Exhibit 2
PURCHASE AGREEMENT
Dated as of August 3, 1998
Among
IMS Health Incorporated,
Pharmaceutical Marketing Services Inc.,
PMSI Holdings Limited
and
Source Informatics European Holdings LLC
TABLE OF CONTENTS
Page
ARTICLE I
TRANSACTIONS................................2
SECTION 1.1. Purchase and Sale of the Transferred Assets......................2
SECTION 1.2. Belgian Subsidiaries.............................................2
ARTICLE II
THE CLOSING..................................3
SECTION 2.1. The Closing......................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES........................4
SECTION 3.1. Representations and Warranties of each of PMSI,
PMSI Holdings and Source Holdings..............................4
SECTION 3.2. Representations and Warranties of the Acquiror..................14
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS...................18
SECTION 4.1. Conduct of Business.............................................18
SECTION 4.2. Other Actions...................................................21
ARTICLE V
ADDITIONAL AGREEMENTS...........................22
SECTION 5.1. Access to Information; Confidentiality..........................22
SECTION 5.2. Reasonable Efforts..............................................22
SECTION 5.3. Public Announcements............................................23
SECTION 5.4. Benefit and Related Matters.....................................23
SECTION 5.5. Stock Exchange Listing..........................................25
SECTION 5.6. Noncompetition..................................................25
SECTION 5.7. Termination of Certain Obligations..............................27
SECTION 5.8. Taxes...........................................................27
SECTION 5.9. Scott-Levin Data Supply Agreement...............................28
SECTION 5.10. Covenants With Respect to Holding and
Disposition of IMS Health
Shares.......................................................29
SECTION 5.11. Capital Contributions of Intercompany Debt.....................30
SECTION 5.12. Reorganization Treatment.......................................30
SECTION 5.13. Bugamor Building...............................................30
ARTICLE VI
CONDITIONS PRECEDENT............................31
SECTION 6.1. Conditions to Obligations of Each Party to
Effect the Transactions to
Be Effected at the Closing....................................31
SECTION 6.2. Additional Conditions to Obligations of the
Acquiror......................................................31
SECTION 6.3. Additional Conditions to Obligations of PMSI
and the Sellers...............................................32
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER................... 33
SECTION 7.1. Termination.....................................................33
SECTION 7.2. Effect of Termination...........................................34
SECTION 7.3. Amendment.......................................................34
SECTION 7.4. Extension; Waiver...............................................34
SECTION 7.5. Procedure for Termination, Amendment,
Extension or Waiver...........................................34
ARTICLE VIII
SURVIVAL; INDEMNIFICATION.........................35
SECTION 8.1. Survival of Representations and Warranties......................35
SECTION 8.2. Indemnification by Sellers and PMSI.............................35
SECTION 8.3. Indemnification by Acquiror.....................................36
SECTION 8.4. Claims Procedures...............................................36
SECTION 8.5. Subrogation.....................................................37
SECTION 8.6. Insured Losses..................................................37
SECTION 8.7. Tax Indemnification.............................................37
SECTION 8.8. Contests........................................................38
SECTION 8.9. Preparation of Tax Returns......................................40
SECTION 8.10. Cooperation and Exchange of Information........................41
SECTION 8.11. Tax Sharing Arrangements.......................................41
SECTION 8.12. Insured Losses.................................................41
ARTICLE IX
GENERAL PROVISIONS............................41
SECTION 9.1. Fees and Expenses...............................................41
SECTION 9.2. Notices.........................................................41
SECTION 9.3. Definitions.....................................................42
SECTION 9.4. Interpretation..................................................45
SECTION 9.5. Counterparts....................................................46
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries..................46
SECTION 9.7. GOVERNING LAW...................................................46
SECTION 9.8. Assignment......................................................47
SECTION 9.9. Enforcement.....................................................47
SECTION 9.10. Termination of Merger and Stock Option
Agreements...................................................47
SCHEDULES
PMSI Disclosure Schedule
IMS Health Disclosure Schedule
Schedule I Interests of PMSI Holdings to be Transferred to IMS Health
Schedule II Interests of Source Holdings to be Transferred to IMS Health
Schedule III Required Consents and Filings
Schedule IV Intercompany Debt
Schedule V Subject Securities
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Allocation Agreement
Exhibit C Designated Representations
Exhibit D Scott-Levin Replacement Data Terms
Exhibit E Form of Confidentiality and Noncompetition Agreement
Exhibit F Defined Term Cross-References
Exhibit G Capital Contribution Agreement
PURCHASE AGREEMENT, dated as of August 3, 1998, among IMS Health
Incorporated, a Delaware corporation (the "Acquiror" or "IMS Health"),
Pharmaceutical Marketing Services Inc., a Delaware corporation ("PMSI"), PMSI
Holdings Limited, a Delaware corporation ("PMSI Holdings"), and Source
Informatics European Holdings LLC, a Delaware limited liability company ("Source
Holdings" and, together with PMSI Holdings, the "Sellers").
WHEREAS, (i) PMSI and PMSI Holdings desire to transfer, or cause to be
transferred, to the Acquiror all of PMSI Holdings' direct and indirect equity
interests in the entities (including, without limitation, all of the Capital
Stock in such entities) listed on Schedule I hereto and (except as otherwise may
be expressly provided herein or in the Allocation Agreement referred to below)
all assets, rights and properties used in or necessary to the businesses or
operations relating thereto (all such assets to be transferred, collectively,
the "PMSI Holdings Transferred Assets") in exchange for shares of IMS Health
Common Stock (as defined in Section 9.3 hereof), (ii) PMSI and Source Holdings
desire to transfer, or cause to be transferred, to the Acquiror all of Source
Holdings' direct and indirect equity interests in the entities (including,
without limitation, all of the Capital Stock in such entities) listed on
Schedule II hereto and (except as otherwise may be expressly provided herein or
in the Allocation Agreement referred to below) all assets, rights and properties
used in or necessary to the businesses or operations relating thereto (all such
assets to be transferred, collectively, the "Source Holdings Transferred Assets"
and, together with the PMSI Holdings Transferred Assets, the "Transferred
Assets"), in exchange for shares of IMS Health Common Stock (such shares,
together with the shares of IMS Health Common Stock to be issued in exchange for
the PMSI Holdings Transferred Assets, being herein referred to as the "IMS
Health Shares") and (iii) the Acquiror desires to acquire the Transferred Assets
pursuant to the terms and conditions hereinafter set forth;
WHEREAS, except as expressly set forth herein, this Agreement
supersedes in their entirety the Agreement and Plan of Merger dated as of March
23, 1998 among the Acquiror, as assignee of Nielsen Media Research, Inc., a
Delaware corporation formerly known as "Cognizant Corporation" (the "Assignor"),
PMSI and New Sierra Acquisition Corp., a Delaware corporation (the "Merger
Agreement"), and the Stock Option Agreement dated as of March 23, 1998 between
the Acquiror, as assignee of the Assignor, and PMSI (the "Stock Option
Agreement"); and
WHEREAS, the parties intend that, in the case of the transfer of
equity interests in each entity listed in Schedules I and II and in the Belgian
Subsidiaries (as defined in Section 1.2) as described above, each such transfer
shall separately qualify as a reorganization within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein set forth and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
TRANSACTIONS
SECTION 1.1. Purchase and Sale of the Transferred Assets. (a) Upon the
terms and subject to the conditions of this Agreement, at the Closing (as
defined in Section 2.1), PMSI Holdings shall and/or shall cause the Selling
Subsidiaries set forth in Schedule I to sell, transfer and deliver to the
Acquiror, and the Acquiror shall purchase, all of the Capital Stock (as defined
in Section 9.3) of the entities listed on Schedule I to be sold.
