, and the Lenders named therein.

(xvii)  Second Amendment to Revolving Credit Agreement dated as of August 23, 2002 by and among the Registrant, SunTrust Bank, and the Lenders named therein.

(xviii)  Asset Contribution Agreement among the Registrant and MedUnite Inc. dated as of June 1, 2001.

Executive Compensation Plans and Arrangements

(xix)  2002 Non-Employee Directors Compensation Plan, dated October 5, 2001 (filed as Exhibit 10(i) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2001, file No. 001-12392, and incorporated herein by reference.)

(xx)  Non-Employee Directors Stock Option Plan (filed as Exhibit 10(iv) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1987, file No. 001-2392, and incorporated herein by reference.)

(xxi)  1995 Non-Employee Director Compensation Plan (filed as Exhibit 10(vii) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1996, file No. 001-12392, and incorporated herein by reference.)

(xxii)  Amended and Restated Retirement Plan for Non-Employee Directors, dated as of April 20, 1994 (filed as Exhibit 10(xii) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1994, file No. 001-12392, and incorporated herein by reference.)

(xxiii)  Amendment to Amended and Restated Retirement Plan for Non-Employee Directors (filed as Exhibit 4(xi) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1995, file No. 001-12392, and incorporated herein by reference.)

(xxiv)  1987 Stock Option Plan, as amended (incorporated by reference from Exhibit 10 to the Registrant’s Registration Statement on Form S-8, No. 333-05449.)

(xxv)  Amended and Restated C.I.S. Technologies, Inc. Stock Option Plan (incorporated by reference from Exhibit 10(a) to the Registrant’s Registration Statement on Form S-8, No. 333-05427.)

(xxvi)  Amended and Restated C.I.S. Technologies, Inc. Employee Stock Option Plan (incorporated by reference from Exhibit 10(b) to the Registrant’s Registration Statement on Form S-8, No. 333-05427.)

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(xxvii)  C.I.S. Technologies, Inc. HCC Management Stock Option Plan (incorporated by reference from Exhibit 10(c) to the Registrant’s Registration Statement on Form S-8, No. 333-05427).

(xxviii)  C.I.S. Technologies, Inc. 1995 Stock Incentive Plan (incorporated by reference from Exhibit 10(e) to the Registrant’s Registration Statement on Form S-8, No. 333-05427.)

(xxix)  Supplemental Executive Retirement Plan effective June 1, 1997 (incorporated by reference from Exhibit 10(xx) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1997, file No. 001-12392.)

(xxx)  Amendment to Registrant’s 1987 Stock Option Plan effective September 28, 1996 (incorporated by reference from Exhibit 10(xxi) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1997, file No. 001-12392.)

(xxxi)  Amendment to Registrant’s 1983 Restricted Stock Plan effective December 17, 1996 (incorporated by reference from Exhibit 10(xxii) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1997, file No. 001-12392.)

(xxxii)  Amendment to the National Data Corporation Employees Retirement Plan effective July 31, 1998 (incorporated by reference from Exhibit 10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended August 31, 1998, file No. 001-12392.)

(xxxiii)  Amendment to the 1984 Non-Employee Director Stock Option Plan effective October 22, 1998. (filed as Exhibit 10 (xxix) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 1999, file No. 001-12392, and incorporated herein by reference.)

(xxxiv)  2000 Long-term Incentive Plan (filed as Exhibit A to the Registrant’s Definitive Proxy Statement on Form 14A for the year ended May 31, 1999 and incorporated herein by reference.)

(xxxv)  Employment Agreement effective December 1, 1999 between Walter M. Hoff and the Registrant (filed as Exhibit 10(xxxiii) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

(xxxvi)  Employment Agreement effective December 1, 1999 between E. Christine Rumsey and the Registrant (filed as Exhibit 10(xxxiv) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

111

(xxxvii)  Employment Agreement effective January 17, 2000 between Charles W. Miller and the Registrant (filed as Exhibit 10(xxxv) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

(xxxviii)  Employment Agreement effective May 1, 2000 between Glenn Rosenkoetter and the Registrant (filed as Exhibit 10(xxxvi) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

(xxxix)  Employment Agreement effective November 20, 2000 between Randolph L.M. Hutto and the Registrant (filed as Exhibit 10(xxxvii) to the Registrant’s Annual Report on Form 10-K for the year ended May 31, 2001, file No. 001-12392, and incorporated herein by reference.)

21  Subsidiaries of the Registrant

23(i)  Consent of Ernst & Young LLP, Independent Auditors.

(ii)  Notice regarding consent of Arthur Andersen LLP, Independent Public Accountants.

99(i)  NDCHealth Corporation (unaudited) Consolidated Statements of Operations (GAAP) for fiscal 2000, 2001 (by quarter) and 2002 (by quarter.)

(ii)  Notes to reconcile NDCHealth Corporation (unaudited) historical GAAP results to NDCHealth Corporation (unaudited) historical normalized results.

(iii)  NDCHealth Corporation (unaudited) Consolidated Statements of Operations (normalized) for fiscal 2000, 2001 (by quarter) and 2002 (by quarter.) (Normalized for certain items discussed in Exhibit 99 (ii))

(b)  Reports on Form 8-K were filed during the last quarter of our fiscal year ending May 31, 2002. The items reported, any financial statements filed, and the dates of any such reports are listed below.

(i)  NDCHealth Corporation’s Current Report on Form 8-K dated March 20, 2002, was filed on March 20, 2002, reporting as an exhibit under Item 7 the Company’s press release dated March 20, 2002 and under Item 9 the Company’s release of financial information including revenue and earnings expectations for the remainder of the fiscal year.

112

(ii)  NDCHealth Corporation’s Current Report on Form 8-K dated March 27, 2002, was filed on March 27, 2002, reporting under Item 4 that Arthur Andersen LLP would no longer be engaged as the Company’s independent public accountant.

(iii)  NDCHealth Corporation’s Current Report on Form 8-K dated April 12, 2002, was filed on April 12, 2002, reporting under Item 4 the appointment of Ernst & Young LLP as the Company’s independent public accountant.

(iv)  NDCHealth Corporation’s Current Report on Form 8-K dated May 29, 2002, was filed on May 29, 2002, reporting under Item 9 the Company’s acquisition of a controlling interest in TechRx Incorporated and selected assets of ScriptLINE from Arclight Systems, LLC.

(c)  The Exhibits to this Report are listed under Item 14(a)(3) above.

(d)  The Financial Statement Schedule to this Report is listed under Item 14(a)(2) above.

113

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, NDCHealth Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NDCHealth Corporation

By: /s/ WALTER M. HOFF

Walter M. Hoff,

President and Chief Executive Officer

(Principal Executive Officer)

By: /s/ RANDOLPH L.M. HUTTO

Randolph L.M. Hutto

Chief Financial Officer

(Principal Financial Officer)

By: /s/ DAVID H. SHENK

David H. Shenk

Corporate Controller

(Chief Accounting Officer)

Date: August 27, 2002

114

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by a majority of the Board of Directors of the Registrant as of August 27, 2002.

Signature	Title
/s/ ROBERT A. YELLOWLEES	Chairman of the Board
Robert A. Yellowlees
/s/ J. VERONICA BIGGINS	Director
J. Veronica Biggins
/s/ TERRI A. DIAL	Director
Terri A. Dial
/s/ WALTER M. HOFF	Director
Walter M. Hoff
	Director
Jeffrey P. Koplan
/s/ KURT M. LANDGRAF	Director
Kurt M. Landgraf
/s/ JAMES R. LIENTZ, JR.	Director
James R. Lientz, Jr.
	Director
James F. McDonald
/s/ NEIL WILLIAMS	Director
Neil Williams

115

NDCHEALTH CORPORATION

FORM 10-K

INDEX TO EXHIBITS

Exhibit Numbers	Description
3 (ii)	By-laws of the Registrant, as amended.
10 (x)	Revolving Credit Agreement dated as of May 1, 2002, among the Registrant, SunTrust Bank, as Administrative Agent, Bank of America, N.A., as Syndication Agent, Wachovia Bank, National Association, as Co-Documentation Agent, U.S. Bank National Association, as Co-Documentation Agent, SunTrust Robinson Humphrey Capital Markets, as Lead Arranger, and the Lenders named therein.
10 (xiii)	Agreement and Plan of Merger dated as of May 28, 2002 by and among TechRx Incorporated, the Registrant, and NDC Acquisition Corp. (NDCHealth Corporation has requested confidential treatment with respect to certain portions of this Exhibit.)
10 (xiv)	Asset Purchase Agreement dated as of May 29, 2002 by and between Arclight Systems LLC and the Registrant. (NDCHealth Corporation has requested confidential treatment with respect to certain portions of this Exhibit.)
10 (xv)	First Amendment to Stock Pledge Agreement dated as of January 9, 2002 by and between MRY Partners, L.P. and the Registrant.
10 (xvi)	First Amendment to Revolving Credit Agreement dated as of May 24, 2002 by and among the Registrant, SunTrust Bank, and the Lenders named therein.
10 (xvii)	Second Amendment to Revolving Credit Agreement dated as of August 23, 2002 by and among the Registrant, SunTrust Bank, and the Lenders named therein.
10 (xviii)	Asset Contribution Agreement among the Registrant and MedUnite Inc. dated as of June 1, 2001.
21	Subsidiaries of the Registrant.
23 (i)	Consent of Ernst & Young LLP, Independent Auditors
23 (ii)	Notice regarding consent of Arthur Andersen LLP, Independent Public Accountants

116

99 (i)	NDCHealth Corporation (unaudited) Consolidated Statements of Income (GAAP) for fiscal 2000, 2001 (by quarter) and 2002 (by quarter.)
99 (ii)	Notes to reconcile NDCHealth Corporation (unaudited) historical GAAP results to NDCHealth Corporation (unaudited) historical normalized results.
99 (iii)	NDCHealth Corporation (unaudited) Consolidated Statements of Income (normalized) for fiscal 2000, 2001 (by quarter) and 2002 (by quarter.) (Normalized for certain items discussed in Exhibit 99 (ii))

117

EX-3.II

Exhibit 3 (ii)

BY-LAWS

OF

NDCHEALTH CORPORATION

(As Amended Through June 20, 2000)

BY-LAWS

of

NDCHEALTH CORPORATION

TABLE OF CONTENTS

	Page
ARTICLE I.    OFFICES
SECTION   1.    Registered Office	1
SECTION   2.    Other Offices	1
ARTICLE II.    MEETINGS OF STOCKHOLDERS
SECTION   1.    Place of Meetings	1
SECTION   2.    Date of Meetings	1
SECTION   3.    Notice of Meetings	2
SECTION   4.    List of Stockholders	2
SECTION   5.    Special Meetings	2
SECTION   6.    Notice of Special Meetings	2
SECTION   7.    Limitations on Special Meetings	2
SECTION   8.    Quorum and Adjournment	2
SECTION   9.    Voting Rights	3
SECTION 10.    Proxies and Voting Rights	3
SECTION 11.    Action by Consent	3
ARTICLE III.    DIRECTORS
SECTION   1.    Number, Election, and Term of Office	3
SECTION   2.    Vacancies	3
SECTION   3.    Powers of Directors	4
SECTION   4.    Place of Meetings	4
SECTION   5.    Time of Meetings	4
SECTION   6.    Regular Meetings	4
SECTION   7.    Special Meetings	4
SECTION   8.    Quorum	4
SECTION   9.    Participation By Conference Telephone	5
SECTION 10.    Action by Consent	5
SECTION 11.    Executive and Other Committees	5
SECTION 12.    Minutes of Meetings	5
SECTION 13.    Compensation	5

-i-

ARTICLE IV.    NOTICES
SECTION   1.    Procedure	6
SECTION   2.    Waiver and Consent	6
ARTICLE V.    OFFICERS
SECTION   1.    General	6
SECTION   2.    Election of Officers	7
SECTION   3.    Additional Officers	7
SECTION   4.    Tenure	7
SECTION   5.    Chairman of the Board	7
SECTION   6.    President	7
SECTION   7.    Vice Presidents—Powers and Duties	8
SECTION   8.    Secretary—Powers and Duties	8
SECTION   9.    Assistant Secretary	8
SECTION 10.    Treasurer—Powers and Duties	8
SECTION 11.    Treasurer—Disbursements and Accounting	8
SECTION 12.    Assistant Treasurer	8
SECTION 13.    Bonds	9
ARTICLE VI.    CERTIFICATES OF STOCK
SECTION   1.    Rights to Certificate	9
SECTION   2.    Classes of Stock—Rights	9
SECTION   3.    Officers’ Signatures	9
SECTION   4.    Lost Certificates	10
SECTION   5.    Transfers of Stock	10
SECTION   6.    Fixing of Record Date	10
SECTION   7.    Registered Stockholders	11
ARTICLE VII.    GENERAL PROVISIONS
SECTION   1.    Dividends	11
SECTION   2.    Reserves	11
SECTION   3.    Annual Statements	11
SECTION   4.    Checks	11
SECTION   5.    Fiscal Year	12
SECTION   6.    Seal	12
SECTION   7.    Indemnification	12
SECTION   8.    Miscellaneous	12
ARTICLE VIII.    AMENDMENTS	12

-ii-

BY–LAWS

of

NDCHEALTH CORPORATION

(As Amended Through June 20, 2000)*

ARTICLE I

OFFICES

SECTION 1.    Registered Office.    The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.

SECTION 2.    Other Offices.    The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1.    Place of Meetings.    All meetings of the stockholders for the election of Directors shall be held in the City of Atlanta, State of Georgia, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

SECTION 2.    Date of Meetings.    Annual meetings of stockholders shall be held on the fourth Thursday of October if not a legal holiday, and if a legal holiday, then on the next secular day following, or on such other date as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which

* These By-Laws were adopted by the Board of Directors on November 30, 1977 and have been amended from time to time thereafter. Restated to reflect all amendments on and through June 20, 2000.

stockholders shall elect a Board of Directors and transact such other business as may be properly brought before the meeting. Elections of Directors need not be by written ballot.

SECTION 3.    Notice of Meetings.    Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten days nor more than sixty days before the date of the meeting.

SECTION 4.    List of Stockholders.    The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at the place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

SECTION 5.    Special Meetings.    Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the Chairman of the Board or the President and shall be called by the Chairman of the Board or the President or Secretary at the request in writing of a majority of the members of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

SECTION 6.    Notice of Special Meetings.    Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten or more than fifty days before the date of the meeting to each stockholder entitled to vote at such meeting.

SECTION 7.    Limitations on Special Meetings.    Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

SECTION 8.    Quorum and Adjournment.    The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business

may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

SECTION 9.    Voting Rights.    When a quorum is present at the meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question.

SECTION 10.    Proxies and Voting Rights.    Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.

SECTION 11.    Action by Consent.    Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of the statutes, the meeting and vote of stockholders may be dispensed with if all of the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken.

ARTICLE III

DIRECTORS

SECTION 1.    Number, Election and Term of Office.    The number of Directors which shall constitute the whole Board shall be not less than three nor more than nine. Within the limits above specified, the number of Directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting. The Directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each Director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.

SECTION 2.    Vacancies.    Vacancies and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a majority of the Directors then in office, though less than a quorum, or by a sole remaining Director, and any Director so chosen shall hold office until the next election of the class for which such Director shall have been chosen and until his successor shall be elected and qualify, unless sooner displaced. If there are no Directors in office, then an election of Directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the Directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the

Court of Chancery may, upon application of any stockholder or stockholders holding at least ten per cent of the total number of the shares at the time outstanding having the right to vote for such Directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the Directors chosen by the Directors then in office.

SECTION 3.    Powers of Directors.    The business of the corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.

SECTION 4.    Place of Meetings.    The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.

SECTION 5.    Time of Meetings.    The first meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of stockholders at the same place as such annual meeting or, in the alternative, at such time and place as shall be fixed by the vote of the stockholders at the annual meeting, and no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held at the time and place determined under the preceding sentence, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the Directors.

SECTION 6.    Regular Meetings.    Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board.

SECTION 7.    Special Meetings.    Special meetings of the Board may be called by the Chairman of the Board on three days’ notice to each Director, either personally or by mail or by telegram; special meeting shall be called by the Chairman of the Board or Secretary in like manner and on like notice on the written request of a majority of the Directors.

SECTION 8.    Quorum.    At all meeting of the Board a majority of the Directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

SECTION 9.    Participation by Conference Telephone.    Members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment through which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 9 shall constitute presence in person at such meeting.

SECTION 10.    Action by Consent.    Unless otherwise restricted by the certificate of incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

SECTION 11.    Executive and Other Committees.    The Board of Directors may, by resolution adopted by a majority of the whole Board of Directors, appoint three or more of its members to constitute an Executive Committee which to the extent provided by the Board of Directors shall have and exercise all of the authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. All action taken by the Executive Committee shall be reported to the Board of Directors at its first meeting thereafter.

The Board of Directors may also from time to time by resolution passed by a majority of the whole Board appoint other committees from among its members and/or officers of the corporation, and such committee or committees shall have such powers and duties to be exercised under the control and direction of the Board of Directors as the latter may from time to time prescribe.

Unless otherwise provided by the Board of Directors, a majority of the members of any committee appointed by the Board of Directors pursuant to this Section shall constitute a quorum at any meeting thereof and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of such committee. Action may be taken by any such committee without a meeting by a writing as provided in Section 10 of this Article III. Any such committee shall, subject to any rules prescribed by the Board of Directors, prescribe its own rules for calling, giving notice of and holding meetings and its method of procedure at such meetings and shall keep a written record of all action taken by it.

SECTION 12.    Minutes of Meetings.    Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

SECTION 13.    Compensation.    The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the corporation in any other

capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

ARTICLE IV

NOTICES

SECTION 1.    Procedure.    Whenever, under the provisions of the statutes or of the certificate of incorporation or of these By-Laws, notice is required to be given to any Director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such Director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United State mail. Notice to Directors may also be given by telegram.

SECTION 2.    Waiver and Consent.    Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

Notice of all stockholders’ meetings, whether annual or special, shall be given in writing and may be given by the Chairman of the Board or the President or the Secretary (or in case of their refusal, by the person or persons entitled to call meetings under the provisions of these By-Laws). The notice shall state the general nature of the business to be transacted at the meeting and the place, day and hour thereof. If such notice is mailed or telegraphed, it shall be deemed to have been given when deposited in the United States mail or with a telegraph office for transmission, as the case may be. If any meeting is adjourned to another time or place, no notice as to such adjourned meeting or of the business to be transacted thereat need be given other than by announcement at the meeting at which such adjournment is given, except as otherwise expressly provided in Section 8 of Article II.

ARTICLE V

OFFICERS

SECTION 1.    General.    The officers of the corporation shall be chosen by the Board of Directors and shall include a President, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, one or more Assistant Secretaries and Assistant Treasurers, and such other officers as the Board of Directors may deem appropriate. Any number of offices may be held by the same person, unless the certificate of incorporation or these By-Laws otherwise provide.

SECTION 2.    Election of Officers.    The Board of Directors at its first meeting after each meeting of stockholders (and thereafter as appropriate) shall elect a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as the Board of Directors may deem appropriate. Officers elected by the Board of Directors shall be denominated as corporate officers, and their compensation shall be fixed by the Board of Directors.

SECTION 3.    Additional Officers.    In addition to the corporate officers elected as provided in Section 2 above, non-corporate officers of the corporation, including, for example, divisional officers, may be appointed from time to time and in such manner as may be prescribed by the Board of Directors, especially including delegation by the Board of Directors to the President of the corporation the power to appoint such non-corporate officers. Such non-corporate officers shall hold their offices for such terms, shall exercise such powers and perform such duties, not inconsistent with these By-Laws, and shall receive such compensation as shall be determined from time to time by the Board of Directors or by the person designated by the Board of Directors to appoint such officers.

SECTION 4.    Tenure.    The corporate officers of the corporation shall hold office until their successors are chosen and qualify. Any corporate officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any corporate office of the corporation shall be filled by the Board of Directors.

SECTION 5.    Chairman of the Board.    In the event the Board of Directors elects a Chairman of the Board, the Chairman of the Board shall call meetings of the stockholders, the Board of Directors and the Executive Committee to order and shall preside at such meetings. The Chairman of the Board shall appoint all committees not otherwise appointed by or pursuant to the instructions of the Board of Directors, and he shall have such other powers and duties as may be assigned to or vested in him from time to time by the Board of Directors or by the Executive Committee.

SECTION 6.    President.    The President shall be the Chief Executive Officer of the corporation and shall have general supervision and control over the business and affairs of the corporation and its officers and employees, subject to the authority granted to the Board of Directors by law and by these By-Laws. The President shall see that all orders and resolutions of the Board of Directors are carried into effect. In the event the Board of Directors does not elect a Chairman of the Board, or in the absence of the Chairman of the Board or his inability to act, the President shall preside at meetings of the stockholders and the Board of Directors and shall have all other powers and responsibilities of the Chairman of the Board under these By-Laws. The President shall also have such other duties and powers as may be assigned to or vested in him from time to time by the Board of Directors or by the Executive Committee.

SECTION 7.    Vice Presidents—Powers and Duties.    The Vice President, or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Vice Presidents who are elected corporate officers under the provisions of Section 2 above shall be governed by the provisions of this Section 7. Non-corporate officers appointed under the provisions of Section 3 above who hold the title “Vice President” shall have the duties and powers as determined under the provisions of Section 3 and shall not perform the duties or exercise the powers of the President in the event of his absence or disability.

SECTION 8.    Secretary—Powers and Duties.    The Secretary (or an Assistant Secretary in his absence) shall record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or officer designated by the Board of Directors, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.

SECTION 9.    Assistant Secretary.    The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

SECTION 10.    Treasurer—Powers and Duties.    The Treasurer shall be responsible for the custody of the corporate funds and securities, for keeping full and accurate accounts of receipts and disbursements in books belonging to the corporation, and for the deposit of all monies and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.

SECTION 11.    Treasurer—Disbursements and Accounting.    The Treasurer shall be responsible for disbursing the funds of the corporation as may be ordered by the Board of Directors and for taking proper vouchers for such disbursements, and he shall render to the officer designated by the Board of Directors and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all transactions performed or ordered by him as Treasurer and of the financial condition of the corporation.

SECTION 12.    Assistant Treasurer.    The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of

Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

SECTION 13.    Bonds.    If required by the Board, any officers or assistant officers shall give the corporation a bond in such sum and with surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of their office and for the restoration to the corporation, in case of their death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the corporation.

ARTICLE VI

CERTIFICATES OF STOCK

SECTION 1.    Right to Certificate.    Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman of the Board, the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation.

SECTION 2.    Classes of Stock—Rights.    If the corporation shall be authorized to issue more than one class of stock, or more than one series of any class, the designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class of stock; provided, however, that except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

SECTION 3.    Officers’ Signatures.    Where a certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such Chairman of the Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued

and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation.

SECTION 4.    Lost Certificates.    The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

SECTION 5.    Transfers of Stock.    Transfers of shares of stock shall be made upon the transfer books of the corporation, kept at the office of the transfer agent designated to transfer the shares, only upon direction of the person named in the certificate or by an attorney lawfully constituted in writing. The corporation is under a duty to register the transfer of its shares only if:

(a)  the old share certificate is surrendered and is endorsed by the appropriate person or persons; and

(b)  reasonable assurance is given that the endorsements are genuine and effective; and

(c)  the corporation has no duty to inquire into adverse claims or has discharged any such duty; and

(d)  any applicable law relating to the collection of taxes has been complied with; and

(e)  the transfer is in fact rightful or is to a bona fide purchaser.

SECTION 6.    Fixing of Record Date.    The Board of Directors may close the stock transfer books of the corporation for a period not less than ten nor more than sixty days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect or for a period not exceeding sixty days in connection with obtaining the consent of stockholders for any purpose. In lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not less than ten nor more than sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the

determination of the stockholders entitled to notice of, and to vote at, any such meetings, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock, or to give such consent, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid.

SECTION 7.    Registered Stockholders.    The corporation shall be entitled to recognized the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII

GENERAL PROVISIONS

SECTION 1.    Dividends.    Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation.

SECTION 2.    Reserves.    Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Directors shall think conducive to the interest of the corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created.

SECTION 3.    Annual Statements.    The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.

SECTION 4.    Checks.    All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

SECTION 5.    Fiscal Year.    The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

SECTION 6.    Seal.    The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

SECTION 7.    Indemnification.    Each director, officer, employee or agent of the corporation, and each person who at the request of the corporation has served as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the corporation against those expenses which are allowed by the laws of the State of Delaware and which are reasonably incurred in connection with any action, suit or proceeding, pending or threatened, in which such person may be involved by reason of his being or having been a director, officer, employee, or agent of this corporation or of such other enterprises. Such indemnification shall be made only in accordance with the laws of the State of Delaware and subject to the conditions prescribed therein. The corporation may purchase and maintain insurance on behalf of any such directors, officers, employees, or agents against any liabilities asserted against such persons whether or not the corporation would have the power to indemnify such directors, officers, employees, or agents against such liability under the laws of the State of Delaware.

SECTION 8.    Miscellaneous.    Unless otherwise ordered by the Board of Directors, the Chairman of the Board or the President or any Vice President or the Secretary or the Treasurer in person or by proxy or proxies appointed by any of them shall have full power and authority on behalf of the corporation to vote, act and consent with respect to any shares of stock issued by other corporations which the corporation may own or as to which the corporation has the right to vote, act or consent.

ARTICLE VIII

AMENDMENTS

These By-Laws may be altered or repealed at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration or repeal be contained in the notice of such special meeting. No By-Law adopted by vote of the stockholders shall be subject to amendment by the Board of Directors if such By-Law so provides. No change of the time or place of the meeting for the election of Directors shall be made within sixty days next before the day on which such meeting is to be held, and in case of any change of such time or place, notice thereof shall be given to each stockholder in person or by letter mailed to his last known post office address at least twenty days before the meeting is held.

EX-10.X

Exhibit 10 (x)

REVOLVING CREDIT AGREEMENT

dated as of May 1, 2002

among

NDCHEALTH CORPORATION

as Borrower

THE LENDERS FROM TIME TO TIME PARTY HERETO

SUNTRUST BANK

as Administrative Agent

BANK OF AMERICA, N.A.

as Syndication Agent

WACHOVIA BANK, NATIONAL ASSOCIATION

as Co-Documentation Agent

and

U.S. BANK NATIONAL ASSOCIATION

as Co-Documentation Agent

SUNTRUST ROBINSON HUMPHREY CAPITAL MARKETS,

a division of SunTrust Capital Markets, Inc.

as Lead Arranger

TABLE OF CONTENTS

	Page
ARTICLE I
DEFINITIONS; CONSTRUCTION	1
SECTION 1.1.  Definitions	1
SECTION 1.2.  Classifications of Loans and Borrowings	21
SECTION 1.3.  Accounting Terms and Determination	21
SECTION 1.4.  Terms Generally	21
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENTS	22
SECTION 2.1.  General Description of Facilities	22
SECTION 2.2.  Revolving Loans	22
SECTION 2.3.  Procedure for Revolving Borrowings	22
SECTION 2.4.  Swingline Commitment	23
SECTION 2.5.  [Reserved]	23
SECTION 2.6.  Procedure for Swingline Borrowing; Etc.	23
SECTION 2.7.  Funding of Borrowings	24
SECTION 2.8.  Interest Elections	25
SECTION 2.9.  Optional Reduction and Termination of Commitments	26
SECTION 2.10.  Repayment of Loans	27
SECTION 2.11.  Evidence of Indebtedness	27
SECTION 2.12.  Optional Prepayments	27
SECTION 2.13.  Mandatory Prepayments	28
SECTION 2.14.  Interest on Loans	29
SECTION 2.15.  Fees	30
SECTION 2.16.  Computation of Interest and Fees	30
SECTION 2.17.  Inability to Determine Interest Rates	31
SECTION 2.18.  Illegality	31
SECTION 2.19.  Increased Costs	32
SECTION 2.20.  Funding Indemnity	33
SECTION 2.21.  Taxes	33
SECTION 2.22.  Payments Generally; Pro Rata Treatment; Sharing of Set-offs	36
SECTION 2.23.  Mitigation of Obligations	37
SECTION 2.24.  Letters of Credit	38
ARTICLE III
CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT	42
SECTION 3.1.  Conditions To Effectiveness	42
SECTION 3.2.  Each Credit Event	44
SECTION 3.3.  Delivery of Documents	44
ARTICLE IV
REPRESENTATIONS AND WARRANTIES	45

SECTION 4.1.  Existence; Power	45
SECTION 4.2.  Organizational Power; Authorization	45
SECTION 4.3.  Governmental Approvals; No Conflicts	45
SECTION 4.4.  Financial Statements	45
SECTION 4.5.  Litigation and Environmental Matters	46
SECTION 4.6.  Compliance with Laws and Agreements	46
SECTION 4.7.  Investment Company Act, Etc.	46
SECTION 4.8.  Taxes	46
SECTION 4.9.  Margin Regulations	47
SECTION 4.10.  ERISA	47
SECTION 4.11.  Ownership of Property	47
SECTION 4.12.  Disclosure	48
SECTION 4.13.  Labor Relations	48
SECTION 4.14.  Subordination of Subordinated Debt	48
SECTION 4.15.  Subsidiaries	48
SECTION 4.16.  Insolvency	48
ARTICLE V
AFFIRMATIVE COVENANTS	49
SECTION 5.1.  Financial Statements and Other Information	49
SECTION 5.2.  Notices of Material Events	50
SECTION 5.3.  Existence; Conduct of Business	50
SECTION 5.4.  Compliance with Laws, Etc.	51
SECTION 5.5.  Payment of Obligations	51
SECTION 5.6.  Books and Records	51
SECTION 5.7.  Visitation, Inspection, Etc.	51
SECTION 5.8.  Maintenance of Properties; Insurance	51
SECTION 5.9.  Use of Proceeds and Letters of Credit	52
SECTION 5.10.  Additional Material Subsidiaries	52
ARTICLE VI
FINANCIAL COVENANTS	54
SECTION 6.1.  Leverage Ratio	54
SECTION 6.2.  Fixed Charge Coverage Ratio	55
SECTION 6.3.  Minimum Consolidated Net Worth	55
SECTION 6.4.  Capital Expenditures	55
ARTICLE VII
NEGATIVE COVENANTS	55
SECTION 7.1.  Indebtedness.	55
SECTION 7.2.  Negative Pledge	56
SECTION 7.3.  Fundamental Changes	58
SECTION 7.4.  Investments, Loans, Etc.	58
SECTION 7.5.  Restricted Payments	60
SECTION 7.6.  Sale of Assets	60
SECTION 7.7.  Transactions with Affiliates	60
SECTION 7.8.  Restrictive Agreements	60
SECTION 7.9.  Sale and Leaseback Transactions	61
SECTION 7.10.  Hedging Transactions.	61
SECTION 7.11.  Amendment to Material Documents	61

SECTION 7.12.  Subordinated Indebtedness	62
SECTION 7.13.  Accounting Changes	62
ARTICLE VIII
EVENTS OF DEFAULT	62
SECTION 8.1.  Events of Default	62
ARTICLE IX
THE ADMINISTRATIVE AGENT	65
SECTION 9.1.  Appointment of Administrative Agent	65
SECTION 9.2.  Nature of Duties of Administrative Agent	65
SECTION 9.3.  Lack of Reliance on the Administrative Agent	66
SECTION 9.4.  Certain Rights of the Administrative Agent	66
SECTION 9.5.  Reliance by Administrative Agent	67
SECTION 9.6.  The Administrative Agent in its Individual Capacity	67
SECTION 9.7.  Successor Administrative Agent	67
SECTION 9.8.  Authorization to Execute other Loan Documents.	68
ARTICLE X
MISCELLANEOUS	68
SECTION 10.1.  Notices	68
SECTION 10.2.  Waiver; Amendments	69
SECTION 10.3.  Expenses; Indemnification	70
SECTION 10.4.  Successors and Assigns	73
SECTION 10.5.  Governing Law; Jurisdiction; Consent to Service of Process	75
SECTION 10.6.  WAIVER OF JURY TRIAL	76
SECTION 10.7.  Right of Setoff	76
SECTION 10.8.  Counterparts; Integration	77
SECTION 10.9.  Survival	77
SECTION 10.10.  Severability	77
SECTION 10.11.  Confidentiality	77
SECTION 10.12.  Interest Rate Limitation	78
SECTION 10.13.  Waiver of Effect of Corporate Seal	78

Schedules
Schedule I	—	Applicable Margin and Applicable Percentage
Schedule 4.1	—	Qualified Jurisdictions
Schedule 4.14	—	Subsidiaries
Schedule 7.1	—	Existing Indebtedness
Schedule 7.2	—	Existing Liens
Schedule 7.4	—	Existing Investments
Schedule 7.7	—	Transactions with Affiliates
Exhibits
Exhibit A	—	Revolving Credit Note
Exhibit B	—	Swingline Note
Exhibit C	—	Form of Assignment and Acceptance
Exhibit D	—	Form of Subsidiary Guarantee Agreement
Exhibit E	—	Form of Indemnity, Subrogation and Contribution Agreement
Exhibit 2.3	—	Form of Notice of Revolving Borrowing
Exhibit 2.5	—	Form of Notice of Swingline Borrowing
Exhibit 2.8	—	Form of Continuation/Conversion
Exhibit 3.1(b)(iv)	—	Form of Secretary’s Certificate
Exhibit 3.1(b)(vii)	—	Form of Officer’s Certificate

iv

REVOLVING CREDIT AGREEMENT

THIS REVOLVING CREDIT AGREEMENT (this “Agreement”) is made and entered into as of May 1, 2002, by and among NDCHEALTH CORPORATION, a Delaware corporation (the “Borrower”), the several banks and other financial institutions from time to time party hereto (the “Lenders”), SUNTRUST BANK, in its capacity as Administrative Agent for the Lenders (the “Administrative Agent”), as Issuing Bank (the “Issuing Bank”), and as Swingline Lender (the “Swingline Lender”), BANK OF AMERICA, N.A., as Syndication Agent (the “Syndication Agent”), and WACHOVIA BANK, NATIONAL ASSOCIATION and U.S. BANK NATIONAL ASSOCIATION as Co-Documentation Agents (the “Co-Documentation Agents”).

W I T N E S S E T H:

WHEREAS, the Borrower has requested (a) that the Lenders establish a $150,000,000 revolving credit facility, (b) that the Issuing Bank establish a $10,000,000 letter of credit subcommitment, and (c) that the Swingline Lender establish a $10,000,000 swingline subcommitment, all in favor of the Borrower;

WHEREAS, subject to the terms and conditions of this Agreement, the Lenders severally, to the extent of their respective Commitments as defined herein, are willing to severally establish the requested revolving credit facility, the letter of credit subcommitment and the swingline subcommitment for the benefit of the Borrower.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrower, the Lenders and the Administrative Agent, the Issuing Bank and the Swingline Lender agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

SECTION 1.1.    Definitions.    In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined):

“Acquisition” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation, partnership, limited liability company or division thereof, whether through purchase of assets, merger or otherwise, or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.

“Adjusted LIBO Rate” shall mean, with respect to each Interest Period for a Eurodollar Borrowing, the rate per annum obtained by dividing (i) LIBOR for such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage.

“Administrative Agent” shall have the meaning assigned to such term in the opening paragraph hereof.

“Administrative Questionnaire” shall mean, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender.

“Affiliate” shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.

“Aggregate Revolving Commitment Amount” shall mean the aggregate principal amount of the Aggregate Revolving Commitments from time to time. On the Closing Date, the Aggregate Revolving Commitment Amount equals $150,000,000.

“Aggregate Revolving Commitments” shall mean, collectively, all Revolving Commitments of all Lenders at any time outstanding.

“Aggregate Subsidiary Threshold” means an amount equal to ninety percent (90%) of the total consolidated revenue or assets of the Borrower and its Subsidiaries for the most recent fiscal quarter as shown on the financial statements most recently delivered or required to be delivered pursuant to Section 5.1(a) or (b), as the case may be.

“Applicable Lending Office” shall mean, for each Lender and for each Type of Loan, the “Lending Office” of such Lender (or an Affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained.

“Applicable Margin” shall mean, with respect to all Revolving Loans outstanding on any date, a percentage per annum determined by reference to the applicable Leverage Ratio in effect on such date as set forth on Schedule I attached hereto; provided, that a change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective on the second day after which the Borrower is required to deliver the financial statements required by Section 5.1(a) or (b) and the compliance certificate required by Section 5.1 (c); provided further, that if at any time the Borrower shall have failed to deliver such financial statements and such certificate, the Applicable Margin shall be at Level IV as set forth on Schedule I until such time as such financial statements and certificate are delivered, at which time the Applicable Margin shall be determined as provided above. Notwithstanding the foregoing, the Applicable Margin from the Closing Date until the delivery to the Administrative Agent of Borrower’s financial statements for the Fiscal Year ending May 31, 2002, pursuant to Section 5.1(a) hereof shall be at Level III as set forth on Schedule I.

2

“Applicable Percentage” shall mean, with respect to the commitment fee or the letter of credit fee, as the case may be, as of any date, the percentage per annum determined by reference to the applicable Leverage Ratio in effect on such date as set forth on Schedule I attached hereto; provided, that a change in the Applicable Percentage resulting from a change in the Leverage Ratio shall be effective on the second day after which the Borrower is required to deliver the financial statements required by Section 5.1(a) or (b) and the compliance certificate required by Section 5.1 (c); provided, further, that if at any time the Borrower shall have failed to deliver such financial statements and such certificate, the Applicable Percentage shall be at Level IV as set forth on Schedule I until such time as such financial statements and certificate are delivered, at which time the Applicable Percentage shall be determined as provided above. Notwithstanding the foregoing, the Applicable Percentage for both the commitment fee and the letter of credit fee from the Closing Date until the delivery to the Administrative Agent of Borrower’s financial statements for the Fiscal Year ending May 31, 2002, pursuant to Section 5.1(a) hereof shall be at Level III as set forth on Schedule I.

“Applicable Pledge Amount” shall mean, in respect of the amount of Capital Stock of a First Tier Non-U.S. Operating Subsidiary to be pledged to the Administrative Agent, for the ratable benefit of the Lenders, Swingline Lender, Issuing Bank and Administrative Agent, pursuant to a Pledge Agreement, the lesser of (i) 65% of all outstanding Capital Stock of such Subsidiary, and (ii) the total amount of all outstanding capital Stock of such subsidiary owned by the Borrower and its other Subsidiaries.

“Approved Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Asset Sale” shall mean the sale (including any transaction that has the economic effect of a sale), transfer or other disposition (by way of merger or otherwise, including sales in connection with a sale and leaseback transaction, or as a result of any condemnation or casualty in respect of property) by the Borrower or any Subsidiary to any Person other than the Borrower or any Subsidiary Guarantor, of (i) any capital stock of any Subsidiary, or (ii) any other assets of the Borrower or any Subsidiary (other than inventory, obsolete or worn out assets, scrap, and Permitted Investments, in each case disposed of in the ordinary course of business), except sales, transfers or other dispositions of any assets in one transaction or a series of related transactions having a value not in excess of $50,000.

“Assignment and Acceptance” shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4(b)) and accepted by the Administrative Agent, in the form of Exhibit C attached hereto or any other form approved by the Administrative Agent.

“Availability Period” shall mean the period from the Closing Date to the Revolving Commitment Termination Date.

3

“Base Rate” shall mean the higher of (i) the per annum rate which the Administrative Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%). The Administrative Agent’s prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent’s prime lending rate. Each change in the Administrative Agent’s prime lending rate shall be effective from and including the date such change is publicly announced as being effective.

“Borrower” shall have the meaning assigned to such term in the introductory paragraph hereof.

“Borrowing” shall mean a borrowing consisting of (i) Loans of the same Class and Type, made, converted or continued on the same date and in case of Eurodollar Loans, as to which a single Interest Period is in effect, or (ii) a Swingline Loan.

“Business Day” shall mean (i) any day other than a Saturday, Sunday or other day on which commercial banks in Atlanta, Georgia are authorized or required by law to close and (ii) if such day relates to a Borrowing of, a payment or prepayment of principal or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice with respect to any of the foregoing, any day on which dealings in Dollars are carried on in the London interbank market.

“Capital Expenditures” shall mean for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its Subsidiaries that are (or would be) set forth on a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Borrower and its Subsidiaries during such period.

“Capital Lease Obligations” of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Capital Stock” shall mean any nonredeemable Capital Stock (or in the case of a partnership or limited liability company, the partners’ or members’ equivalent equity interest) of the Borrower or any of its Subsidiaries (to the extent issued to a Person other than the Borrower), whether common or preferred.

“Carryover Amount” shall have the meaning set forth in Section 6.4.

“Cash Taxes” shall mean, for any period, Taxes relating to income paid by the Consolidated Companies during such period.

4

“Change in Control” shall mean the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of the Borrower to any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of 35% or more of the outstanding shares of the voting stock of the Borrower; or (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the current board of directors or (ii) appointed by directors so nominated.

“Change in Law” shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office) or the Issuing Bank (or for purposes of Section 2.19(b), by such Lender’s or the Issuing Bank’s holding company, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, or a Swingline Commitment.

“Closing Date” shall mean the date on which the conditions precedent set forth in Section 3.1 and Section 3.2 have been satisfied or waived in accordance with Section 10.2.

“Code” shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time.

“Commitment” shall mean a Revolving Commitment or a Swingline Commitment or any combination thereof (as the context shall permit or require).

“Consolidated EBITDA” shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, but without duplication, (i) Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation and amortization and (iv) all other non-cash charges; provided, however, that such non-cash charges shall be limited in amount to $10,000,000, determined on a consolidated basis in accordance with GAAP in each case for such period.

“Consolidated EBITR” shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, but without

5

duplication, (i) Consolidated Interest Expense, (ii) income tax expense, and (iii) Consolidated Lease Expense.

“Consolidated Fixed Charges” shall mean, for the Borrower and its Subsidiaries for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period, and (b) Consolidated Lease Expense for such period.

“Consolidated Interest Expense” shall mean, for the Borrower and its Subsidiaries for any period determined on a consolidated basis in accordance with GAAP, the sum of (i) total cash interest expense, including without limitation the interest component of any payments in respect of Capital Leases Obligations capitalized or expensed during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) under Hedging Transactions during such period (whether or not actually paid or received during such period).

“Consolidated Lease Expense” shall mean, for any period, the aggregate amount of fixed and contingent rentals payable during such period by the Borrower and its Subsidiaries with respect to leases of real and personal property (excluding Capital Lease Obligations) with a term of one year or more determined on a consolidated basis in accordance with GAAP for such period.

“Consolidated Net Income” shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets and (iii) any equity interest of the Borrower or any Subsidiary of the Borrower in the unremitted earnings of any Person that is not a Subsidiary and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary on the date that such Person’s assets are acquired by the Borrower or any Subsidiary.

“Consolidated Net Worth” shall mean, as of any date, (i) the total assets of the Borrower and its Subsidiaries that would be reflected on the Borrower’s consolidated balance sheet as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus the sum of (i) the total liabilities of the Borrower and its Subsidiaries that would be reflected on the Borrower’s consolidated balance sheet as of such date prepared in accordance with GAAP and (ii) the amount of any write-up in the book value of any assets resulting from a revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the consolidated balance sheet of the Borrower as of such date prepared in accordance with GAAP.

“Consolidated Total Debt” shall mean, as of any date of determination, all Indebtedness (other than obligations under Hedging Transactions) of the Borrower and its Subsidiaries as of such date (excluding Guarantees of any such Indebtedness to the extent such Indebtedness is already included in the calculation of Consolidated Total Debt).

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“Contractual Obligation” of any Person shall mean any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property in which it has an interest is bound.

“Control” shall mean the power, directly or indirectly, either to (i) vote 5% or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling”, “Controlled by”, and “under common Control with” have meanings correlative thereto.

“Convertible Notes” shall mean the unsecured subordinated convertible notes in the principal amount of $143,750,000 issued by the Borrower to the Subordinated Noteholders on November 6, 1996 pursuant to the Indenture.

“Current CapEx” shall have the meaning set forth in Section 6.4.

“Default” shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

“Default Interest” shall have the meaning set forth in Section 2.14(c).

“Dollar(s)” and the sign “$” shall mean lawful money of the United States of America.

“Domestic Operating Subsidiary” shall mean an Operating Subsidiary organized under the laws of any State of the United States of America or the District of Columbia, or the federal laws of the United States of America.

“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural Person) approved by the Administrative Agent and unless (x) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivatives transaction or (y) an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld, conditioned or delayed). If the consent of the Borrower to an assignment or to an Eligible Assignment is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified in paragraph (b)(i) of Section 10.4), the Borrower shall be deemed to have given its consent five (5) Business Days after the date notice thereof has actually been delivered by the assigning Lender (through the Administrative Agent) to the Borrower, unless such consent is expressly refused by the Borrower prior to such fifth Business Day.

“Environmental Laws” shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters.

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“Environmental Liability” shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated), which, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Eurodollar” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBO Rate.

“Eurodollar Reserve Percentage” shall mean the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to eurocurrency funding (currently referred to as “eurocurrency liabilities” under Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such

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reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Event of Default” shall have the meaning provided in Article VIII.

“Excluded Taxes” shall mean with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any Lender is located and (c) in the case of a Foreign Lender, any withholding tax that (i) is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement, (ii) is imposed on amounts payable to such Foreign Lender at any time that such Foreign Lender designates a new lending office, other than taxes that have accrued prior to the designation of such lending office that are otherwise not Excluded Taxes, and (iii) is attributable to such Foreign Lender’s failure to comply with Section 2.19(e).

“Existing Credit Agreement” shall mean that certain Credit Agreement dated as of January 31, 2001, among Borrower, the lenders party thereto, Bank One, N.A., as administrative agent, swing line lender, and letter of credit issuer, as the same has been amended and is in effect as of the Closing Date.

“Federal Funds Rate” shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York on the next succeeding Business Day or if such rate is not so published for any Business Day, the Federal Funds Rate for such day shall be the average rounded upwards, if necessary, to the next 1/100th of 1% of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent.

“First Tier Non-U.S. Operating Subsidiary” shall mean a Non-U.S. Operating Subsidiary, the majority of whose Capital Stock is owned by the Borrower and/or its Domestic Operating Subsidiaries.

“Fiscal Year” shall mean a fiscal year of the Borrower and its Subsidiaries; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the “Fiscal Year 2000”) refers to the Fiscal Year ending during such calendar year.

“Fixed Charge Coverage Ratio” shall mean, as of any date of determination, the ratio of (a) Consolidated EBITR for the four fiscal quarter period ending on such date to (b) Consolidated Fixed Charges for such four fiscal quarter period.

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“Foreign Lender” shall mean any Lender that is not a United States person under Section 7701(a)(3) of the Code.

“GAAP” shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3.

“Governmental Authority” shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided, that the term “Guarantee” shall not include endorsements for collection or deposits in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term “Guarantee” used as a verb has a corresponding meaning.

“Hazardous Materials” shall mean all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedging Obligations” of any Person shall mean any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired under (i) any and all Hedging Transactions, (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Hedging Transactions and (iii) any and all renewals, extensions and modifications of any Hedging Transactions and any and all substitutions for any Hedging Transactions.

“Hedging Transaction” of any Person shall mean any transaction (including an agreement with respect thereto) now existing or hereafter entered into between such Person and any Lender or Affiliate of any Lender that is a rate swap, basis swap, forward rate transaction,

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commodity swap, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collateral transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

“Indebtedness” of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Section 8.1(g), trade payables overdue by more than 150 days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person, (x) Off-Balance Sheet Liabilities (xi) all Hedging Obligations. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

“Indemnity and Contribution Agreement” shall mean the Indemnity, Subrogation and Contribution Agreement dated May 1, 2002, substantially in the form of Exhibit E, among the Borrower, the Subsidiary Loan Parties and the Administrative Agent.

“Indemnity, Subrogation and Contribution Agreement Supplement” shall mean each supplement substantially in the form of Annex I to Exhibit E executed and delivered by a Domestic Operating Subsidiary of the Borrower pursuant to Section 5.10.

“Indenture” means the trust indenture dated as of November 6, 1996, between National Data Corporation and The First National Bank of Chicago, as trustee, pursuant to which National Data Corporation issued its Convertible Subordinated Notes Due 2003 in an aggregate principal amount of $143,750,000.

“Information Memorandum” shall mean the Confidential Information Memorandum dated March 2002, relating to the Borrower and the transactions contemplated by this Agreement and the other Loan Documents.

“Interest Period” shall mean with respect to any Eurodollar Borrowing, a period of one, two, three or six months; provided, that:

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(i)  the initial Interest Period for such Borrowing shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of another Type), and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires;

(ii)  if any Interest Period would otherwise end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such Business Day falls in another calendar month, in which case such Interest Period would end on the next preceding Business Day;

(iii)  any Interest Period which begins on the last Business Day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of such calendar month;

(iv)  no Interest Period may extend beyond the Revolving Commitment Termination Date.

“Issuing Bank” shall mean SunTrust Bank or any other Lender, each in its capacity as an issuer of Letters of Credit pursuant to Section 2.24.

“LC Commitment” shall mean that portion of the Aggregate Revolving Commitments that may be used by the Borrower for the issuance of Letters of Credit in an aggregate face amount not to exceed $10,000,000.

“LC Disbursement” shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit.

“LC Documents” shall mean the Letters of Credit and all applications, agreements and instruments relating to the Letters of Credit.

“LC Exposure” shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender shall be its Pro Rata Share of the total LC Exposure at such time.

“Lenders” shall have the meaning assigned to such term in the opening paragraph of this Agreement and shall include, where appropriate, the Swingline Lender.

“Letter of Credit” shall mean any letter of credit issued pursuant to Section 2.24 by the Issuing Bank for the account of the Borrower pursuant to the LC Commitment.

“Leverage Ratio” shall mean, as of any date of determination, the ratio of (i) Consolidated Total Debt as of such date to (ii) Pro Forma EBITDA, measured for the four fiscal quarter period ending on such date.

“LIBOR” shall mean, for any applicable Interest Period with respect to any Eurodollar Loan, the British Bankers’ Association Interest Settlement Rate per annum for

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deposits in Dollars for a period equal to such Interest Period appearing on the display designated as Page 3750 on the Telerate Screen (or such other page on that service or such other service designated by the British Banker’s Association for the display of such Association’s Interest Settlement Rates for Dollar deposits) as of 11:00 a.m. (London, England time) on the day that is two Business Days prior to the first day of the Interest Period or if such Page 3750 is unavailable for any reason at such time, the rate which appears on the Reuters Screen ISDA Page as of such date and such time; provided, that if the Administrative Agent determines that the relevant foregoing sources are unavailable for the relevant Interest Period, LIBOR shall mean the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at which deposits in Dollars are offered to the Administrative Agent two (2) Business Days preceding the first day of such Interest Period by leading banks in the London interbank market as of 10:00 a.m. for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Loan of the Administrative Agent.

“Lien” shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing).

“Loan Documents” shall mean, collectively, this Agreement, the Notes, the Subsidiary Guarantee Agreements, the Pledge Agreements, LC Documents, the Indemnity and Contribution Agreement, all Notices of Borrowing, all Notices of Conversion/Continuation, the Subordination Agreement and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing.

“Loan Parties” shall mean the Borrower and the Subsidiary Loan Parties.

“Loans” shall mean all Revolving Loans and Swingline Loans in the aggregate or any of them, as the context shall require.

“Material Adverse Effect” shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singularly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, liabilities or prospects of the Borrower and of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform any of their respective obligations under the Loan Documents, (iii) the rights and remedies of the Administrative Agent, the Issuing Bank the Swingline Lender and the Lenders under any of the Loan Documents or (iv) the legality, validity or enforceability of any of the Loan Documents.

“Material Indebtedness” shall mean Indebtedness (other than the Loans and Letters of Credit) or Hedging Obligations, of any one or more of the Borrower and the Subsidiaries individually or in an aggregate principal amount exceeding $1,000,000. For

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purposes of determining Material Indebtedness, the “principal amount” of any Hedging Obligations at any time shall be the Net Mark-to-Market Exposure of such Hedging Obligations at such time.

“Moody’s” shall mean Moody’s Investors Service, Inc.

“Multiemployer Plan” shall have the meaning set forth in Section 4001(a)(3) of ERISA.

“Net Mark-to-Market Exposure” of any Person shall mean, as of any date of determination with respect to any Hedging Obligation, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from such Hedging Obligation. “Unrealized losses” shall mean the fair market value of the cost to such Person of replacing the Hedging Transaction giving rise to such Hedging Obligation as of the date of determination (assuming the Hedging Transaction was to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Hedging Transaction as of the date of determination (assuming such Hedging Transaction were to be terminated as of that date).

“Non-U.S. Operating Subsidiary” shall mean any Operating Subsidiary of the Borrower other than a Domestic Operating Subsidiary.

“Notes” shall mean, collectively, the Revolving Credit Notes and the Swingline Note.

“Notices of Borrowing” shall mean, collectively, the Notices of Revolving Borrowing and the Notices of Swingline Borrowing.

“Notice of Conversion/Continuation” shall mean the notice given by the Borrower to the Administrative Agent in respect of the conversion or continuation of an outstanding Borrowing as provided in Section 2.8(b) hereof.

“Notice of Revolving Borrowing” shall have the meaning as set forth in Section 2.3.

“Notice of Swingline Borrowing” shall have the meaning as set forth in Section 2.6.

“Obligations” shall mean all amounts owing by the Borrower to the Administrative Agent, the Issuing Bank or any Lender (including the Swingline Lender) pursuant to or in connection with this Agreement or any other Loan Document, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all fees and expenses of counsel to the Administrative Agent and any Lender (including the Swingline Lender) incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising

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hereunder or thereunder, and all Hedging Obligations owing to the Administrative Agent, any Lender or any of their Affiliates incurred in order to limit interest rate or fee fluctuation with respect to the Loans and Letters of Credit, and all obligations and liabilities incurred in connection with collecting and enforcing the foregoing, together with all renewals, extensions, modifications or refinancings thereof.

“Off-Balance Sheet Liabilities” of any Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability of such Person under any sale and leaseback transactions which do not create a liability on the balance sheet of such Person, (iii) any liability of such Person under any so-called “synthetic” lease transaction or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person.

“Operating Subsidiary” shall mean any Subsidiary of the Borrower that owns or acquires assets, including without limitation, Capital Stock issued by any other Person.

“Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Participant” shall have the meaning set forth in Section 10.4(c).

“Payment Office” shall mean the office of the Administrative Agent located at 303 Peachtree Street, N.E., Atlanta, Georgia 30308, or such other location as to which the Administrative Agent shall have given written notice to the Borrower and the other Lenders.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions.

“Permitted Encumbrances” shall mean

(i)  Liens imposed by law for taxes or special assessments not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP;

(ii)  statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP;

(iii)  pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

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(iv)  deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(v)  judgment and attachment liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; and

(vi)  easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower and its Subsidiaries taken as a whole;

(vii)  provided, that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness other than hereunder.

“Permitted Investments” shall mean:

(i)  direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof;

(ii)  commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody’s and in either case maturing within six months from the date of acquisition thereof;

(iii)  certificates of deposit, bankers’ acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(iv)  fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; and

(v)  mutual funds investing solely in any one or more of the Permitted Investments described in clauses (i) through (iv) above or, without duplication, in U.S. dollar-denominated money market securities of domestic and foreign issuers rated in the highest category by at least two nationally recognized rating services or by one if only one rating service has rated a security, U.S. Government securities, repurchase agreements, and entering into reserve repurchase agreements; it being further understood that mutual fund investments in unrated securities shall also be permitted, if determined to be of equivalent quality to rated securities meeting the aforesaid conditions by Fidelity

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Investments, FMR Corporation, Bank of America, N.A. or any similar, nationally recognized financial institution offering institutional money market funds.

“Person” shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority.

“Plan” shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreements” shall mean the pledge and security agreements made by the Borrower and/or its Subsidiaries pursuant to which the Applicable Pledge Amount of the Capital Stock of First Tier Non-U.S. Operating Subsidiaries is pledged to the Administrative Agent, for the ratable benefit of the Lenders, Swingline Lender, Issuing Bank, and Administrative Agent, creating and granting a first priority pledge and Lien thereon, as required by Sections 3.1 and 5.10, all in the form and substance satisfactory to the Administrative Agent.

“Pro Forma EBITDA” means, for any fiscal period of the Borrower, the sum of Consolidated EBITDA for such period plus, to the extent not already reflected in Consolidated EBITDA for such period, but without duplication, EBITDA for such period of any other Person or all or substantially all of the business or assets of any other Person or operating division or business unit of any other Person acquired in an Acquisition during such period.

“Pro Rata Share” shall mean (i) with respect to any Commitment of any Lender at any time, a percentage, the numerator of which shall be such Lender’s Commitment (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, such Lender’s Loan funded under such Commitment), and the denominator of which shall be the sum of such Commitments of all Lenders (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, all Loans of all Lenders funded under such Commitments), and (ii) with respect to all Commitments of any Lender at any time, the numerator of which shall be the sum of such Lender’s Revolving Commitment (or if the Revolving Commitments have been terminated or expired or the Loans have been declared to be due and payable, such Lender’s Revolving Loan) and the denominator of which shall be the sum of all Lenders’ Revolving Commitments (or if the Revolving Commitments have been terminated or expired or the Loans have been declared to be due and payable, all Revolving Loans).

“Projections” shall mean the Borrower’s forecasted (a) balance sheets; (b) profit and loss statements; and (c) cash flow statements; all prepared on a combined basis and otherwise consistent with the historical financial statements of the Borrower, together with appropriate supporting details and a statement of underlying assumptions which are believed by the Borrower to be reasonable and fair in light of the current condition and past performance of the Borrower and to reflect a reasonable estimate of the projected balance sheets, results of operations, cash flows and other information presented therein.

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“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations.

“Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Release” shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture.

“Required Lenders” shall mean, at any time, Lenders holding more than 51% of the aggregate outstanding Revolving Loans and unused Revolving Commitments at such time or if the Lenders have no Revolving Loans outstanding, then Lenders holding more than 51% of the Commitments.

“Requirement of Law” for any Person shall mean the articles or certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule or regulations, or determination of a Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Responsible Officer” shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or a vice president of the Borrower or such other representative of the Borrower as may be designated in writing by any one of the foregoing with the consent of the Administrative Agent; and, with respect to the financial covenants only, the chief financial officer or the treasurer of the Borrower.

“Restricted Payment” shall mean (i) any dividend or other distribution on any Capital Stock of the Borrower (except dividends payable solely in its Capital Stock), or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any Capital Stock of the Borrower (except as acquired upon the conversion thereof into additional Capital Stock) or (b) any option, warrant or other right to acquire any Capital Stock of the Borrower.

“Revolving Commitment” shall mean, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to participate in Letters of Credit and Swingline Loans in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on the signature pages to this Agreement, or in the case of a Person becoming a Lender after the Closing Date, the amount of the assigned “Revolving Commitment” as provided in the Assignment and Acceptance Agreement executed by such Person as an assignee, as the same may be changed pursuant to terms hereof.

“Revolving Commitment Termination Date” shall mean the earliest of (i) May 1, 2005, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.9 and (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise); provided,

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however, if by May 1, 2003, the obligations under the Convertible Notes have not been paid in full or if the Convertible Notes have not been amended such that they mature after May 1, 2005, then “Revolving Commitment Termination Date” shall mean the earliest of (i) May 1, 2003, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.9 and (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise).

“Revolving Credit Availability Period” shall mean the period from the Closing Date to the Revolving Commitment Termination Date.

“Revolving Credit Exposure” shall mean, for any Lender, the sum of such Lender’s Revolving Loans, LC Exposure and Swingline Exposure.

“Revolving Credit Note” shall mean a promissory note of the Borrower payable to the order of a requesting Lender in the principal amount of such Lender’s Revolving Commitment, in substantially the form of Exhibit A.

“Revolving Loan” shall mean a loan made by a Lender (other than the Swingline Lender) to the Borrower under its Revolving Commitment, which may either be a Base Rate Loan or a Eurodollar Loan.

“S&P” shall mean Standard & Poor’s.

“Single Subsidiary Threshold” shall mean an amount equal to (a) five percent (5%) of the consolidated total assets of the Borrower and its Subsidiaries, or (b) five percent (5%) of the consolidated total revenues or net income of the Borrower and its Subsidiaries for the most recent fiscal quarter as shown on the financial statements most recently delivered or required to be delivered pursuant to Section 5.1(a) or (b), as the case may be.

“Specified CapEx” shall have the meaning set forth in Section 6.4.

“Subordinated Debt Documents” shall mean the Convertible Notes and any and all other instruments, agreements, documents and writings executed in connection with the Convertible Notes.

“Subordinated Noteholders” shall mean the holders of Convertible Notes from time to time.

“Subsidiary” shall mean, with respect to any Person (the “parent”), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity (i) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

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Unless otherwise indicated, all references to “Subsidiary” hereunder shall mean a Subsidiary of the Borrower.

“Subsidiary Guarantors” shall mean, collectively, the Subsidiaries of the Borrower that are parties to the Subsidiary Guarantee Agreement and each additional Domestic Operating Subsidiary of the Borrower that executes and delivers a Subsidiary Guarantee Supplement pursuant to Section 5.10.

“Subsidiary Guarantee Agreement” shall mean the Subsidiary Guarantee Agreement, substantially in the form of Exhibit D, made by the Subsidiary Loan Parties in favor of the Administrative Agent for the benefit of the Lenders.

“Subsidiary Guarantee Supplement” shall mean each supplement substantially in the form of Annex I to Exhibit D executed and delivered by a Domestic Operating Subsidiary of the Borrower pursuant to Section 5.10.

“Subsidiary Loan Party” shall mean (i) any Subsidiary Guarantor and (i) any First Tier Non-U.S. Operating Subsidiaries whose Capital Stock has been pledged to the Administrative Agent pursuant to a Pledge Agreement.

“Swingline Commitment” shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding not to exceed $10,000,000.

“Swingline Exposure” shall mean, with respect to each Lender, the principal amount of the Swingline Loans in which such Lender is legally obligated either to make a Base Rate Loan or to purchase a participation in accordance with Section 2.6, which shall equal such Lender’s Pro Rata Share of all outstanding Swingline Loans.

“Swingline Lender” shall mean SunTrust Bank, or any other Lender that may agree to make Swingline Loans hereunder.

“Swingline Loan” shall mean a loan made to the Borrower by the Swingline Lender under the Swingline Commitment.

“Swingline Note” shall mean the promissory note of the Borrower payable to the order of the Swingline Lender in the principal amount of the Swingline Commitment, substantially the form of Exhibit B.

“Swingline Rate” shall mean, for any Interest Period, the rate as offered by the Swingline Lender and accepted by the Borrower. Borrower shall have no obligation to accept this rate and Swingline Lender shall have no obligation to provide it.

“Swingline Termination Date” shall mean the date that is 2 Business Days prior to the Revolving Commitment Termination Date.

“Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

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“Tax Benefit” shall have the meaning set forth in Section 2.21(h).

“Type”, when used in reference to a Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base Rate.

“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of Georgia.

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Working Capital” shall mean, as of any date, an amount equal to the current assets of the Consolidated Companies as of such date (excluding cash and cash equivalents), less the current liabilities of the Consolidated Companies as of such date (excluding current maturities of the Obligations), in each case, determined on a consolidated basis in accordance with GAAP.

SECTION 1.2.    Classifications of Loans and Borrowings.    For purposes of this Agreement, Loans may be classified and referred to by Class (e.g. a “Revolving Loan”) or by Type (e.g. a “Eurodollar Loan” or “Base Rate Loan”) or by Class and Type (e.g. “Revolving Eurodollar Loan”). Borrowings also may be classified and referred to by Class (e.g. “Revolving Borrowing”) or by Type (e.g. “Eurodollar Borrowing”) or by Class and Type (e.g. “ Revolving Eurodollar Borrowing”).

SECTION 1.3.    Accounting Terms and Determination.    Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent (except for such changes approved by the Borrower’s independent public accountants) with the most recent audited consolidated financial statement of the Borrower delivered pursuant to Section 5.1(a); provided, that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders.

SECTION 1.4.    Terms Generally.    The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. In the computation of periods of time from a specified date to a later specified date, the

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word “from” means “from and including” and the word “to” means “to but excluding”. Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (iii) the words “hereof”, “herein” and “hereunder” and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in the city and state of the Administrative Agent’s principal office, unless otherwise indicated.

ARTICLE II

AMOUNT AND TERMS OF THE COMMITMENTS

SECTION 2.1.    General Description of Facilities.    Subject to and upon the terms and conditions herein set forth, (i) the Lenders hereby establish in favor of the Borrower a revolving credit facility pursuant to which the Lenders severally agree (to the extent of such Lender’s Revolving Commitment) to make Revolving Loans to the Borrower in accordance with Section 2.2, (ii) the Issuing Bank agrees to issue Letters of Credit in accordance with Section 2.24, (iii) the Swingline Lender agrees to make Swingline Loans in accordance with Section 2.4, and (iv) each Lender agrees to purchase a participation interest in the Letters of Credit and the Swingline Loans pursuant to the terms and conditions hereof; provided, that in no event shall the aggregate principal amount of all outstanding Revolving Loans, Swingline Loans and outstanding LC Obligations exceed at any time the Aggregate Revolving Commitments from time to time in effect.

SECTION 2.2.    Revolving Loans.    Subject to the terms and conditions set forth herein, including, but not limited to, Section 3.1 and 3.2, each Lender severally agrees to make Revolving Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time that will not result in (a) such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving Commitment, or (b) the aggregate Revolving Credit Exposures of all Lenders exceeding the Aggregate Revolving Commitment Amount. During the Availability Period, the Borrower shall be entitled to borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement.

SECTION 2.3.    Procedure for Revolving Borrowings.

The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Revolving Borrowing substantially in the form of Exhibit 2.3 attached hereto (a “Notice of Revolving Borrowing”) (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of each Base Rate Borrowing and (y) prior to 11:00

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a.m. three (3) Business Days prior to the requested date of each Eurodollar Borrowing. Each Notice of Revolving Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan comprising such Borrowing and (iv) in the case of a Eurodollar Borrowing, the duration of the initial Interest Period applicable thereto (subject to the provisions of the definition of Interest Period). Each Revolving Borrowing shall consist entirely of Base Rate Loans or Eurodollar Loans, as the Borrower may request. The aggregate principal amount of each Eurodollar Borrowing shall be not less than $1,000,000 or a larger multiple of $500,000, and the aggregate principal amount of each Base Rate Borrowing shall not be less than $500,000 or a larger multiple of $100,000; provided, that Base Rate Loans made pursuant to Section 2.6 or Section 2.24(d) may be made in lesser amounts as provided therein. At no time shall the total number of Eurodollar Borrowings outstanding at any time exceed six. Promptly following the receipt of a Notice of Revolving Borrowing in accordance herewith, the Administrative Agent shall advise each Lender of the details thereof and the amount of such Lender’s Revolving Loan to be made as part of the requested Revolving Borrowing.

SECTION 2.4.    Swingline Commitment.    Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower, from time to time from the Closing Date to the Swingline Termination Date in an aggregate principal amount outstanding at any time not to exceed the lesser of (i) the Swingline Commitment then in effect and (ii) the difference between the Aggregate Revolving Commitments and the aggregate Revolving Credit Exposures of all Lenders; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. The Borrower shall be entitled to borrow, repay and reborrow Swingline Loans in accordance with the terms and conditions of this Agreement.

SECTION 2.5.    [Reserved]

SECTION 2.6.    Procedure for Swingline Borrowing; Etc.    (a)  The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Swingline Borrowing (“Notice of Swingline Borrowing”) prior to 11:00 a.m. on the requested date of each Swingline Borrowing. Each Notice of Swingline Borrowing shall be irrevocable and shall specify: (i) the principal amount of such Swingline Loan, (ii) the date of such Swingline Loan (which shall be a Business Day) and (iii) the account of the Borrower to which the proceeds of such Swingline Loan should be credited. The Administrative Agent will promptly advise the Swingline Lender of each Notice of Swingline Borrowing. Each Swingline Loan shall accrue interest at the Swingline Rate or any other interest rate as agreed between the Borrower and the Swingline Lender and shall have an Interest Period (subject to the definition thereof) as agreed between the Borrower and the Swingline Lender. The aggregate principal amount of each Swingline Loan shall be not less than $100,000 or a larger multiple of $50,000, or such other minimum amounts agreed to by the Swingline Lender and the Borrower. The Swingline Lender will make the proceeds of each Swingline Loan available to the Borrower in Dollars in immediately available funds at the account specified by the Borrower in the applicable Notice of Swingline Borrowing not later than 1:00 p.m. on the requested date of such Swingline Loan. The Administrative Agent will notify the Lenders on a quarterly basis if any Swingline Loans occurred during such quarter.

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(a)  The Swingline Lender, at any time and from time to time in its sole discretion, may, on behalf of the Borrower (which hereby irrevocably authorizes and directs the Swingline Lender to act on its behalf), give a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders (including the Swingline Lender) to make Loans in an amount equal to the unpaid principal amount of any Swingline Loan. Each Lender will make the proceeds of its Loan included in such Borrowing available to the Administrative Agent for the account of the Swingline Lender in accordance with Section 2.7, which will be used solely for the repayment of such Swingline Loan.

(b)  If for any reason a Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Swingline Lender) shall purchase an undivided participating interest in such Swingline Loan in an amount equal to its Pro Rata Share thereof on the date that such Borrowing should have occurred. On the date of such required purchase, each Lender shall promptly transfer, in immediately available funds, the amount of its participating interest to the Administrative Agent for the account of the Swingline Lender. If such Swingline Loan bears interest at a rate other than the Base Rate, such Swingline Loan shall automatically become a Base Rate Loan on the effective date of any such participation and interest shall become payable on demand.

(c)  Each Lender’s obligation to make a Loan pursuant to Section 2.6(b) or to purchase the participating interests pursuant to Section 2.6(c) shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have or claim against the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of any Lender’s Revolving Commitment, (iii) the existence (or alleged existence) of any event or condition which has had or could reasonably be expected to have a Material Adverse Effect, (iv) any breach of this Agreement or any other Loan Document by the Borrower, the Administrative Agent or any Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If such amount is not in fact made available to the Swingline Lender by any Lender, the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with accrued interest thereon for each day from the date of demand thereof at the Federal Funds Rate. Until such time as such Lender makes its required payment, the Swingline Lender shall be deemed to continue to have outstanding Swingline Loans in the amount of the unpaid participation for all purposes of the Loan Documents. In addition, such Lender shall be deemed to have assigned any and all payments made of principal and interest on its Loans and any other amounts due to it hereunder, to the Swingline Lender to fund the amount of such Lender’s participation interest in such Swingline Loans that such Lender failed to fund pursuant to this Section, until such amount has been purchased in full.

         SECTION 2.7.    Funding of Borrowings.

(a)  Each Lender will make available each Loan to be made by it hereunder on the proposed date thereof by wire transfer in immediately available funds by 11:00 a.m. to the Administrative Agent at the Payment Office; provided, that the Swingline Loans will be made as set forth in Section 2.6. The Administrative Agent will make such Loans available to the

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Borrower by promptly crediting the amounts that it receives, in like funds by the close of business on such proposed date, to an account maintained by the Borrower with the Administrative Agent or at the Borrower’s option, by effecting a wire transfer of such amounts to an account designated by the Borrower to the Administrative Agent.

(b)  Unless the Administrative Agent shall have been notified by any Lender prior to 5 p.m. one (1) Business Day prior to the date of a Borrowing in which such Lender is participating that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance on such assumption, may make available to the Borrower on such date a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of such Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate for up to two (2) Business Days and thereafter at the rate specified for such Borrowing. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for such Borrowing. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder.

(c)  All Revolving Borrowings shall be made by the Lenders on the basis of their respective Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make its Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.

SECTION 2.8.    Interest Elections.

(a)  Each Borrowing initially shall be of the Type specified in the applicable Notice of Borrowing, and in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower may elect to convert such Borrowing into a different Type or to continue such Borrowing, and in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall NOT apply to Swingline Borrowings, which may not be converted or continued.

(b)  To make an election pursuant to this Section, the Borrower shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing (a “Notice of Conversion/Continuation”) that is to be converted or continued, as the case may be, (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of a conversion into a Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business

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Days prior to a continuation of or conversion into a Eurodollar Borrowing. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing to which such Notice of Continuation/Conversion applies and if different options are being elected with respect to different portions thereof, the portions thereof that are to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Notice of Continuation/Conversion, which shall be a Business Day, (iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is to be a Eurodollar Borrowing, the Interest Period applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of “Interest Period”. If any such Notice of Continuation/Conversion requests a Eurodollar Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected an Interest Period of one month. The principal amount of any resulting Borrowing shall satisfy the minimum borrowing amount for Eurodollar Borrowings and Base Rate Borrowings set forth in Section 2.3.

(c)  If, on the expiration of any Interest Period in respect of any Eurodollar Borrowing, the Borrower shall have failed to deliver a Notice of Conversion/ Continuation, then, unless such Borrowing is repaid as provided herein, the Borrower shall be deemed to have elected to convert such Borrowing to a Base Rate Borrowing. No Borrowing may be converted into, or continued as, a Eurodollar Borrowing if a Default or an Event of Default exists, unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Eurodollar Loans shall be permitted except on the last day of the Interest Period in respect thereof.

(d)  Upon receipt of any Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

SECTION 2.9.    Optional Reduction and Termination of Commitments.

(a)  Unless previously terminated, all Revolving Commitments shall terminate on the Revolving Commitment Termination Date, except that the Swingline Commitment shall terminate on the Swingline Termination Date.

(b)  Upon at least three (3) Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent (which notice shall be irrevocable), the Borrower may reduce the Aggregate Revolving Commitments in part or terminate the Aggregate Revolving Commitments in whole; provided, that (i) any partial reduction shall apply to reduce proportionately and permanently the Revolving Commitment of each Lender, (ii) any partial reduction pursuant to this Section 2.9 shall be in an amount of at least $100,000 and any larger multiple of $50,000, and (iii) no such reduction shall be permitted which would reduce the Aggregate Revolving Commitments to an amount less than the outstanding Revolving Credit Exposures of all Lenders. Any such reduction in the Aggregate Revolving Commitments shall result in a proportionate reduction (rounded to the next lowest integral multiple of $100,000) in the Swingline Commitment and the LC Commitment.

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SECTION 2.10.    Repayment of Loans.

(a)  The outstanding principal amount of all Revolving Loans shall be due and payable (together with accrued and unpaid interest thereon) on the Revolving Commitment Termination Date.

(b)  The principal amount of each Swingline Borrowing shall be due and payable (together with accrued and unpaid interest thereon) on the Swingline Termination Date.

SECTION 2.11.    Evidence of Indebtedness.    (a)  Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Revolving Commitment of each Lender, (ii) the amount of each Loan made hereunder by each Lender, the Class and Type thereof and the Interest Period applicable thereto, (iii) the date of each continuation thereof pursuant to Section 2.8, (iv) the date of each conversion of all or a portion thereof to another Type pursuant to Section 2.8, (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of such Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Loans and each Lender’s Pro Rata Share thereof. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement.

(a)  At the request of any Lender (including the Swingline Lender) at any time, the Borrower agrees that it will execute and deliver to such Lender a Revolving Credit Note and, in the case of the Swingline Lender only, a Swingline Note, payable to the order of such Lender.

SECTION 2.12.    Optional Prepayments.    The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent no later than (i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m. not less than three (3) Business Days prior to any such prepayment, (ii) in the case of any prepayment of any Base Rate Borrowing, not less than one Business Day prior to the date of such prepayment, and (iii) in the case of Swingline Borrowings, prior to 11:00 a.m. on the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the principal amount of each Borrowing or portion thereof to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each affected Lender of the contents thereof and of such Lender’s Pro Rata Share of any such prepayment. If such notice is given, the aggregate amount specified in such notice shall be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.14(d); provided, that if a Eurodollar Borrowing is prepaid on a date other than the last day of an Interest Period applicable thereto, the

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Borrower shall also pay all amounts required pursuant to Section 2.20. Each partial prepayment of any Loan (other than a Swingline Loan) shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type pursuant to Section 2.3 or in the case of a Swingline Loan pursuant to Section 2.6. Each prepayment of a Borrowing shall be applied ratably to the Loans comprising such Borrowing.

SECTION 2.13.    Mandatory Prepayments.