(b) Upon the terms and subject to the conditions of this Agreement, at
the Closing, Source Holdings shall and/or shall cause the Selling Subsidiaries
set forth in Schedule II to sell, transfer and deliver to the Acquiror, and the
Acquiror shall purchase, all of the Capital Stock of the entities listed on
Schedule II.
(c) The purchase price for the PMSI Holdings Transferred Assets (the
"PMSI Holdings Purchase Price") shall equal 805,031 shares of IMS Health Common
Stock.
(d) The purchase price for the Source Holdings Transferred Assets (the
"Source Holdings Purchase Price", together with the PMSI Holdings Purchase
Price, the "Transferred Assets Purchase Price") shall equal 392,932 shares of
IMS Health Common Stock.
SECTION 1.2. Belgian Subsidiaries. The Acquiror is hereby granted an
option, exercisable at any time or from time to time during the three-month
period following the Closing Date (the "Option Period"), to acquire, at no
additional cost and without payment of any additional consideration, all of the
outstanding shares of Capital Stock of any or all of the following entities:
PMSI Belgium S.A., Source Informatics Belgium SA, Inedi SA, and Medical Time
Communication (the "Belgian Subsidiaries"). Upon the written request of the
Acquiror to PMSI, each of the parties hereto shall use all reasonable efforts to
obtain any and all governmental or third-party authorizations, approvals,
consents or waivers necessary to effect the transfer of all of the outstanding
shares of Capital Stock of the Belgian Subsidiaries to the Acquiror (including,
without limitation, any approval required to be obtained from the Belgian
Competition Council). As promptly as practicable following the exercise of such
option and the receipt of all such authorizations, approvals, consents, and
waivers (and in any event within 5 Business Days thereafter) PMSI Holdings and
Source Holdings shall deliver to the Acquiror certificates (or other comparable
indicia of ownership in form and substance satisfactory to the Acquiror)
representing all of the outstanding shares of Capital Stock of the Belgian
Subsidiaries against which such option is exercised and take all other necessary
action to transfer all right, title and interest in all of the shares of Capital
Stock of the Belgian Subsidiaries to the Acquiror, free of any Liens (as defined
in Section 3.1(c). The Belgian Subsidiaries comprise all of the subsidiaries of
PMSI that conduct any business or operate in, derive any revenues or income
from, or own any assets in, Belgium.
ARTICLE II
THE CLOSING
SECTION 2.1. The Closing. (a) The closing of the transactions pursuant
to Section 1.1 (hereinafter called the "Closing") shall take place at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
at 10:00 a.m., local time, on the first Business Day following the date on which
all of the consents and approvals specified in Schedule III of this Agreement
have been duly obtained, if the conditions set forth in Article VI have been
satisfied or waived by such time or, if not, at the soonest time and date
thereafter as shall be fixed by agreement of the parties hereto (the date on
which the Closing occurs is hereinafter referred to as the "Closing Date"). The
Closing shall be deemed effective as of the close of business on July 31, 1998.
(b) At the Closing:
(i) each of PMSI, PMSI Holdings and Source Holdings shall deliver
(or cause to be delivered) to the Acquiror certificates representing all of
the Transferred Assets to be transferred pursuant to Section 1.1 duly
endorsed in blank in proper form for transfer or otherwise endorsed as
reasonably acceptable to counsel to the Acquiror, with appropriate transfer
stamps, if any, affixed thereto, or in such other form as shall be
reasonably satisfactory to the Acquiror, or such instruments of transfer
as, in the opinion of counsel to the Acquiror, may be required under the
laws of the jurisdictions of incorporation of the Transferred Subsidiaries,
in order to convey all of the Transferred Assets to the Acquiror;
(ii) each of the Sellers and PMSI shall deliver to the Acquiror
all documents and other instruments contemplated by Article VI to be so
delivered;
(iii) the Acquiror shall deliver to each of the Sellers and PMSI
all documents and other instruments contemplated by Article VI to be so
delivered;
(iv) the Acquiror shall issue and deliver (or cause to be issued
and delivered) to PMSI Holdings certificates representing the number of
shares of IMS Health Common Stock to be issued to PMSI Holdings pursuant to
Section 1.1(a) registered in the name of PMSI Holdings, with such
restrictive legends affixed thereto as deemed by the Acquiror to be
necessary under applicable law;
(v) the Acquiror shall issue and deliver (or cause to be issued
and delivered) to Source Holdings certificates representing the number of
shares of IMS Health Common Stock to be issued pursuant to Section 1.1(b)
registered in the name of Source Holdings, with such restrictive legends
affixed thereto as deemed by the Acquiror to be necessary
under applicable law;
(vi) the Acquiror and PMSI shall execute and deliver a
registration rights agreement, substantially in the form attached hereto as
Exhibit A (the "Registration Rights Agreement"); and
(vii) the Acquiror, PMSI and the subsidiaries of PMSI named as
signatories therein shall execute and deliver an allocation agreement
substantially in the form attached hereto as Exhibit B (the "Allocation
Agreement").
(c) In the event that PMSI and the Sellers are unable to deliver all
of the documentation (the "Transfer Instruments") required to be delivered
pursuant to clause (b)(i) of this Section 2.1 with respect to the Capital Stock
of any of the Transferred Subsidiaries listed in Schedule V of this Agreement at
the time that the Closing is otherwise scheduled to occur in accordance with
paragraph (a) of this Section 2.1, the Closing nevertheless will occur as so
scheduled; provided that, in such event: (i) the Acquiror shall issue to its
transfer agent, First National Bank of Chicago (the "Transfer Agent"), an
irrevocable instruction to issue to the applicable Seller the number of IMS
Health Shares ("Subject Securities") indicated opposite the name of the
applicable Transferred Subsidiary or Subsidiaries on Schedule V, which
instruction (i) shall be conditioned on the receipt of a Joint Release Notice
(as defined below) with respect to such Subject Securities and (ii) shall expire
on August 15, 1998 at 5:00 p.m., New York time (the "Expiration Time"), with
respect to any Subject Securities Shares as to which a Joint Release Notice has
not been received prior to the Expiration Time. The Acquiror and PMSI shall
submit a jointly executed notice to the Transfer Agent (a "Joint Release
Notice") upon receipt of all the Transfer Instruments with respect any
Transferred Subsidiary instructing the Transfer Agent to issue the Subject
Securities applicable to such Transferred Subsidiary to the applicable Seller.
To the extent that a Joint Release Notice with respect to any Transferred
Subsidiary has not been received by the Transfer Agent prior to Expiration Time,
the parties hereto will be under no further obligation with respect to the
purchase and sale of such Transferred Subsidiary or the issuance of the related
Subject Securities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of each of PMSI, PMSI
Holdings and Source Holdings. Each of the Sellers and PMSI represents and
warrants to the Acquiror as follows:
(a) Merger Agreement Representations. Except to the extent otherwise
specifically set forth in Section 3.1(a) of the disclosure schedule delivered by
PMSI to the Acquiror at the time of the execution of this Agreement (the "PMSI
Disclosure Schedule"), each of the Designated Representations (as defined in
Section 9.3) that is qualified as to "materiality," "Material Adverse Change"
(which, as used in this Section 3.1(a) and elsewhere in this Agreement, shall
have the meaning specified in Section 9.3) or "Material Adverse Effect" (which,
as used in this Section 3.1(a) and elsewhere in this Agreement, shall have the
meaning specified in Section 9.3) is true and correct, and each of the other
Designated Representations is true and correct in all material respects, in each
case as of the date hereof as though made as of the date hereof, except (i) for
changes specifically permitted by the Merger Agreement and (ii) that those
Designated Representations that address matters only as of a particular date are
true and correct as of such date.
(b) Organization Documents. PMSI has delivered to the Acquiror
complete and correct copies of the certificates of incorporation and by-laws (or
other organizational documents) of each of PMSI, PMSI Holdings, Source Holdings,
each of the Transferred Subsidiaries (as hereinafter defined) and each of the
Belgian Subsidiaries, in each case as amended to the date of this Agreement.
(c) Transferred Subsidiaries. (i) Except as set forth in Section
3.1(c)(i) of the PMSI Disclosure Schedule, none of the direct or indirect
subsidiaries (as defined in Section 9.3) of PMSI comprising the Transferred
Assets (collectively, the "Transferred Subsidiaries") or the Belgian
Subsidiaries, owns, operates or leases any assets in, conducts any business in,
has any sales in or into or attributable to, or otherwise derives any revenues
or other income from the United States of America or any of its territories or
possessions. Upon payment for the Transferred Assets (including, without
limitation, all of the Capital Stock of each of the Transferred Subsidiaries) as
herein provided and assuming the Acquiror has the requisite power and authority
to be the lawful owner of such assets, the Acquiror will acquire good title
thereto, free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens")
(other than (x) Liens created by the Acquiror and (y) the requirements of any
applicable securities laws respecting limitations on the subsequent transfer of
securities). Upon transfer of the Capital Stock of the Belgian Subsidiaries as
provided in Section 1.3 (the "Belgian Transfer"), assuming the Acquiror has the
requisite power and authority to be the lawful owner thereof, the Acquiror will
acquire good title thereto, free and clear of all Liens (except as contemplated
by the preceding sentence). All of the Capital Stock of each Transferred
Subsidiary and each Belgian Subsidiary are owned (of record and beneficially) by
PMSI, by another wholly owned subsidiary of PMSI or by PMSI and another such
wholly owned subsidiary, in each case as set forth in Schedules I and II hereto.
All of the outstanding shares of Capital Stock of each of the Transferred
Subsidiaries and each of the Belgian Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. The
Transferred Assets will include all of the Capital Stock of each of the
Transferred Subsidiaries. Except as otherwise specifically set forth by the
Allocation Agreement or as specifically set forth in Section 3.1(c)(ii) of the
PMSI Disclosure Schedule, as of the Closing (or the date of the Belgian Transfer
in the case of the Belgian Subsidiaries), the Transferred Subsidiaries and the
Belgian Subsidiaries shall be the sole and exclusive owners (free of all Liens)
of all assets, rights, businesses and properties used in or necessary to the
businesses or operations of the Transferred Subsidiaries.
(ii) The Transferred Subsidiaries, all of which are listed in
Schedules I or II hereto, and the Belgian Subsidiaries, all of which are set
forth in Section 1.3, comprise all of the subsidiaries of PMSI that conduct any
business or operate in, derive any revenue or income from, or own any assets in,
the Territories. PMSI does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, limited liability
company, business association, joint venture or other entity incorporated,
formed or organized in the Territories other than the Transferred Subsidiaries
and the Belgian Subsidiaries (other than ISIS Research Limited, a company
incorporated in the United Kingdom). There is no Capital Stock of any
Transferred Subsidiary or any Belgian Subsidiary issued, reserved for issuance
or outstanding other than as set forth in Schedules I and II. All securities
issued by each of the Transferred Subsidiaries and each of the Belgian
Subsidiaries were issued in compliance in all material respects with all
applicable federal and state securities laws and all applicable rules and
regulations promulgated thereunder. There are no outstanding bonds, debentures,
notes or other indebtedness or debt securities of any of the Transferred
Subsidiaries or any of the Belgian Subsidiaries having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Transferred Subsidiaries or of the
Belgian Subsidiaries may vote (collectively, "Voting Debt"). Other than
commitments, agreements or undertakings assigned to the Acquiror pursuant to the
Agreement and the agreements executed in connection therewith, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which PMSI or any of its
subsidiaries is a party or by which any of them is bound obligating PMSI or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other equity or voting securities
of any of the Transferred Subsidiaries or any of the Belgian Subsidiaries or
obligating PMSI or any of its subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. There are no outstanding contractual obligations,
commitments, understandings or arrangements of PMSI or any of its subsidiaries
to repurchase, redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of any of the Transferred Subsidiaries or any of the
Belgian Subsidiaries and, to the knowledge of PMSI, there are no irrevocable
proxies with respect to shares of capital stock of any of the Transferred
Subsidiaries or any of the Belgian Subsidiaries. There are no agreements or
arrangements pursuant to which PMSI or any of its Subsidiaries is or could be
required to register shares of Capital Stock of any of the Transferred
Subsidiaries or Belgian Subsidiaries or other securities of any of the
Transferred Subsidiaries or Belgian Subsidiaries under the Securities Act of
1933, as amended (the "Securities Act").