(a)  If at any time the Revolving Credit Exposure of all Lenders exceeds the Aggregate Revolving Credit Commitments, as reduced pursuant to Section 2.9 or otherwise, the Borrower shall immediately repay Swingline Loans and Revolving Loans in an amount equal to such excess, together with all accrued and unpaid interest on such excess amount and any amounts due under Section 2.19. Each prepayment of a Borrowing shall be applied ratably to the Revolving Base Rate Loans to the full extent thereof, and finally to Revolving Eurodollar Loans to the full extent thereof. If after giving effect to prepayment of all Swingline Loans and Revolving Loans, the Revolving Credit Exposure of all Lenders exceeds the Aggregate Revolving Credit Commitments, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Issuing Bank and the Lenders, an amount in cash equal to such excess plus any accrued and unpaid fees thereon to be held as collateral for the LC Exposure. Such account shall be administered in accordance with Section 2.24(g) hereof.

(b)  Immediately upon receipt by the Borrower of net proceeds of any sale or disposition by the Borrower of any of its assets (including condemnation proceeds) in excess of the amounts permitted under Section 7.6 herein, the Borrower shall prepay the Loans and deposit cash collateral for the LC Exposure in an amount equal to all such proceeds, net of commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by the Borrower in connection therewith (in each case, paid to non-Affiliates). Any such prepayment shall be applied in accordance with paragraph (d) below.

(c)  If the Borrower issues any debt securities for cash proceeds other than any debt securities issued in connection with a refinancing of Indebtedness permitted pursuant to Section 7.1, then, no later than the Business Day following the date of receipt of the cash proceeds thereof, the Borrower shall prepay the Loans and deposit cash collateral for the LC Exposure in an amount equal to all such proceeds, net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith. Any such prepayment shall be applied in accordance with paragraph (d) below.

(d)  Any prepayments made by the Borrower pursuant to paragraphs (a), (b) or (c) above shall be applied as follows: first, to fees and reimbursable expenses of the Administrative Agent then due and payable pursuant to any of the Loan Documents; second, to all other fees (other than LC Fees) and reimbursable expenses of the Lenders then due and payable pursuant to any of the Loan Documents, pro rata to the Lenders based on their respective Pro Rata Shares of thereof; third, to interest and LC Fees then due and payable on Loans made to the Borrower and Letters of Credit issued for the account of Borrowers, pro rata to the Lenders based on their respective Pro Rata Shares thereof; fourth, to the principal balance of the Revolving Loans, until the same shall have been paid in full, pro rata to the Lenders based on their respective Pro Rata

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Shares thereof; and fifth, to an account with the Administrative Agent in the name of the Administrative Agent and for the benefit of the Issuing Bank and the Lenders to hold as cash collateral for the LC Exposure, in an amount of up to 100% of the LC Exposure, such account to be administered in accordance with Section 2.24(g) hereof. The applicable Commitments shall be permanently reduced by the amount of any prepayments made pursuant to clauses fourth and fifth above, provided that, if and to the extent such prepayments are made from the proceeds of any debt securities issued in connection with additional Indebtedness created subsequent hereto which is then permitted to be incurred pursuant to Section 7.1(g), then, notwithstanding the foregoing, no such permanent reductions in the applicable Commitments shall be made upon such prepayments being made.

SECTION 2.14.    Interest on Loans.

(a)  The Borrower shall pay interest on each Base Rate Loan at the Base Rate in effect from time to time and on each Eurodollar Loan at the Adjusted LIBO Rate for the applicable Interest Period in effect for such Loan, plus, in each case, the Applicable Margin in effect from time to time.

(b)  The Borrower shall pay interest on each Swingline Loan at the Swingline Rate in effect from time to time, plus the Applicable Margin in effect from time to time.

(c)  While an Event of Default exists or after acceleration, at the option of the Required Lenders, the Borrower shall pay interest (“Default Interest”) with respect to all Eurodollar Loans at the rate otherwise applicable for the then-current Interest Period plus an additional 2% per annum until the last day of such Interest Period, and thereafter, and with respect to all Base Rate Loans (including all Swingline Loans) and all other Obligations hereunder (other than Loans), at an all-in rate in effect for Base Rate Loans, plus an additional 2% per annum.

(d)  Interest on the principal amount of all Loans shall accrue from and including the date such Loans are made to but excluding the date of any repayment thereof. Interest on all outstanding Base Rate Loans shall be payable quarterly in arrears on the last day of each February, May, August and November and on the Revolving Commitment Termination Date, as the case may be. Interest on all outstanding Eurodollar Loans shall be payable on the last day of each Interest Period applicable thereto, and, in the case of any Eurodollar Loans having an Interest Period in excess of three months or 90 days, respectively, on each day which occurs every three months or 90 days, as the case may be, after the initial date of such Interest Period, and on the Revolving Commitment Termination Date. Interest on each Swingline Loan shall be payable quarterly in arrears on the last day of each February, May, August and November and on the Swingline Termination Date, as the case may be. All Default Interest shall be payable on demand.

(e)  The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and shall promptly notify the Borrower and the Lenders of such rate in writing (or by telephone, promptly confirmed in writing). Any such determination shall be conclusive and binding for all purposes, absent manifest error

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SECTION 2.15.    Fees.

(a)  The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon by the Borrower and the Administrative Agent.

(b)  Commitment Fee.    The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Percentage (determined in accordance with Schedule I) on the daily amount of the unused Revolving Commitment of such Lender during the Availability Period; provided, that if such Lender continues to have any Revolving Credit Exposure after the Revolving Commitment Termination Date, then the commitment fee shall continue to accrue on the amount of such Lender’s unused Revolving Commitment from and after the Revolving Commitment Termination Date to the date that all of such Lender’s Revolving Credit Exposure has been paid in full. Accrued commitment fees shall be payable in arrears on the last day of each February, May, August and November of each year and on the Revolving Commitment Termination Date, commencing on the first such date after the Closing Date; provided further, that any commitment fees accruing after the Revolving Commitment Termination Date shall be payable on demand. For purposes of computing commitment fees with respect to the Revolving Commitments, the Revolving Commitment of each Lender shall be deemed used to the extent of the outstanding Revolving Loans and LC Exposure, but not Swingline Exposure, of such Lender.

(c)  Letter of Credit Fees.    The Borrower agrees to pay (i) to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit, which shall accrue at the Applicable Percentage then in effect on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) attributable to such Letter of Credit during the period from and including the date of issuance of such Letter of Credit to but excluding the date on which such Letter expires or is drawn in full (including without limitation any LC Exposure that remains outstanding after the Revolving Commitment Termination Date) and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the Availability Period (or until the date that such Letter of Credit is irrevocably cancelled, whichever is later), as well as the Issuing Bank’s standard fees with respect to issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder.

(d)  Payments.    Accrued fees shall be payable quarterly in arrears on the last day of each February, May, August and November, commencing on May 31, 2002 and on the Revolving Commitment Termination Date (and if later, the date the Loans and LC Exposure shall be repaid in their entirety).

SECTION 2.16.    Computation of Interest and Fees.

All computations of interest and fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the

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basis of days elapsed). Each determination by the Administrative Agent of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes.

SECTION 2.17.    Inability to Determine Interest Rates.    If prior to the commencement of any Interest Period for any Eurodollar Borrowing,

(i)  the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining LIBOR for such Interest Period, or

(ii)  the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBO Rate does not adequately and fairly reflect the cost to such Lenders (or Lender, as the case may be) of making, funding or maintaining their (or its, as the case may be) Eurodollar Loans for such Interest Period, the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrower and to the Lenders as soon as practicable thereafter. In the case of Eurodollar Loans, until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) the obligations of the Lenders to make Eurodollar Revolving Loans or to continue or convert outstanding Loans as or into Eurodollar Loans shall be suspended and (ii) all such affected Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto unless the Borrower prepays such Loans in accordance with this Agreement. Unless the Borrower notifies the Administrative Agent at least one Business Day before the date of any Eurodollar Revolving Borrowing for which a Notice of Revolving Borrowing has previously been given that it elects not to borrow on such date, then such Revolving Borrowing shall be made as a Base Rate Borrowing.

SECTION 2.18.    Illegality.    If any Change in Law shall make in unlawful or impossible for any Lender to make, maintain or fund any Eurodollar Loan and such Lender shall so notify the Administrative Agent, the Administrative Agent shall promptly give notice thereof to the Borrower and the other Lenders, whereupon until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Revolving Loans, or to continue or convert outstanding Loans as or into Eurodollar Loans, shall be suspended. In the case of the making of a Eurodollar Revolving Borrowing, such Lender’s Revolving Loan shall be made as a Base Rate Loan as part of the same Revolving Borrowing for the same Interest Period and if the affected Eurodollar Loan is then outstanding, such Loan shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Eurodollar Loan if such Lender may lawfully continue to maintain such Loan to such date or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain such Eurodollar Loan to such date. Notwithstanding the foregoing, the affected Lender shall, prior to giving such notice to the Administrative Agent, designate a different Applicable Lending Office if such designation would avoid the need for giving such notice and if such designation would not otherwise be disadvantageous to such Lender in the good faith exercise of its discretion.

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SECTION 2.19.    Increased Costs.

(a)  If any Change in Law shall:

(i)  impose, modify or deem applicable any reserve, special deposit or similar requirement that is not otherwise included in the determination of the Adjusted LIBO Rate hereunder against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or

(ii)  impose on any Lender or on the Issuing Bank or the eurodollar interbank market any other condition affecting this Agreement or any Eurodollar Loans made by such Lender or any Letter of Credit or any participation therein;

and the result of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining a Eurodollar Loan or to increase the cost to such Lender or the Issuing Bank of participating in or issuing any Letter of Credit or to reduce the amount received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then the Borrower shall promptly pay, upon written notice from and demand by such Lender on the Borrower (with a copy of such notice and demand to the Administrative Agent), to the Administrative Agent for the account of such Lender, within fifteen Business Days after the date of such notice and demand, additional amount or amounts reasonably sufficient to compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

(b)  If any Lender or the Issuing Bank shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital (or on the capital of such Lender’s or the Issuing Bank’s parent corporation) as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s parent corporation could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies or the policies of such Lender’s or the Issuing Bank’s parent corporation with respect to capital adequacy) then, from time to time, within fifteen (15) Business Days after receipt by the Borrower of written demand by such Lender (with a copy thereof to the Administrative Agent), the Borrower shall pay to such Lender such reasonable additional amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s parent corporation for any such reduction suffered.

(c)  A certificate of a Lender or the Issuing Bank setting forth the amount or amounts reasonably necessary to compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s parent corporation, as the case may be, specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be conclusive, absent manifest error. The Borrower shall pay any such Lender or the Issuing Bank, as the case may be, such amount or amounts within 15 days after receipt thereof.

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(d)  Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation.

SECTION 2.20.    Funding Indemnity.    In the event of (a) the payment of any principal of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion or continuation of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure by the Borrower to borrow, prepay, convert or continue any Eurodollar Loan on the date specified in any applicable notice (regardless of whether such notice is withdrawn or revoked), then, in any such event, the Borrower shall compensate each Lender, within fifteen (15) Business Days after written demand from such Lender, for any loss, cost or expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense shall be deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount of interest that would have accrued on the principal amount of such Eurodollar Loan if such event had not occurred at the Adjusted LIBO Rate applicable to such Eurodollar Loan for the period from the date of such event to the last day of the then current Interest Period therefore (or in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurodollar Loan) over (B) the amount of interest that would accrue on the principal amount of such Eurodollar Loan for the same period if the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid or converted or the date on which the Borrower failed to borrow, convert or continue such Eurodollar Loan. A certificate as to any additional amount payable under this Section 2.20 submitted to the Borrower by any Lender (with a copy to the Administrative Agent) shall be conclusive, absent manifest error.

SECTION 2.21.    Taxes.

(a)  Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, any Lender or the Issuing Bank (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b)  In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law; provided, however, the Lenders and the Administrative Agent shall use their reasonable efforts to avoid the imposition of any such Other Taxes.

(c)  The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within fifteen (15) Business Days after written demand therefore, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed

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or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

(d)  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e)  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the Code or any treaty to which the United States is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Without limiting the generality of the foregoing, each Foreign Lender agrees that it will deliver to the Administrative Agent and the Borrower (or in the case of a Participant, to the Lender from which the related participation shall have been purchased), as appropriate, two (2) duly completed copies of (i) Internal Revenue Service Form W-8 ECI, or any successor form thereto, certifying that the payments received from the Borrower hereunder are effectively connected with such Foreign Lender’s conduct of a trade or business in the United States; or (ii) Internal Revenue Service Form W-8 BEN, or any successor form thereto, certifying that such Foreign Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest; or (iii) Internal Revenue Service Form W-8 BEN, or any successor form prescribed by the Internal Revenue Service, together with a certificate (A) establishing that the payment to the Foreign Lender qualifies as “portfolio interest” exempt from U.S. withholding tax under Code section 871(h) or 881(c), and (B) stating that (1) the Foreign Lender is not a bank for purposes of Code section 881(c)(3)(A), or the obligation of the Borrower hereunder is not, with respect to such Foreign Lender, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of that section; (2) the Foreign Lender is not a 10% shareholder of the Borrower within the meaning of Code section 871(h)(3) or 881(c)(3)(B); and (3) the Foreign Lender is not a controlled foreign corporation that is related to the Borrower within the meaning of Code section 881(c)(3)(C); or (iv) such other Internal Revenue Service forms as may be applicable to the Foreign Lender, including Forms W-8 IMY or W-8 EXP. Each such Foreign Lender shall deliver to the Borrower and the Administrative Agent such forms on or before the date that it becomes a party to this Agreement (or in the case of a Participant, on or before the date such Participant purchases the related participation). In addition, each such Foreign Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Each such Foreign Lender shall promptly notify the Borrower and the Administrative Agent at any time that it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted

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by the Internal Revenue Service for such purpose) which such notice shall create in Borrower the right to replace such Lender pursuant to Section 2.23 hereof.

(f)  Each Lender agrees upon the request of the Borrower and at the Borrower’s expense to complete, accurately and in a manner reasonably satisfactory to the Borrower and the Administrative Agent, and to execute, arrange for any required certification of, and deliver to the Borrower (with a copy to the Administrative Agent) (or to such government or taxing authority as the Borrower or Administrative Agent reasonably directs), any other form or document that may be required under the laws of any jurisdiction outside the United States to allow the Borrower to make a payment under this Agreement or the other Loan Documents without any deduction or withholding for or on account of any taxes of the type described in Section 2.21 hereof or with any such deduction or withholding for or on account of such taxes at a reduced rate, in each case so long as such Lender is (i) legally entitled to provide such certification and deliver such form or document and (ii) such action is consistent with its overall tax policies and is not otherwise, in the judgment of such Lender, impractical or disadvantageous in any material respect to such Lender.

(g)  Notwithstanding any provision of Section 2.21 above to the contrary, the Borrower shall not have any obligations to pay any taxes or to indemnify any Lender for such taxes pursuant to this Section 2.21 to the extent that such taxes result from (i) the failure of any Lender to comply with its obligations pursuant to Section 2.21(f) or (ii) any representation made on Form 1001, 4224 or W-8 or successor applicable form or certification by any Lender incurring such taxes proving to have been incorrect, false or misleading in any material respect when so made or deemed to be made or (iii) such Lender changing its Applicable Lending Office to a jurisdiction in which such taxes arise, except to the extent in the judgment of such Lender such change was required by the terms of this Agreement.

(h)  To the extent that the payment of any Lender’s Indemnified Taxes or Other Taxes by the Borrower hereunder gives rise from time to time to a Tax Benefit to such Lender in any jurisdiction other than the jurisdiction which imposed such Indemnified Taxes or Other Taxes, such Lender shall pay to the Borrower the amount of each such Tax Benefit so recognized or received. The amount of each Tax Benefit and, therefore, payment to the Borrower will be determined from time to time by the relevant Lender in its sole discretion, which determination shall be binding and conclusive on all parties hereto. Each such payment will be due and payable by such Lender to the Borrower within a reasonable time after the filing of the tax return in which such Tax Benefit is recognized or, in the case of any tax refund, after the refund is received; provided, however, if at any time thereafter such Lender is required to rescind such Tax Benefit or such Tax Benefit is otherwise disallowed or nullified, the Borrower shall promptly, after notice thereof from such Lender, repay to such Lender the amount of such Tax Benefit previously paid to such Lender and which has been rescinded, disallowed or nullified. For purposes hereof, the term “Tax Benefit” shall mean the amount by which any Lender’s income tax liability for the taxable period in question is reduced below what would have been payable had the Borrower not been required to pay such Lender’s taxes hereunder.

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SECTION 2.22.    Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a)  The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.19, 2.20 or 2.21, or otherwise) prior to 12:00 noon, on the date when due, in immediately available funds, free and clear of any defenses, rights of set-off, counterclaim, or withholding or deduction of taxes. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Payment Office, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.19, 2.20 and 2.21 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars.

(b)  If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c)  If any Lender shall, by exercising any right of set-of or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans that would result in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements and Swingline Loans; provided, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements or Swingline Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower

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consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d)  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount or amounts due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e)  If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.6(b), 2.24(d) or (e), 2.22(d), 2.7(b) or 10.3(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.23.    Mitigation of Obligations.    (a)  If any Lender requests compensation under Section 2.19, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.21, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 2.19 or Section 2.21, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with such designation or assignment.

(b)  If any Lender requests compensation under Section 2.19, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority of the account of any Lender pursuant to Section 2.21, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions set forth in Section 10.4(b) all its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such obligations (which Eligible Assignee may be another Lender); provided, that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an

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amount equal to the outstanding principal amount of all Loans owed to it, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the Eligible Assignee (in the case of such outstanding principal and accrued interest) and from the Borrower (in the case of all other amounts) and (iii) in the case of a claim for compensation under Section 2.19 or payments required to be made pursuant to Section 2.21, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

SECTION 2.24.    Letters of Credit.

(a)  During the Availability Period, the Issuing Bank, in reliance upon the agreements of the other Lenders pursuant to Section 2.24(d), agrees to issue, at the request of the Borrower, Letters of Credit for the account of the Borrower on the terms and conditions hereinafter set forth; provided, that (i) each Letter of Credit shall expire on the earlier of (A) the date one year after the date of issuance of such Letter of Credit (or in the case of any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Revolving Commitment Termination Date; (ii) each Letter of Credit shall be in a stated amount of at least $100,000; and (iii) the Borrower may not request any Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC Exposure would exceed the LC Commitment or (B) the aggregate LC Exposure, plus the aggregate outstanding Revolving Credit Exposure of all Lenders would exceed the Aggregate Revolving Commitments. Upon the issuance of each Letter of Credit each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank without recourse a participation in such Letter of Credit equal to such Lender’s Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit. Each issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Lender by an amount equal to the amount of such participation.

(b)  To request the issuance of a Letter of Credit (or any amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall give the Issuing Bank and the Administrative Agent irrevocable written notice at least three (3) Business Days prior to the requested date of such issuance specifying the date (which shall be a Business Day) such Letter of Credit is to be issued (or amended, extended or renewed, as the case may be), the expiration date of such Letter of Credit, the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. In addition to the satisfaction of the conditions in Article III, the issuance of such Letter of Credit (or any amendment which increases the amount of such Letter of Credit) will be subject to the further conditions that such Letter of Credit shall be in such form and contain such terms as the Issuing Bank shall approve and that the Borrower shall have executed and delivered any additional applications, agreements and instruments relating to such Letter of Credit as the Issuing Bank shall reasonably require; provided, that in the event of any conflict between such applications, agreements or instruments and this Agreement, the terms of this Agreement shall control.

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(c)  At least two Business Days prior to the issuance of any Letter of Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received such notice and if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the Issuing Bank has received notice from the Administrative Agent on or before the Business Day immediately preceding the date the Issuing Bank is to issue the requested Letter of Credit (1) directing the Issuing Bank not to issue the Letter of Credit because such issuance is not then permitted hereunder because of the limitations set forth in Section 2.24(a) or that one or more conditions specified in Article III are not then satisfied, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue such Letter of Credit in accordance with the Issuing Bank’s usual and customary business practices.

(d)  The Issuing Bank shall examine all documents purporting to represent a demand for payment under a Letter of Credit promptly following its receipt thereof. The Issuing Bank shall notify the Borrower and the Administrative Agent of such demand for payment and whether the Issuing Bank has made or will make a LC Disbursement thereunder; provided, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement. The Borrower shall be irrevocably and unconditionally obligated to reimburse the Issuing Bank for any LC Disbursements paid by the Issuing Bank in respect of such drawing, without presentment, demand or other formalities of any kind. Unless the Borrower shall have notified the Issuing Bank and the Administrative Agent prior to 11:00 a.m. on the Business Day immediately prior to the date on which such drawing is honored that the Borrower intends to reimburse the Issuing Bank for the amount of such drawing in funds other than from the proceeds of Revolving Loans, the Borrower shall be deemed to have timely given a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders to make a Base Rate Borrowing on the date on which such drawing is honored in an exact amount due to the Issuing Bank; provided, that for purposes solely of such Borrowing, the conditions precedents set forth in Section 3.2 hereof shall not be applicable. The Administrative Agent shall notify the Lenders of such Borrowing in accordance with Section 2.3, and each Lender shall make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Issuing Bank in accordance with Section 2.8. The proceeds of such Borrowing shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for such LC Disbursement.

(e)  If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Issuing Bank) shall be obligated to fund the participation that such Lender purchased pursuant to subsection (a) in an amount equal to its Pro Rata Share of such LC Disbursement on and as of the date which such Base Rate Borrowing should have occurred. Each Lender’s obligation to fund its participation shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the Issuing Bank or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of the Aggregate Revolving Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Subsidiaries, (iv) any breach of this Agreement by the Borrower or any other

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Lender, (v) any amendment, renewal or extension of any Letter of Credit or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. On the date that such participation is required to be funded, each Lender shall promptly transfer, in immediately available funds, the amount of its participation to the Administrative Agent for the account of the Issuing Bank. Whenever, at any time after the Issuing Bank has received from any such Lender the funds for its participation in a LC Disbursement, the Issuing Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Administrative Agent or the Issuing Bank, as the case may be, will distribute to such Lender its Pro Rata Share of such payment; provided, that if such payment is required to be returned for any reason to the Borrower or to a trustee, receiver, liquidator, custodian or similar official in any bankruptcy proceeding, such Lender will return to the Administrative Agent or the Issuing Bank any portion thereof previously distributed by the Administrative Agent or the Issuing Bank to it.

(f)  To the extent that any Lender shall fail to pay any amount required to be paid pursuant to paragraph (d) of this Section 2.24 on the due date therefor, such Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on such amount from such due date to the date such payment is made at a rate per annum equal to the Federal Funds Rate; provided, that if such Lender shall fail to make such payment to the Issuing Bank within three (3) Business Days of such due date, then, retroactively to the due date, such Lender shall be obligated to pay interest on such amount at the Default Rate.

(g)  If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Issuing Bank and the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid fees thereon; provided, that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (g), (h) or (i) of Section 8.1. Such deposit shall be held by the Administrative Agent as collateral in an interest bearing account (which account shall be chosen in the sole discretion of the Administrative Agent and at the Borrower’s risk and expense) for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Borrower agrees to execute any documents and/or certificates to effectuate the intent of this paragraph. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest and profits on such investments shall accumulate in such account for the benefit of the Borrower. Moneys in such account shall applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it had not been reimbursed and to the extent so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, with the consent of the Required Lenders, be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such

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amount (to the extent not so applied as aforesaid) shall be returned to the Borrower with three Business Days after all Events of Default have been cured or waived.

(h)  Promptly following the end of each fiscal quarter, the Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the Borrower a report describing the aggregate Letters of Credit outstanding at the end of such fiscal quarter. Upon the request of any Lender from time to time, the Issuing Bank shall deliver to such Lender any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding.

(i)  The Borrower’s obligation to reimburse LC Disbursements hereunder shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever and irrespective of any of the following circumstances:

(i) Any lack of validity or enforceability of any Letter of Credit or this Agreement;

(ii) The existence of any claim, set-off, defense or other right which the Borrower or any Subsidiary or Affiliate of the Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or transferee may be acting), any Lender (including the Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction;

(iii) Any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect;

(iv) Payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document to the Issuing Bank that does not comply with the terms of such Letter of Credit;

(v) Any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder; or

(vi) The existence of a Default or an Event of Default.

Neither the Administrative Agent, the Issuing Bank, the Lenders nor any Related Party of any of the foregoing shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to above), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided, that the foregoing shall not be

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construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts or other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree, that in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(j)  Each Letter of Credit shall be subject to the Uniform Customs and Practices for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time, and, to the extent not inconsistent therewith, the governing law of this Agreement set forth in Section 10.5.

ARTICLE III

CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT

SECTION 3.1.    Conditions To Effectiveness.    The obligations of the Lenders (including the Swingline Lender) to make Loans and the obligation of the Issuing Bank to issue any Letter of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2).

(a)  The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Administrative Agent or SunTrust Robinson Humphrey Capital Markets, Inc., as Lead Arranger.

(b)  The Administrative Agent (or its counsel) shall have received the following:

(i)  a counterpart of this Agreement signed by or on behalf of each party thereto or written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement;

(ii)  a duly executed Note payable to each Lender;

(iii)  a duly executed Subsidiary Guarantee Agreement and Indemnity and Contribution Agreement;

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(iv)  the duly executed Pledge Agreement(s), if any, together with any and all certificates representing the Capital Stock pledged thereby, instruments of transfer and stock powers endorsed in blank, and Uniform Commercial Code financing statements in appropriate form with respect thereto;

(v)  evidence that the Borrower’s Existing Credit Agreement has been terminated, and all interest, fees and principal accrued thereunder through the Closing Date will be paid in full from the initial Revolving Loan;

(vi)  a certificate of the Secretary or Assistant Secretary of each Loan Party, attaching and certifying copies of its bylaws and of the resolutions of its boards of directors, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Loan Party executing the Loan Documents to which it is a party;

(vii)  certified copies of the articles of incorporation or other charter documents of each Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation of such Loan Party and each other jurisdiction where such Loan Party is required to be qualified to do business as a foreign corporation;

(viii)  the favorable written opinions of (A) Patricia Wilson, general counsel of the Loan Parties and (B) Alston & Bird LLP, special counsel to the Loan Parties, addressed to the Administrative Agent and each of the Lenders, each covering such matters relating to the Loan Parties, the Loan Documents and the transactions contemplated therein as the Administrative Agent or the Required Lenders shall reasonably request;

(ix)  a certificate, dated the Closing Date and signed by a Responsible Officer, confirming compliance with the conditions set forth in paragraphs (a), (b) and (c) of Section 3.2;

(x)  duly executed Notices of Borrowing, if applicable;

(xi)  a duly executed funds disbursement agreement, together with a report setting forth the sources and uses of the proceeds hereof;

(xii)  certified copies of all consents, approvals, authorizations, registrations and filings and orders required or advisable to be made or obtained under any Requirement of Law, or by any Contractual Obligation of each Loan Party, in connection with the execution, delivery, performance, validity and enforceability of the Loan Documents or any of the transactions contemplated thereby, and such consents, approvals, authorizations, registrations, filings and orders shall be in full force and effect and all applicable waiting periods shall have expired; and

(xiii)  certificates of insurance, in form and detail acceptable to the Administrative Agent, describing the types and amounts of insurance (property and liability) covering any of the tangible insurable property maintained by the Loan Parties;

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(xiv) a certificate, dated the Closing Date and signed by the chief financial officer of each Loan Party, confirming the solvency of each Loan Party before and after giving effect to all transactions contemplated by the Loan Documents, together with the Projections of the Borrower as of the Closing Date;

(xv) copies of (A) the internally prepared quarterly financial statements of the Borrower and its subsidiaries on a consolidated basis for the fiscal quarter ending on March 1, 2002, (B) the audited consolidated financial statements for the Borrower and its subsidiaries for the Fiscal Years ending 1999, 2000 and 2001, including balance sheets income and cash flow statements audited by an independent public accountant of recognized national standing and prepared in conformity with GAAP, and (C) any such other financial information as Administrative Agent may request; and

(xvi) a certified copy of the Indenture pursuant to which the Convertible Notes were issued and any amendments, modifications or waivers related thereto.

(c) The Administrative Agent shall have received such other documents, certificates, information or legal opinions as the Administrative Agent or the Required Lenders may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent or the Required Lenders.

SECTION 3.2.    Each Credit Event.    The obligation of each Lender to make a Loan on the occasion of any Borrowing and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit is subject to the satisfaction of the following conditions:

(a)  at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall exist; and

(b)  all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, extension or renewal of such Letter of Credit, in each case before and after giving effect thereto, except for changes expressly permitted herein and except to the extent such representations and warranties relate solely to an earlier date; and

(c)  since the date of the most recent financial statements of the Borrower described in Section 4.4 or Section 5.1, there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect.

Each Borrowing and each issuance, amendment, extension or renewal of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2.

SECTION 3.3.    Delivery of Documents.    All of the Loan Documents, certificates, legal opinions and other documents and papers referred to in this Article III, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders and shall be in form and substance satisfactory in all respects to the Administrative Agent.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Administrative Agent and each Lender as follows:

SECTION 4.1.    Existence; Power.    The Borrower and each of its Subsidiaries (i) is duly organized, validly existing and in good standing as a corporation under the laws of the jurisdiction of its organization, (ii) is duly qualified to transact business in every jurisdiction set forth on Schedule 4.1, and the failure of the Borrower to be so qualified in any other jurisdiction could not reasonably be expected to have or cause a Material Adverse Effect, and (iii) has all powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any such licenses, authorizations, consents and approvals could not reasonably be expected to have or cause a Material Adverse Effect.

SECTION 4.2.    Organizational Power; Authorization.    The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party’s organizational powers and have been duly authorized by all necessary organizational, and if required, stockholder, action. This Agreement has been duly executed and delivered by the Borrower, and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of the Borrower or such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

SECTION 4.3.    Governmental Approvals; No Conflicts.    The execution, delivery and performance by the Borrower of this Agreement, and by each Loan Party of the other Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect or where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of the Subsidiary Loan Parties or any judgment or order of any Governmental Authority which could reasonably be expected to have a Material Adverse Effect, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on the Borrower or any of the Subsidiary Loan Parties or any of its assets or give rise to a right thereunder to require any payment to be made by the Borrower or any of the Subsidiary Loan Parties and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of the Subsidiary Loan Parties except Liens (if any) created under the Loan Documents.

SECTION 4.4.    Financial Statements.    The Borrower has furnished to each Lender (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries as of May 31, 2001 and the related consolidated statements of income, shareholders’ equity and cash flows

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for the Fiscal Year then ended prepared by Arthur Andersen LLP and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of the March 1, 2002, and the related unaudited consolidated statements of income and cash flows for the fiscal quarter and year-to-date period then ending, certified by a Responsible Officer. Such financial statements fairly present in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied, subject to year end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii). Since May 31, 2001, there have been no changes with respect to the Borrower and its Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect.

SECTION 4.5.    Litigation and Environmental Matters.

(a)  Except for matters set forth on Schedule 4.5(a), no litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of the Subsidiary Loan Parties (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Loan Document.

(b)  Except for matters set forth on Schedule 4.5(b), neither the Borrower nor any of the Subsidiary Loan Parties (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

SECTION 4.6.    Compliance with Laws and Agreements.    Except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, the Borrower and each Subsidiary Loan Party is in compliance with (a) all applicable laws, rules, regulations, judgments and orders of any Governmental Authority except where such compliance is being contested in good faith through appropriate proceedings, and (b) all indentures, agreements or other instruments binding upon it or its properties.

SECTION 4.7.    Investment Company Act, Etc.    Neither the Borrower nor any of the Subsidiary Loan Parties is (a) an “investment company”, or is “controlled” by an “investment company” as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended or (c) otherwise subject to any other regulatory scheme limiting its ability to incur debt.

SECTION 4.8.    Taxes.    The Borrower and the Subsidiary Loan Parties have timely filed or caused to be filed all Federal income tax returns and all other material tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges

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imposed on it or any of its property by any Governmental Authority, except (i) to the extent the failure to do so would not have a Material Adverse Effect or (ii) where the same are currently being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary Loan Party, as the case may be, has set aside on its books adequate reserves. The charges, accruals and reserves on the books of the Borrower and the Subsidiary Loan Parties in respect of such taxes are adequate, and no tax liabilities that could be materially in excess of the amount so provided are anticipated.

SECTION 4.9.    Margin Regulations.    None of the proceeds of any of the Loans or Letters of Credit will be used for “purchasing” or “carrying” any “margin stock” with the respective meanings of each of such terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the applicable Margin Regulations.

SECTION 4.10.    ERISA.    No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $5,000,000 of the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $5,000,000 of the fair market value of the assets of all such underfunded Plans.

SECTION 4.11.    Ownership of Property.

(a)  Each of the Borrower and the Subsidiary Loan Parties has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business (except for any such failure that, individually or in the aggregate, would not have a Material Adverse Effect), including without limitation, all properties reflected in the Borrower’s most recent consolidated financial statements provided to the Lenders as described in Section 4.4 or delivered pursuant to Section 5.1, as the case may be (but excluding any such assets sold in the ordinary course of business, or as otherwise expressly permitted by Section 7.6 of this Agreement or consented to in writing by the Required Lenders, subsequent to the date of such financial statements), and none of such properties is subject to any Lien except as permitted by Section 7.2.

(b)  Each of the Borrower and its Subsidiary Loan Parties owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, trade names, copyrights and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiary Loan Parties does not infringe on the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not have a Material Adverse Effect.

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SECTION 4.12.    Disclosure.    The Borrower has disclosed to the Lenders all agreements, instruments, and corporate or other restrictions to which the Borrower or any of the Subsidiary Loan Parties is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the reports (including without limitation all reports that the Borrower is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation or syndication of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading.

SECTION 4.13.    Labor Relations.    There are no strikes, lockouts or other material labor disputes or grievances against the Borrower or any of the Subsidiary Loan Parties, or, to the Borrower’s knowledge, threatened against or affecting the Borrower or any of the Subsidiary Loan Parties, and no significant unfair labor practice, charges or grievances are pending against the Borrower or any of the Subsidiary Loan Parties, or to the Borrower’s knowledge, threatened against any of them before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect. All payments due from the Borrower or any of the Subsidiary Loan Parties pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of the Borrower or any such Subsidiary Loan Party, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

SECTION 4.14.    Subordination of Subordinated Debt.    This Agreement, and all amendments, modifications, extensions, renewals, refinancings and refundings hereof, constitute “Senior Indebtedness” within the meaning of the Indenture; and the Revolving Loans and all other Obligations of the Borrower to the Lenders and the Administrative Agent under this Agreement, the Notes and all other Loan Documents, and all amendments, modifications, extensions, renewals, refundings or refinancings of any of the foregoing constitute “Senior Indebtedness” of the Borrower within the meaning of the Indenture, and the holders thereof from time to time shall be entitled to all of the rights of a holder of “Senior Indebtedness” pursuant to the Indenture.

SECTION 4.15.    Subsidiaries.    Schedule 4.15 sets forth the name of, the ownership interest of the Borrower in, the jurisdiction of incorporation of, and the type of, each Subsidiary and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Closing Date.

SECTION 4.16.    Insolvency.    After giving effect to the execution and delivery of the Loan Documents, the making of the Loans under this Agreement, the Borrower will not be “insolvent,” within the meaning of such term as used in O.C.G.A. § 18-2-22 or as defined in § 101 of Title 11 of the United States Code, as amended from time to time, or be unable to pay its debts generally as such debts become due, or have an unreasonably small capital to engage in any business or transaction, whether current or contemplated.

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ARTICLE V

AFFIRMATIVE COVENANTS

The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of and interest on any Loan or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:

SECTION 5.1.    Financial Statements and Other Information.    The Borrower will deliver to the Administrative Agent and each Lender:

(a)  as soon as available and in any event within 90 days after the end of each Fiscal Year of Borrower, a copy of the annual audited report for such Fiscal Year for the Borrower and its Subsidiaries, containing a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows (together with all footnotes thereto) of the Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and reported on by Ernst & Young LLP or other independent public accountants of nationally recognized standing (without a “going concern” or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of the Borrower and its Subsidiaries for such Fiscal Year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards;

(b)  as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each Fiscal Year of the Borrower, an unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter and the related unaudited consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal quarter and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding fiscal quarter and the corresponding portion of Borrower’s previous Fiscal Year, all certified by the chief financial officer or treasurer of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes;

(c)  concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, a certificate of a Responsible Officer, (i) certifying as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Borrower has taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with Section 5.10 and Article VI and (iii) stating whether any change in GAAP or the application thereof has occurred since the date of the Borrower’s audited financial statements referred to in Section 4.4 and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

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(d)  within five (5) Business Days after the delivery of the financial statements referred to in clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained any knowledge during the course of their examination of such financial statements of any Default or Event of Default (which certificate may be limited to the extent required by accounting rules or guidelines);

(e)  promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and

(f)  promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of the Borrower or any Subsidiary as the Administrative Agent or any Lender may reasonably request.

SECTION 5.2.    Notices of Material Events.    The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:

(a)  the occurrence of any Default or Event of Default;

(b)  the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of the Borrower, affecting the Borrower or any Subsidiary which is reasonably likely to be adversely determined and, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(c)  the occurrence of any event or any other development by which the Borrower or any of its Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect;

(d)  the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $5,000,000; and

(e)  any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

(f)  Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.3.    Existence; Conduct of Business.    The Borrower shall at all times maintain its existence as a corporation in the jurisdiction of its incorporation. The Borrower shall cause each of its Operating Subsidiaries to maintain its legal existence, and carry on its

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business in substantially the same industry as such business shall be carried on the date of the first Borrowing hereunder; provided, that (i) the Borrower may dissolve Subsidiaries from time to time if (x) the Board of Directors of such Subsidiary has determined that such dissolution is desirable, and (y) such dissolution could not reasonably be expected to have or cause a Material Adverse Effect, and (ii) the Borrower or any Subsidiary may eliminate or discontinue a business line or consummate an Asset Sale pursuant to Section 7.6(a); provided, further, that nothing in this Section shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.3.

SECTION 5.4.    Compliance with Laws, Etc.    The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its properties, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.5.    Payment of Obligations.    The Borrower will, and will cause each of its Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.6.    Books and Records.    The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Borrower in conformity with GAAP.

SECTION 5.7.    Visitation, Inspection, Etc.    The Borrower will, and will cause each of its Subsidiaries to, permit any representative of the Administrative Agent or any Lender, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Administrative Agent or any Lender may reasonably request after reasonable prior notice to the Borrower; provided, however, if an Event of Default has occurred and is continuing, no prior notice shall be required.

SECTION 5.8.    Maintenance of Properties; Insurance.    The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so, either individually or it the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily

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insured against by companies in the same or similar businesses operating in the same or similar locations.

SECTION 5.9.    Use of Proceeds and Letters of Credit.    The Borrower will use the proceeds of all Loans to refinance existing debt on the Closing Date and thereafter to finance working capital needs, acquisitions contemplated under Section 7.4, capital expenditures and for other general corporate purposes of the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. All Letters of Credit will be used for general corporate purposes.

SECTION 5.10.    Additional Material Subsidiaries.    (a)  If any Domestic Operating Subsidiary of the Borrower, whether now existing or hereafter organized or acquired, has consolidated revenue or assets in any fiscal quarter that exceeds the Single Subsidiary Threshold, then the Borrower shall cause such Domestic Operating Subsidiary to become an additional Subsidiary Guarantor, as provided in this Section 5.10, within 30 days after delivery of the financial statements required to be delivered pursuant to Section 5.1(a) or (b), as the case may be, with respect to such fiscal quarter; provided, however, that in those instances where as a result of an Acquisition, or as a result of the sale, contribution, or other transfer of assets to a Subsidiary of the Borrower, the consolidated revenue or assets of the resulting Domestic Operating Subsidiary is projected (on a pro forma basis) by the Borrower to exceed the Single Subsidiary Threshold during the current or the immediately succeeding fiscal quarter of the Borrower, and such Domestic Operating Subsidiary is not then a Subsidiary Guarantor, the Borrower shall cause such Domestic Operating Subsidiary to become an additional Subsidiary Guarantor, as provided in this Section 5.10, within 30 days after the date of such Acquisition, sale, contribution or other transfer of assets.

(b)  If any First Tier Non-U.S. Operating Subsidiary, whether now existing or hereafter organized or acquired, has consolidated revenue or assets in any fiscal quarter that exceeds the Single Subsidiary Threshold, then the Borrower shall cause the Applicable Pledge Amount of the Capital Stock of such First Tier Non-U.S. Operating Subsidiary to be pledged to the Administrative Agent, for the ratable benefit of the Lenders, the Swingline Lender, the Issuing Bank, and the Administrative Agent, pursuant to a Pledge Agreement as provided in this Section 5.10, within 30 days after delivery of the financial statements required to be delivered pursuant to Section 5.1(a) or (b), as the case may be, with respect to such fiscal quarter; provided, however, that in those instances where as a result of an Acquisition, or as a result of the sale, contribution, or other transfer of assets to a Subsidiary of the Borrower, the consolidated revenue or assets of the resulting First Tier Non-U.S. Operating Subsidiary is projected (on a pro forma basis) by the Borrower to exceed the Single Subsidiary Threshold during the current or the immediately succeeding fiscal quarter of the Borrower, and none of the Capital Stock of such First Tier Non-U.S. Operating Subsidiary is then pledged to the Administrative Agent pursuant to a Pledge Agreement, then the Borrower shall cause the Applicable Pledge Amount of the Capital Stock of such First Tier Non-U.S. Operating Subsidiary to be so pledged to the Administrative Agent pursuant to a Pledge Agreement as provided in this Section 5.10, within 30 days after the date of such Acquisition, sale, contribution or other transfer of assets.

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(c)  If for any fiscal quarter of the Borrower, the aggregate revenue or assets (on a non-consolidated basis) of the Borrower and those Domestic Operating Subsidiaries that are then Subsidiary Guarantors, and those First Tier Non-U.S. Operating Subsidiaries whose Capital Stock has been pledged to the Administrative Agent pursuant to a Pledge Agreement, are less than the Aggregate Subsidiary Threshold, then the Borrower shall cause one or more other Domestic Operating Subsidiaries to become additional Subsidiary Guarantors, as provided in this Section 5.10, and/or shall cause the Applicable Pledge Amount of Capital Stock of one or more other First Tier Non-U.S. Operating Subsidiaries to be pledged to the Administrative Agent pursuant to a Pledge Agreement, within 30 days after delivery of the financial statements required to be delivered pursuant to Section 5.1 (a) or (b), as the case may be, with respect to such fiscal quarter, so that after including the revenue or assets of any such additional Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries, the aggregate revenue or assets (on a non-consolidated basis) of the Borrower and all such Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries would equal or exceed the Aggregate Subsidiary Threshold for such fiscal quarter; provided, however, that in those instances where as a result of an Acquisition, or as a result of the sale, contribution, or other transfer of assets to a Subsidiary of the Borrower, or as a result of the sale or other disposition of assets by the Borrower or any Subsidiary (including the sale or other disposition of the Capital Stock of any Subsidiary), the aggregate revenue or assets (on a non-consolidated basis) of the Borrower, those Domestic Operating Subsidiaries that are then Subsidiary Guarantors, and those First Tier Non-U.S. Operating Subsidiaries whose Capital Stock has been pledged to the Administrative Agent pursuant to a Pledge Agreement, are projected (on a pro forma basis) by the Borrower to be less than the Aggregate Subsidiary Threshold during the current or the immediately succeeding fiscal quarter of the Borrower, then the Borrower shall cause one or more other Domestic Operating Subsidiaries to become additional Subsidiary Guarantors, as provided in this Section 5.10, and/or shall cause the Applicable Pledge Amount of the Capital Stock of one or more other First Tier Non-U.S. Operating Subsidiaries to be pledged to the Administrative Agent pursuant to a Pledge Agreement, within 30 days after the date of such Acquisition, sale, contribution or other transfer or disposition, so that after including the revenue or assets of any such additional Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries, the aggregate revenue or assets (on a non-consolidated basis) of the Borrower and all such Subsidiary Guarantors and First Tier Non-U.S. Operating Subsidiaries for such fiscal quarter would equal or exceed the Aggregate Subsidiary Threshold.

(d)  The Borrower may elect at any time to have a Domestic Operating Subsidiary become an additional Subsidiary Guarantor as provided in this Section 5.10.

(e)  Upon the occurrence and during the continuation of any Event of Default, if the Required Lenders so direct, the Borrower shall (i) cause all of its Domestic Operating Subsidiaries to become additional Subsidiary Guarantors, as provided in this Section 5.10, within 30 days after the Borrower’s receipt of written confirmation of such direction from the Administrative Agent, and (ii) cause the Applicable Pledge Amount of the Capital Stock of all First Tier Non-U.S. Subsidiaries to be pledged to the Administrative Agent pursuant to a Pledge Agreement, as provided in this Section 5.10, within 30 days after the Borrower’s receipt of written confirmation of such direction from the Administrative Agent.

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(f)  A Domestic Operating Subsidiary shall become an additional Subsidiary Guarantor by executing and delivering to the Administrative Agent a Subsidiary Guarantee Supplement and a Indemnity, Subrogation and Contribution Agreement Supplement, accompanied by (i) all other Loan Documents related thereto, (ii) certified copies of certificates or articles of incorporation or organization, by-laws, membership operating agreements, and other organizational documents, appropriate authorizing resolutions of the board of directors of such Domestic Operating Subsidiaries, and opinions of counsel comparable to those delivered pursuant to Section 3.1(viii), and (iii) such other documents as the Administrative Agent may reasonably request. No Domestic Operating Subsidiary that becomes a Subsidiary Guarantor shall thereafter cease to be a Subsidiary Guarantor or be entitled to be released or discharged from its obligations under the Subsidiary Guarantee or Indemnity, Subrogation and Contribution Agreement, except in connection with a sale of such Subsidiary Guarantor’s Capital Stock or Assets pursuant to Section 7.6, a merger consolidation or other fundamental change with respect to such Subsidiary Guarantor described in Section 7.3 or otherwise expressly permitted pursuant to Sections 5.3, 7.3 or 7.6 of this Agreement or consented to in writing by all of the Lenders.

(g)  The Capital Stock of a First Tier Non-U.S. Operating Subsidiary shall be pledged to the Administrative Agent by the execution and delivery to the Administrative Agent of a Pledge Agreement, accompanied by (i) all certificates representing such Capital Stock, instruments of transfer and stock powers endorsed in blank, and Uniform Commercial Code financing statements in appropriate form in respect thereof, and (ii) such other documents as the Administrative Agent may reasonably request (including, without limitation, certified copies of certificates or articles of incorporation or organization, by-laws, membership operating agreements, and other organizational documents, appropriate authorizing resolutions of the Board of Directors of the holders of such Capital Stock, and opinions of counsel comparable to those delivered pursuant to Section 3.1(viii)). The Capital Stock of a First Tier Non-U.S. Operating Subsidiary that has been pledged to the Administrative Agent pursuant to a Pledge Agreement shall not be entitled thereafter to be released from such Pledge Agreement, except in connection with a sale of such Capital Stock or such First Tier Non-U.S. Operating Subsidiary’s Assets pursuant to Section 7.6, a merger, consolidation or other fundamental change with respect to such Subsidiary Guarantor described in Section 7.3 or otherwise expressly permitted pursuant to Sections 5.3, 7.3 or 7.6 of this Agreement or consented to in writing by all of the Lenders.

ARTICLE VI

FINANCIAL COVENANTS

The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of or interest on or any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:

SECTION 6.1.    Leverage Ratio.    The Borrower and its Subsidiaries will have, as of the end of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending May 31, 2002 and on each fiscal quarter thereafter, a Leverage Ratio of not greater than 2.50:1.00.

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SECTION 6.2.    Fixed Charge Coverage Ratio.    The Borrower and its Subsidiaries will have, as of the end of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending May 31, 2002 and on each fiscal quarter thereafter, a Fixed Charge Coverage Ratio of not less than 3.00:1.00.

SECTION 6.3.    Minimum Consolidated Net Worth.    The Borrower and its Subsidiaries will maintain a Consolidated Net Worth in an amount equal to (i) $207,420,000, plus (ii) 50% of Consolidated Net Income on a cumulative basis for all preceding fiscal quarters of the Borrower, commencing with the fiscal quarter ending August 31, 2001, plus (iii) 100% of the net proceeds from any equity offering, calculated quarterly on the last day of each fiscal quarter, plus (iv) 100% of the increase to Consolidated Net Worth resulting from the conversion of any debt of the Borrower into equity (including, without limitation, the conversion of the Convertible Notes into common stock of the Borrower); provided, that if Consolidated Net Income is negative in any fiscal quarter the amount added for such fiscal quarter shall be zero and such negative Consolidated Net Income shall not reduce the amount of Consolidated Net Income added from any previous fiscal quarter.

SECTION 6.4.    Capital Expenditures.    The Borrower and its Subsidiaries may make Capital Expenditures during any Fiscal Year in an amount not to exceed (i) $37,000,000 for the Fiscal Year ending May 30, 2003; (ii) $40,000,000 for the Fiscal Year ending May 31, 2004; and (iii) $45,000,000 for the Fiscal Year ending May 31, 2005; provided, however, commencing with the Fiscal Year ending May 30, 2003, if the actual aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries during any Fiscal Year (the “Current CapEx”) is less than the respective limit specified above for such Fiscal Year (the “Specified CapEx”), then the applicable limit for the immediately succeeding Fiscal Year shall be increased by an amount equal to the difference between the Current CapEx and the Specified CapEx (the “Carryover Amount”). For purposes of this Section 6.4 Capital Expenditures made by the Borrower in any Fiscal Year shall be deemed to be made first with Specified CapEx for such Fiscal Year, then, from the Carryover Amount, if any.

ARTICLE VII

NEGATIVE COVENANTS

The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of or interest on any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding:

SECTION 7.1.    Indebtedness.    The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except:

(a)  Indebtedness created pursuant to the Loan Documents;

(b)  Indebtedness existing on the date hereof and set forth on Schedule 7.1 and extensions, renewals and replacements of any such Indebtedness which net of financing fees do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof;

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(c)  Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets if secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided further, that the aggregate principal amount of such Indebtedness does not exceed $15,000,000 at any time outstanding;

(d)  Indebtedness of the Borrower owing to any Subsidiary and of any Subsidiary owing to the Borrower or any other Subsidiary; provided, that any such Indebtedness that is owed to a Subsidiary that is not a Subsidiary Loan Party shall be subject to Section 7.4;

(e)  Guarantees by the Borrower of Indebtedness or other obligations of any Subsidiary and by any Subsidiary of Indebtedness or other obligations of the Borrower or any other Subsidiary; provided, that Guarantees by any Loan Party of Indebtedness or other obligations of any Subsidiary that is not a Subsidiary Loan Party shall be subject to Section 7.4;

(f)  Indebtedness of any Person which becomes a Subsidiary after the date of this Agreement and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided, that (i) such Indebtedness exists at the time that such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (ii) the aggregate principal amount of such Indebtedness permitted hereunder shall not exceed $10,000,000 outstanding at any time;

(g)  Indebtedness created pursuant to the Subordinated Debt Documents, together with any extensions, renewals or refinancings of such Indebtedness, and other, additional unsecured Indebtedness of Borrower and its Subsidiaries created subsequent hereto which is subordinated, in right of payment and claim, to the rights and claims of the Lenders hereunder in respect of the Obligations on terms not less favorable to the Lenders than those set forth in Subordinated Debt Documents as in effect on the date hereof, provided that the aggregate principal amount of all Indebtedness permitted to exist under this subsection (g), inclusive of the Indebtedness created pursuant to the Subordinated Debt Documents, shall not exceed $200,000,000 outstanding at any time;

(h)  Hedging Obligations permitted by Section 7.10; and

(i)  other unsecured Indebtedness in an aggregate principal amount not to exceed $25,000,000 at any time outstanding.

SECTION 7.2.    Negative Pledge.    The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired or, except:

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(a)  Permitted Encumbrances;

(b)  any Liens on any property or asset of the Borrower or any Subsidiary existing on the Closing Date set forth on Schedule 7.2; provided, that such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary;

(c)  purchase money Liens upon or in any fixed or capital assets to secure the purchase price or the cost of construction or improvement of such fixed or capital assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such fixed or capital assets (including Liens securing any Capital Lease Obligations); provided, that (i) such Lien secures Indebtedness permitted by Section 7.1(c), (ii) such Lien attaches to such asset concurrently or within 120 days after the acquisition, improvement or completion of the construction thereof; (iii) such Lien does not extend to any other asset; and (iv) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets;

(d)  any Lien (i) existing on any asset of any Person at the time such Person becomes a Subsidiary of the Borrower, (ii) existing on any asset of any Person at the time such Person is merged with or into the Borrower or any Subsidiary of the Borrower or (iii) existing on any asset prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower; provided, that any such Lien was not created in the contemplation of any of the foregoing and any such Lien secures only those obligations which it secures on the date that such Person becomes a Subsidiary or the date of such merger or the date of such acquisition;

(e)  extensions, renewals, or replacements of any Lien referred to in paragraphs (a) through (d) of this Section; provided, that the principal amount of the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby;

(f)  Liens securing Indebtedness permitted under Section 7.1(e); and

(g)  Liens not otherwise permitted by the foregoing paragraphs of this Section securing Indebtedness, otherwise permitted pursuant to Section 7.2, in an aggregate principal amount at any time outstanding not to exceed $5,000,000.

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SECTION 7.3.    Fundamental Changes.

(a)  The Borrower will not, and will not permit any Operating Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Operating Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) the Borrower or any Subsidiary may merge with a Person if the Borrower (or such Subsidiary if the Borrower is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary; provided, that if any party to such merger is a Subsidiary Loan Party, the Subsidiary Loan Party shall be the surviving Person or such other Subsidiary becomes a Subsidiary Loan Party pursuant to Section 5.10, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or to another Subsidiary or, if such transaction is permitted by Section 7.6, to another Person and (iv) any Subsidiary (other than a Subsidiary Loan Party, unless such Subsidiary Loan Party is no longer an Operating Subsidiary) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided, that any such merger involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 7.4.

(b)  The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date hereof and businesses reasonably related thereto.

SECTION 7.4.    Investments, Loans, Etc.    (a)  The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger), any common stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called “Investments”), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, or create or form any Subsidiary, except (provided such Investments do not violate Section 7.4(b)):

(i)  Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 7.4 (including Investments in Subsidiaries);

(ii)  absent the existence of a Default or Event of Default, Permitted Investments;

(iii)  Investments made by the Borrower in or to any Subsidiary Loan Party and by any Subsidiary Loan Party to the Borrower or in or to another Subsidiary Loan Party

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(including, without limitation, any Person becoming a Subsidiary as a result of such Investment pursuant to an Acquisition otherwise permitted pursuant to Section 7.4(i));

(iv)  capital contributions of assets as permitted by Section 7.6(a);

(v)  Investments made pursuant to an Acquisition otherwise permitted pursuant to Section 7.4(b);

(vi)  (A)  loans or advances (other than travel advances described in clause (D) below) to employees not exceeding $1,000,000 in aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on the Closing Date, (B) deposits required by government agencies or public utilities, (C) loans or advances by the Borrower to its Operating Subsidiaries or by such Operating Subsidiaries to the Borrower or other Operating Subsidiaries, (D) Guarantees permitted pursuant to Section 7.1(e), (E) travel advances to employees not exceeding $500,000 in the aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on the Closing Date, and (F) loans or advances representing Investments as described in Schedule 7.4; provided that after giving effect to the making of any loans, advances or deposits permitted by clauses (A) through (E) of this Section, no Default or Event of Default shall be in existence (which has not been specifically waived in writing pursuant to Section 10.2);

(vii)  Hedging Obligations permitted by Section 7.10; and

(viii)  Other Investments not described in the preceding clauses (i) through (vii) made in an aggregate amount during any period of four consecutive fiscal quarters not to exceed 5% of the Borrower’s Consolidated Net Worth as of the end of the most recent fiscal quarter; and

(b) Without the prior written consent of the Required Lenders, the Borrower will not, nor will it permit any of its Subsidiaries to, acquire, whether directly or through the purchase of stock, convertible notes or otherwise, effect an Acquisition, or otherwise acquire any assets, other than (A) the Investments permitted by Section 7.4(a), (B) the assets of one of its Subsidiaries, or (C) fixed assets (which fixed assets do not constitute all or substantially all of the assets of the Person from whom such assets are acquired), unless, in each case (i) such Acquisition is of a business which is similar (as to product sold or service rendered) to the Borrower’s or any relevant Subsidiary’s, (ii) such Acquisition is made upon a negotiated basis with the approval of the board of directors of the Person to be acquired, or of the percentage of ownership interests required by the charter documents of such Person to approve any such Acquisition, (iii) the total amount of cash consideration paid, and Indebtedness assumed or otherwise becoming part of Consolidated Total Debt (x) in such Acquisition shall not exceed $50,000,000, and (y) in such Acquisition, together with the aggregate amount of such cash consideration and Indebtedness in respect of all other Acquisitions made during the then-current Fiscal Year (or, in the case of the Borrower’s 2002 Fiscal Year, the period from the Closing Date through the end of such 2002 Fiscal Year) shall not exceed $75,000,000, (iv) the then-current market value of all Capital Stock of the Borrower given as consideration in such Acquisition, if

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any, together with the aggregate value of all such Capital Stock given in respect of all other Acquisitions made during the then-current Fiscal Year, if any (or, in the case of the Borrower’s 2002 Fiscal Year, the period from the Closing Date through the end of such 2002 Fiscal Year) shall not exceed $75,000,000, and (v) no Default or Event of Default shall be in existence or be caused thereby which has not been specifically waived in writing pursuant to Section 10.2 (and, if requested by the Administrative Agent, the Borrower has provided to the Administrative Agent a certificate to such effect, with supporting calculations of the financial covenants set forth in Sections 6.1 and 6.2 on a pro forma basis for the most recent four fiscal quarters of the Borrower for which financial statements (annual or quarterly) are available after giving effect to such Acquisition as of the first day of such period, and the financial covenant set forth in Section 6.3 on a pro forma basis as of the end of the most recent fiscal quarter of the Borrower for which financial statements (annual or quarterly) are available after giving effect to such Acquisition as of the end of such fiscal quarter); provided, notwithstanding the foregoing, the Borrower shall in no case be allowed to effect more than four Acquisitions during any Fiscal Year.

SECTION 7.5.    Restricted Payments.    The Borrower will not declare or make any Restricted Payment if, after giving effect thereto, (i) the aggregate of all Restricted Payments declared or made in any period of four consecutive fiscal quarters exceeds $10,000,000; or (ii) any Default or Event of Default shall be in existence (which has not been specifically waived in writing pursuant to Section 10.2) either immediately preceding or succeeding the making or declaration of any such Restricted Payment.

SECTION 7.6.    Sale of Assets.    The Borrower will not, nor will it permit any of its Subsidiaries to effect any Asset Sale to, any other Person, or discontinue or eliminate any Operating Subsidiary or business segment, provided that (A) the Borrower and its Subsidiaries may eliminate or discontinue business lines and segments from time to time if (i) such action has been approved by the Board of Directors of the Borrower or such Subsidiary, and (ii) such elimination or discontinuance will not jeopardize the Borrower’s or any Subsidiary Guarantor’s ability to perform under any of the Loan Documents, and (B) so long as no Default or Event of Default shall be in existence either immediately prior to or following any asset disposition, the Borrower and its respective Subsidiaries may effect any Asset Sale, including any Asset Sale resulting in the sale of all or substantially all of the assets of a Subsidiary, so long as the value of the assets sold (measured at the higher of book value or the total sale price for such assets) pursuant to all such Asset Sales during any period of four consecutive fiscal quarters does not exceed $25,000,000.

SECTION 7.7.    Transactions with Affiliates.    Except for those agreements more particularly described on Schedule 7.7, neither the Borrower nor any of its Subsidiaries shall enter into, or be a party to, any transaction with any Affiliate of the Borrower or such Subsidiary (which Affiliate is not the Borrower or a Guarantor), except as permitted by law and in the ordinary course of business and pursuant to reasonable terms which are no less favorable to the Borrower or such Subsidiary than would be obtained in a comparable arm’s length transaction with a Person which is not an Affiliate.

SECTION 7.8.    Restrictive Agreements.    The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any

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Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its common stock, to make or repay loans or advances to the Borrower or any other Subsidiary, to Guarantee Indebtedness of the Borrower or any other Subsidiary or to transfer any of its property or assets to the Borrower or any Subsidiary of the Borrower; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement or any other Loan Document or any other document evidencing Indebtedness in existence on the Closing Date and any refinancing thereof permitted herein provided that the restrictions contained in the agreements governing such refinanced Indebtedness are not materially more restrictive than those contained in the agreements governing the Indebtedness being refinanced; (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness, (iv) the foregoing shall not apply to any instrument governing Indebtedness or Capital Stock of a Person acquired by the Borrower and its Subsidiaries (except to the extent such Indebtedness was incurred or such Capital Stock was issued or its terms amended in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the property or assets of any Person, other than the Person or the property or assets of the Person, so acquired and (v) clause (a) shall not apply to customary provisions in leases and other contracts restricting the assignment thereof.

SECTION 7.9.    Sale and Leaseback Transactions.    The Borrower will not, and will not permit any of the Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred.

SECTION 7.10.    Hedging Transactions.    The Borrower will not, and will not permit any of its Subsidiaries to, enter into any Hedging Transaction, other than Hedging Transactions entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiaries is exposed in the conduct of its business or the management of its liabilities. Solely for the avoidance of doubt, the Borrower acknowledges that a Hedging Transaction entered into for speculative purposes or of a speculative nature (which shall be deemed to include any Hedging Transaction under which the Borrower or any of its Subsidiaries is or may become obliged to make any payment (i) in connection with the purchase by any third party of any Capital Stock or any Indebtedness or (ii) as a result of changes in the market value of any Capital Stock or any Indebtedness) is not a Hedging Obligations entered into in the ordinary course of business to hedge or mitigate risks.

SECTION 7.11.    Amendment to Material Documents.    The Borrower will not, and will not permit any Subsidiary to, amend, modify or waive any of its rights in a manner materially adverse to the Lenders under (a) its certificate of incorporation, bylaws or other organizational documents, and (b) the Convertible Notes.

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SECTION 7.12.    Subordinated Indebtedness.    (a)  The Borrower will not, and will not permit any of its Subsidiaries to (i) prepay, redeem, repurchase or otherwise acquire for value the Convertible Notes, or (ii) make any principal, interest or other payments on the Convertible Notes that is not expressly permitted by the subordination provisions of the Indenture.

(b)  The Borrower will not, and will not permit any of its Subsidiaries to, agree to or permit any amendment, modification or waiver of any provision of the Convertible Notes or the Indenture if the effect of such amendment, modification or waiver is to (i) increase the interest rate on the Convertible Notes or change (to earlier dates) the dates upon which principal and interest are due thereon; (ii) alter the redemption, prepayment or subordination provisions thereof; (iii) alter the covenants and events of default in a manner that would make such provisions more onerous or restrictive to the Borrower or any such Subsidiary; or (iv) otherwise increase the obligations of the Borrower or any Subsidiary in respect of the Convertible Notes or the Indenture or confer additional rights upon the holders thereof which individually or in the aggregate would be adverse to the Borrower or any of its Subsidiaries or to the Administrative Agent or the Lenders; provided, however, the Borrower may enter into any extensions, renewals and replacements of the Convertible Notes or the Indenture which (x) net of financing fees and expenses do not increase the outstanding principal amount thereof in excess of $200,000,000 (immediately prior to giving effect to such extension, renewal or replacement), (y) shorten the maturity or the weighted average life thereof, or (z) alter the redemption, prepayment or subordination provisions thereof.

SECTION 7.13.    Accounting Changes.    The Borrower will not, and will not permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the Fiscal Year of the Borrower or of any Subsidiary, except to change the Fiscal Year of a Subsidiary to conform its Fiscal Year to that of the Borrower.

ARTICLE VIII

EVENTS OF DEFAULT

SECTION 8.1.    Events of Default.    If any of the following events (each an “Event of Default”) shall occur:

(a)  the Borrower shall fail to pay any principal of any Loan or of any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or

(b)  the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) Business Days; or

(c)  any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any other Loan

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Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Administrative Agent or the Lenders by any Loan Party or any representative of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document shall prove to be incorrect in any material respect when made or deemed made or submitted; or

(d)  the Borrower shall fail to observe or perform any covenant or agreement contained in Sections 5.1, 5.2 or 5.3 (with respect to the Borrower’s existence) or Articles VI or VII; or

(e)  any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those referred to in clauses (a), (b) and (d) above) or any other Loan Document, and such failure shall remain unremedied for 30 days after the earlier of (i) any Responsible Officer of the Borrower becomes aware of such failure, or (ii) notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or

(f)  any default or event of default (after giving effect to any grace period) shall have occurred and be continuing under the Convertible Notes or any Subordinated Debt Document shall cease to be in full force and effect or the validity or enforceability thereof is disaffirmed by or on behalf of any subordinated lender party thereto, or any Obligations fail to constitute “Senior Indebtedness” for purposes of the Indenture, or all or any part of the Convertible Notes is accelerated, is declared to be due and payable is required to be prepaid or redeemed, in each case prior to the stated maturity thereof;

(g)  the Borrower or any Subsidiary Loan Party (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of or premium or interest on the Convertible Notes or any Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable; or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or

(h)  the Borrower or any Subsidiary Loan Party shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any such Subsidiary Loan Party or for a

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substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or

(i)  an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary Loan Party or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any Subsidiary Loan Party or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or

(j)  the Borrower or any Subsidiary Loan Party shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or

(k)  an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to the Borrower and the Subsidiaries in an aggregate amount exceeding $5,000,000; or

(l)  any judgment or order for the payment of money in excess of $5,000,000 in the aggregate shall be rendered against the Borrower or any Subsidiary Loan Party, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(m)  any non-monetary judgment or order shall be rendered against the Borrower or any Subsidiary Loan Party that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(n)  a Change in Control shall occur or exist; or

(o)  (i)  any provision of any Subsidiary Guarantee Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Subsidiary Loan Party, or any Subsidiary Loan Party shall so state in writing, or any Subsidiary Loan Party shall seek to terminate its Subsidiary Guarantee Agreement, except as otherwise permitted by this Agreement, or (ii) any provision of the Subordination Agreement shall for any reason cease to be valid and binding on, or enforceable against, the Subordinated Noteholders, or the Subordinated Noteholders shall so state in writing, or the Subordinated Noteholders shall seek to terminate the Subordination Agreement;

(p)  any Event of Default shall occur under any other Loan Documents;

then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Section) and at any time thereafter during the continuance of such event,

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the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately; (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and (iii) exercise all remedies contained in any other Loan Document; and that, if an Event of Default specified in either clause (h) or (i) shall occur, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE IX

THE ADMINISTRATIVE AGENT

SECTION 9.1.    Appointment of Administrative Agent.    (a)  Each Lender irrevocably appoints SunTrust Bank as the Administrative Agent and authorizes it to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent under this Agreement and the other Loan Documents, together with all such actions and powers that are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder or under the other Loan Documents by or through any one or more sub-agents or attorneys-in-fact appointed by the Administrative Agent. The Administrative Agent and any such sub-agent or attorney-in-fact may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Article shall apply to any such sub-agent or attorney-in-fact and the Related Parties of the Administrative Agent, any such sub-agent and any such attorney-in-fact and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

(b) The Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for the Issuing Bank with respect thereto; provided, that the Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as the term “Administrative Agent” as used in this Article IX included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuing Bank.

SECTION 9.2.    Nature of Duties of Administrative Agent.    The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (b) the Administrative

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Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except those discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it, its sub-agents or attorneys-in-fact with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or any Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms and conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent may consult with legal counsel (including counsel for the Borrower) concerning all matters pertaining to such duties.

SECTION 9.3.    Lack of Reliance on the Administrative Agent.    Each of the Lenders, the Swingline Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each of the Lenders, the Swingline Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, continue to make its own decisions in taking or not taking of any action under or based on this Agreement, any related agreement or any document furnished hereunder or thereunder.

SECTION 9.4.    Certain Rights of the Administrative Agent.    If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until it shall have received instructions from such Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders where required by the terms of this Agreement.

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SECTION 9.5.    Reliance by Administrative Agent.    The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or made by the proper Person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or not taken by it in accordance with the advice of such counsel, accountants or experts.

SECTION 9.6.    The Administrative Agent in its Individual Capacity.    The bank serving as the Administrative Agent shall have the same rights and powers under this Agreement and any other Loan Document in its capacity as a Lender as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent; and the terms “Lenders”, “Required Lenders”, “holders of Notes”, or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The bank acting as the Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Administrative Agent hereunder.

SECTION 9.7.    Successor Administrative Agent.

(a)  The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval by the Borrower provided that no Default or Event of Default shall exist at such time. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or any state thereof or a bank which maintains an office in the United States, having a combined capital and surplus of at least $500,000,000.

(b)  Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent’s resignation under this Section 9.7 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45^th day (i) the retiring Administrative Agent’s resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time as the Required Lenders appoint a successor Administrative Agent as provided above. After any retiring Administrative Agent’s resignation hereunder, the provisions of this Article IX shall continue in effect for the benefit of such retiring Administrative Agent and its representatives and agents in

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respect of any actions taken or not taken by any of them while it was serving as the Administrative Agent.

SECTION 9.8.    Authorization to Execute other Loan Documents.    Each Lender hereby authorizes the Administrative Agent to execute on behalf of all Lenders all Loan Documents other than this Agreement.

ARTICLE X

MISCELLANEOUS

SECTION 10.1.    Notices.

(a)  Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

To the Borrower:	Randy Hutto Chief Financial Officer NDCHealth Corporation National Data Plaza Atlanta, GA 30329-2010 Telecopy Number: 404-728-3780
With a copy to (other than Notices of Borrowing)	Patricia Wilson General Counsel NDC Health Corporation National Data Plaza Atlanta, GA 30329-2010 Telecopy Number: 404-728-3180
To the Administrative Agent: or Swingline Lender	SunTrust Bank 303 Peachtree Street, N. E. Atlanta, Georgia 30308 Attention: Robert Massenburg Telecopy Number: 404-658-4843
With a copy to: (for Notices of Borrowing)	Libby Mansfield (all lending notices) Assistant Vice President SunTrust Robinson Humphrey Capital Markets 303 Peachtree Street NE, 25th Floor Atlanta, GA 30308 Telecopy Number: 404-658-4906

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With a copy to: (for all notices other than Notices of Borrowing)	SunTrust Robinson Humphrey Capital Markets 303 Peachtree Street, N. E./ 24th Floor Atlanta, Georgia 30308 Attention: Jay White Telecopy Number: 404-827-6502
To the Issuing Bank:	SunTrust Bank 25 Park Place, N. E./Mail Code 3706 Atlanta, Georgia 30303 Attention: Michael E. Sullivan Telecopy Number: (404) 588-8129
To any other Lender:	the address set forth in the Administrative Questionnaire

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails or if delivered, upon delivery; provided, that notices delivered to the Administrative Agent under Article 2 shall not be effective until actually received at its address specified in this Section 10.1.

(b)  Any agreement of the Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent and Lenders shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent and the Lenders to be contained in any such telephonic or facsimile notice.

SECTION 10.2.    Waiver; Amendments.

(a)  No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between the Borrower and the Administrative Agent or any Lender, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or

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remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time.

(b)  No amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Required Lenders or the Borrower and the Administrative Agent with the consent of the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment or waiver shall: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.21 (b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement, without the written consent of each Lender; (vii) release all or substantially all collateral (if any) securing any of the Obligations, without the written consent of each Lender or; provided, that no such agreement shall amend, modify or otherwise affect the rights, duties or obligations of the Administrative Agent, the Swingline Bank or the Issuing Bank without the prior written consent of such Person. Any consent of the Borrower otherwise required hereunder shall not be required if an Event of Default has occurred and is continuing. Any assignment or other transfer by a Lender that does not fully comply with the terms of this clause (b) shall be treated for purposes of this Agreement as a sale of a participation pursuant to clause (d) below.

SECTION 10.3.    Expenses; Indemnification.

(a)  The Borrower shall pay (i) all reasonable, out-of-pocket costs and expenses of the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and its Affiliates, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any

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demand for payment thereunder and (iii) all out-of-pocket costs and expenses (including, without limitation, the reasonable fees, charges and disbursements of outside counsel) incurred by the Administrative Agent, the Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made or any Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b)  The Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing (each, an “Indemnitee”) against, and hold each of them harmless from, any and all costs, losses, liabilities, claims, damages and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee (“Claims and Expenses”), which may be incurred by or asserted against any Indemnitee arising out of, in connection with or as a result of the following (each, an “Indemnity Proceeding”) (i) the execution or delivery of this Agreement or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of any of the transactions contemplated hereby, (ii) any Loan or Letter of Credit or any actual or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned by the Borrower or any Subsidiary or any Environmental Liability related in any way to the Borrower or any Subsidiary or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided, that the Borrower shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee’s gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and nonappealable judgment or to the extent that such losses relate to a claim made by an Indemnitee hereunder arising from any cause of action pursued by the Borrower against such Indemnitee where the Borrower alleged that the Indemnitee breached its obligations under the Loan Documents and a court having competent jurisdiction shall have determined by final judgment (not subject to appeal) that the Indemnitee breached its obligations to the Borrower under the Loan Documents.

(c)  The Borrower shall pay, and hold the Administrative Agent and each of the Lenders harmless from and against, any and all present and future stamp, documentary, and other similar taxes with respect to this Agreement and any other Loan Documents, any collateral described therein, or any payments due thereunder, and save the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes.

(d)  To the extent that the Borrower fails to pay any amount required to be paid to the Administrative Agent, the Issuing Bank or the Swingline Lender under clauses ( a ), (b) or (c) hereof, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified payment, claim, damage, liability or

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related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such.

(e)  To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan or any Letter of Credit or the use of proceeds thereof.

(f)  All amounts due under this Section shall be payable promptly after written demand therefor.

(g)  If the Borrower is required to indemnify an Indemnitee pursuant hereto and have provided evidence reasonably satisfactory to such Indemnitee that the Borrower has the financial wherewithal to reimburse such Indemnitee for any amount paid by such Indemnitee with respect to such Indemnity Proceeding, such Indemnitee shall not settle or compromise any such Indemnity Proceeding without the prior written consent of the Borrower (which consent shall not be unreasonably withheld or delayed).

(h)  If a claim is to be made by an Indemnitee under this Section, the Indemnitee shall give written notice to the Borrower promptly after the Indemnitee receives actual notice of any Claims and Expenses incurred or instituted for which the indemnification is sought; provided, that, the failure to give such prompt notice shall not decrease the Claims and Expenses payable by the Borrower, except to the extent that such failure has caused the Borrower to forfeit any substantive right of a material nature. If requested by the Borrower in writing, and so long as (i) no Event of Default shall have occurred and be continuing and (ii) the Borrower has acknowledged in writing to the Indemnitee that the Borrower shall be obligated under the terms of its indemnity hereunder in connection with such Indemnity Proceeding (subject to the exclusion of any losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Indemnitee), the Borrower may, at its election, conduct the defense of any such Indemnified Proceeding to the extent such contest may be conducted in good faith on legally supported grounds. If any lawsuit or enforcement action is filed against any Indemnitee entitled to the benefit of indemnity under this Section, written notice thereof shall be given to the Borrower as soon as practicable (and in any event within 15 days after the service of the citation or summons). Notwithstanding the foregoing, the failure so to notify the Borrower as provided in this Section will not relieve the Borrower from liability hereunder. After such notice, the Borrower shall be entitled, if it so elects, to take control of the defense and investigation of such lawsuit or action and to employ and engage counsel of their own choice reasonably acceptable to the Indemnitee to handle and defend the same, at the Borrower’s cost, risk and expense; provided however, that the Borrower and its counsel shall proceed with diligence and in good faith with respect thereto. If (i) the engagement of such counsel by the Borrower would present a conflict of interest which would prevent such counsel from effectively defending such action on behalf of the Indemnitee, (ii) the defendants in, or targets of, any such lawsuit or action include both the Indemnitee and Borrower, and the Indemnitee reasonably concludes that there may be legal defenses available to it that are different from or in addition to those available to the Borrower, (iii) the Borrower fails to assume the

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defense of the lawsuit or action or to employ counsel reasonably satisfactory to such Indemnitee, in either case in a timely manner, or (iv) an Event of Default shall occur and be continuing, then such Indemnitee may employ separate counsel to represent or defend it in any such action or proceeding and the Borrower will pay the fees and disbursements of such counsel; provided, however that each Indemnitee shall, in connection with any matter covered by this Section which also involves other Indemnified Parties, use reasonable efforts to avoid unnecessary duplication of efforts by counsel for all indemnities. Should the Borrower be entitled to conduct the defense of any Indemnity Proceeding pursuant to the terms of this Section, the Indemnitee shall cooperate (with all Claims and Expenses associated therewith to be paid by the Borrower) in all reasonable respects with the Borrower and such attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom; provided, however that the Indemnitee may, at its own cost (except as set forth in, and in accordance with, the foregoing sentence), participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom.