(d) Dividends. Since June 30, 1998, except as disclosed in Section
3.1(d) of the PMSI Disclosure Schedule, none of the Transferred Subsidiaries and
none of the Belgian Subsidiaries has declared, set aside, made or paid to the
stockholders of PMSI or any of its Subsidiaries (other than to another
Transferred Subsidiary, in the case of Transferred Subsidiaries, or to another
Belgian Subsidiary, in the case of the Belgian Subsidiaries) dividends or other
distributions on the outstanding shares of its Capital Stock.
(e) Authority; Noncontravention. Each of the Sellers and PMSI has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of the Sellers and PMSI and the consummation by each of
the Sellers and PMSI of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of them. This
Agreement has been duly executed and delivered by each of the Sellers and PMSI
and (assuming due authorization, execution and delivery by the Acquiror)
constitutes a valid and binding obligation of each of them, enforceable against
each of the Sellers and PMSI in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing. Except as set forth in
Section 3.1(e) of the PMSI Disclosure Schedule, the execution and delivery of
this Agreement does not, and the consummation by each of the Sellers and PMSI of
the transactions contemplated by this Agreement and compliance by the each of
the Sellers and PMSI with the provisions hereof will not, conflict with, or
result in any breach or violation of, or any default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of, or a "put" right with respect to any obligation
under, or to a loss of a material benefit under, or result in the creation of
any Lien under, (i) the certificate of incorporation or by-laws or the
comparable charter or organizational documents of PMSI or any of PMSI's
subsidiaries (including, without limitation, any of the Transferred Subsidiaries
and any of the Belgian Subsidiaries), (ii) any loan or credit agreement, note,
note purchase agreement, bond, mortgage, indenture, lease or any other contract,
agreement, instrument, permit, concession, franchise or license to which PMSI or
any of its subsidiaries (including, without limitation, any of the Transferred
Subsidiaries and any of the Belgian Subsidiaries) is a party or by which PMSI or
any of its subsidiaries (including, without limitation, any of the Transferred
Subsidiaries and any of the Belgian Subsidiaries) or any of their respective
properties or assets are bound or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to PMSI or any of its subsidiaries (including, without limitation,
any of the Transferred Subsidiaries and any of the Belgian Subsidiaries) or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect with respect to PMSI. No consent, approval, order
or authorization of, or registration, declaration or filing with, or notice to,
any international organization, the government of the United States of America,
any other nation or any political subdivision thereof, whether state,
provincial, local or otherwise, or any court, administrative agency or
commission or other governmental authority, regulatory body or agency, domestic
or foreign (a "Governmental Entity"), or any other third party is required by or
with respect to PMSI or any of its subsidiaries (including, without limitation,
any of the Transferred Subsidiaries and any of the Belgian Subsidiaries) in
connection with the execution and delivery of this Agreement by each of the
Sellers and PMSI or the consummation by each of the Sellers and PMSI of the
transactions contemplated hereby or the performance by each of the Sellers and
PMSI of its obligations hereunder, except (i) the filing with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers (the "NASD") of such reports under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated hereby and (ii) the consents and
approvals specified in Schedule III of this Agreement and (iii) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings or notices the failure of which to make or obtain, individually or in
the aggregate, could not reasonably be expected to (x) prevent or materially
delay consummation of the transactions contemplated hereby or performance of any
of the obligations of PMSI or any of the Sellers hereunder or (y) have a
Material Adverse Effect with respect to PMSI.
(f) Absence of Certain Changes or Events. Except as disclosed in
Section 3.1(f) of the PMSI Disclosure Schedule or reflected in the Pro Forma
Balance Sheet, there is not and has not been since March 23, 1998: (i) any
action or failure to act which (A) if it had been taken or not taken after the
execution of this Agreement, would have required the consent of the Acquiror
pursuant to this Agreement or (B) if it had been taken or not taken after the
execution of the Merger Agreement, would have required the consent of the
Acquiror or the Assignor thereunder; or (ii) any condition, event or occurrence
which, individually or in the aggregate, could reasonably be expected to prevent
or materially delay the ability of any of the Sellers or of PMSI to consummate
the transactions contemplated by this Agreement or perform its obligations
hereunder.
(g) Financial Statements; Books and Records. (i) Attached as Schedule
3.1(g)(i) of the PMSI Disclosure Schedule is the unaudited consolidating and
combined balance sheets of the Transferred Subsidiaries (the "Transferred
Subsidiaries Interim Balance Sheet") as of June 30, 1998 and 1997, and the
related unaudited consolidating and combined statements of operations for the
periods ended on such date (together with the Transferred Subsidiaries Interim
Balance Sheet, the "Transferred Subsidiaries Interim Financial Statements").
(ii) Each of the Transferred Subsidiaries Interim Financial
Statements has been prepared based upon the books and records of PMSI and the
Transferred Subsidiaries on a consistent basis throughout the periods covered
thereby and, except as disclosed in the notes thereto, have been prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP"), except to the extent that intercompany obligations,
investments in subsidiaries and certain carveout entries relating to WII and its
subsidiaries have not been eliminated in consolidation, applied a consistent
basis for the period involved, and fairly present, in all material respects, the
consolidating and combined financial position of the Transferred Subsidiaries,
as of their respective dates and the consolidating and combined results of
operations of the Transferred Subsidiaries, for the periods set forth therein,
subject to the absence of footnotes and normal consolidation and year-end
adjustments. As of the date hereof, none of the Transferred Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be recognized or disclosed on a combined
balance sheet of the Transferred Subsidiaries or in the notes thereto, other
than (x) liabilities reflected in the Transferred Subsidiaries Interim Balance
Sheet (except to the extent satisfied since June 30, 1998), (y) liabilities
incurred since June 30, 1998 in the ordinary course of business consistent with
past practice or (z) reflected in the Pro Forma Balance Sheet.
(iii) The books and records of each of the Transferred
Subsidiaries and the Belgian Subsidiaries have been maintained in accordance
with reasonable commercial practices.
(iv) Attached as Schedule 3.1(g)(iv) of the PMSI Disclosure
Schedule is the Transferred Subsidiaries Interim Balance Sheet as of June 30,
1998, as adjusted to give pro forma effect to the Closing and the transactions
contemplated by the Allocation Agreement and Section 5.7 of this Agreement as if
all of such transactions had been effected on June 30, 1998 (the "Pro Forma
Balance Sheet"). As of (and after giving effect to) the Closing and the
transactions contemplated by the Allocation Agreement and Section 5.7 of this
Agreement, (x) the Transferred Subsidiaries will have no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
other than (A) liabilities reflected in the Pro Forma Balance Sheet (except to
the extent satisfied since June 30, 1998) and (B) liabilities to unaffiliated
third parties incurred as permitted by this Agreement since June 30, 1998 in the
ordinary course of business consistent with past practice; (y) the excess of the
combined Current Liabilities of the Transferred Subsidiaries over their combined
Current Assets (determined in each case in conformity with GAAP) will not be
greater than $8.5 million. For purposes of Section 3.1(g)(iv)(y), "Current
Liabilities" shall mean accounts payable, accrued liabilities and pre-billings,
and "Current Assets" shall mean cash, accounts receivable, work in process,
inventory, and prepaid assets, in each case determined in accordance with GAAP,
applied on a basis consistent with the preparation of the Pro Forma Balance
Sheet. For purposes of determining Current Liabilities and Current Assets,
(A) account classification treatment for specific items, (B) reserve treatment
for balance sheet items (e.g., items such as sales taxes receivable) and (C) the
amount of charter client contract liabilities shall also be consistent with the
Pro Forma Balance Sheet. The initial determination of Current Liabilities and
Current Assets as of the Closing Date shall be made as promptly as practicable
after the Closing by the Acquiror. The Acquiror shall provide such initial
determination (and any work papers used to prepare such determination) to PMSI
for review. If PMSI shall disagree with such determination, it shall notify the
Acquiror of such disagreement (setting forth in reasonable detail the
particulars of such disagreement), within 20 days of PMSI's receipt of such
determination. In the event of any such notice of disagreements, PMSI and the
Acquiror shall use their reasonable efforts for a period of 15 days to resolve
any disagreements. If at the end of such period they are unable to resolve such
disagreements, PMSI and the Acquiror shall select an accounting firm of
nationally recognized standing (the "Accountant") to resolve any disagreements.
The Accountant shall resolve any disagreements and its determination shall be
final, binding and conclusive on the parties. The Sellers and PMSI and the
Acquiror shall share equally the fees and expenses incurred by the Accountant in
resolving such disagreements. To the extent Current Liabilities exceeds Current
Assets by $8.5 million as so determined by the Acquiror (subject to any
adjustment made by the Accountant as described above) such excess amount shall
be paid by PMSI to the Acquiror with interest at the rate of 8% per annum from
the Closing Date.
(h) Taxes. Except as set forth in Schedule 3.1(h), (i) each of the
Transferred Subsidiaries and the Belgian Subsidiaries and any consolidated,
combined, unitary or aggregate group of which any of the Transferred
Subsidiaries or any of the Belgian Subsidiaries is or has been a member has
timely filed all Tax Returns required to be filed by it, or requests for
extensions to file such Tax Returns have been timely filed, granted and have not
expired; (ii) all such Tax Returns are complete and correct in all material
respects; (iii) each of the Transferred Subsidiaries and each of the Belgian
Subsidiaries, and any consolidated, combined, unitary or aggregate group of
which any of the Transferred Subsidiaries or any of the Belgian Subsidiaries is
or has been a member, has paid all Taxes due or has provided adequate reserves
in its financial statements (other than in respect of deferred taxes) for any
Taxes that have not been paid, whether or not reflected in such Tax Return; (iv)
no material claim for unpaid Taxes has been asserted by a Tax authority or has
become a lien against the property of any of the Transferred Subsidiaries or any
of the Belgian Subsidiaries (other than with respect to Taxes not yet due and
payable) or is being asserted against any of the Transferred Subsidiaries or any
of the Belgian Subsidiaries; (v) no audit or other proceeding with respect to
any Taxes due from or with respect to PMSI or any of its Subsidiaries or any Tax
Return filed by PMSI any of its Subsidiaries is being conducted by any
governmental or Tax authority and neither PMSI nor any of its Subsidiaries has
received notification in writing that any such audit or other proceeding with
respect to Taxes or any Tax Return is pending; (vi) no extension of the statute
of limitations on the assessment of any Taxes has been granted by PMSI in
respect of the Transferred Subsidiaries or any of the Belgian Subsidiaries or by
the Transferred Subsidiaries or any of the Belgian Subsidiaries; (vii) none of
the Transferred Subsidiaries is subject to liability for Taxes of any Person
(other than the Transferred Subsidiaries) and none of the Belgian Subsidiaries
is subject to liability for Taxes of any Person (other than the Belgian
Subsidiaries); and (viii) all withholding and similar Taxes have been collected
and remitted or will be remitted on a timely basis to the appropriate Taxing
authority.
(i) Brokers. No broker, investment banker, financial advisor or other
person, other than S.G. Cowen Securities Corporation (formerly known as Cowen &
Company), the fees and expenses of which will be paid by PMSI, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of PMSI. PMSI agrees to indemnify the Acquiror
and to hold the Acquiror harmless from and against any and all claims,
liabilities or obligations with respect to any fee, commission or expense
asserted by any person on the basis of any act or statement alleged to have been
made by PMSI or any of its affiliates.
(j) Intellectual Property. (i) Except as specifically set forth in
Section 3.1(j)(i) of the PMSI Disclosure Schedule, the Transferred Subsidiaries
own or have the right to use all Intellectual Property material to the operation
of the business of the Transferred Subsidiaries and the Belgian Subsidiaries as
currently conducted or to products or services currently under development by
any of the Transferred Subsidiaries and the Belgian Subsidiaries (collectively,
"Material Intellectual Property"), and have the right to use, license,
sublicense or assign the same without liability to, or any requirement of
consent from, any other person or party; in this regard, to the knowledge of
PMSI as of the date hereof, no facts or circumstances exist which would affect
the validity, subsistence or existence of any Material Intellectual Property or
the rights of the Transferred Subsidiaries with respect thereto. Except as
specifically set forth in Section 3.1(j)(i) of the PMSI Disclosure Schedule, all
Material Intellectual Property is either owned by one of the Transferred
Subsidiaries free and clear of all Liens or is used pursuant to an agreement or
license from a party unaffiliated with PMSI and each such agreement or license
is valid and enforceable and in full force and effect and none of the
Transferred Subsidiaries or the Belgian Subsidiaries is in default under or in
breach of any such license or agreement and, to the knowledge of PMSI as of the
date hereof, none of the licensors is in default under or in breach of any such
license or agreement. Unless otherwise noted in Section 3.1(j)(i) of the PMSI
Disclosure Schedule, (i) none of the Material Intellectual Property infringes or
otherwise conflicts with any proprietary or other right of any person or party;
(ii) as of the date hereof, there is no pending or threatened litigation,
adversarial proceeding, administrative action or other challenge or claim
relating to any of the Material Intellectual Property; (iii) there is no
outstanding judgment, order, writ, injunction or decree relating to any of the
Material Intellectual Property; (iv) as of the date hereof, there is currently
no infringement by any third party of any of the Material Intellectual Property;
and (v) the Material Intellectual Property owned, used or possessed by the
Transferred Subsidiaries is sufficient and adequate to conduct the business of
each of the Transferred Subsidiaries and the Belgian Subsidiaries to the full
extent as such business is currently conducted.