(i)  The Administrative Agent, Issuing Bank, Swingline Lender and each Lender agree that in the event that any Indemnity Proceeding is asserted or threatened in writing or instituted against it or any other party entitled to indemnification hereunder, the Administrative Agent, Issuing Bank, Swingline Lender or such Lender shall promptly notify the Borrower thereof in writing and agree, to the extent appropriate, to consult with the Borrower with a view to minimizing the cost to the Borrower of its obligations under this Section; provided that the failure to so notify the Borrower will not relieve the Borrower from liability hereunder except to the extent such failure has caused the Borrower to forfeit any substantive right of a material nature.

SECTION 10.4.    Successors and Assigns.

(a)  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)  Any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000, in the case of any assignment of a Revolving Loan or reimbursement obligation of outstanding Letters of Credit,

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unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consent (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Commitments on a non-pro rata basis, and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $1,000, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.19, 2.20, 2.21 and 10.3. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.

(c)  The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Atlanta, Georgia a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d)  Any Lender may, without the consent of, or notice to, the Borrower, the Administrative Agent, the Swingline Bank or the Issuing Bank sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Swingline Bank, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to

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any amendment, modification or waiver with respect to the following to the extent affecting such Participant: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.22(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement without the written consent of each Lender except to the extent such release is expressly provided under the terms of the Guaranty Agreement; or (vii) release all or substantially all collateral (if any) securing any of the Obligations. Subject to paragraph (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.19, 2.20, 2.21 and 10.3 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.7 as though it were a Lender, provided such Participant agrees to be subject to Section 10.7 as though it were a Lender.

(e)  A Participant shall not be entitled to receive any greater payment under Section 2.19 and Section 2.21 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.21 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.21(e) as though it were a Lender.

(f)  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 10.5.    Governing Law; Jurisdiction; Consent to Service of Process.

(a)  This Agreement and the other Loan Documents shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of Georgia.

(b)  The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the United States District Court of the

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Northern District of Georgia, and of any state court of the State of Georgia located in Fulton County and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Georgia state court or, to the extent permitted by applicable law, such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.

(c)  The Borrower irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph (b) of this Section and brought in any court referred to in paragraph (b) of this Section. Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)  Each party to this Agreement irrevocably consents to the service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement or in any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by law.

SECTION 10.6.    WAIVER OF JURY TRIAL.    EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 10.7.    Right of Setoff.    In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and the Issuing Bank shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of the Borrower at any time held or other obligations at any time owing by such Lender and the Issuing

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Bank to or for the credit or the account of the Borrower against any and all Obligations held by such Lender or the Issuing Bank, as the case may be, irrespective of whether such Lender or the Issuing Bank shall have made demand hereunder and although such Obligations may be unmatured. Each Lender and the Issuing Bank agree promptly to notify the Administrative Agent and the Borrower after any such set-off and any application made by such Lender and the Issuing Bank, as the case may be; provided, that the failure to give such notice shall not affect the validity of such set-off and application.

SECTION 10.8.    Counterparts; Integration.    This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Administrative Agent constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters.

SECTION 10.9.    Survival.    All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.20, 2.21, 2.22, and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. All representations and warranties made herein, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and the making of the Loans and the issuance of the Letters of Credit.

SECTION 10.10.    Severability.    Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 10.11.    Confidentiality.    Each of the Administrative Agent, the Issuing Bank and each Lender agrees to take normal and reasonable precautions to maintain the confidentiality of any information designated in writing as confidential and provided to it by the Borrower or any Subsidiary, except that such information may be disclosed (i) to any Related

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Party of the Administrative Agent, the Issuing Bank or any such Lender, including without limitation accountants, legal counsel and other advisors, (ii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iii) to the extent requested by any regulatory agency or authority, (iv) to the extent that such information becomes publicly available other than as a result of a breach of this Section, or which becomes available to the Administrative Agent, the Issuing Bank, any Lender or any Related Party of any of the foregoing on a nonconfidential basis from a source other than the Borrower, (v) in connection with the exercise of any remedy hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, and (ix) subject to provisions substantially similar to this Section 10.11, to any actual or prospective assignee or Participant, or (vi) with the consent of the Borrower. Any Person required to maintain the confidentiality of any information as provided for in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord its own confidential information.

SECTION 10.12.    Interest Rate Limitation.    Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which may be treated as interest on such Loan under applicable law (collectively, the “Charges”), shall exceed the maximum lawful rate of interest (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by a Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender.

SECTION 10.13.    Waiver of Effect of Corporate Seal.    The Borrower represents and warrants that neither it nor any other Loan Party is required to affix its corporate seal to this Agreement or any other Loan Document pursuant to any requirement of law or regulation, and waives any shortening of the statute of limitations that may result from not affixing the corporate seal to this Agreement or such other Loan Documents.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal by their respective authorized officers as of the day and year first above written.

NDCHEALTH CORPORATION

as Borrower

By:                                                  

    Name:

    Title:

[SEAL]

SUNTRUST BANK

as Administrative Agent, as Issuing Bank, as Swingline Lender and as a Lender

By                                                  

    Name:

    Title:

Revolving Commitment:

$23,000,000

BANK OF AMERICA, N.A., as Syndication Agent

By                                                  

    Name:

    Title:

Revolving Commitment:

$22,000,000

WACHOVIA BANK, NATIONAL ASSOCIATION, as

    Co-Documentation Agent

By                                                  

    Name:

    Title:

Revolving Commitment:

$22,000,000

U.S. BANK, NATIONAL ASSOCIATION, as

    Co-Documentation Agent

By                                                  

    Name:

    Title:

Revolving Commitment:

$22,000,000

LASALLE BANK, N.A., as a Lender

By                                                  

    Name:

    Title:

Revolving Commitment:

$18,000,000

KEY CORPORATE CAPITAL, INC., as a Lender

By                                                  

    Name:

    Title:

Revolving Commitment:

$18,000,000

REGIONS BANK, as a Lender

By                                                  

    Name:

    Title:

Revolving Commitment:

$15,000,000

COMERICA BANK, as a Lender

By                                                  

    Name:

    Title:

Revolving Commitment:

$10,000,000

Schedule I

APPLICABLE MARGIN AND APPLICABLE PERCENTAGE

Pricing Level	Leverage Ratio	Applicable Margin for Eurodollar Loans	Applicable Margin for Base Rate Loans	Applicable Percentage for Commitment Fee	Applicable Percentage for Letter of Credit Fees
I	Less than 1.00:1.00	1.375% p.a.	0.375% p.a.	0.25% p.a.	1.375% p.a.
II	Less than 1.50:1.00 but greater than or equal to 1.00:1.00	1.625% p.a.	0.625% p.a.	0.375% p.a.	1.625% p.a.
III	Less than 2.00:1.00 but greater than or equal to 1.50:1.00	1.75% p.a.	0.75% p.a.	0.375% p.a.	1.75% p.a.
IV	Greater than or equal to 2.0:1.0	2.00% p.a.	1.00% p.a.	0.50% p.a.	2.00% p.a.

Schedule I-2

SCHEDULE 4.14

SUBSIDIARIES

SCHEDULE 7.1

EXISTING INDEBTEDNESS

SCHEDULE 7.2

EXISTING LIENS

SCHEDULE 7.4

EXISTING INVESTMENTS

Exhibit 3.1(b)(vii)

EX-10.XIII

Exhibit 10 (xiii)

Confidential treatment requested. Confidential portions of this document have been redacted and are
subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934 and have been filed separately with the Securities and Exchange Commission.

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

TECHRX INCORPORATED

NDCHEALTH CORPORATION

AND

NDC ACQUISITION CORP.

Dated as of May 28, 2002

TABLE OF CONTENTS

		Page
ARTICLE 1	THE MERGER	2
1.1	The Merger	2
1.2	Effective Time	2
1.3	Effect of the Merger on Constituent Corporations	3
1.4	Certificate of Incorporation and Bylaws of Surviving Corporation	3
1.5	Directors and Officers of Surviving Corporation	3
1.6	Effect on Capital Stock	3
1.7	Anti-Dilution Provisions	7
1.8	Fractional Shares	7
1.9	Dissenting Shares	7
1.10	Exchange Procedures	7
1.11	No Further Ownership Rights in Company Capital Stock; Withholding Rights	9
1.12	Lost, Stolen or Destroyed Certificates	9
1.13	Tax Consequences	9
1.14	Purchases Prior to Closing	9
1.15	Taking of Necessary Action; Further Action	10
ARTICLE 2	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	10
2.1	Organization and Qualification	10
2.2	Authority Relative to this Agreement	11
2.3	Capital Stock	11
2.4	No Conflicts	13
2.5	Books and Records; Organizational Documents	14
2.6	Company Financial Statements	14
2.7	Absence of Changes	14
2.8	No Undisclosed Liabilities	16
2.9	Taxes	16
2.10	Legal Proceedings	18
2.11	Compliance with Laws and Orders; Permits	18
2.12	Employee Benefit Plans and Employee Matters	19
2.13	Real Property	22
2.14	Tangible Personal Property	22
2.15	Intellectual Property	22
2.16	Contracts	25
2.17	Insurance	26
2.18	Affiliate Transactions	27
2.19	Employees; Labor Relations	27
2.20	Environmental Matters.	28
2.21	Accounts Receivable	29
2.22	Other Negotiations; Brokers	29
2.23	Banks and Brokerage Accounts	29

i

		Page
2.24	Foreign Corrupt Practices Act	30
2.25	Disclosure	30
ARTICLE 3	REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB	30
3.1	Organization and Qualification	30
3.2	Valid Issuance	30
3.3	Authority Relative to this Agreement	31
3.4	SEC Filings	31
3.5	No Conflicts	32
3.6	Finders’ and Advisors’ Fees	32
3.7	Governmental Authorization	32
3.8	Disclosure	33
ARTICLE 4	CONDUCT PRIOR TO THE EFFECTIVE TIME	33
4.1	Conduct of Business of the Company	33
4.2	No Solicitation	35
ARTICLE 5	ADDITIONAL AGREEMENTS	36
5.1	Registration Statement	36
5.2	Meeting of Company Stockholders	37
5.3	Access to Information	38
5.4	Confidentiality	38
5.5	Expenses	38
5.6	Public Disclosure	39
5.7	Regulatory Applications	39
5.8	FIRPTA Compliance	39
5.9	Notification of Certain Matters	39
5.10	Additional Documents and Further Assurances; Cooperation	40
5.11	Indemnification	40
5.12	Company’s Financial Statements	41
5.13	Company Affiliate Agreements	41
5.14	Takeover Statutes	42
5.15	[INTENTIONALLY OMITTED]	42
5.16	NYSE Listing Application	42
5.17	Certain Tax Matters	42
5.18	Operating Plan	42
5.19	Board of Directors of Company	43
5.20	Benefit Arrangements	43
5.21	Fiscal Year	43
5.22	Parent Acquisition Proposal	43
ARTICLE 6	CONDITIONS TO THE MERGER	43
6.1	Conditions to Obligations of Each Party to Effect the Merger	43
6.2	Additional Conditions to Obligations of the Company	44
6.3	Additional Conditions to the Obligations of Parent and Merger Sub	44

ii

		Page
ARTICLE 7	TERMINATION, BREACHES AND AMENDMENT	45
7.1	Termination	45
7.2	Effect of Termination	46
7.3	Amendment	47
7.4	Extension; Waiver	47
ARTICLE 8	MISCELLANEOUS PROVISIONS	47
8.1	Nonsurvival of Representations, Warranties and Covenants	47
8.2	Notices	47
8.3	Entire Agreement	48
8.4	Further Assurances; Post-Closing Cooperation	48
8.5	Waiver	49
8.6	Remedies	49
8.7	Third Party Beneficiaries	49
8.8	No Assignment; Binding Effect	49
8.9	Invalid Provisions	49
8.10	Governing Law	49
8.11	Arbitration	49
8.12	Construction	50
8.13	Counterparts	51
ARTICLE 9	DEFINITIONS	51
9.1	Definitions	51

iii

Exhibits

Exhibit A	Key Employees
Exhibit B	Form of Voting and Lock-Up Agreement
Exhibit C	Form of Restrictive Covenant Agreement
Exhibit D	Form of Company Affiliate Agreement
Exhibit E	Human Resources Agreement
Exhibit F	Legal Opinion of Counsel to Parent and Merger Sub
Exhibit G	Legal Opinion of Counsel to the Company

iv

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of May 28, 2002, by and among NDCHEALTH CORPORATION, a Delaware corporation (“Parent”), NDC ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and TECHRX INCORPORATED, a Pennsylvania corporation (the “Company”). Capitalized terms used and not otherwise defined herein have the meanings set forth in Article 9.

RECITALS:

A.    The respective Boards of Directors of each of Parent, Merger Sub and the Company have approved this Agreement, and deem it advisable and in the best interests of each corporation and its respective stockholders to consummate the merger of the Company with Merger Sub (the “Merger”) and, in furtherance thereof, have approved the Merger, this Agreement and the transactions contemplated hereby.

B.    As a condition and an inducement to the willingness of Parent and Merger Sub to enter into this Agreement, certain stockholders of the Company executed an Option Agreement with Parent, pursuant to which Parent is exercising contemporaneously with the execution of this Agreement its option to purchase the shares of Company Common Stock owned by such stockholders.

C.    As a condition and a further inducement to the willingness of Parent and Merger Sub to enter into this Agreement, the Company is amending its Articles of Incorporation to modify certain conversion restrictions on the Company Series C Preferred Stock.

D.    As a condition and a further inducement to the willingness of Parent and Merger Sub to enter into this Agreement, certain employees of the Company have entered into employment agreements with the Company.

E.    As a condition and a further inducement to the willingness of Parent and Merger Sub to enter into this Agreement, the employees of the Company set forth on Exhibit A (the “Key Employees”) are concurrently herewith executing Voting and Lock-Up Agreements with Parent and Merger Sub in substantially the form attached hereto as Exhibit B (“Voting and Lock-Up Agreements”), pursuant to which, among other things, such stockholders have agreed to vote the shares of Company Capital Stock owned by them in favor of the Merger and to not dispose of Company Capital Stock acquired through the exercise of Company Options for the time period specified therein.

F.    As a condition and a further inducement to the willingness of Parent and Merger Sub to enter into this Agreement, the Key Employees are concurrently herewith executing Restrictive Covenant Agreements in substantially the form attached hereto as Exhibit C (“Restrictive Covenant Agreements”).

G.    Between the date hereof and the Effective Time, Parent may (but is not required to) offer to purchase from any or all stockholders of the Company, and from holders of Company Warrants, shares of the Company Capital Stock and the Company Warrants on the terms set forth herein.

H.    Parent, Merger Sub and the Company intend that the Merger and the transactions contemplated hereby shall constitute a reorganization within the meaning of Section 368(a) of the Code, subject to certain exceptions and contingencies, and in furtherance thereof intend that this Agreement shall be a “plan of reorganization” within the meaning of Sections 354(a) and 361(a) of the Code.

NOW, THEREFORE, in consideration of the covenants, promises, representations and warranties set forth herein, and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by the parties), intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1

THE MERGER

1.1    The Merger.

(a)    Subject to the terms and conditions of this Agreement and Section 1.1(b) below, at the Effective Time, the Company shall be merged with and into Merger Sub in accordance with the relevant provisions of Delaware Law and Pennsylvania Law. The separate corporate existence of the Company shall cease, and Merger Sub shall continue as the surviving corporation governed by the Laws of the State of Delaware and a wholly owned subsidiary of Parent.

(b)    In the event Parent is unable to obtain the opinion described in Article 5.17 herein or for any other reason whatsoever, if Parent so elects (in its sole and absolute discretion for any or no reason), at the Effective Time (and in lieu of Section 1.1(a) above), Merger Sub shall be merged with and into the Company in accordance with the relevant provisions of Delaware Law and Pennsylvania Law. The separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation governed by the Laws of the Commonwealth of Pennsylvania and as a wholly owned subsidiary of Parent.

1.2    Effective Time.  Subject to the last sentence of Section 5.17, and unless this Agreement is earlier terminated pursuant to Section 7.1 hereof, the closing of the Merger (the “Closing”) is expected to take place on or about May 31, 2003, and will take place following satisfaction or waiver of the conditions set forth in Article 6 in Coraopolis, Pennsylvania, at the principal offices of the Company, unless another place or time is agreed to by Parent and the Company. The date upon which the Closing actually occurs is herein referred to as the “Closing Date.” On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the relevant provisions of Delaware Law, and the Articles of Merger with the Secretary of State of the Commonwealth of Pennsylvania in accordance with the relevant provisions of Pennsylvania Law. The Merger and the other transactions contemplated by this Agreement will

2

become effective on the later to occur (the “Effective Time”) of the date and at the time (a) the Certificate of Merger is accepted by the Secretary of State of the State of Delaware, and (b) the Articles of Merger are accepted by the Secretary of State of the Commonwealth of Pennsylvania.

1.3    Effect of the Merger on Constituent Corporations.  At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware Law and Pennsylvania Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Merger Sub and the Company shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of Merger Sub and the Company shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

1.4    Certificate of Incorporation and Bylaws of Surviving Corporation.  The certificate of incorporation and bylaws, as in effect immediately prior to the Effective Time, of the corporation that continues in existence pursuant to Section 1.1 shall be those of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

1.5    Directors and Officers of Surviving Corporation.  The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation. The officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the bylaws of the Surviving Corporation.

1.6    Effect on Capital Stock.  On the terms and subject to the conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company, or the holders of any of the capital stock of the Company, the following shall occur:

(a)    Conversion of Company Common Stock. Subject to Section 1.8, each share of Common Stock, $0.001 par value per share of the Company (the “Company Common Stock”), issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares as provided in Section 1.9 or any shares held by the Company as treasury stock) will be cancelled, extinguished and converted automatically into the right to receive, upon surrender of the certificate formerly representing such shares of Company Common Stock (or compliance with Section 1.12 regarding lost certificates), one of the following amounts per share of Company Common Stock as determined in Parent’s absolute and sole discretion at or prior to Closing:

(i)      a cash payment equal to the Company Closing Price; or

(ii)     a number of shares of Parent Common Stock equal to the quotient obtained by dividing (A) the Company Closing Price, by (B) the Parent Closing Price (the “Exchange Ratio”); or

(iii)    a combination of (A) a cash payment, as determined by Parent in its sole and absolute discretion, in an amount less than the Company Closing Price and (B) a number of shares of Parent Common Stock equal to the quotient obtained by dividing (1)

3

the difference of the Company Closing Price minus the cash payment determined by Parent pursuant to this Section 1.6(a)(iii), by (2) the Parent Closing Price; provided, that, Troutman Sanders LLP delivers the legal opinion contemplated by Section 5.17 to the extent the Merger Consideration is calculated pursuant to this Section 1.6(a)(iii). For purposes of example only, if the Company Closing Price is equal to $6.00, the Parent Closing Price is equal to $32.00, and Parent determines to pay $2.00 in cash, then the Merger Consideration to be received for one share of Company Common Stock shall equal $2.00 in cash and 0.125 shares of Parent Common Stock.

(b)    Conversion of Company Preferred Stock.  Subject to Section 1.8, each share of Company Preferred Stock issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares as provided in Section 1.9) will be cancelled, extinguished and converted automatically into the right to receive, upon surrender of the certificate formerly representing such shares of Company Preferred Stock (or compliance with Section 1.12 regarding lost certificates), one of the following amounts per share of Company Preferred Stock as determined in Parent’s absolute and sole discretion at or prior to Closing:

(i)      a cash payment equal to (A) the Company Closing Price multiplied by (B) the number of shares of Company Common Stock that such share of Company Preferred Stock is convertible into immediately prior to the Effective Time (calculated pursuant to the optional conversion provisions contained in the Articles of Incorporation); or

(ii)     a number of shares of Parent Common Stock equal to the product of (A) the Exchange Ratio, multiplied by (B) the number of shares of Company Common Stock that such shares of Company Preferred Stock is convertible into immediately prior to the Effective Time (calculated pursuant to the optional conversion provisions contained in the Articles of Incorporation); or

(iii)    a combination of (A) a cash payment, as determined by Parent in its sole and absolute discretion, in an amount less than (1) the Company Closing Price, multiplied by (2) the number of shares of Company Common Stock that such share of Company Preferred Stock is convertible into immediately prior to the Effective Time (calculated pursuant to the optional conversion provisions contained in the Articles of Incorporation), and (B) a number of shares of Parent Common Stock equal to the product of (1) the quotient obtained by dividing (a) the difference of the Company Closing Price minus the cash payment determined by Parent pursuant to this Section 1.6(b)(iii), by (b) the Parent Closing Price, multiplied by (2) the number of shares of Company Common Stock that such share of Company Preferred Stock is convertible into immediately prior to the Effective Time (calculated pursuant to the optional conversion provisions contained in the Articles of Incorporation); provided, that, Troutman Sanders LLP delivers the legal opinion contemplated by Section 5.17 to the extent the Merger Consideration is calculated pursuant to this Section 1.6(b)(iii). For purposes of example only, if the Company Closing Price is equal to $6.00, the Parent Closing Price is equal to $32.00, Parent determines to pay $2.00 in cash, and the applicable conversion ratio of such share of Company Preferred Stock is 1.1:1, then the Merger Consideration to be received for one share of such Company Capital Stock shall equal $2.00 in cash and 0.1375 shares of Parent Common Stock.

4

(c)    Cancellation of Parent-Owned and Company-Owned Stock.  In the event the Merger occurs pursuant to Section 1.1(a), each share of Company Capital Stock owned by Parent or the Company or any Subsidiary of Parent or the Company immediately prior to the Effective Time shall be automatically canceled and extinguished without any conversion thereof and without any further action on the part of Parent, Merger Sub or the Company. In the event the Merger occurs pursuant to Section 1.1(b), each share of Company Capital Stock owned by Parent or the Company or any Subsidiary of Parent or the Company immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time.

(d)    Company Options and Company Stock Plan.

(i)        All unexpired and unexercised Company Options then outstanding, whether vested or unvested, shall be treated in accordance with the Human Resources Agreement.

(ii)       Company employees shall be permitted at Closing (but not prior thereto) to exercise all vested Company Options on a cashless basis; provided, however, that any Key Employees that exercise Company Options pursuant to this Section 1.6(d) shall have entered into a Voting and Lock-Up Agreement in substantially the form attached hereto as Exhibit B.

(e)    Company Warrants.  Any Company Warrants not exercised at the Closing shall be converted automatically into Parent Warrants upon substantially the same terms and conditions as are set forth in the applicable Company Warrant, unless the terms of such Company Warrant require or permit the Company, at its option, to cash-out the Company Warrant (whether in a cashless transaction or otherwise), in which case the Merger Consideration (net of the exercise price) shall be paid to the holder of the Company Warrant in accordance with the terms hereof.

(f)    Capital Stock of Merger Sub.  In the event the Merger occurs pursuant to Section 1.1(a), each share of Common Stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time. Each stock certificate of Merger Sub evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Corporation.

(g)    Reduction to Company Closing Price.

(i)        If the Company (or any of its Subsidiaries) breaches any of its representations or warranties as of the date of this Agreement, the Company Closing Price shall be reduced by an amount equal to the quotient obtained by dividing (X) the Damages arising in connection with any breach of a representation or warranty, by (Y) the total number of outstanding shares of Company Stock Equivalents on a fully diluted and on an “as if converted to Company Common Stock basis”; provided, however, that the Company Closing Price shall not be reduced pursuant to Section 1.6(g)(i) until the total amount of all Damages (including the Damages arising from any other breaches of any representations or warranties) exceeds $3,000,000 (after which point the total amount of all Damages shall be used to calculate the Company Closing Price pursuant to this

5

Section 1.6(g)(i)); provided, further, that Damages shall not exceed the lesser of $26,500,000 and the Offset Amount.

(ii)       Notwithstanding anything herein to the contrary, none of the limitations on the reduction of the Company Closing Price set forth in Section 1.6(g)(i) shall apply to any breach by the Company of its representations and warranties as of the date of this Agreement that is the result of fraud or intentional misrepresentation by the Company.

(iii)      If (1) the Company (or any of its Subsidiaries) violates Section 4.1(i), or (2) unless otherwise agreed to by Parent and Company, Parent shall have contributed working capital (which shall specifically include payments to (i) Parent under the Services Agreement between Parent and Company dated July 1, 2000, and (ii) Cardinal Healthcare to satisfy the indebtedness to Cardinal Healthcare pursuant to the Promissory Note dated April 2, 2001, and shall specifically exclude (i) capital expenditures to the ASP hosted by Parent, (ii) restructuring costs associated with this transaction, and (iii) costs and expenses of the Company in connection with this transaction as specified in Section 5.5 hereof, and assumes a payment of $11,375,000 by [****] pursuant to the Term Sheet and Loan Agreement between Company and [****] to the Company after the date hereof and prior to the Effective Time in an amount exceeding $13,900,000, the Company Closing Price shall be reduced (after any reduction pursuant to Section 1.6(g)(i) above) by an amount equal to the quotient obtained by dividing (X) the sum of the indebtedness incurred by the Company in violation of Section 4.1(i) (on a dollar-for-dollar basis), and the excess amount of working capital contributed to the Company by Parent, by (Y) the total number of outstanding shares of Company Stock Equivalents on a fully diluted and on an “as if converted to Company Common Stock basis.”

(h)    Additional Issuances of Securities.  Notwithstanding anything herein to the contrary, to the extent that the Company (or any of its Subsidiaries) violates Section 4.1(e) hereof (other than for any violation of Section 3 of the Letter Agreement), the Company Closing Price shall equal (after any adjustment pursuant to Section 1.6(g) above) the product of:

(X)    the Company Closing Price, multiplied by

(Y)    the quotient obtained by dividing (1) the difference of (a) the total number of outstanding shares of Company Stock Equivalents on a fully diluted and on an “as if converted to Company Common Stock basis” on the date hereof, minus (b) the total number of outstanding shares of Company Stock Equivalents on a fully diluted and on an “as if converted to Company Common Stock basis” purchased by Parent pursuant to Section 1.14 hereof, minus (c) the total number of shares of Company Stock Equivalents on a fully diluted and on an “as if converted to Company Common Stock basis” purchased by the Company after the date hereof and prior to Closing with the prior consent of Parent, by (2) the total number of outstanding shares of Company Stock Equivalents on a fully diluted and on an “as if converted to Company Common Stock basis” at the Effective Time.

[****] Confidential treatment requested. Confidential portions of this page have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

6

1.7    Anti-Dilution Provisions.  The Merger Consideration shall be equitably adjusted to reflect fully the effect of any stock split, reverse split, stock combination, stock dividend (including any dividend or distribution of securities convertible into Parent Common Stock or Company Common Stock, but excluding any stock dividend required on the date hereof with respect to the Company Series B Preferred Stock and the Company Series C Preferred Stock), reorganization, reclassification, recapitalization or other like change with respect to Parent Common Stock or Company Common Stock the effective date of which occurs after the date hereof and prior to the Effective Time.

1.8    Fractional Shares.  No fraction of a share of Parent Common Stock will be issued by virtue of the Merger. Each holder of shares of Company Capital Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock to be received by such holder) shall be entitled to receive from Parent, in lieu thereof, an amount of cash (rounded to the nearest whole cent) equal to the product of (a) such fraction, multiplied by (b) the Parent Closing Price.

1.9    Dissenting Shares.

(a)    Generally.  Notwithstanding any provision of this Agreement to the contrary, any shares of Company Capital Stock held by a holder who has demanded and perfected appraisal rights for such shares in accordance with Pennsylvania Law, and who, as of the Effective Time, has not effectively withdrawn or lost such appraisal or dissenters’ rights (“Dissenting Shares”) shall not be converted into or represent a right to receive the Merger Consideration pursuant to Section 1.6, if applicable, but the holder thereof shall only be entitled to such rights as are granted by Pennsylvania Law.

(b)    Withdrawal or Loss of Right.  Notwithstanding the provisions of Section 1.9(a) above, if any holder of shares of Company Capital Stock who demands appraisal of such shares under Pennsylvania Law shall effectively withdraw or lose (through failure to perfect or otherwise) the right to appraisal, then, as of the later of (i) the Effective Time or (ii) the occurrence of such event, such holder’s shares shall automatically be converted into and represent only the right to receive the Merger Consideration as provided in Section 1.6, without interest thereon, upon surrender to the Company of the certificate representing such shares in accordance with Section 1.10.

(c)    Notice.  The Company shall give Parent (i) prompt notice of its receipt of any written demands for appraisal of any shares of Company Capital Stock and withdrawals of such demands, and (ii) the opportunity to participate in all negotiations and proceedings with respect to each such demand. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal of Company Capital Stock or offer to settle or settle any such demands.

1.10    Exchange Procedures.

(a)    Parent Common Stock.  On the Closing Date, Parent shall deposit with the Exchange Agent for exchange in accordance with Section 1.6, the Merger Consideration (including a sufficient number of shares of Parent Common Stock and cash) and a sufficient

7

amount of cash to permit the payment of cash in lieu of fractional shares of Parent Common Stock pursuant to Section 1.8, to be paid in exchange for outstanding shares of Company Capital Stock as of the Effective Time.

(b)    Exchange Procedures.  As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall cause to be mailed to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Capital Stock (the “Certificates”) and which shares were converted into the right to receive the Merger Consideration pursuant to Section 1.6, (i) a letter of transmittal in customary form (which letter of transmittal 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 such 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 and cash in lieu of fractional shares of Parent Common Stock. 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 completed and validly executed in accordance with the instructions contained therein, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration and cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 1.8, and the Certificate so surrendered shall be canceled. Until surrendered, each outstanding Certificate that, prior to the Effective Time, represented shares of Company Capital Stock will be deemed from and after the Effective Time, for all purposes, to evidence the right to receive the Merger Consideration and cash in lieu of fractional shares of Parent Common Stock. No interest will be paid or accrued on the Cash Payment or on any cash to be paid in lieu of fractional shares of Parent Common Stock. Notwithstanding anything to the contrary contained herein, Certificates surrendered for exchange by any Person constituting a Company Affiliate for purposes of Section 5.13 shall not be exchanged until Parent has received from such Person a Company Affiliate Agreement substantially in the form attached hereto as Exhibit D.

(c)    Transfers of Ownership.  If the Merger Consideration is to be issued pursuant to the Merger in a name other than that in which the Certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that (i) the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange will have paid to Parent or any agent designated by it any transfer or other Taxes required by reason of the issuance of the Merger Consideration in any name other than that of the registered holder of the Certificate surrendered, or established to the satisfaction of Parent or any agent designated by it that such tax has been paid or is not payable and (ii) if requested by Parent, the Person surrendering such Certificate shall provide Parent with an opinion of counsel, acceptable to Parent, that such transfer does not violate state or federal securities Laws.

(d)    No Liability.  Notwithstanding anything to the contrary in this Section 1.10, neither the Exchange Agent, the Surviving Corporation, Parent, nor any party hereto shall be liable to a holder of shares of Company Capital Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Law.

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1.11    No Further Ownership Rights in Company Capital Stock; Withholding Rights.

(a)    The Merger Consideration issued upon the surrender for exchange of shares of Company Capital Stock in accordance with the terms hereof (including any cash in lieu of fractional shares) shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Capital Stock, and there shall be no further registration of transfers on the records of the Company of shares of Company Capital 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 1.

(b)    Each of Parent and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article 1 such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign Tax Law. To the extent that amounts are so withheld by Parent or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Capital Stock in respect of which such deduction and withholding was made by Parent or the Exchange Agent, as the case may be.

1.12    Lost, Stolen or Destroyed Certificates.  In the event any certificates evidencing shares of Company Capital Stock shall have been lost, stolen or destroyed, the Exchange Agent shall issue the Merger Consideration and cash in lieu of fractional shares of Parent Common Stock in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof; provided, however, that Parent or the Exchange Agent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to provide an indemnity or deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent or the Exchange Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

1.13    Tax Consequences.  It is intended by the parties that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, subject to certain exceptions and contingencies. The parties hereto hereby adopt this Agreement as the “plan of reorganization” within the meaning of Sections 354(a) and 361(a) of the Code and as described in Sections 1.368-2(a) and 1.368-3(a) of the Income Tax Regulations.

1.14    Purchases Prior to Closing.  At any time after the date of this Agreement and ending six (6) months prior to the Closing Date, Parent may, at its option and with sole responsibility therefor, offer to acquire shares of the Company Capital Stock owned by certain stockholders of the Company and to acquire Company Warrants in one or more private placement transactions in exchange for either cash, shares of Parent Common Stock (which shall be registered for resale in accordance with Section 5.1 if Parent purchases at least 2,500,000 shares of Company Capital Stock and Company Warrants (on an “as-if-converted” basis) pursuant to this Section 1.14) or a combination thereof; provided, however, that to the extent Parent purchases in excess of 250,000 shares of Company Capital Stock (on an “as-if-converted” basis), pursuant to this Section 1.14 from holders of Company Series A Preferred Stock, Parent shall be required to make an offer to purchase all shares of Company Capital Stock held by the

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holders of Company Series A Preferred Stock as of the date hereof (regardless of whether such shares of Company Series A Preferred Stock have been converted to Company Common Stock after the date hereof). To the extent applicable, Parent acknowledges the existence of that certain Amended and Restated Stockholders Agreement, dated September 29, 1999, as amended. Notwithstanding anything herein to the contrary, Parent shall have no obligation to effect any transaction pursuant to this Section 1.14. The Company shall make no recommendation for or against any such offer and all disclosure responsibilities with respect to the offer shall be with Parent.

1.15    Taking of Necessary Action; Further Action.  If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company, or to effect the assignment to the Surviving Corporation of any and all Company Intellectual Property created by a founder, employee or consultant of the Company, the officers and directors of the Surviving Corporation are fully authorized to take, and will take, all such lawful and necessary action.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to each of Parent and Merger Sub, subject to such exceptions as are specifically disclosed with respect to specific numbered and lettered sections and subsections of this Article 2 in the disclosure schedule and schedule of exceptions (the “Company Disclosure Schedule”) delivered herewith and dated as of the date hereof, and numbered with corresponding numbered and lettered sections and subsections, as of date of this Agreement as follows:

2.1    Organization and Qualification.

(a)    The Company is a corporation duly organized, validly existing and in good standing under the Laws of the Commonwealth of Pennsylvania, and has full corporate power and authority to conduct its business as now conducted and as currently proposed to be conducted and to own, use, license and lease its Assets and Properties. The Company is duly qualified, licensed or admitted to transact business and is in good standing as a foreign corporation in each jurisdiction in which the ownership, use, licensing or leasing of its Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so duly qualified, licensed or admitted and in good standing that could not reasonably be expected to have a Material Adverse Effect on the Business or Condition of the Company. Section 2.1(a) of the Company Disclosure Schedule sets forth each jurisdiction where the Company is so qualified, licensed or admitted to transact business.

(b)    Section 2.1(b) of the Company Disclosure Schedule sets forth a list as of the date hereof of all of the Company’s Subsidiaries, together with their jurisdiction of organization or incorporation. Each Subsidiary is duly qualified, licensed or admitted to transact business and is in good standing as a foreign corporation in each jurisdiction in which the ownership, use,

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licensing or leasing of its Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so duly qualified, licensed or admitted and in good standing that could not reasonably be expected to have a Material Adverse Effect on the Business or Condition of the Company. The Company has provided to Parent complete and correct copies of the articles of incorporation, bylaws or other governing or organizational documents of each of its Subsidiaries, in each case as amended and in full force and effect as of the date of this Agreement, and neither the Company nor any such Subsidiary is in violation of any provision thereof. Except as set forth in Section 2.1(b) of the Company Disclosure Schedule, the Company does not hold any equity, membership, partnership, joint venture or other ownership in any Person.

(c)    The Company owns, directly or indirectly, beneficially and of record 100% of the issued and outstanding capital stock of each of the Company’s Subsidiaries. No equity securities of any Subsidiary of the Company are or may become required to be issued (other than to the Company) by reason of any rights, Contracts or arrangements, and there are no Contracts, commitments, understandings or arrangements by which any of such Subsidiaries is bound to sell or otherwise transfer any share of capital stock of any such Subsidiary (other than to the Company). All of the issued and outstanding shares of capital stock of each of the Subsidiaries of the Company are fully paid and nonassessable and are owned by the Company free and clear of any Liens and are not subject to, and were not issued in violation of, any preemptive rights. There are no outstanding contractual obligations of the Company or any of its Subsidiaries to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary.

2.2    Authority Relative to this Agreement.  The Company has full corporate power and authority to execute and deliver this Agreement and the other agreements contemplated hereby (the “Ancillary Agreements”) to which the Company is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The Company’s Board of Directors has approved this Agreement and declared its advisability. The execution and delivery by the Company of this Agreement and the Ancillary Agreements to which the Company is a party, and the performance by the Company of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary action by the Board of Directors of the Company, and, except for approval of this Agreement and the Merger by the stockholders of the Company, no other corporate action on the part of the Company is necessary. This Agreement and the Ancillary Agreements to which the Company is a party have been or will be, as applicable, duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof (and, in the case of the Ancillary Agreements to which Parent is a party, thereof) by Parent and/or the other parties thereto, each constitutes or will constitute, as applicable, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its respective terms.

2.3    Capital Stock.

(a)    The authorized capital stock of the Company consists of 90,000,000 shares of Company Common Stock, of which only 15,367,179 shares of Company Common Stock are issued and outstanding as of the date hereof, and 37,500,000 shares of Preferred Stock, $0.001 par value per share (the “Company Preferred Stock”). The designation and status of the

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Company Preferred Stock is as follows: (i) 7,033,500 shares are designated as Series A Preferred Stock (the “Company Series A Preferred Stock”), of which only 6,973,500 shares are issued and outstanding as of the date hereof, (ii) 3,000,000 shares are designated as Series B Preferred Stock (the “Company Series B Preferred Stock”), all of which are issued and outstanding as of the date hereof, and (iii) 19,669,500 shares are designated as Series C Preferred Stock (the “Company Series C Preferred Stock”), of which only 9,663,717 shares are issued and outstanding as of the date hereof. All of the issued and outstanding shares of Company Common Stock and Company Preferred Stock are validly issued, fully paid and nonassessable, and have been issued in compliance with all applicable federal and state securities Laws. Except as set forth in Section 2.3(a) of the Company Disclosure Schedule, no shares of Company Common Stock or Company Preferred Stock are held in treasury or are authorized or reserved for issuance.

(b)    Section 2.3(b) of the Company Disclosure Schedule lists the name, address and state of residence of each holder of Company Capital Stock (as provided by such holder to the Company), and the number of shares of Company Capital Stock held by such holder. There are no other shares of Company Capital Stock outstanding.

(c)    With respect to any Company Capital Stock that has been issued and is currently outstanding or any Equity Equivalents that are subject to a repurchase option on the part of the Company, Section 2.3(c) of the Company Disclosure Schedule sets forth the holder thereof, the number and type of securities covered thereby, and the vesting schedule thereof (including a specific description of the circumstances under which such vesting schedule for each such security can or will be accelerated).

(d)    With respect to each Company Option, Company Warrant, or agreements, arrangements or understandings (written or oral) to issue any Options or any other equity securities with respect to the Company or any of its Subsidiaries, Section 2.3(d) of the Company Disclosure Schedule sets forth the holder thereof and the number and type of securities issuable thereunder. Except as set forth in Section 2.3(d) of the Company Disclosure Schedule, there are no outstanding Company Options, Company Warrants, or agreements, arrangements or understandings (written or oral) to issue any Company Options or Company Warrants with respect to the Company or any of its Subsidiaries. All of the Company Options and Company Warrants were issued in compliance with all applicable federal and state securities Laws.

(e)    Except as set forth in Section 2.3(e) of the Company Disclosure Schedule, there are no preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of Company Capital Stock created by statute, the certificate of incorporation or bylaws of the Company, or any agreement or other arrangement (written or oral) or to which it is bound and there are no agreements, arrangements or understandings (written or oral) pursuant to which Liability may be satisfied by issuing Company Common Stock, the capital stock of any Subsidiary of the Company or Equity Equivalents.

(f)    True and complete copies of all agreements and instruments relating to or issued under the Company Stock Plan for Company Options outstanding have been provided to Parent and such agreements and instruments have not been amended, modified or supplemented, and

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there are no agreements to amend, modify or supplement such agreements or instruments in any case from the form provided to Parent, except as contemplated pursuant to this Agreement.

(g)    Except for the Voting and Lock-Up Agreements and as set forth in Section 2.3(g) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party or subject to any agreement or understanding, and, to the Company’s knowledge, there is no agreement, arrangement or understanding between or among any Persons which affects, restricts or relates to voting, giving of written consents, dividend rights or transferability of shares with respect to the Company Capital Stock or the capital stock of any Subsidiary of the Company, including any voting trust agreement or proxy.

(h)    Except as set forth in Section 2.3(h) of the Company Disclosure Schedule, the Company is not a party to any agreements or understandings (written or oral) requiring the Company to register any Company Capital Stock pursuant to the federal securities Laws.

(i)    No debt securities of the Company or its Subsidiaries are issued and outstanding except for (i) debt securities issued to Parent and (ii) those debt securities set forth in Section 2.3(i) of the Company Disclosure Schedule.

2.4    No Conflicts.  The execution and delivery by the Company of this Agreement and the Ancillary Agreements to which the Company is a party does not, and the performance by the Company of its obligations under this Agreement and the Ancillary Agreements to which the Company is a party and the consummation of the transactions contemplated hereby and thereby do not and will not:

(a)    conflict with or violate any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws of the Company or the organizational or governing documents of any of its Subsidiaries;

(b)    conflict with or violate any Law or Order applicable to the Company, its Subsidiaries or any of their Assets and Properties, except to the extent such conflict or violation would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company; or

(c)    (i) conflict with or result in a violation or breach of, (ii) constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, (iii) require the Company or any of its Subsidiaries to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of (except for (A) the filing of the Certificate of Merger and the Articles of Merger; (B) such consents approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state or federal securities Laws; and (C) such filings as may be required under the HSR Act, if any), (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any entitlement to increased, additional, accelerated or guaranteed payments or performance under, (vi) result in the creation or imposition of (or the obligation to create or impose) any Lien upon the Company, its Subsidiaries or any of their Assets and Properties under, or (vii) result in the loss of any benefit under any of the terms, conditions or provisions of any License or Contract to which the

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Company or any of its Subsidiaries is a party or by which any of the Assets and Properties of the Company or its Subsidiaries is bound, except, in the case of (i), (ii), (iii), (iv) and (viii) above, to the extent it would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company.

2.5    Books and Records; Organizational Documents.  The minute books and stock record books and other similar records of the Company and its Subsidiaries have been provided or made available to Parent or its counsel prior to the execution of this Agreement, are complete and correct in all material respects and have been maintained in accordance with sound business practices. Such minute books contain a true and complete record, in all material respects, of all actions taken at all meetings and by all written consents in lieu of meetings of the directors, stockholders and committees of the Board of Directors of the Company and its Subsidiaries through the date hereof. The Company is not in violation of any provisions of its Articles of Incorporation or Bylaws.

2.6    Company Financial Statements.

(a)    Section 2.6(a) of the Company Disclosure Schedule sets forth the Company Financials.  The Company Financials are correct and complete in all material respects and have been prepared in accordance with GAAP applied on a basis consistent throughout the periods indicated and consistent with each other (except in the case of any unaudited financial statements included in the Company Financial Statements, subject to normal year-end adjustments, and except as set forth in Section 2.6(a) of the Company Disclosure Schedule). The Company Financials present fairly and accurately the financial condition and operating results of the Company as of the dates and during the periods indicated therein, subject, in the case of the Interim Financial Statements, to normal year-end adjustments and the absence of footnotes.

(b)    Since June 30, 2001, and except as set forth in Section 2.6(a) of the Company Disclosure Schedule, there has been no change in any material accounting policies, principles, methods or practices, including any change with respect to reserves (whether for bad debts, contingent liabilities or otherwise) of the Company and its Subsidiaries.

2.7    Absence of Changes.  Since February 28, 2002, there has not been any Material Adverse Effect upon the Business or Condition of the Company or any occurrence or event which, individually or in the aggregate, could be reasonably expected to have any Material Adverse Effect upon the Business or Condition of the Company. Without limiting the generality of the foregoing, except as expressly contemplated or permitted by this Agreement and except as disclosed in Section 2.7 of the Company Disclosure Schedule:

(a)    Since February 28, 2002, neither the Company nor any of its Subsidiaries has entered into any Contract, commitment or transaction or incurred any Liabilities outside of the ordinary course of business consistent with past practice;

(b)    Since February 28, 2002, neither the Company nor any of its Subsidiaries has entered into any strategic alliance, joint development or joint marketing Contract outside the ordinary course of Company’s business and consistent with past practice;

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(c)    Since February 28, 2002, there has not been any material amendment or other material modification (or agreement to do so) or violation of the terms of, any of the Material Contracts outside the ordinary course of Company’s business and consistent with past practice;

(d)    Since June 30, 2001, neither the Company nor any of its Subsidiaries has declared or set aside or paid any dividends on or made any other distributions (whether in cash, stock or property) in respect of its capital stock or Equity Equivalents (except as specifically required by the Articles of Incorporation), or effected or approved any split, combination or reclassification of its capital stock or Equity Equivalents or issued or authorized the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or Equity Equivalents, or repurchased, redeemed or otherwise acquired, directly or indirectly, any shares of its capital stock or Equity Equivalents;

(e)    Since June 30, 2001, except for (i) the issuance of shares of Company Capital Stock upon exercise or conversion of then-outstanding Company Options, Company Warrants or Company Preferred Stock listed in Section 2.3(b) of the Company Disclosure Schedule, or (ii) the issuance of options available for grant under the Company’s existing Company Stock Plan in the ordinary course of business to employees hired after June 30, 2001 on terms and in amounts consistent with past practice, neither the Company nor any of its Subsidiaries has issued, granted, delivered, sold or authorized or proposed to issue, grant, deliver or sell, or purchased or proposed to purchase, any shares of its capital stock;

(f)    Since February 28, 2002, there has not been any transfer by the Company (by way of a License or otherwise) to any Person of rights to any Company Intellectual Property other than in the ordinary course of business consistent with past practice;

(g)    Since February 28, 2002, the Company (including its Subsidiaries) has not made or agreed to make any capital expenditures or commitments for additions to property, plant or equipment constituting capital assets individually in an amount exceeding $25,000 or in the aggregate in an amount exceeding $300,000;

(h)    Except as set forth in Section 2.7(h) of the Company Disclosure Schedule, since June 30, 2001, neither the Company nor any of its Subsidiaries has made or agreed to make any write-off or write-down any determination to write-off or write-down, or revalue, any of the Assets and Properties of the Company or its Subsidiaries (other than accounts receivables written-down in the ordinary course of business consistent with past practice), or has changed any reserves or liabilities associated therewith except in the ordinary course of business consistent with past practice, in each case, individually or in the aggregate in an amount exceeding $100,000 (and except for reserves for assets impaired or liabilities incurred that are set forth in the Company Financials at or prior to June 30, 2001, and taken in subsequent periods);

(i)    Except as set forth in Section 2.7(i) of the Company Disclosure Schedule, since February 28, 2002, neither the Company nor any of its Subsidiaries has failed to pay or otherwise satisfy any Liabilities presently due and payable by it, except such Liabilities that are due and payable to Parent or which are being contested in good faith by appropriate means or procedures and which, individually or in the aggregate, are immaterial in amount;

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(j)    Except as set forth in Section 2.7(j) of the Company Disclosure Schedule, since November 30, 2001, neither the Company nor any of its Subsidiaries has granted any severance or termination pay to any director, officer, employee or consultant, has modified any compensation arrangements or granted or approved any increase in salary, rate of commissions, rate of consulting fees or any other compensation of any current or former officer, director, stockholder, employee or independent contractor of, or advisor or consultant to, the Company or its Subsidiaries, other than in the ordinary course of business and consistent with past practices, or has paid or agreed or made any commitment to pay any discretionary or stay bonus;

(k)    Except as set forth in Section 2.7(k) of the Company Disclosure Schedule, since June 30, 2001, neither the Company nor any of its Subsidiaries has made or changed any election in respect of Taxes, adopted or changed any accounting method in respect of Taxes, entered into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or closing agreement, settlement or compromise of any claim or assessment in respect of Taxes, or consented to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes with any Taxing Authority or otherwise;

(l)    Since February 28, 2002, there has been no physical damage, destruction or other casualty loss (whether or not covered by insurance) affecting any of the real or personal property or equipment of the Company and its Subsidiaries individually or in the aggregate in an amount exceeding $50,000; and

(m)    Neither the Company nor any of its Subsidiaries has entered into or approved any Contract, arrangement or understanding or acquiesced in respect of any arrangement or understanding, to do, engage in or cause or having the effect of any of the foregoing, including with respect to any Business Combination not otherwise restricted by the foregoing paragraphs.

2.8    No Undisclosed Liabilities.  Except as reflected or reserved against in the Company Financials (including the notes thereto), there are no Liabilities of, relating to or affecting the Company, its Subsidiaries or any of their Assets and Properties, other than Liabilities incurred in the ordinary course of business consistent with past practice since February 28, 2002, other than Liabilities that are not, individually or in the aggregate, material to the Business or Condition of the Company.

2.9    Taxes.

(a)    The Company and its Subsidiaries have filed all Tax Returns that were required to be filed under all applicable Laws or regulations or properly sought extensions therefrom. All such Tax Returns were correct and complete in all material respects and have been prepared in compliance with all applicable Laws and regulations. All Taxes due and owed by the Company and its Subsidiaries (whether or not shown on any Tax Return) have been paid, except to the extent the failure to do so would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company. All Tax Returns that are currently under extension are set forth in Section 2.9(a) of the Company Disclosure Schedule.

(b)    Except as set forth in Section 2.9(b) of the Company Disclosure Schedule, there are no disputes or claims concerning any Tax liability of the Company or its Subsidiaries either:

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(A) claimed or raised by any Taxing Authority in writing or (B) as to which any of the stockholders or the directors and officers of the Company or its Subsidiaries has knowledge based upon contact with any agent of any Taxing Authority. No foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are, to the Company’s knowledge, pending or are being conducted with respect to the Company or its Subsidiaries.

(c)    The Company and its Subsidiaries have withheld and paid all Taxes required to be withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(d)    Section 2.9(d) of the Company Disclosure Schedule lists all federal, state, local and foreign jurisdictions in which Tax Returns were filed by the Company and its Subsidiaries for taxable periods ended on or after June 30, 1998. No Tax Returns for taxable periods ended on or after June 30, 1998, have been audited. The Company has delivered or otherwise made available to Parent the correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by the Company or their Subsidiaries since June 30, 1998. To the Company’s knowledge, there is no Tax audit pending as of the date of this Agreement.

(e)    Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a pending Tax assessment or deficiency.

(f)    Neither the Company nor any of its Subsidiaries has filed a consent under Code §341(f) concerning collapsible corporations.

(g)    Except as set forth in Section 2.9(g) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has made any material payments, are obligated to make any material payments, or are parties to any agreement that under certain circumstances could obligate them to make any material payments that will not be deductible under Code §280G.

(h)    Neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii).

(i)    Neither the Company nor any of its Subsidiaries is a party to any tax allocation or sharing agreement. Neither the Company nor any of its Subsidiaries (A) have been members of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Company) or (B) have any liability for the Taxes of any Person (other than Company or its Subsidiaries) under U.S. Treasury Regulation §1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor or by Contract.

(j)    The unpaid Taxes of the Company and its Subsidiaries (A) did not, as of February 28, 2002, exceed the reserve for Tax liability (other than any reserve for deferred taxes established to reflect timing differences between book and tax income) set forth on the February 28, 2002, balance sheet and (B) will not exceed that reserve as adjusted for operations and

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transactions through the date of this Agreement in accordance with the past custom and practice of the Company and its Subsidiaries in filing their Tax Returns.

(k)    Section 2.9(k) of the Company Disclosure Schedule sets forth the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company or Subsidiary.

(l)    To the Company’s knowledge, neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the date of this Agreement as a result of any (A) change in method of accounting for a taxable period ending on or prior to the date of this Agreement under Code §481(c) (or any corresponding or similar provision of state, local or foreign income Tax Law); (B) “closing agreement” as described in Code §7121 (or any corresponding or similar provision of state, local or foreign income Tax Law) executed on or prior to the date of this Agreement; (C) intercompany items or any excess loss account described in U.S. Treasury Regulations under Code §1502 (or any corresponding or similar provision of state, local or foreign income Tax Law); (D) installment sale or open transaction disposition made on or prior to the date of this Agreement; or (E) prepaid amount received on or prior to the date of this Agreement.

(m)    There are no Liens for Taxes or any related encumbrances upon the assets of the Company or any of its Subsidiaries, except Liens and encumbrances for Taxes not yet due.

2.10    Legal Proceedings.

(a)    There are no Actions or Proceedings pending or, to the knowledge of the Company, threatened against the Company, its Subsidiaries or any of their Assets and Properties. No notice has been received and the Company does not otherwise have knowledge of any Orders outstanding against the Company or any of its Subsidiaries.

(b)    Section 2.10(b) of the Company Disclosure Schedule sets forth all Actions or Proceedings pending as of the date hereof against or, to the knowledge of the Company, threatened against, the Company, its Subsidiaries or any of their Assets and Properties.

2.11    Compliance with Laws and Orders; Permits.

(a)    Neither the Company, nor its Subsidiaries, nor any of their directors, officers, Affiliates, agents or employees has violated since June 30, 1999, or is currently in default or violation under, any Law or Order applicable to the Company, any of its Subsidiaries or any of their Assets and Properties, and the Company is not aware of any claim of violation, or of any actual violation, of any such Laws and Orders, except, in each such case, as such default or violation would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company.

(b)    The Company and each of its Subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals from Governmental or Regulatory Authorities which are material or necessary to the operation of the business of the Company and its Subsidiaries

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(collectively, the “Company Permits”). The Company and its Subsidiaries are in compliance with the terms of all Company Permits, except as such non-compliance would not have, individually or in the aggregate, a Material Adverse Effect on the Business or the Condition of the Company.

2.12    Employee Benefit Plans and Employee Matters.

(a)    Section 2.12(a) of the Company Disclosure Schedule lists every pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus or other incentive plan; any medical, vision, dental or other health plan; any life insurance plan or any other employee benefit plan or fringe benefit plan; any payroll practice, other written or unwritten employee program, arrangement, agreement or understanding; commitments or methods of contribution or compensation (whether arrived at through collective bargaining or otherwise), whether formal or informal, and whether funded or unfunded; including, without limitation, any “employee benefit plan,” as that term is defined in Section 3(3) of ERISA; and including plans otherwise exempt from ERISA under Section 4(b)(4) thereof because they are maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens; that is currently maintained, sponsored in whole or in part, or contributed to by or was adopted during the past six years by the Company or any ERISA Affiliate of the Company or under (or in connection with) which the Company or an ERISA Affiliate of the Company has any contingent or noncontingent liability of any kind, whether or not probable of assertion (collectively, the “Benefit Plans”). Any of the Benefit Plans that is an “employee pension benefit plan” as that term is defined in Section 3(1) of ERISA, is referred to herein as an “ERISA Plan.” No Benefit Plan is or has been a multiemployer plan within the meaning of Section 3(37) of ERISA.

(b)    Section 2.12(b) of the Company Disclosure Schedule lists, with respect to all Benefit Plans listed in Section 2.12(a) of the Company Disclosure Schedule: (a) all trust agreements or other funding arrangements, including insurance contracts, all annuity contracts, actuarial statements or valuations, fidelity bonds, fiduciary liability policies, investment manager or advisory contracts, and all amendments (if any) thereto; (b) where applicable, with respect to any such plans or plan amendments, the most recent determination letters issued by the IRS; and (c) the most recent summary plan descriptions, any material modifications thereto, and all material employee communications with respect to such Benefit Plans. Contemporaneous with the delivery of the Company Disclosure Schedule, the Company has delivered a true and complete copy of each such Benefit Plan, agreement, most recent IRS letter or ruling, opinion, return, financial statement and summary plan description described in Section 2.12(a) or Section 2.12(b) hereof, certified as such by the chief financial officer of the Company, together with the annual report (Form 5500 Series) for the two most recent plan years for any Benefit Plan subject to such reporting requirements.

(c)    All the Benefit Plans and any related trusts subject to ERISA comply in all material respects with and have been administered in substantial compliance with the provisions of ERISA, all applicable provisions of the Code, and all applicable federal or state Laws and all other applicable Laws, rules and regulations, and the Company has not received any notice from any governmental agency or instrumentality questioning or challenging such compliance. Any noncompliance or failure properly to maintain, operate or administer a Benefit Plan or related

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trust has not rendered nor will render (i) such Benefit Plan or related trust of the Company subject to or liable for any material taxes, penalties or Liabilities to any Person; (ii) such Benefit Plan subject to disqualification; or (iii) the related trust subject to loss of tax-exempt status.

(d)    Neither the Company, nor, to the best knowledge and belief of the Company, any administrator or fiduciary of any such Benefit Plan (or agent or delegate of any of the foregoing) has engaged in any transaction or acted or failed to act in any manner that could subject the Company to any direct or indirect liability (by indemnity or otherwise) for a breach of any fiduciary, co-fiduciary or other duty under ERISA. Except as set forth in Section 2.12(d) of the Company Disclosure Schedule, no material oral or written representation or communication with respect to any aspect of the Benefit Plans has been or will be made to employees of the Company prior to the Closing Date that is not in accordance with the written or otherwise preexisting terms and provisions of such Benefit Plans in effect immediately prior to the Closing Date, except for any amendments or terminations required by the terms of this Agreement or by applicable Law. There are no claims or disputes under the terms of, or in connection with, the Benefit Plans (other than routine claims for benefits).

(e)    All annual reports or returns, audited or unaudited financial statements, actuarial valuations, summary annual reports and summary plan descriptions issued with respect to the Benefit Plans are correct and accurate in all material respects as of the dates thereof; and there have been no amendments filed to any of such reports, returns, statements, valuations or descriptions or required to make the information therein true and accurate. All annual reports (Form 5500 series) required to be filed with respect to any Benefit Plan have been or will be timely filed.

(f)    No non-exempt “prohibited transaction” (within the meaning of Section 4975(c) of the Code) involving any Benefit Plan has occurred. None of the assets of any ERISA Plan is an “employer security” (within the meaning of Section 407(d)(1) of ERISA) or “employer real property” (within the meaning of Section 407(d)(2) of ERISA).

(g)    Each Benefit Plan that is or has been an “employee pension benefit plan” as defined in Section 3(2) of ERISA is a defined contribution plan qualified under Section 401(a) of the Code and its related trust is exempt from tax under Section 501(a) of the Code (a “Qualified Plan”) and no circumstances exist that could reasonably be expected to result in disqualification of any Qualified Plan or loss of tax-exempt status for its related trust. No Qualified Plan (nor any predecessor to a Qualified Plan) has ever been subject to the provisions of Title IV of ERISA or to the minimum funding standards of Section 412 of the Code.

(h)    The Company has no current or future liability with respect to any events or matters occurring, arising or accruing on or prior to such date under any Benefit Plan that is not reflected in the Company Financials.

(i)    The Company does not maintain any Benefit Plan providing deferred or stock based compensation that is not reflected in the Company Financials.

(j)    Neither the Company nor any ERISA Affiliate of the Company has maintained, and neither now maintains, a Benefit Plan providing welfare benefits (as defined in ERISA

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Section 3(1)) to employees after retirement or other separation of service except to the extent required under Part 6 of Title I of ERISA and Code Section 4980B.

(k)    Except as set forth in Section 2.12(k) of the Company Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee (or any spouse, dependent or other family member of such employee) of the Company to severance pay, unemployment compensation or any payment contingent upon a change in control or ownership of the Company or (ii) accelerate the time of payment or vesting, or increase the amount, of any compensation due to any such employee or former employee (or any spouse, dependent or other family member of such employee).

(l)    Section 2.12(l) of the Company Disclosure Schedule sets forth a complete list of all agreements, Contracts or commitments of the Company (description to include title of agreement or indicate if letter agreement, together with employee’s name and date of agreement) in favor of any of the persons subject to covenants-not-to-compete as of the date of this Agreement that provide for continuation of salary or any severance benefit payable on or after termination of employment in respect of any of the officers of the Company, including without limitation those persons subject to covenants-not-to-compete as of the date of this Agreement.

(m)    The list of welfare plans in Section 2.12(a) of the Company Disclosure Schedule discloses whether each welfare plan is (i) unfunded, (ii) funded through a “welfare benefit fund”, as such term is defined in Section 419(e) of the Code, or other funding mechanism or (iii) insured. Each such welfare plan may be amended or terminated without liability to the Parent, Merger Sub or Company at any time after the date of this Agreement, except as may arise under Section 4980(B) of the Code. The Company and its ERISA Affiliates have complied and complies in all material respects with the applicable requirements of Section 4980B(f) of the Code with respect to each Benefit Plan that is a group health plan, as such term is defined in Section 4000(b)(1) of the Code.

(n)    There are no corrections of any Benefit Plan pending under the Employee Plan Compliance Reconciliation System (as set forth in Internal Revenue Service Revenue Procedure 2001-17) (“EPCRS”). The Company has provided Parent with copies of all compliance agreements, memoranda, and such other documents produced under EPCRS with respect to a Benefit Plan.

(o)    The Company has provided Parent with employment information and records as described in the Human Resources Agreement, and such information and records are complete and accurate.

(p)    All Benefit Plans maintained outside of the United States for the benefit of Company employees are in material compliance with all applicable Laws of the relevant jurisdiction in which such Benefit Plans are maintained. Section 2.12(p) of the Company Disclosure Schedule sets forth a complete list of the Benefit Plans maintained by the Company for its employees based primarily in countries and territories other than the United States.

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2.13    Real Property.

(a)    Section 2.13(a) of the Company Disclosure Schedule contains a true and correct list of (i) each parcel of real property leased, utilized and/or operated by the Company or any of its Subsidiaries (as lessor or lessee or otherwise) (the “Leased Real Property”) and (ii) all Liens against the Company or any of its Subsidiaries relating to or affecting any parcel of Leased Real Property. Neither the Company nor any of its Subsidiaries owns any real property other than leasehold improvements, if any, on the Leased Real Property.

(b)    Subject to the terms of its respective leases, the Company has a valid and subsisting leasehold estate in and the right to quiet enjoyment of each of the Leased Real Properties for the full term of the leases relating thereto. Each lease referred to in clause (i) of Section 2.13(a) above is a legal, valid and binding agreement, enforceable against the Company in accordance with its terms and, to the Company’s knowledge, against each other Person that is a party thereto, and there is no, and neither the Company nor any of its Subsidiaries has received notice of any, current default (or any condition or event which, after notice or lapse of time or both, would constitute a material default) thereunder. Neither the Company nor any of its Subsidiaries owes any brokerage commissions or finders fees with respect to any such Leased Real Property.

(c)    All improvements on the Leased Real Property (i) comply with and are operated in all material respects in accordance with applicable Laws (including Environmental Laws) and all applicable Liens, Approvals, Contracts, covenants and restrictions and (ii) are in all material respects in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, and such improvements are in all material respects adequate and suitable for the purposes for which they are presently being used and there are no condemnation or appropriation proceedings pending or, to the knowledge of the Company, threatened against any of such real property or the improvements thereon.

2.14    Tangible Personal Property.  The Company (or its Subsidiaries) is in possession of and has good and marketable title to, or has valid leasehold interests in or valid rights under Contract to use, all tangible personal property used in the conduct of its business, including all tangible personal property reflected on the Company Financials and tangible personal property acquired since February 28, 2002. All such tangible personal property (including plant, property and equipment) is free and clear of all Liens and is adequate and suitable in all material respects for the conduct by the Company of its business as presently conducted, and is in good working order and condition, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws.

2.15    Intellectual Property.

(a)    Section 2.15(a) of the Company Disclosure Schedule lists all Company Registered Intellectual Property. Each item of Company Registered Intellectual Property is valid and subsisting, and all necessary registration, maintenance, renewal fees, annuity fees and Taxes in connection with such Registered Intellectual Property due and payable on or before the date hereof have been paid and all necessary documents and certificates in connection with such Company Registered Intellectual Property which are due on or before the date hereof have been

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filed with the relevant patent, copyright, trademark or other federal authorities in the United States or foreign jurisdictions where the Company has filed documents for such purpose, as the case may be, for the purposes of maintaining such Company Registered Intellectual Property. To the extent required to protect its ownership rights in and to such Registered Intellectual Property in accordance with applicable Laws, the Company or its Subsidiary has recorded each such assignment of Registered Intellectual Property with the relevant Governmental or Regulatory Authority, including the PTO, the U.S. Copyright Office, or their respective equivalents in any foreign jurisdiction where the Company or any of its Subsidiaries has filed documents for such purpose, as the case may be, except where the failure to so file would not reasonably be expected to have a Material Adverse Effect on the Business or Condition of the Company. To the Company’s knowledge, there are no facts or circumstances that would render any Company Registered Intellectual Property invalid or unenforceable. To the Company’s knowledge, neither the Company nor any of its Subsidiaries has misrepresented, or failed to disclose, and is aware of any misrepresentation or failure to disclose, any fact or circumstances in any application for any Company Registered Intellectual Property that would constitute fraud or a material misrepresentation with respect to such application or that would otherwise adversely effect the validity or enforceability of any Company Registered Intellectual Property in any material respect.

(b)    The Company Intellectual Property constitutes all the Intellectual Property used in or necessary to the conduct of the Company’s business as it is currently conducted and, to the Company’s knowledge with respect to T-Rex One, as is currently contemplated to be conducted in the Operating Plan (but including the provision for additional third party software licenses as set forth in Section 2.15(b) of the Company Disclosure Schedule). The Company and its Subsidiaries have all requisite right, title and interest in or valid and enforceable rights under Contracts or Licenses to use all Company Intellectual Property necessary to the conduct of its business as currently conducted. Each item of Company Intellectual Property, including all Company Registered Intellectual Property listed in Section 2.15(a) of the Company Disclosure Schedule, is owned exclusively by the Company (or its Subsidiaries) and is free and clear of any Liens (in each case, excluding Intellectual Property licensed to the Company under any License disclosed under Section 2.15(e) of the Company Disclosure Schedule and excluding standard Licenses for available software or off-the-shelf, shrink-wrap, or browse wrap software or “open source” code that is commercially available to any single Person for a license fee of no more than $5,000).

(c)    The Company and its Subsidiaries have taken reasonable steps to protect and preserve its ownership of Company Intellectual Property and to protect its rights in confidential information and trade secrets which are material to the conduct of the Company’s business. To the extent that any Company Intellectual Property has been developed or created by any Person other than the Company, or to the extent that any Company Intellectual Property has been developed or created by consultants and employees of the Company or its Subsidiaries, which in either case is material to the conduct of the Company’s business, the Company has a written agreement with such Person with respect thereto and the Company has either (i) obtained ownership of, and is the exclusive owner of, all such Intellectual Property by operation of law or by valid assignment of any such rights or (ii) has obtained a License under or to such Intellectual Property as disclosed under Section 2.15(e) of the Company Disclosure Schedule.

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(d)    Neither the Company nor any of its Subsidiaries has transferred ownership of any Intellectual Property that is Company Intellectual Property and is material to the conduct of the Company’s business, to any other Person.

(e)    Section 2.15(e) of the Company Disclosure Schedule lists (i) all inbound Licenses of Intellectual Property or software licensed to the Company or any of its Subsidiaries from a third party (other than standard Licenses for available software or off-the-shelf, shrink-wrap, or browse wrap software or “open source” code that is commercially available to any single Person for a license fee of no more than $5,000), and (ii) all outbound Licenses of Intellectual Property or software licensed from the Company or any of its Subsidiaries to a third party that grants licenses to Intellectual Property (other than Licenses to pharmacies in the ordinary course of business consistent with past practice). Neither the Company nor any of its Subsidiaries is in breach of, nor has it failed to perform under any of the Contracts and Licenses to which either the Company or any of its Subsidiaries is a party and, to the Company’s knowledge, no other party to such Contracts and Licenses is in breach of or has failed to perform thereunder, except, in each such case, to the extent it would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company.

(f)    The operation of the business of the Company as currently conducted does not infringe or misappropriate the Intellectual Property of any Person, and neither the Company nor any of its Subsidiaries has received notice from any Person claiming that such operation or any act, product, technology or service (including products, technology or services currently under development) of the Company or its Subsidiaries infringes or misappropriates the Intellectual Property of any Person, nor is the Company aware of any basis for any such claim. To the knowledge of the Company, no Person is infringing or misappropriating any Company Intellectual Property owned by the Company or any of its Subsidiaries.

(g)    There are no Contracts or Licenses between the Company (or any of its Subsidiaries) and any other Person with respect to Company Intellectual Property under which there is any material dispute (or, to the Company’s knowledge, facts that may reasonably lead to a dispute) including any material dispute or facts that may reasonably lead to a material dispute regarding the scope of the Intellectual Property Rights granted in such Contract or License, or performance under such Contract or License, including with respect to any payments to be made or received by the Company or its Subsidiaries thereunder.

(h)    No Company Intellectual Property owned by the Company, or any product, technology or service of the Company or any of its Subsidiaries, or to the Company’s knowledge, any other Company Intellectual Property, is subject to any Order, Action or Proceeding or “march in” rights that restricts, or that is reasonably expected to restrict in any manner, the use, transfer or licensing of any Company Intellectual Property by the Company or any of its Subsidiaries or that may affect the validity, use or enforceability of such Company Intellectual Property, except to the extent it would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company.

(i)    Neither this Agreement nor any transaction contemplated by this Agreement will result in the loss of any ownership or License rights of the Company or any of its Subsidiaries prior to the Closing Date, or the Surviving Corporation from and after the Closing Date (except

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as set forth in Section 2.15(i) of the Company Disclosure Schedule), in any of the Company Intellectual Property or require or obligate Parent or the Surviving Corporation (i) to grant to any third party any rights or licenses with respect to any Company Intellectual Property; or (ii) to pay any royalties or other amounts. Except as set forth in Section 2.15(i) of the Company Disclosure Schedule, neither this Agreement nor any transaction contemplated by this Agreement will give to any third party the lawful right to terminate, in whole or in part, any Contracts or Licenses to which the Company or any of its Subsidiaries is a party with respect to any Intellectual Property, except to the extent it would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company.

(j)    Except as set forth in Section 2.15(j) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has delivered or permitted to be delivered to any Person any source code of the Company Intellectual Property, and no Person has any rights with respect to, the source code, or any portion or aspect of the source code of an Company Intellectual Property.

2.16    Contracts.

(a)    Section 2.16(a) of the Company Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts or other arrangements (true and complete copies of which or, if none, reasonably complete and accurate written descriptions thereof, together with all amendments and supplements thereto and all waivers of any terms thereof, have been provided to Parent prior to the execution of this Agreement), to which the Company or any of its Subsidiaries is a party or by which any of their Assets and Properties is bound (such Contracts or other arrangements being referred to herein as the “Material Contracts”):

(i)         (A) all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultant services for a specified or unspecified term; (B) any written or unwritten representations, commitments, promises, communications or courses of conduct involving an obligation of the Company or any of its Subsidiaries to make payments (with or without notice, passage of time or both) to any Person in connection with, or as a consequence of, the transactions contemplated hereby; and (C) all severance agreements or change of control arrangements;

(ii)        all Contracts with any Person containing any provision or covenant prohibiting or limiting the ability of the Company or any of its Subsidiaries to engage in any business activity or compete with any Person or prohibiting or limiting the ability of any Person to compete with the Company or any of its Subsidiaries;

(iii)      all partnership, joint venture, stockholders’ or other similar Contracts with any Person;

(iv)       all Contracts relating to Indebtedness in an amount of $100,000 or more of the Company on a consolidated basis;

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(v)       any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, any guarantees, currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with GAAP which in each case exceeds $100,000;

(vi)       all Contracts relating to (A) the future disposition or acquisition of any Assets and Properties with an aggregate value of $100,000 or more, and (B) any Business Combination;

(vii)      all Contracts that (A) limit or contain restrictions on the ability of the Company or any of its Subsidiaries to declare or pay dividends on, to make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any Assets and Properties exceeding $25,000, to change the lines of business in which it participates or engages, (B) require the Company or any of its Subsidiaries to maintain specified financial ratios or levels of net worth or other indicia of financial condition, or (C) require the Company or any of its Subsidiaries to maintain insurance in certain amounts or with certain coverages;

(viii)     all powers of attorney and comparable delegations of authority; and

(ix)       all other Contracts not otherwise required to be disclosed above in Section 2.16(a) of the Disclosure Schedule which are material to the Business or Condition of the Company as currently conducted.

(b)    Each Material Contract is in full force and effect and constitutes a legal, valid and binding agreement, enforceable against the Company in accordance with its terms, and to the knowledge of the Company, each other party thereto, and, to the knowledge of the Company, no party to such Material Contract is, nor has received notice that it is currently in violation or breach of or default under any such Material Contract, except to the extent it would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company (or with notice or lapse of time or both, would be in violation or breach of or default under any such Material Contract, except to the extent it would not have, individually or in the aggregate, a Material Adverse Effect on the Business or Condition of the Company).

2.17    Insurance.

(a)    Section 2.17(a) of the Company Disclosure Schedule contains a true and complete list (including the names and addresses of the insurers and the expiration dates thereof) of all liability, property, workers’ compensation, directors’ and officers’ liability and other insurance policies currently in effect that insure any of the business, operations or employees of the Company or any of its Subsidiaries and that (i) have been issued to the Company or any of its Subsidiaries or (ii) to the knowledge of the Company, have been issued to any Person (other than the Company) for the benefit of the Company or any of its Subsidiaries. The insurance coverage provided by the policies set forth in Section 2.17(a) of the Company Disclosure Schedule will not terminate or lapse by reason of any of the transactions contemplated by this Agreement. Each policy listed in Section 2.17(a) of the Company Disclosure Schedule is valid and binding

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and in full force and effect, all premiums due thereunder have been paid when due and neither the Company or, to the Company’s knowledge, the Person to whom such policy has been issued has received any notice of cancellation or termination in respect of any such policy or is in default thereunder, and the Company has no knowledge of any reason or state of facts that could reasonably be expected to lead to the cancellation of such policies or of any threatened termination of, or material premium increase with respect to, any of such policies. The insurance policies listed in Section 2.17(a) of the Company Disclosure Schedule, are in amounts and have coverages as required by any Contract to which the Company or any of its Subsidiaries is a party or by which any of their Assets and Properties is bound.

(b)    Section 2.17(b) of the Company Disclosure Schedule contains a list of all claims over $25,000 made under any insurance policies covering the Company or any of its Subsidiaries in the last two (2) years. The Company has not received notice that any insurer under any policy listed (or required to be listed) in Section 2.17(a) of the Company Disclosure Schedule is denying, disputing or questioning liability with respect to a claim thereunder or defending under a reservation of rights clause.

2.18 Affiliate Transactions.

(a)    Except as set forth in Section 2.18(a) of the Company Disclosure Schedule, and except for transactions with Parent, (i) there are no Contracts or Liabilities between the Company (or any of its Subsidiaries), on the one hand, and any current or former officer, director, material stockholder (which for purposes of this Section 2.18 shall mean holding greater than 0.5% of the outstanding shares of Company Capital Stock on an “as-if-converted” basis), or Affiliate of the Company (or any of its Subsidiaries), on the other hand, (ii) neither the Company nor any of its Subsidiaries provides or causes to be provided any assets, services or facilities to any such current or former officer, director, material stockholder or Affiliate, (iii) no current or former officer, director, material stockholder or Affiliate provides or causes to be provided any assets, services or facilities to the Company and (iv) neither the Company nor any of its Subsidiaries beneficially owns, directly or indirectly, any Investment Assets of any such current or former officer, director, material stockholder or Affiliate.

(b)    Each of the Contracts and Liabilities listed in Section 2.18(a) of the Company Disclosure Schedule were entered into or incurred, as the case may be, on terms no less favorable to the Company (in the reasonable judgment of the Company) than if such Contract or Liability was entered into or incurred on an arm’s length basis on competitive terms. Any Contract to which the Company or any of its Subsidiaries is a party and in which any director of the Company has a financial interest in such Contract was approved in accordance with Pennsylvania Law.