(ii) Each of PMSI and each of its subsidiaries has taken
reasonable steps to protect, maintain and safeguard the Material Intellectual
Property, including any Material Intellectual Property for which improper or
unauthorized disclosure would impair its value or validity, and has executed
appropriate nondisclosure agreements and made appropriate filings and
registrations in connection with the foregoing.
(iii) Except as specifically set forth in Section 3.1(j)(iii)(a)
of the PMSI Disclosure Schedule, the Transferred Subsidiaries are the sole and
exclusive owner of all Software (which term includes, without limitation, all
computer programs, whether in source code or object code form, algorithms, edit
controls, methodologies, applications, flow charts and any and all systems
documentation (including, but not limited to, data entry and data processing
procedures, report generation and quality control procedures), logic and designs
for all programs, and file layouts and written narratives of all procedures used
in the coding or maintenance of the foregoing) that is required to conduct the
business of the Transferred Subsidiaries and the Belgian Subsidiaries to the
full extent such businesses are currently conducted. Except as set forth in
Section 3.1(j)(iii)(b) of the PMSI Disclosure Schedule, all of the Software
owned by any of the Transferred Subsidiaries is Year 2000 Compliant (as defined
in Section 9.3). Notwithstanding anything to the contrary set forth in this
Section 3.1(j)(iii), the term "Software" does not include any software used or
held for use by the Transferred Subsidiaries or the Belgian Subsidiaries and not
owned by the Transferred Subsidiaries, including but not limited to any software
licensed or leased by third parties (other than PMSI or any of its Subsidiaries
that is not a Transferred Subsidiary) to any of the Transferred Subsidiaries or
the Belgian Subsidiaries and commonly available "shrink wrap" software
copyrighted by third parties (other than PMSI or any of its subsidiaries that is
not a Transferred Subsidiary) (collectively, the "Third Party Software"). All of
the Third Party Software required to conduct the businesses of the Transferred
Subsidiaries and the Belgian Subsidiaries to the full extent such businesses are
currently conducted is used pursuant to an agreement or license and each such
agreement or license is valid and enforceable and in full force and effect and
neither PMSI nor any of its Subsidiaries (including the Transferred Subsidiaries
and the Belgian Subsidiaries) is in default under or in breach of any such
license or agreement and, to the knowledge of PMSI as of the date hereof, none
of the licensors is in default under or in breach of any such license or
agreement. To PMSI's knowledge as of the date hereof, except as set forth in
Section 3.1(j)(iii)(c) of the PMSI Disclosure Schedule, all of the Third Party
Software is Year 2000 Compliant.
(iv) Except as specifically set forth in Section 3.1(j)(iv)(a) of
the PMSI Disclosure Schedule, the Transferred Subsidiaries are the sole and
exclusive owner of all Databases (which term includes, without limitation, all
databases, documentation and written narratives of all procedures used in
connection with the collection, processing and distribution of data contained in
the databases) that are required to conduct the business of the Transferred
Subsidiaries and the Belgian Subsidiaries to the full extent such businesses are
currently conducted. The Databases, together with the Third Party Databases (as
defined below), contain that data heretofore used by the Transferred
Subsidiaries and the Belgian Subsidiaries in the operation of their respective
businesses. Except as set forth in Section 3.1(j)(iv)(b) of the PMSI Disclosure
Schedule, the Databases are Year 2000 Compliant. Notwithstanding anything to the
contrary set forth in this Section 3.1(j)(iv), the term "Databases" does not
include any databases used or held for use by the Transferred Subsidiaries or
the Belgian Subsidiaries and not owned by the Transferred Subsidiaries,
including, but not limited to, any databases licensed or leased by third parties
(other than PMSI or any of its subsidiaries that is not a Transferred
Subsidiary) to PMSI and databases generally available to the public
(collectively, the "Third Party Databases"). All of the Third Party Databases
required to conduct the businesses of the Transferred Subsidiaries and the
Belgian Subsidiaries to the full extent such businesses are currently conducted
are used pursuant to an agreement or license and each such agreement or license
is valid and enforceable and in full force and effect and neither PMSI nor any
of its Subsidiaries (including the Transferred Subsidiaries and the Belgian
Subsidiaries) is in default under or in breach of any such license or agreement
and, to the knowledge of PMSI as of the date hereof, none of the licensors is in
default under or in breach of any such license or agreement. To PMSI's knowledge
as of the date hereof, except as set forth in Section 3.1(j)(iv)(d) of the PMSI
Disclosure Schedule, all of the Third Party Databases are Year 2000 Compliant.
(v) Except as set forth in Section 3.1(j)(v) of the PMSI
Disclosure Schedule, to the knowledge of PMSI, no confidential or trade secret
information used or useful in the business of the Transferred Subsidiaries or
the Belgian Subsidiaries has been provided to any party except subject to
written confidentiality agreements.
(k) Affiliate Transactions. As of the date of this Agreement (except
as set forth in Section 3.1(k) of the PMSI Disclosure Schedule): (a) there is
not any ongoing agreement or arrangement between PMSI or any of its subsidiaries
(other than the Transferred Subsidiaries) and any Transferred Subsidiary having
an annual value, individually or in the aggregate, in excess of $50,000; (b)
there is not any ongoing agreement or arrangement between PMSI or any of its
subsidiaries (other than the Belgian Subsidiaries) and any Belgian Subsidiary
having an annual value, individually or in the aggregate, in excess of $50,000;
(c) there is not any indebtedness (as defined in Section 9.3) owed by any
Transferred Subsidiary to PMSI or any of its subsidiaries (other than another
Transferred Subsidiary); (d) there is not any indebtedness owed by any Belgian
Subsidiary to PMSI or any of its subsidiaries (other than another Belgian
Subsidiary); (e) except as may exist or arise by operation of law, there
is not any indemnification or similar obligation owed by any Transferred
Subsidiary to PMSI or any of its subsidiaries (other than another Transferred
Subsidiary); (f) except as may exist or arise by operation of law, there is not
any indemnification or similar obligation owed by any Belgian Subsidiary to PMSI
or any of its subsidiaries (other than another Belgian Subsidiary); (g) there
are not any assets, rights or properties used in or necessary to the businesses
of the Transferred Subsidiaries as conducted on the date of this Agreement that
are owned or provided by PMSI or any of its subsidiaries (other than another
Transferred Subsidiary); and (h) there are not any assets, rights or properties
used in or necessary to the businesses of the Belgian Subsidiaries as conducted
on the date of this Agreement that are owned or provided by PMSI or any of its
subsidiaries (other than another Belgian Subsidiary).