2.19    Employees; Labor Relations.

(a)    Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement and there is no unfair labor practice or labor arbitration proceedings pending, or, to the knowledge of the Company, threatened. To the knowledge of the Company, there are no organizational efforts presently underway or threatened involving any employees of

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the Company or any of its Subsidiaries. Since June 30, 1999, there has been no work stoppage, strike or other concerted action by employees of the Company or any of its Subsidiaries.

(b)    Except as set forth in Section 2.19(b) of the Company Disclosure Schedule, each Person who is an employee of the Company or any of its Subsidiaries is employed at will. To the Company’s knowledge, each Person who is an independent contractor of the Company or any of its Subsidiaries is properly classified as an independent contractor for purposes of all employment related Laws and all Laws concerning the status of independent contractors. Except as set forth in Section 2.19(b) of the Company Disclosure Schedule, the completion of the transactions contemplated by this Agreement will not result in any payment or increased payment becoming due to any current or former officer, director, or employee of, or consultant to, the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to any agreement for the provision of labor from any outside agency outside the ordinary course of business.

(c)    Except as set forth in Section 2.19(c) of the Company Disclosure Schedule, since June 30, 1999, there have been no federal or state claims based on sex, sexual or other harassment, age, disability, race or other discrimination or common law claims, including claims of wrongful termination, filed by any employees of the Company or any of its Subsidiaries or by any of the employees performing work for the Company or any of its Subsidiaries but provided by an outside employment agency and against the Company or any of its Subsidiaries, nor, to the knowledge of the Company, is any such claim threatened. The Company and its Subsidiaries have complied in all material respects with all Laws related to the employment of employees and since June 30, 1999, the Company has not received any notice of any claim that it has not complied in any material respect with any Laws relating to the employment of employees, including any provisions thereof relating to wages, hours, collective bargaining, the payment of social security and similar taxes, equal employment opportunity, employment discrimination, the WARN Act, employee safety, or that it is liable for any arrearages of wages or any Taxes or penalties for failure to comply with any of the foregoing.

(d)    There are no written policies and/or employee handbooks or manuals except as described in Section 2.19(d) of the Company Disclosure Schedule. True and correct copies of all of such written policies and/or employee handbooks or manuals have been provided to Parent.

2.20    Environmental Matters.

(a)    The Company and its Subsidiaries possess any and all Environmental Permits necessary to or required for the operation of its business as currently conducted and is in compliance in all material respects with (i) all terms, conditions and provisions of its Environmental Permits; and (ii) all Environmental Laws.

(b)    Neither the Company, nor any of its Subsidiaries, nor any predecessor of the Company nor any entity previously owned by the Company has received any notice of alleged, actual or potential responsibility for, or any inquiry regarding, (i) any Release or threatened or suspected Release of any Hazardous Material, or (ii) any violation of Environmental Law, and there is no outstanding civil, criminal or administrative investigation, action, suit hearing or proceeding pending or threatened against the Company or any of its Subsidiaries pursuant to any

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Environmental Law. Neither the Company, nor any of its Subsidiaries, nor any predecessor of the Company nor any entity previously owned by the Company has any obligation or liability with respect to any Hazardous Material, including any Release or threatened or suspected Release of any Hazardous Material and any violation of Environmental Law, and, to the Company’s knowledge, there have been no events, facts or circumstances which could form the basis of any such obligation or liability.

(c)    To the Company’s knowledge, no Releases of Hazardous Material(s) have occurred at, from, in, to, on, or under any Site and no Hazardous Material is present in, on, about or migrating to or from any Site. Neither the Company, nor any of its Subsidiaries nor any predecessor of the Company, nor any entity previously owned by the Company, has transported or arranged for the treatment, storage, handling, disposal or transportation of any Hazardous Material at, from or to any site or other location. To the Company’s knowledge, there is no (i) underground storage tank, active or abandoned, (ii) polychlorinated biphenyl containing equipment, (iii) asbestos-containing material, (iv) radon, (v) lead-based paint or (vi) urea formaldehyde at any Site. Any underground storage tank meets all current applicable upgrade requirements.

2.21    Accounts Receivable.  The accounts and notes receivable of the Company and its Subsidiaries reflected on the Company Financials, and all accounts and notes receivable arising subsequent to the Financial Statement Date, (a) arose from bona fide sales transactions in the ordinary course of business, consistent with past practice, and are payable on ordinary trade terms, (b) are, to the Company’s knowledge, legal, valid and binding obligations of the respective debtors enforceable in accordance with their respective terms, and (c) are not subject to any valid set-off or counterclaim, except for such offsets of accounts receivables in the ordinary course of business consistent with past practice or as otherwise set forth in Section 2.21 of the Company Disclosure Schedule.

2.22    Other Negotiations; Brokers.  Except for CIBC World Markets Corp., no investment bankers, broker, financial advisor or other Person which has been retained by or is authorized to act on behalf of the Company who might be entitled to any broker’s, finder’s, financial advisor’s or similar fee or commission in connection with this Agreement and the transactions contemplated hereby based on arrangements made by or on behalf of the Company. Neither the Company, any Subsidiary nor any officer, director or Affiliate of the Company, nor any agent of the Company has engaged in discussions with a third party, nor entered into any agreement, relating to the acquisition of the Company or substantially all of the Assets or Properties of the Company by such third party, which may, in any such case, reasonably result in liability to the Company, to such third party, or to any broker, finder or intermediary from such discussions.

2.23    Banks and Brokerage Accounts.  Section 2.23 of the Company Disclosure Schedule sets forth (a) a true and complete list of the names and locations of all banks, trust companies, securities brokers and other financial institutions at which the Company or any of its Subsidiaries has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship, (b) a true and complete list and description of each such account, box and relationship, indicating in each case the account number and the names of the respective officers, employees, agents or other similar representatives of the Company and its Subsidiaries

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having signatory power with respect thereto and (c) a list of each Investment Asset, the name of the record and beneficial owner thereof, the location of the certificates, if any, therefor, the maturity date, if any, and any stock or bond powers or other authority for transfer granted with respect thereto.

2.24    Foreign Corrupt Practices Act.  Neither the Company, nor its Subsidiaries, nor to the knowledge of the Company, any agent, employee or other Person associated with or acting on behalf of the Company or its Subsidiaries has, directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kick-back or other similar unlawful payment.

2.25    Disclosure.  No representation or warranty made by the Company contained in this Agreement, and no statement contained in the Company Disclosure Schedule or in any certificate, list or other writing prepared by or on behalf of the Company and furnished to Parent pursuant to any provision of this Agreement omits to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub, jointly and severally, hereby represent and warrant to the Company, subject to such exceptions as are specifically disclosed with respect to specific numbered and lettered sections and subsections of this Article 3 in the disclosure schedule and schedule of exceptions (the “Parent Disclosure Schedule”) delivered herewith and dated as of the date hereof, and numbered with corresponding numbered and lettered sections and subsections, as of the date of this Agreement as follows:

3.1    Organization and Qualification.  Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of Parent and Merger Sub has full corporate power and authority to conduct its business as now conducted and as currently proposed to be conducted and to own, use, license and lease its Assets and Properties. Each of Parent and Merger Sub is duly qualified, licensed or admitted to transact business and is in good standing as a foreign corporation in each jurisdiction where the ownership, use, licensing or leasing of its Assets or Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing that could not reasonably be expected to have a Material Adverse Effect on the Business or Condition of Parent.

3.2    Valid Issuance.  The shares of Parent Common Stock issued in connection with the Merger has been duly authorized, and, upon issuance in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and are not otherwise subject to any preemptive rights.

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3.3    Authority Relative to this Agreement.  Each of Parent and Merger Sub has full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each of Parent and Merger Sub of this Agreement and the Ancillary Agreements to which it is a party, and the performance by each of Parent and Merger Sub of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary action by the Board of Directors of each of Parent and Merger Sub, and no other corporate action on the part of either of Parent and Merger Sub is necessary. This Agreement and the Ancillary Agreements to which each of Parent and Merger Sub is a party have been or will be, as applicable, duly and validly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery hereof (and in the case of the Ancillary Agreements to which Parent or Merger Sub is a party thereof) by the Company and/or the other parties thereto, constitutes or will constitute, as applicable, a legal, valid and binding obligation of Parent or Merger Sub enforceable against Parent or Merger Sub in accordance with its respective terms.

3.4    SEC Filings.

(a)    Parent Filings.  Parent has made available, or will make available, to the Company (i) its annual reports on Form 10-K for its fiscal years ended May 31, 1999, 2000 and 2001, (ii) its quarterly reports on Form 10-Q for its quarters ended August 31, 2001, November 30, 2001, and March 1, 2002, (iii) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of Parent held since May 31, 2001 and (iv) all of its other reports, statements, schedules and registration statements filed with the SEC since March 1, 2002 through the Closing Date (the documents referred to in this Section 3.4(a) being referred to collectively as the “Parent SEC Documents”).

(b)    Securities Compliance.  As of its filing date, each Parent SEC Document, including the financial statements contained therein (i) has or will comply in all material respects with the applicable requirements of the Exchange Act and the Securities Act; (ii) did not and will not 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 made therein, in the light of the circumstances under which they were made, not misleading, and (iii) were and will be prepared in accordance with GAAP consistently applied, and fairly present in all material respects the consolidated position of Parent and its Subsidiaries as of the dates set forth therein, and do not and will not (a) contain any items of special or nonrecurring revenue or any other income not earned in the ordinary course of business except as expressly stated therein, (b) omit any liabilities that would be required to be disclosed under GAAP, or (c) omit any special purpose entities involving affiliated entities which are required to be disclosed under GAAP.

(c)    Information Supplied.  None of the information to be supplied by Parent or Merger Sub for inclusion or incorporation in the Registration Statements will, at the time the Registration Statements are filed with the SEC and at the time that it becomes effective under the Securities Act 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 made therein not misleading. Neither Parent nor Merger Sub makes any representation, warranty or covenant with respect to

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information supplied or to be supplied by the Company (or any stockholder of the Company, except Parent) which is contained in or omitted from the Registration Statements.

3.5    No Conflicts.  The execution and delivery by each of Parent and Merger Sub of this Agreement and the Ancillary Agreements to which it is a party does not, and the performance by Parent and Merger Sub of its obligations under this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby do not and will not:

(a)    conflict with or violate any of the terms, conditions or provisions of the certificate of incorporation or bylaws of Parent or Merger Sub;

(b)    conflict with or violate any Law or Order applicable to Parent or Merger Sub or their respective Assets or Properties; or

(c)    except as would not have a Material Adverse Effect on the Business or Condition of Parent, (i) conflict with or result in a violation or breach of, (ii) constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, require Parent to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result of the terms of (except for (A) the filing of the Certificate of Merger and Articles of Merger; (B) such consents approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state or federal securities Laws; and (C) such filings as may be required under the HSR Act, if any), (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any person any additional rights or entitlement to increased, additional, accelerated or guaranteed payments or performance under, (vi) result in the creation or imposition of (or the obligation to create or impose) any Lien upon Parent or any of its Assets or Properties, or result in the loss of a material benefit under, any of the terms, conditions or provisions of any Contract or License to which Parent is a party or by which any of its Assets and Properties are bound.

3.6    Finders’ and Advisors’ Fees.  Except for fees payable to Credit Suisse First Boston Corporation, there is no investment banker, broker, financial advisor or other Person which has been retained by or is authorized to act on behalf of Parent or any of its Subsidiaries who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

3.7    Governmental Authorization.  The execution, delivery and performance by Parent and Merger Sub of this Agreement and the Ancillary Agreements to which Parent or Merger Sub is a party and the consummation of the transactions contemplated by this Agreement by Parent and Merger Sub require no consent of, or filing with, any Governmental or Regulatory Authority other than (a) the filing of the Certificate of Merger in accordance with Delaware Law and the Articles of Merger in accordance with Pennsylvania Law, (b) compliance with any applicable requirements of the HSR Act, (c) compliance with any applicable requirements of the Exchange Act, (d) compliance with any applicable requirements of the Securities Act and state securities Laws, and (e) other actions or filings which if not taken or made would not, individually or in the aggregate, have a Material Adverse Effect on Parent.

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3.8    Disclosure.  No representation or warranty made by Parent contained in this Agreement, and no statement contained in the Parent Disclosure Schedule or in any certificate, list or other writing prepared by or on behalf of Parent and furnished to Company pursuant to any provision of this Agreement omits to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading.

ARTICLE 4

CONDUCT PRIOR TO THE EFFECTIVE TIME

4.1    Conduct of Business of the Company.  During the period from the date of this Agreement and continuing until the Effective Time, the Company and each Subsidiary agrees (unless the Company is required to take such action pursuant to this Agreement or Parent shall give its prior consent in writing which consent shall not be unreasonably withheld) to carry on its business in the ordinary course consistent with past practice and in any event substantially consistent with the Operating Plan provided to Parent prior to the date of this Agreement, to use all commercially reasonable efforts to preserve intact its present business organization, keep available the services of its present officers and Key Employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, independent contractors and other Persons having business dealings with it, all with the express purpose and intent of preserving unimpaired the Company’s and each Subsidiary’s goodwill and ongoing business at the Effective Time. Without limiting the generality of the foregoing, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, except as set forth in the Company Disclosure Schedule or as required or expressly permitted by this Agreement, neither the Company nor any of its Subsidiaries shall do, cause or permit any of the following, without the prior written consent of Parent:

(a)    Charter Documents:  cause or permit any amendments to its Articles of Incorporation, Bylaws, or other governing or organizational documents;

(b)    Dividends; Changes in Capital Stock:  declare or pay any dividend on or make any other distribution (whether in cash, stock or property) in respect of any of its capital stock (except as required by the Articles of Incorporation in effect as of the date of this Agreement), or 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 repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock except from former employees, directors and consultants in accordance with agreements providing for the repurchase of shares in connection with any termination of service to it;

(c)    Stock Option Plan:   accelerate, amend or change the period of exercisability or vesting of options or other rights granted under its stock plans or authorize cash payments in exchange for any options or other rights granted under any of such plan; or, except as approved by the Company’s Board of Directors, grant any additional Company Options;

(d)    Contracts:  enter into any Contract or commitment, or violate, amend or otherwise modify or waive any of the terms of any of its Contracts, other than Contracts in the ordinary

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course of business consistent with past practice which involve total obligations of less than $100,000 and which are not otherwise material to the business of the Company;

(e)    Issuance of Securities:  issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of Company Capital Stock or shares of capital stock of any of its Subsidiaries or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities other than the issuance of shares of Company Common Stock to Parent or pursuant to the conversion of outstanding shares of Company Preferred Stock and the exercise of Company Options or Company Warrants outstanding as of the date hereof;

(f)    Intellectual Property:  dispose of, license or transfer to any person or entity any rights to any Company Intellectual Property other than non-exclusive licenses in the ordinary course of business consistent with past practice;

(g)    Exclusive Rights:  enter into or amend any agreement pursuant to which any other party is granted exclusive marketing or other exclusive rights of any type or scope with respect to any of Company’s products or technology;

(h)    Dispositions:  sell, lease, license or otherwise dispose of or encumber any of the Company’s properties or assets, except for sales of products or services (and related nonexclusive licenses) in the ordinary course of business consistent with past practice;

(i)    Indebtedness:  incur any indebtedness for borrowed money or guarantee any such indebtedness (excluding capital leases consistent with the Company’s prior practices, borrowings pursuant to its line of credit with Silicon Valley Bank in effect on the date of this Agreement, loans under the Loan Agreement in effect with [****] as of the date of this Agreement, and any capital received from Parent) or issue or sell any debt securities or guarantee any debt securities of others;

(j)    Payment of Obligations:  pay, discharge or satisfy any Liability arising other than in the ordinary course of business, other than the payment, discharge or satisfaction of Liabilities reflected or reserved against in the Company Financials;

(k)    Capital Expenditures:  make any capital expenditures, capital additions or capital improvements individually in excess of $25,000 or except in accordance with the Company’s Operating Plan;

(l)    Insurance:  reduce the amount of any insurance coverage provided by existing insurance policies;

(m)    Termination or Waiver:  terminate or waive any right of substantial value;

(n)    Employee Benefit Plans; New Hires; Pay Increases:  adopt or amend, or make any promise to adopt or amend, employee benefit, stock purchase, severance, change in control, retention, bonus or other compensation or option plan, or any other similar plan except as required by applicable law, or hire, or make any promise to hire, any new director level or officer level consultant or employee, pay, or make any promise to pay, any special bonus or special

[****] Confidential treatment requested. Confidential portions of this page have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

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remuneration (except as due under a plan or agreement existing as of the date hereof and set forth in Section 2.12(a) of the Company Disclosure Schedule) to any employee, consultant or director or increase, or make any promise to increase, the salaries, wage rates or compensation of any employee or consultant;

(o)    Severance Arrangements:  grant any severance or termination pay (i) to any director, officer or consultant or (ii) to any other employee, except payments made pursuant to standard written agreements outstanding on the date hereof;

(p)    Lawsuits:  commence a lawsuit other than (i) for the routine collection of bills, (ii) in such cases where it in good faith determines that failure to commence suit would result in the material impairment of a valuable aspect of its business, provided that it consults with Parent prior to the filing of such a suit, or (iii) for a breach of this Agreement;

(q)    Acquisitions:  acquire or agree to acquire 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, association or other business organization or division thereof;

(r)    Taxes:  make or change any material election in respect of Taxes, adopt or change any accounting method in respect of Taxes, file any amendment to a Tax Return that was filed prior to the date hereof or file any Tax Return after the date hereof that has not been reviewed by Parent prior to filing, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes;

(s)    Revaluation:  revalue any of its assets, including writing down the value of inventory or writing off notes or accounts receivable;

(t)    Operating Plan:  take any action or omit to take any action inconsistent with the Operating Plan, or amend or modify the Operating Plan; or

(u)    Other:  take or agree in writing or otherwise to take, any of the actions described in Section 4.1(a) through Section 4.1(t) above, or any other action that would reasonably be expected to prevent the Company from performing, or cause the Company not to perform, its covenants and agreements hereunder.

4.2    No Solicitation.  Until the earlier of the Effective Time and the date of termination of this Agreement pursuant to the provisions of Section 7.1, or if Parent shall violate Section 3 of the Letter Agreement, neither the Company nor any of its Subsidiaries will take, nor will the Company permit any of the Company’s Representatives to (directly or indirectly), take any of the following actions with any Person other than Parent and its designees: (a) solicit, encourage, initiate, entertain, review or encourage any proposals or offers from, or participate in or conduct discussions with or engage in negotiations with, any Person relating to any offer, indication of interest or proposal, oral, written or otherwise, formal or informal (a “Competing Proposed Transaction”), with respect to any possible Business Combination with the Company or any of its Subsidiaries (whether such Subsidiaries are in existence on the date hereof or are hereafter organized), (b) provide information not customarily disclosed consistent with the Company’s past practices with respect to the Company or any of its Subsidiaries (whether such

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Subsidiaries are in existence on the date hereof or are hereafter organized) to any Person, other than Parent, relating to (or which the Company believes or should reasonably know would be used for the purpose of formulating an offer, indication of interest or proposal with respect to), or otherwise assist, cooperate with, facilitate or encourage any effort or attempt by any such Person with regard to, any possible Business Combination with the Company or any Subsidiary of the Company (whether such Subsidiary is in existence on the date hereof or is hereafter organized), (c) agree to or enter into a Contract with any Person, other than Parent, providing for or approving a Business Combination with the Company or any Subsidiary (whether such Subsidiary is in existence on the date hereof or is hereafter organized), (d) make or authorize any statement, recommendation, solicitation or endorsement in support of any possible Business Combination with the Company or any Subsidiary (whether such Subsidiary is in existence on the date hereof or is hereafter organized) other than by Parent, or (e) authorize or permit any of the Company’s Representatives to take any such action. In addition to the foregoing, if the Company receives prior to the Effective Time or the termination of this Agreement any offer, indication of interest or proposal (formal or informal, oral, written or otherwise) relating to, or any inquiry or contact from any Person with respect to, a Competing Proposed Transaction, the Company shall promptly notify Parent thereof, such notice to include the identity of the Person or Persons making such offer, indication of interest or proposal and the terms thereof, and will keep Parent apprised on a current basis of the status and details of any such offer, indication of interest or proposal and of any modifications to the terms thereof; provided, however, that this provision shall not in any way be deemed to limit the obligations of the Company and its Representatives set forth in the first sentence of this Section 4.2. Each of the Company and Parent acknowledge that this Section 4.2 was a significant inducement for Parent to enter into this Agreement and the absence of such provision would have resulted in either (i) a material reduction in the consideration to be paid to the stockholders of the Company in the Merger or (ii) a failure to induce Parent to enter into this Agreement.

ARTICLE 5

ADDITIONAL AGREEMENTS

5.1    Registration Statement.

(a)    Parent agrees to prepare, and Company agrees to cooperate in the preparation of, a registration statement on Form S-4 (the “Merger Registration Statement”) in connection with the issuance of shares of Parent Common Stock in the Merger (including the proxy statement and prospectus and other proxy solicitation materials of the Company constituting a part thereof (the “Company Proxy Statement”) and all related documents). Parent shall use its reasonable best efforts to file such Merger Registration Statement with the SEC, and, to the extent required pursuant to Section 1.14, shall use its reasonable best efforts to prepare and file a registration statement on Form S-3 (the “Resale Registration Statement”) with the SEC in connection with such issuance of shares of Parent Common Stock pursuant to Section 1.14 entitled to resale rights, no later than March 1, 2003. Each Registration Statement and the Company Proxy Statement shall comply as to form and substance in all material respects with the applicable provisions of the Securities Act and the Exchange Act and the rules and regulations thereunder. Parent shall, as promptly as practicable after receipt thereof, provide copies of any written comments received from the SEC with respect to the Registration Statements and the Company

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Proxy Statement to the Company, and advise the Company of any oral comments with respect to the Registration Statements or the Company Proxy Statement, as the case may be, received from the SEC. Parent agrees to use reasonable best efforts, and Company agrees to cooperate, to cause the Registration Statements to be declared effective under the Securities Act as soon as reasonably practicable after April 30, 2003, and the Company agrees to mail the Company Proxy Statement to its stockholders as promptly as practicable after the Merger Registration Statement is declared effective. The Company shall furnish to Parent all information concerning the Company, and its officers, directors and stockholders as may be necessary in connection with the preparation and filing of each Registration Statement and the Company Proxy Statement and any amendments or supplements thereto.

(b)    Each of Parent and the Company agrees, as to itself and its Subsidiaries, that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) either Registration Statement will, at the time such Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, 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 and (ii) the Company Proxy Statement and any amendment or supplement thereto, will, at the date of mailing to stockholders and the Company Stockholder Meeting, 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 Company agrees promptly to advise Parent if at any time during which the Company Proxy Statement is required to be delivered any information contained in the Company Proxy Statement becomes incorrect or incomplete in any material respect and to provide Parent with the information necessary to correct such inaccuracy or omission.

(c)    Parent agrees to advise the Company, promptly after Parent receives notice thereof, of the time when either such Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of the Parent Common Stock for offering or sale in any jurisdiction, of the initiation or threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of either Registration Statement or for additional information.

5.2    Meeting of Company Stockholders.

(a)    The Company will take all action necessary in accordance with Pennsylvania Law and its Articles of Incorporation and Bylaws to convene the Company Stockholder Meeting to be held as promptly as practicable after the Merger Registration Statement is declared effective, for the purpose of voting upon this Agreement, the Merger and the transactions contemplated herein. The Company will use its reasonable best efforts to solicit from its stockholders proxies in favor of the adoption and approval of this Agreement and the approval of the Merger and will take all other action necessary or advisable to secure the vote or consent of its stockholders required by Pennsylvania Law and all other applicable legal requirements to obtain such approvals.

(b)    (i) The Board of Directors of the Company shall recommend that the Company’s stockholders vote in favor of and adopt and approve this Agreement, the Merger and the

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transactions contemplated herein at the Company Stockholder Meeting; (ii) the Proxy Statement shall include a statement to the effect that the Board of Directors of the Company has recommended that the Company’s stockholders vote in favor of and adopt and approve this Agreement, the Merger and the transactions contemplated herein at the Company Stockholder Meeting; and (iii) the Board of Directors of the Company shall not withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in a manner adverse to the Parent, its recommendation that the Company’s stockholders vote in favor of and adopt and approve this Agreement, the Merger and the transactions contemplated hereby.

5.3    Access to Information.  Between the date of this Agreement and the earlier of the Effective Time or the termination of this Agreement, the Company shall (a) give Parent and its officers, employees, accountants, counsel, financing sources and other agents and representatives reasonable access to all buildings, offices, and other facilities and to all Books and Records of the Company and its Subsidiaries, whether located on the premises of the Company or at another location; (b) permit Parent to make such inspections as it may require; (c) cause its officers to furnish Parent such financial, operating, technical and product data and other information with respect to the business and Assets and Properties of the Company and its Subsidiaries as Parent from time to time may request, including financial statements and schedules; (d) allow Parent the opportunity to interview such employees and other personnel and Affiliates of the Company and its Subsidiaries; and (e) assist and cooperate with Parent in the development of integration plans for implementation by Parent and the Surviving Corporation following the Effective Time; provided; however, that no investigation pursuant to this Section 5.3 shall affect or be deemed to modify any representation or warranty made by the Company herein. Materials furnished to Parent pursuant to this Section 5.3 may be used by Parent for strategic and integration planning purposes relating to accomplishing the transactions contemplated hereby.

5.4    Confidentiality.  The parties acknowledge that Parent and the Company have previously executed a non-disclosure agreement dated February 21, 2002, and April 15, 2002 (the “Confidentiality Agreements”), and that each such Confidentiality Agreement shall continue in full force and effect in accordance with its terms.

5.5    Expenses.  Except as otherwise provided in this Agreement, and whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger (including, without limitation, all legal, accounting, consulting, broker’s and finder’s fees) and all other fees and expenses of third parties incurred by a party in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby, shall be the obligation of the respective party incurring such fees and expenses; provided, however, that Parent shall (a) pay the success fee payable by the Company to CIBC World Markets Corp. upon Closing; (b) pay the Company’s documented and reasonable costs and expenses (including fairness opinion fees) incurred in connection with this Agreement and the transactions contemplated herein within thirty (30) days of invoice therefor; (c) pay all filing fees with respect to the HSR Act; and (d) pay all fees associated with the preparation and filing of the Registration Statements, including reasonable attorneys’ fees for one outside counsel to review such Registration Statements on behalf of the Company (except Parent shall not be required to pay any brokers commissions or selling, legal, or other expenses of a stockholder related thereto).

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5.6    Public Disclosure.  Unless otherwise required by Law (including federal and state securities Laws) or, as to Parent, by the rules and regulations of the NYSE, prior to the Effective Time, no public disclosure (whether or not in response to any inquiry) of the existence of any subject matter of, or the terms and conditions of, this Agreement shall be made by any party hereto or any of their respective representatives unless approved by Parent and the Company prior to release; provided, however, that such approval shall not be unreasonably withheld or delayed.

5.7    Regulatory Applications.

(a)    Parent and the Company shall cooperate and use their respective reasonable best efforts (i) to prepare all documentation, to effect all filings (including, without limitation, filings under the HSR Act) and to obtain all permits, consents, approvals and authorizations of all third parties and Governmental or Regulatory Authorities necessary to consummate the transactions contemplated by this Agreement and (ii) to cause the Merger to be consummated as expeditiously as reasonably practicable. Each of Parent and the Company shall have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable Laws relating to the exchange of information, with respect to, all material written information submitted to any third party or any Governmental or Regulatory Authority in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable. Each party hereto agrees that it will consult with the other party hereto with respect to the obtaining of all material permits, consents, approvals and authorizations of all third parties and Governmental and Regulatory Authorities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other party apprised of the status of material matters relating to completion of the transactions contemplated hereby.

(b)    Each party agrees, upon request, to furnish the other party with all information concerning itself, its Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other party or any of its Subsidiaries to any third party or Governmental or Regulatory Authority.

5.8    FIRPTA Compliance.  Within thirty (30) days prior to the Closing Date, the Company shall deliver to Parent a properly executed statement in a form reasonably acceptable to Parent for purposes of satisfying Parent’s obligations under Section 1.1445-2(c)(3) of the Income Tax Regulations, a properly executed notice to the IRS required by Section 1.897-2(h) in a form satisfactory to Parent and either evidence satisfactory that the statement and notice have been properly filed with the IRS or authorization for Parent so to file the statement and notice.

5.9    Notification of Certain Matters.  The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (a) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which is likely to cause any representation or warranty of the Company, Parent or Merger Sub, respectively, contained in this Agreement to be untrue or inaccurate as of the date of this Agreement and (b) any failure of the Company, Parent or Merger Sub, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery

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of any notice pursuant to this Section 5.9 shall not limit or otherwise affect any remedies available to the party receiving such notice.

5.10    Additional Documents and Further Assurances; Cooperation.  Subject to the terms and conditions of this Agreement, each party hereto, at the request of the other party hereto, shall execute and deliver such other instruments and do and perform such other acts and things (including all action reasonably necessary to seek and obtain any and all consents, waivers and approvals of any Governmental or Regulatory Authority or Person required in connection with the Merger (provided, however, that Parent shall not be obligated to consent to any divestitures, operational or ownership limitations or activities in connection therewith and no party shall be obligated to make a payment of money as a condition to obtaining any such consent, waiver or approval) as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. Each party agrees to use commercially reasonable efforts to cause the conditions set forth in Article 6 to be satisfied, where the satisfaction of such conditions depends on action or forbearance from action by such party.

5.11    Indemnification.

(a)    For a period of five (5) years after the Effective Time, Parent agrees that it will indemnify, defend and hold harmless each present and former director, officer, employee, agent and representative of the Company (when acting in such capacity) determined as of the Effective Time (the “Company Indemnified Parties”), against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities (collectively, “Costs”) incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that the Company would have been permitted under Pennsylvania Law and its Articles of Incorporation, Bylaws and other agreements in effect on the date hereof (including the insurance policies described in Section 5.11(d) hereof) to indemnify such Person (and Parent shall also advance expenses as incurred to the fullest extent permitted under applicable Law, the Company’s Articles of Incorporation, Bylaws and such other agreements in effect on the date hereof; provided, however, that the Person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Person is not entitled to indemnification).

(b)    Any Company Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 5.11, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right to assume the defense thereof and Parent shall not be liable to such Company Indemnified Parties for any legal expenses of other counselor any other expenses subsequently incurred by such Company Indemnified Parties in connection with the defense thereof, (ii) the Company Indemnified Parties will cooperate in the defense of any such matter and (iii) Parent shall not be liable for any settlement effected without its prior written consent, which consent shall not be unreasonably withheld; and provided, further, that Parent shall not have any obligation hereunder to any Company Indemnified Party if and when a court of competent jurisdiction shall ultimately determine, and such determination shall have become

40

final, that the indemnification of such Company Indemnified Party in the manner contemplated hereby is prohibited by applicable Law.

(c)    The provisions of this Section 5.11 are intended to be for the benefit of, and shall be enforceable by, each of the Company Indemnified Parties and their heirs and estates. Nothing in this Section 5.11 shall limit in any way any other rights to indemnification that any current or former director or officer of the Company may have by Contract or otherwise.

(d)    For a period of six (6) years after the date of this Agreement, Parent shall cause to be maintained in effect the current policies of directors’ and officers’ liability insurance maintained by the Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous) with respect to claims arising from facts or events which occurred before the date of this Agreement; provided, however, that Parent shall not be obligated to make annual premium payments for such insurance to the extent such premiums exceed one hundred forty percent (140%) of the premiums paid as of the date hereof by the Company for such insurance; provided, further, that to the extent such directors’ and officers’ liability insurance is not maintained pursuant to this Section 5.11(d) because the annual premium payments exceed one hundred forty percent (140%) of the premiums paid as of the date hereof, then Parent shall be obligated to indemnify any such director or officer for any claim that would have been covered by such existing directors’ and officers’ liability insurance policy had it been maintained. Parent will receive the benefit of any unearned premiums on any insurance policies maintained by the Company in existence on the date of this Agreement.

5.12    Company’s Financial Statements.  The Company will cause its management to facilitate on a timely basis (a) the preparation of financial statements (including pro forma financial statements if required) as required by Parent to comply with applicable SEC regulations, (b) the review of any Company Books and Records, including the examination of selected interim financial statements and data, and (c) the delivery of such representations from the Company’s independent accountants as may be reasonably requested by Parent or its accountants.

5.13    Company Affiliate Agreements.  Set forth in Section 5.13 of the Company Disclosure Schedule is a list of those persons who may be deemed to be, in the Company’s reasonable judgment, affiliates of the Company within the meaning of Rule 145 promulgated under the Securities Act as of the date hereof and as updated as of the date of the Company Stockholder Meeting (“Company Affiliates”). The Company will provide to Parent with such information and documents as Parent reasonably requests for purposes of reviewing such list. The Company will use its best efforts to deliver or cause to be delivered to Parent as promptly as practicable on or following the Company Stockholder Meeting from each Company Affiliate (as determined on the date of such Company Stockholders Meeting) an executed affiliate agreement in substantially the form attached hereto as Exhibit D (the “Company Affiliate Agreement”), each of which will be in full force and effect as of the Effective Time. Parent will be entitled to place appropriate legends on the certificates evidencing any shares of Parent Common Stock to be received by a Company Affiliate pursuant to the terms of this Agreement, and to issue appropriate stop transfer instructions to the transfer agent for the Parent Common Stock, consistent with the terms of the Company Affiliate Agreement.

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5.14    Takeover Statutes.  If any Takeover Statute is or may become applicable to the transactions contemplated hereby, the Board of Directors of the Company will grant such approvals and take such actions as are necessary so that the transactions contemplated by this Agreement and the Ancillary Agreements may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate the effects of any Takeover Statute on any of the transactions contemplated hereby.

5.15    [INTENTIONALLY OMITTED]

5.16    NYSE Listing Application.  Prior to the Effective Time, Parent shall, to the extent required by the rules of the NYSE, file with the NYSE a listing application or other notice as may be required with respect to the shares of Parent Common Stock to be issued to the holders of Company Capital Stock in the Merger, and shall use commercially reasonable efforts to obtain, prior to the Effective Time, approval (if required) for the listing of such Parent Common Stock, subject to official notice of issuance.

5.17    Certain Tax Matters.  It is the intention of Parent and Company that the transactions contemplated hereby shall constitute a reorganization within the meaning of Section 368(a) of the Code such that the exchange of Company Capital Stock for Parent Common Stock is a tax-free exchange, but only to the extent that the stockholders of the Company receive shares of Parent Common Stock. Parent shall endeavor to obtain an opinion of Troutman Sanders LLP, counsel to Parent, dated the Closing Date, to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, the receipt of shares of Parent Common Stock by the Company stockholders in the Merger does not result in the recognition of gain or loss to such stockholder for United States federal income tax purposes; provided however, that the delivery of such opinion shall only be a condition to closing for purposes of Article 6 to the extent the Merger Consideration paid to by Parent shall be calculated pursuant to either of Section 1.6(a)(iii) or Section 1.6(b)(iii). In rendering its opinion, Troutman Sanders LLP may require and rely upon customary representations contained in letters from the Company, Parent, Merger Sub and stockholders of the Company. Each of Parent and the Company will timely satisfy, or cause to be timely satisfied, all applicable tax reporting and filing requirements contained in the Code and Income Tax Regulations with respect to the Merger. If Parent is unable to obtain the opinion described in this Section 5.17, and provided that the Key Employees exercise all vested Company Options prior to or on the date hereof, then the Closing may be delayed so as to be no earlier than one (1) year and one (1) day from the date of this Agreement.

5.18    Operating Plan.  The Operating Plan of the Company, which among other things, sets forth the restructuring of the Company’s operations, shall remain in full force and effect through the Effective Time. The parties agree that such Operating Plan shall not be modified or amended without the consent of both Parent and the Company. Parent further agrees to assume all costs associated with such restructuring, including payment of severance, cancellation of Contracts (if necessary), and other expenses that may be incurred and directly related to the restructuring. Such costs shall not be considered part of Parent’s capital contribution to the Company. To the extent that any further restructuring occurs, the parties shall mutually agree on the allocation of costs therefor.

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5.19    Board of Directors of Company.  The Company agrees that from the date of this Agreement through the Effective Time, it will take all necessary action (including, without limitation, the calling of a meeting of the stockholders of the Company and amending its Articles of Incorporation or Bylaws) to ensure that the Board of Directors of the Company shall consist of five (5) members. Parent shall have the right to appoint three (3) nominees and the Company Designee shall have the right to appoint two (2) nominees.

5.20    Benefit Arrangements.  Prior to the Effective Time, the Company will not alter any requirements for coverage (as described in Section 410(b) of the Code and regulations thereunder) under any Benefit Plan. Prior to the Effective Time, Parent and Company shall enter into the Human Resources Agreement in substantially the form as attached hereto as Exhibit E (the “Human Resources Agreement”).

5.21    Fiscal Year.  Prior to the Effective Time, the Company shall change its fiscal year from June 30 to May 31.

5.22    Parent Acquisition Proposal.  If Parent enters into a Business Combination prior to the Effective Time in which Parent is not the surviving company, then the surviving company of such Business Combination shall be obligated to pay the Merger Consideration to the stockholders of the Company as follows: (a) the Parent Closing Price shall be the closing sales price of shares of Parent Common Stock as reported by The Wall Street Journal on the full trading day immediately preceding the date such Business Combination is publicly announced, (b) each Company Milestone that is capable of definitive measurement on the date that is the earlier of the date such Business Combination is consummated and the Closing Date shall be determined on such date and in accordance with Schedule 1.6, and (c) each Company Milestone that is not capable of definitive measurement on the date that is the earlier of the date such Business Combination is consummated and the Closing Date shall determined to be fulfilled (provided such Company Milestone shall not have been conditioned upon the fulfillment of a Company Milestone that was not fulfilled either pursuant to Section 5.22(b) or otherwise).

ARTICLE 6

CONDITIONS TO THE MERGER

6.1    Conditions to Obligations of Each Party to Effect the Merger.  The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction at or prior to the Closing of the following conditions:

(a)    Governmental and Regulatory Approvals.  Approvals from any Governmental or Regulatory Authority necessary for consummation of the transactions contemplated hereby shall have been timely obtained, except for any such approvals the failure of which to obtain would not have a Material Adverse Effect on the Business or Condition of Parent or the Company; and any waiting period applicable to the consummation of the Merger under the HSR Act, if any shall have expired or been terminated.

(b)    No Injunctions or Regulatory Restraints; Illegality.  No temporary restraining order, preliminary or permanent injunction or other Order issued by any court of competent

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jurisdiction or Governmental or Regulatory Authority or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall be in effect; nor shall there be any action taken, or any Law or Order enacted, entered, enforced or deemed applicable to the Merger or the other transactions contemplated by the terms of this Agreement that would prohibit the consummation of the Merger or which would permit consummation of the Merger only if certain divestitures were made or if Parent were to agree to limitations on its business activities or operations.

(c)    Effectiveness of Registration Statements.  The Merger Registration Statement (and to the extent applicable, the Resale Registration Statement) shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Merger Registration Statement (or the Resale Registration Statement, as applicable) shall have been issued and be in effect and no proceedings for that purpose shall have been initiated or threatened by the SEC and not concluded or withdrawn.

6.2    Additional Conditions to Obligations of the Company.  The obligations of the Company to consummate the Merger and the other transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by the Company:

(a)    Representations and Warranties.  The representations and warranties of Parent and Merger Sub contained in this Agreement shall be accurate in all material respects as of the date of this Agreement and as of the Closing Date (without giving effect to any materiality qualification or similar qualifications contained in such representations and warranties).

(b)    Performance.  Parent and Merger Sub shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Parent and Merger Sub at or before the Closing, and the Company shall have received a certificate, dated the Effective Date, signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to such effect.

(c)    Legal Opinion.  The Company shall have received an opinion of Troutman Sanders, LLP, counsel to Parent and Merger Sub, dated as of the Closing Date, in substantially the form of Exhibit F.

(d)    NYSE Listing.  If required by applicable NYSE rules, the shares of Parent Common Stock to be issued in connection with the Merger shall have been authorized for listing on the NYSE upon official notice of issuance.

6.3    Additional Conditions to the Obligations of Parent and Merger Sub.  The obligations of Parent and Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by Parent:

(a)    Representations and Warranties.  The representations and warranties of the Company contained in this Agreement shall be accurate in all material respects as of the date of this Agreement (without giving effect to any materiality qualification or similar qualifications contained in such representations and warranties).

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(b)    Performance.  The Company shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by the Company on or before the Closing Date, and Parent and Merger Sub shall have received a certificate, dated the Effective Date, signed on behalf of the Company by the Chief Executive Officer and the Chief Financial Officer of the Company to such effect.

(c)    Third Party Consents.  Parent shall have been furnished with evidence satisfactory to it that the Company has obtained the consents, approvals and waivers listed (or required to be listed) in Section 2.4 of the Company Disclosure Schedule (except for such consents, approvals and waivers the absence of which, in the aggregate, could not reasonably be expected to have a Material Adverse Effect on the Business or Condition of the Company), and that all such consents, approvals and waivers are in full force and effect.

(d)    Legal Opinion.  Parent shall have received an opinion of Morgan, Lewis & Bockius LLP, counsel to the Company, dated as of the Closing Date, in substantially the form of Exhibit G.

(e)    Stockholder Approval.  This Agreement, the Merger and the transactions contemplated hereby shall have been duly approved by the requisite vote as and to the extent required under Pennsylvania Law by the stockholders of the Company.

(f)    Revenues of the Company.  The Company shall have recognized revenues, computed in accordance with GAAP and on a basis consistent with the Company’s past practices, for the twelve-month period ending April 30, 2003, of not less than 90% of the revenue recognized by the Company for the twelve-month period ended April 30, 2002, but excluding for comparison purposes from the twelve-month period ended April 30, 2002, those revenues set forth on Section 6.3(f) of the Company Disclosure Schedule.

(g)    T-Rex One.  No event, occurrence or change shall have occurred, individually or in the aggregate, that materially and adversely affects Parent’s right to use T-Rex One in the manner contemplated by Parent and the Company in the Operating Plan.

ARTICLE 7

TERMINATION, BREACHES AND AMENDMENT

7.1    Termination.  Except as provided in Section 7.2, this Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time:

(a)    by mutual agreement of the Company, Parent and Merger Sub;

(b)    by Parent, Merger Sub or the Company if: (i) the Effective Time has not occurred before 5:00 p.m. (Eastern Time) on December 31, 2003 (provided, however, that the right to terminate this Agreement under this Section 7.1(b)(i) shall not be available to any party whose willful failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date); (ii) there shall be a final nonappealable order of a federal or state court in effect preventing consummation of the Merger; or (iii) there

45

shall be any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger by any Governmental or Regulatory Authority that would make consummation of the Merger illegal;

(c)    by Parent if it and Merger Sub are not in material breach of their respective representations, warranties, covenants and agreements under this Agreement and the right to use T-Rex One in the manner contemplated by Parent and the Company in the Operating Plan have been materially and adversely affected such that the condition set forth in Section 6.3(g) would not be satisfied as of the Closing Date.

(d)    by the Company if it is not in material breach of its representations and warranties under this Agreement and there has been (i) any breach by Parent or Merger Sub of any of their representations or warranties as of the date of this Agreement and as of the Closing Date which, individually or in the aggregate, has a Material Adverse Effect on the Business or Condition of Parent, or (ii) any breach by Parent or Merger Sub of any covenant or agreement set forth in this Agreement and as a result of such breach the condition set forth in Section 6.2(b) would not be satisfied as of the Closing Date; provided, however, that the parties agree that the Company may, in addition to other remedies available in law or in equity, seek specific performance requiring Parent and Merger Sub to consummate the Merger and the other transactions contemplated hereby and neither Parent nor Merger Sub may interpose as a defense to such action that the Company has an adequate remedy at law; provided, further, that if the Merger and the other transactions contemplated hereby are not consummated as a result of such material breaches by Parent and Merger Sub, then Parent agrees to allow deferral of payments due and owing to Parent from Company for a period of six (6) months beginning on the date the Agreement is terminated pursuant to this Section 7.1(d) and agrees to provide a reasonable amount of working capital to the Company in the form of a loan to enable the Company to continue its operations as previously conducted for a reasonable period of time so as to be able to pursue other outside capital or a sale of the Company; provided, further, that such period of time shall not exceed six (6) months after the date this Agreement is terminated by the Company pursuant to this Section 7.1(d), and the amount of working capital loaned to the Company shall not exceed $8,500,000.

(e)    by Parent and Merger Sub, upon a Company Triggering Event or if the Merger shall not have been approved by the requisite votes or consents, as applicable, of the Company’s stockholders in accordance with Pennsylvania Law at any meeting (or any adjournment thereof) convened for the purpose of taking a vote with respect to the Merger or, in any solicitation of stockholder written consents with respect to the Merger, within twenty (20) days after the record date established for determining the stockholders of the Company entitled to consent (or such shorter period as may be permitted by law; provided, however, that Parent shall have voted all its voting shares of Company Capital Stock (and convert, as required, any Company Common Stock), so as to approve the Merger Agreement, the Merger and the transactions contemplated hereby and thereby.

7.2    Effect of Termination.  In the event of a valid termination of this Agreement as provided in Section 7.1, this Agreement and the Ancillary Agreements shall forthwith become void and there shall be no liability or obligation on the part of Parent, Merger Sub or the Company, or their respective officers, directors or stockholders or Affiliates; provided, further, that each party shall remain liable for any breaches of this Agreement prior to its termination;

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and provided, further, that, the provisions of Sections 5.4, 5.5 and 7.2, Article 8 (exclusive of Section 8.4) and the applicable definitions set forth in Article 9 shall remain in full force and effect and survive any termination of this Agreement.

7.3    Amendment.  Except as is otherwise required by applicable Law after the stockholders of the Company approve the Merger and this Agreement, prior to the Effective Time this Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of each of the parties hereto; provided, however, that no amendment shall be effective that (i) decreases the Merger Consideration, (ii) delays the Closing beyond thirty (30) days following the later of May 31, 2003, and the date all conditions set forth in Article 6 are satisfied, or (iii) otherwise materially and adversely affects the rights of the Company stockholders (other than Parent).

7.4    Extension; Waiver.  At any time prior to the Effective Time, Parent, Merger Sub and the Company may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations of the other party hereto, (b) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements, covenants or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.

ARTICLE 8

MISCELLANEOUS PROVISIONS

8.1    Nonsurvival of Representations, Warranties and Covenants.  All representations, warranties and covenants in this Agreement and in any certificate delivered pursuant hereto shall not survive beyond the Effective Time. Notwithstanding the foregoing, this Section 8.1 shall not limit any covenant or agreement of the parties hereto which by its terms contemplates performance after the Effective Time.

8.2    Notices.  All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission against facsimile confirmation or mailed by internationally recognized overnight courier prepaid, to the parties at the following addresses or facsimile numbers:

If to Parent or	NDCHealth Corporation
Merger Sub	National Data Plaza
	Atlanta, GA 30329
	Telephone No.:(404) 728-2000
	Facsimile No.: (404) 728-2947
	Attn: Chief Executive Officer

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With a copy (which shall not	Troutman Sanders LLP
constitute notice) to:	600 Peachtree Street, N.E., Suite 5200
	Atlanta, GA 30308
	Telephone No.: (404) 885-3000
	Facsimile No.: (404) 962-6616
	Attn: Stephen E. Lewis, Esq.
If to the Company:	TechRx Incorporated
	530 Lindberg Drive
	Coraopolis, PA 15100
	Telephone No.: (412) 474-1000
	Facsimile No.: (412) 474-1074
	Attn: Pritam Advani
With a copy (which shall not	Morgan, Lewis & Bockius LLP
constitute notice) to:	One Oxford Centre, 32nd Floor
	Pittsburgh, PA 15219
	Telephone No.: (412) 560-3300
	Facsimile No.: (412) 560-3399
	Attn: Eric D. Kline, Esq.

All such notices, requests and other communications will (a) if delivered personally to the address as provided in this Section 8.2, be deemed given upon delivery, (b) if delivered by facsimile transmission to the facsimile number as provided for in this Section 8.2, be deemed given upon facsimile confirmation, and (c) if delivered by overnight courier to the address as provided in this Section 8.2, be deemed given on the earlier of the first Business Day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 8.2). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto.

8.3    Entire Agreement.  This Agreement and the Exhibits and Schedules hereto, including the Company Disclosure Schedule and the Parent Disclosure Schedule, constitute the entire Agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, except for the Confidentiality Agreements, which shall continue in full force and effect and shall survive any termination of this Agreement or the Closing in accordance with their terms.

8.4    Further Assurances; Post-Closing Cooperation.  At any time or from time to time after the Closing, the parties shall execute and deliver to the other party such other documents and instruments, provide such materials and information and take such other actions as the other party may reasonably request to consummate the transactions contemplated by this Agreement and otherwise to cause the other party to fulfill its obligations under this Agreement and the transactions contemplated hereby. Each party agrees to use commercially reasonable efforts to cause the conditions to its obligations to consummate the Merger to be satisfied.

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8.5    Waiver.  Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in anyone or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.

8.6    Remedies.  All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

8.7    Third Party Beneficiaries.  The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights, upon any other Person other than any Person entitled to indemnity under Section 5.11.

8.8    No Assignment; Binding Effect.  Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party without the prior written consent of the other party and any attempt to do so will be void; provided, however, that Merger Sub shall have the right to assign its rights, interests and obligations to an acquisition subsidiary of Parent that is a single member limited liability company prior the Effective Time and, to the extent any such assignment occurs, the representations and warranties of Merger Sub set forth in Article 3 hereof shall be appropriately adjusted to apply to such limited liability company for purposes of Section 6.2(a). Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns.

8.9    Invalid Provisions.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

8.10    Governing Law.  This Agreement, the Ancillary Agreements and any other closing documents shall be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

8.11    Arbitration.  All claims arising out of the interpretation, application or enforcement of this Agreement, including but not limited to the breach hereof, shall be settled by final and binding arbitration in Pittsburgh, Pennsylvania in accordance with the then current rules of the American Arbitration Association by a panel of three (3) arbitrators appointed by the

49

American Arbitration Association, and judgment on the arbitration award may be rendered by any court of competent jurisdiction. The prevailing party in the arbitration proceeding shall be awarded reasonable attorneys’ fees, expert witness costs and expenses, and all other costs and expenses incurred in connection with such proceeding, unless the arbitrators shall for good cause determine otherwise.

8.12    Construction.

(a)    The parties hereto agree that this Agreement is the product of negotiation between sophisticated parties and individuals, all of whom were represented by counsel, and each of whom had an opportunity to participate in and did participate in, the drafting of each provision hereof. Accordingly, ambiguities in this Agreement, if any, shall not be construed strictly or in favor of or against any party hereto but rather shall be given a fair and reasonable construction without regard to the rule of contra proferentem. 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.

(b)    Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender and the neuter, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement as a whole and not to any particular Article, Section or other subdivision, (iv) the terms “Article” or “Section” or other subdivision refer to the specified Article, Section or other subdivision of the body of this Agreement, (v) the phrases “ordinary course of business” and “ordinary course of business consistent with past practice” refer to the business and practice of the Company, (vi) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation,” and (vii) when a reference is made in this Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement unless otherwise indicated. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. When used herein, the terms “party” or “parties” refer to Parent and/or Merger Sub, on the one hand, and the Company, on the other, and the terms “third party” or “third parties” refers to Persons other than Parent, Merger Sub or the Company.

(c)    When used herein, the phrase “to the knowledge of’ any Person, “to the best knowledge of’ any Person, “known to” any Person or any similar phrase, means (i) with respect to any Person who is an individual, the actual knowledge of such Person, (ii) with respect to any other person, the actual knowledge of the directors and officers of such Person and other individuals that have a similar position or have similar powers and duties as the officers and directors of such Person, and (iii) in the case of each of (i) and (ii), the knowledge of facts that such individuals should have after due inquiry. For this purpose, “due inquiry” with respect to any matter means inquiry of and consultations with (A) the directors and officers of such Person and other individuals that have a similar position or have similar powers and duties as such officers and directors, (B) other employees of and the advisors to such Person, including legal counsel and outside auditors, who have principal responsibility for the matter in question or are otherwise likely to have information relevant to the matter, and (C) the stockholders owning more than twenty percent (20%) of the equity interests, by vote or value, of such Person.

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8.13    Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

ARTICLE 9

DEFINITIONS

9.1    Definitions.  As used in this Agreement, the following defined terms shall have the meanings indicated below:

“Actions or Proceedings” means any action, suit, complaint, petition, investigation, proceeding, arbitration, litigation or Governmental or Regulatory Authority investigation, audit or other proceeding, whether civil or criminal, in law or in equity, or before any arbitrator or Governmental or Regulatory Authority.

“Affiliate” means, as applied to any Person, (a) any other Person directly or indirectly controlling, controlled by or under common control with, that Person, (b) any other Person that owns or controls (i) ten percent (10%) or more of any class of equity securities of that Person or any of its Affiliates or (ii) ten percent (10%) or more of any class of equity securities (including any equity securities issuable upon the exercise of any option or convertible security) of that Person or any of its Affiliates, or (c) as to a corporation, each director and officer thereof, and as to a partnership, each general partner thereof, and as to a limited liability company, each managing member or similarly authorized person thereof (including officers), and as to any other entity, each Person exercising similar authority to those of a director or officer of a corporation. For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling,” “controlled by,” and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by Contract or otherwise.

“Agreement” means this Agreement and Plan of Merger, including (unless the context otherwise requires) the Exhibits and the Disclosure Schedules and the certificates and instruments delivered in connection herewith, or incorporated by reference, as the same may be amended or supplemented from time to time in accordance with the terms hereof.

“Ancillary Agreements” has the meaning ascribed to it in Section 2.2.

“Approval” means any approval, authorization, consent, permit, qualification or registration, or any waiver of any of the foregoing, required to be obtained from or made with, or any notice, statement or other communication required to be filed with or delivered to, any Governmental or Regulatory Authority or any other Person.

“Articles of Incorporation” means the Articles of Incorporation of the Company, including all Certificates of Designations included therewith.

“Articles of Merger” means the Articles of Merger to be executed by the Company and Merger Sub and filed with the Secretary of State of the Commonwealth of Pennsylvania relating to the Merger as contemplated by Section 1.1.

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“Assets and Properties” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned, licensed or leased by such Person, including cash, cash equivalents, Investment Assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory, goods and Intellectual Property.

“Benefit Plans” has the meaning ascribed to it in Section 2.12(a).

“Books and Records” means all files, documents, instruments, papers, books and records relating to the Business or Condition of a Person, including financial statements, internal reports, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs (including data processing files and records), retrieval programs, operating data and plans and environmental studies and plans, in each case which are material to the operations or finances of the Company.

“Business Combination” means, with respect to any Person, (a) any merger, consolidation, share exchange reorganization or other business combination transaction to which such Person is a party (other than a transaction involving such Person where the sole purpose of the transaction is to change the Person’s state of incorporation), (b) any sale, dividend, split or other disposition of any capital stock or other equity interests of such Person (except for issuances of common stock upon conversion of preferred stock outstanding on the date hereof or upon the exercise of options or warrants outstanding on the date hereof or issued in accordance with the covenants of this Agreement), (c) any tender offer (including a self tender), exchange offer, recapitalization, restructuring, liquidation, dissolution or similar or extraordinary transaction, any sale, dividend or other disposition of all or a material or significant portion of the Assets and Properties of such Person (including by way of exclusive license or joint venture formation, but excluding non-exclusive licenses in connection with the sale or license of such Person’s products or Intellectual Property in the ordinary course of business consistent with past practice) or (e) the entering into of any agreement or understanding, the granting of any rights or options, with respect to any of the foregoing.

“Business or Condition of Parent” means the financial condition, properties, assets, liabilities, business, operations, or results of operations of Parent and its Subsidiaries, considered in the aggregate.

“Business or Condition of the Company” means the financial condition, properties, assets, liabilities, business, operations, or results of operations of the Company and its Subsidiaries, considered in the aggregate.

“Business Day” means a day other than Saturday, Sunday or any day on which banks in New York, New York are authorized or obligated to close.

“Bylaws” means the Bylaws of the Company.

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“Cash Payment” means the Common Cash Payment and the Preferred Cash Payment.

“Certificate of Merger” means the Certificate of Merger to be executed by the Surviving Corporation and filed with the Secretary of State of the State of Delaware relating to the Merger as contemplated by Section 1.1.

“Certificates” has the meaning ascribed to it in Section 1.10(b).

“Closing” has the meaning ascribed to it in Section 1.2.

“Closing Date” has the meaning ascribed to it in Section 1.2.

“Code” means the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Common Cash Payment” means the cash paid to the stockholders of the Company pursuant to Section 1.6(a).

“Common Stock Payment” means the Parent Common Stock issued to the stockholders of the Company pursuant to Section 1.6(a).

“Company” has the meaning ascribed to it in the forepart of this Agreement.

“Company Affiliates” has the meaning ascribed to it in Section 5.13.

“Company Affiliate Agreement” has the meaning ascribed to it in Section 5.13.

“Company Capital Stock” means the Company Common Stock and the Company Preferred Stock.

“Company Closing Price” has the meaning ascribed to it in Schedule 1.6.

“Company Common Stock” has the meaning ascribed to it in Section 1.6(a).

“Company Designee” has the meaning ascribed to it in Schedule 1.6.

“Company Disclosure Schedule” means the schedules delivered to Parent by or on behalf of the Company, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein in connection with the representations and warranties made by the Company in Article 2.

“Company Financials” means the (a) audited consolidated balance sheets of the Company as of each of the fiscal years ended June 30, 1999, June 30, 2000, and June 30, 2001, respectively, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the fiscal years then ended; and (b) Interim Financial Statements.

“Company Indemnified Party” has the meaning ascribed to it in Section 5.11.

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“Company Intellectual Property” shall mean any Intellectual Property that (a) is owned by the Company or any of its Subsidiaries, (b) is licensed to the Company or any of its Subsidiaries or (c) was developed or created by or for the Company or any of its Subsidiaries.

“Company Milestones” has the meaning ascribed to it in Schedule 1.6.

“Company Option(s)” means any Option to purchase Company Capital Stock or the capital stock of any of the Company’s Subsidiaries, excluding the Company Preferred Stock and the Company Warrants.

“Company Permits” has the meaning ascribed to it in Section 2.11(b).

“Company Preferred Stock” has the meaning ascribed to it in Section 2.3(a).

“Company Proxy Statement” has the meaning ascribed to it in Section 5.1(a).

“Company Registered Intellectual Property” means all Registered Intellectual Property owned by, filed in the name of, assigned to or applied for by, the Company or any of its Subsidiaries.

“Company Series A Preferred Stock” has the meaning ascribed to it in Section 2.3(a).

“Company Series B Preferred Stock” has the meaning ascribed to it in Section 2.3(a).

“Company Series C Preferred Stock” has the meaning ascribed to it in Section 2.3(a).

“Company Stock Equivalents” means the Company Common Stock, Company Preferred Stock, Company Options, Company Warrants and any Company Equity Equivalents.

“Company Stock Plan” means the Company 1999 Stock Option Plan, as amended.

“Company Stockholder Meeting” means the meeting of the stockholders of the Company to consider and vote upon this Agreement and the Merger (including the transactions contemplated hereby).

“Company Triggering Event” shall mean the occurrence of any of the following: (a) the Board of Directors of the Company or any committee thereof shall for any reason have withdrawn or shall have amended or modified in a manner adverse to Parent such Board’s recommendation in favor of, the adoption and approval of the Agreement and the approval of the Merger; (b) the Company shall have failed to include in the Company Proxy Statement the recommendation of the Board of Directors of the Company in favor of the adoption and approval of this Agreement and the approval of the Merger; or (c) the Board of Directors of the Company or any committee thereof shall have approved or recommended any Competing Proposed Transaction.

“Company Warrants” means any and all warrants to purchase Company Capital Stock, including the warrants listed in Section 2.3 of the Company Disclosure Schedule.

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“Competing Proposed Transaction” has the meaning ascribed to it in Section 4.2.

“Confidentiality Agreements” has the meaning ascribed to it in Section 5.4

“Contract” means any legally binding agreement, lease, evidence of Indebtedness, mortgage, indenture, security agreement or other Contract or business arrangement (whether written or oral).

“Costs” has the meaning ascribed to it in Section 5.11.

“Damages” means any actually incurred loss, damage, injury, provable decline in value, claim or demand of ascertainable value, settlement, judgment, award, fine, penalty, Tax, fee (including any reasonable legal fee, expert fee, accounting fee or advisory fee), charge, cost (including any cost of investigation) or expense of any nature.

“Delaware Law” means the Delaware General Corporation Law and all amendments and additions thereto.

“Disclosure Schedules” means the Company Disclosure Schedule and the Parent Disclosure Schedule.

“Dissenting Shares” has the meaning ascribed to it in Section 1.9(a).

“Effective Date Price” means the closing sales price of shares of Parent Common Stock as reported by The Wall Street Journal on the second trading day immediately preceding the date the Company Proxy Statement is mailed to the holders of Company Capital Stock in connection with the Company Stockholder Meeting.

“Effective Time” has the meaning ascribed to it in Section 1.2.

“Environment” means air, surface water, ground water, or land, including land surface or subsurface, and any receptors such as persons, wildlife, fish, biota or other natural resources.

“Environmental Law” means any federal, state, local or foreign environmental, health and safety or other Law relating to of Hazardous Materials, including the Comprehensive, Environmental Response Compensation and Liability Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the California Safe Drinking Water and Toxic Enforcement Act.

“Environmental Permit” means any permit, license, approval, consent or authorization required under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued by or entered into with a Governmental or Regulatory Authority.

“EPCRS” has the meaning ascribed to it in Section 2.12(n).

“Equity Equivalents” means securities (including Options to purchase any shares of Company Capital Stock or stock of any Subsidiary) which, by their terms, are or may be

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exercisable, convertible or exchangeable for or into common stock, preferred stock or other securities at the election of the holder thereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means, with respect to a Person, any other Person that is required to be aggregated with such Person under Code Section 414(b), (c), (m) and/or (o) at any time prior to the Closing Date.

“ERISA Plan” has the meaning ascribed to it in Section 2.12(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder.

“Exchange Agent” means an institution selected by Parent and reasonably satisfactory to the Company to act as the exchange agent in the Merger.

“Exchange Ratio” has the meaning ascribed to it in Section 1.6(a).

“GAAP” means generally accepted accounting principles in the United States, as in effect from time to time.

“Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, bureau, board, commission, department, official or other instrumentality of the United States, any foreign county or any domestic or foreign state, county, city or other political subdivision, and shall include any stock exchange, quotation service and the NASD.

“Hazardous Material” means (a) any chemical, material, substance or waste including, containing or constituting petroleum or petroleum products, solvents (including chlorinated solvents), nuclear or radioactive materials, asbestos in any form that is or could become friable, radon, lead-based paint, urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any chemicals, materials, substances or wastes which are now defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants” or words or similar import under any Environmental Law, or (c) any other chemical, material, substance, pollutant or waste which is regulated by any Governmental or Regulatory Authority or which could constitute a nuisance.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Human Resources Agreement” has the meaning ascribed to it in Section 5.20.

“Income Tax Regulations” means regulations, promulgated under the Code.

“Indebtedness” of any Person means all obligations of such Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar instruments, (c) for the deferred

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purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (d) under capital leases or (e) in the nature of guarantees of the obligations described in clauses (a) through (d) above of any other Person.

“Intellectual Property” means all trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, patents and patent rights, utility models and utility model rights, copyrights, mask work rights, brand names, trade dress, product designs, product packaging, business and product names, logos, slogans, rights of publicity, trade secrets, inventions (whether patentable or not), invention disclosures, improvements, processes, formulae, industrial models, processes, designs, specifications, technology, methodologies, computer software (including all source code and object code), firmware, development tools, flow charts, annotations, all Web addresses, sites and domain names, all data bases and data collections and all rights therein, any other confidential and proprietary right or information, whether or not subject to statutory registration, and all related technical information, manufacturing, engineering and technical drawings, know-how and all pending applications for and registrations of patents, utility models, trademarks, service marks and copyrights, and the right to sue for past infringement, if any, in connection with any of the foregoing, and all documents, disks, records, files and other media on which any of the foregoing is stored.

“Interim Financial Statements” means the unaudited consolidated balance sheet of the Company as of August 31, 2001, November 30, 2001, and February 28, 2002, and the related unaudited consolidated statement of operations and statement of cash flows for the nine (9) month period ended on such date.

“Investment Assets” means all debentures, notes and other evidences of Indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets owned of record or beneficially by the Company or any of its Subsidiaries.

“IRS” means the United States Internal Revenue Service or any successor entity.

“Key Employees” has the meaning ascribed to it in the Recitals to this Agreement.

“Law” or “Laws” means any law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in the United States, any foreign country, or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority.

“Leased Real Property(ies)” has the meaning ascribed to it in Section 2.13(a).

“Letter Agreement” means the Letter Agreement between Parent and the Company, dated the date hereof.

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“Liabilities” means all Indebtedness, obligations and other liabilities of a Person, whether absolute, accrued, asserted or unasserted, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due.

“License” means any Contract that grants a Person the right to use or otherwise enjoy the benefits of any Intellectual Property (including any covenants not to sue with respect to any Intellectual Property).

“Liens” means any mortgage, pledge, assessment, security interest, lease, lien, easement, license, covenant, condition, restriction, adverse claim, levy, charge, option, equity, adverse claim or restriction or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing, except for any restrictions on transfer generally arising under any applicable federal or state securities Law.

“Material Adverse Effect” shall mean, with respect to any Person, any event, change or effect that is or is reasonably likely to be materially adverse to the financial condition, properties, assets, liabilities, business, operations, results of operations of such Person and its subsidiaries, taken as a whole, or to prevent or materially delay consummation of the Merger or otherwise prevent such entity and its subsidiaries from performing their obligations under this Agreement; provided, however, that the following shall not be taken into account in determining whether there has been or could or would be a “Material Adverse Effect” on or with respect to a Person: (i) any occurrences relating to the economy of the United States in general or the economies in which such Person operates or the industries in which such Person operates in general and not specifically relating to such Person; (ii) any litigation brought or threatened against a Person or any officer or member of the Board of Directors of such Person in respect of this Agreement or the Merger (including any stockholder class action litigation arising from allegations or a breach of fiduciary duty relating to this Agreement); or (iii) changes in trading prices for such Person’s securities.

“Material Contracts” has the meaning ascribed to it in Section 2.16(a).

“Merger” has the meaning ascribed to it in the Recitals to this Agreement.

“Merger Consideration” shall mean the Cash Payment plus the Stock Payment.

“Merger Registration Statement” has the meaning ascribed to it in Section 5.1(a).

“Merger Sub” has the meaning ascribed to it in the forepart of this Agreement.

“NYSE” means the New York Stock Exchange, Inc.

“Offset Amount” means the maximum amount of Damages that reduces the Company Closing Price calculated pursuant to Section 1.6(g)(i) to be equal to the amount set forth in the first sentence of the first clause of Schedule 1.6.

“Operating Plan” means the written budget and operating plan of the Company, a copy of which is attached hereto as Schedule 9.1.

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“Option” with respect to any Person means any security, right, subscription, warrant, option, “phantom” stock right or other Contract that gives the right to (a) purchase or otherwise receive or be issued any shares of capital stock or other equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of such Person or (b) receive any benefits or rights similar to any rights enjoyed by or accruing to the holder of shares of capital stock or other equity interests of such Person, including any rights to participate in the equity, income or election of directors or officers of such Person.

“Option Agreements” shall mean (i) that certain Option Agreement, dated March 10, 2002, between Parent and Alan J. Hayes, and (ii) that certain Option Agreement, dated March 21, 2002, among Parent, Jimmie J. Barnes and the other parties named therein.

“Order” means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).

“Parent” has the meaning ascribed to it in the forepart of this Agreement.

“Parent Closing Price” means the average closing sales price of shares of Parent Common Stock as reported by The Wall Street Journal, for the twenty (20) consecutive full trading days on which such shares are actually traded on the NYSE ending at the close of trading on the second trading day immediately preceding the Closing Date; provided, however, that if such average closing sales price is more than 110% of the Effective Date Price, then the Parent Closing Price shall be deemed to be 110% of the Effective Date Price; provided, further, that if such average closing sales price is less than 90% of the Effective Date Price, then the Parent Closing Price shall be deemed to be 90% of the Effective Date Price.

“Parent Common Stock” means the shares of common stock, $.125 par value per share, of Parent.

“Parent Disclosure Schedule” has the meaning ascribed to it in the forepart of Article 3.

“Parent SEC Documents” has the meaning ascribed to it in Section 3.4(a).

“Parent Warrants” means a warrant exercisable to acquire Parent Common Stock.

“Pennsylvania Law” means the Pennsylvania Business Corporation Law and all amendments and additions thereto.

“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.

“Preferred Cash Payment” means the cash paid to the stockholders of the Company pursuant to Section 1.6(b).

“Preferred Stock Payment” means the Parent Common Stock issued to the stockholders of the Company pursuant to Section 1.6(b).

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“PTO” means the United States Patent and Trademark Office.

“Qualified Plan” has the meaning ascribed to it in Section 2.12(g).

“Registered Intellectual Property” shall mean all United States, international and foreign: (a) patents and patent applications (including provisional applications); (b) registered trademarks and service marks, applications to register trademarks and service marks, intent-to-use applications, other registrations or applications to trademarks or service marks; (c) registered copyrights and applications for copyright registration; (d) any mask work registrations and applications to register mask works; and (e) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public legal authority to protect or perfect Company’s rights in such Intellectual Property other than filings to perfect liens or other security interests in such Intellectual Property.

“Registration Statements” means the Resale Registration Statement and the Merger Registration Statement.

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of a Hazardous Material into the Environment.

“Representatives” means, with respect to any Person, such Person’s officers, directors, employees, stockholders, attorneys, investment advisors, agents and representatives and Affiliates.

“Resale Registration Statement” has the meaning ascribed to it in Section 5.1(a).

“Restrictive Covenant Agreement” has the meaning ascribed to in the Recitals.

“SEC” means the Securities and Exchange Commission or any successor entity “SEC Documents” means, with respect to any Person, each report, schedule, form, statement or other document filed or required to be filed with the SEC by such Person pursuant to section 13(a) of the Exchange Act.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.

“Site” means any of the real properties currently or previously owned, leased, occupied, used or operated by the Company, any predecessors of the Company, or any entities previously owned by the Company, including all soil, subsoil, surface waters and groundwater.

“Stock Payment” means the Common Stock Payment and the Preferred Stock Payment.

“Subsidiary” means all those corporations, associations, or other business entities of which the entity in question either (i) owns or control 50% or more of the outstanding equity securities either directly or indirectly, (ii) in the case of partnerships, serves as a general partner,

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(iii) in the case of a limited liability company, serves as a managing member, or (iv) otherwise has the ability to elect a majority of the director, trustee or managing members thereof.

“Surviving Corporation” means the surviving corporation in the Merger as provided in Section 1.1.

“Takeover Statute” means a “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation enacted under state or federal Laws in the United States, including Section 203 of the Delaware Law and Section 2555 of the Pennsylvania Law.

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), Medicare, unemployment, disability, real property, personal property, sales, use, service, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

“Tax Returns” means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) filed or required to be filed with, or, where none is required to be filed with a Taxing Authority, the statement or other document issued by, a Taxing Authority in connection with any Tax.

“Taxing Authority” means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax.

“Voting and Lock-Up Agreement” has the meaning ascribed to it in the Recitals to this Agreement.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be signed by their duly authorized representatives, all as of the date first written above.

NDCHEALTH CORPORATION
By:	/s/    RANDOLPH L.M. HUTTO
	Name: Randolph L.M. Hutto Title: Executive Vice President and Chief Financial Officer

NDC ACQUISITION CORP.
By:	/s/    RANDOLPH L.M. HUTTO
	Name: Randolph L.M. Hutto Title: Executive Vice President, Chief Financial Officer and Treasurer

TECHRX INCORPORATED
By:	/s/    JOSEPH J. PORFELI
	Name: Joseph J. Porfeli Title: Chairman and Chief Executive Officer

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SCHEDULE 1.6

COMPANY CLOSING PRICE

“Company Closing Price” shall mean an amount equal to $4.00, but adjusted as follows:

(1) increased by $0.25 if the Company’s Revenues arising from sales of its Legacy Systems during the Relevant Period are equal to or greater than 95% of the amounts therefor reflected on the Plan;

(2) increased by $0.50 if the Company and [****] execute a license agreement (with materially the same or better terms for the Company as contained in the [****] Term Sheet) for T-Rex One (the “[****] License Agreement”) at or before the Closing;

(3) increased by $0.50 if the Company and [****] execute a license agreement (with materially the same or better terms for the Company as contained in the [****] Term Sheet) for T-Rex One (the “[****] License Agreement”) at or before the Closing;

(4) increased by $0.50 if the Company and the Third Chain execute a license agreement (with materially the same or better terms for the company as contained in the [****] Term Sheet or the [****] Term Sheet) for T-Rex One (the “Third Chain License Agreement”) at or before the Closing;

(5) decreased by $0.05 per $1,000,000 (or portion thereof) of penalties assessed against the Company pursuant to the [****] License Agreement, up to a maximum amount of $0.50;

(6) increased by $0.50 if Milestone 2 has been achieved and written acceptance of T-Rex One by [****] occurs pursuant to the terms of the [****] License Agreement on or before April 1, 2003 (provided such acceptance may be limited to the test sites and converted stores, if any, at which [****] is then using T-Rex One);

(7) decreased by $0.50 if Milestone 2 has been achieved and written acceptance of T-Rex One by [****] does not occur pursuant to the terms of the [****] License Agreement on or before May 31, 2003, as a result of the Company’s failure to comply with its obligations under the [****] License Agreement;

(8) increased by $0.50 if Milestone 3 has been achieved and written acceptance of T-Rex One by [****] occurs pursuant to the terms of the [****] License Agreement on or before April 1, 2003 (provided such acceptance may be limited to the test sites and converted stores, if any, at which [****] is then using T-Rex One);

[****] Confidential treatment requested. Confidential portions of this page have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

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(9) decreased by $0.50 if Milestone 3 has been achieved and written acceptance of T-Rex One by [****] does not occur pursuant to the terms of the [****] License Agreement on or before May 31, 2003, as a result of the Company’s failure to comply with its obligations under the [****] License Agreement;

(10) increased by $0.50 if Milestone 4 has been achieved and written acceptance of T-Rex One by the Third Chain occurs pursuant to the terms of the Third Chain License Agreement on or before April 1, 2003 (provided such acceptance may be limited to the test sites and converted stores, if any, at which the Third Chain is then using T-Rex One);

(11) decreased by $0.50 if Milestone 4 is achieved and written acceptance of T-Rex One by the Third Chain does not occur pursuant to the terms of the Third Chain License Agreement on or before May 31, 2003, as a result of the Company’s failure to comply with its obligations under the Third Chain License Agreement;

(12) increased by $0.25 if the Company’s Operating Margin for the Relevant Period is equal to or better than the amounts therefor reflected on the Plan;

(13) increased by $0.50 if the Company has Converted at least 1,000 Independent Pharmacies to T-Rex One on or before April 30, 2003;

(14) increased by $0.25 if either (i) Parent makes an offer to purchase any capital stock of the Company pursuant to Section 1.14 of the Agreement, or (ii) Parent purchases the Company’s Series B Preferred Stock and the Company Closing Price is equal to or greater than $5.75; and

(15) increased by $0.75 if Parent purchases at least 4,500,000 Company Stock Equivalents in the Company pursuant to Section 1.14 of the Agreement.

Notwithstanding the foregoing:

(a) The Company Milestone reductions pursuant to this Schedule 1.6 cannot exceed the Company Milestone increases.

(b) The Company Closing Price may be further reduced in accordance with the provisions of Section 1.6 of the Agreement.

(c) In the event the Company enters into a license agreement for T-Rex One with more than one (1) Third Chain, the provisions contained in Company Milestones (4), (10) and (11) above shall only be applicable to one such license agreement of Company’s choice.

(d) In the event Parent takes any action or fails to take an action which, in light of the totality of the circumstances (which shall include, without limitation, actions taken by Parent which shall facilitate the achievement of a Company Milestone),

[****] Confidential treatment requested. Confidential portions of this page have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

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materially contributes to the Company’s inability to achieve any Company Milestone, then such Company Milestone shall be deemed to have been satisfied by the Company. Without limiting the generality of the foregoing:

· beyond the restructuring contemplated by the Agreement, if Parent further reduces Company staff in a manner which materially contributes to the failure to achieve a Company Milestone, such Company Milestone shall be considered to be met;

· if Parent alters the terms of the [****] License Agreement or [****] License Agreement from the Term Sheet for such respective License Agreement as in place prior to the date of this Agreement which materially contributes to the failure to achieve a Company Milestone, such Company Milestone shall be considered to be met;

· if Parent assumes effective control over T-Rex One operations, including development or implementations, and/or revises terms under existing license agreements with [****], [****] or Third Chain in a manner which reasonably results in a change to, or delay in, implementation schedules for such respective party, and which materially contributes to the failure to achieve a Company Milestone, such Company Milestone shall be considered to be met or penalty waived, as the case may be;

· if Parent assumes effective control over the finance functions for Company and causes changes which materially contributes to the failure to meet a Company Milestone or Company Milestones, or materially contributes to the Company’s inability to meet the minimum revenue closing condition set forth in Section 6.3(f) of the Agreement, such Company Milestone or closing condition shall be considered to be met;

In all events, Parent shall provide reasonable assistance to reach each Company Milestone consistent with the provisions of this Agreement and the Operating Plan, it being the intention of the parties that realization of Company Milestones is in the long-term interests of both parties (excluding Parent’s ability, in its sole discretion, to make offers pursuant to Company Milestones 14 and 15). To enforce the aforementioned Company Milestones, the procedure set forth in Section (d) below shall be operative.

(e) The satisfaction of any of the Company Milestones set forth in items (1)—(15) shall be deemed to have occurred when agreed to by an independent party or committee identified by the Company (the “Company Designee”) and Parent in accordance herewith. Upon notification by management of the Company that a Company Milestone has been achieved or prevented, the Company Designee shall notify Parent in writing specifying the Company Milestone achieved or prevented and providing reasonable evidence thereof (which shall include, without limitation, a fully executed license agreement with respect to a Company Milestone that requires execution of a license agreement; a certification by the

[****] Confidential treatment requested. Confidential portions of this page have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

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Company and a representative of the applicable third party or third parties with respect to satisfaction of an implementation Company Milestone; and certification by a financial officer of the Company and verified by the appropriate Parent counterpart with respect to a financial Company Milestone). Parent shall respond to the Company Designee in writing as soon as reasonably practicable following receipt of notice from the Company Designee, but in any event within thirty (30) days, as to whether Parent is satisfied with such evidence. If Parent is not reasonably satisfied with such evidence, then the Company Designee and Parent shall promptly meet in person or telephonically to ascertain the reason for the disagreement and any additional evidence required to satisfy Parent that the applicable Company Milestone has been achieved.

(f) The Company Designee and its outside advisors (accounting and legal) shall have access to such information as is reasonably necessary to enforce the Company’s rights under the Agreement, and Parent shall cooperate with the Company Designee in connection therewith. The written determination of the Company Designee and Parent with respect to any disagreement with respect to the matters set forth herein shall be final; provided, however, that if the Company Designee and Parent cannot come to a final agreement with respect to any matter, such matter shall be subject to binding arbitration in accordance with Section 8.11 of the Agreement.

For purposes of this Schedule 1.6, the following terms shall have the following respective meanings:

(i) “[****]” shall mean [****] (or any Subsidiary or Affiliate of [****] to which the [****] License Agreement may be assigned; provided, however, that the [****] License Agreement shall be for pharmacy operations in at least 500 of its stores).

(ii) “[****] Term Sheet” shall mean the term sheet between [****] and the Company for a license of T-Rex One, a copy of which is attached hereto as Appendix 1.

(iii) “Converted” shall mean pharmacy systems migrated from a Legacy System or a new customer for T-Rex One.

(iv) “[****]” shall mean [****] (or any Subsidiary or Affiliate of [****] to which the [****] License Agreement may be assigned; provided, however, that the [****] License Agreement shall be for pharmacy operations in at least 500 of its stores).

(v) “[****] Term Sheet” shall mean the term sheet between [****] and the Company for a license of T-Rex One, a copy of which is attached hereto as Appendix 2.

(vi) “Independent Pharmacy” shall mean pharmacy, or a chain of pharmacies, with ten stores or less under common ownership.

[****] Confidential treatment requested. Confidential portions of this page have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

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(vii) “Legacy Systems” shall mean any Company system other than T-Rex One.

(viii) “Operating Margin” shall mean operating margin as a percentage of revenue (excluding non-recurring restructuring costs).

(ix) “Plan” shall mean the Operating Plan as defined in the Agreement.

(x) “Relevant Period” shall mean the three (3) month period beginning February 1, 2003, and ending April 30, 2003.

(xi) “Revenues” shall mean revenues recognized less returns, refunds, rebates and allowances.

(xii) “Third Chain” shall mean any retail chain with pharmacy operations in at least 500 of its stores.

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The following is a list of omitted schedules and exhibits. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Commission upon request.

Exhibit A—Key Employees

Exhibit B—Form of Voting and Lock-Up Agreement

Exhibit C—Form of Restrictive Covenant Agreement

Exhibit D—Form of Company Affiliate Agreement

Exhibit E—Human Resources Agreement

Exhibit F—Legal Opinion of Counsel to Parent and Merger Sub

Exhibit G—Legal Opinion of Counsel to the Company

Company Disclosure Schedule

Parent Disclosure Schedule

Schedule 9.1—Operating Plan

EX-10.XIV

Exhibit 10 (xiv)

Confidential treatment requested. Confidential portions of this document have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

ASSET PURCHASE AGREEMENT

BETWEEN

ARCLIGHT SYSTEMS LLC

AND

NDCHEALTH CORPORATION

Dated as of May 29, 2002

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is dated as of May 29, 2002 the “Agreement”) by and between Arclight Systems LLC, a Delaware limited liability company (“Seller”), and NDCHealth Corporation, a Delaware corporation (“Buyer”).

PRELIMINARY STATEMENT

WHEREAS, Seller is, among other things, in the business of providing switching services and pre-adjudication and post-adjudication prescription claims editing services to the retail pharmacy segment (the “Business”);

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, certain assets of Seller relating to the Business; and

WHEREAS, Seller is, among other things, in the business of providing data-based products and services with respect to retail (including mail order and long term care) prescription claims dispensing data and retail prescription claim adjudication outsourcing services to pharmacy benefit managers which Seller does not desire to sell to Buyer (together with all other businesses of Seller except for the Business, the “Excluded Business”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed between Seller and Buyer as follows:

ARTICLE I

DEFINITIONS

1.1    Definitions.

The capitalized terms used in this Agreement have the meanings set forth or referenced in this Section 1.1. Any reference in this Agreement, including the attachments hereto, to a month-end as of which a calculation is made shall be deemed to refer to the close of business on the last business day of such month. The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. The terms “dollars” and “$” shall mean United States Dollars.

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly is controlled by such Person. For purposes of this definition, “control” of a Person shall have the meaning set forth in Rule 405 promulgated under the Securities Act of 1933.

“Agreement” has the meaning specified in the preamble.

“Allocation Schedule” has the meaning specified in Section 3.2.

“Assigned Chain Contract” means any Assigned Contract between Seller and a customer that has ten (10) or more retail outlets that are the subject of such Assigned Contract.

“Assigned Contracts” has the meaning specified in Section 2.1(a). The contracts governed by the Subcontract Services Agreement shall be treated as Assigned Contracts for purposes of the representations and warranties of Seller from and after the date hereof, and each shall be treated as an Assigned Contract for all other purposes under this Agreement from and after the date of the assignment of such contract.

“Assumed Liabilities” has the meaning specified in Section 2.3.

“Bill of Sale and Instrument of Assignment” means the Bill of Sale and Instrument of Assignment in the form of Exhibit A.

“Business” has the meaning specified in the Preliminary Statement to this Agreement.

“Buyer” has the meaning specified in the first paragraph of this Agreement.

“Buyer Ancillary Agreements” means all agreements, instruments and documents being or to be executed and delivered by Buyer or its Affiliates pursuant to Section 4.3.

“Buyer Group Member” means (a) Buyer and its Affiliates, (b) directors, officers and employees of Buyer and its Affiliates and (c) the respective successors and assigns of the foregoing.

“Cardinal” means Cardinal Health, Inc., an Ohio corporation.

“Claim Notice” has the meaning specified in Section 11.3.

“Closing” means the closing of the transfer of the Purchased Assets from Seller to Buyer.

“Closing Date” has the meaning specified in Section 4.1.

“Closing Date Payment” has the meaning specified in Section 3.1.

“Code” means the Internal Revenue Code of 1986 and any regulations promulgated thereunder.

“Confidentiality Agreement” means that certain Confidentiality and Non-Disclosure Agreement dated September 20, 2001 by and between Buyer and Seller, as amended by that certain addendum dated March 4, 2002, as amended by that certain amendment to the addendum dated March 20, 2002.

“Court Order” means any judgment, order, award or decree of any foreign, federal, state, local or other court or tribunal and any award in any arbitration proceeding.

“Data Rights” has the meaning specified in Section 8.4(a).

“Employees” has the meaning specified in Section 7.5.

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“Encumbrance” means any lien, claim, charge, security interest, mortgage, pledge, easement, conditional sale or other title retention agreement, defect in title or other restrictions of a similar kind.

“Excluded Assets” has the meaning specified in Section 2.2.

“Excluded Business” has the meaning specified in the Preliminary Statement to this Agreement.

“Excluded Liabilities” has the meaning specified in Section 2.4.

“Expenses” means any and all reasonable out-of-pocket expenses incurred in connection with defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including reasonable fees and disbursements of legal counsel).

“Financial Statements” has the meaning specified in Section 5.3.

“Financial Statements Date” means December 31, 2001.

“GAAP” means United States generally accepted accounting principles, consistently applied, in effect at the date of the financial statement to which it refers.

“Governmental Body” means any federal, state, municipal, or other governmental court, department, commission, board, bureau, agency, instrumentality or other governmental authority or regulatory body, domestic or foreign.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“Indemnified Party” has the meaning specified in Section 11.3.

“Indemnitor” has the meaning specified in Section 11.3.

“Instrument of Assumption” means the Instrument of Assumption in the form of Exhibit B.

“Intellectual Property” means all ideas, discoveries, improvements, patents, designs (useful or ornamental), art work, labels, specifications, designs-in-progress, formulations, know-how, prototypes, inventions (whether patented or patentable), trademarks, trade names, trade styles, service marks, and copyrights, whether completed or a work-in-process; all registrations and applications therefor, both registered and unregistered, foreign and domestic; all trade secrets, technology or processes; and all confidential or proprietary information. Intellectual Property does not include Software or any copyright interest in Software.

“IRS” means the Internal Revenue Service.

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“Knowledge of Buyer” (or similar words) means, as to a particular matter, the actual knowledge of Walter M. Hoff, Randolph L.M. Hutto, James F. Campbell, David E. Oles, Joseph Rector and Steve Groover.

“Knowledge of Seller” (or similar words) means, as to a particular matter, the actual knowledge of Thomas Ludlam, Fritz Krieger, Michael Baird, Steve Lawrence and Paul Hooper and, with respect to Section 5.6, the actual knowledge of the aforementioned employees and David Waller, Lisa Stewart, Edward Costello, Scott Laws and Kelee Summers after reasonable inquiry within Seller.

“Losses” means any and all losses, costs, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies and other charges, and diminution in value of the Purchased Assets, it being understood that Losses shall not include punitive, special, consequential or opportunity cost damages.

“Material Adverse Effect” means an event, change or occurrence which, individually or together with any other event, change or occurrence, has had or will have a material adverse effect on (a) the Purchased Assets taken as a whole or (b) the financial position, business or results of operations of the Business taken as a whole, other than changes (i) relating to generally applicable economic conditions or the industry of the Business in general, to the extent the foregoing do not disproportionately affect the Purchased Assets, (ii) resulting from the public disclosure of Buyer as the purchaser of the Business, or (iii) resulting from former customers of Seller who become customers of Buyer.

“Member Services Agreement” means the Member Services Agreement in the Form of Exhibit C.

“Other Edits” means the prescription edits described in Item 2 of Schedule 5.8(a).

“Permitted Encumbrances” means (a) liens for Taxes and other governmental charges and assessments which are not yet due and payable, (b) liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable, (c) Encumbrances identified as Permitted Encumbrances on the Schedules to this Agreement, and (d) other minor Encumbrances or imperfections on property which in the aggregate are not material in amount or do not materially detract from the value of or materially impair the existing use of the property affected by such lien or imperfection.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, other entity or Governmental Body.

“Prorated Rebate Amount” has the meaning specified in Section 3.3(a).

“Prorated Rebate Certificate” has the meaning specified in Section 3.3(a).

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“Purchased Assets” has the meaning specified in Section 2.1.

“Purchase Price” has the meaning specified in Section 3.1.

“Purchased Intellectual Property” has the meaning specified in Section 2.1(b).

“Requirements of Law” means any foreign, federal, state and local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Body and common law.

“ScriptLINE Sublicense Agreement” means the ScriptLINE Sublicense Agreement in the form of Exhibit D.

“Seller” has the meaning specified in the first paragraph of this Agreement.

“Seller Ancillary Agreements” means all agreements, instruments and documents being or to be executed and delivered by Seller pursuant to Section 4.4.

“Seller Group Member” means (a) Seller and its Affiliates, (b) directors, managers, officers and employees of Seller and its Affiliates and (c) the respective successors and assigns of the foregoing.

“Software” means computer software programs and software systems, including, without limitation, all databases, compilations, tool sets, compilers, higher level “proprietary” languages, related documentation and materials, whether in source code, object code or human readable form; provided, however, that Software does not include software that is available generally through consumer retail stores, distribution networks or is otherwise subject to “shrink-wrap” or “click-wrap” license agreements including, without limitation, any software pre-installed in the ordinary course of business on hardware.

“Software Modifications” means the modifications to code listed in Schedule 1.1 developed by or for Seller to the Software licensed by Seller from Comcotec, Inc., which modifications are used by Seller in performing the pre-adjudication and post-adjudication prescription claims editing services pursuant to the Assigned Contracts.

“Subcontract Services Agreement” means the Subcontract Services Agreement in the form of Exhibit F.

“Tax” means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value added, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any governmental authority.

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“Tax Return” means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

“Transition Services Agreement” means the Transition Services Agreement in the form of Exhibit E.

1.2    Interpretation.

As used in this Agreement, the word “including” means without limitation, the word “or” is not exclusive and the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (a) to Paragraphs, Recitals, Articles, Sections, Exhibits and Schedules mean the Paragraphs, Recitals, Articles and Sections of and the Exhibits and Schedules attached to this Agreement; (b) to an agreement, instrument or other document means such agreement, instrument or other document as amended, restated, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement; and (c) to a statute means such statute as amended from time to time and includes any successor legislation thereto. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. Titles to Articles and headings of Sections are inserted for convenience of reference only and shall not be deemed a part of or to affect meaning or interpretation of this Agreement.

ARTICLE II

PURCHASE AND SALE

2.1    Transfer of Assets.

Subject to the terms and conditions of this Agreement, other than the Excluded Assets, Seller will sell, convey, assign, transfer and deliver to Buyer, and Buyer, will purchase, assume and acquire from Seller, all of Seller’s right, title and interest in and to the following assets (the “Purchased Assets”):

(a)    all of the customer agreements of the Business in effect on the Closing Date, including each of the business agreements identified in Schedule 2.1(a) unless terminated in accordance with its terms (collectively, the “Assigned Contracts”), and all rights, claims and causes of action related thereto to the extent relating to the period after the Closing Date;

(b)    all Intellectual Property used in the Business that is embodied in the business rules and other design information and documentation for the data receipt, parsing, editing, report writing, pre and post editing, switch and data delivery functions performed by Seller in the performance of the Assigned Contracts, specifically including trade secrets, know-how and report forms but specifically excluding the Intellectual Property identified in Schedule 2.1(b) (the “Purchased Intellectual Property”);

(c)    all historical customer files and other business records related to the Assigned Contracts and otherwise related exclusively to the Business; and

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(d)  all historical data related to the performance of the Assigned Contracts that Seller may still have either online or in storage on magnetic media or otherwise.

2.2    Excluded Assets.

Notwithstanding anything to the contrary contained herein, nothing in this Agreement will constitute or be construed as conferring on Buyer, and Buyer is not acquiring, any right, title or interest in or to the following, all of the following being specifically excluded from the sale of assets contemplated by this Agreement (collectively, the “Excluded Assets”):

(a)  the assets (including contracts) not listed or described as Purchased Assets, including the assets identified in Schedule 2.2(a);

(b)  any properties, assets, business or operation of Seller, whether tangible or intangible, real, personal or mixed, related primarily to the Excluded Business;

(c)  any receivables arising under the Assigned Contracts to the extent relating to the period prior to the Closing Date, together with any cash, cash equivalents, bank deposits and marketable securities of Seller and all accounting or general ledger records of Seller;

(d)  all rights, claims and causes of action related to the Assigned Contracts to the extent relating to the period prior to the Closing Date;

(e)  any abatement or refund of any Tax for which Seller is liable pursuant to Section 8.1; and

(f)  any rights, claims or causes of action against any third parties relating to the Excluded Assets or the Excluded Liabilities.

2.3    Assumed Liabilities.

On the Closing Date, other than the Excluded Liabilities, Buyer will assume and be responsible and liable for all obligations and liabilities (i) under the Assigned Contracts arising from and after the Closing, except to the extent any such obligations arise from a default occurring on or before the Closing Date, (ii) any performance guarantees or other provisions of the Assigned Contracts that may result in rebates payable for periods prior to the Closing, and (iii) those obligations and liabilities identified on Schedule 2.3 (collectively, “Assumed Liabilities”).

2.4    Excluded Liabilities.

Except for the Assumed Liabilities, Seller shall retain all obligations and liabilities of Seller, whether known or unknown, absolute, contingent or otherwise (collectively, the “Excluded Liabilities”) including:

(a)  the obligations and liabilities under the Assigned Contracts to the extent related to the period prior to the Closing;

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(b)    obligations and liabilities of Seller in respect of any Excluded Assets or other assets of Seller which are not Purchased Assets;

(c)    liabilities of Seller’s employee benefit arrangements; and

(d)    any costs and expenses incurred by Seller incident to its negotiation and preparation of this Agreement and its performance and compliance with the agreements and conditions contained herein.

ARTICLE III

PURCHASE PRICE

3.1    Purchase Price.    

The purchase price for the Purchased Assets shall be equal to $81 million in cash (the “Closing Date Payment”) less the Prorated Rebate Amounts (the “Purchase Price”). The Closing Date Payment shall be paid by Buyer pursuant to Section 4.2 hereof. The Prorated Rebate Amounts shall be paid by Seller pursuant to Section 3.3 hereof.

3.2    Allocation of Purchase Price.    

Prior to the execution of this Agreement, the parties have agreed in writing to a preliminary allocation of the Purchase Price among the Purchased Assets based upon a valuation of the Purchased Assets by Deloitte Touche Tomatsu International, a copy of which is attached hereto as Schedule 3.2. The parties shall jointly prepare a final schedule (the “Allocation Schedule”) allocating the Purchase Price among the Purchased Assets. The Allocation Schedule shall be reasonable, shall reflect the valuations used in the preliminary allocation, and shall be prepared in accordance with Section 1060 of the Code and the regulations thereunder. Buyer and Seller each agree to file IRS Form 8594 and all federal, state, local and foreign Tax Returns, in accordance with the Allocation Schedule. Buyer and Seller each agree to provide the other promptly with any other information required to complete IRS Form 8594. Neither Seller nor Buyer shall file a Tax Return or take any position with any taxing authority that is inconsistent with the Allocation Schedule.

3.3    Purchase Price Adjustment for Rebates.    The Purchase Price shall be decreased by the Prorated Rebate Amounts, which Prorated Rebate Amounts shall be as follows:

(a)    Prior to each of July 31, 2002 and January 31, 2003, Buyer shall deliver to Seller a certificate (each a “Prorated Rebate Certificate”) setting forth Buyer’s calculation of performance guarantees or other provisions of the Assigned Contracts in effect as of the Closing Date that have resulted in rebates payable by Buyer for the quarter ending June 30, 2002 and for the year ending December 31, 2002, respectively, for services provided by Seller prior to the Closing Date that have not previously been paid by Seller (collectively, the “Prorated Rebate Amounts”). The parties agree that volume-based rebates shall compare the volume of transactions processed during the relevant period by Seller prior to the Closing Date to the volume of transactions processed by Buyer on or after the Closing Date (rather than prorating such rebates by time period).

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(b)  Within thirty (30) days after the delivery of such Prorated Rebate Certificate, Seller shall either (i) pay such Prorated Rebate Amount or (ii) deliver a notice of disagreement to Buyer setting forth Seller’s disagreement with the calculated amounts.

(c)  If a notice of disagreement is delivered by Seller pursuant to Section 3.3(b), Buyer and Seller will use good faith efforts to resolve any such disagreement. If, within thirty (30) days of the date of receipt by Buyer of Seller’s notice with disagreement, Buyer and Seller are unable to resolve such disagreement, they shall promptly thereafter appoint a firm of independent accountants of nationally recognized standing (who shall not have any material relationship with Buyer or Seller) to review the disputed calculation of the Prorated Rebate Amount, and to make their own calculation thereof. Such independent accountants shall, as promptly as practicable, deliver a calculation of the Prorated Rebate Amount and a report thereof to Buyer and Seller, and the calculation of the Prorated Rebate Amount effected by such independent accountant shall be final and binding on all parties. The cost of such independent accountant shall be borne equally by Buyer, on the one hand, and Seller, on the other.

(d)  Upon final determination of a Prorated Rebate Amount, if any, Seller shall deliver to Buyer, by wire transfer of immediately available funds to the bank account or accounts specified by Buyer, the amount of such Prorated Rebate Amount so determined.

ARTICLE IV

CLOSING; PAYMENT OF PURCHASE PRICE

4.1    Closing Date.

The Closing shall be consummated on a date and at a time agreed upon by Buyer and Seller, but in no event later than the second (2nd) business day after the conditions set forth in Article IX and Article X have been satisfied or waived, at the offices of Sidley Austin Brown & Wood, Bank One Plaza, Chicago, Illinois, or at such other time and place as shall be agreed upon by Buyer and Seller. The time and date on which the Closing is actually held is referred to herein as the “Closing Date.” The Closing shall be effective at the time when Buyer releases to Seller the Notice to Disburse contemplated by the Escrow Agreement dated as of May 28, 2002 between Buyer and SunTrust Bank.

4.2    Payment of Purchase Price.

At the Closing, Buyer shall pay Seller the Purchase Price by wire transfer of immediately available funds to the bank account or accounts specified by Seller.

4.3    Buyer’s Additional Closing Date Deliveries.

Subject to fulfillment or waiver (where permissible) of the conditions set forth in Article IX, at the Closing Buyer shall deliver to Seller all of the following:

(a)  a certificate of good standing of Buyer issued as of a recent date by the Secretary of State of the State of Delaware;

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(b)  a certificate of the secretary or an assistant secretary of Buyer, dated the Closing Date, in form and substance reasonably satisfactory to Seller, as to (i) the resolutions of the board of directors of Buyer authorizing the execution and performance of this Agreement, any Buyer Ancillary Agreements and the transactions contemplated hereby and thereby; and (ii) incumbency and signatures of the officers of Buyer executing this Agreement and any Buyer Ancillary Agreements;

(c)  the certificate contemplated by Section 10.1, duly executed by a duly authorized officer of Buyer;

(d)  the Instrument of Assumption duly executed by Buyer; and

(e)  the Member Services Agreement, the ScriptLINE Sublicense Agreement, the Transition Services Agreement and the Subcontract Services Agreement, in each case duly executed by Buyer.

4.4    Seller’s Closing Date Deliveries.

Subject to fulfillment or waiver (where permissible) of the conditions set forth in Article X, at the Closing Seller shall deliver to Buyer all of the following:

(a)  a certificate of good standing of Seller, issued as of a recent date by the Secretary of State of the State of Delaware;

(b)  a certificate of the secretary or an assistant secretary of Seller, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to (i) the resolutions of the board of managers of Seller authorizing the execution and performance of this Agreement, any Seller Ancillary Agreements and the transactions contemplated hereby and thereby; and (ii) incumbency and signatures of the officers of Seller executing this Agreement and any Seller Ancillary Agreements;

(c)  the certificates contemplated by Sections 9.1 and 9.4, duly executed by the applicable duly authorized officers of Seller;

(d)  the Bill of Sale and Instrument(s) of Assignment duly executed by Seller;

(e)  the Member Services Agreement, ScriptLINE Sublicense Agreement, the Transition Services Agreement and the Subcontract Services Agreement, in each case duly executed by Seller; and

(f)  such other bills of sale, assignment and other instruments of transfer or conveyance as may be otherwise reasonably requested by Buyer to evidence and effect the sale, assignment, transfer, conveyance and delivery of the Purchased Assets.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

As an inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, Seller represents and warrants to Buyer as follows:

5.1    Organization of Seller.

Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller is duly qualified to do business as a foreign limited liability company and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where failure to so qualify does not have a Material Adverse Effect or materially impair Seller’s performance hereunder.

5.2    Authority of Seller; Conflicts.

(a)    Seller has the full limited liability company power and limited liability company authority to execute, deliver and perform this Agreement and each of the Seller Ancillary Agreements. The execution, delivery and performance of this Agreement and the Seller Ancillary Agreements by Seller have been fully and duly authorized and approved by Seller’s managers and do not require any further authorization or consent of Seller or its members. This Agreement has been duly authorized, executed and delivered by Seller and (assuming the valid authorization, execution and delivery of this Agreement by Buyer) is the legal, valid and binding obligation of Seller enforceable in accordance with its terms, and each of the Seller Ancillary Agreements has been duly authorized by Seller and, upon execution and delivery by Seller, will be (assuming the valid authorization, execution and delivery by Buyer, where Buyer is a party, or the other party or parties thereto) a legal, valid and binding obligation of Seller enforceable in accordance with its terms, subject, in the case of this Agreement and each of the Seller Ancillary Agreements, to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting creditors’ rights and to general equity principles.

(b)    Except as set forth in Schedule 5.2, neither the execution and delivery of this Agreement or any of the Seller Ancillary Agreements by Seller or the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof by Seller will:

(i)    result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation, or a loss of rights under, or result in the creation or imposition of any Encumbrance upon, any of the Purchased Assets (other than the Assigned Contracts);

(ii)    result in a breach of the terms of the organizational documents of Seller;

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(iii)    result in a breach of any of the terms, conditions or provisions of, or constitute a default under, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, any note, instrument, agreement (other than the Assigned Contracts), mortgage, lease, franchise or financial obligation to which Seller is a party or by which Seller is bound, other than those that, individually or in the aggregate, would not materially impair the ability of the Seller to perform its obligations under this Agreement or the Seller Ancillary Agreements or prevent the consummation of the transactions contemplated hereby or thereby;

(iv)    result in a breach of the terms, conditions or provisions of, any Court Order to which Seller is a party or by which Seller is bound or any Requirements of Law affecting Seller, other than those that, individually or in the aggregate, would not materially impair the ability of the Seller to perform its obligations under this Agreement or the Seller Ancillary Agreements or prevent the consummation of the transactions contemplated hereby or thereby; or

(v)    require the approval, consent, authorization, declaration or act of, or the making by Seller of any declaration, filing or registration with, any Person.

(c)    Except as set forth on Schedule 5.2, Seller is current in payment of all invoices or other requests for payment received under the agreement referenced in Item 1 of Schedule 5.2.

(d)    Seller has not received any notice of default under the agreement referenced in Item 1 of Schedule 5.2, such agreement has not been terminated by Seller, Seller has not received notice of termination of such agreement by the other party thereto and Seller has not received notice from the other party to such agreement of such other party’s intention not to renew the agreement. As used in the immediately preceding sentence, “notice” refers to the notice required by such agreement. Seller has no Knowledge that the other party to such agreement intends not to renew such agreement.

5.3    Financial Statements.

(a)    Schedule 5.3 contains a copy of the pro forma unaudited statement of operations for the nine-month period ended December 31, 2001 and the unaudited pro forma balance sheet as of December 31, 2001 of the Business (the “Financial Statements”). The Financial Statements have been prepared from the books and records of Seller in accordance with GAAP and present fairly, in all material respects, in accordance with GAAP, the financial condition as of December 31, 2001 and the results of operations of the Business for the nine-month period then ended except (i) for the assumptions set forth on the cover page thereto, (ii) for the absence of notes and (iii) for typical year-end adjustments. Seller has not received any advice or notification from its independent certified public accountants that Seller has used any improper accounting practice that would have the effect of reflecting in the Financial Statements or the books and records of Seller any properties, assets, liabilities, revenues or expenses, not in accordance with GAAP. Except as set forth in Item 3 of Schedule 5.3, the books, records

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and accounts of the Seller accurately and fairly reflect, in all material respects, the transactions and the assets and liabilities of the Seller.

(b)    Seller has regularly prepared its consolidated balance sheet in the ordinary course of its business, and the most recent regularly prepared consolidated balance sheet of Seller was prepared consistently with past practice and does not state an amount of total assets of $10 million or more. Since February 28, 2002, no change has been made in the ownership or structure of Seller that could affect the determination that Seller is its own “ultimate parent entity” for purposes of the HSR Act.

5.4    Operations Since Financial Statements Date.

Except as set forth in Schedule 5.4, since the Financial Statements Date, Seller has conducted the Business only in the ordinary course. Except as set forth in the Financial Statements or on Schedule 5.4, since December 31, 2001, there has not been any transaction or occurrence in which the Business has suffered any Material Adverse Effect. Further, except as set forth in the Financial Statements or on Schedule 5.4, from December 31, 2001 through the date hereof Seller has not:

(a)    renegotiated the terms of any Assigned Contract that was in effect as of December 31, 2001 in any material respect;

(b)    entered into any new Assigned Contract with terms materially different than the Assigned Contracts with like customers in effect as of December 31, 2001;

(c)    entered into any new Assigned Contract with a founding member of Seller or which is reasonably expected to generate annual revenue in excess of $150,000;

(d)    permitted, allowed, or suffered any of the Purchased Assets (real, personal or mixed, tangible, or intangible) to be subjected to any Encumbrance, other than Permitted Encumbrances or Excluded Liabilities;

(e)    cancelled any debts or waived any claims or rights in connection with the Purchased Assets other than in the ordinary course of business consistent with past practice;

(f)    disposed of or permitted to lapse any right to the use of any Purchased Intellectual Property, or disposed of, or to the Knowledge of the Seller, disclosed to any Person not authorized to have such information, any of the Purchased Intellectual Property not previously a matter of public knowledge or existing in the public domain;

(g)    made any material change in any method of accounting or accounting principle, practice, or policy in connection with the Business and the Financial Statements; or

(h)    agreed, so as to legally bind Seller whether in writing or otherwise, to take any of the actions set forth in this Section 5.4.

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5.5    Ownership of Contract Rights.

(a)    Except as set forth on Schedule 5.5, (i) Seller’s right, title and interest to the Assigned Contracts is free and clear of all Encumbrances except for Permitted Encumbrances; (ii) Seller has not granted any power of attorney affecting or with respect to the Business or the Assigned Contracts; and (iii) Seller is the proper party-in-interest to each of the Assigned Contracts and is the sole holder of all rights necessary to recognize any of Seller’s benefits thereunder.

(b)    Seller has good and valid title to the Purchased Assets other than the Assigned Contracts, free and clear of all Encumbrances except for Permitted Encumbrances. Seller has not granted any power of attorney affecting or with respect to the Purchased Assets other than the Assigned Contracts.

5.6    Assigned Contracts.

(a)    Schedule 5.6(a) contains a true and correct list of each of the Assigned Contracts. Except as set forth in Schedule 5.6(a), Seller has made available true, complete and correct copies (except as redacted as to pricing terms) of each of the written Assigned Contracts to Buyer and made available true, complete and correct (except as redacted as to pricing terms) summaries of the material terms of each of the oral Assigned Chain Contracts to Buyer. Each of the Assigned Contracts that Seller has directly entered into was entered into by Seller in the ordinary course of business consistent with past practice for like customers. Each of the Assigned Contracts is in full force and effect as of the date hereof and there exists no material breach or violation of or material default under any of the Assigned Contracts by Seller or, to the Knowledge of Seller, any other party to the Assigned Contracts, or any event which, with or without notice or the lapse of time, or both, will create a material breach or violation thereof or material default thereunder by Seller or, to the Knowledge of Seller, any other party to such Assigned Contracts.

(b)    Except as set forth in Schedule 5.6(b), there exists no actual or, to the Knowledge of Seller, any threatened, termination, cancellation or material amendment or modification to any Assigned Chain Contract.

(c)    Except as set forth in Schedule 5.6(c), since January 1, 2002, no other party to any of the Assigned Chain Contracts has terminated their contract, or reduced or, to the Knowledge of Seller, threatened to reduce the volume of transactions processed under any of the Assigned Chain Contracts.

(d)    Except as set forth in Schedule 5.6(d), neither the execution and delivery of this Agreement or any of the Seller Ancillary Agreements by Seller, nor the consummation of the transactions contemplated hereunder and thereunder by Seller (excluding, for the avoidance of doubt, the performance by Seller under the Transition Services Agreement), will result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration,

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termination or cancellation, or a loss of rights under, or result in the creation or imposition of any Encumbrance upon, any of the Assigned Contracts.

5.7    Nature of the Purchased Assets.

(a)    Except as described on Schedule 5.7(a), all of the revenues included in the Financial Statements were received by Seller pursuant to the terms of the Assigned Contracts, and all material expenses incurred by Seller in the performance of the Assigned Contracts are reflected in the Financial Statements for the relevant period. None of the Assigned Chain Contracts have been amended or revised in any material respect subsequent to the later of the date of its execution or April 1, 2001.

(b)    Except as described on Schedule 2.1(b) and Schedule 5.7(b), the Purchased Intellectual Property constitutes all of the material Intellectual Property and Software used by Seller in performing the Assigned Contracts.

(c)    The documents set forth in Schedule 5.7(c) fairly reflect, in all material respects, the financial and transactional information relating to the Business that they purport to reflect.

5.8    Purchased Intellectual Property.

(a)    Schedule 5.8(a) contains a true, correct and complete list of the Purchased Intellectual Property, with a brief description of each such item and the nature of Seller’s interest therein.

(b)    All underlying designs and business rules for the pre-adjudication and post-adjudication prescription claims editing performed by the Software Modifications and the Other Edits and the documentation thereof were developed by or for Seller in conjunction with customers of Seller; Seller has conveyed no rights in any of such underlying designs and business rules or documentation thereof to any such customers.

(c)    No claim is pending or, to the Knowledge of Seller, threatened, and Seller has not received any notice that the use of any Purchased Intellectual Property in conducting the Business infringes upon or conflicts with any rights claimed therein by any third party. No claim is pending or, to the Knowledge of Seller, threatened which alleges that any Purchased Intellectual Property is invalid or unenforceable by Seller.

(d)    Except as provided herein or in any other agreement entered into between Buyer and Seller pursuant hereto, there are no licenses related to the Purchased Intellectual Property. Except as set forth in Schedule 5.8(d), no royalties or fees are payable by Seller to anyone for use of the Purchased Intellectual Property.

(e)    All former and current employees of Seller that participated in the development, operation or use of the Purchased Intellectual Property were subject to, and agreed in writing to be bound by, written policies that provide that, as between Seller and such employees, Seller retains all rights to any inventions, improvements, discoveries, or information relating to the Business. Except as set forth in Schedule 5.8(e), all former

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and current independent contractors of Seller that participated in the development, operation or use of the Purchased Intellectual Property are subject to a written agreement that provides that, with respect to all Purchased Intellectual Property that such independent contractor has been involved with, as between Seller and such independent contractor, Seller retains all rights to any inventions, improvements, discoveries, or information relating to the Business. To the Knowledge of Seller, no employee or independent contractor of Seller has entered into any agreement that restricts or limits in any way the scope or type of work in which such employee or independent contractor may be engaged or requires the employee or independent contractor to transfer, assign, or disclose information concerning his or her work to anyone other than Seller, as it relates to the Business.

(f)    Seller is the owner of the Software Modifications.

5.9    No Violation, Litigation or Regulatory Action; Compliance with Privacy Laws.

Except as set forth in Schedule 5.9:

(a)    to the Knowledge of Seller, Seller is not engaging in any activity or omitting to take any action with respect to the Business that is or creates a material violation of any law, status, ordinance or regulation applicable to the Business;

(b)    Seller is not subject to any judgment, order, writ, injunction, or decree issued by any court or any Governmental Body with respect to the Business or the Purchased Assets;

(c)    Seller has obtained all material governmental approvals, authorizations, permits, licenses, and orders required for the lawful operation of the Business as presently conducted;

(d)    as of the date hereof, there are no claims, charges, arbitrations, grievances, actions, suits, proceedings or investigations pending, or to the Knowledge of Seller, threatened, at law or in equity, or before or by any Governmental Body adversely affecting or that are reasonably expected to adversely affect the Business or the Purchased Assets;

(e)    as of the date hereof, there are no claims, charges, arbitrations, grievances, actions, suits, proceedings or investigations pending, or to the Knowledge of Seller, threatened, at law or in equity, or before any Governmental Body which are reasonably expected to impair the ability of Seller to perform its obligations hereunder or prevent the consummation of any of the transactions contemplated hereby;

(f)    as of the date hereof, there are no claims, charges, arbitrations, grievances, actions, suits, proceedings or investigations pending, or to the Knowledge of Seller, threatened, at law or in equity, or before or by any Governmental Body that questions the legality of the transactions contemplated by this Agreement or any of the Seller Ancillary Agreements; and

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(g)    to the Knowledge of Seller, Seller has conducted the operations of the Business in material compliance with all applicable federal, state and foreign privacy laws, regulations and restrictions relating to the collection, processing, use and disclosure of confidential information to which Seller is subject.

5.10    No Brokers.

Except for the fees payable to UBS Warburg LLC by Seller (which shall be paid by Seller), no broker, finder or investment banker is entitled to any fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Seller.

5.11    Tax Matters.

Except as set forth in Schedule 5.11:

(a)    Seller has duly and timely filed all material sales and use tax returns required to be filed by it on or before the Closing Date, and all such sales and use tax returns were correct and complete, in all material respects, as filed;

(b)    all material sales and use taxes (whether or not shown on any tax return) have been fully paid and Seller has made available to Buyer complete and correct copies of all sales and use tax returns filed by Seller;

(c)    no written claim has been asserted, raised, or, to the Knowledge of Seller, threatened by any taxing authority in a jurisdiction in which Seller does not file sales and use tax returns or pay or collect sales and use taxes that Seller is or may be subject to an obligation to file sales and use tax returns or pay or collect sales and use taxes in that jurisdiction and no basis exists for any additional sales and use taxes against Seller; and

(d)    no sales and use tax return filed by Seller is currently under audit by any taxing authority and no taxing authority is now asserting, raising or threatening in writing against Seller, any deficiency or claim for additional sales and use taxes or any adjustment of sales and use taxes.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUYER

As an inducement to Seller to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer hereby represents and warrants to Seller as follows:

6.1    Organization of Buyer.

Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted

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by it, requires such qualification, except where failure to so qualify does not materially impair Buyer’s performance hereunder.

6.2    Authority of Buyer; Conflicts.

(a)  Buyer has the full corporate power and corporate authority to execute, deliver and perform this Agreement and each of the Buyer Ancillary Agreements. The execution, delivery and performance of this Agreement and the Buyer Ancillary Agreements by Buyer have been fully and duly authorized and approved by Buyer’s board of directors and do not require any further authorization or consent of Buyer or its stockholders. This Agreement has been duly authorized, executed and delivered by Buyer and (assuming the valid authorization, execution and delivery of this Agreement by Seller) is the legal, valid and binding agreement of Buyer enforceable in accordance with its terms, and each of the Buyer Ancillary Agreements has been duly authorized by Buyer and upon execution and delivery by Buyer will be (assuming the valid authorization, execution and delivery by Seller, where a Seller is a party, or the other party or parties thereto) a legal, valid and binding obligation of Buyer enforceable in accordance with its terms, subject, in the case of this Agreement and each of the Buyer Ancillary Agreements, to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting creditors’ rights and to general equity principles.

(b)  Neither the execution and delivery of this Agreement or any of the Buyer Ancillary Agreements by Buyer or the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof by Buyer will:

(i)  result in a breach of the terms of the Certificate of Incorporation or bylaws of Buyer;

(ii)  result in a breach of the terms, conditions or provisions of, or constitute a default under, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, any note, instrument, agreement, mortgage, lease, franchise or financial obligation to which Buyer is a party or by which Buyer is bound, other than those that, individually or in the aggregate, would not materially impair the ability of Buyer to perform its obligations under this Agreement or the Buyer Ancillary Agreements or prevent the consummation of any of the transactions contemplated hereby and thereby;

(iii)  result in a breach of the terms, conditions or provisions of, any Court Order to which Buyer is a party or by which Buyer is bound or any Requirements of Law affecting Buyer, other than those that, individually or in the aggregate, would not materially impair the ability of Buyer to perform its obligations under this Agreement or the Buyer Ancillary Agreements or prevent the consummation of any of the transactions contemplated hereby and thereby; or

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(iv)    require the approval, consent, authorization, declaration or act of, or the making by Buyer of any declaration, filing or registration with, any Person.

6.3    No Violation, Litigation or Regulatory Action.

Except as set forth in Schedule 6.3:

(i) as of the date hereof, there are no lawsuits, claims, suits, proceedings or investigations pending or, to the Knowledge of Buyer, threatened against Buyer or its subsidiaries which are reasonably expected to materially impair the ability of Buyer to perform its obligations hereunder or prevent the consummation of any of the transactions contemplated hereby; and

(ii) as of the date hereof, there is no action, suit or proceeding pending or, to the Knowledge of Buyer, threatened that questions the legality of the transactions contemplated by this Agreement or any of the Buyer Ancillary Agreements.

6.4    Financing.

Buyer will have at Closing sufficient funds available for it to pay the Purchase Price.

6.5    No Brokers.

Except for the fees payable to Goldman, Sachs & Co. by Buyer (the fees of which shall be paid by Buyer), no broker, finder or investment banker is entitled to any fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Buyer.

ARTICLE VII

ACTION PRIOR TO THE CLOSING DATE

The respective parties hereto covenant and agree to take the following actions between the date hereof and the Closing Date:

7.1    Access to Information.

Seller shall afford to the officers, employees and authorized representatives of Buyer (including, without limitation, independent public accountants and attorneys) reasonable access during normal business hours, upon reasonable advance notice, to the offices, properties, employees and business and financial records (including computer files, retrieval programs and similar documentation) of the Business to the extent Buyer shall reasonably deem necessary or desirable and shall furnish to Buyer or its authorized representatives such additional information concerning the Business as shall be reasonably requested; provided, however, that Seller shall not be required to violate any obligation of confidentiality to which Seller is subject or to waive any privilege which Seller may possess in discharging its obligations pursuant to this Section

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7.1; and, provided, further, Seller shall not be required to furnish or otherwise make available to Buyer customer-specific data or competitively sensitive information relating to the Business. Notwithstanding the foregoing, it is understood and agreed that all requests for access pursuant to this Section 7.1 shall be submitted or directed exclusively through Michael Baird and, without his prior approval (which shall not be unreasonably withheld), Buyer shall not initiate, or cause to be initiated, communication with any employee or customer of Seller primarily with respect to the Business and a representative of Seller shall participate in any such approved communication. Buyer agrees that such investigation shall be conducted in such a manner as not to interfere unreasonably with the operations of Seller. Notwithstanding the foregoing, the obligations of Seller pursuant to this Section 7.1 shall be subject to the right of Seller to determine, in its discretion, the appropriate timing of the disclosure of information it deems proprietary commercial information or privileged information.

7.2    Notifications.

Each of Buyer and Seller shall promptly notify the other of any action, suit or proceeding that shall be instituted or threatened against such party to restrain, prohibit or otherwise challenge the legality of any transaction contemplated by this Agreement. Each party hereto shall promptly notify the other of any lawsuit, claim, proceeding or investigation that may be threatened, brought, asserted or commenced against Seller or Buyer, as the case may be, that would have been listed in Schedule 5.9 or Schedule 6.3, as the case may be, if such lawsuit, claim, proceeding or investigation had arisen prior to the date hereof.

7.3    Consents of Third Parties; Governmental Approvals; Reasonable Efforts.

(a)  Seller and Buyer will act diligently and reasonably in attempting to secure, before the Closing Date, their respective consents, approvals or waivers, in form and substance reasonably satisfactory to the other party, required to be obtained from any party (other than a Governmental Body) to consummate the transactions contemplated by this Agreement. Except as otherwise provided herein, in Schedule 5.2 or in any other agreement entered into between Buyer and Seller pursuant hereto, any costs associated with a consent listed on Schedule 5.2 shall be borne by Seller.

(b)  During the period prior to the Closing Date, each party shall use its commercially reasonable efforts to secure any consents and approvals of any Governmental Body required to be obtained in order to permit the consummation of the transactions contemplated by this Agreement.

(c)  Subject to the terms and conditions of this Agreement, each of the parties hereto shall use its commercially reasonable efforts to consummate the transactions contemplated hereby as expeditiously as practicable.

7.4    Operations Prior to the Closing Date.

Seller shall use commercially reasonable efforts to operate and carry on the Business in the ordinary course and substantially as operated immediately prior to the date of this Agreement. Consistent with the foregoing, Seller shall use its commercially reasonable efforts consistent with good business practice to preserve the goodwill of the suppliers, contractors,

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licensors, employees, customers and distributors of the Business. Without limiting the foregoing, without the prior written consent of Buyer, which consent will not be unreasonably delayed or withheld, Seller shall:

(a)  refrain from entering into any new customer contract or agreement for the Business for a period of ten (10) days following the date hereof, and, following such period, refrain from entering into any new contract or agreement for the Business that is not in the ordinary course of business;

(b)  not Knowingly fail to perform in all material respects all obligations under the Assigned Contracts;

(c)  not sell, transfer or assign any Purchased Asset or create any Encumbrances (except for Permitted Encumbrances) upon or with respect to any Purchased Asset;

(d)  not materially modify or make any material new commitment under the Assigned Contracts;

(e)  commence any litigation or dispute proceedings against any other party to an Assigned Contract or settle any litigation or dispute that involves any restrictions upon the operation of the Business;

(f)  not amend or modify its governing documents in any manner that would frustrate or prohibit the transactions contemplated hereby; and

(g)  not make any agreement or commitment which will result in or cause to occur a violation of any of the items contained in paragraphs (a) through (f) above.

7.5    Employee Matters.

Schedule 7.5 contains a list of those employees of the Business who Buyer may interview for potential employment (“Employees”) and, the conditions under which such solicitation shall occur. Seller shall not unreasonably interfere with such process by Buyer, and shall not act outside the ordinary course of business (such as a raise, promotion, the payment of any bonus or any such other perquisite that is not part of their normal review process) to attempt to hire, retain or solicit, such Employees except as otherwise indicated in Schedule 7.5; provided, however, that Seller shall be entitled to make payments to such Employees in connection with the transition services under the Transition Services Agreement. Buyer agrees to hold such visits and interviews with such Employees at such times and in such manner as shall not unreasonably interfere with Seller’s conduct of the Business. Notwithstanding any such discussions or interviews, Buyer shall have no obligation to offer employment to any Employee of Seller and the terms of any such offer shall be in the discretion of Buyer and in accordance with Buyer’s policies and plans. Seller shall be responsible for the payment of any amounts due to its employees pursuant to any agreement, compensation plan, severance, retention or other policy of Seller, and any other welfare, compensation and employee benefit plan of Seller, including without limitation, with respect to those Employees who are hired by Buyer, all liabilities related to their employment with Seller. All of such amounts shall be Excluded Liabilities.

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ARTICLE VIII

ADDITIONAL AGREEMENTS

8.1    Tax Matters.

(a)  Seller shall be liable for and shall pay all Taxes (whether assessed or unassessed) applicable to the Purchased Assets attributable to periods (or portions thereof) ending on or prior to the Closing Date. Buyer shall be liable for and shall pay all Taxes (whether assessed or unassessed) applicable to the Purchased Assets attributable to periods (or portions thereof) beginning after the Closing Date. For purposes of this Section 8.1(a), any period beginning before and ending after the Closing Date shall be treated as two partial periods, one ending on the Closing Date and the other beginning after the Closing Date except that Taxes (such as property Taxes) imposed on a periodic basis shall be allocated on a daily basis.

(b)  Notwithstanding Section 8.1(a), any sales Tax, use Tax, real property transfer or gains Tax, documentary stamp Tax or similar Tax attributable to the sale or transfer of the Purchased Assets shall be shared equally by Buyer and Seller. The parties agree to timely sign and deliver such certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or make a report with respect to, such Taxes.

(c)  Seller or Buyer, as the case may be, shall provide reimbursement for any Tax paid by one party all or a portion of which is the responsibility of the other party in accordance with the terms of this Section 8.1. Within a reasonable time prior to the payment of any said Tax, the party paying such Tax shall give notice to the other party of the Tax payable and the portion which is the liability of each party, although failure to do so will not relieve the other party from its liability hereunder.

8.2    Post-Closing Remittances.

If, after the Closing Date, Seller shall receive any remittance from any account debtors with respect to any accounts or notes receivable generated by Assigned Contracts and relating to the period on or after the Closing Date, Seller shall endorse such remittance to the order of Buyer and forward it to Buyer promptly following receipt thereof. Conversely, if, after the Closing Date, Buyer or its Affiliates shall receive any remittance from any account debtors with respect to any accounts or notes receivables generated by Assigned Contracts and relating to the period prior to the Closing Date, then Buyer or its Affiliates, as applicable, shall endorse such remittance to the order of Seller and forward it to Seller promptly following receipt thereof.

8.3    Covenant Not to Compete or Solicit Business.

(a)  In furtherance of the sale of the Purchased Assets to Buyer hereunder by virtue of the transactions contemplated hereby and to more effectively protect the value and goodwill of the Purchased Assets so sold, Seller covenants and agrees that, for a period beginning on the Closing Date and ending on the fifth (5th) anniversary of the Closing Date, neither Seller nor any of its Affiliates will:

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(i)  directly or indirectly (whether as principal, agent, independent contractor, partner or otherwise) own, manage, operate, control, participate in, perform switching or pre-adjudication and post-adjudication prescription claims editing services for, or otherwise carry on, a business competitive with the Business anywhere in United States of America;

(ii)  induce or attempt to persuade any employee or agent of Buyer to terminate such employment or agency relationship in order to enter into any such relationship on behalf of any other business organization in competition with the Business; or

(iii)  for itself or on behalf of any other Person or entity, knowingly and deliberately solicit, divert away, take away or attempt to solicit or take away any customer under an Assigned Contract or for whom Seller provided services in the Business at any time during the twelve-month period prior to the Closing Date, for purposes of providing or selling any services competitive with the Business.

(b)  Buyer acknowledges that this Section 8.3 in no way constrains Seller from performing under the Transition Services Agreement or conducting any of its Excluded Businesses during the term of this covenant. Buyer further acknowledges that this Section 8.3 in no way constrains Seller from (i) entering into ordinary course arrangements with Persons engaged in the Business to obtain data from such Persons, (ii) impartially discussing in the ordinary course of Seller’s business with its owners, managers, vendors, service/data providers or any other third Person (in each case, if applicable, after reasonable compliance by Seller with Section 2.2 of the Member Services Agreement) means by which such Persons could transmit data to Seller and impartially advising such Persons on possible courses of action or (iii) discussing with its managers, in their capacity as managers, Seller’s business and operations, including the performance of Buyer under agreements between Buyer and Seller.

(c)  As an inducement to Seller to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer covenants and agrees that, for a period beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date, neither Buyer nor any of its Affiliates will, except as provided for in Schedule 7.5, induce or attempt to persuade any employee or agent of Seller to terminate such employment or agency in order to enter into any such relationship with Buyer.

(d)  Notwithstanding anything contained herein to the contrary, in the event Seller terminates the Member Services Agreement pursuant to its right to terminate set forth in Section 2.10(b) thereof or in accordance with Section 7.2 thereof, the parties agree that the covenants contained in Sections 8.3(a)(i) and 8.3(a)(iii) hereof shall immediately thereupon terminate and be of no further force or effect.

(e)  Notwithstanding anything to the contrary in this Section 8.3, nothing set forth in this Section 8.3 shall prohibit any party or its Affiliates from owning not in excess of five percent (5%) in the aggregate of any class of capital stock of any corporation if such stock is publicly traded and listed on any national or regional stock

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exchange or on the NASDAQ market system. In the event a party or any Affiliate of such party violates any of its obligations under this Section 8.3, the other party may proceed against it in law or in equity for such damages or other relief as a court may deem appropriate. The parties acknowledge that a violation of this Section 8.3 may cause the other party irreparable harm which may not be adequately compensated for by money damages. The parties therefore agree that in the event of any actual or threatened violation of this Section 8.3, the other party shall be entitled, in addition to other remedies that it may have, to a temporary restraining order and to preliminary and final injunctive relief against the violating party or an Affiliate of such party to prevent any violations of this Section 8.3, without the necessity of posting a bond. The prevailing party in any action commenced under this Section 8.3 shall also be entitled to receive reasonable attorneys’ fees and court costs. It is the intent and understanding of each party hereto that if, in any action before any court or agency legally empowered to enforce this Section 8.3, any term, restriction, covenant or promise in this Section 8.3 is found to be unreasonable and for that reason unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency.

8.4    Data Rights under Assigned Contracts.

As an inducement to Seller to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer covenants and agrees that:

(a)  During the term of the Assigned Contracts as of the Closing Date or any extension or renewal of such contracts, but in any event, for a period not to exceed three (3) years from the Closing Date, Buyer will not, directly or indirectly, use, exercise or avail itself of any provisions of the Assigned Contracts which would otherwise grant to Buyer any ownership rights in the information provided to Buyer pursuant to the Assigned Contracts or any use rights relating to such information (the “Data Rights”), except as specifically required in the performance of the Buyer’s duties under such Assigned Contracts or under the Member Services Agreement.

(b)  Buyer shall use commercially reasonable efforts not to amend any Assigned Contract that provides Data Rights to, alter the Data Rights thereunder or enter into any subsequent agreement with a party to an Assigned Contract that provides Data Rights which, in any case, would preclude Buyer from providing such information to Seller under the Member Services Agreement.

(c)  Seller shall retain the right to use all prescription claim data that Seller obtained under the Assigned Contracts prior to the Closing Date to the same extent that Seller had such rights prior to the Closing Date (“Pre-Closing Data”). For a period of three (3) years from the Closing Date, Buyer will not, directly or indirectly, use, exercise or avail itself of any provisions of the Assigned Contracts which would otherwise grant Buyer any ownership rights in the Pre-Closing Data, except as specifically required in the performance of Buyer’s duties under such Assigned Contracts or under the Member Services Agreement.

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8.5    Assistance with Customers.

(a)    During the term of the Transition Services Agreement, Seller agrees (i) to provide such assistance as Buyer shall reasonably request in marketing and facilitating a sale of Buyer’s services (including the services to be performed under the Assigned Contracts) to [****], [****], [****] and [****] and (ii) to introduce Buyer to and provide such assistance as Buyer shall reasonably request in connection with Buyer’s marketing and facilitating a sale of its services (including the services to be provided pursuant to the Assigned Contracts) to [****] and [****].

(b)    Prior to Closing, Seller agrees to provide such assistance as Buyer shall reasonably request to introduce and facilitate discussions and negotiations with Cardinal with respect to an agreement pursuant to which Cardinal would market Buyer’s products and services.

(c)    Seller has provided Buyer with a deferred credit under the Transition Services Agreement in the aggregate amount of $700,000, and in the event that deferred credit is not used in full in accordance with the terms of the Transition Services Agreement, Seller shall pay to Buyer the amount of any remaining balance within thirty (30) days following Buyer’s request. Seller shall bear its own costs of management and employee time and reasonable travel and related out-of-pocket expenses incurred in connection with the services provided under this Section 8.5.

8.6    No Shop.    Until Closing, none of Seller nor any of its Affiliates or representatives shall directly or indirectly solicit or respond to any proposal to acquire the Purchased Assets, whether by means of an asset purchase, stock purchase, merger or consolidation, reorganization or otherwise, by any third Person. None of Seller nor any of its Affiliates or representatives shall furnish any non-public information, negotiate or engage in discussions with respect to, or enter into any contract or agreement with respect to, any such proposed transaction. Seller and its Affiliates shall (i) immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Persons conducted heretofore with respect to any of the foregoing, and (ii) direct and use its commercially reasonable efforts to cause all of its representatives not to engage in any of the foregoing.

8.7    License of Purchased Intellectual Property.    Buyer hereby grants to Seller a worldwide, perpetual, royalty-free, non-exclusive right and license to use, operate, modify, copy and create derivative works of the Purchased Intellectual Property; provided, however, that Seller shall not exercise its rights under this license of Purchased Intellectual Property unless and until Seller terminates the Member Services Agreement pursuant to its right to terminate set forth in Section 2.10(b) thereof or in accordance with Section 7.2 thereof. Seller may sublicense the rights granted in this license only for the limited purpose of allowing third Persons to use, operate, modify, copy and create derivative works on behalf of Seller within the scope of this license. Subject to Buyer’s ownership rights in the Purchased Intellectual Property, Seller shall own any derivative works of the Purchased Intellectual Property that Seller may create or develop (or have created or developed).

[****] Confidential treatment requested. Confidential portions of this page have been redacted and are subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and have been filed separately with the Securities and Exchange Commission.

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8.8    Use of Software Modifications.

(a)    Seller agrees that it will not, nor will Seller grant to any other Person the right to, use, operate, modify, copy, create derivative works, license, sell, convey, assign, transfer or deliver the Software Modifications from and after the Closing Date, except (i) in accordance with the Transition Services Agreement, (ii) to the extent that, following Seller’s good faith defense of its rights thereto, Seller is required by any applicable court or governmental authority to do so, and (iii) from and after the date upon which Seller terminates the Member Services Agreement pursuant to its right to terminate set forth in Section 2.10(b) thereof or in accordance with Section 7.2 thereof. Seller agrees that it will not, nor will Seller grant to any other Person any of Seller’s rights to, use, operate, modify, copy, create derivative works, license, sell, convey, assign, transfer or deliver the computer software modifications used by Seller to perform the Other Edits and the edits described in Item 1 of Schedule 2.1(b) from and after the Closing Date, except (i) in accordance with the Transition Services Agreement, (ii) to the extent that Seller is required by any applicable court or governmental authority to do so; provided that Buyer is afforded control of any litigation or proceeding seeking such grant, and (iii) from and after the date upon which Seller terminates the Member Services Agreement pursuant to its right to terminate set forth in Section 2.10(b) thereof or in accordance with Section 7.2 thereof. Seller agrees to reimburse Buyer for one-half of Buyer’s costs of defending any litigation or proceeding described in clause (ii) of the immediately preceding sentence.

(b) For a period of three (3) years after the Closing Date, Seller shall (at its expense) initiate and pursue in good faith an infringement claim against any Person that it believes is infringing Seller’s rights in and to the Software Modifications, and shall reasonably consider any request from Buyer to pursue an infringement claim against any Person that Buyer reasonably consider any request from Buyer to pursue an infringement claim against any Person that Buyer reasonably believes is infringing Seller’s rights in and to the Software Modifications.

ARTICLE IX

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

The obligations of Buyer under this Agreement shall, subject to the waiver by Buyer (to the extent permissible under applicable law), be subject to the satisfaction, on or prior to the Closing Date, of the following conditions:

9.1    No Misrepresentation or Breach of Covenants and Warranties.

There shall not have been any material breach by Seller in the performance of any of its covenants and agreements herein which shall not have been remedied or cured; each of the representations and warranties of Seller contained in this Agreement (without taking into account any materiality qualifiers) shall be true and correct on the Closing Date as though made on the Closing Date (except to the extent that they expressly relate to an earlier date), except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by Buyer or any transaction permitted by this Agreement and other than breaches of representations and warranties which, individually or in the aggregate, would not have a Material Adverse Effect (provided that notwithstanding the foregoing the representations and warranties contained in Section 5.3(b) shall be true and correct on the

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Closing Date); and there shall have been delivered to Buyer a certificate to such effect, dated the Closing Date, signed on behalf of Seller by a duly authorized officer of Seller.

9.2    No Restraint.

No injunction or restraining order shall have been issued by and be in effect, nor shall an injunction or restraining order initiated by a Governmental Body be pending before, any court of competent jurisdiction which restrains or prohibits any material transaction contemplated hereby.

9.3    Release of Encumbrances.

Buyer shall have received evidence reasonably satisfactory to it that all Encumbrances against the Purchased Assets, other than Permitted Encumbrances, have been released or terminated prior to or at the Closing.

9.4    Material Adverse Effect.

Between the date hereof and the Closing Date, no Material Adverse Effect shall have occurred and Seller shall have delivered to Buyer a certificate, dated as of the Closing Date, executed by the Chief Executive Officer and Acting Chief Financial Officer of Seller to such effect.

ARTICLE X

CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

The obligations of Seller under this Agreement shall, subject to the waiver by Seller (to the extent permissible under applicable law), be subject to the satisfaction, on or prior to the Closing Date, of the following conditions:

10.1    No Misrepresentation or Breach of Covenants and Warranties.

Buyer shall have duly performed in all material respects all of the covenants and agreements of Buyer herein which shall not have been remedied or cured; each of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects on the Closing Date as though made on the Closing Date, except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by Seller or any transaction expressly contemplated by this Agreement, and provided that any representation or warranty that is qualified as to materiality shall be true and correct in all respects as of the Closing Date, after giving effect to such qualification as to materiality; and there shall have been delivered to Seller a certificate to such effect, dated the Closing Date, signed on behalf of Buyer by a duly authorized officer of Buyer.

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10.2    No Restraint.

No injunction or restraining order shall have been issued by and be in effect, nor shall an injunction or restraining order initiated by a Governmental Body be pending before, any court of competent jurisdiction which restrains or prohibits any material transaction contemplated hereby.

ARTICLE XI

INDEMNIFICATION

11.1    Indemnification by Seller.

(a)    From and after the Closing, Seller agrees to indemnify and hold harmless each Buyer Group Member from and against any and all Losses and Expenses incurred by such Buyer Group Member in connection with or arising from:

(i)  any breach of any warranty or the inaccuracy of any representation of Seller contained in this Agreement or any certificate delivered by or on behalf of Seller, other than those referenced in Section 11.1(a)(ii) below;

(ii)  any breach of any warranty or the inaccuracy of any representation of Seller set forth in Sections 5.2(d), 5.3(b), 5.5(a) or 5.6(d) of this Agreement;

(iii)  any breach by Seller of, or failure by Seller to perform, any of its covenants or obligations contained in this Agreement, other than its covenants or obligations contained in Section 8.8(b);

(iv)  any Excluded Liabilities;

(v)  any breach by Seller of, or failure by Seller to perform, any of its covenants or obligations contained in Section 8.8(b) of this Agreement.

provided, however, that Seller shall be required to indemnify and hold harmless under Sections 11.1(a)(i) and 11.1(a)(v) with respect to Losses and Expenses incurred by Buyer Group Members only to the extent that (y) the aggregate amount of such Losses and Expenses exceeds $100,000 (it being understood that such $100,000 shall be a deductible for which Seller shall bear no indemnification responsibility); and (z) the aggregate amount required to be paid by Seller pursuant to Sections 11.1(a)(i) and 11.1(a)(v) shall not exceed twenty five percent (25%) of the Purchase Price.

(b)    The indemnification provided for in Section 11.1(a) shall terminate eighteen (18) months after the Closing Date (and no claims shall be made by any Buyer Group Member under Section 11.1(a) thereafter), except that the indemnification by Seller shall continue as to:

(i)  the obligations of Seller with respect to Section 11.1(a)(iv) (with respect to Section 2.4(a) only), which shall survive for three (3) years after the Closing Date;

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(ii)  the obligations of Seller with respect to Sections 11.1(a)(ii), 11.1(a)(iii),11.1(a)(iv) (other than with respect to Section 2.4(a) only), and 11.1(a)(v) which shall survive indefinitely;

(iii)  the covenants of Seller set forth in Section 13.6, which shall survive for the period of time set forth therein; and

(iv)  any Losses or Expenses of which any Buyer Group Member has validly given a Claim Notice to Seller in accordance with the requirements of Section 11.3 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.1, as to which the obligation of Seller shall continue solely with respect to the specific matters in such Claim Notice until the liability of Seller shall have been determined pursuant to this Article XI, and Seller shall have reimbursed all Buyer Group Members for the full amount of such Losses and Expenses that are payable with respect to such Claim Notice in accordance with this Article XI.

(v)  the obligations of Seller with respect to Section 11.1(a)(i) (with respect to any breach of any warranty or the inaccuracy of any representation of Seller contained in Section 5.8(f) only) which shall survive for three (3) years after the Closing Date.

11.2    Indemnification by Buyer.

(a)  From and after the Closing, Buyer agrees to indemnify and hold harmless each Seller Group Member from and against any and all Losses and Expenses incurred by such Seller Group Member in connection with or arising from:

(i)  any breach of any warranty or the inaccuracy of any representation of Buyer contained in this Agreement or any certificate delivered by or on behalf of Buyer;

(ii)  any breach by Buyer of, or failure by Buyer to perform, any of its covenants and obligations contained in this Agreement; or

(iii)  the Assumed Liabilities;

provided, however, that Buyer shall be required to indemnify and hold harmless under Section 11.2(a)(i) with respect to Losses and Expenses incurred by Seller Group Members only to the extent that (y) the aggregate amount of such Losses and Expenses exceeds $100,000 (it being understood that such $100,000 shall be a deductible for which Buyer shall bear no indemnification responsibility); and (z) the aggregate amount required to be paid by Buyer pursuant to Section 11.2(a)(i) shall not exceed twenty five percent (25%) of the Purchase Price.

(b)  The indemnification provided for in Section 11.2(a) shall terminate eighteen (18) months after the Closing Date (and no claims shall be made by any Seller

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Group Member under Section 11.2(a) thereafter), except that the indemnification by Buyer shall continue as to:

(i)    the obligations of Buyer with respect to Sections 11.2(a)(ii) and 11.2(a)(iii) which shall survive indefinitely;

(ii)    the covenants of Buyer set forth in Section 13.6 which shall survive for the period of time set forth therein; and

(iii)    any Losses or Expenses of which any Seller Group Member has validly given a Claim Notice to Buyer in accordance with the requirements of Section 11.3 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.2, as to which the obligation of Buyer shall continue solely with respect to the specific matters in such Claim Notice until the liability of Buyer shall have been determined pursuant to this Article XI, and Buyer shall have reimbursed all Seller Group Members for the full amount of such Losses and Expenses that are payable with respect to such Claim Notice in accordance with this Article XI.

11.3    Notice of Claims.

Any Buyer Group Member or Seller Group Member seeking indemnification hereunder (the “Indemnified Party”) shall give promptly to the party obligated to provide indemnification to such Indemnified Party (the “Indemnitor”) a notice (a “Claim Notice”) describing in reasonable detail the facts then known giving rise to the claim for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision of this Agreement or any other agreement, document or instrument executed hereunder or in connection herewith upon which such claim is based.

11.4    Determination of Amount.

(a)    Buyer and Seller agree that, for purposes of computing the amount of any indemnification payment under this Article XI, any such indemnification payment shall be treated as an adjustment to the Purchase Price for all Tax purposes. If Seller is required to indemnify a Buyer Group Member pursuant to the provisions of Section 11.1 or Buyer is required to indemnify a Seller Group Member pursuant to the provisions of Section 11.2, and the cost, expense or liability for which the indemnification is sought has provided or will provide the Indemnified Party with a Tax benefit, the amount of such Tax benefit shall reduce the Indemnitor’s liability to indemnify an Indemnified Party under this Article XI. After the giving of any Claim Notice pursuant to Section 11.3, the amount of indemnification to which an Indemnified Party shall be entitled under this Article XI shall be determined: (i) by the written agreement between the Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any court of competent jurisdiction; or (iii) by any other means to which the Indemnified Party and the Indemnitor shall agree. The judgment or decree of a court shall be deemed final when

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the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined.

11.5    Third Person Claims.

(a)    Any party seeking indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by any third Person against the Indemnified Party shall notify the Indemnitor in writing, and in reasonable detail, of the third Person claim within ten (10) business days after receipt by such Indemnified Party of written notice of the third Person claim. Thereafter, the Indemnified Party shall deliver to the Indemnitor, within ten (10) business days after the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitor relating to the third Person claim. Notwithstanding the foregoing, should a party be physically served with a complaint with regard to a third Person claim, the Indemnified Party shall notify the Indemnitor with a copy of the complaint within ten (10) business days after receipt thereof and shall deliver to the Indemnitor within five (5) business days after the receipt of such complaint copies of notices and documents (including court papers) received by the Indemnified Party relating to the third Person claim. The failure to give notice as provided in this Section 11.5 shall not relieve the Indemnitor of its obligations hereunder except to the extent it shall have been prejudiced by such failure.

(b)    In the event any legal proceeding shall be threatened or instituted or any claim or demand shall be asserted by any Person in respect of which payment may be sought by one party hereto from the other party under the provisions of this Article XI, the Indemnified Party shall promptly cause written notice of the assertion of any such claim of which it has knowledge which is covered by this indemnity to be forwarded to the Indemnitor. Any notice of a claim by reason of any of the representations, warranties or covenants contained in this Agreement shall contain a reference to the provision of this Agreement or any other agreement, document or instrument executed hereunder or in connection herewith upon which such claim is based, the facts giving rise to an alleged basis for the claim and the amount of the liability asserted against the Indemnitor by reason of the claim. In the event of the initiation of any legal proceeding against the Indemnified Party by a third Person, the Indemnitor shall, except as otherwise provided below, be represented by counsel of its choice and control, defend against, negotiate, settle or otherwise deal with any proceeding, claim, or demand which relates to any loss, liability or damage indemnified against hereunder. Notwithstanding the foregoing, if in the reasonable opinion of the Indemnified Party, any such third Person claim or the litigation or resolution of any such third Person claim, involves an issue or matter which, if determined adversely to the Indemnified Party, would have a material adverse effect on the Indemnified Party, including without limitation a dispute with a significant customer or supplier of the Business, then the Indemnified Party (upon notice to the Indemnitor) shall have the right to control the defense or settlement of any such claim or demand and its reasonable costs and expenses shall be included as part of the indemnification obligation of the Indemnitor; provided, however, that the party not controlling the defense may participate in any such proceeding with counsel of its choice and at its expense. The parties hereto agree to cooperate fully with each other in connection with

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the defense, negotiation or settlement of any such legal proceeding, claim or demand. To the extent the Indemnitor fails to defend such proceeding, claim or demand, and the Indemnified Party defends against or otherwise deals with any such proceeding, claim or demand, the Indemnified Party may retain counsel, at the expense of the Indemnitor, and control the defense of such proceeding. Neither the Indemnitor nor the Indemnified Party may settle any such proceeding without the consent of the other party, such consent not to be unreasonably withheld.

(c)    Notwithstanding anything contained herein to the contrary, Seller shall have the exclusive right to assume the defense of, or otherwise contest or settle any claim, action, suit, investigation or proceeding which is an Excluded Liability and Buyer shall have the exclusive right to control the defense of, or otherwise contest or settle any claim, action, suit or proceeding which is an Assumed Liability. Buyer and Seller agree to cooperate and assist the other with all reasonable requests (including, without limitation, making employees available for interviews, depositions and trials) and to afford the other access to any records, reports or other documents reasonably requested in connection with such claims, actions, suits or proceedings.

11.6    Limitations.

(a)    Except for fraud and other remedies that cannot be waived as a matter of law and injunctive and provisional relief (including, but not limited to, specific performance), if the Closing occurs, this Article XI shall be the exclusive remedy for breaches of this Agreement (including any covenant, obligation, representation or warranty contained in this Agreement or in any certificate delivered pursuant to this Agreement) or otherwise in respect of the sale of the Purchased Assets contemplated hereby.

(b)    Notwithstanding anything to the contrary in this Asset Purchase Agreement, except with respect to Excluded Liabilities, Assumed Liabilities, and any breach of any warranty or the inaccuracy of any representation of Seller set forth in Sections 5.2(d) or 5.3(b) to which this Section 11.6(b) shall not apply, the aggregate liability of any Indemnitor pursuant to Section 11.1 or Section 11.2 shall not exceed an amount equal to the Purchase Price.

Article XII

TERMINATION

12.1    Termination.

Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated at any time prior to the Closing Date:

(a)    by the mutual consent of Buyer and Seller;

(b)    by Buyer in the event any condition in Article IX becomes impossible of performance or has not been satisfied in full (in each case, other than as a result of a

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breach or default by Buyer in the performance of its obligations hereunder) or otherwise waived by Buyer in writing prior to or at the Closing;

(c)    by Seller in the event any condition in Article X becomes impossible of performance or has not been satisfied in full (in each case, other than as a result of a breach or default by Seller in the performance of its obligations hereunder) or otherwise waived by Seller in writing prior to or at the Closing;

(d)    by Buyer or Seller if any court of competent jurisdiction in the United States or other United States Governmental Body shall have issued a final and non-appealable order, decree or ruling permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; or

(e)    by Buyer or Seller if the Closing shall not have occurred on or before July 1, 2002 (or such later date as may be agreed in writing to by Buyer and Seller), unless the failure of such consummation shall be due to the failure of the party seeking to terminate this Agreement to comply in all material respects with the agreements and covenants contained herein to be performed by such party on or before the Closing Date.

12.2    Notice of Termination.

Any party desiring to terminate this Agreement pursuant to Section 12.1 shall give written notice of such termination to the other party to this Agreement.

12.3    Effect of Termination.

In the event that this Agreement shall be terminated pursuant to this Article XII, all further obligations of the parties under this Agreement (other than Sections 13.10 and 12.4) shall be terminated without further liability of any party to the other; provided, however, that nothing herein shall relieve any party from liability for its willful breach of this Agreement.

12.4    Non-Solicitation.

(a)    If this Agreement is terminated, neither Buyer nor any of its Affiliates will, for a period of two (2) years thereafter, without the prior written approval of Seller, directly or indirectly solicit, induce or attempt to persuade any person who is an employee of Seller on the date hereof or at any time hereafter that precedes such termination, to terminate his or her employment with Seller. Without limiting the rights of Seller to pursue all other legal and equitable rights available for a violation of this Section 12.4(a) by Buyer or its Affiliates, it is agreed that other remedies cannot fully compensate Seller for such a violation and that Seller shall be entitled to injunctive relief to prevent a violation or continuing violation hereof.

(b)    If this Agreement is terminated, neither Seller nor any of its Affiliates will, for a period of two (2) years thereafter, without the prior written approval of Buyer, directly or indirectly solicit, induce or attempt to persuade any person who is an employee of Buyer on the date hereof or at any time hereafter that precedes such

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termination, to terminate his or her employment with Buyer. Without limiting the rights of Buyer to pursue all other legal and equitable rights available for a violation of this Section 12.4(b) by Seller or its Affiliates, it is agreed that other remedies cannot fully compensate Buyer for such a violation and that Buyer shall be entitled to injunctive relief to prevent a violation or continuing violation hereof.

(c)    Notwithstanding the foregoing, nothing in this Section 12.4 will prevent Buyer or Seller from employing any person (i) who contacts such party on his or her own initiative without any direct or indirect solicitation by or knowing encouragement from Buyer or Seller, as applicable, or (ii) as a result of general, non-targeted solicitations for employment in newspapers or other media.

ARTICLE XIII

GENERAL PROVISIONS

13.1    Survival of Representations and Warranties.

All representations and warranties contained in this Agreement shall survive the consummation of the transactions contemplated by this Agreement through the period during which claims for indemnification may be made for such representations and warranties pursuant to Article XI, at which time such representations and warranties shall terminate.

13.2    Governing Law.

This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of Delaware (without regard to the conflicts of law provisions thereof), except to the extent that the application of substantive laws of the United States or another jurisdiction is mandatory.

13.3    No Public Announcement.

Neither Buyer nor Seller shall, without the approval of the other, which approval shall not be unreasonably withheld, make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such party shall be so obligated by law, in which case the other party shall be advised and the parties shall use their reasonable efforts to cause a mutually agreeable release or announcement to be issued; provided, however, that the foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement or to comply with the accounting and the Securities and Exchange Commission disclosure obligations or the rules of any stock exchange.

13.4    Notices.

All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered when delivered personally or when sent by registered or certified mail or by private courier addressed as follows:

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If to Buyer, to:

NDCHealth Corporation

NDC Plaza

Atlanta, Georgia 30329

Attention: Chief Executive Officer

with a copy to:

NDCHealth Corporation

NDC Plaza

Atlanta, Georgia 30329

Attention: General Counsel

If to Seller, to:

Arclight Systems LLC

480 Olde Worthington Road

Westerville, Ohio 43082

Attention: Chief Executive Officer

with a copy to:

Sidley Austin Brown & Wood

Bank One Plaza

10 S. Dearborn St.

Chicago, Illinois 60603

Attention: Gary D. Gerstman

or to such other address as such party may indicate by a notice delivered to the other party hereto.