(l) PMSI Stock Options. Section 3.1(l) of the PMSI Disclosure Schedule
sets forth, with respect to each person identified in the letter referred to in
Section 5.4(a): (i) the number of options to purchase shares of Common Stock,
par value $.01 per share, of PMSI ("PMSI Common Stock") held by such person;
(ii) the date or dates of grant of such options; (iii) the exercise price or
prices of such options; and (iv) the term or terms of such options and the
period or periods during which they are exercisable in whole or in part.
(m) Employee Benefit Plans. The mathematical reserves existing as at
the date of this Agreement under each non-governmental retirement plan
(including, without limitation, old age, death and long-term disability benefit
plans) maintained or contributed to by any of the Transferred Subsidiaries or
the Belgian Subsidiaries are not less than the higher of (i) the capital value
as at the date of this Agreement of the benefits payable (whether immediately,
prospectively or contingently) under each such plan to or in respect of the
persons covered thereunder in respect of their services up to and including the
date of this Agreement, taking into account past service obligations and making
allowance for reasonable long-term discount rates and projected pay increases,
all in accordance with actuarial methods, accounting standards, regulations and
customs applicable or generally applied in each relevant jurisdiction, and (ii)
the legal minimum funding required with respect to each such plan in each
relevant jurisdiction.
(n) Purchase for Investment. Each of the Sellers and PMSI are
acquiring the IMS Health Shares for their own accounts. Each of the Sellers and
PMSI are aware that their acquisition of the IMS Health Shares has not been
registered under the Securities Act or any state or other securities laws. Each
of the Sellers and PMSI further acknowledge and agree that the certificates
representing the IMS Health Shares will include an appropriate legend to the
effect that the issuance and sale of such shares pursuant to this Agreement have
not been registered under the Securities Act or any state securities laws and
that such shares may not be (and will not be) sold or transferred except in
compliance with the Securities Act and applicable state or other securities
laws.
SECTION 3.2. Representations and Warranties of the Acquiror. The
Acquiror represents and warrants to each of the Sellers and PMSI as follows:
(a) Organization, Standing and Corporate Power. Each of the Acquiror
and each of the Acquiror's "significant subsidiaries" (within the meaning of
Rule 1-02 of Regulation S-X of the SEC) (collectively, the "IMS Health
Subsidiaries") is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of the Acquiror and each of the IMS Health Subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction
(domestic or foreign) in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) could not reasonably be expected to have a
Material Adverse Effect with respect to the Acquiror. The Acquiror has made
available to PMSI complete and correct copies of its articles of incorporation
and by-laws.
(b) Capital Structure. (i) As of the date of this Agreement, the
authorized capital stock of the Acquiror consists of 400,000,000 shares of IMS
Health Common Stock, 10,000,000 shares of Series Common Stock, $.01 per share,
of the Acquiror ("Series Stock") and 10,000,000 shares of preferred stock, par
value $.01 per share, of the Acquiror (the "IMS Health Preferred Stock"). As of
the close of business on July 8, 1998, there were: (i) 166,812,695 shares of IMS
Health Common Stock issued and outstanding; (ii) 800,000 shares of IMS Health
Common Stock held in the treasury of the Acquiror; (iii) 36,055,000 shares of
IMS Health Common Stock reserved for issuance pursuant to the Acquiror's stock
option and stock purchase plans (such plans, collectively, the "IMS Health Stock
Plans"); (iv) 15,594,988 shares of IMS Health Common Stock issuable upon
exercise of awarded but unexercised stock options; and (v) no shares of Series
Stock or IMS Health Preferred Stock outstanding. Except as set forth above and
except for shares of junior participating preferred stock issuable pursuant to
the Rights Agreement, dated as of June 15, 1998, between the Acquiror and First
Chicago Trust Company of New York, as of the close of business on July 8, 1998
there were no shares of capital stock or other equity securities of the Acquiror
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of the Acquiror are, and all shares which may be issued as described above
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. As of the date of this
Agreement, there are no outstanding bonds, debentures, notes or other
indebtedness or debt securities of the Acquiror having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Acquiror may vote. Except as set forth
above or in Section 3.2(b) of the disclosure schedule delivered by the Acquiror
to PMSI at the time of the execution of this Agreement (the "IMS Health
Disclosure Schedule"), there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements (other than this Agreement), arrangements
or undertakings of any kind to which the Acquiror is a party or by which it is
bound obligating the Acquiror to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity or voting
securities of the Acquiror or obligating the Acquiror to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Except as set forth in Section 3.2(b) of
the IMS Health Disclosure Schedule, there are no outstanding contractual
obligations, commitments, understandings or arrangements of the Acquiror to
repurchase, redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of the Acquiror.
(ii) During the period from July 1, 1998 through the date of this
Agreement, except as set forth in Section 3.2(b) of the IMS Health Disclosure
Schedule, the Acquiror did not (A) issue or permit to be issued any shares of
capital stock, or securities exercisable for or convertible into shares of
capital stock, of the Acquiror, other than pursuant to or as permitted by the
terms of the IMS Health Stock Plans; (B) repurchase, redeem or otherwise
acquire, directly or indirectly through one or more subsidiaries, any shares of
capital stock of the Acquiror; or (C) declare, set aside, make or pay to the
stockholders of the Acquiror dividends or other distributions on the outstanding
shares of capital stock of the Acquiror (other than regular quarterly cash
dividends on the IMS Health Common Stock).