13.5    Successors and Assigns.

(a)  The rights of any party under this Agreement shall not be assignable by such party hereto prior to the Closing without the written consent of the other party.

(b)  Following the Closing, no party may assign any of its rights hereunder to any third Person without the written consent of the other party, except that a party may assign its rights hereunder to an Affiliate or to any party that acquires substantially all of the assets or stock of such party or any successor corporation resulting from a merger or consolidation of or with such party. Any assignment hereunder (whether before or after the Closing) shall not relieve the assigning party of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the parties and successors and assigns permitted by this Section 13.5 and pursuant to Article XI any right, remedy or claim under or by reason of this Agreement.

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13.6    Access to Records after Closing.

(a)  For a period of six (6) years after the Closing Date, Seller and its representatives shall have full access to all of the books and records of the Business to the extent that such access may reasonably be required by Seller in connection with matters relating to or affected by the operations of the Business prior to the Closing Date. Such access shall be afforded by Buyer upon receipt of reasonable advance notice (not to exceed five (5) business days) and during normal business hours. Seller shall be solely responsible for its costs or expenses incurred by it pursuant to this Section 13.6(a). Buyer shall be responsible for any costs associated with the provision of copies requested pursuant to this Section 13.6(a). If Buyer or its Affiliates shall desire to dispose of any of such books and records prior to the expiration of such period, Buyer shall, prior to such disposition, give Seller a reasonable opportunity, at Seller’s expense, to segregate and remove such books and records as Seller may select.

(b)  For a period of six (6) years after the Closing Date, Buyer and its representatives shall have full access to all of the books and records relating to the Business (but only to the extent that such relate to the Business, acknowledging that such books and records may be redacted to omit information unrelated to the Business) which Seller or any of its Affiliates may retain after the Closing Date. Such access shall be afforded by Seller and its Affiliates upon receipt of reasonable advance notice (not to exceed five (5) business days) and during normal business hours. Buyer shall be solely responsible for its costs and expenses incurred by it pursuant to this Section 13.6(b). Seller shall be responsible for any costs associated with the provision of copies requested pursuant to this Section 13.6(b). If Seller or any of its Affiliates shall desire to dispose of any of such books and records prior to the expiration of such period, Seller shall, prior to such disposition, give Buyer a reasonable opportunity, at Buyer’s expense, to segregate and remove such books and records as Buyer may select.

13.7    Entire Agreement; Amendments; Confidentiality.

This Agreement, the Exhibits and Schedules referred to herein, the documents delivered pursuant hereto and the Confidentiality Agreement contain the entire understanding of the parties hereto with regard to the subject matter contained herein or therein, and supersede all other prior representations, warranties, agreements, understandings or letters of intent between or among any of the parties hereto. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each of the parties hereto. Notwithstanding anything to the contrary in the Confidentiality Agreement, the parties agree that the term of the Confidentiality Agreement shall be extended through and including the Closing Date.

13.8    Schedules.

Disclosure of any fact or item in any Schedule hereto referenced by a particular Section in this Agreement shall be deemed to have been disclosed with respect to any Section to which such matter is expressly responsive. Neither the specification of any dollar amount in any representation or warranty contained in this Agreement nor the inclusion of any specific item in

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any Schedule hereto is intended to imply that such amount, or higher or lower amounts, or the item so included or other items, are or are not material. Unless this Agreement specifically provides otherwise, neither the specification of any item or matter in any representation or warranty contained in this Agreement nor the inclusion of any specific item in any Schedule hereto is intended to imply that such item or matter, or other items or matters, are or are not in the ordinary course of business.

13.9    Waivers.

Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

13.10    Expenses.

Except as expressly set forth herein, each party hereto will pay all costs and expenses incident to its negotiation and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel and independent public accountants.

13.11    Partial Invalidity.

Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable.

13.12    Execution in Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to Seller and Buyer.

13.13    Further Assurances.

(a)  On and after the Closing Date, each party hereto shall take such other actions and execute such other documents and instruments of conveyance and transfer as may be reasonably requested by the other party hereto from time to time to effectuate or

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confirm the transfer of the Purchased Assets to Buyer in accordance with the terms of this Agreement.

(b)    If, despite the efforts of Seller to obtain any required third party consents in accordance with this Agreement, such consents are not obtained prior to Closing, and Buyer waives its right at Closing to receive such consent in its sole discretion, then notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any agreement, contract or other commitment included in the Purchased Assets if an attempted assignment thereof without the consent of a third party thereto would constitute a breach thereof giving the third party a right of termination. If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair Buyer’s rights under the Purchased Asset in question so that Buyer would not in effect acquire the benefit of all such rights, (i) Seller shall continue to undertake commercially reasonable efforts to obtain any such consent and/or remove any other impediments to the transfer/assignment of such deferred contract at the earliest practicable date and shall transfer or assign such contract with three (3) business days of obtaining such consent, (ii) until the time of assignment of such deferred contract, to the maximum extent permitted by law and the Purchased Asset, Seller shall act after the Closing Date as Buyer’s agent in order to obtain for Buyer all benefits thereunder and to allow Buyer to perform obligations under such contract, to the same extent as if such contract had been transferred or assigned at Closing, and each party shall bear its own administrative expenses incurred in connection with any such arrangement, and (iii) until the time of assignment of such deferred contract, Seller shall, at the request and for the account of Buyer, and subject to the Buyer’s reasonable discretion, enforce, at Buyer’s expense, the Seller’s rights thereto or interests therein against other parties. Buyer and Seller shall cooperate, to the maximum extent permitted by law and the Purchased Asset, with each other in any legal and reasonable arrangement designed to provide such benefits to Buyer and to relieve Seller from any obligation, liability or burden associated therewith. Except as otherwise provided herein, in Schedule 5.2 or in any other agreement entered into between Buyer and Seller pursuant hereto, any costs associated with a consent listed on Schedule 5.2 shall be borne by Seller.

13.14    Disclaimer of Warranties.

Seller makes no representations or warranties with respect to any projections, forecasts or forward-looking information provided to Buyer. There is no assurance that any projected or forecasted results will be achieved. Except as expressly provided in this Agreement, Buyer acknowledges that neither Seller nor any of its representatives or any other Person has made any representation or warranty, express or implied, as to the accuracy or completeness of any memoranda, charts or summaries heretofore made available by Seller or its representatives to Buyer or any other information which is not included in this Agreement or the Schedules hereto, and none of Seller, any of its representatives or any other Person will have or be subject to any liability to Buyer, any Affiliate of Buyer or any other Person resulting from the distribution of any such information to, or use of any such information by, Buyer, any Affiliate of Buyer or any of its agents, consultants, accountants, counsel or other representatives.

[Signatures on Following Page]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.

ARCLIGHT SYSTEMS LLC
By:
	Name: Thomas P. Ludlam, Jr. Title: Chief Executive Officer

NDCHEALTH CORPORATION
By:
	Name: Randolph L. M. Hutto Title: Chief Financial Officer

The following is a list of omitted schedules and exhibits. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Commission upon request.

Exhibit A—Bill of Sale and Instrument of Assignment

Exhibit B—Instrument of Assumption

Exhibit C—Member Services Agreement

Exhibit D—ScriptLINE Sublicense Agreement

Exhibit E—Transition Services Agreement

Exhibit F—Subcontract Services Agreement

Schedule 1.1—Software Modifications

Schedule 2.1(a)—Assigned Agreements

Schedule 2.1(b)—Excluded Intellectual Property

Schedule 2.2(a)—Excluded Assets

Schedule 2.3—Assumed Liabilities

Schedule 3.2—Preliminary Purchase Price Allocation

Schedule 5.2—Authority of Seller; Conflicts

Schedule 5.3—Financial Statements

Schedule 5.4—Operations Since Financial Statements Date

Schedule 5.5—Ownership of Assigned Contracts

Schedule 5.6(a)—Assigned Contracts

Schedule 5.6(b)—Changes in Assigned Chain Contracts

Schedule 5.6(c)—Changes in the Status of Assigned Chain Contracts Since January 1, 2002

Schedule 5.6(d)—Conflicts with Assigned Contracts

Schedule 5.7(a)—Nature of Assigned Contracts

Schedule 5.7(b)—Nature of Purchased Intellectual Property

Schedule 5.7(c)—Disclosure Items

Schedule 5.8(a)—Purchased Intellectual Property

Schedule 5.8(d)—Royalties for Purchased Intellectual Property

Schedule 5.8(e)—Rights to Inventions

Schedule 5.9—Seller Violations; Litigation; Compliance with Laws

Schedule 5.11—Tax Matters

Schedule 6.3—Buyer Violations; Litigation or Regulatory Actions

Schedule 7.5—Potential Buyer Employees

EX-10.XV

Exhibit 10 (xv)

FIRST AMENDMENT TO

STOCK PLEDGE AGREEMENT

THIS FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT dated as of January 9, 2002 (this “Amendment”) by and between MRY PARTNERS, L.P., a Georgia limited partnership (the “Pledgor”) and NDCHEALTH CORPORATION (formerly known as National Data Corporation), a Delaware corporation (the “Pledgee”).

WHEREAS, the Pledgor and the Pledgee are parties to that certain Stock Pledge Agreement dated as of April 3, 2001 (the “Pledge Agreement”);

WHEREAS, the Pledgor and the Pledgee desire to amend the Pledge Agreement on the terms and conditions contained herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.    Specific Amendment to Pledge Agreement.

The Pledge Agreement is amended by adding the following new Section 24. to the end thereof:

“SECTION 24.    Release of Collateral.

(a)  Notwithstanding anything contained in this Agreement to the contrary, so long as no Default or Event of Default has occurred and is continuing, the Pledgor may request that the Pledgee, and the Pledgee shall, release its lien and security interest in a portion of the Securities and take such other action as may be reasonably necessary and requested by the Pledgor to evidence such release; provided, however, that after giving effect to such release, the Fair Market Value of the Securities in which the Pledgee has a first priority, perfected security interest (the “Security Collateral Value”) shall be equal to, or greater than, 125% of the amount of the then outstanding Secured Obligations (the “125% Threshold”); provided further, that, unless the Pledgee agrees otherwise, the Pledgor may make only one such request for release during any consecutive three-month period. Any such request shall be in writing, shall specify in reasonable detail the Securities to be released and shall set forth such other information as the Pledgee shall reasonably request, such as the Pledgor’s calculations of the Fair Market Value of the Securities and the 125% Threshold as of the date of such request and the source used to obtain the Fair Market Value of the Securities.

(b)  In the event that the Security Collateral Value at the end of any calendar quarter is less than the 125% Threshold, the Pledgor shall, on or before the 15^th day of the first calendar month next succeeding such calendar quarter, provide the Pledgee a first priority, perfected security interest in additional Collateral in the form of common stock of NDCHealth Corporation or other marketable securities acceptable to the Pledgee with a Fair Market Value sufficient to correct such deficiency.

(c)  Upon any release of Collateral described in subsection (a) or addition of Collateral provided for in subsection (b), Schedule 1 to the Pledge Agreement shall automatically be deemed to be amended to reflect such release or addition.

(d)  For the purposes hereof, “Fair Market Value” with respect to any Security or other marketable security on any date means the fifty (50) day moving average value of such security as reported by any source specified by the Pledgor and reasonably acceptable to the Pledgee.”

SECTION 2.    Release of Securities.    The Pledgee hereby releases its lien and security interest in 565,023 shares of the common stock of NDCHealth Corporation previously pledged by the Pledgor to the Pledgee and set forth on Schedule 1 to the Pledge Agreement. The Pledgee shall, upon the request of the Pledgor, take such other action as may be reasonably necessary to evidence such release. Schedule 1 to the Pledge Agreement is hereby deemed amended to reflect such release.

SECTION 3.    Effectiveness.    The effectiveness of Sections 1 and 2 is subject to the truth and accuracy of the representations set forth in Section 4 below and receipt by the Pledgee of counterparts of this Amendment duly executed by each of the parties hereto.

SECTION 4.    Representations of the Pledgor.    The Pledgor represents and warrants to the Pledgee that:

(a)  Authorization.    The Pledgor has the right and power, and has taken all necessary action to authorize it, to execute, deliver and perform this Amendment. This Amendment has been duly executed and delivered by the general partner of the Pledgor and is a legal, valid and binding obligation of the Pledgor enforceable against it in accordance with its respective terms.

(b)  Compliance of Loan Documents with Laws, Etc.    The execution, delivery and performance of this Amendment, and the Loan Documents as amended by this Amendment, in accordance with their respective terms do not and will not, by the passage of time, the giving of notice, or both: (i) require any governmental approval or violate any applicable law relating to the Pledgor; (ii) conflict with, result in a breach of or constitute a default under the partnership agreement of the Pledgor, or any indenture, agreement or other instrument to which the Pledgor is a party or by which it or any of its properties may be bound, except as such conflict, breach or default shall have been waived in a writing presented to the Pledgee; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Pledgor.

(c)  No Default.    No Default or Event of Default will exist immediately after giving effect to this Amendment.

SECTION 5.    Reaffirmation of Representations.    The Pledgor hereby repeats and reaffirms all representations and warranties made by it to the Pledgee in the Loan Documents to which it is a party on and as of the date hereof (and after giving effect to this Amendment) with the same force and effect as if such representations and warranties were set forth in this Amendment in full.

SECTION 6.    References to the Pledge Agreement.    Each reference to the Pledge Agreement in any of the Loan Documents (including the Pledge Agreement) shall be deemed to be a reference to the Pledge Agreement, as amended by this Amendment.

SECTION 7.    Benefits.    This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

SECTION 8.    GOVERNING LAW.    THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.

SECTION 9.    Effect.    Except as expressly herein amended, the terms and conditions of the Pledge Agreement and the other Loan Documents shall remain in full force and effect.

SECTION 10.    Effective Date.    This Amendment shall not be effective until its execution and delivery by the Pledgee and the Pledgor whereupon it shall be deemed effective as of January 9, 2002.

SECTION 11.    Counterparts.    This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns.

SECTION 12.    Definitions.    All capitalized terms not otherwise defined herein are used herein with the respective definitions given them in the Pledge Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Stock Pledge Agreement to be executed as of the date first above written.

MRY PARTNERS, L.P.
By:
	Name:    Robert A. Yellowlees Title:    General Partner

NDCHEALTH CORPORATION
By:
	Name:    Patricia A. Wilson Title:    General Counsel

EX-10.XVI

Exhibit 10 (xvi)

FIRST AMENDMENT TO

REVOLVING CREDIT AGREEMENT

THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT, dated as of May 24, 2002 (this “Amendment”), by and among NDC HEALTH CORPORATION, a Delaware corporation (the “Borrower”), SUNTRUST BANK, a Georgia banking corporation (“SunTrust”), the other banks and lending institutions from time to time party thereto (SunTrust and such other banks and lending institutions, individually a “Lender” and collectively, the “Lenders”), SunTrust in its capacity as Administrative Agent for the Lenders (the “Administrative Agent”), as Issuing Bank (the “Issuing Bank”), and as Swingline Lender (the “Swingline Lender”), BANK OF AMERICA, N.A., in its capacity as Syndication Agent (the “Syndication Agent”), and WACHOVIA BANK, NATIONAL ASSOCIATION and U.S. BANK NATIONAL ASSOCIATION, in their capacities as Co-Documentation Agents (the “Co-Documentation Agents”).

W I T N E S S E T H :

WHEREAS, Borrower, Lenders, Administrative Agent, Issuing Bank, Swingline Lender, Syndication Agent and Co-Documentation Agents are parties to that certain Revolving Credit Agreement, dated as of May 1, 2002 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”);

WHEREAS, Borrower has requested that Administrative Agent and Lenders agree to amend the Credit Agreement so as to make certain changes in the terms and conditions of the Credit Agreement as are more fully set forth herein.;

NOW, THEREFORE, in consideration of the mutual promises and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound:

1.    Definitions.    Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement.

2.    Amendment to Section 1.1 of the Credit Agreement.    Section 1.1 of the Credit Agreement is hereby amended by adding the following as new definitions in proper alphabetical order:

“Scriptline Acquisition” shall mean the Acquisition by Borrower of the selected assets of Scriptline, a business unit of ArcLight Systems LLC, pursuant to an Asset Purchase Agreement dated as of May 2002, between ArcLight Systems LLC and Borrower, to be consummated on or prior to May 31, 2002.

“TechRx Phase I Acquisition” shall mean the Acquisition by Borrower of a majority of the ownership interest of TechRx, Inc. pursuant to a Stock Purchase Agreement dated as of May

2002, between TechRx, Inc. and Borrower, to be consummated on or prior to May 31, 2002.

3.    Amendment to Section 6.4 of the Credit Agreement.    Section 6.4 of the Credit Agreement is hereby amended by deleting such Section 6.4 in its entirety and substituting the following in lieu thereof:

Section 6.4    Capital Expenditures.    The Borrower and its Subsidiaries may make Capital Expenditures during any Fiscal Year in an amount not to exceed (i) $57,200,000 for the Fiscal Year ending May 30, 2003; (ii) $45,500,000 for the Fiscal Year ending May 31, 2004; and (iii) $48,500,000 for the Fiscal Year ending May 31, 2005; provided, however, commencing with the Fiscal Year ending May 30, 2003, if the actual aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries during any Fiscal Year (the “Current CapEx”) is less than the respective limit specified above for such Fiscal Year (the “Specified CapEx”), then the applicable limit for the immediately succeeding Fiscal Year shall be increased by an amount equal to the difference between the Current CapEx and the Specified CapEx (the “Carryover Amount”). For purposes of this Section 6.4 Capital Expenditures made by the Borrower in any Fiscal Year shall be deemed to be made first with Specified CapEx for such Fiscal Year, then, from the Carryover Amount, if any. No Carryover Amount may be carried over, however, beyond the immediately succeeding Fiscal Year.

4.    Amendment to Section 7.4(b) of the Credit Agreement.    Subsection 7.4(b) of the Credit Agreement is hereby amended by deleting such subsection 7.4(b) in its entirety and substituting the following in lieu thereof:

(b)    Without the prior written consent of the Required Lenders, the Borrower will not, nor will it permit any of its Subsidiaries to, acquire, whether directly or through the purchase of stock, convertible notes or otherwise, or otherwise acquire any assets, other than (A) the Investments permitted by Section 7.4(a); (B) the assets of one of its Subsidiaries; (C) fixed assets (which fixed assets do not constitute all or substantially all of the assets of the Person from whom such assets are acquired) or (D) Acquisitions, to the extent permitted in Section 7.4(c) below.

5.  Amendment to Section 7.4 of the Credit Agreement.    Section 7.4 of the Credit Agreement is hereby amended by adding the following new subsection 7.4(c):

(c)    Without the prior written consent of the Required Lenders, the Borrower will not effect any Acquisitions, unless, in each case (A) such Acquisition is of a business which is similar (as to product sold or service rendered) to the Borrower’s or any relevant Subsidiary’s; (B) such Acquisition is made upon a negotiated basis with the approval of the board of directors of the Person to be acquired, or of the percentage of ownership interests required by the charter documents of such Person to approve any such Acquisition; (C) no Default or Event of Default shall be in existence or be caused thereby which has not been

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specifically waived in writing pursuant to Section 10.2 (and, if requested by the Administrative Agent, the Borrower has provided to the Administrative Agent a certificate to such effect, with supporting calculations of the financial covenants set forth in Sections 6.1 and 6.2 on a pro forma basis for the most recent four fiscal quarters of the Borrower for which financial statements (annual or quarterly) are available after giving effect to such Acquisition as of the first day of such period, and the financial covenant set forth in Section 6.3 on a pro forma basis as of the end of the most recent fiscal quarter of the Borrower for which financial statements (annual or quarterly) are available after giving effect to such Acquisition as of the end of such fiscal quarter); and (D) (x) if the Borrower fails to prepay the Loans pursuant to Section 2.12 in an aggregate amount in excess of $50,000,000 during the 12 month period following the later of the consummation of the TechRx Phase I Acquisition or the Scriptline Acquisition (the “Post Acquisition Period”), the then-current market value of all Capital Stock of the Borrower given as consideration in such Acquisition, if any, together with the aggregate value of all such Capital Stock given in respect of all other Acquisitions made shall not exceed $50,000,000 or (y) if the Borrower shall prepay the Loans pursuant to Section 2.12 in an aggregate amount in excess of $50,000,000 during the Post Acquisition Period, (i) the total amount of cash consideration paid, and Indebtedness assumed or otherwise becoming part of Consolidated Total Debt in such Acquisition shall not exceed $15,000,000, individually, or when aggregated with such cash consideration and assumed Indebtedness in respect of all other Acquisitions made during the Post Acquisition Period shall not exceed $25,000,000; and (ii) the then-current market value of all Capital Stock of the Borrower given as consideration in such Acquisition, if any, together with the aggregate value of all such Capital Stock given in respect of all other Acquisitions made during the Post Acquisition Period shall not exceed $50,000,000; provided, notwithstanding the foregoing, the Borrower shall in no case be allowed to effect more than two Acquisitions during the Post Acquisition Period.

Provided, further, in addition to the foregoing, the Borrower may effect up to four Acquisitions per Fiscal Year during the twenty-four (24) month period following the Post Acquisition Period, provided, in each case such Acquisition (x) complies with the requirements of Sections 7.4(c)(A), (B) and (C); (y) the total amount of cash consideration paid, and Indebtedness assumed or otherwise becoming part of Consolidated Total Debt in such Acquisition shall not exceed $50,000,000, individually, or when aggregated with such cash consideration and assumed Indebtedness in respect of all other Acquisitions made during the then-current Fiscal Year shall not exceed $75,000,000; and (z) the then-current market value of all Capital Stock of the Borrower given as consideration in such Acquisition, if any, together with the aggregate value of all such Capital Stock given in respect of all other Acquisitions made during the then-current Fiscal Year shall not exceed $75,000,000.

Provided, further, notwithstanding the foregoing, the Borrower may effect the TechRx Phase I Acquisition and the Scriptline Acquisition, provided, in each

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case such Acquisition (w) complies with the requirements of Sections 7.4(c)(A), (B) and (C); (x) the total amount of cash consideration paid, and Indebtedness assumed or otherwise becoming part of Consolidated Total Debt (i) for the TechRx Phase I Acquisition shall not exceed $54,000,000 and (ii) for the Scriptline Acquisition shall not exceed $81,000,000; (y) the then-current market value of all Capital Stock of the Borrower given as consideration (i) for the TechRx Phase I Acquisition, if any, shall not exceed $12,000,000 and (ii) for the Scriptline Acquisition shall not exceed $0; and (z) each such Acquisition shall occur on or before May 31, 2002.

6.    Conditions to Effectiveness of Amendment.    This Amendment shall become effective upon the satisfaction of the following conditions precedent:

(a)    Administrative Agent shall have received a duly executed counterpart of this Amendment executed by the Borrower and the Required Lenders;

(b)    Administrative Agent shall have received duly executed counterparts of the Reaffirmation of Guarantee in the form attached hereto, executed by each Subsidiary Guarantor; and

(c)    Borrower shall have paid all other fees and reasonable costs and expenses of the Arranger and the Administrative Agent incurred in connection with this Amendment, including without limitation the reasonable fees and out-of-pocket expenses of counsel to the Administrative Agent.

7.    Representations and Warranties.    The Borrower hereby represents and warrants to the Administrative Agent and Lenders that:

(a)    the execution, delivery and performance of this Amendment (i) is within Borrower’s corporate power; (ii) has been duly authorized by all necessary corporate and shareholder action; (iii) does not require the consent, approval, authorization of, or registration or filing with, any Person under any material Contractual Obligation, with any Person under the organizational documents of Borrower or any Subsidiary Guarantor, or with any Governmental Authority other than such consents, approvals, authorizations, registrations or filings which have been made or obtained and are in full force and effect, and (iv) will not violate any Requirement of Law or cause a breach or default under Borrower’s or any Subsidiary Guarantor’s Contractual Obligations or organizational documents except as could not reasonably be expected to have a Materially Adverse Effect;

(b)    this Amendment has been duly executed and delivered for the benefit or on behalf of Borrower and constitutes the legal, valid and binding obligation of Borrower, enforceable against it in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights and remedies in general, and by general principles of equity; and

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(c)    after giving effect to this Amendment, all of the representations and warranties set forth in Article IV of the Credit Agreement, except for changes expressly permitted herein and except to the extent such representations and warranties relate solely to an earlier date, are true and correct in all material respects and no Default or Event of Default has occurred and is continuing as of the date hereof.

8.    Survival.    Except as expressly provided herein, the Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction.

9.    Effect of Amendment.    From and after the date hereof, references to the Credit Agreement shall be references to the Credit Agreement as amended hereby.

10.    Entire Understanding.    This Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Neither this Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 12.02 of the Credit Agreement.

11.    GOVERNING LAW.    THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA.

12.    Counterparts.    This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

[Signatures to Follow on Next Page]

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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first above written.

NDCHEALTH CORPORATION as Borrower
By
	Name: Randolph L.M. Hutto Title: Executive Vice President & CFO

[SEAL]

SUNTRUST BANK as Administrative Agent, as Issuing Bank, as Swingline Lender and as a Lender
By
	Name: Title:

BANK OF AMERICA, N.A., as Syndication Agent
By
	Name: Title:

WACHOVIA BANK, NATIONAL ASSOCIATION, as Co-Documentation Agent
By
	Name:
	Title:

U.S. BANK, NATIONAL ASSOCIATION, as Co-Documentation Agent
By
	Name:
	Title:

LASALLE BANK, N.A., as a Lender
By
	Name:
	Title:

KEY CORPORATE CAPITAL, INC., as a Lender
By
	Name:
	Title:

REGIONS BANK, as a Lender
By
	Name:
	Title:

COMERICA BANK, as a Lender
By
	Name:
	Title:

ACKNOWLEDGMENT OF GUARANTORS

Each of the undersigned, being a Subsidiary Guarantor of the Obligations of NDCHealth Corporation (“Borrower”) to the Lenders (as defined below) under that certain Revolving Credit Agreement, dated as of May 1, 2002 (as further amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein but not defined herein shall have the respective meanings assigned to such term in the Credit Agreement) by and among the Borrower, SunTrust Bank, (“SunTrust”), the other banks and lending institutions from time to time party thereto (SunTrust and such other banks and lending institutions, individually a “Lender” and collectively, the “Lenders”), SunTrust in its capacity as Administrative Agent for the Lenders (the “Administrative Agent”), as Issuing Bank (the “Issuing Bank”), and as Swingline Lender (the “Swingline Lender”), Bank of America, N.A., in its capacity as Syndication Agent (the “Syndication Agent”), and Wachovia Bank, National Association and U.S. Bank National Association, in their capacities as Co-Documentation Agents (the “Co-Documentation Agents”), hereby (a) acknowledges its receipt of a copy of the within and foregoing First Amendment to Revolving Credit Agreement (“First Amendment”), (b) consents thereto and agrees to be bound thereby and (c) agrees that its guaranty of the Obligations of Borrower to the Lenders shall continue in full force and effect from and after the execution and delivery by Borrower and the Lenders of the First Amendment, without diminution or impairment.

IN WITNESS WHEREOF, each of the undersigned has caused this acknowledgment to be executed under seal by their respective officers thereunto duly authorized, as of May 23, 2002.

NDC HEALTH INFORMATION SERVICES (ARIZONA) INC., as Guarantor
By:
	Name: Randolph L.M. Hutto Title: Executive Vice President & CFO

SOURCE INFORMATICS INC., as Guarantor
By:
	Name: Randolph L.M. Hutto Title: Executive Vice President & CFO

THE COMPUTER PLACE, INC., as Guarantor
By:
	Name: Randolph L.M. Hutto Title: Executive Vice President & CFO

EX-10.XVII

Exhibit 10 (xvii)

SECOND AMENDMENT TO

REVOLVING CREDIT AGREEMENT

THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT, dated as of August 23, 2002 (this “Amendment”), by and among NDC HEALTH CORPORATION, a Delaware corporation (the “Borrower”), SUNTRUST BANK, a Georgia banking corporation (“SunTrust”), the other banks and lending institutions from time to time party thereto (SunTrust and such other banks and lending institutions, individually a “Lender” and collectively, the “Lenders”), SunTrust in its capacity as Administrative Agent for the Lenders (the “Administrative Agent”), as Issuing Bank (the “Issuing Bank”), and as Swingline Lender (the “Swingline Lender”), BANK OF AMERICA, N.A., in its capacity as Syndication Agent (the “Syndication Agent”), and WACHOVIA BANK, NATIONAL ASSOCIATION and U.S. BANK NATIONAL ASSOCIATION, in their capacities as Co-Documentation Agents (the “Co-Documentation Agents”).

W I T N E S S E T H :

WHEREAS, Borrower, Lenders, Administrative Agent, Issuing Bank, Swingline Lender, Syndication Agent and Co-Documentation Agents are parties to that certain Revolving Credit Agreement, dated as of May 1, 2002, as amended by that certain First Amendment to Revolving Credit Agreement, dated as of May 24, 2002 (as further amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”);

WHEREAS, Borrower has requested that Administrative Agent and Lenders agree to amend the Credit Agreement so as to make certain changes in the terms and conditions of the Credit Agreement as are more fully set forth herein.;

NOW, THEREFORE, in consideration of the mutual promises and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound:

1.  Definitions.    Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement.

2.  Amendment to Section 1.1 of the Credit Agreement.    Section 1.1 of the Credit Agreement is hereby amended by adding the following as new definitions in proper alphabetical order:

“MedUnite Investment” shall mean those certain investments made by the borrower in MedUnite, Inc. during (i) the first fiscal quarter of fiscal year 2002 and (ii) the third fiscal quarter of fiscal year 2002 which were valued at $52,711,349 as of May 30, 2002.

3.  Amendment to Section 1.1 of the Credit Agreement.    Section 1.1 of the Credit Agreement is hereby amended by replacing the definitions of “Consolidated EBITDA” and

“Consolidated Net Income” with the following new definitions:

“Consolidated EBITDA” shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, but without duplication, (i) Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation and amortization and (iv) all other non-cash charges (excluding any non cash charges related to the write down of the MedUnite Investment already included in Consolidated Net Income); provided, however, that such non-cash charges shall be limited in amount to $10,000,000 per four quarter period, determined on a consolidated basis in accordance with GAAP in each case for such period.

“Consolidated Net Income” shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets and (iii) any equity interest of the Borrower or any Subsidiary of the Borrower in the unremitted earnings of any Person that is not a Subsidiary, (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary on the date that such Person’s assets are acquired by the Borrower or any Subsidiary and (v) any loss resulting from any non-cash charges taken by the Borrower as a result of the write-down of the MedUnite Investment.

4.  Conditions to Effectiveness of Amendment.    This Amendment shall become effective upon the satisfaction of the following conditions precedent:

(a)  Administrative Agent shall have received a duly executed counterpart of this Amendment executed by the Borrower and the Required Lenders;

(b)  Administrative Agent shall have received duly executed counterparts of the Reaffirmation of Guarantee in the form attached hereto, executed by each Subsidiary Guarantor; and

(c)  Borrower shall have paid all other fees and reasonable costs and expenses of the Arranger and the Administrative Agent incurred in connection with this Amendment, including without limitation the reasonable fees and out-of-pocket expenses of counsel to the Administrative Agent.

5.  Representations and Warranties.    The Borrower hereby represents and warrants to the Administrative Agent and Lenders that:

(a)  the execution, delivery and performance of this Amendment (i) is within Borrower’s corporate power; (ii) has been duly authorized by all necessary corporate and shareholder action; (iii) does not require the consent, approval, authorization of, or registration or filing with, any Person under any material Contractual Obligation, with any Person under the organizational documents of Borrower or any Subsidiary Guarantor, or with any Governmental Authority other than such consents, approvals, authorizations, registrations or filings which have

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been made or obtained and are in full force and effect, and (iv) will not violate any Requirement of Law or cause a breach or default under Borrower’s or any Subsidiary Guarantor’s Contractual Obligations or organizational documents except as could not reasonably be expected to have a Materially Adverse Effect;

(b)  this Amendment has been duly executed and delivered for the benefit or on behalf of Borrower and constitutes the legal, valid and binding obligation of Borrower, enforceable against it in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights and remedies in general, and by general principles of equity; and

(c)  after giving effect to this Amendment, all of the representations and warranties set forth in Article IV of the Credit Agreement, except for changes expressly permitted herein and except to the extent such representations and warranties relate solely to an earlier date, are true and correct in all material respects and no Default or Event of Default has occurred and is continuing as of the date hereof.

6.  Survival.    Except as expressly provided herein, the Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction.

7.  Effect of Amendment.    From and after the date hereof, references to the Credit Agreement shall be references to the Credit Agreement as amended hereby.

8.  Entire Understanding.    This Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Neither this Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 12.02 of the Credit Agreement.

9.  GOVERNING LAW.    THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA.

10.  Counterparts.    This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

[Signatures to Follow on Next Page]

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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first above written.

NDCHEALTH CORPORATION as Borrower
By:
	Name: Title:

[SEAL]

SUNTRUST BANK as Administrative Agent, as Issuing Bank, as Swingline Lender and as a Lender
By:
	Name: Title:

BANK OF AMERICA, N.A., as Syndication Agent
By:
	Name: Title:

WACHOVIA BANK, NATIONAL ASSOCIATION, as Co-Documentation Agent
By:
	Name: Title:

U.S. BANK, NATIONAL ASSOCIATION, as Co-Documentation Agent
By:
	Name: Title:

LASALLE BANK, N.A., as a Lender
By:
	Name: Title:

KEY CORPORATE CAPITAL, INC., as a Lender
By:
	Name: Title:

REGIONS BANK, as a Lender
By:
	Name: Title:

COMERICA BANK, as a Lender
By:
	Name: Title:

ACKNOWLEDGMENT OF GUARANTORS

Each of the undersigned, being a Subsidiary Guarantor of the Obligations of NDCHealth Corporation (“Borrower”) to the Lenders (as defined below) under that certain Revolving Credit Agreement, dated as of May 1, 2002, as amended by that certain First Amendment to Revolving Credit Agreement, dated as of May 24, 2002 (as further amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein but not defined herein shall have the respective meanings assigned to such term in the Credit Agreement) by and among the Borrower, SunTrust Bank, (“SunTrust”), the other banks and lending institutions from time to time party thereto (SunTrust and such other banks and lending institutions, individually a “Lender” and collectively, the “Lenders”), SunTrust in its capacity as Administrative Agent for the Lenders (the “Administrative Agent”), as Issuing Bank (the “Issuing Bank”), and as Swingline Lender (the “Swingline Lender”), Bank of America, N.A., in its capacity as Syndication Agent (the “Syndication Agent”), and Wachovia Bank, National Association and U.S. Bank National Association, in their capacities as Co-Documentation Agents (the “Co-Documentation Agents”), hereby (a) acknowledges its receipt of a copy of the within and foregoing Second Amendment to Revolving Credit Agreement (“Second Amendment”), (b) consents thereto and agrees to be bound thereby and (c) agrees that its guaranty of the Obligations of Borrower to the Lenders shall continue in full force and effect from and after the execution and delivery by Borrower and the Lenders of the Second Amendment, without diminution or impairment.

IN WITNESS WHEREOF, each of the undersigned has caused this acknowledgment to be executed under seal by their respective officers thereunto duly authorized, as of August 23, 2002.

NDCHEALTH INFORMATION SERVICES (ARIZONA) INC., as Guarantor
By:
	Name: Title:

SOURCE INFORMATICS INC., as Guarantor
By:
	Name: Title:

THE COMPUTER PLACE, INC., as Guarantor
By:
	Name: Title:

EX-10.XVIII

Exhibit 10(xviii)

ASSET CONTRIBUTION AGREEMENT

among:

NATIONAL DATA CORPORATION,

a Delaware corporation;

and

MEDUNITE INC.,

a Delaware corporation

Dated as of June 1, 2001

1.	CONTRIBUTION OF ASSETS; RELATED TRANSACTIONS	2
	1.1       Contribution of Assets	2
	1.2       Equity Securities and Promissory Note	2
	1.3       Sales Taxes	3
	1.4       Closing	3
	1.5       Substitute Arrangements	3
2.	REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTING STOCKHOLDER	4
	2.1       Due Organization	4
	2.2       Authority; Binding Nature of Agreements	4
	2.3       Non-Contravention; Consents	4
	2.4       Financial Statements	5
	2.5       Absence Of Changes	5
	2.6       Title To Assets; Sufficiency of Assets	6
	2.7       Revenue Recognition; Cost of Regulatory Compliance	7
	2.8       Receivables	7
	2.9       Customers; Distributors	8
	2.10     Inventory	8
	2.11     Equipment, Etc.	8
	2.12     Real Property	8
	2.13     Proprietary Assets	9
	2.14     Contracts	10
	2.15     Liabilities	12
	2.16     Compliance with Legal Requirements	12
	2.17     Governmental Authorizations	12
	2.18     Tax Matters	13
	2.19     Employee and Labor Matters	13
	2.20     Benefit Plans; ERISA	15
	2.21     Environmental Matters	17
	2.22     Sale of Products	18
	2.23     Performance of Services	18
	2.24     Insurance	18
	2.25     Related Party Transactions	18
	2.26     Proceedings; Orders	18

	2.27     Fraudulent Transfers	19
	2.28     Investment Representations	19
	2.29     Full Disclosure	21
	2.30     Investment Banking Fees	21
3.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	21
	3.1       Due Incorporation; Authority; Binding Nature Of Agreements	21
	3.2       Capitalization; Voting Rights	22
	3.3       Obligations to Related Parties	22
	3.4       Intellectual Property	23
	3.5       Compliance with Other Instruments	24
	3.6       Litigation	24
	3.7       Financial Statements; Absence of Changes	24
	3.8       Employees	25
	3.9       Registration Rights and Voting Rights	25
	3.10     Compliance with Legal Requirements; Governmental Authorizations	26
	3.11     Offering Valid	26
	3.12     Real Property Holding Corporation	26
	3.13     Insurance	26
	3.14     Company Contracts; Other Agreements	26
	3.15     Investment Banking Fees	27
4.	OPERATING COVENANTS	27
	4.1       Access and Investigation	27
	4.2       Operation Of Business	27
5.	OTHER AGREEMENTS	31
	5.1       Reasonable Efforts; Filings and Consents	31
	5.2       Notification	32
	5.3       No Negotiation	33
	5.4       Noncompetition	33
	5.5       Public Announcements	35
	5.6       Access; Further Actions	35
	5.8       Insurance; Destruction or Condemnation	38
	5.9       Confidentiality	38
	5.10     Disclosure Schedule Updates	39

	5.11      Exculpation Among Founders	39
	5.12      Restricted Names	39
	5.13      Limited Trademark License	40
	5.14      401(k) Plan Accounts	40
	5.15      Certain Payor Contracts	41
6.	CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATION TO CLOSE	41
	6.1        Accuracy Of Representations	41
	6.2        Governmental Approvals	41
	6.3        No Restraints	41
	6.4        Performance Of Obligations	41
	6.5        Additional Documents	42
	6.6        No Governmental Litigation	42
	6.7        No Other Litigation	42
	6.8        Services Agreements	42
	6.9        Related Agreements	42
	6.10      Third Party Consents	43
	6.11      Outsourcing Agreements	43
	6.12      Series A Preferred Stock Financing	43
	6.13      Employment Agreement	43
	6.14      Norcross Sublease and Software License	43
	6.15      Business Employee Bonuses	43
	6.16      Company Transition Services Agreement	43
7.	CONDITIONS PRECEDENT TO THE CONTRIBUTING STOCKHOLDER’S OBLIGATION TO CLOSE	43
	7.1        Accuracy Of Representations	43
	7.2        Consents and Governmental Approvals	44
	7.3        No Restraints	44
	7.4        Company’s Performance	44
	7.5        No Governmental Litigation	44
	7.6        No Other Litigation	45
	7.7        Services Agreements	45
	7.9        Series A Preferred Stock Financing	45
	7.10      Outsourcing Agreements	45

	7.11     Norcross Sublease and Software License	45
	7.12     Company Transition Services Agreement	45
	7.13     Service Agreements with the Founders	45
	7.14     Data Access	46
8.	TERMINATION	46
	8.1       Termination Events	46
	8.2       Termination Procedures	47
	8.3       Effect Of Termination	47
	8.4       Nonexclusivity Of Termination Rights	47
9.	INDEMNIFICATION, ETC.	47
	9.1       Survival Of Representations And Covenants	47
	9.2       Indemnification By The Contributing Stockholder	48
	9.3       Indemnification By Company	50
	9.4       Setoff	51
	9.5       Defense of Third Party Claim	51
	9.6       Exercise Of Remedies By Indemnitees Other Than Parties To This Agreement	52
	9.7       Payment of Replacement Costs by the Contributing Stockholder	52
	9.8       Alternative Arrangements In Lieu of Payment For Replacement Costs	53
	9.9       Exclusive Remedy For Certain Claims	56
	9.11     Consequential Damages.	57
	9.12     Contracts with Certain Payors	58
10.	MISCELLANEOUS PROVISIONS	58
	10.1     Further Assurances	58
	10.3     Attorneys’ Fees	59
	10.4     Notices	59
	10.5     Time Of The Essence	60
	10.6     Headings	60
	10.7     Counterparts	60
	10.8     Governing Law; Venue	61
	10.9     Successors And Assigns; Parties In Interest	61
	10.10   Remedies Cumulative; Specific Performance	62
	10.11   Waiver	62

10.12	Amendments	62
10.13	Severability	62
10.14	Entire Agreement	63
10.15	Construction	63

The following is a list of omitted exhibits and annexes. The Registrant agrees to furnish supplementally a copy of any omitted exhibit or annex to the Commission upon request.

EXHIBIT LIST

Exhibit B-1:    List of Contributed Assets

Exhibit B-2:    List of Excluded Assets

Exhibit C-1:    List of Assumed Liabilities

Exhibit C-2:    List of Excluded Liabilities

Exhibit D:       Tulsa Physician Groups

Exhibit E:        List of Transactions For Non-compete

Exhibit F-1:     Form of Legal Opinion of Troutman Sanders LLP

Exhibit F-2:     Form of Legal Opinion of Cooley Godward LLP

Exhibit G:       Key Consents

Exhibit H-1:    Transition Services Agreement

Exhibit H-2:    Company Transition Services Agreement

Exhibit H-3:    Statement Processing Services Agreement

Exhibit I-1:      MASS REVS Support Service Agreement

Exhibit I-2:      Tandem Outsourcing Agreement

Exhibit I-3:      Stratus Outsourcing Agreement

Exhibit J-1:      Physician Services Reseller Agreement

Exhibit J-2:      Hospital Marketing Agreement

Exhibit K:        Norcross Sublease

Exhibit L:        Software License Agreement

Exhibit M:       Discovered Contracts

ANNEX LIST

Annex 1        Registration Rights Agreement

Annex 2        Amended and Restated Series A Preferred Stock Purchase Agreement

Annex 3        Stockholders Agreement

Annex 4        Voting Agreement

Annex 5        Amended and Restated Certificate of Incorporation

Annex 6        Form of Promissory Note

ASSET CONTRIBUTION AGREEMENT

THIS ASSET CONTRIBUTION AGREEMENT (this “Agreement”) is entered into as of June 1, 2001, by and among: NATIONAL DATA CORPORATION, a Delaware corporation (the “Contributing Stockholder”); and MEDUNITE INC., a Delaware corporation (the “Company”). Capitalized terms used in this Agreement are defined in Exhibit A.

RECITALS

WHEREAS, the Founders have made commitments for capital contributions to the Company in exchange for equity securities of the Company simultaneously with the consummation of the Transactions as part of a plan pursuant to Section 351 of the Code;

WHEREAS, the Contributing Stockholder wishes to contribute and transfer substantially all of its assets constituting the Contributed Business to the Company in exchange for equity securities and a promissory note of the Company simultaneously with the contribution by the Founders and as part of a plan pursuant to Section 351 of the Code;

WHEREAS, concurrently with the consummation of the Transactions, the Company and the Contributing Stockholder will enter into the Statement Processing Services Agreement whereby the Contributing Stockholder will provide to the Company on a transitional basis certain services and support related to the Contributed Business;

WHEREAS, concurrently with the consummation of the Transactions, the Company and the Contributing Stockholder will enter into the Statement Processing Services Agreement whereby the Contributing Stockholder will provide to the Company certain printing services related to the Contributed Business;

WHEREAS, concurrently with the consummation of the Transactions, the Company and the Contributing Stockholder will enter into the Marketing Agreements whereby the Contributing Stockholder and the Company will enter into certain marketing arrangements as set forth therein; and

WHEREAS, concurrently with the consummation of the Transactions the Company and the Contributing Stockholder will enter into the Outsourcing Agreements whereby the parties will outsource to each other the use of certain assets and/or services.

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AGREEMENT

The parties to this Agreement, intending to be legally bound, agree as follows:

1.     CONTRIBUTION OF ASSETS; RELATED TRANSACTIONS.

1.1     Contribution of Assets.

(a)  The Contributing Stockholder shall cause to be contributed, assigned, transferred, conveyed and delivered to the Company, and the Company shall accept and assume from the Contributing Stockholder, at the Closing (as defined in Section 1.4(a) below), good and valid title to the Contributed Assets, free and clear of any Encumbrances, other than Permitted Encumbrances, on the terms and subject to the conditions set forth in this Agreement. For purposes of this Agreement, “Contributed Assets” shall mean and consist of the assets listed on Exhibit B-1 hereto.

(b)  Notwithstanding anything herein to the contrary, all assets of the Contributing Stockholder not specifically identified on Exhibit B-1 as a Contributed Asset (the “Excluded Assets”) shall not be contributed or transferred hereunder, shall be excluded from the definition of Contributed Assets and shall remain the property of the Contributing Stockholder. Without limiting the generality of the foregoing, Excluded Assets includes the assets listed on Exhibit B-2.

1.2     Equity Securities and Promissory Note.

(a)  As consideration for the contribution of the Contributed Assets to the Company:

(i)  at the Closing, the Company shall issue to the Contributing Stockholder the Equity Consideration and the Promissory Note; and

(ii)  at the Closing, the Company shall assume the Assumed Liabilities by delivering to the Contributing Stockholder an Assumption Agreement and other documents as may (in the reasonable judgment of the Contributing Stockholder or its counsel) be necessary or appropriate to evidence the same (the “Assumption Agreement”).

(b)  For purposes of this Agreement “Assumed Liabilities” shall mean only the Liabilities of the Contributing Stockholder specifically listed on Exhibit C-1.

(i)  Notwithstanding the foregoing, and notwithstanding anything in this Agreement to the contrary, the Assumed Liabilities shall not include, the Company shall not be required to assume or to perform or discharge, and the Contributing Stockholder shall be solely responsible to pay, perform and discharge all Liabilities not specifically listed on Exhibit C-1, as well as the specific Liabilities listed on Exhibit C-2 (collectively, the “Excluded Liabilities”).

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1.3     Sales Taxes.    The Company shall bear and pay any sales taxes, use taxes, transfer taxes, documentary charges, recording fees or similar taxes, charges, fees or expenses that may become payable in connection with the transfers of the Contributed Assets to the Company.

1.4     Closing.

(a)  The closing of the sale of the Contributed Assets to the Company (the “Closing”) shall take place at the offices of Cooley Godward LLP in San Diego, California, at 10:00 a.m. on the fifth business day after the last of the conditions set forth in Section 6 and Section 7 has been satisfied or waived or such other date, time or place as mutually agreed between the Contributing Stockholder and the Company. For purposes of this Agreement, “Closing Date” shall mean the date as of which the Closing actually takes place, and “Effective Time” shall mean the close of business on the Closing Date.

(b)  At the Closing:

(i)  the Contributing Stockholder shall execute and deliver to the Company such bills of sale, endorsements, assignments and other documents as may (in the reasonable judgment of the Company or its counsel) be necessary or appropriate to assign, convey, transfer and deliver to the Company good and valid title to the Contributed Assets free and clear of any Encumbrances, other than Permitted Encumbrances;

(ii)  the Company shall issue a certificate or certificates evidencing the Equity Consideration as contemplated by Section 1.2(a)(i);

(iii)  the Company shall execute and deliver to the Contributing Stockholder the Assumption Agreement; and

(iv)  the Company shall issue and deliver to the Contributing Stockholder the Promissory Note.

1.5     Substitute Arrangements.

Notwithstanding any provision of this Agreement to the contrary, nothing in this Agreement shall be deemed to constitute an agreement to transfer, assign or permit the use of any Contributed Asset if an attempted transfer, assignment or permitted use thereof, without the consent of any Person or Governmental Body, would constitute a breach thereof or in any way adversely affect the rights of the Company thereunder. The Contributing Stockholder will use its reasonable efforts to obtain any Consents or waivers required to assign to the Company all rights, benefits and interests under each Contributed Asset that requires the Consent of any Person or Governmental Body, without any conditions to such transfer or changes or modifications of terms thereunder, in a manner to permit the Contributed Business to be conducted as currently conducted following the Closing. If any such necessary Consent has not been obtained by the Closing, or if an attempted assignment thereof would otherwise be ineffective so that the Company would not receive the benefit of all of the Contributing Stockholder’s rights thereunder, the Company shall be entitled to the remedies set forth in Section 9.7 and Section 9.8, as applicable.

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2.     REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTING STOCKHOLDER.

The Contributing Stockholder represents and warrants to and for the benefit of the Company Indemnitees that each of the following representations and warranties is true and correct except as expressly set forth otherwise in a correspondingly numbered or cross-referenced part of the Contributing Stockholder Disclosure Schedule:

2.1     Due Organization.    The Contributing Stockholder is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Contributing Stockholder is qualified, authorized, registered or licensed to do business as a foreign corporation in each jurisdiction where the conduct of the Contributed Business requires it except where the failure to do so would not (A) give rise to any Liabilities other than Excluded Liabilities or (B) materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements.

2.2     Authority; Binding Nature of Agreements.     The Contributing Stockholder has the requisite corporate power and authority to enter into and to perform its obligations under each of the Transactional Agreements to which it is a party; and the execution, delivery and performance by the Contributing Stockholder of the Transactional Agreements to which it is a party have been duly authorized by all necessary action on the part of the Contributing Stockholder and its board of directors. This Agreement constitutes the legal, valid and binding obligation of the Contributing Stockholder, enforceable against the Contributing Stockholder in accordance with its terms. Upon the execution of each of the other Transactional Agreements at the Closing, each of such other Transactional Agreements to which the Contributing Stockholder is a party will constitute the legal, valid and binding obligation of the Contributing Stockholder, enforceable against the Contributing Stockholder in accordance with its terms.

2.3     Non-Contravention; Consents.    

(a)  Neither the execution and delivery by the Contributing Stockholder of any of the Transactional Agreements, nor the consummation or performance by the Contributing Stockholder of any of the Transactions, will (with or without notice or lapse of time):

(i)  result in a violation of, or give any Governmental Body or other Person the right to exercise any remedy or obtain any relief under, any Legal Requirement (other than Governmental Authorizations) or any Order to which the Contributed Assets or any other assets of the Contributing Stockholder required for the performance of its obligations under the Transaction Documents are subject;

(ii)  result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is to be included in the Contributed Assets;

(iii)  result in a violation or breach of, or result in a default under, or give any Person the right to exercise any remedy under, any provision of any Contributing Stockholder Contract except to the extent it would not (A) give rise to any Liabilities other than

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Excluded Liabilities or (B) materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements

(iv)  accelerate the maturity or performance of, or cancel, terminate or modify, any Contributing Stockholder Contract except to the extent it would not (A) give rise to any Liabilities other than Excluded Liabilities, or (B) materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements, or

(v)  result in the imposition or creation of any Encumbrance (other than Permitted Encumbrances) upon any of the Contributed Assets.

(b)  No filing with or notice to, or Consent from, any Person is or will be required in connection with the execution and delivery of any of the Transactional Agreements or the consummation or performance of any of the Transactions. No vote or other approval by the stockholders of the Contributing Stockholder is or will be required in connection with the execution and delivery of any of the Transactional Agreements or the consummation or performance of any of the Transactions.

2.4     Financial Statements.    Part 2.4 of the Contributing Stockholder Disclosure Schedule includes the following pro forma financial statements of the Contributed Business (collectively, the “Contributed Business Pro Forma Financial Statements”): the unaudited balance sheet of the Contributed Business as of March 31, 2001, and the related statement of operations for the ten month period ended March 31, 2001. The Contributed Business Pro Forma Financial Statements are derived from the financial statements of the Contributing Stockholder which are accurate and complete in all material respects and have been prepared in accordance with generally accepted accounting principles consistently applied. The Contributed Business Pro Forma Financial Statements present fairly in all material respects the financial position of the Contributed Business as of the respective dates thereof and the results of operations of the Contributed Business for the periods covered thereby.

2.5     Absence Of Changes.    Since March 31, 2001:

(a)  there has not been any material adverse change in the business, condition, assets, liabilities, operations, financial performance or operating income of the Contributed Business;

(b)  there has not been any material loss, damage or destruction to any of the material assets used in the Contributed Business (whether or not covered by insurance);

(c)  the Contributing Stockholder has not sold or otherwise transferred, or leased or licensed, any material portion of the assets used in the Contributed Business to any other Person, except for inventory sold and non-exclusive licenses to software granted, in each case in the Ordinary Course of Business;

(d)  the Contributing Stockholder has not written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other

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indebtedness included in the Contributed Assets, except for write-offs in the Ordinary Course of Business;

(e)  the Contributing Stockholder has not incurred any Liability which is an Assumed Liability, except in the Ordinary Course of Business;

(f)  the Contributing Stockholder has not forgiven any debt or otherwise released or waived any right or claim related to the Contributed Business, except for rights or claims not exceeding $50,000 in the aggregate in the Ordinary Course of Business;

(g)  the Contributing Stockholder has not changed any of its methods of accounting or accounting practices (other than the Transactions) as related to the Contributed Business;

(h)  the Contributing Stockholder has not entered into any transaction or taken any other action outside the Ordinary Course of Business as related to the Contributed Business (other than the Transactions); and

(i)  the Contributing Stockholder has not agreed, committed or irrevocably offered (in writing or otherwise) to take any of the actions referred to in clauses “(c)” through “(h)” above.

2.6     Title To Assets; Sufficiency of Assets.

(a)  The Contributing Stockholder has good title to, or in the case of leased property has valid leasehold interest in, all of the Contributed Assets (whether real or personal, tangible or intangible). Exhibit B-2 identifies as such each asset of the Contributing Stockholder which is currently shared or commonly used between the Contributed Business and any other Affiliate, division or line of business of the Contributing Stockholder. None of the Contributed Assets is subject to any Encumbrances (including tax-related Encumbrances) other than Permitted Encumbrances.

(b)  At the Effective Time, the Contributing Stockholder will transfer to the Company good and valid title to all owned Contributed Assets, free and clear of any Encumbrances, other than Permitted Encumbrances. The Contributing Stockholder has validly and effectively obtained the right and license to use, copy, modify, and distribute any third-party programming and materials contained in the owned Contributed Business Proprietary Assets included in the Contributed Assets, and such owned Contributed Business Proprietary Assets included in the Contributed Assets do not contain any programming or materials, or derivative works of any programming or materials, in which any third party has a superior ownership, including any right or license.

(c)  The Contributed Assets and the assets listed on Exhibit B-2 constitute all the assets, properties, rights and goodwill necessary to carry on the Contributed Business as conducted on the date of this Agreement and as of the Effective Time.

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(d)  As of the Effective Time, neither the Contributing Stockholder nor any Related Party nor any Affiliate of the Contributing Stockholder will have custody or possession of any asset, property or right included in the Contributed Assets.

(e)  Neither the Contributing Stockholder nor any of its Affiliates has any agreement, absolute or contingent, written or oral, with any other Person (i) to effect any Acquisition Transaction or (ii) to sell or otherwise transfer any of the Contributed Assets (other than inventory in the Ordinary Course of Business) or any line of business or material asset required for the performance of the Contributing Stockholder’s obligations under the Transactional Agreements except for sales or transfers which are, individually or in the aggregate, immaterial to the Contributed Business.

(f)  All material tangible Contributed Assets which are owned, leased or used by the Contributing Stockholder are in good operating condition and repair in all material respects, subject to normal wear and tear.

2.7     Revenue Recognition; Cost of Regulatory Compliance.

(a)  Part 2.7 of the Contributing Stockholder Disclosure Schedule lists the Contributed Business Contracts to be included in the Contributed Assets pursuant to which the Contributing Stockholder has received payments related to deferred income or pre-billing for future services in excess of $50,000 in the aggregate to the extent such revenues or such other payments are related to Contract obligations to be fully or partially performed after the Effective Time under the applicable Contributed Business Contract to be included in the Contributed Assets.

(b)  The aggregate cost of rendering the Contributed Business compliant with the requirements of HIPAA applicable to the operations of the Contributed Business as set forth in the HIPAA Report, dated March 2, 2001 previously provided to the Company (the “Report”) is based on the Contributing Stockholder’s good faith estimate, which is consistent with the methodology used by the Contributing Stockholder for calculating its HIPAA compliance costs as presented to the Contributing Stockholder’s Board of Directors in connection with its operating budget for the fiscal year ended May 31, 2002.

2.8     Receivables.     Exhibit B-1 and Exhibit B-2 contain accurate summaries of the breakdown and aging of all accounts receivable, notes receivable, other receivables, prepaid expenses and other current assets of the Contributing Stockholder related to the Contributed Business as of the date of this Agreement. The Contributing Stockholder has delivered to the Company complete and accurate information (either on computer/compact disk or hard copy format) of all such accounts receivable that are summarized in Exhibits B-1 and Exhibit B-2. All such accounts receivable to be included in the Contributed Assets represent valid obligations of customers of the Contributing Stockholder (without any right of counterclaim or setoff) arising from bona fide transactions entered into in the Ordinary Course of Business. Part 2.8 of the Contributing Stockholder Disclosure Schedule identifies all unreturned security deposits and other deposits related to the Contributed Assets and made by, or held by any Person for the benefit of, the Contributing Stockholder.

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2.9     Customers; Distributors.    Part 2.9 of the Contributing Stockholder Disclosure Schedule identifies each customer or other Person, including Vendors and Payors, that (together with such customer’s or other Person’s Affiliates) accounted for (i) more than $500,000 of the gross revenues of the Contributed Business in fiscal 2000 or fiscal 1999, or (ii) more than $500,000 of the gross revenues of the Contributed Business in fiscal 2001 on an annualized basis. The Contributing Stockholder has not received any written notice or, to its Knowledge, other communication (in writing or otherwise), indicating that any customer or other Person identified or required to be identified in Part 2.9 of the Contributing Stockholder Disclosure Schedule intends to cease dealing with the Contributing Stockholder or intends to materially reduce the volume of business transacted by such Person with the Contributing Stockholder below historical levels. The Contributing Stockholder has not received any written notice or, to its Knowledge, other communication (in writing or otherwise), indicating that any distributor of any of the Contributing Stockholder’s products related to the Contributed Business intends to cease acting as a distributor of such products or otherwise dealing with the Contributing Stockholder.

2.10     Inventory.    Exhibit B-1 and Exhibit B-2 contain a breakdown of all inventory (including raw materials, work in process and finished goods) of the Contributing Stockholder related to the Contributed Business as of the date of this Agreement. All of such inventory included in the Contributed Assets is of such quality as to be usable and saleable by the Contributing Stockholder in the Ordinary Course of Business.

2.11     Equipment, Etc.    Exhibit B-1 and Exhibit B-2 identify all equipment, materials, prototypes, tools, supplies, vehicles, furniture, fixtures, improvements and other tangible assets used in or necessary for the conduct of the Contributed Business. The Continuing Stockholder has delivered to the Company prior to the date of this Agreement a schedule which accurately sets forth either by specific asset or by group of assets the Contributing Stockholder’s tax basis as of April 30, 2001 after depreciation, date of acquisition by the Contributing Stockholder, and to the extent reasonably available to the Contributing Stockholder, the Contributing Stockholder’s original cost and book value of each such asset or group of assets included in the Contributed Assets; it being understood that such schedule shall be deemed part of the Contributing Stockholder Disclosure Schedule. In a letter supplement, which shall be deemed part of the Contributing Stockholder Disclosure Schedule Update, and which will be delivered to the Company no later than 15 business days after the Closing Date, the Contributing Stockholder will provide to the Company the information required by the preceding sentence updated and accurate as of the Closing Date. Exhibit B-1 and Exhibit B-2 also accurately identify all tangible assets leased to the Contributing Stockholder and used in or necessary for the conduct of the Contributed Business and includes each lease for tangible Contributed Assets leased to the Contributing Stockholder.

2.12     Real Property.    There is no real property or any interest in real property which is used or utilized by the Contributing Stockholder in connection with the Contributed Business, except for the leaseholds created under the real property leases listed in Exhibit B-1 and except for real property used by general and administrative employees, other than Business Employees. The Contributing Stockholder enjoys peaceful and undisturbed possession of the leaseholds created under the real property leases included in the Contributed Assets.

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2.13     Proprietary Assets.

(a)  Exhibit B-1 and Exhibit B-2 identify and provide a brief description of all registered Patents, registered Copyrights, registered Trademarks, trade names and owned software used in, or necessary for the conduct of, the Contributed Business. Exhibit B-1 and Exhibit B-2 list each Proprietary Asset used in or necessary for the conduct of the Contributed Business that is owned by any other Person and that is licensed to or used by the Contributing Stockholder and its Affiliates in the conduct of the Contributed Business, including a separate list of all third-party commercially available software identifying the number of copies used in the Contributed Business and the number of copies licensed to the Contributing Stockholder (except for any Proprietary Asset that is licensed to the Contributing Stockholder under any third-party software license that (1) is generally available to the public, (2) imposes no future monetary obligation on the Contributing Stockholder and (3) is assignable to the Company without any Liability to the Company and is a Contributed Asset) and lists the license agreement or other Contracts under which such licensed Contributed Business Proprietary Asset is being licensed to or used by the Contributing Stockholder. The Contributing Stockholder has good and valid title to all of the owned Contributed Business Proprietary Assets included in the Contributed Assets or licensed to the Company pursuant to the Software License Agreement, free of any Encumbrances, other than Permitted Encumbrances, and has a valid right to use and otherwise exploit, and to license others to use and otherwise exploit, all such owned Contributed Business Proprietary Assets included in the Contributed Assets or licensed to the Company pursuant to the Software License Agreement. The Contributing Stockholder is not obligated to make any future payment to any Person for the use or other exploitation of any Contributed Business Proprietary Asset included in the Contributed Assets except in accordance with the terms of applicable license agreements listed on Exhibit B-1. The Contributing Stockholder has a valid right to use and otherwise exploit, and to license others to use and otherwise exploit each of the licensed Contributed Business Proprietary Assets included in the Contributed Assets or licensed to the Company pursuant to the Software License Agreement subject to the terms of the applicable license agreements listed on Exhibit B-1.

(b)  The Contributing Stockholder has taken all reasonable measures and precautions necessary to protect and maintain the confidentiality and secrecy of all Contributed Business Proprietary Assets (except Contributed Business Proprietary Assets whose value would be unimpaired by public disclosure). The Contributing Stockholder has not delivered or permitted to be delivered to any Person any source code of any Contributed Business Proprietary Asset included in the Contributed Assets, and no Person (other than the Contributing Stockholder) has any rights with respect to, the source code, or any portion or aspect of the source code, of any Contributed Business Proprietary Asset included in the Contributed Assets.

(c)  All Patents, Trademarks and Copyrights included in the Contributed Assets that are registered with any Governmental Body and held by the Contributing Stockholder for use in connection with the Contributed Business are valid and subsisting. To the Knowledge of the Contributing Stockholder, none of the Contributed Business Proprietary Assets included in the Contributed Assets or licensed to the Company pursuant to the Software License Agreement infringes or conflicts with any Proprietary Asset owned or used by any other Person. The Contributing Stockholder is not in the conduct of the Contributed Business infringing,

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misappropriating or making any unlawful use of, and the Contributing Stockholder has not in the conduct of the Contributed Business infringed, misappropriated or made any unlawful use of, or within the last twenty four months received any written notice or, to its Knowledge, other communication of any actual, alleged, possible or potential infringement, misappropriation or unlawful use in the conduct of the Contributed Business of, any Proprietary Asset owned or used by any other Person. To the Knowledge of the Contributing Stockholder, no other Person is infringing, misappropriating or making any unlawful use of, and no Proprietary Asset owned or used by any other Person infringes or conflicts with, any Contributed Business Proprietary Asset included in the Contributed Assets.

(d)  Part 2.13(d) of the Contributing Stockholder Disclosure Schedule lists each Contributed Business Proprietary Asset included in the Contributed Assets which has been licensed to any Person, other than licenses to healthcare providers, value-added resellers and distributors in the Ordinary Course of Business. The Contributing Stockholder has not entered into any covenant not to compete or Contract with respect to any of the Contributed Business Proprietary Assets included in the Contributed Assets limiting its ability to transact the Contributed Business in any market or geographical area in the United States or with any Person. The Contributing Stockholder has, and the Company will acquire at the Closing, the right to use the Restricted Names and, to the extent the Contributing Stockholder has rights therein, any variations thereof.

(e)  The Contributing Stockholder has not entered into and is not bound by any Contract under which any Person has the right to distribute or license any Contributed Business Proprietary Asset other than non-exclusive marketing rights granted to value added resellers in the Ordinary Course of Business. The Contributing Stockholder has not caused, and to its Knowledge no other Person has caused, any event, circumstance or condition, that (with or without notice or lapse of time) will, or could reasonably be expected to, result in the disclosure or delivery to any Person of the source code, or any portion or aspect of the source code, or any proprietary information or algorithm contained in any source code, of any Contributed Business Proprietary Asset included in the Contributed Assets.

(f)  To the Contributing Stockholder’s Knowledge, no employee or consultant who has contributed to the creation or development of the Contributed Business Proprietary Assets has any valid and enforceable legal rights in the Contributed Business Proprietary Assets that would prevent the Contributing Stockholder from transferring the Contributed Assets to the Company.

2.14     Contracts.

(a)  Exhibit B-1 and Exhibit B-2 list each Contributing Stockholder Contract used or necessary for the conduct of the Contributed Business, except for Contributing Stockholder Contracts with Physicians, of which there are approximately 18,000 Contracts included in the Contributed Assets as of April 30, 2001. The Contributing Stockholder has delivered or made available to the Company accurate and complete copies of all Contributed Business Contracts included in the Contributed Assets, including all amendments thereto, except for Contributed Business Contracts with physicians and other healthcare providers to the extent

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the accurate standard forms of such Contracts are attached to the Contributing Stockholder Disclosure Schedule. Each Contributed Business Contract is valid and in full force and effect and is enforceable in accordance with its terms against the Contributing Stockholder, and, to its Knowledge, against the counterparty thereto.

(b)  The Contributing Stockholder has not, and to the Contributing Stockholder’s Knowledge, no other Person has, violated or breached, or declared or committed any default under, any Contributed Business Contract except for any violation, breach or default that (A) would not give rise to any Liabilities other than Excluded Liabilities or (B) would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements. The Contributing Stockholder has not caused, and to its Knowledge, no other Person has caused (excluding the consummation of the transactions contemplated hereby), any event, circumstance or condition, that would (with or without notice or lapse of time) (A) result in a violation or breach of any of the provisions of any Contributed Business Contract, (B) give any Person the right to declare a default or exercise any remedy under any Contributed Business Contract, (C) give any Person the right to accelerate the maturity or performance of any Contributed Business Contract, or (D) give any Person the right to cancel, terminate or modify any Contributed Business Contract except in each case to the extent that any such event (A) would not give rise to any Liabilities other than Excluded Liabilities or (B) would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements. The Contributing Stockholder has not received any written notice or, to its Knowledge, other communication (in writing or otherwise) regarding any actual or alleged violation or breach of, or default under, any Contributed Business Contract and has not waived any material right under any Contributed Business Contract included in the Contributed Assets.

(c)  The Contributed Assets are not pledged to secure the performance or payment of any obligation or other Liability of any Person.

(d)  No Person is renegotiating, or has given written notice, or to the Contributing Stockholder’s Knowledge, any oral notice of an intention to negotiate any amount paid or payable to the Contributing Stockholder under any material Contributed Business Contract or any other term or provision of any material Contributed Business Contract, in each case to the extent included in the Contributed Assets.

(e)  As of the date of this Agreement, the Contributing Stockholder has no Knowledge of any basis upon which any party to any Contributed Business Contract included in the Contributed Assets would object to (i) the assignment to the Company of any right under any Contributed Business Contract included in the Contributed Assets, or (ii) the delegation to or performance by the Company of any obligation under such Contract.

(f)  As of the Effective Time and except as contemplated by any Transactional Agreement, the Company shall not have any Liability or obligation under any Contributed Business Contract included in the Contributed Assets to process any claims or other transactions for the existing hospital or pharmacy connectivity businesses of the Contributing Stockholder.

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2.15     Liabilities.    The Contributing Stockholder has not, at any time, (i) made a general assignment for the benefit of creditors, (ii) filed, or had filed against it, any bankruptcy petition or similar filing, which was not dismissed, (iii) suffered the attachment or other judicial seizure of all or a substantial portion of its assets, (iv) admitted in writing its inability to pay its debts as they become due, (v) been convicted of, or pleaded guilty or no contest to, any felony, or (vi) taken or been the subject of any action that would materially and adversely affect its ability to comply with or perform any of its obligations under any of the Transactional Agreements.

2.16     Compliance with Legal Requirements.    The Contributing Stockholder is not in violation of any Legal Requirement that is applicable to it or to the conduct of the Contributed Business or the ownership or use of any of its assets used in the conduct of the Contributed Business, except to the extent any such noncompliance (A) would not give rise to any Liabilities other than Excluded Liabilities or (B) would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements. The Contributing Stockholder has not received, at any time during the last twelve months, any written notice or, to its Knowledge, other communication (in writing or otherwise) from any Governmental Body or any other Person alleging a violation of, or failure to comply with, any Legal Requirement, or alleging any obligation on the part of the Contributing Stockholder to undertake, or to bear all or any portion of the cost of, any cleanup or any remedial, corrective or response action of any nature in each instance to the extent related to the Contributed Business. To the Knowledge of the Contributing Stockholder, no Governmental Body has proposed any Legal Requirement (other than HIPAA) that, if adopted or otherwise put into effect, (i) would have a material and adverse effect on the Contributed Business or of the Contributing Stockholder to the extent materially and adversely affecting its ability to perform any obligation under any of the Transactional Agreements, or (ii) would have the effect of preventing, delaying or making illegal any of the Transactions.

2.17     Governmental Authorizations.    Exhibit B-1 and Exhibit B-2 identify: (a) each Governmental Authorization that is held by the Contributing Stockholder and is necessary for the conduct of, the Contributed Business; and (b) each other Governmental Authorization that, to the Knowledge of the Contributing Stockholder, is held by any employee of the Contributing Stockholder and is necessary for the conduct of, the Contributed Business. The Contributing Stockholder has delivered to the Company accurate and complete copies of all of the Governmental Authorizations included in the Contributed Assets and each such Governmental Authorization is valid and in full force and effect. The Governmental Authorizations identified in Exhibit B-1 and Exhibit B-2 constitute all of the Governmental Authorizations necessary (i) to enable the Contributing Stockholder to conduct the Contributed Business in the manner in which such business is currently being conducted, and (ii) to permit the Contributing Stockholder to own and use the assets related to the Contributed Business in the manner in which they are currently owned or used. The Contributing Stockholder is not in violation of any Governmental Authorization identified or required to be identified in the Contributing Stockholder Disclosure Schedule, except to the extent any such noncompliance (A) would not give rise to any Liabilities other than Excluded Liabilities, (B) would not adversely affect the ability of the Company to obtain a replacement governmental authorization or to operate the Contributed Business under existing Governmental Authorizations, or (C) would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional

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Agreements. The Contributing Stockholder has not received at any time during the last twelve months any written notice or, to its Knowledge, other communication (in writing or otherwise) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Authorization, or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization. All applications required to have been filed for the renewal of the Governmental Authorizations required to be identified in the Contributing Stockholder Disclosure Schedule have been duly filed on a timely basis with the appropriate Governmental Bodies, and each other notice or filing required to have been given or made with respect to such Governmental Authorizations has been duly given or made on a timely basis with the appropriate Governmental Body.

2.18     Tax Matters.

(a)  Each Tax related to the Contributed Business required to have been paid by the Contributing Stockholder prior to the date hereof has been duly paid in full on a timely basis, and each Tax related to the Contributed Business required to be paid by the Contributing Stockholder prior to the Effective Time will be paid in full prior to the Effective Time. Any Tax related to the Contributed Business required to have been withheld or collected by the Contributing Stockholder prior to the date hereof has been duly withheld and collected; and (to the extent required) each such Tax has been paid to the appropriate Governmental Body. Any Tax related to the Contributed Business required to have been withheld or collected by the Contributing Stockholder prior to the Effective Time will be withheld and collected prior to the Effective Time; and (to the extent required) each such Tax will be paid to the appropriate Governmental Body.

(b)  No claim or other Proceeding is pending or, to the Contributing Stockholder’s Knowledge, has been threatened against or with respect to the Contributing Stockholder in respect of any Tax related to the Contributed Business. There are no unsatisfied Liabilities for Taxes (including liabilities for interest, additions to tax and penalties thereon and related expenses) related to the Contributed Business with respect to any notice of deficiency or similar document received by the Contributing Stockholder. The Contributing Stockholder has not entered into or become bound by any agreement or Consent pursuant to Section 341(f) of the Code with respect to the Contributed Business.

(c)  There is no agreement, plan, arrangement or other Contract covering any Business Employee that, individually or collectively, could give rise directly or indirectly to the payment of any amount that would not be deductible pursuant to Section 280G or Section 162 of the Code.

2.19     Employee and Labor Matters.

(a)  No later than 15 calendar days after the date of this Agreement, the Contributing Stockholder shall deliver to the Company accurate information with respect to the following items, with respect to each employee whose services are utilized or necessary for the conduct of the Contributed Business (including any employee who is on a leave of absence or on layoff status) (such individuals, collectively, “Business Employees”): (i) the name and title of

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such employee; (ii) the aggregate dollar amounts of the cash compensation (including wages, salary, commissions, director’s fees and bonuses received by such employee from the Contributing Stockholder with respect to services performed in fiscal 2001; (iii) such employee’s annualized compensation as of the date of this Agreement; (iv) the number of hours of personal days and sick-time which such employee has accrued as of the date hereof and the aggregate dollar amount thereof; and (v) the number of hours of vacation time which such employee has accrued as of the date hereof and the aggregate dollar amount thereof; it being expressly understood that for all purposes of this Agreement all such information shall be deemed to be included in Part 2.19 of the Contributing Stockholder Disclosure Schedule.

(b)  The Contributing Stockholder is not a party to or bound by any union contract, collective bargaining agreement or similar Contract which covers any of the Business Employees. Mr. Robert Strickland is the only Business Employee with an employment Contract with the Contributing Stockholder.

(c)  The employment of the Business Employees (other than Mr. Strickland) is terminable by the Contributing Stockholder at will and no Business Employee is entitled to severance pay or other benefits following termination or resignation, except as (A) otherwise provided by applicable Legal Requirements or (B) would not give rise to any Liability other than an Excluded Liability. The Contributing Stockholder has made available to the Company accurate and complete copies of all employee manuals and handbooks, disclosure materials, policy statements and other materials relating to the employment of the Business Employees. The completion of the transactions contemplated by this Agreement will not result in any payment or increased payment becoming due from the Contributing Stockholder to any Business Employee or any current or former consultant to Contributing Stockholder, in each case only to the extent any such payment or increased payment will give rise to any Liabilities other than Excluded Liabilities. The Contributing Stockholder Disclosure Schedule provides a list as of April 30, 2001 of temporary workers (other than temporary workers used for regular holidays and vacations of Business Employees) used from outside labor agencies by the Contributed Business and open positions related to the Contributed Business.

(d)  To the actual knowledge of the individuals identified to have Knowledge with respect to the Contributing Stockholder: (i) no Business Employee intends to terminate his employment; (ii) no Business Employee has received an offer to join a business that is a Restricted Business; (iii) no Business Employee is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person other than the Contributing Stockholder) that would have an adverse effect on the performance by such employee of any of his duties or responsibilities as an employee of the Contributing Stockholder; and (iv) no Business Employee has received an offer to transfer to the Contributing Stockholder’s other businesses, Subsidiaries or Affiliates.

(e)  The Contributing Stockholder has not engaged in any unfair labor practice of any nature with respect to the Contributed Business or the Business Employees to the extent any such practices will give rise to any Liabilities other than Excluded Liabilities. In the previous three years, there has not been any slowdown, work stoppage, labor dispute or union organizing activity, or any similar activity or dispute, affecting the Contributed Business or any

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of the Business Employees, and, to the Contributing Stockholder’s Knowledge, no Person has threatened to commence any such slowdown, work stoppage, labor dispute or union organizing activity or any similar activity or dispute. To the Knowledge of the Contributing Stockholder, no officer, employee or consultant of the Contributing Stockholder is obligated under any Contract or subject to any Order or Legal Requirement that would materially and adversely affect the Contributed Business as currently conducted.

(f)  Part 2.19 of the Contributing Stockholder Disclosure Schedule sets forth the name of, and a general description of the services performed by, each independent contractor to whom the Contributing Stockholder has made payments exceeding $100,000 in the aggregate for any of the last two fiscal years or during the current fiscal year on an annualized basis in connection with the Contributed Business. The Contributing Stockholder does not have any leased employees related to the Contributed Business with continuous service of twelve calendar months or more.

(g)  Assuming the performance of the Company’s obligations pursuant to Section 5.7(b), the transactions contemplated by this Agreement will not give rise to any Liability under the Worker Adjustment Retraining and Notification Act (the “WARN Act”) (29 USC§§2101, et seq.) or any similar state law or statute relating to employment termination in connection with a mass layoff, plant closing or similar event.

(h)  In the last thirty-six months, there have been no federal or state claims based on sex, sexual or other harassment, age, disability, race or other discrimination or common law claims, including claims of wrongful termination, by or against any Business Employee, and, to the Knowledge of the Contributing Stockholder, there are no facts or circumstances that would give rise to such complaint or claim.

(i)  Part 2.19(i) of the Contributing Stockholder Disclosure Schedule sets forth the individual severance benefits of each Business Employee who will be providing transition services to the Contributing Stockholder related to customer service for Lytec and/or Medisoft customers of the Contributing Stockholder pursuant to the Company Transition Services Agreement (such Business Employees, “Transition Business Employees”).

2.20     Benefit Plans; ERISA.

(a)  Part 2.20 of the Contributing Stockholder Disclosure Schedule contains an accurate and complete list of all Employee Benefit Plans contributed to, maintained or sponsored by the Contributing Stockholder, which cover the Business Employees. With respect to each Employee Benefit Plan required to be identified in Part 2.20 of the Contributing Stockholder Disclosure Schedule, the Contributing Stockholder has provided the Company with or made available to the Company true, complete, and correct copies, to the extent applicable, of all material documents pursuant to which the Employee Benefit Plans are maintained, funded and administered. With respect to any Employee Benefit Plan identified on Part 2.20 of the Contributing Stockholder Disclosure Schedule that includes a cash or deferred arrangement under Section 401(k) of the Code: (i) each such Employee Benefit Plan is being and has at all times been operated and administered in compliance with the provisions thereof and in compliance with all applicable reporting, disclosure and other requirements of ERISA and the

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Code and all other applicable Legal Requirements; (ii) each such Employee Benefit Plan has received a favorable determination letter from the Internal Revenue Service with respect to its qualified status under Section 401(a) of the Code; and (iii) no condition or circumstance exists, and no event has occurred or might reasonably be expected to occur as a result of transactions contemplated by this Agreement or otherwise, that could reasonably be expected to give rise directly or indirectly (with or without notice or lapse of time) to any Liability to any Person (other than routine claims for benefits), the Internal Revenue Service or any other Governmental Body.

(b)  The transactions contemplated by this Agreement will not result in any additional payments to, or increase the vested interest of, any Business Employee or their dependents under any Employee Benefit Plan. All salaries and bonuses, deferred compensation and any other payments pursuant to any Employee Benefit Plan that are due and payable as of the Effective Time have been paid by the Contributing Stockholder, and all year-end and/or merit bonuses to Business Employees with respect to performance for the fiscal year ended May 31, 2001 have been paid by the Contributing Stockholder as of the Effective Time. Each Employee Benefit Plan has been established, maintained and administered in substantial compliance with its terms and all related documents or agreements, and in substantial compliance with applicable provisions of ERISA, the Code, and other applicable Legal Requirements, except to the extent that any such noncompliance would not give rise to any Liabilities other than Excluded Liabilities.

(c)  With respect to each Contributing Stockholder Employee Benefit Plans that is an “employee pension benefit plan” as defined under Section 3(2) of ERISA and is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code no Liability (other than premiums to the Pension Benefit Guarantee Corporation (“PBGC”)) under Title IV of ERISA has been or is reasonably expected to be incurred by the Contributing Stockholder or any ERISA Affiliate of the Contributing Stockholder. Part 2.20 of the Contributing Stockholder Disclosure Schedule lists each Business Employee who is entitled to receive pension benefits pursuant to each Contributing Stockholder Employee Benefit Plans referred to in the preceding sentence of this Section 2.20(c).

(d)  With respect to any “group health plan” (as defined in Section 5000(b)(1) of the Code) listed on Part 2.20 of the Contributing Stockholder Disclosure Schedule, following the Closing Date the Contributing Stockholder shall continue to maintain and sponsor a group health plan and the Contributing Stockholder shall be solely responsible for continuation coverage pursuant to Section 4980B of the Code (“COBRA”) for any covered Business Employee and associated qualified beneficiaries who incurs a qualifying event (as described in Section 4980B(f)(3) of the Code) on or before the Closing Date and who elects COBRA continuation coverage pursuant to Section 4980B(f)(5) of the Code.

(e)  The Company shall not be liable or otherwise responsible to any extent for any accrued or unaccrued Liability (including, but not limited to, any underfunding, withdrawal liability, penalties, excise taxes, penalties, judgments, or other obligations) whether currently existing or accrued or otherwise discovered or accrued in the future, with respect to any Employee Benefit Plan maintained, sponsored or otherwise contributed to by Contributing

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Stockholder or any ERISA Affiliate of Contributing Stockholder (collectively referred to as “Employee Benefit Plan Liabilities”).

2.21     Environmental Matters.

(a)  The Contributing Stockholder is not liable or potentially liable for any response cost or natural resource damages under Section 107(a) of CERCLA, or under any other so-called “superfund” or “superlien” law or similar Legal Requirement, at or with respect to the Norcross Property. The Contributing Stockholder has, and to its Knowledge, all other Persons have, complied with all applicable Environmental Laws at or with respect to the Norcross Property and the Other Properties.

(b)  The Contributing Stockholder has not received any written notice or, to its Knowledge, other communication (in writing or otherwise) from any Governmental Body or other Person regarding any actual or alleged, Liability arising from or relating to the presence, generation, manufacture, production, transportation, importation, use, treatment, refinement, processing, handling, storage, discharge, release, emission or disposal of any Hazardous Material with respect to the Contributed Business or with respect to the Norcross Property or the Other Properties. No Person has commenced or, to the Contributing Stockholder’s Knowledge, threatened to commence any contribution action or other Proceeding against the Contributing Stockholder with respect to the Norcross Property or the Other Properties in connection with any such actual or alleged Liability. No event has occurred, and no condition or circumstance exists, that may directly or indirectly give rise to, or result in the Contributing Stockholder becoming subject to, any Liability arising from or relating to the presence, generation, manufacture, production, transportation, importation, use, treatment, refinement, processing, handling, storage, discharge, release, emission or disposal of any Hazardous Material with respect to the Norcross Property. The Contributing Stockholder has not caused and, to the Contributing Stockholder’s Knowledge, no other Person has caused any event, condition or circumstance, that may directly or indirectly give rise to, or result in the Contributing Stockholder becoming subject to, any Liability arising from or relating to the presence, generation, manufacture, production, transportation, importation, use, treatment, refinement, processing, handling, storage, discharge, release, emission or disposal of any Hazardous Material with respect to the Other Properties.

(c)  The Contributing Stockholder has not generated, manufactured, produced, transported, imported, used, treated, refined, processed, handled, stored, discharged, released or disposed of any Hazardous Material in connection with the Contributed Business or in connection with the Norcross Property or the Other Properties. The Contributing Stockholder has not permitted any Hazardous Material to be generated, manufactured, produced, used, treated, refined, processed, handled, stored, discharged, released or disposed of: (i) on or beneath the surface of the Norcross Property or the Other Properties; (ii) in or into any surface water, groundwater, soil or air associated with or adjacent to the Norcross Property or the Other Properties; or (iii) in or into any well, pit, pond, lagoon, impoundment, ditch, landfill, building, structure, facility, improvement, installation, equipment, pipe, pipeline, vehicle or storage container that is or was located on or beneath the surface of the Norcross Property or the Other Properties.

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2.22     Sale of Products.    Each product of the Contributed Business that has been sold or licensed by the Contributing Stockholder to any Person: (i) conformed and complied in all material respects with the terms and requirements of any applicable warranty and with all applicable Legal Requirements except as (A) would not give rise to any Liabilities other than Excluded Liabilities or (B) would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements; and (ii) was free of any design defects, construction defects, programming defects or other defects or deficiencies at the time of sale or license, except for immaterial defects and deficiencies, and except in the case of software programming bugs consistent with industry standards that do not render the software program unusable for its intended purpose. No product of the Contributed Business manufactured or sold by the Contributing Stockholder has been the subject of any recall or other similar action.

2.23     Performance of Services.    All services that have been performed on behalf of the Contributing Stockholder in connection with the Contributed Business were, in all material respects, performed properly and in conformity with the terms and requirements of all applicable warranties and other Contracts and with all applicable Legal Requirements, except to the extent any failure to do so would give rise to any Liabilities other than Excluded Liabilities. There is no Proceeding pending or, to the Knowledge of the Contributing Stockholder, being threatened against the Contributing Stockholder relating to any services performed by the Contributing Stockholder in connection with the Contributed Business, and, to the Knowledge of the Contributing Stockholder, there is no basis for the assertion of any such claim which would give rise to any Liabilities other than Excluded Liabilities.

2.24     Insurance.

The Contributing Stockholder maintains insurance policies with respect to the Contributed Business in such amounts and for such uses as the Contributing Stockholder reasonably has determined to be prudent in accordance with industry practices and applicable legal requirements. All such insurance policies are in full force and effect, and have been issued by insurance carriers that, to the Knowledge of the Contributing Stockholder, are solvent, financially sound and reputable. As of the date of this Agreement, the Contributing Stockholder has not received any written notice of cancellation or termination with respect to any such insurance policies.

2.25     Related Party Transactions.    Neither any Related Party nor any Affiliate of the Contributing Stockholder: (a) has any direct or indirect interest of any nature in any of the Contributed Assets; (b) has entered into, or has any direct or indirect financial interest in, any Contributed Business Contract included in the Contributed Assets; or (c) to the Knowledge of the Contributing Stockholder, has any claim or right against the Contributed Business. To the Knowledge of the Contributing Stockholder, no Related Party or Affiliate of the Contributing Stockholder has a valid basis to bring any Proceeding against the Contributed Business after the Effective Time.

2.26     Proceedings; Orders.    There is no pending Proceeding, and to the Knowledge of the Contributing Stockholder, no Person has threatened to commence any Proceeding: (i) that

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involves the Contributing Stockholder and that would (A) give rise to any Liabilities other than Excluded Liabilities or (B) materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements; or (ii) that challenges, or that would have the effect of preventing, delaying or making illegal any of the Transactions. There is no Order to which the Contributing Stockholder or any of the assets owned or used by the Contributing Stockholder in connection with the Contributed Business, is subject and, to the Knowledge of the Contributing Stockholder, none of the Business Employees, Affiliates of the Contributing Stockholder or any other Related Party is subject to any Order except in each case any Order (i) that would not give rise to any Liabilities other than Excluded Liabilities or (ii) that challenges, or that would have the effect of preventing, delaying or making illegal any of the Transactions.

2.27     Fraudulent Transfers.

The Contributing Stockholder is not now insolvent, and will not be rendered insolvent by any of the Transactions. Immediately after consummation of the Transactions, (a) the Contributing Stockholder will be able to pay its debts as they become due; (b) the Contributing Stockholder will not have unreasonably small assets with which to conduct its present or proposed business, and (c) taking into account all pending and, to its Knowledge, threatened Proceedings against the Contributing Stockholder, final judgments against the Contributing Stockholder in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, the Contributing Stockholder will be unable to satisfy any such judgments promptly. As used in this Section, “insolvent” means that the sum of the value of the Contributing Stockholder’s assets does not and will not exceed its debts and other liabilities.

2.28     Investment Representations.    The Contributing Stockholder understands that the Equity Securities have not been registered under the Securities Act. The Contributing Stockholder also understands that the Equity Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Contributing Stockholder’s representations contained in this Agreement. The Contributing Stockholder hereby represents and warrants as follows:

(a)  Acquisition for Own Account.    The Contributing Stockholder is acquiring the Equity Securities for the Contributing Stockholder’s own account for investment only, and not with a view towards their distribution.

(b)  Accredited Investor.    The Contributing Stockholder represents that it is an accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act.

(c)  Company Information.    Contributing Stockholder has had an opportunity to discuss the Company’s business, management and financial affairs with directors, officers and management of the Company and has had the opportunity to review the Company’s operations and facilities. Contributing Stockholder has also had the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of this investment.

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(d)  Limitation on Transfer; Rule 144.    The Contributing Stockholder acknowledges and agrees that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Contributing Stockholder understands that the certificate evidencing the Shares, and if issued, the Conversion Shares, will be imprinted with a legend which prohibits the transfer of such securities unless such securities are registered or such registration is not required in the opinion of counsel for the Company. The Contributing Stockholder has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act as in effect from time to time, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations.

(e)  Transfer Restrictions.    The Contributing Stockholder shall not assign, hypothecate, donate, encumber or otherwise dispose of any interest in the Securities except in compliance with the provisions herein, the Stockholders’ Agreement (as hereinafter defined) and applicable securities laws. Furthermore, the Equity Securities shall be subject to any right of first refusal in favor of the Company or its assignees that may be contained in the Company’s Bylaws. The Company shall not be required (a) to transfer on its books any of the Equity Securities which shall have been transferred in violation of any of the provisions set forth in the Agreement or the Stockholders’ Agreement, or (b) to treat as the owner of such Equity Securities or to accord the right to vote as such owner or to pay dividends to any transferee to whom such Equity Securities shall have been so transferred. The Contributing Stockholder acknowledges and agrees that the Shares and the Conversion Shares are subject to restrictions on transfer as set forth in the Stockholders’ Agreement, Voting Agreement and right of first refusal in favor of the Company as provided in the Company’s Bylaws.

(f)  Restrictive Legends.    All certificates representing the Equity Securities shall have endorsed thereon legends in substantially the following forms (in addition to any other legend which may be required by other agreements between the parties hereto):

(i)  “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.”

(ii)  “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS ASSIGNEE(S) AS PROVIDED IN THE BYLAWS OF THE COMPANY.”

(iii)  “THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS

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AND CONDITIONS OF A CERTAIN STOCKHOLDERS’ AGREEMENT, A CERTAIN VOTING AGREEMENT AND A CERTAIN REGISTRATION RIGHTS AGREEMENT BY AND AMONG THE STOCKHOLDER, THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENTS MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.”

(iv)  Any legend required by appropriate blue sky officials.

2.29     Full Disclosure.    None of the Transactional Agreements omits or will omit to state any fact necessary to make any of the representations, warranties or other statements or information contained therein not misleading. All of the information set forth in the Contributing Stockholder Disclosure Schedule when read in conjunction with the corresponding representation and warranty in Section 2 of this Agreement, and all other information regarding the Contributing Stockholder and its business, condition, assets, liabilities, operations, financial performance and operating income that has been furnished to the Company or any of the Company’s Representatives by or on behalf of the Contributing Stockholder or by any Representative of the Contributing Stockholder, is accurate and complete in all material respects at the time provided to the Company.

2.30     Investment Banking Fees.    The Contributing Stockholder and its Affiliates have not incurred any investment banking, broker or finder fees which will become the responsibility of the Company before or after the Effective Time.

3.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants, to and for the benefit of the Contributing Stockholder Indemnitees that each of the following representatives and warranties is true and correct except as expressly set forth otherwise in a correspondingly numbered or cross-referenced part of the Company Disclosure Schedule:

3.1     Due Incorporation; Authority; Binding Nature Of Agreements.

(a)  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to own and operate its Assets. The Company is duly qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction where the conduct of its business requires it except where the failure to do so would not have a material and adverse effect on the Company. The Company has delivered to (or made available for inspection by) the Contributing Stockholder accurate and complete copies of the certificate of incorporation and bylaws of the Contributing Stockholder, including all amendments thereto.

(b)  The Company has the requisite corporate power and authority to enter into and perform its obligations under each of the Transactional Agreements to which it is a party, and the execution and delivery by the Company of each Transactional Agreement to which it is a party has been duly authorized by all necessary action on the part of the Company and its board of directors.

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(c)  This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms. Upon the execution and delivery of the remaining Transactional Agreements at the Closing, each such Transactional Agreement will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

3.2     Capitalization; Voting Rights.

(a)  As of the date of this Agreement, the authorized capital stock of the Company consists of 10,000 shares of common stock, $0.001 par value per share, of which 6,550 shares are issued and outstanding. All such issued and outstanding shares of common stock, $0.001 par value per share, of the Company are duly authorized, validly issued, fully paid and nonassessable. Immediately prior to the Effective Time and upon the filing of the Amended and Restated Certificate of Incorporation, the authorized capital stock of the Company shall consist of 434,000,000 shares, of which (i) 210,000,000 are shares of Class A Common Stock, $0.001 par value per share (“Class A Common Stock”), none of which will be issued and outstanding, (ii) 87,000,000 are shares of Class B Common Stock, $0.001 par value per share (“Class B Common Stock”), none of which shares will be issued and outstanding, (the Class A Common Stock and Class B Common Stock being collectively referred to as “Common Stock”), and (iii) 137,000,000 are shares of Preferred Stock, $0.001 par value per share, of which 87,000,000 are designated shares of Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”), 6,550 shares of which will be issued and outstanding.

(b)  Except as may be granted pursuant to this Agreement and the Related Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities.

(c)  The rights, preferences, privileges and restrictions of the Shares are as stated in the Amended and Restated Certificate. Each series of Preferred Stock is convertible into Common Stock on a one-for-one basis as of the date hereof. The Conversion Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of this Agreement and the Amended and Restated Certificate the Equity Securities will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances other than liens and encumbrances created by or imposed upon the Contributing Stockholder; provided, however, that the Equity Securities may be subject to restrictions on transfer as set forth in the Bylaws, the Related Agreements or under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed.

3.3     Obligations to Related Parties.    There are no obligations of the Company to officers, directors, stockholders, or employees of the Company other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company). None of the officers, directors or stockholders of the Company, or any members of their immediate families, are indebted to the Company. None of

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the officers, directors or, to the best of the Company’s knowledge, key employees or stockholders of the Company or any members of their immediate families, are indebted to the Company or have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, other than passive investments in publicly traded companies (representing less than 1% of such company) which may compete with the Company. No officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, interested in any material Company Contract (other than such Contracts as relate to any such person’s ownership of capital stock or other securities of the Company).

3.4     Intellectual Property.

(a)  To its Knowledge, the Company owns or possesses sufficient legal rights to all Proprietary Assets used or necessary for its business as now conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing Proprietary Assets, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to any Proprietary Assets of any other Person other than such licenses or agreements arising from the purchase of “off the shelf” or standard products.

(b)  The Company has not received any communications (whether written or otherwise) alleging that the Company has violated or, by conducting its business as presently conducted or proposed to be conducted, would violate any Proprietary Assets of any other Person, nor is the Company aware of any basis therefor.

(c)  To the Knowledge of the Company none of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with the Company’s business as presently proposed to be conducted. Each employee, officer and consultant of the Company has executed a proprietary information and inventions agreement in the form(s) as delivered to the Contributing Stockholder. No employee, officer or consultant of the Company has excluded works or inventions made prior to his or her employment with the Company from his or her assignment of inventions pursuant to such employee, officer or consultant’s proprietary information and inventions agreement. The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been assigned to the Company and which are disclosed in the Company Disclosure Schedule.

(d)  Neither the execution nor delivery of this Agreement, the Transactional Agreements or the Related Agreements, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s Knowledge, result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract, covenant or instrument under which any employee is now obligated.

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3.5     Compliance with Other Instruments.    The Company is not in violation or default of any term of its Certificate of Incorporation or Bylaws, or of any provision of any Company Contract or of any Order. The execution, delivery, and performance of and compliance with the Agreement and each Transactional Agreement to which it is a party, and the issuance and sale of the Shares pursuant hereto and of the Conversion Shares pursuant to the Amended and Restated Certificate, will not, with or without the passage of time or giving of notice, result in any such material violation, or constitute a default under any such term, or result in the creation of any Encumbrance upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any Governmental Authorization applicable to the Company, its business or operations or any of its Assets or properties.

3.6     Litigation.    There is no Proceeding pending or, to the Company’s Knowledge, currently threatened against the Company that questions the validity of this Agreement, the Transactional Agreements or the Related Agreements, or the right of the Company to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby, or which would result, either individually or in the aggregate, in any material and adverse effect to the Company or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for any of the foregoing. The Company is not a party or subject to the provisions of any Order. There is no Proceeding including the Company currently pending or which the Company intends to initiate.

3.7     Financial Statements; Absence of Changes.

(a)  The Company Disclosure Schedule includes the following financial statements of the Company (collectively, the “Company Financial Statements”): the unaudited balance sheet and the statement of cash flows of the Company as of April 30, 2001. The unaudited balance sheet included in the Company Financial Statements is the last regularly prepared balance sheet of the Company. The Company Financial Statements are accurate and complete in all material respects and have been prepared in accordance with generally accepted accounting principles and present fairly in all material respects the financial position of the Company as of the date thereof. As of the date of this Agreement, the Company has no other indebtedness for borrowed money except as reflected on the Company Financial Statements.

(b)  Since April 30, 2001:

(i)  there has not been any material adverse change in the business, condition, assets, liabilities, operations or financial performance of the Company;

(ii)  there has not been any material loss, damage or destruction to any of the assets used by the Company (whether or not covered by insurance);

(iii)  the Company has not sold or otherwise transferred, or leased or licensed, any material portion of its assets to any other Person; except for non-exclusive, non-transferable licenses to software granted in the ordinary course of business

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(iv)  the Company has not written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other indebtedness, except for write-offs not exceeding $50,000 in the aggregate occurring in the ordinary course of business;

(v)  no material Company Contract has been amended or terminated, except for Contracts amended or terminated in the ordinary course of business;

(vi)  the Company has not forgiven any debt or otherwise released or waived any right or claim, except for rights or claims not exceeding $50,000 in the aggregate in the ordinary course of business consistent with past practice;

(vii)  the Company has not changed any of its methods of accounting or accounting practices in any respect;

(viii)  the Company has not entered into any transaction or taken any other action outside the ordinary course of business; and

(ix)  the Company has not agreed, committed or offered (in writing or otherwise) to take any of the actions referred to in clauses “(i)” through “(viii)” above.

3.8     Employees.    The Company has no collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to the Company’s Knowledge, threatened with respect to the Company. The Company is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the Company’s Knowledge, no employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company because of the nature of the business to be conducted by the Company; and to the Company’s Knowledge the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company has not received any notice alleging that any such violation has occurred. No employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. The Company is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with the Company, nor does the Company have a present intention to terminate the employment of any officer, key employee or group of employees.

3.9     Registration Rights and Voting Rights.    Except as required pursuant to the Registration Rights Agreement, the Company is presently not under any obligation, and has not granted any rights, to register (as defined in Section 1.1 of the Registration Rights Agreement) any of the Company’s presently outstanding securities or any of its securities that may hereafter be issued. To the Company’s Knowledge, except as contemplated in the Voting Agreement, no stockholder of the Company has entered into any agreement with respect to the voting of equity securities of the Company.

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3.10     Compliance with Legal Requirements; Governmental Authorizations.    The Company is not in violation of any applicable Legal Requirement, in respect of the conduct of its business or the ownership of its properties which violation would, individually or in the aggregate, have a material and adverse effect on the Company. Neither the execution and delivery of any of the Transactional Agreements by the Company, nor the consummation or performance of any of the Transactions by it, will (with or without notice or lapse of time) result in (i) a violation of any Legal Requirement or any Order to which the Company or any of its Assets is subject, or (ii) a violation or breach of, or result in a default under, or give any Person the right to exercise any remedy under, any provisions of any Company Contract except where such violation or breach would not, individually or in the aggregate, have a material and adverse effect on the Company. No Consents are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of the Transactional Agreements and the issuance of the Equity Securities, except such as has been duly and validly obtained or filed. The Company has all Governmental Authorizations necessary for the conduct of its business as now being conducted by it, the lack of which would, individually or in the aggregate, have a material and adverse effect on the Company and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted.

3.11     Offering Valid.    Assuming the accuracy of the representations and warranties of the Contributing Stockholder contained in Section 2.28 hereof, the offer, sale and issuance of the Shares and the Conversion Shares will be exempt from the registration requirements of the Securities Act, and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Shares to any person or persons so as to bring the sale of such Shares by the Company within the registration provisions of the Securities Act or any state securities laws.

3.12     Real Property Holding Corporation.    The Company is not a real property holding corporation within the meaning of Code Section 897(c)(2) and any regulations promulgated thereunder.

3.13     Insurance.    The Company has or will obtain promptly following the Closing general commercial, product liability, fire and casualty insurance policies with coverage customary for companies similarly situated to the Company.

3.14     Company Contracts; Other Agreements.    Each Contract of the Company listed on Part 3.14 of the Company Disclosure Schedule (“Company Contract”) is valid and in full force and effect and is enforceable in accordance with its terms against the Company, and, to its Knowledge, against the counterparty thereto. Except in each case as would not, individually or in the aggregate, cause a material and adverse effect on the Company, the Company has not, and to the Company’s Knowledge, no other Person has, caused, any event, circumstance or condition that would (with or without the lapse of time) (A) result in a violation or breach of any of the provisions of any Company Contract, (B) give any Person the right to declare a default or exercise any remedy under any Company Contract, (C) give any Person the right to accelerate

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the maturity or performance of any Company Contract, or (D) give any Person the right to cancel, terminate or modify any Company Contract. The Company has not received any written notice or, to its Knowledge, other communication (in writing or otherwise) regarding any actual or alleged violation or breach of, or default under, any Company Contract and has not waived any material right under any Company Contract. The Company has no agreement, absolute or contingent, written or oral, with any other Person to effect any Acquisition Transaction, to sell or otherwise transfer the Contributed Business or any line of business or material asset relating to the Company’s obligations under the Transactional Agreements.

3.15     Investment Banking Fees.    The Company and its Affiliates have not incurred any investment banking, broker or finder fees which will become the responsibility of the Contributing Stockholder before or after the Effective Time.

4.     OPERATING COVENANTS.

4.1     Access and Investigation.    During the Pre-Closing Period, upon the reasonable request of the other party, each party and its Representatives shall provide the other party and its Representatives during normal business hours (a) with free and reasonable access to such party’s Representatives, personnel and assets and to all existing books, records, Tax Returns, work papers and other documents and information (but in the case of the Contributing Stockholder primarily relating to the Contributed Business); (b) with such copies of existing books, records, Tax Returns, work papers and other documents and information as the other party may reasonably request in good faith (but in the case of the Contributing Stockholder primarily relating to the Contributed Business); and (c) with such additional financial, operating and other data and information under its control as the other party may reasonably request in good faith (but in the case of the Contributing Stockholder primarily relating to the Contributed Business).

4.2     Operation Of Business.

(a)  Except as disclosed in the Contributing Stockholder Disclosure Schedule during the Pre-Closing Period:

(1)  the Contributing Stockholder shall conduct the operations of the Contributed Business in the Ordinary Course of Business;

(2)  the Contributing Stockholder shall use all reasonable efforts to: (i) preserve intact the current business organization of the Contributed Business, (ii) keep available the services of the current officers and employees of the Contributed Business, (iii) maintain the relations and good will with all material suppliers, customers, landlords, creditors, licensors, licensees, employees, independent contractors and other Persons having material business relationships with the Contributed Business, and (iv) promptly repair, restore or replace in the Ordinary Course of Business any Contributed Assets that are destroyed or damaged;

(3)  the Contributing Stockholder shall maintain insurance on the Contributed Business which is at least comparable to the insurance policies in place on the date hereof;

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(4)  the officers of the Contributing Stockholder shall confer regularly with the Company concerning operational matters and the status of the business, condition, assets, liabilities, operations, financial performance and prospects of the Contributed Business;

(5)  the Contributing Stockholder and its officers shall use their reasonable efforts to cause the Contributed Business to operate profitably and to maximize its revenues consistent with the Ordinary Course of Business;

(6)  the Contributing Stockholder shall not alter, modify or accelerate its existing collection levels of account receivables or its existing levels of invoice billing or billing services or billing method in each case as related to the Contributed Business except in each case consistent with the Ordinary Course of Business;

(7)  the Contributing Stockholder shall not authorize, commit or irrevocably offer to take any of the actions inconsistent with this Section 4.2(a).

(b)  Without limiting Section 4.2(a), and except as disclosed in the Contributing Stockholder Disclosure Schedule, the Contributing Stockholder agrees that, during the Pre-Closing Period, it will not, and will cause its Subsidiaries not to, in each case without the prior written Consent of the Company (which Consent may not be unreasonably withheld or unduly delayed):

(1)  in a single transaction or series of related transactions, sell (including any sale-leaseback), lease, license, pledge, transfer or otherwise dispose of (including through a dividend or distribution to any Person), or discontinue, all or any portion of its assets, business or properties that are used in or necessary for the conduct of the Contributed Business or are part of the Contributed Assets except, (A) in the case of assets other than Contributed Assets, in the Ordinary Course of Business and (B) in the case of the Contributed Assets, inventory in the Ordinary Course of Business;

(2)  except with respect to Contributed Business Contracts not included in the Contributed Assets and with respect to which any of the actions described in this Section 4.2(b)(2) would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under the Transactional Agreements, terminate, amend, modify or waive any material right under any Contributed Business Contract or enter into any material Contributing Stockholder Contract included or to be included in the Contributed Assets (other than in the Ordinary Course of Business or renewals of existing Contributed Business Contracts on substantially the same terms and, in any event, involving a Contributed Business Contract with aggregate payments (payable or receivable) or amounts not in excess of $50,000); provided that, to the extent the Contributing Stockholder reasonably requests a waiver from this provision in order to permit it to comply with any of its obligations under Article I and the Company does not grant the waiver, the Contributing Stockholder will have no liability under this Agreement for the failure to perform such obligations;

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(3)  dismiss any management-level Business Employee other than for cause or transfer any Business Employee to operations other than those of the Contributed Business;

(4)  except in an amount, individually or in the aggregate, not to exceed $100,000, commit to make any capital expenditure or acquire any property or assets in connection with the Contributed Business to the extent the commitment will give rise to any Liabilities other than Excluded Liabilities;

(5)  permit or allow any of the Contributed Assets to be subject to any Encumbrance (other than Permitted Encumbrances) which cannot be removed prior to the Effective Time without giving rise to any Liabilities other than Excluded Liabilities;

(6)  write-off as uncollectible any notes or accounts, funds or trust receivables that are part of the Contributed Assets, except for write-downs or write-offs in the Ordinary Course of Business;

(7)  incur or assume any indebtedness for borrowed money or other Liability (other than accounts payable), or assume, guarantee, endorse or otherwise become liable or responsible for indebtedness for borrowed money or other Liability of any Person, in each case that would give rise to any Liabilities other than Excluded Liabilities;

(8)  grant any increase in the compensation or benefits of any Business Employee (excluding any increase specifically provided for in the terms of, or legally required by, any bonus, pension, profit sharing or other plan or commitment) or any increase in the compensation or benefits payable, or to become payable, to any Business Employee, except for (A) increases in the Ordinary Course of Business to Business Employees in terms of proportion and timing, (B) other changes that are required by applicable Legal Requirements, (C) grants of awards to newly hired officers and employees consistent with past practice, (D) the Employment Agreement, dated May 12, 1999, by and among the Contributing Stockholder and Mr. Robert Strickland and (E) increases to Employee Benefit Plan benefits to all participating employees of the Contributing Stockholder;

(9)  adopt, enter into or amend, or become obligated under, any employment, severance, bonus, profit sharing, compensation, equity interest, option, pension, retirement, deferred compensation, health care, employment or other employee benefit plan, agreement, trust, fund or arrangement for the benefit or welfare of any Business Employee other than any new Business Employee that enters into any benefit plan or arrangement in effect on the date hereof, except as (i) required to comply with changes in applicable Legal Requirements or (ii) to the extent that any such plan, agreement, trust, fund or arrangement is primarily or disproportionately for the benefit or welfare of the Business Employees;

(10)  defer or delay the payment of, or fail to pay when otherwise due, material expenses, material indebtedness or other material obligations, in each case, of

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the Contributed Business, including material compensation expenses of any Business Employee, except in the Ordinary Course of Business;

(11)  to the extent related to the Contributed Business, commence, undertake or engage in any new and material line of business or commit to open or open a new office (or move or close any existing office);

(12)  except to the extent that would not have a material adverse effect on the Contributed Business or would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements, amend its articles of incorporation, bylaws or similar constituent documents;

(13)  adopt a plan or resolution to dissolve or liquidate the Contributing Stockholder or any of its Subsidiaries other than to the extent the dissolution or liquidation does not materially and adversely affect the Contributed Business and would not materially and adversely affect the ability of the Contributing Stockholder to perform its obligations under any of the Transactional Agreements;

(14)  intentionally take any action that, or intentionally omit to take any action not otherwise prohibited by the terms of this Agreement the omission of which, would (A) Breach any provision of this Agreement, or (B) result in any of the conditions to the consummation of the Transactions not being satisfied on or prior to the Termination Date;

(15)  recognize any labor union or enter into any collective bargaining agreement that includes any Business Employee;

(16)  settle or compromise any pending Proceeding on a basis requiring any agreement that would (A) give rise to any Liabilities other than Excluded Liabilities or (B) materially and adversely affect the Contributing Stockholder’s ability to perform its obligations under any of the Transactional Agreements;

(17)  commit, enter into, or irrevocably offer to enter into, any Contract to take any of the actions prohibited in this Section 4.2(b).

(c)  Except as set forth in the Company Disclosure Schedule, the Company agrees that during the Pre-Closing Period it (i) will conduct the operations of its business in the Ordinary Course of Business and in the same manner as such operations have been conducted prior to the date of this Agreement, and (ii) will not (without the prior written Consent of the Contributing Stockholder, which Consent will not be unreasonably withheld or unduly delayed) intentionally take any action that, or intentionally omit to take any action not otherwise prohibited by the terms of this Agreement the omission of which, would, (A) Breach any provision of this Agreement, or (B) result in any of the conditions to the consummation of the Transactions not being satisfied on or prior to the Termination Date.

(d)  Without limiting Section 4.2(c), and except as disclosed in the Company Disclosure Schedule, the Company agrees that, during the Pre-Closing Period, it will not, and

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will cause its Subsidiaries not to, in each case without the prior written Consent of the Contributing Stockholder (which Consent may not be unreasonably withheld or unduly delayed):

(1)  issue any shares of its capital stock (or any securities convertible or exchangeable for shares of its capital stock) or pay any dividend with respect to any shares of its capital stock, except that the Company may issue (A) additional unsecured notes up to an aggregate principal amount of $70 million convertible into Series A Preferred Stock concurrent with the Closing and (B) stock options to its employees and consultants in the ordinary course of business not to exceed an aggregate amount of $23 million;

(2)  amend its articles of incorporation or bylaws, except as required by any of the Related Agreements and the Series A Preferred Stock Financing;

(3)  engage in a new line of business not contemplated by its certificate of incorporation or the Amended and Restated Certificate of Incorporation;

(4)  adopt a plan or resolution to dissolve or liquidate the Company or any of its Subsidiaries;

(5)  incur or assume any indebtedness for borrowed money or assume, guarantee, endorse or otherwise become liable or responsible for indebtedness for borrowed money of any Person other than notes issued to the Founders in an aggregate amount not to exceed $70 million; or

(6)  commit, enter into, or irrevocably offer to enter into, any Contract to take any of the actions prohibited in this Section 4.2(d).

5.     OTHER AGREEMENTS.

5.1     Reasonable Efforts; Filings and Consents.

(a)  Subject to the terms and conditions of this Agreement, each of the parties to this Agreement will use its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable Legal Requirements, so as to permit consummation of the Transactions as promptly as reasonably practicable and in any event prior to the Termination Date and will use reasonable efforts to cooperate fully with the other parties hereto to that end.

(b)  The Company and the Contributing Stockholder shall use reasonable efforts to file, as soon as practicable after the date of this Agreement, all notices, reports and other documents required to be filed with any Governmental Body with respect to the Transactions, and to submit promptly any additional information requested by any such Governmental Body. Without limiting the generality of the foregoing, the Company and the Contributing Stockholder shall, promptly after the date of this Agreement, prepare and file the notifications, if any at all, required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), in connection with the Transactions. The Company and the Contributing Stockholder shall respond as promptly as practicable to (i) any inquiries or requests

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received from the Federal Trade Commission or the Department of Justice for additional information or documentation and (ii) any inquiries or requests received from any state attorney general or other Governmental Body in connection with antitrust or related matters. Each of the Company and the Contributing Stockholder shall (i) give the other party prompt notice of the commencement of any Proceeding by or before any Governmental Body with respect to the Transactions, (ii) keep the other party informed as to the status of any Proceeding, and (iii) subject to their obligations to comply with applicable Legal Requirements, promptly inform the other party of any communication to or from the Federal Trade Commission, the Department of Justice or any other Governmental Body regarding the Transactions. The Company and the Contributing Stockholder will consult and cooperate with one another, and will consider in good faith the views of one another, in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted in connection with any Proceeding under or relating to the HSR Act or any other federal or state antitrust or fair trade law. In addition, except as may be prohibited by the HSR Act or any Governmental Body or by any Legal Requirement, in connection with any Proceeding under or relating to any other federal or state antitrust or fair trade law or any other similar Proceeding, each of the Company and the Contributing Stockholder agrees to permit authorized Representatives of the other party to be present at each meeting or conference with government representatives relating to any such Proceeding and to have reasonable access to and be consulted in connection with any document, opinion or proposal made or submitted to any Governmental Body in connection with any such Proceeding.

(c)  Notwithstanding anything to the contrary contained in this Agreement, neither the Contributing Stockholder nor the Company shall have any obligation under this Agreement to do any of the following (or cause the other to do any of the following): (i) to dispose or cause any of its Subsidiaries to dispose of any assets; (ii) to discontinue or cause any of its Subsidiaries to discontinue offering any product; (iii) to license or otherwise make available, or cause any of its Subsidiaries to license or otherwise make available, to any Person, any technology, software or other Proprietary Asset, other than any Contributed Business Proprietary Asset included in the Contributed Assets; (iv) to hold separate or cause any of its Subsidiaries to hold separate any assets or operations (either before or after the Closing Date); or (v) to make or cause any of its Subsidiaries to make any commitment (to any Governmental Body or otherwise) regarding its future operations ((i) through (v), collectively, “Burdensome Conditions”).

5.2     Notification.    During the Pre-Closing Period, each party shall promptly notify the other in writing of (including through the delivery of a Disclosure Schedule Update pursuant to Section 5.10), and shall subsequently keep such other party updated on a current basis regarding: (a) the discovery of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes a Breach of any representation or warranty made in this Agreement; (b) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement and that would cause or constitute a Breach of any representation or warranty made in this Agreement if (i) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance, or (ii) such event, condition, fact or circumstance had occurred, arisen or existed on or prior to the date of this Agreement; (c) any Breach of any covenant or obligation in

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this Agreement; and (d) any event, condition, fact or circumstance that may make the timely satisfaction of any of the conditions set forth in Section 6 or Section 7 impossible or unlikely.

5.3     No Negotiation.    Each party shall ensure that, during the Pre-Closing Period, neither it nor any of its Representatives, directly or indirectly: (a) solicits or encourages the initiation of any inquiry, proposal or offer from any Person (other than the other party) relating to the Contributed Business or any business engaged wholly or partially in a business which is substantially similar to the Contributed Business (collectively, a “Competing Transaction”); (b) participates in any discussions or negotiations with, or provides any non-public information to, any Person (other than the other party) relating to a Competing Transaction; or (c) evaluates the merits of any unsolicited inquiry, proposal or offer from any Person (other than the other party) relating to a Competing Transaction without complying with the provisions of the next sentence of this Section 5.3. Each party shall immediately cease and cause to be terminated any Contract or discussions with any Person related to a Competing Transaction. In addition, if during the Pre-Closing Period any party receives a written offer or proposal relating to, or any written inquiry from any Person with respect to, a Competing Transaction, such party shall immediately notify the other party thereof and provide the other party with details thereof, including the identity of the Person or Persons making such offer or proposal, and will keep the other party fully informed on a current basis of the status and details of any such offer or proposal and any modification to the terms thereof; it being expressly understood that in the case of the Contributing Stockholder, this sentence shall not impose any obligations with respect to any offer or proposal not exclusively related to the Contributed Business.

5.4     Noncompetition.    The Contributing Stockholder agrees that, in consideration of the consummation of the Transactions by the Company hereunder, it shall not and shall cause its Subsidiaries not to, at any time between the Effective Time and the fifth anniversary of the Effective Time, directly or through any other Person, in the United States:

(a)  compete or assist any other Person in competing with the Restricted Business;

(b)  engage or assist any other Person in engaging in a business or activity substantially similar or equivalent to the Restricted Business;

(c)  acquire any equity interest in, or substantially all of the assets of, any Person if such Person derived more than 40% of its annual revenues during its last fiscal year from a business substantially similar or equivalent to the Restricted Business except for (i) the securities listed on Part 5.4 of the Contributing Stockholder Disclosure Schedule (“Grandfathered Holdings”), or (ii) the acquisition, in a transaction or a series of transactions, of up to 1% in the aggregate (it being understood that Grandfathered Holdings under 1% shall be counted towards the computation of the 1% threshold) of any class of securities of any publicly traded company in the United States, but in each case only to the extent such securities are acquired by the Contributing Stockholder after the date hereof in, or through acquisition of, any Person not engaged in the Restricted Business or through the exchange of a security owned by the Contributed Stockholder in such Person in a share exchange offer or stock-for-stock merger,

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so long as in each case such securities are held solely as a passive investment (“Permitted Holdings”); or,

(d)  except for Grandfathered Holdings and Permitted Holdings, acquire any equity interest in, or substantially all of the assets of, any Person if such Person derived less than 40% of its annual revenues during its last fiscal year from a business substantially similar or equivalent to the Restricted Business unless promptly after such acquisition (i) the Contributing Stockholder causes the business of such Person which is substantially similar or equivalent to the Restricted Business to be valued by an accounting firm or a valuation firm of national reputation reasonably acceptable to the Company (it being expressly understood that it shall be reasonable to not accept a valuation firm or an accounting firm representing the Contributing Stockholder in the transaction or engaged by the Contributing Stockholder as its accounting auditor), and (ii) the Contributing Stockholder offers in writing to the Company the rights to purchase such business at the value determined in accordance with clause (i) above; provided, however, that if the Company does not exercise its right to purchase such business from the Contributing Stockholder within thirty calendar days of receiving the written offer from the Contributing Stockholder, the Contributing Stockholder shall, and shall cause its Subsidiaries to, divest of such business within twelve months of the date on which the Contributing Stockholder acquired such business. The Contributing Stockholder agrees and acknowledges that in connection with the Company’s right to purchase the business subject to the divestiture contemplated by Section 5.4(d)(ii), the Contributing Stockholder shall, and shall cause its Subsidiaries, to afford the Company reasonable access to the books, records, personnel and Representatives of such acquired business during normal business hours for the purpose of conducting a due diligence review of such business for thirty calendar days after receipt of the written offer from the Contributing Stockholder.

(e)  take any action that is designed or intended to have the effect of discouraging any customer, supplier, lessor, licensor or other business associate of the Contributed Business from maintaining the same business relationship with the Contributed Business after the Effective Time as it maintained with the Contributed Business prior to the Effective Time.

Notwithstanding the foregoing, nothing herein shall (i) prevent the Contributing Stockholder from marketing, selling or distributing its Direct Claim Products, in conjunction with an NDC POMIS or to an NDC POMIS Customer or to an NDC VAR for resale to a an NDC POMIS Customer, to the extent required, as determined by the Contributing Stockholder in its sole and reasonable discretion, for the Contributing Stockholder to remain competitive in the healthcare POMIS marketplace; provided that no NDC POMIS sold on an application service provider basis shall include any Direct Claim Products, or (ii) restrict the Contributing Stockholder from providing the services provided by the Contributing Stockholder as of the date hereof to the physician groups who currently submit transactions through the Tulsa network and who are specifically identified on Exhibit D hereto.

Notwithstanding anything in this Agreement to the contrary, upon the occurrence of a Change in Control the covenants and obligations of the Contributing Stockholder set forth in this Section 5.4 shall terminate and be of no further force and effect; provided, however, that such

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termination shall not affect the liability of the Contributing Stockholder for any violations of this Section 5.4 prior to the occurrence of a Change in Control.

For purposes of this Agreement, the term “Restricted Business” shall mean any business or activity which involves the operation of network EDI or other connectivity to Payors and clearinghouses for Physician transactions but only to the extent of the specific transactions listed on Exhibit E.

If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 5.4 is invalid or unenforceable, the parties agree that the court making such determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgement may be appealed.

5.5       Public Announcements.    The Company and the Contributing Stockholder will consult with each other as to the form, substance and timing of any press release or other public statement relating to this Agreement, or any of the Transactions, and no such public statement will be made by one without the consent of the other, which consent will not be unreasonably withheld or unduly delayed; provided that each may make such disclosures as are necessary to comply with any Legal Requirement or the request of any Governmental Body after making good faith efforts under the circumstances to consult in advance with the other. Notwithstanding the foregoing, the parties shall agree to joint press releases upon the execution of this Agreement.

5.6     Access; Further Actions.

(a)  From and after the Effective Time, each party covenants and agrees to execute and deliver such documents and take such other actions as may be reasonably requested by the other party, to give effect to the terms and conditions in the Transactional Documents. Without limiting the generality of the foregoing, from and after the Effective Time, the Contributing Stockholder shall promptly remit to the Company any funds that are received by the Contributing Stockholder and that are included in, or that represent payment of receivables included in, the Contributed Assets.

(b)    The Contributing Stockholder and the Company will cooperate in good faith in connection with the filing of Tax Returns, any audit or Proceeding with respect to Taxes and in connection with any other Proceeding in each case relating to the Contributed Assets or the Contributed Business, as and to the extent reasonably requested by the Company or the Contributing Stockholder. Such cooperation shall include (1) the retention and (upon a party’s request) the provision of records and information which are reasonably relevant to the preparation of Tax Returns or to any such Proceeding and (2) making relevant employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Contributing Stockholder and the Company shall (1) retain all Books and Records with respect to the Contributed Assets relating to any period beginning before the Effective Time until the expiration of all relevant statues of limitations

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(and, to the extent notified by the Contributing Stockholder or the Company, any extensions thereof), and abide by all record retention agreements entered into with any Governmental Authority (with respect to agreements of another party, to the extent notified thereof) and (2) give the other party to this Agreement reasonable written notice prior to transferring, destroying or discarding any such Books and Records. From and after the Effective Time, the Contributing Stockholder shall, and shall cause its Subsidiaries to, provide to the Company and its Representatives reasonable access during normal business hours to the Books and Records for the purpose of copying or referring to such Books and Records, as reasonably required by the Company in each instance only to the extent primarily related to the Contributed Assets, or Assumed Liabilities; it being expressly understood that the Contributing Stockholder shall not be obligated to provide access to Books and Records with respect to the Excluded Assets or Excluded Liabilities. From and after the Effective Time, the Company shall, and shall cause its Subsidiaries to, provide to the Contributing Stockholder and its Representatives reasonable access during normal business hours to any Books and Records included in the Contributed Assets for the purpose of copying or referring to such Books and Records included in the Contributed Assets, as reasonably required by the Contributing Stockholder; it being expressly understood that the Company shall not be obligated to provide access to its general books and records not solely related to the Books and Records included in the Contributed Assets.

(c)  From and after the Effective Time, the Contributing Stockholder shall exercise its reasonable efforts to assist the Company in procuring as promptly as practicable a Contract with (i) the Payors listed on Exhibit B-2 as Payors who currently have a Contract with the Contributing Stockholder but such Contract has not been included as part of the Contributed Assets, and (ii) the Payors listed on Schedule 5.6(c) of the Contributing Stockholder Disclosure Schedule as Payors who currently have a Contract with the Contributing Stockholder but such Contract has not been included as part of the Contributed Assets because a Governmental Authorization is required and was not obtained prior to Closing (collectively, the “Governmental Authorization Contracts”).

5.7    Employees, Employee Benefit Matters; Non-Solicitation.

(a)  The Company shall offer employment, conditional on Closing and commencing as of the Effective Time to all Business Employees. The Contributing Stockholder shall use all reasonable efforts to cause each Business Employee to commence employment with the Company.

(b)  The Company will provide each Business Employee a package of compensation and employee benefits that is, in the aggregate, comparable to the level of compensation and employee benefits currently provided to him or her by the Contributing Stockholder.

(c)  Assuming the Company has performed its obligation pursuant to Section 5.7(b), the Contributing Stockholder is in compliance with its obligations pursuant to WARN and all other notification and bargaining obligations arising under any collective bargaining agreement, statute or otherwise, in each case to the extent affecting in whole or any part of any site of employment, facility, operating unit or employee of the Contributed Business. The

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Contributing Stockholder shall not affect a “plant closing” or “mass layoff”, as those terms are defined in the WARN at any time between the date hereof and the Effective Time, affecting in whole or in part any site of employment, facility, operating unit or employee of the Contributed Business, without notifying the Company in advance and obtaining the advance approval of the Company, and complying with all provisions of WARN. The Contributing Stockholder shall be responsible for providing any notice of layoff or plant closing, as may be required pursuant to WARN and any applicable state or local plant closing notification statute, with respect to Business Employees who are not employed by the Company or its Affiliates as of the Effective Time and shall maintain such employees on Contributing Stockholder’s payroll for any period of notice required by WARN and any applicable state or local plant closing notification statute.

(d)  For a period of two years after the Effective Time, the Contributing Stockholder will not and will cause its Subsidiaries not to, directly or indirectly, without the written consent of the Company, and whether or not for compensation, either on its own behalf or through any third person, solicit, persuade, encourage or induce any Transferred Employee then employed by the Company and/or its Subsidiaries to cease employment with or retention by the Company and/or its Subsidiaries; provided that this Section 5.7(d) will not apply to general solicitation of employment not specifically directed toward Transferred Employees. For a period of two years following the Effective Time, the Contributing Stockholder will not, and will cause its Subsidiaries not to hire any employees then employed by the Company or its Affiliates.

(e)  For a period of two years after the Effective Time, the Company will not and will cause its Subsidiaries not to, directly or indirectly, without the written consent of the Contributing Stockholder, and whether or not for compensation, either on its own behalf or through any third person, solicit, encourage or induce any employee then employed by the Contributing Stockholder and/or its Subsidiaries to cease employment with or retention by the Contributing Stockholder and/or its Subsidiaries; provided that this Section 5.7(e) will not apply to general solicitation of employment not specifically directed toward employees of the Contributing Stockholder and/or its Affiliates. For a period of two years following the Effective Time the Company will not, and will cause its Subsidiaries not to, hire any employees then employed by the Contributing Stockholder and its Affiliates.

(f)  Prior to the Effective Time, the Contributing Stockholder shall pay in full to the Business Employees all bonuses and other merit payments with respect to performance for the fiscal year ended May 31, 2001, and none of such bonuses and other merit payments shall result in any Assumed Liabilities.

(g)  Prior to the Effective Time, with the prior consent of the Contributing Stockholder, such consent not to be unreasonably withheld or unduly delayed, the Contributing Stockholder shall provide reasonable access and afford opportunity to the Company and its Representatives from time to time during normal business hours to conduct discussions with the Business Employees for the purpose of presenting to one or more of the Business Employees the terms of the employment packages to be offered by the Company to the Business Employees.

(h)  After the Effective Time, the Contributing Stockholder agrees to reimburse the Company for any severance or other expenses not in excess of the aggregate

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amount set forth in Part 2.19(i) of the Contributing Stockholder Disclosure Schedule incurred by the Company in connection with (i) the termination of employment of any Transition Business Employee no later than 30 calendar days after the expiration of the Company Transition Services Agreement, or (ii) the termination of the employment of any other employee, no later than 30 calendar days after the expiration of the Company Transition Services Agreement, as a direct result of the retention of any Transition Business Employee beyond the expiration date of the transition services provided by the Company to the Contributing Stockholder pursuant to the Company Transition Services Agreement.

5.8     Insurance; Destruction or Condemnation.

(a)  In the event any Contributed Assets are destroyed, damaged or taken in condemnation proceedings prior to the Closing, the provisions of Sections 9.7 and 9.8 of this Agreement shall apply; provided, however that if the destruction, damage or condemnation is of such proportions as to reasonably eliminate the expected benefits of the Transactions to the Company, this Agreement shall terminate and shall have no further force and effect upon written notice by the Company to the Contributing Stockholder.

5.9     Confidentiality.

(a)  From and after the Effective Time, the Contributing Stockholder shall, and shall cause its Subsidiaries and its or their Representatives to: (i) treat and hold as confidential (and not disclose or provide access to any Person to) all Confidential Information and Trade Secrets in each case related to the Contributed Business, (ii) in the event that the Contributing Stockholder or any of its Subsidiaries or its or their Representatives becomes legally compelled to disclose any such Confidential Information or Trade Secrets, provide the Company with prompt written notice of such requirement so that the Company may seek a protective order or other remedy, (iii) in the event that such protective order or other remedy is not obtained, furnish only that portion of such Confidential Information and Trade Secrets which is legally required to be provided and exercise its reasonable efforts to obtain assurances that confidential treatment will be accorded to such information.

(b)  From and after the Effective Time, the Company shall, and shall cause its Subsidiaries and its or their Representatives to: (i) treat and hold as confidential (and not disclose or provide access to any Person to) all Confidential Information and Trade Secrets in each case related to the Contributing Stockholder and the operations of the Contributed Business by the Contributing Stockholder prior to the Effective Time, (ii) in the event that the Company or any of its Subsidiaries or its or their Representatives becomes legally compelled to disclose any such Confidential Information or Trade Secrets, provide the Contributing Stockholder with prompt written notice of such requirement so that the Contributing Stockholder may seek a protective order or other remedy, (iii) in the event that such protective order or other remedy is not obtained, furnish only that portion of such Confidential Information and Trade Secrets which is legally required to be provided and exercise its reasonable efforts to obtain assurances that confidential treatment will be accorded to such information.

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5.10     Disclosure Schedule Updates.

(a)  The Contributing Stockholder may from time to time up to the second business day preceding the Closing Date deliver to the Company updates (collectively “Disclosure Schedule Updates”) to the Contributing Stockholder Disclosure Schedule setting forth any event, condition, fact or circumstance which would cause the condition set forth in Section 6.1 not to be satisfied as of the Effective Time. No Disclosure Schedule Update shall be deemed to supplement or amend the Contributing Stockholder Disclosure Schedule for the purpose of (i) determining the accuracy of any of the representations and warranties made by the Contributing Stockholder in this Agreement as of the date of this Agreement; or (ii) determining whether any condition set forth in Section 6.1 has been satisfied. If the Company elects to consummate the Transactions despite of a failure of the condition set forth in Section 6.1 to be satisfied, then, in order to determine if a Breach of the representations and warranties of the Contributing Stockholder has occurred as of the Effective Time for purposes of Section 9.2 and Section 9.7, the representations and warranties of the Contributing Stockholder shall be modified by the information set forth in the Disclosure Schedule Update, but only to the extent of such information.

(b)  The Company may from time to time up to the second business day preceding the Closing Date deliver to the Contributing Stockholder Disclosure Schedule Updates setting forth any event, condition, fact or circumstance which would cause the condition set forth in Section 7.1 not to be satisfied as of the Effective Time. No Disclosure Schedule Update shall be deemed to supplement or amend the Company Stockholder Disclosure Schedule for the purpose of (i) determining the accuracy of any of the representations and warranties made by the Company in this Agreement as of the date of this Agreement; or (ii) determining whether any condition set forth in Section 7.1 has been satisfied. If the Contributing Stockholder elects to consummate the Transactions despite of a failure of the condition set forth in Section 7.1 to be satisfied, then, in order to determine if a Breach of the representations and warranties of the Company has occurred as of the Effective Time, the representations and warranties of the Company shall be modified by the information set forth in the Disclosure Schedule Update, but only to the extent of such information

5.11     Exculpation Among Founders.    The Contributing Stockholder acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. The Contributing Stockholder agrees that no Founder nor the respective controlling persons, officers, directors, partners, agents, or employees of any Founder shall be liable to the Contributing Stockholder for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Equity Securities it being understood that nothing herein shall be understood to limit the rights and remedies of the Contributing Shareholder with respect to the Company pursuant to this Agreement, the Marketing Agreements or the Transactional Agreements.

5.12     Restricted Names.    From and after the Effective Time the Contributing Stockholder and its Subsidiaries shall not use any Restricted Name or any Restricted Name derivative, except to make factual reference thereto in explaining the prior history of the Contributed Business, in a non-trademark sense.

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5.13     Limited Trademark License.

(a)  Subject to the terms and conditions of this Agreement, the Contributing Stockholder hereby grants to the Company a   limited, non-exclusive, non-transferable, royalty-free right and license to use (i) the trademarks and service marks of the Contributing Stockholder listed on Schedule 5.13(a) for a period of six (6) months beginning on the date of the Closing (ii) and the trademarks and service marks listed on Schedule 5.13(b) for a period of 12 (twelve) months beginning on the date of the Closing, in the case of each of (i) and (ii), solely for use by the Company in connection with its operation of the Contributed Business (the items listed on Schedule 5.13, collectively the “Licensed Marks”; provided, however, the Company shall use commercially reasonable efforts to begin using its own trademarks, service marks or tradenames in lieu of the Licensed Marks as soon as reasonably practicable after the Closing but in any event prior to the end of the six (6) month period after the Closing. The Company will comply with the Contributing Stockholders’ trademark usage guidelines in using any of the Licensed Marks and will use the Licensed Marks in a manner that is substantially consistent with their usage in connection with the Contributed Business prior to Closing.

(b)  Except as expressly authorized by this Agreement, the Company will not use the Licensed Marks. The Company agrees to state in appropriate places on all materials containing the Licensed Marks that the Licensed Marks are trademarks or service marks of the Contributing Stockholder and to include the symbols TM, SM or ^®, as appropriate. The Contributing Stockholder does not grant any other rights in or to its marks other than those expressly granted hereunder, and the Company expressly acknowledges the Contributing Stockholder’s exclusive ownership of the Licensed Marks. The Company agrees not to take any action inconsistent with such ownership. The Company agrees not to adopt, use or attempt to register any trademarks, service marks or tradenames that are similar or confusingly similar to the Licensed Marks or in such a way as to create combination marks with the Licensed Marks. The Company shall provide the Contributing Stockholder with samples of all materials that use the Licensed Marks for the Contributing Stockholder’s quality control purposes. The Contributing Stockholder may suspend, in whole or in part, the license to use the Licensed Marks if, in the Contributing Stockholder’s sole discretion, the use of the Licensed Mark does not comply with its then-current trademark or service mark usage policy.

5.14     401(k) Plan Accounts.    As soon as practicable following the Closing Date, the Contributing Stockholder shall cause the trustee of the National Data Corporation 401(k) plan (the “Contributing Stockholder 401(k) Plan”) to transfer directly to the trustee of the MedUnite Inc. 401(k) plan (the “Company’s 401(k) Plan”), in cash, the account balance (including any loan balances) of each Business Employee who is a participant under the Contributing Stockholder 401(k) Plan and who has commenced employment with the Company. Such transfer shall comply with the requirements of Section 414(l) of the Code and all other applicable provisions of the Code and ERISA and shall be carried out under procedures mutually agreeable to the Contributing Stockholder and the Company. Promptly after the Closing, the Company shall provide the Contributing Stockholder with a copy of the determination or opinion letter, as applicable, as to the Company 401(k) Plan’s tax qualified status under Section 401(a) of the Code.

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5.15     Certain Payor Contracts.    As soon as practicable after the Effective Time, the Contributing Stockholder will use its reasonable efforts to obtain the Consents required for the Payor Contracts listed on Schedule 5.15 of the Contributing Stockholder Disclosure Schedule and the Company will cooperate in good faith with the Contributing Stockholder in its efforts to obtain such Consents. If any such Consent is not obtained within 90 days of the Closing Date, the Company shall be entitled to the remedies set forth in Section 9.7 and Section 9.8, as applicable.

6.     CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATION TO CLOSE.

The Company’s obligation to accept the contribution of the Contributed Assets and to take the other actions required to be taken by the Company at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by the Company, in whole or in part, in writing):

6.1     Accuracy Of Representations.    All of the representations and warranties made by the Contributing Stockholder in this Agreement considered individually and in the aggregate, shall have been true and complete in all material respects as of the date of this Agreement, and shall be true and complete in all material respects as of the Effective Time as if made at the Effective Time (in each case without giving effect to any materiality qualifications or similar qualifications contained or incorporated directly or indirectly in such representations and warranties and without giving effect to any Disclosure Schedule Updates).

6.2     Governmental Approvals.    All Consents required to be obtained by the Company or the Contributing Stockholder from a Governmental Body, in each case in order to consummate the Transactions, shall have been obtained and shall be in full force and effect and all waiting periods required by any Legal Requirement shall have expired; provided, however, that no such Consent shall be deemed obtained if it would impose a Burdensome Condition on the Company or its stockholders and Subsidiaries.

6.3     No Restraints.    No temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the Transactions shall have been issued by any Governmental Body, and there shall not be any Legal Requirement enacted or deemed applicable to the Transactions that makes the consummation of the Transactions illegal or imposes a Burdensome Condition on the Company or its stockholders or Subsidiaries.

6.4     Performance Of Obligations.

(a)  Each of the documents referred to in Sections 1.4(b)(i) shall have been executed by each of the parties thereto and delivered to the Company.

(b)  All of the other covenants and obligations that the Contributing Stockholder is required to comply with or to perform pursuant to this Agreement at or prior to the Closing considered individually and in the aggregate, shall have been duly complied with and performed in all material respects.

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6.5     Additional Documents.    The Company shall have received the following documents:

(a)  an opinion letter from Troutman Sanders LLP, dated the Closing Date, in substantially the form of Exhibit F-1;

(b)  evidence, reasonably satisfactory to the Company, that all Encumbrances listed on Part 2.6 of the Contributing Stockholder Disclosure Schedule have been removed;

(c)  a certificate executed by the Chief Executive Officer and Chief Financial Officer of the Contributing Stockholder to the effect that the Contributing Stockholder has satisfied each of the conditions set forth in Section 6.1 and 6.4(b); and

(d)  a release by the Contributing Stockholder of all former Business Employees who commence employment with the Company from any confidentiality or intellectual property restrictions contained in any Contract between such employees and the Contributing Stockholder to the extent such confidentiality or intellectual property restrictions relate to the operations of the Contributed Business.

6.6     No Governmental Litigation.    There shall not be pending or threatened any Proceeding in which a Governmental Body is or is threatened to become a party or is otherwise involved, and neither the Contributing Stockholder nor the Company shall have received any communication from any Governmental Body in which such Governmental Body indicates the possibility of commencing any Proceeding or taking any other action: (a) challenging or seeking to restrain or prohibit the consummation of the Transactions; (b) relating to the Transactions and seeking to obtain from the Company or any of its Subsidiaries any damages or other relief that may be material to the Company; or (c) which would materially and adversely affect the Transactions or the right of the Company or any Subsidiary of the Company to own the Contributed Assets or to operate the Contributed Business.

6.7      No Other Litigation.    There shall not be pending any Proceeding against the Company in which, in the reasonable judgment of the Company, there is a reasonable possibility of an outcome that would: (a) challenge or seek to restrain or prohibit the consummation of the Transactions; or (b) materially and adversely affect the Transactions or the right of the Company or any Subsidiary of the Company to own the Contributed Assets or operate the Contributed Business, provided, however, that in the case of each of (a) and (b) above, the damages to the Company and its Subsidiaries would be reasonably likely to exceed $10 million.

6.8     Services Agreements.    The Transition Services Agreement, the Statement Processing Services Agreement and each of the Marketing Agreements shall have been executed and delivered to the Company by the Contributing Stockholder and, assuming the execution and delivery by the counterparties thereof, shall be in full force and effect.

6.9     Related Agreements.    The Contributing Stockholder and the Founders shall have executed and delivered each Related Agreement to which they are a party, and, assuming the execution and delivery by the counterparties thereto, each Related Agreement shall be in full force and effect.

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6.10     Third Party Consents.    Each third-party Consent for the lawful transfer of the Contributed Assets listed on Exhibit G shall have been obtained without cost to the Company and shall be in full force and effect; provided, however, that no such Consent shall be deemed obtained if it would impose a Burdensome Condition on the Company or its stockholders or Subsidiaries.

6.11     Outsourcing Agreements.    Each of the Outsourcing Agreements shall have been executed and delivered by the Contributing Stockholder and, assuming execution and delivery by the counterparties thereof, shall be in full force and effect.

6.12     Series A Preferred Stock Financing.    The closing of the Series A Preferred Stock Financing shall be occurring simultaneously with the Closing of the Transactions.

6.13     Employment Agreement.    The Employment Agreement, dated May 12, 1999, between Mr. Robert Strickland and the Contributing Stockholder shall be terminated and all of its provisions, including Sections 7, 8 and 9 therein, shall be of no further force and effect.

6.14     Norcross Sublease and Software License.    Each of the Norcross Sublease and the Software License Agreement shall have been executed and delivered by the Contributing Stockholder and, assuming execution and delivery by the counterparties thereof, shall be in full force and effect.

6.15     Business Employee Bonuses.    The Contributing Stockholder shall have paid in full all year-end and/or merit bonuses to Business Employees with respect to performance for the fiscal year ended May 31, 2001.

6.16     Company Transition Services Agreement.    The Company Transition Services Agreement in the form of Exhibit L shall have been executed and delivered by the Contributing Stockholder and, assuming the execution and delivery by the counterparties thereto, shall be in full force and effect.

7.     CONDITIONS PRECEDENT TO THE CONTRIBUTING STOCKHOLDER’S OBLIGATION TO CLOSE.

The Contributing Stockholder’s obligation to contribute the Contributed Assets and to take the other actions required to be taken by the Contributing Stockholder at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by the Contributing Stockholder, in whole or in part, in writing):

7.1     Accuracy Of Representations.    All of the representations and warranties made by the Company in this Agreement considered individually and in the aggregate, shall have been true and complete in all material respects as of the date of this Agreement and shall be true and complete in all material respects as of the Effective Time as if made at the Effective Time (without giving effect to any materiality qualifications or similar qualifications contained or incorporated directly or indirectly in such representations and warranties).

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7.2     Consents and Governmental Approvals.    All Consents required to be obtained (i) by the Company from any Person other than a Governmental Body, and (ii) by the Company or the Contributing Stockholder from a Governmental Body, in each case in order to consummate the Transactions, shall have been obtained and shall be in full force and effect and all waiting periods required by any Legal Requirement shall have expired; provided, however, that no such Consent shall be deemed obtained if it would impose a Burdensome Condition on the Company, the Contributing Stockholder or their respective Subsidiaries.

7.3     No Restraints.    No temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the Transactions shall have been issued by any Governmental Body, and there shall not be any Legal Requirement enacted or deemed applicable to the Transactions that makes the consummation of the Transactions illegal or imposes a Burdensome Condition on the Company, the Contributing Stockholder or their respective Subsidiaries.

7.4     Company’s Performance.

(a)  The Company shall have executed and delivered the Assumption Agreement and shall have issued to the Contributing Stockholder the Equity Consideration and the Promissory Note contemplated by Section 1.4(b)(ii) and Section 1.4(b)(iv).

(b)  All of the other covenants and obligations that the Company is required to comply with or to perform pursuant to this Agreement at or prior to the Closing considered individually and in the aggregate shall have been duly complied with and performed in all material respects.

(c)  The Contributing Stockholder shall have received a certificate executed by the Chief Executive Officer and Chief Financial Officer of the Company to the effect that the Company has satisfied each of the conditions set forth in Section 7.1 and 7.4(b).

(d)  The Contributing Stockholder shall have received an opinion letter from Cooley Godward LLP, dated the Closing Date, in substantially the form of Exhibit F-2.

(e)  The Contributing Stockholder shall have received a certificate executed by the Chief Financial Officer of the Company to the effect that consistent with the resolutions adopted by the Company’s Board of Directors, the Chief Financial Officer of the Company in good faith has made the determination that the value of the Contributed Assets is under $50,000,000.

7.5     No Governmental Litigation.    There shall not be pending or threatened any Proceeding in which a Governmental Body is or is threatened to become a party or is otherwise involved, and neither the Contributing Stockholder nor the Company shall have received any communication from any Governmental Body in which such Governmental Body indicates the possibility of commencing any Proceeding or taking any other action: (a) challenging or seeking to restrain or prohibit the consummation of the Transactions; (b) relating to the Transactions and seeking to obtain from the Company, the Contributing Stockholder or any of their respective Subsidiaries any damages or other relief that may be material to the Company or the

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Contributing Stockholder; or (c) which would materially and adversely affect the Transactions or the right of the Company or any Subsidiary of the Company to own the Contributed Assets or to operate the Contributed Business.

7.6     No Other Litigation.    There shall not be pending any Proceeding against the Company or the Contributing Stockholder in which, in the reasonable judgment of the Contributing Stockholder, there is a reasonable possibility of an outcome that would: (a) challenge or seek to restrain or prohibit the consummation of the Transactions; or (b) materially and adversely affect the Transactions or the right of the Company or any Subsidiary of the Company to own the Contributed Assets or operate the Contributed Business, provided, however, that, in the case of each of (a) and (b) above, the damages to the Company, the Contributing Stockholder or their respective Subsidiaries would be reasonably expected to exceed $10 million with respect to the Company or $10 million with respect to the Contributing Stockholder.

7.7     Services Agreements.    The Transition Services Agreement, the Statement Processing Services Agreement and each of the Marketing Agreements shall have been executed and delivered to the Contributing Stockholder by the Company and, assuming execution and delivery by the counterparties thereof, shall be in full force and effect.

7.8    Related Agreements.    The Company and the Founders shall have executed and delivered each Related Agreement to which they are a party, and, assuming execution and delivery by the counterparties thereof, each Related Agreement shall be in full force and effect.

7.9     Series A Preferred Stock Financing.    The closing of the Series A Preferred Stock Financing shall be occurring simultaneously with the Closing of the Transactions.

7.10     Outsourcing Agreements.    Each of the Outsourcing Agreements shall have been executed and delivered to the Contributing Stockholder by the Company and, assuming execution and delivery by the counterparties thereof, shall be in full force and effect.

7.11     Norcross Sublease and Software License.    Each of the Norcross Sublease and the Software License Agreement shall have been executed and delivered by the Company to the Contributing Stockholder and, assuming execution and delivery by the counterparties thereof, shall be in full force and effect.

7.12     Company Transition Services Agreement.    The Company Transition Services Agreement in the form of Exhibit L shall have been executed and delivered by the Company and, assuming the execution and delivery by the counterparties thereto, shall be in full force and effect.

7.13     Service Agreements with the Founders.    The Company shall have entered into a service agreement with each Founder on substantially equivalent terms (including pricing) as the service agreement term sheet signed by each Founder and the Company and previously provided to the Contributing Stockholder.

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7.14     Data Access.    The Company and the Contributing Stockholder shall have entered into an arrangement on mutually agreeable terms whereby the Company will provide to the Contributing Stockholder for a limited period of time certain data which historically has been provided by the Norcross facility to certain third parties previously identified to the Company by the Contributing Stockholder.

8.     TERMINATION.

8.1     Termination Events.    This Agreement may be terminated prior to the Closing:

(a)  by the Company if (i) there is a Breach of any covenant or obligation of the Contributing Stockholder in this Agreement, or (ii) there is a Breach of the Contributing Stockholder’s representations and warranties in this Agreement as of the date of this Agreement or as of any subsequent date (as if made on such subsequent date); provided, however, that the Company shall not be permitted to terminate this Agreement pursuant to this Section 8.1(a) on account of any Breach which is curable by the Contributing Stockholder unless the Contributing Stockholder fails to cure such Breach within 15 calendar days after receiving written notice of such Breach from the Company;

(b)  by the Contributing Stockholder if (i) there is a Breach of any covenant or obligation of the Company in this Agreement, or (ii) there is a Breach of the Company’s representations and warranties in this Agreement as of the date of this Agreement or as of any subsequent date (as if made on such subsequent date); provided, however, that the Contributing Stockholder shall not be permitted to terminate this Agreement pursuant to this Section 8.1(b) on account of any Breach which is curable by the Company unless the Company fails to cure such Breach within 15 calendar days after receiving written notice of such Breach from the Contributing Stockholder;

(c)  by either the Company or the Contributing Stockholder if the Closing has not taken place on or before August 31, 2001 (the “Termination Date”) (other than as a result of any failure on the part of the terminating party to comply with or perform its covenants and obligations under this Agreement); provided, however, that if the parties hereto file a notification under the HSR Act and receive on or prior to the Termination Date a second request for information from the Federal Trade Commission in connection with such filing, the Termination Date shall be automatically extended by the number of calendar days from receipt of such second request for information until final action by the Federal Trade Commission on the HSR Act notification;

(d)  by the mutual written consent of the Company and the Contributing Stockholder;

(e)  by the Company or the Contributing Stockholder if the Federal Trade Commission or any successor Governmental Body advises the Company that it will issue its Consent to the consummation of the transactions contemplated in the Transactional Agreements if and only if any of the Company, the Contributing Stockholder, any of their respective Subsidiaries or the stockholders of the Company becomes subject to a Burdensome Condition; and

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(f)  by the Company, pursuant to Section 5.8.

8.2     Termination Procedures.    If the Company wishes to terminate this Agreement pursuant to Section 8.1, the Company shall deliver to the Contributing Stockholder a written notice stating that the Company is terminating this Agreement and setting forth a brief description of the basis on which the Company is terminating this Agreement. If the Contributing Stockholder wishes to terminate this Agreement pursuant to Section 8.1, the Contributing Stockholder shall deliver to the Company a written notice stating that the Contributing Stockholder is terminating this Agreement and setting forth a brief description of the basis on which the Contributing Stockholder is terminating this Agreement.

8.3     Effect Of Termination.    If this Agreement is terminated pursuant to Section 8.1, all further obligations of the parties under this Agreement shall terminate; provided, however, that: (a) no party shall be relieved of any obligation or other Liability arising from any Breach by such party of any provision of this Agreement; (b) the parties shall, in all events, remain bound by and continue to be subject to the provisions set forth in Section 10; and (c) the parties shall, in all events, remain bound by and continue to be subject to Section 5.5.

8.4     Nonexclusivity Of Termination Rights.    The termination rights provided in Section 8.1 shall not be deemed to be an exclusive right or remedy. Accordingly, the exercise by any party of its right to terminate this Agreement pursuant to Section 8.1 shall not be deemed to be an election of remedies and shall not be deemed to prejudice, or to constitute or operate as a waiver of, any other right or remedy that such party may be entitled to exercise (whether under this Agreement, under any other Contract, under any statute, rule or other Legal Requirement, at common law, in equity or otherwise).

9.     INDEMNIFICATION, ETC.

9.1     Survival Of Representations And Covenants.

(a)  The representations, warranties, covenants and obligations of the Contributing Stockholder and the Company, and the rights and remedies that may be exercised by the Indemnitees, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or any knowledge of, any of the Indemnitees or any of their Representatives.

(b)  The representations, warranties, covenants and obligations of each party to this Agreement shall survive (A) the Closing and the contribution of the Contributed Assets to the Company; (B) any sale or other disposition of any or all of the Contributed Assets by the Company; and (C) the dissolution of any party to this Agreement as follows: (i) the representations and warranties set forth in Sections 2.3, 2.4, 2.5, 2.6(c), 2.6(e), 2.6(f), 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 2.19, 2.22, 2.23, 2.24, 2.25, 2.26, 2.27, 2.29 and 2.30 shall survive until 11:59 p.m. (PST) on the last calendar day of the eighteenth month immediately following the Closing Date, (ii) the representations and warranties set forth in Section 2.20 shall survive until 11:59 p.m. (PST) on the earlier of the next business day following the termination of the relevant statute of limitations or the date on which all Liabilities under each Company Employee Benefit Plan have been satisfied, (iii) the representations and

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warranties set forth in Sections 2.18, and 2.21 shall survive until 11:59 p.m. (PST) on the next business day following the termination of the relevant statute of limitations, (iv) the representations and warranties set forth in Sections, 2.1, 2.2, 2.6(a), 2.6(b), 2.6(d), 3.1 and 3.2 shall survive indefinitely, except that, with respect to any individual Breach of such representations and warranties, the right of an Indemnified Party to bring an indemnification claim shall expire at 11:59 p.m. (PST) on the first anniversary of the date on which such Indemnified Party had knowledge of such Breach; (v) the provisions of Section 2.28 and Section 5.11 shall survive indefinitely, (vi) the covenants set forth in this Agreement (other than those contained in Section 2.28 or Section 5.11) shall survive until the expiration of the relevant statute of limitations unless a shorter period of time is expressly specified therein and (vii) the representations and warranties set forth in Sections 3.3 through 3.15 shall survive until 11:59 (PST) on the first anniversary of the Closing (each of the time periods in (i) through (vii), a “Survival Period”); provided, however, that if a Claim Notice (as defined below) relating to any representation, warranty or covenant is given to the indemnifying party on or prior to the expiration of the applicable Survival Period, then, notwithstanding anything to the contrary contained in this Section 9.1(b), such representation, warranty or covenant shall not so expire, but rather shall remain in full force and effect until such time as such claim has been fully and finally resolved, either by means of a written settlement agreement executed on behalf of the Contributing Stockholder and the Company or by means of a final, non-appealable judgment issued by a court of competent jurisdiction.

(c)  For purposes of this Agreement, a “Claim Notice” relating to a particular representation, warranty or covenant shall be deemed to have been given if any Indemnitee, acting in good faith, delivers to the indemnifying party a written notice stating that such Indemnitee believes that there is or has been a Breach of such representation, warranty or covenant and containing (i) a description in reasonable detail of the circumstances supporting such Indemnitee’s good faith belief that there is or has been such a Breach, and (ii) a non-binding, preliminary estimate of the aggregate dollar amount of the actual and potential Damages that have arisen and may arise as a result of such Breach.

(d)  For purposes of this Agreement, each statement or other item of information set forth in a Disclosure Schedule shall be read in conjunction with and deemed to be a part of the respective representation and warranty made in this Agreement by the party delivering such Disclosure Schedule.

9.2     Indemnification By The Contributing Stockholder.

(a)  Subject to the provisions of this Section 9, the Contributing Stockholder shall hold harmless and indemnify each of the Company Indemnitees from and against, and shall compensate and reimburse each of the Company Indemnitees for, any Damages that are suffered or incurred by any of the Company Indemnitees or to which any of the Company Indemnitees otherwise becomes subject (regardless of whether or not such Damages relate to any third-party claim) and that arise from or as a result of:

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(i)  any Breach of any of the representations or warranties made by the Contributing Stockholder in this Agreement, except for any Breach of the representations and warranties set forth in Section 2.6(c) of this Agreement;

(ii)  any Breach of any covenant or obligation of the Contributing Stockholder contained in this Agreement, except for any Breach of Section 1.5;

(iii)  any failure on the part of the Contributing Stockholder to perform and discharge the Excluded Liabilities on a timely basis;

(iv)  any Liability (other than the Assumed Liabilities) to which the Company or any of the other Company Indemnitees may become subject and that arises directly or indirectly from or relates directly or indirectly to any failure to comply with any bulk transfer law in connection with the contribution of the Contributed Assets to the Company; or

(v)  any Proceeding relating to any Breach referred to in clauses (i) or (ii) above and any Liability referred to in clauses (iii) and (iv) above (including any Proceeding commenced by any Company Indemnitee for the purpose of enforcing any of its rights under this Section 9).

(b)  Subject to Section 9.2(d), the Contributing Stockholder shall not be required to make any indemnification payment pursuant to Section 9.2(a)(i), Section 9.2(a)(ii) or Section 9.2(a)(v) (other than Proceedings related to Section 9.2(iii)) until such time as the total amount of all Damages (including the Damages arising from such Breach and all other Damages arising from any other Breaches of any representations, warranties or covenants) that have been suffered or incurred by any one or more of the Company Indemnitees, or to which any one or more of the Company Indemnitees has or have otherwise become subject, exceeds $200,000 in the aggregate, and then only to the extent of such excess.

(c)  Notwithstanding anything in this Agreement to the contrary, subject to Section 9.2(d), the Contributing Stockholder’s aggregate liability for any indemnification payments pursuant to Section 9.2(a)(i), 9.2(a)(ii) and 9.2(a)(v) (other than Proceedings related to Section 9.2(a)(iii)) shall be limited to and shall not exceed, $3,000,000 (the “Contributing Stockholder Indemnity Cap”); provided, however, that the Contributing Stockholder Indemnity Cap shall not apply to any indemnification obligations of the Contributing Stockholder arising out of any breach of Section 2.6(b) and Section 2.6(d).

(d)  The limitation on the indemnification obligations of the Contributing Stockholder that is set forth in Section 9.2(b) and Section 9.2(c) shall not apply to (i) any Breach of Section 5.4 or (ii) any willful misconduct, including willful Breach, intentional misrepresentation or fraud by the Contributing Stockholder or any of its Subsidiaries.

(e)  Notwithstanding anything in this Agreement to the contrary, if the Company (i) suffers or incurs Damages with respect to the Governmental Authorization Contracts or (ii) receives a notification from a counterparty to any Governmental Authorization Contract to the effect that such Governmental Authorization Contract has not been legally assigned to the Company, then (A) in the case of 9.2(e)(ii) above, the Company shall provide

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such notification to the Contributing Stockholder before any remedy is undertaken by the Company and before the Company seeks indemnification under Article 9, and (B) in the case of either 9.2(e)(i) or 9.2(e)(ii) above, before the Company exercises its rights to seek indemnification or any other remedy provided under this Agreement, it will notify the Contributing Stockholder and permit the Contributing Stockholder to perform its obligations under Section 5.6(c)(ii) for a period of sixty (60) days.

(f)  Notwithstanding anything in this Agreement to the contrary, the Contributing Stockholder shall hold harmless and indemnify each Company Indemnitee from and against any Damages that are suffered or incurred by any of the Company Indemnitees in connection with any matter identified in writing by the Company to the Contributing Stockholder with respect to any Contributed Business Contract included in the Contributed Assets, and identified on Exhibit M (it being understood that the Company may from time to time update Exhibit M based on new Discovered Contracts produced by the Contributed Stockholder) (such Contract, “Discovered Contract”); provided, however, that this Section 9.2(f) shall not apply to (i) any matter identified by the Company later than 30 calendar days following actual receipt by the Company of such Discovered Contract, and (ii) any matter identified by the Company if such matter is substantially consistent with the terms of a group of comparable Contributable Business Contracts included in the Contributed Assets, a copy of which had been previously provided to the Company.

9.3     Indemnification By Company.

(a)  Subject to the provisions of this Section 9, the Company shall hold harmless and indemnify each of the Contributing Stockholder Indemnitees from and against, and shall compensate and reimburse each of the Contributing Stockholder Indemnitees for, any Damages that are suffered or incurred by any of the Contributing Stockholder Indemnitees or to which any of the Contributing Stockholder Indemnitees otherwise becomes subject (regardless of whether or not such Damages relate to any third-party claim) and that arise from or as a result of:

(i)  any failure on the part of the Company to perform and discharge the Assumed Liabilities on a timely basis;

(ii)  any Breach of any covenant or obligation of the Company contained in this Agreement; or

(iii)  any Proceeding relating to any Liability referred to in clause (i) and any Breach referred to in clause (ii), (including any Proceeding commenced by any Contributing Stockholder Indemnitee for the purpose of enforcing its rights under this Section 9.3).

(b)  The Company shall not be required to make any indemnification payment pursuant to Section 9.3(a)(ii) or Section 9.3(a)(iii) (other than Proceedings related to Section 9.3(a)(i)) until such time as the total amount of all Damages (including the Damages arising from such Breach and all other Damages arising from any other Breaches of its covenants) that have been suffered or incurred by any one or more of the Contributing Stockholder Indemnitees, or to which any one or more of the Contributing Stockholder

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Indemnitees has or have otherwise become subject, exceeds $200,000 in the aggregate, and then only to the extent of such excess.

(c)  The limitation on the indemnification obligation of the Company that is set forth in Section 9.3 shall not apply to any willful misconduct, including willful Breach, intentional misrepresentation or fraud by the Company or its Subsidiaries.

9.4     Setoff.    The parties hereto agree that any payments required to be made by any party pursuant to this Section 9 shall be made without any withholding, deduction or set-off, and each party hereto agrees not to assert a right of set-off at common law or otherwise.

9.5     Defense of Third Party Claim.

(a)  Within thirty (30) days after delivery to the indemnifying party of any Claim Notice with respect to any claim, demand or action by a third party solely for money damages (hereinafter referred to as a “Monetary Adverse Claim”) against an Indemnitee, the indemnifying party shall have the right, by written notice to the Indemnitee, to conduct the defense of, and the negotiations for settlement with respect to, the Monetary Adverse Claim, in good faith and at its own expense. The indemnifying party shall control such defense and negotiations and shall retain the right to make final decisions with respect to the defense or settlement thereof. If the indemnifying Party has given the Indemnitee such notice with respect to a Monetary Adverse Claim, the Indemnitee shall nevertheless have the right to participate in the defense or settlement thereof at its own expense, without a right of reimbursement for such expense. If the indemnifying party does not so notify the Indemnitee of its election to conduct the defense of a Monetary Adverse Claim or at any time thereafter fails to defend such Monetary Adverse Claim, the Indemnitee may conduct the defense of the Monetary Adverse Claim. The Indemnitee may at any time notify the indemnifying party of its intention to settle, compromise or satisfy any Monetary Adverse Claim (the defense of which the indemnifying party has not undertaken) and may make such settlement, compromise or satisfaction unless the indemnifying party notifies the Indemnitee in writing (within thirty (30) days after receipt of such notice of intention to settle, compromise or satisfy) of its election to assume (at its sole expense) the defense of any such Monetary Adverse Claim and promptly thereafter takes appropriate action to implement such defense.

(b)  Within thirty (30) days after delivery to the indemnifying party of any Claim Notice with respect to any claim, demand or action by a third party not solely for money damages (hereinafter referred to as an “Equitable Adverse Claim”) against an Indemnified Party, the Indemnified Party shall have the right, by written notice to the indemnifying party, to designate the indemnifying party to conduct the defense of, and the negotiations for settlement with respect to, the Equitable Adverse Claim, in good faith and at its own expense. The indemnifying party shall control such defense and negotiations and shall retain the right to make final decisions with respect to the defense or settlement thereof; provided, however, that it shall keep the Indemnified Party fully informed on a current basis regarding the status of the Proceedings. If the Indemnified Party has given the indemnifying party such notice with respect to an Equitable Adverse Claim, the Indemnified Party shall nevertheless have the right to participate in the defense or settlement thereof at its own expense, without a right of further

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reimbursement for such expense. Notwithstanding the foregoing, and regardless of whether the Indemnified Party had previously elected to allow an indemnifying party to defend an Equitable Adverse Claim, the Indemnified Party may at any time by notice to the indemnifying party assume the exclusive right to defend, compromise or settle such Equitable Adverse Claim without the consent of the indemnifying party and at the sole expense of the indemnifying party.

9.6     Exercise Of Remedies By Indemnitees Other Than Parties To This Agreement.    No Indemnitee (other than the parties to this Agreement or any successor thereto or assign thereof) shall be permitted to assert any indemnification claim or exercise any other remedy under this Agreement unless the respective party to this Agreement entitled to indemnification (or any successor thereto or assign thereof) shall have consented to the assertion of such indemnification claim or the exercise of such other remedy.

9.7    Payment of Replacement Costs by the Contributing Stockholder.

(a)  Subject to Section 9.7(b), Section 9.7(c) and Section 9.8, the Contributing Stockholder shall hold harmless and indemnify each of the Company Indemnitees from and against, and shall compensate and reimburse each of the Company Indemnitees for, any Replacement Costs, in the case of Section 9.7(a)(i) and Section 9.7(a)(ii), or any Damages, in the case of Section 9.7(a)(iii) that are suffered or incurred by any of the Company Indemnitees or to which any of the Company Indemnitees otherwise becomes subject (regardless of whether or not such Replacement Costs or Damages relate to any third-party claim) and that arise from or as a result of:

(i)  Any Breach of the representations and warranties made by the Contributing Stockholder in Section 2.6(c) of this Agreement;

(ii)  Any Contributed Asset, contemplated in Section 1.5 but subject to Section 5.15 and Section 9.12, for which the required Consent for transfer to the Company was not obtained prior to the Effective Time, except for the Contracts between the Contributing Stockholder, on the one hand, and Physicians on the other hand, included in the Contributed Assets; or

(iii)  Subject to Section 5.15 and Section 9.12, any Proceeding by (A) a counterparty to a Contributed Business Contract (other than any Contract with Physicians) included in the Contributed Assets requiring Consent for transfer to the Company if and only if such Proceeding relates to a Breach of such Contributed Business Contract included in the Contributed Assets due to the failure to obtain prior to the Effective Time the required Consent from such counterparty pursuant to the terms of such Contributed Business Contract included in the Contributed Assets, or (B) by any Payor listed on Schedule 9.12 of the Contributing Stockholder Disclosure Schedule if and only if such Proceeding relates to the failure to obtain any required Consent from such Payor.

(b)  Notwithstanding anything in this Agreement to the contrary, subject to Section 9.7(e), the Contributing Stockholder shall not be required to make any payments pursuant to Section 9.7(a):

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(i)  with respect to any individual occurrence not exceeding $25,000 in Replacement Costs, unless the aggregate amount of Replacement Costs has exceeded the amount set forth in Section 9.7(b)(ii); and

(ii)  until such time as the total amount of all Replacement Costs that have been incurred by one or more of the Company Indemnitees, or to which any one or more of the Company Indemnitees has or have become subject, exceeds $200,000 in the aggregate, and then only to the extent of such excess, it being understood that any individual occurrence not exceeding $25,000 as contemplated in Section 9.7(b)(i) shall be counted in computing the aggregate threshold set forth in this Section 9.7(b)(ii).

(c)  Notwithstanding anything in this Agreement to the contrary, subject to Section 9.7(e), the Contributing Stockholder’s aggregate liability for any payments pursuant to Section 9.7(a)(i), Section 9.7(a)(ii) and Section 9.7(a)(iii) shall be limited to, and shall not exceed $3,000,000.

(d)  For purposes of this Agreement, a demand for payment of Replacement Costs exceeding the applicable limitations set forth in Sections 9.7(b)(i) and 9.7(b)(ii) (the “Replacement Cost Demand”) shall be deemed given if any Company Indemnitee, acting in good faith, delivers to the Contributing Stockholder a written notice stating that such Company Indemnitee believes that an amount of Replacement Costs has been incurred or is reasonably likely to be incurred in the immediate future and including (i) a description in reasonable detail of the circumstances supporting such Company Indemnitee’s good faith belief that an amount of Replacement Costs has been incurred or is reasonably likely to be incurred in the immediate future, and (ii) a non-binding, preliminary estimate of the aggregate dollar amount of such Replacement Cost.

(e)  The limitations on the Replacement Cost payment obligations of the Contributing Stockholder set forth in Section 9.7(c) and Section 9.7(d) shall not apply to any willful misconduct, including any willful Breach, intentional misrepresentation or fraud by the Contributing Stockholder or any of its Affiliates.

9.8     Alternative Arrangements In Lieu of Payment For Replacement Costs.

(a)  The parties agree and acknowledge that in lieu of the immediate payment obligation with respect to Replacement Costs pursuant to Section 9.7, the Contributing Stockholder and the Company may agree, in accordance with the provisions of Section 9.8(e), that instead of paying to the Company the amount of Replacement Costs due pursuant to Section 9.7, the Contributing Stockholder may take any one of the actions set forth in Section 9.8(b), Section 9.8(c) or Section 9.8(d).

(b)  If and only if (A) the Replacement Cost payable by the Contributed Stockholder pursuant to Section 9.7(a) is related solely to a service (and not to an Asset) and (B) in the reasonable judgment of the Company, the Contributing Stockholder is capable of performing such service with similar quality to that provided to the Contributing Business prior to the Effective Time, then the Contributing Stockholder may provide such service to the Company or any of its Affiliates, as applicable, on an outsourcing basis and at a cost to the

53

Company or any of its Affiliates not to exceed the historic costs therefor as represented on the Contributed Business Pro Forma Financial Statements to the extent such historic costs are an Assumed Liability, but taking into account any express price escalation provisions contained as of the date hereof in any Contract included in the Contributed Assets (such service, a “Substitute Service”) for a period of time as required by the Company not to exceed the applicable term of the underlying service arrangement included in the Contributed Assets (the “Mitigating Service Period”) on the terms and conditions (other than duration and payment terms) substantially equivalent to the terms of the Transition Services Agreement. At the end of the Mitigating Service Period, the Contributing Stockholder shall hold harmless and indemnify each of the Company Indemnitees from and against, and shall compensate and reimburse each of the Company Indemnitees for, any Replacement Costs related to the service set forth in the original Replacement Cost Demand; it being understood that such Replacement Costs shall be measured and computed as of the last calendar day immediately after the end of the Mitigating Service Period. In addition, subject to the limitations set forth in Section 9.7(c), the Contributing Stockholder shall hold harmless and indemnify each of the Company Indemnitees from and against, and shall compensate and reimburse each of the Company Indemnitees for, any Damages that are suffered or incurred by any of the Company Indemnitees or to which any of the Company Indemnitees otherwise becomes subject (regardless of whether or not such Damages relate to any third-party claim) and that arise from each Substitute Service Arrangement, except for Damages arising from any Contract breach by the Company.

(c)  If and only if (A) the Replacement Cost payable by the Contributing Stockholder pursuant to Section 9.7(a) is related solely to a tangible asset and (B) the Contributing Stockholder has, and is able to convey to the Company in accordance with applicable Legal Requirements, good and valid title to a replacement asset reasonably acceptable to the Company (the “Replacement Asset”), free and clear of any Encumbrances (other than Permitted Encumbrances), then, in lieu of paying the Replacement Costs associated with such tangible asset, the Contributing Stockholder may transfer to the Company, at no cost and expense to the Company or its Affiliates, good and valid title to such Replacement Asset, free and clear of any Encumbrances (other than Permitted Encumbrances). Subject to the limitations set forth in Section 9.7(c), the Contributing Stockholder shall hold harmless and indemnify each of the Company Indemnitees from and against, and shall compensate and reimburse each of the Company Indemnitees for, any Damages that are suffered or incurred by any of the Company Indemnitees or to which any of the Company Indemnitees otherwise becomes subject (regardless of whether or not such Damages relate to any third-party claim) and that arise from a failure by the Contributing Stockholder to vest in the Company good and valid title to any Replacement Asset, free and clear of any Encumbrances, other than Permitted Encumbrances.

(d)  If and only if (A) the Replacement Cost payable by the Contributing Stockholder pursuant to Section 9.7(a)(ii) is related solely to a Contract and (B) in the reasonable judgment of the Company, the Contributing Stockholder is capable of providing an arrangement (including entering into a subcontract on the same terms and conditions as the underlying Contract) which provides to the Company all of the material benefits of the Contributing Stockholder’s rights under such Contract, then the Contributing Stockholder may provide, at a cost to the Company or its Affiliates not to exceed the historic costs therefor as represented on the Contributed Business Pro Forma Financial Statements to the extent such historic costs are an

54

Assumed Liability (but taking into account any express price escalation provisions contained as of the date hereof in any Contract included in the Contributed Assets) a substitute arrangement with respect to such Contract (including entering into a subcontract on the same terms and conditions as the underlying Contract) (such arrangement, a “Substitute Arrangement”) which provides to the Company all of the benefits of the Contributing Stockholder’s rights under such Contract and for the term of such Contract. The terms of each Substitute Arrangement shall be negotiated in good faith by the Company and the Contributing Stockholder to be consistent with the terms and intent of this Agreement. Subject to the limitations set forth in Section 9.7(c), the Contributing Stockholder shall hold harmless and indemnify each of the Company Indemnitees from and against, and shall compensate and reimburse each of the Company Indemnitees for, any Damages that are suffered or incurred by any of the Company Indemnitees or to which any of the Company Indemnitees otherwise becomes subject (regardless of whether or not such Damages relate to any third-party claim) and that arise from each Substitute Arrangement, other than any Contract breach by the Company.

(e)  Within five business days of receipt by the Contributing Stockholder of a Replacement Cost Demand, the Contributing Stockholder may send to the Company a written notice (the “Action Notice”) (i) setting forth the specific action which the Contributing Stockholder wishes to take pursuant to one of Sections 9.8(b), 9.8(c) or 9.8(d) in lieu of the immediate payment of Replacement Costs by the Contributing Stockholder, (ii) describing in reasonable detail the facts and circumstances supporting the belief of the Contributing Stockholder that it is able to take the specific action set forth in Sections 9.8(b), 9.8(c) or 9.8(d), as applicable, without any cost or expense to the Company or its Affiliates in excess of the historic costs therefor as represented on the Contributing Stockholder Financial Statements to the extent such historic costs are an Assumed Liability (but taking into account any express price escalation provisions contained as of the date hereof in any Contract included in the Contributed Assets), and (iii) an irrevocable commitment with respect to the date on which the specific action set forth in Sections 9.8(b), 9.8(c) or 9.8(d), as applicable, will become effective. The Company shall have ten business days to review the Action Notice (the “Review Period”), and the Contributing Stockholder shall make available to the Company and its Representatives to answer any inquiries or provide other oral or written information reasonably requested by the Company related to the Action Notice. If at the end of the Review Period the Company concludes in good faith that it is not reasonably likely that the Contributing Stockholder can take the action specified in the Action Notice without the Company incurring any Damages in excess of the Replacement Costs set forth in the Replacement Cost Demand, the Company may, within two calendar days after the end of the Review Period, decline in a written notice to the Contributing Stockholder (the “Decline Notice”) to accept the specific action set forth in the Action Notice in lieu of the payment of Replacement Costs, in which case the Contributing Stockholder shall pay such Replacement Costs as set forth in Section 9.7 of this Agreement. If the Company does not send a Decline Notice to the Contributing Stockholder, then the parties will exercise their respective reasonable efforts to implement the arrangement described in the Action Notice prior to the irrevocable commitment date specified in such Action Notice. Subject to the limitations set forth in Section 9.7(c), the Contributing Stockholder shall hold harmless and indemnify each of the Company Indemnitees from and against, and shall compensate and reimburse each of the Company Indemnitees for, any Damages that are suffered or incurred by any of the Company Indemnitees or to which any of the Company Indemnitees otherwise becomes subject (regardless

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of whether or not such Damages relate to any third-party claim) and that arise from any failure by the Contributing Stockholder to implement the arrangement described in the Action Notice prior to the binding commitment date specified in such Action Notice.

(f)  The Company and the Contributing Stockholder agree and acknowledge that to the extent the cost of any of the arrangements contemplated by Section 9.8(a) is counted for purposes of computing the limitation set forth in Section 9.7(c), the amount counted against the limitation set forth in Section 9.7(c) shall be the actual out-of-pocket cost to the Contributing Stockholder of any such arrangements.

9.9     Exclusive Remedy For Certain Claims.

(a)  From and after the Effective Time, the provisions of this Section 9 shall provide the sole and exclusive remedy of the Company for any Breach of this Agreement by the Contributing Stockholder, and shall preclude the assertion of any other right or remedy by the Company in connection therewith provided, however, that this Section 9.9 shall not preclude or otherwise limit the assertion of (i) any right or remedy for willful misconduct, including willful Breach, intentional misrepresentation or fraud by any Person, or (ii) any right or remedy for specific performance or other equitable relief, including specific performance of the covenants contained in Sections 5.4, 5.5 and 5.6 of this Agreement.

(b)  From and after the Effective Time, the provisions of this Section 9 shall provide the sole and exclusive remedy of the Contributing Shareholder for any Breach by the Company of any covenant contained in this Agreement, and shall preclude the assertion of any other right or remedy by the Contributing Shareholder in connection therewith provided, however, that this Section 9.9 shall not preclude or otherwise limit the assertion of (i) any right or remedy for willful misconduct, including willful Breach, intentional misrepresentation or fraud by any Person, (ii) any right or remedy for specific performance or other equitable relief, including specific performance of the covenants contained in Sections 5.5 and 5.6 of this Agreement, or (iii) any right or remedy with respect to any Breach of this Agreement by the Company for which indemnification for such Breach is not provided for in this Agreement.

9.10    Additional Limitations.

(a)  If and only if an Indemnified Party actually receives any payments from an insurance provider in respect of Damages suffered by it due to a Breach of this Agreement by the other party (such payments, “Insurance Reimbursements”), then such Indemnified Party shall accept such Insurance Reimbursements as full or partial satisfaction, as the case may be, with respect to the indemnification obligations of the indemnifying party to pay for Damages under this Agreement. If the indemnifying party has made a payment for Damages to the Indemnified Party, and the indemnified party subsequently receives any Insurance Reimbursements with respect to such Damages, then the Indemnified Party shall reimburse the indemnifying party in the amount of Insurance Reimbursements actually received subject to each of the following limitations: (i) the indemnifying party shall not be entitled to receive the first $200,000 of Insurance Reimbursements received by the Indemnified Party, (ii) the indemnifying party shall not be entitled to receive any Insurance Reimbursements in excess of Damages actually paid by the indemnifying party, and (iii) the indemnifying party shall not be entitled to receive Insurance

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Reimbursements to the extent such Insurance Reimbursements relate to Damages suffered by the Indemnified Party after the aggregate amount of Damages paid by the indemnifying party exceeds the Contributing Stockholder Indemnity Cap if the indemnifying party is the Contributing Stockholder. Notwithstanding anything in this Agreement to the contrary, the Parties agree and acknowledge that if an indemnifying party receives a set-off or actual payment with respect to Insurance Reimbursements, the amount of Damages related to such Insurance Reimbursements shall be disregarded for all purposes of calculating the Contributing Stockholder Indemnity Cap and the indemnifying party shall not be deemed to have made any payments for Damages to the Indemnified Party to the extent of such Insurance Reimbursements for purposes of calculating the Contributing Stockholder Indemnity Cap. Further, the Company and the Contributing Stockholder expressly agree and acknowledge that nothing in this Agreement obligates either party to submit any claims for Insurance Reimbursements to any insurance provider, and the failure to submit any clam to an insurance provider shall not be asserted as a defense to payment of Damages or an offset for failure to mitigate Damages.

(b)  Notwithstanding anything to the contrary contained in this Section 9, the Company shall not be deemed to have incurred Damages as a result of a Breach of any representation or warranty of the Contributing Stockholder if the Damages resulting from such Breach shall have been properly reflected as a liability on the most recent Statement of Operations included in the Contributed Business Pro Forma Financial Statements (“P&L Liability”), provided, however, that this Section 9.10(b) shall not apply if each of the following conditions is not satisfied: (i) such P&L Liability is an Assumed Liability (taking into account any express price escalation provisions contained as of the date hereof in any Contract included in the Contributed Assets), (ii) the amount of Damages which the Company would be deemed not to have incurred pursuant to this Section 9.10(b) does not exceed the amount of P&L Liabilities recorded historically by the Contributing Stockholder with respect to the particular item which had given rise to such Damages, and (iii) the Company shall have received as part of the Contributed Assets the full benefits associated with the P&L Liability as a result of which the Company would have been deemed not to have incurred Damages pursuant to this Section 9.10(b).

9.11     Consequential Damages.

(a)  The parties agree and acknowledge that in the event of a Breach of Section 5.4 by the Contributing Stockholder, the Contributing Stockholder shall not be liable for any consequential, incidental, indirect or special damages (including loss of profits, loss of use or business stoppage) except as expressly set forth in Section 9.11(b).

(b)  The Contributing Stockholder agrees and acknowledges that in the event of a Breach of Section 5.4 the Contributing Stockholder shall disgorge and pay to the Company, in lieu of any consequential, incidental, indirect or special damages, an amount (plus interest to the date of payment) equal to any profits derived by the Contributing Stockholder as a result of its Breach of Section 5.4; it being expressly understood that nothing in this Section 9.11 is intended to limit the ability of the Company to recover as a result of a Breach of Section 5.4 any general or mitigation damages which are not consequential, incidental, indirect or special

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damages. For purposes of this Section 9.11, “profits” shall mean revenues minus direct cost to revenues.

(c)  The Contributing Stockholder hereby irrevocably waives any defense based in whole or in part on any claim that the profits derived by the Contributing Stockholder as a result of any Breach of Section 5.4 are a speculative, inappropriate or impracticable measure of damages in connection with any Breach of Section 5.4. The Contributing Stockholder further agrees that if it undertakes any legal action or Proceeding in law or in equity to avoid or otherwise frustrate its obligation to pay to the Company the profits derived by the Contributing Stockholder as a result of any Breach of Section 5.4, the provisions of Section 9.11(a) shall terminate immediately and shall be null and void; it being expressly understood that the Contributing Stockholder shall not be deemed to have violated the provisions of this second sentence of Section 9.11(c) if it has in good faith contested (A) the occurrence of any Breach of Section 5.4, or (B) the actual amount of payments to be made pursuant to Section 9.11(b); it being further understood, that if the Contributing Stockholder does not prevail in such contested legal action or Proceeding in law or in equity, the Company shall be entitled to recover attorney’s fees as set forth in Section 10.3.

9.12     Contracts with Certain Payors.    Notwithstanding anything in this Agreement to the contrary, if within 18 months after the Closing Date, claims submitted by the Company to any Payor listed on Schedule 9.12 of the Contributing Stockholder Disclosure are not rejected by such Payor due to failure by the Contributing Stockholder to obtain a Consent required with respect to such Payor, then any such Consent will be deemed to have been successfully obtained by the Contributing Stockholder, and the remedies set forth in this Article 9 afforded to the Company with respect to the failure to obtain Consent with respect to such Payor shall no longer be available; provided, however that the provisions of this Section 9.12 shall not apply with respect to any Payor listed on Schedule 9.12 of the Contributing Stockholder Disclosure if the Contributing Stockholder has not delivered prior to the Effective Time to such Payor a written notice of assignment reasonably satisfactory in form and substance to the Company; it being expressly understood that if any Payor listed on Schedule 9.12 of the Contributing Stockholder Disclosure shall reject any claims submitted by the Company within 18 months of the Closing Date due to the failure of a required Consent to be obtained with respect to such Payor, the Company shall be entitled to the remedies set forth in Section 9.7(a) of this Agreement.

10.     MISCELLANEOUS PROVISIONS.

10.1     Further Assurances.    Unless this Agreement is terminated pursuant to Section 8 hereof, each party hereto shall execute and/or cause to be delivered to each other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request (prior to, at or after the Closing) to give effect to the terms and conditions set forth in the Transactional Agreements.

10.2    Fees and Expenses; Investment Banking Fees.

(a)  Each party to this Agreement shall bear and pay all fees, costs and expenses (including all legal fees and expenses) that have been incurred or that are in the future incurred by, on behalf of or for the benefit of such party in connection with: (i) the negotiation,

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preparation and review of any letter of intent or similar document relating to any of the Transactions; (ii) the investigation and review conducted by such party and its Representatives with respect to the Transactions; (iii) the negotiation, preparation and review of this Agreement, the other Transactional Agreements and all bills of sale, assignments, certificates, opinions and other instruments and documents delivered or to be delivered in connection with the Transactions; (iv) the preparation and submission of any filing or notice required to be made or given in connection with any of the Transactions, and the obtaining of any Consent required to be obtained in connection with any of the Transactions; and (v) the consummation and performance of the Transactions.

(b)  Notwithstanding anything to the contrary contained elsewhere in this Agreement, and regardless of whether or not the Closing takes place, the Contributing Stockholder and the Company shall each bear and pay 50% of the amount of any filing fee payable under the HSR Act in connection with the Transactions.

(c)  Notwithstanding anything to the contrary contained elsewhere in this Agreement, and regardless of whether or not the Closing takes place, each party to this agreement shall pay its own investment banking, broker or finder fees incurred in connection with the Transactions.

10.3     Attorneys’ Fees.    If any legal action or other legal proceeding relating to any of the Transactional Agreements or the enforcement of any provision of any of the Transactional Agreements is brought against any party to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

10.4     Notices.    Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto):

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if to the Contributing Stockholder:

NATIONAL DATA CORPORATION

NDC Plaza

Atlanta, GA 30329-2012

Attention: Randy Hutto, Chief Financial Officer

Telephone: (404) 728-2265

Facsimile: (404) 728-2780

With a copy (which copy shall not constitute notice) to:

Stephen E. Lewis, Esq.

Troutman Sanders LLP

600 Peachtree Street, Suite 5201

Atlanta, Georgia 30308-2216

Telephone: (404) 885-3000

Facsimile: (404) 962-6616

if to the Company:

MEDUNITE INC.

4445 Eastgate Mall, 2^nd Floor

San Diego, CA 92121

Attention: David Cox

Telephone: (858) 812-2059

Facsimile: (858) 812-3309

With a copy (which copy shall not constitute notice) to:

Barbara Borden, Esq.

Cooley Godward LLP

4365 Executive Drive, Suite 1100

San Diego, California 92121-2128

Telephone: (858) 550-6000

Facsimile: (858) 453-3555

10.5     Time Of The Essence.    Time is of the essence in the performance of this Agreement.

10.6     Headings.    The headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

10.7     Counterparts.    This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.

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10.8      Governing Law; Venue.

(a)  This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of California) without giving effect to principles of conflicts of laws).

(b) Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in any state or federal court located in the County of San Diego, California or the metropolitan area of Atlanta, Georgia. Each party to this Agreement:

(i)      expressly and irrevocably consents and submits to the jurisdiction of each state and federal court located in the County of San Diego, California or the City of Atlanta, Georgia (and each appellate court located in the State of California or the State of Georgia) in connection with any such legal proceeding;

(ii)    agrees that each state and federal court located in the County of San Diego, California or the metropolitan area of Atlanta, Georgia shall be deemed to be a convenient forum; and

(iii)   agrees not to assert (by way of motion, as a defense or otherwise), in any such legal proceeding commenced in any state or federal court located in the County of San Diego, California or the metropolitan area of Atlanta, Georgia, any claim that such party is not subject personally to the jurisdiction of such court, that such legal proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced in or by such court.

10.9      Successors And Assigns; Parties In Interest.

(a)   This Agreement shall be binding upon: the Contributing Stockholder and its successors and assigns (if any); and the Company and its successors and assigns (if any). This Agreement shall inure to the benefit of: the Contributing Stockholder; the Company; the other Indemnitees (subject to Section 9.6); and the respective successors and assigns (if any) of the foregoing.

(b)   Prior to the Effective Time, neither Party shall assign or delegate this Agreement, in whole or in part, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or unduly delayed. After the Effective Time, either party may assign this Agreement, provided, however, that such assignment shall not relieve the assigning party from any of its liabilities or obligations under this Agreement. For purposes hereof, any sale or transfer (whether structured as a sale of stock, merger, joint venture or otherwise) of an equity interest in either Party greater than or equal to fifty percent (50%) individually or in the aggregate, shall be deemed an assignment for which the other Party’s consent is required. Any purported assignment in violation of this Section 10.9 shall be null and void.

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(c)  Except for the provisions of Section 9 and Section 5.11 hereof, none of the provisions of this Agreement is intended to provide any rights or remedies to any Person other than the parties to this Agreement and their respective successors and assigns (if any); it being expressly understood that the Founders shall be intended third-party beneficiaries with respect to the provisions of Section 5.11. Without limiting the generality of the foregoing, (i) no employee of the Contributing Stockholder or the Company shall have any rights under this Agreement or under any of the other Transactional Agreements, and (ii) no creditor of the Contributing Stockholder or the Company shall have any rights under this Agreement or any of the other Transactional Agreements.

10.10     Remedies Cumulative; Specific Performance.  The rights and remedies of the parties hereto shall be cumulative and not alternative. The parties hereto agree that: (a) in the event of any Breach or threatened Breach by any party hereto of Section 5.4, Section 5.5, Section 5.6, Section 5.7(d), Section 5.7(e), Section 5.9 and Section 9.11, the other party shall be entitled (in addition to any other remedy that may be available to it) to (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (ii) an injunction restraining such Breach or threatened Breach; and (b) neither such other party nor any other Indemnitee shall be required to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action or Proceeding.

10.11     Waiver.

(a)  No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

(b)   No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

10.12     Amendments.    This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of the Company and the Contributing Stockholder.

10.13     Severability.    In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.

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10.14     Entire Agreement.    The Transactional Agreements and the Mutual Non-Disclosure Agreement between the Contributing Stockholder and the Company, dated as of August 8, 1998, as amended on December 7, 2000 (which shall continue in existence and not be affected by the execution of this Agreement or the Closing), set forth the entire understanding of the parties relating to the subject matter thereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter thereof.

10.15     Construction.

(a)  For purposes of this Agreement, including the Exhibits hereto, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders.

(b)  The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(c)  As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d)  Except as otherwise indicated, all references in this Agreement to “Sections” and “Exhibits” are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

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The parties to this Agreement have caused this Agreement to be executed and delivered as of June , 2001.

NATIONAL DATA CORPORATION,      a Delaware corporation
By:
	Name: Randy Hutto
	Title: Chief Financial Officer

MEDUNITE INC.,     a Delaware corporation
By:
	Name: David Cox
	Title: Chief Executive Officer

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EXHIBIT A

CERTAIN DEFINITIONS

For purposes of the Agreement (including this Exhibit A):

Acquisition Transaction.    “Acquisition Transaction” shall mean any transaction involving: (a) the sale or other disposition of all or substantially all of the business or assets of the Contributing Stockholder, or (b) any merger, consolidation, business combination, share exchange, tender offer reorganization or similar transaction involving the Contributing Stockholder in which (A) the Contributing Stockholder is the constituent corporation or (B) a Person or “group” (as defined in the Securities Exchange Act of 1934 and the regulations thereunder) of Persons directly or indirectly acquires or seeks to acquire beneficial or record ownership of securities representing more than 20% of the outstanding securities of any class of voting securities of the Contributing Stockholder.

Affiliate.    “Affiliate” shall mean with respect to any Person, any other Person controlling, controlled by or within common control with such Person.

Agreement.    “Agreement” shall mean the Asset Contribution Agreement to which this Exhibit A is attached (including any Disclosure Schedule and Disclosure Schedule Update), as it may be amended from time to time.

Amended and Restated Certificate.    “Amended and Restated Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of the Company in the form of Annex 5.

Asset.    “Asset” shall mean any item regularly included in the computation of the asset column of a balance sheet prepared in accordance with GAAP, any Contract, Proprietary Asset, third-party licensed Proprietary Asset, real property lease, personal property lease or any other tangible or intangible asset or item of property whether or not such asset or item of property could reasonably be assigned any value by another Person.

Books and Records.    “Books and Records” shall mean:

(a)  All books, records, documents, files and papers of the Contributing Stockholder necessary for the conduct of the Contributed Business, whether in hard copy or electronic format, in the possession or control of the Contributing Stockholder or its Affiliates at the Effective Time including all customer files, customer account records, production data, equipment maintenance data, accounting records, inventory records, sales and sales promotional data, advertising materials, customer lists, cost and pricing information, supplier lists, business plans, reference catalogs and any other similar records, in each case, necessary for the conduct of the Contributed Business;

(b)  Copies of (1) all Tax records and Tax Returns to the extent related to the Contributed Business, (2) the personnel files of Transferred Employees and (3) the legal,

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financial and accounting records to the extent related to the Contributed Business of which the Contributing Stockholder or any of its Affiliates is required to retain originals under any Legal Requirement.

Breach.    There shall be deemed to be a “Breach” of a representation, warranty, covenant, obligation or other provision if there is or has been any inaccuracy in or breach (including any inadvertent or innocent breach) of, or any failure (including any inadvertent failure) to comply with or perform, such representation, warranty, covenant, obligation or other provision; and the term “Breach” shall be deemed to refer to any such inaccuracy, breach or failure.

CERCLA.    “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act.

Change in Control.    “Change in Control” shall mean (i) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own 50% or less of the combined entity’s voting power immediately after such consolidation, merger or reorganization, or (ii) any transaction or series of related transactions to which the Company is a party in which at least 50% of the Company’s voting power is transferred, or (iii) the filing by the Company of a Proceeding under Chapter 7 of the United States Bankruptcy Code (11 U.S.C.A. Section 701 et seq.) if and only if such filing is not withdrawn within 60 days of the initial filing date.

Code.    “Code” shall mean the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder.

Company Disclosure Schedule.    “Company Disclosure Schedule” shall mean the schedule (dated as of the date of this Agreement) delivered to the Contributing Stockholder, a copy of which is attached to this Agreement and incorporated in the Agreement by reference.

Company Contract.    “Company Contract” shall mean any Contract: (a) to which the Company is a party; (b) by which the Company or any of its assets is or may become bound or under which the Company has, or may become subject to, any obligation; or (c) under which the Company has or may acquire any right or interest.

Company Indemnitees.    “Company Indemnitees” shall mean the following Persons: (a) the Company; (b) the Company’s current and future Affiliates; (c) the respective Representatives of the Persons referred to in clauses “(a)” and “(b)” above; and (d) the respective successors and assigns of the Persons referred to in clauses “(a)”, “(b)” and “(c)” above.

Confidential Information.    “Confidential Information” shall mean information related to processes, product development, price, customer support and customer lists, pricing, marketing plans, policies and strategies, operational methods, product development techniques, business plans and other confidential and non-public information.

Consent.    “Consent” shall mean any approval, consent, ratification, permission, waiver, authorization, filing, registration or notification (including any Governmental Authorization).

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Contract.    “Contract” shall mean any written, oral, implied or other agreement, contract, understanding, arrangement, instrument, note, guaranty, indemnity, warranty, deed, assignment, certificate, purchase order, work order, commitment, covenant, assurance or undertaking of any nature.

Contributed Business.    “Contributed Business” shall mean the physician real-time and batch intelligent clearinghouse network supporting office-based physician EDI as currently conducted by the Contributing Stockholder and which supports the gross revenues provided in the Contributed Business Pro Forma Financial Statements, including all operations of the Contributing Stockholder conducted in and through its computer network data center located in Norcross, Georgia.

Contributed Business Contracts shall mean any Contributing Stockholder Contract (1) included in the Contributed Assets or (2) required for the Contributing Stockholder’s performance of it obligations under any of the Transaction Documents.

Contributed Business Proprietary Assets shall mean the Contributing Stockholder Proprietary Assets which are (1) included in the Contributed Assets or (2) required for the Contributing Stockholder’s performance of its obligations under any of the Transactional Agreements.

Contributing Stockholder Contract.    “Contributing Stockholder Contract” shall mean any Contract: (a) to which the Contributing Stockholder is a party; (b) by which the Contributing Stockholder or any of its assets is or may become bound or under which the Contributing Stockholder has, or may become subject to, any obligation; or (c) under which the Contributing Stockholder has or may acquire any right or interest.

Contributing Stockholder Disclosure Schedule.    “Contributing Stockholder Disclosure Schedule” shall mean the schedule (dated as of the date of the Agreement) delivered to the Company on behalf of the Contributing Stockholder, a copy of which is attached to the Agreement and incorporated in the Agreement by reference, it being expressly understood that each of Exhibit B-1 and Exhibit B-2 shall be deemed part of the Contributing Stockholder Disclosure Schedule.

Contributing Stockholder Employee Benefit Plans.    “Contributing Stockholder Employee Benefit Plans” shall mean all Employee Benefit Plans listed or required to be listed on Part 2.20 of the Contributing Stockholder Disclosure Schedule.

Contributing Stockholder Indemnitees.    “Contributing Stockholder Indemnitees” shall mean the following Persons: (a) the Contributing Stockholder; (b) the Contributing Stockholder’s current and future Affiliates; (c) the respective Representatives of the Persons referred to in clauses “(a)” and “(b)” above; and (d) the respective successors and assigns of the Persons referred to in clauses “(a)”, “(b)” and “(c)” above.

Contributing Stockholder Proprietary Asset.    “Contributing Stockholder Proprietary Asset” shall mean any Proprietary Asset owned by or licensed to the Contributing Stockholder or otherwise used by the Contributing Stockholder.

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Conversion Shares.    “Conversion Shares” shall mean the shares of Class B Common Stock issuable upon conversion of the Shares and shares of Class A Common Stock issuable upon conversion of the Class B Common Stock.

Copyright.    “Copyright” shall mean any registered or unregistered copyright in both published and unpublished works, any rights in maskwork and any application for any of the foregoing.

Damages.    “Damages” shall include any loss, damage, injury, decline in value, lost opportunity, Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including any legal fee, expert fee, accounting fee or advisory fee), charge, cost (including any cost of investigation) or expense of any nature.

Direct Claim Products.    “Direct Claim Products” shall mean software products sold by the Contributing Stockholder that enable the purchaser to transmit claims directly to (i) a Payor; or (ii) a vendor to whom a Payor has outsourced the function of receiving claims on behalf of such Payor; or (iii) a fiscal intermediary for Medicare or Medicaid; so long as the Contributing Stockholder or an NDC POMIS is not serving as a connectivity switch, hub, or clearinghouse for any transaction listed on Exhibit E, and further provided that the Contributing Stockholder derives no transaction-based revenues related to transactions submitted through or originating from any Direct Claim Product. Direct Claim Products may also include the functionality to receive and post electronic remittance advice directly from Payors or their intermediaries.

Employee Benefit Plan.    “Employee Benefit Plan” shall have the meaning specified in Section 3(3) of ERISA.

Encumbrance.    “Encumbrance” shall mean any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, equity, trust, equitable interest, claim, preference, right of possession, lease, tenancy, license, encroachment, covenant, infringement, interference, Order, proxy, option, right of first refusal, preemptive right, community property interest, legend, defect, impediment, exception, reservation, limitation, impairment, imperfection of title, condition or restriction of any nature (including any restriction on the transfer of any asset, any restriction on the receipt of any income derived from any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

Entity.    “Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, cooperative, foundation, society, political party, union, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

Environmental Laws.    “Environmental Laws” shall mean any federal, state and local laws, rules, regulations, ordinances and codes, together with all administrative orders, licenses, authorizations and permits of, and agreements with, any Governmental Authority, now or hereafter in effect relating to pollution or protection of the environment (including, without limitation, ambient air, surface water, ground water and land), health, safety and land use matters, including laws relating to emissions, discharges, releases or threatened releases of

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pollutants, Hazardous Materials, chemicals or industrial, toxic or hazardous substances or wastes into the environment or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, removal, transport or handling of pollutants, Hazardous Materials, chemicals or industrial, toxic or hazardous substances or wastes.

Equity Consideration.    “Equity Consideration” shall mean the Shares.

Equity Securities.    “Equity Securities” shall mean the Shares and the Conversion Shares.

ERISA.    “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate.    “ERISA Affiliate” shall mean any Person that is, was or would be treated as a single employer with any of the Specified Entities under Section 414 of the Code.

Founders.    “Founders” shall mean each of Aetna U.S. Healthcare, Inc., CIGNA Health Corporation, Health Net, Inc. (formerly Foundation Health Systems, Inc.), Oxford Health Plans, Inc., Anthem Insurance Companies, Inc., PacifiCare Health Systems, Inc. and WellPoint Health Networks, Inc.

GAAP.    “GAAP” shall mean generally accepted accounting principles consistently applied over the relevant period.

Governmental Authorization.    “Governmental Authorization” shall mean any: (a) permit, license, certificate, franchise, concession, approval, consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement, except for any local business license for the conduct of business in the Ordinary Course of Business; or (b) right of a Governmental Body under any Contract with any Governmental Body.

Governmental Body.    “Governmental Body” shall mean any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Entity and any court or other tribunal); (d) multi-national organization or body; or (e) individual, Entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.

Hazardous Material.    “Hazardous Material” shall include: (a) any petroleum, waste oil, crude oil, asbestos, urea formaldehyde or polychlorinated biphenyl; (b) any waste, gas or other substance or material that is explosive or radioactive; (c) any “hazardous substance,” “pollutant,” “contaminant,” “hazardous waste,” “regulated substance,” “hazardous chemical” or “toxic chemical” as designated, listed or defined (whether expressly or by reference) in any Environmental Law (including CERCLA and any other so-called “superfund” or “superlien” law

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and the respective regulations promulgated thereunder); (d) any other substance or material (regardless of physical form) or form of energy that is subject to any Environmental Law; and (e) any compound, mixture, solution, product or other substance or material that contains any substance or material referred to in clause “(a)”, “(b)”, “(c)” or “(d)” above.

HIPAA.    “HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996 and the regulations promulgated thereunder.

Hospital.    “Hospital” shall mean any healthcare facility within the United States of America, and its territories and possessions (and/or each parent company of the foregoing, or the contracting entity of the foregoing, but solely insofar as such contracting entity’s contracts cover services to a hospital), that: (i) is licensed as a hospital under applicable law; and, (ii) provides in-patient services (and, in addition, may provide out-patient services) to patients as a routine component of such facility’s overall service offering.

Hospital Marketing Agreement.    “Hospital Marketing Agreement” shall mean the Hospital Marketing Agreement between the Company and the Contributing Stockholder substantially in the form of Exhibit J-2.

Indemnitees.    “Indemnitees” shall mean the Contributing Stockholder Indemnitees and the Company Indemnitees.

Individually and in the aggregate.    “individually and in the aggregate” when used in this Agreement with respect to representations and warranties shall mean individually, in the case of a given representation or warranty, and in the aggregate, with respect to all representations or warranties contained in this Agreement without regard to any headings, sections or subsections.

Knowledge.    An individual shall be deemed to have “Knowledge” of a particular fact or other matter if:

(a)  such individual is actually aware of such fact or other matter; or

(b)  a prudent individual would be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably diligent investigation based on the records kept in the ordinary course of business within the area of his or her function and responsibility.

Each of the Company or the Contributing Stockholder shall be deemed to have “Knowledge” of a particular fact or other matter if any of the following individuals has Knowledge of such fact or other matter: (i) in the case of the Contributing Stockholder, Walter Hoff, Randy Hutto, James Campbell, David Turner, Robert Strickland, Robert Engel, Steve Owens, Roy Price, Carol Arms only to the extent of Section 2.4, Beverly Coleman only to the extent of Sections 2.19 and 2.20, Patricia Wilson and Jim Dicello, and (ii) in the case of the Company, David Cox, John Fessler, Pierre Towns, Tim Rich and Lee Root.

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Legal Requirement.    “Legal Requirement” shall mean any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement, specification, determination, decision, opinion or interpretation issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Body.

Liability.    “Liability” shall mean any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with generally accepted accounting principles and regardless of whether such debt, obligation, duty or liability is immediately due and payable.

Marketing Agreements.    “Marketing Agreements” shall mean the Physician Services Reseller Agreement and the Hospital Marketing Agreement.

NDC POMIS.    “NDC POMIS” shall mean a physician office management information system that is now or in the future offered, sold, or marketed by the Contributing Stockholder to provide practice management functions (whether turnkey, timeshared, Internet-based, Application Service Provider (“ASP”)-based, or otherwise). As of the Effective Time, the following are the NDC POMIS offerings: Lytec, Medisoft, and Concept Practice Management.

NDC POMIS Customer.    “NDC POMIS Customer” shall mean any active user of any NDC POMIS that is (i) under contract with the Contributing Stockholder as a POMIS customer as of the Effective Time; or, (ii) becomes under contract with the Contributing Stockholder as an NDC POMIS Customer subsequent to the Effective Time, including, without limitation, any pre-existing customer of any POMIS that becomes an NDC POMIS after the Effective Time, provided that such pre-existing customer shall not become an NDC POMIS Customer until such POMIS becomes an NDC POMIS.

Norcross Property.    “Norcross Property” shall mean the real property in Norcross, Georgia subject to the Sublease.

Order.    “Order” shall mean any: (a) order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, subpoena, writ or award issued, made, entered, rendered or otherwise put into effect by or under the authority of any court, administrative agency or other Governmental Body or any arbitrator or arbitration panel; or (b) Contract with any Governmental Body entered into in connection with any Proceeding.

Ordinary Course of Business.  An action taken by or on behalf of the Contributing Stockholder shall not be deemed to have been taken in the “Ordinary Course of Business” unless:

(a)  such action is recurring in nature, is consistent with the past practices of the Contributing Stockholder in the conduct of the Contributed Business or is taken in the ordinary course of the normal day-to-day operations of the Contributed Business; and

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(b)  such action is not required to be authorized by the shareholders of the Contributing Stockholder.

Other Properties.    “Other Properties” shall mean the real properties in Virginia and Texas leased by the Contributing Stockholder pursuant to the real property leases included in the Contributed Assets.

Outsourcing Agreements.    “Outsourcing Agreements” shall mean the MASS REVs Support Service Agreement substantially in the form of Exhibit I-1, the Tandem Outsourcing Agreement substantially in the form of Exhibit I-2, and the Stratus Outsourcing Agreement substantially in the form of Exhibit I-3.

Patent.    “Patent” shall mean any patent or patent application.

Payor.    “Payor” shall mean any of the following entities located in the United States of America, and its territories and possessions: (i) any health maintenance organization, health insurance carrier, or other commercial payor of health care expenses; or, (ii) any Medicare, Medicaid and BlueCross/Blue Shield entity.

Permitted Encumbrance.    “Permitted Encumbrance” shall mean (i) any easement of record affecting real property that does not adversely affect the full enjoyment of such real property for the purpose of which it is currently used by the Contributing Stockholder, (ii) any Encumbrance for Taxes not yet due and payable to the extent such Taxes are an Excluded Liability, and (iii) any Encumbrance with respect to leased equipment that exists under the express terms of any equipment lease included in the Contributed Assets.

Person.    “Person” shall mean any individual, Entity or Governmental Body.

Physician.    “Physician” means any person, or group of persons (including, without limitation, clinics), providing healthcare services to individuals in the United States of America, and its territories and possessions and is: (i) licensed as a physician, or whose partners, members, or professional employees are licensed as physicians, under applicable law; or, (ii) working as a physician extender, physician assistant, nurse or nurse extender. Physician does not include any such person, group, or clinic whose claims are submitted by a Hospital.

Physician Services Reseller Agreement.    “Physician Services Reseller Agreement” shall mean the Office-Based Physician Services Reseller Agreement between the Company and the Contributing Stockholder substantially in the form of Exhibit J-1.

POMIS.    “POMIS” shall mean a physician office management information system.

Pre-Closing Period.    “Pre-Closing Period” shall mean the period from the date of the Agreement through the Effective Time.

Proceeding.    “Proceeding” shall mean any claim, action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation commenced,

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brought, conducted or heard by or before, or otherwise involving, any Governmental Body or any arbitrator or arbitration panel.

Promissory Note.    “Promissory Note” shall mean an unsecured promissory note for the principal amount of $2.3 million substantially in the form of Annex 6.

Proprietary Asset.    “Proprietary Asset” shall mean any Patent, Trademark, Copyright, trade secret, know-how, customer list, franchise, system, computer software, invention, design, blueprint, engineering drawing, proprietary product, technology, proprietary right or other intellectual property right or intangible asset.

Registration Rights Agreement.    “Registration Rights Agreement” shall mean that certain Registration Rights Agreement, dated as of the Closing Date between the Company and the Founders in substantially the form of Annex 1.

Related Agreements.    “Related Agreements” shall mean the Stockholders Agreement, the Voting Agreement, the Registration Rights Agreement and the Series A Preferred Stock Purchase Agreement.

Related Party.    Each of the following shall be deemed to be a “Related Party”: (a) each individual who is, or who has at any time been, an officer, director or 50% partner of the Contributing Stockholder; (b) each member of the immediate family of each of the individuals referred to in clause “(a)” above; and (c) any Entity (other than the Contributing Stockholder) in which any one of the individuals referred to in clauses “(a)” and “(b)” above holds or held (or in which more than one of such individuals collectively hold or held), beneficially or otherwise, a controlling interest or a material voting, proprietary or equity interest.

Replacement Cost.    “Replacement Cost” shall mean, with respect to any Asset or service, the amount of Damages associated with replacing the use and functionality of such Asset or service in the Contributed Business as operated by the Company after the Effective Time; provided, however, that if the expense incurred historically by the Contributing Stockholder to maintain any Asset or service on an annual basis (excluding any amortization or depreciation expense) as reflected in the Contributed Business Pro Forma Financial Statements is an Assumed Liability, then the amount of Damages associated with replacing the use and functionality of such Asset or service will be reduced by the amount of such expense.

Representatives.    “Representatives” shall mean officers, directors, employees, agents, attorneys, accountants, advisors and representatives.

Restricted Names.    “Restricted Names” shall mean StatLink and EDILink and derivations or variations thereof.

Securities Act.    “Securities Act” shall mean the Securities Act of 1933, as amended, and the regulations promulgated thereunder.

Series A Preferred Stock Financing.    “Series A Preferred Stock Financing” shall mean the issuance of Series A Preferred Stock with an aggregate purchase price of at least $70 million,

A-9

including the conversion of bridge notes issued to the Founders, it being understood, that $10 million of the aggregate purchase price may be paid by one of the Founders within 60 days after the Closing Date.

Series A Preferred Stock Purchase Agreement.    “Series A Preferred Stock Purchase Agreement” shall mean that certain Amended and Restated Series A Preferred Stock Purchase Agreement, dated as of the Closing Date, between the Company, the Founders and the Contributing Stockholder in substantially the form of Annex 2.

Shares.    “Shares” means the number of shares of Series A Preferred Stock to be issued to the Contributing Stockholder hereunder, representing 17.9% of the Series A Preferred Stock of the Company issued and outstanding as of the Effective Time, after taking into account the issuance of shares of Series A Preferred Stock pursuant to the Series A Preferred Stock Purchase Agreement and the conversion of bridge notes issued to the Founders.

Software License Agreement.    “Software License Agreement” shall mean the Software License Agreement substantially in the form of Exhibit L.

Statement Processing Services Agreement.    “Statement Processing Services Agreement” shall mean the Statement Processing Services Agreement between the Company and the Contributing Stockholder substantially in the form of Exhibit H-3.

Stockholders’ Agreement.    “Stockholders Agreement” shall mean that certain Stockholders Agreement, dated as of the Closing Date between the Company, the Contributing Stockholder and the Founders in substantially the form of Annex 3.

Sublease.    “Sublease” shall mean the sublease for the Norcross facility substantially in the form of Exhibit K.

Subsidiary.    “Subsidiary” shall mean with respect to any Person, any other Person (a) of which the initial Person directly or indirectly owns or controls more than 50% of the voting equity interests or has the power to elect or direct the election of a majority of the members of the governing body of such Person or to direct the management and policies of such Person, (b) which is required to be consolidated with such Person under GAAP, (c) which is required to be accounted for by such Person under the equity method of accounting under GAAP, or (d) with whom such Person is engaged in a 50/50 joint venture, partnership or similar enterprise.

Tax.    “Tax” shall mean any tax (including any income tax, franchise tax, capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll tax), levy, assessment, tariff, impost, imposition, toll, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty or interest), that is, has been or may in the future be (a) imposed, assessed or collected by or under the authority of any Governmental Body, or (b) payable pursuant to any tax-sharing agreement or similar Contract.

A-10

Tax Return.    “Tax Return” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information that is, has been or may in the future be filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

Trade Secrets.    “Trade Secrets” shall mean the “trade secrets” of a Party as defined under applicable Legal Requirements, including, without limitation, such Party’s business processes and know-how.

Transactional Agreements.    “Transactional Agreements” shall mean: (a) this Agreement; (b) the Transition Services Agreement; (c) the Sublease; (d) the Assumption Agreement, (e) the Outsourcing Agreements, (f) the Company Transition Services Agreement, (g) the Software License Agreement, (h) the Statement Processing Services Agreement and (i) the transfer documents contemplated by Section 1.4(b)(i).

Trademarks.    “Trademarks” shall mean all assumed fictitious business names, trade names, registered and unregistered trademarks (whether or not related to a published work), registered or unregistered service marks and applications for any of the foregoing.

Transactions.    “Transactions” shall mean (a) the execution and delivery of the respective Transactional Agreements, and (b) all of the transactions contemplated by the respective Transactional Agreements, including: (i) the contribution of the Contributed Assets by the Contributing Stockholder to the Company in accordance with the Agreement and the issuance to the Contributing Stockholder of the Equity Consideration and the Promissory Note; (ii) the assumption of the Assumed Liabilities by the Company pursuant to the Assumption Agreement; and (iii) the performance by the Contributing Stockholder and the Company of their respective obligations under the Transactional Agreements, and the exercise by the Contributing Stockholder and the Company of their respective rights under the Transactional Agreements.

Transferred Employees.    “Transferred Employees” shall mean all Business Employees who have accepted, and not since revoked, employment with the Company as of the Effective Time.

Transition Services Agreement.    “Transition Services Agreement” shall mean the Transition Services Agreement between the Company and the Contributing Stockholder substantially in the form of Exhibit H-1.

Company Transition Services Agreement.    “Company Transition Services Agreement” shall mean the Company Transition Services Agreement between the Company and the Contributing Stockholder substantially in the form of Exhibit H-2.

Vendor.    “Vendor” shall mean those parties to the Contributed Business Contracts listed on Schedule 1.1(a)-6 “Vendor and Alliance Agreements.”

A-11

Voting Agreement.    “Voting Agreement” shall mean that certain Voting Agreement, dated as of the Closing Date among the Founders and the Contributing Stockholder in substantially the form of Annex 4.

Written.    “written,” when used in this Agreement with respect to any notice, shall mean any written communication, including e-mail, facsimile or other communication reduced to writing in any medium.

Each of the following terms is defined in the respective section of this Agreement:

Defined Term	Section
Agreement	Preamble
Action Notice	9.8(e)
Assumption Agreement	1.2(a)
Assumed Liabilities	1.2(b)
Burdensome Conditions	5.1(c)
Business Employee	2.19(a)
Claim Notice	9.1(c)
Class A Common Stock	3.2
Class B Common Stock	3.2
Closing	1.4(a)
Closing Date	1.4(a)
COBRA	2.20(g)
Common Stock	3.2
Company	Preamble
Company Contract	3.14
Company Financial Statements	3.7(a)
Competing Transaction	5.3
Contributed Assets	1.1(a)
Contributed Business Pro-Forma Financial Statements	2.4
Contributing Stockholder	Preamble
Contributing Stockholder Indemnity Cap	9.2(c)
Decline Notice	9.8(e)
Disclosure Schedule Update	5.10(a)
Excluded Assets	1.1(b)
Effective Time	1.4(a)
Employee Benefit Plan Liabilities	2.20(e)
Equitable Adverse Claim	9.5(b)
Grandfathered Holdings	5.4(c)
HSR Act	5.1(b)
Mitigating Service Period	9.8(b)
Monetary Adverse Claim	9.5(a)
Permitted Holdings	5.4(c)
Physician	5.4

A-12

Defined Term	Section
P&L Liability	9.10(b)
Replacement Asset	9.8(c)
Replacement Cost Demand	9.7(c)
Report	2.7(b)
Restricted Business	5.4
Review Period	9.8(e)
Series A Preferred Stock	3.2
Substitute Arrangement	9.8(d)
Substitute Service	9.8(b)
Survival Period	9.1(b)
Termination Date	8.1(c)
Transition Business Employee	2.19(i)
WARN Act	2.19(g)

A-13

EX-21

Exhibit 21

Subsidiaries of the Registrant

The Registrant had the following subsidiaries each of which was wholly owned by the Registrant, except as noted below:

Name	Jurisdiction of Incorporation
The Computer Place, Inc.	Arizona
NDC Health Information Services (Arizona) Inc.	Delaware
Physerv Solutions, Inc.	Delaware
HealthTran LLC (Note 1)	Delaware
NDCHealth Intellectual Property Corp.	Delaware
HISIP Corp.	Delaware
NDCIP, Inc.	Delaware
NDCHealth Licensing, Inc.	Delaware
NDC of Canada, Inc.	Delaware
TechRx Canada Corporation (Note 2)	Delaware
NDC Acquisition Corp.	Delaware
Computerized Medical Communications, Inc	Illinois
TechRx Incorporated (Note 2)	Pennsylvania
National Data Corporation of Canada	Canada
TechRx Canada ULC (Note 2)	Canada
NDC Health Holding GmbH	Germany
NDC Health GmbH and Co. KG (Note 3)	Germany
NDC Health Management GmbH (Note 4)	Germany
NDC Health Holdings UK Limited	United Kingdom
NDC Health Limited	United Kingdom

Note 1. HealthTran LLC is 49.5% owned by the Registrant.

Note 2. TechRx Incorporated and its subsidiaries are 63% owned by the Registrant.

Note 3. NDC Health GmbH and Co. KG is 51% owned by the Registrant.

Note 4. NDC Health Management GmbH is 51% owned by the Registrant.

EX-23.I

Exhibit 23 (i)

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements on Form S-8 Nos. 33-55057, 333-05449, 333-05427 and 333-50474 of our report dated July 23, 2002, except for Note 19, as to which the date is August 19, 2002, with respect to the consolidated financial statements and schedule of NDCHealth Corporation included in the Annual Report (Form 10-K) for the year ended May 31, 2002.

/S/    Ernst & Young LLP

Atlanta, Georgia

August 23, 2002

EX-23.II

Exhibit 23 (ii)

NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP

Section 11(a) of the Securities Act of 1933, as amended (the “Securities Act”) provides that if part of a registration statement at the time it becomes effective contains an untrue statement of a material fact, or omits a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may assert a claim against, among others, an accountant who has consented to be named as having certified any part of the registration statement or as having prepared any report for use in connection with the registration statement.

On March 27, 2002, NDCHealth Corporation dismissed Arthur Andersen LLP as its independent auditors. Prior to the date of this Form 10-K, the Arthur Andersen Atlanta, Georgia office closed and did not renew their license to practice. As a result, after reasonable efforts, we have not been able to obtain a consent related to the Arthur Andersen opinion for the fiscal years ended May 31, 2001, 2000 and 1999. Therefore, we have been unable to obtain Arthur Andersen’s written consent to the incorporation by reference into the Company’s previously filed Registration Statements, File Numbers 33-55057, 333-05449, 333-05427, and 333-50474 of Arthur Andersen’s audit report for the National Data Corporation financial statements for the fiscal years ended May 31, 2001, 2000 and 1999. Under these circumstances, Rule 437a under the Securities Act permits the Company to file this Form 10-K, which is incorporated by reference in the Registration Statements on Form S-8 Nos. 33-55057, 333-05449, 333-05427 and 333-50474, without a written consent from Arthur Andersen. However, as a result, Arthur Andersen will not have any liability under Section 11(a) of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen or any omissions of a material fact required to be stated therein. Accordingly, you would not be able to assert a claim against Arthur Andersen under Section 11(a) of the Securities Act.

EX-99.I

Exhibit 99 (i)

Consolidated Statement of Operations (Unaudited)

NDCHealth (GAAP)

(in thousands)

	FY000			FY01															FY02
	YTD			Qtr 1			Qtr 2			Qtr 3			Qtr 4			YTD			Qtr 1			Qtr 2			Qtr 3			Qtr 4			YTD
Revenues:
Information Management	$	131,229		$	31,109		$	33,412		$	34,905		$	37,190		$	136,616		$	34,186		$	37,097		$	38,943		$	40,173		$	150,399
Network Services and Systems		139,626			41,972			42,098			45,018			46,927			176,015			46,014			48,059			50,218			54,331			198,622
Divested Businesses		74,818			10,345			5,023			4,731			4,322			24,421			3,956			297			107			—			4,360
		345,673			83,426			80,533			84,654			88,439			337,052			84,156			85,453			89,268			94,504			353,381
Operating expenses:
Cost of service		181,001			41,808			39,904			43,515			43,464			168,691			39,094			43,852			44,410			47,588			174,944
Sales, general and administrative		86,062			20,134			18,385			18,653			20,468			77,640			20,986			17,262			19,344			19,369			76,961
Depreciation and amortization		31,834			8,213			8,683			8,686			9,163			34,745			6,581			5,897			5,948			5,948			24,374
Non-recurring charges		34,393			—			2,156			—			—			2,156			—			—			—			—			—
		333,290			70,155			69,128			70,854			73,095			283,232			66,661			67,011			69,702			72,905			276,279
Operating income		12,383			13,271			11,405			13,800			15,344			53,820			17,495			18,442			19,566			21,599			77,102
Other income/(expense)		(11,721	)		(1,942	)		(1,781	)		(1,112	)		(8,264	)		(13,099	)		(1,643	)		(1,234	)		(1,459	)		(42,715	)		(47,051	)
IBITELDO—Information Management		17,728			3,434			4,624			5,122			5,045			18,225			4,527			6,132			6,903			7,753			25,315
IBITELDO—Network Services and Systems		24,832			7,428			7,121			7,345			9,174			31,068			11,390			11,394			21,391			12,131			46,306
IBITELDO—Other		(41,898	)		467			(2,121	)		221			(7,139	)		(8,572	)		(65	)		(318	)		(187	)		(41,000	)		(41,570	)
Income before income taxes, equity in losses of affiliated companies and discontinued operations—NDC Health		662			11,329			9,624			12,688			7,080			40,721			15,852			17,208			18,107			(21,116	)		30,051
Income Taxes		1,825			4,362			3,781			4,885			2,725			15,753			5,707			6,195			6,518			(5,543	)		12,877
Income before equity in losses of affiliated companies and discontinued operations		(1,163	)		6,967			5,843			7,803			4,355			24,968			10,145			11,013			11,589			(15,573	)		17,174
Equity in losses of affiliated companies, net of taxes		—			(66	)		(139	)		(247	)		(299	)		(751	)		(1,114	)		(292	)		(344	)		(314	)		(2,064	)
Income before discontinued operations		(1,163	)		6,901			5,704			7,556			4,056			24,217			9,031			10,721			11,245			(15,887	)		15,110
Discontinued Operations, net of income taxes		(39,002	)		8,649			(326	)		—			—			8,323			—			—			—			—			—
Net Income	$	(40,165	)	$	15,560		$	5,378		$	7,556		$	4,056		$	32,540		$	9,031		$	10,721		$	11,245		$	(15,887	)	$	15,110
Basic Shares		33,232			32,778			32,889			32,992			33,970			33,009			33,937			34,066			34,135			34,260			34,087
Basic earnings per share	$	(1.21	)	$	0.47		$	0.16		$	0.23		$	0.12		$	0.99		$	0.27		$	0.31		$	0.33		$	(0.46	)	$	0.44
Diluted Shares		33,232			36,193			34,057			34,348			35,368			34,153			35,530			39,822			39,721			34,260			35,496
Diluted earnings per share	$	(1.21	)	$	0.46		$	0.16		$	0.22		$	0.11		$	0.95		$	0.25		$	0.30		$	0.31		$	(0.46	)	$	0.43

EX-99.II

Exhibit 99 (ii)

NDCHealth Corporation

Notes to reconcile (unaudited) historical GAAP results to (unaudited) historical normalized results.

As an indication of the historical performance of the continuing NDCHealth Corporation business, in Exhibit 99 (iii) to this report, we have provided certain financial information regarding NDCHealth, the stand-alone healthcare information business that remains after the spin-off of Global Payments Inc. The financial information presented in this exhibit has been “normalized” by adjusting for the following:

a)  Discontinued operations, net of tax, for all periods,

b)  Restructuring and impairment charges in the amount of $34.4 million and $2.2 million previously recorded in fiscal 2000 and the second quarter of fiscal 2001, respectively,

c)  Unusual expenses in the amount of $11.1 million previously recorded in fiscal 2000,

d)  Other income related to the gain from sale of marketable securities in the amount of $1.6 million previously recorded in fiscal 2000,

e)  Other income related to the gain on the divestiture of a business in the amount of $2.3 million previously recorded in fiscal 2000,

f)  Other expense related to the non-cash loss recorded to mark to market the Medscape, Inc. investment in the amounts of $9.7 million and $7.0 million previously recorded in fiscal 2000 and the fourth quarter of fiscal 2001, respectively.

g)  Incremental Sales, General and Administrative expenses associated with being a separate public company of approximately $2.3 million have been added to fiscal 2000. These expenses are estimates for the additional functionality needed for corporate activities such as legal, financial, human resources, communication and similar functions, and

h)  Revenue and operating expenses related to divested businesses, as follows:

1)  Fiscal 2000: Revenue $74.8 million; Operating Expenses $74.7 million; and Other Income $0.7 million.

2)  Quarter ended August 31, 2000: Revenue $10.3 million; and Operating expenses $9.9 million.

3)  Quarter ended November 30, 2000: Revenue $5.0 million; and Operating expenses $5.0 million.

4)  Quarter ended February 28, 2001: Revenue $4.7 million; and Operating expenses $4.5 million.

5)  Quarter ended May 31, 2001: Revenue $4.3 million; and Operating expenses $4.5 million.

6)  Quarter ended August 31, 2001: Revenue $4.0 million; and Operating expenses $4.0 million.

7)  Quarter ended November 30, 2001: Revenue $0.3 million; and Operating expenses $0.6 million.

8)  Quarter ended March 1, 2002: Revenue $0.1 million; and Operating expenses $0.3 million.

9)  Quarter ended May 31, 2002: Other expense related to the non-cash loss recorded to reduce the carrying value of the MedUnite investment in the amount of $41.0 million.

EX-99.III

Exhibit 99 (iii)

Consolidated Statement of Operations (Unaudited)

NDCHealth (Normalized)

(in thousands)

	FY00			FY01															FY02
	YTD			Qtr 1			Qtr 2			Qtr 3			Qtr 4			YTD			Qtr 1			Qtr 2			Qtr 3			Qtr 4			YTD
Revenues:
Information Management	$	131,229		$	31,109		$	33,412		$	34,905		$	37,190		$	136,616		$	34,186		$	37,097		$	38,943		$	40,173		$	150,399
Network Services and Systems		139,626			41,972			42,098			45,018			46,927			176,015			46,014			48,059			50,218			54,331			198,622
		270,855			73,081			75,510			79,923			84,117			312,631			80,200			85,156			89,161			94,504			349,021
Operating expenses:
Cost of service		132,867			34,533			37,314			41,145			41,504			154,496			36,971			43,643			44,501			47,588			172,703
Sales, general and administrative		56,348			18,407			16,759			17,252			18,663			71,081			19,511			16,856			18,960			19,369			74,696
Depreciation and amortization		26,213			7,337			7,911			7,947			8,420			31,615			6,158			5,897			5,948			5,948			21,951
		215,428			60,277			61,984			66,344			68,587			257,192			62,640			66,396			69,409			72,905			271,950
Operating income		55,427			12,804			13,526			13,579			15,530			55,439			17,560			18,760			19,752			21,599			77,671
Other income/(expense)		(6,580	)		(1,942	)		(1,781	)		(1,112	)		(1,311	)		(6,146	)		(1,643	)		(1,234	)		(1,459	)		(1,715	)		(6,061	)
IBITEL—Information Management		21,978			3,434			4,624			5,122			5,045			18,225			4,527			6,132			6,902			7,753			25,314
IBITEL—Network Services and Systems		26,869			7,428			7,121			7,345			9,174			31,068			11,390			11,394			11,391			12,131			46,306
Income before income taxes and equity in losses of affiliated companies—NDCHealth		48,847			10,862			11,745			12,467			14,219			49,293			15,917			17,526			18,293			19,884			71,620
Income Taxes		18,806			4,182			4,522			4,800			5,474			18,978			5,730			6,309			6,585			7,157			25,781
Income before equity in losses of affiliated companies		30,041			6,680			7,223			7,667			8,745			30,315			10,187			11,217			11,708			12,727			45,839
Equity in losses of affiliated companies, net of taxes		—			(66	)		(139	)		(247	)		(299	)		(751	)		(1,114	)		(292	)		(344	)		(314	)		(2,064	)
Net Income	$	30,041		$	6,614		$	7,084		$	7,420		$	8,446		$	29,564		$	9,073		$	10,925		$	11,364		$	12,413		$	43,775
Basic Shares		33,232			32,778			32,889			32,992			33,970			33,009			33,937			34,066			34,135			34,260			34,087
Basic earnings per share	$	0.90		$	0.20		$	0.22		$	0.22		$	0.25		$	0.90		$	0.27		$	0.32		$	0.33		$	0.36		$	1.28
Diluted Shares		34,448			33,441			34,057			34,348			35,368			34,153			35,530			39,822			39,721			39,331			39,636
Diluted earnings per share	$	0.87		$	0.20		$	0.21		$	0.22		$	0.24		$	0.87		$	0.26		$	0.31		$	0.32		$	0.35		$	1.23