(c) Authority; Noncontravention. The Acquiror has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Acquiror and the consummation by the Acquiror of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Acquiror. This Agreement has been duly executed and delivered
by the Acquiror and (assuming due authorization, execution and delivery by each
of the Sellers and PMSI) constitutes a valid and binding obligation of the
Acquiror, enforceable against it in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing. The execution and
delivery of this Agreement does not, and the consummation by the Acquiror of the
transactions contemplated by this Agreement and compliance by the Acquiror with
the provisions of this Agreement will not, conflict with, or result in any
breach or violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of, or a "put" right with respect to any obligation under, or to a
loss of a material benefit under, or result in the creation of any Lien under,
(i) the certificate of incorporation or by-laws of the Acquiror or any
subsidiary of the Acquiror, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or any contract, agreement, instrument, permit,
concession, franchise or license to which the Acquiror or any subsidiary of the
Acquiror is a party or by which any of their respective properties or assets are
bound or (iii) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law, ordinance,
rule, regulation or arbitration award applicable to the Acquiror or any
subsidiary of the Acquiror or its respective properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect with respect to the
Acquiror. No consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any Governmental Entity or any other
third party is required by or with respect to the Acquiror in connection with
the execution and delivery of this Agreement by the Acquiror or the consummation
by the Acquiror of any of the transactions contemplated hereby, except for the
filing with the SEC and The New York Stock Exchange, Inc. (the "NYSE") of such
reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (ii) the consents and
approvals specified in Schedule III of this Agreement and (iii) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings or notices the failure of which to make or obtain, individually or in
the aggregate, could not reasonably be expected to (x) prevent or materially
delay consummation of the transactions contemplated hereby or performance of any
of the Acquiror's obligations hereunder or (y) have a Material Adverse Effect
with respect to the Acquiror.
(d) IMS Health SEC Documents; Undisclosed Liabilities. The Acquiror
has filed with the SEC a Registration Statement on Form 10 and all reports,
schedules, forms, statements and other documents required to be filed by it
pursuant to the Securities Act and the Exchange Act since the filing of such
Registration Statement on Form 10 (collectively, and in each case including all
exhibits and schedules thereto and documents incorporated by reference therein,
the "IMS Health SEC Documents"). Except as set forth in Section 3.2(d) of the
IMS Health Disclosure Schedule, as of their respective dates, the IMS Health SEC
Documents complied as to form in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such IMS Health SEC
Documents, and none of the IMS Health SEC Documents (including any and all
financial statements included therein) as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except as
set forth in Section 3.2(d) of the IMS Health Disclosure Schedule, except to the
extent that information contained in any IMS Health SEC Document has been
revised or superseded by a later filed IMS Health SEC Document, none of the IMS
Health SEC Documents (including any and all financial statements included
therein) contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Except as disclosed in Section 3.2(d) of the IMS Health
Disclosure Schedule, the consolidated financial statements of the Acquiror
included in all IMS Health SEC Documents filed (the "IMS Health SEC Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited consolidated quarterly
financial statements, as permitted by Form 10-Q of the SEC), applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Acquiror and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
recurring year-end audit adjustments). Except as disclosed in Section 3.2(d) of
the IMS Health Disclosure Schedule, as of the date hereof, neither the Acquiror
nor any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be recognized or disclosed on a consolidated
balance sheet of the Acquiror and its consolidated subsidiaries or in the notes
thereto, except (i) liabilities reflected in the audited consolidated balance
sheet of the Acquiror as of December 31, 1997, (ii) liabilities disclosed in any
SEC Document filed by the Acquiror prior to the date of this Agreement with
respect to any period ending, or date occurring, after December 31, 1997 and
(iii) liabilities incurred since December 31, 1997 in the ordinary course of
business consistent with past practice.
(e) Absence of Certain Changes or Events. Except as disclosed in
Section 3.2(e) of the IMS Health Disclosure Schedule or in the IMS Health SEC
Documents, during the period from December 31, 1997 through and including the
date hereof, there is not and has not been: (i) any Material Adverse Change with
respect to the Acquiror; (ii) any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or give rise to a Material Adverse Change with respect
to the Acquiror; (iii) any action or failure to act which, if it had been taken
or not taken after the execution of this Agreement, would have required the
consent of PMSI pursuant to this Agreement; or (iv) any condition, event or
occurrence which, individually or in the aggregate, could reasonably be expected
to prevent or materially delay the ability of the Acquiror to consummate the
transactions contemplated by this Agreement or perform its obligations
hereunder.
(f) Litigation; Compliance with Laws. (i) Except as disclosed in
Section 3.2(f)(i) of the IMS Health Disclosure Schedule or in the IMS Health SEC
Documents, as of the date hereof there is (1) no suit, action, arbitration or
proceeding pending, and (2) to the knowledge of the Acquiror, no suit, action,
arbitration or proceeding threatened against or investigation pending, in each
case with respect to the Acquiror or any of its subsidiaries that, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect with respect to the Acquiror or prevent or materially delay the ability
of the Acquiror to consummate the transactions contemplated by this Agreement or
to perform its obligations hereunder nor is there any judgment, decree,
citation, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Acquiror or any of its subsidiaries which, individually
or in the aggregate, has or could reasonably be expected to have a Material
Adverse Effect with respect to the Acquiror or prevent or materially delay the
ability of the Acquiror to consummate the transactions contemplated by this
Agreement or to perform its obligations hereunder. To the knowledge of the
Acquiror, except as disclosed in Section 3.2(f)(i) of the IMS Health Disclosure
Schedule or in any SEC Document filed by the Acquiror prior to the date of this
Agreement with respect to any period ending, or date occurring, after December
31, 1997, as of the date hereof there is no reasonable basis for any action,
suit, arbitration or proceeding that, individually or in the aggregate, could
reasonable be expected to have a Material Adverse Effect with respect to the
Acquiror or prevent or materially delay the ability of the Acquiror to
consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder.
(ii) Except as disclosed in Section 3.2(f)(ii) of the IMS Health
Disclosure Schedule, the businesses of the Acquiror and its subsidiaries are not
being conducted in violation of any law (domestic or foreign), ordinance or
regulation of any Governmental Entity, except for possible violations which,
individually or in the aggregate, do not and could not reasonably be expected to
have a Material Adverse Effect with respect to the Acquiror.
(g) Brokers. No broker, investment banker, financial advisor or other
person, other than Goldman, Sachs & Co., the fees and expenses of which will be
paid by the Acquiror, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Acquiror. The Acquiror agrees to indemnify PMSI and to hold PMSI harmless
from and against any and all claims, liabilities or obligations with respect to
any fee, commission or expense asserted by any person on the basis of any act or
statement alleged to have been made by the Acquiror or its affiliates.
(h) Purchase for Investment. The Acquiror is acquiring the Capital
Stock of the Transferred Subsidiaries (and, if applicable, the Belgian
Subsidiaries) for its own account. The Acquiror is aware that its acquisition of
such Capital Stock has not been registered under the Securities Act or any state
or other securities laws. The Acquiror further acknowledges and agrees that such
shares may not be (and will not be) sold or transferred except in compliance
with the Securities Act and applicable state or other securities laws.
(i) Tax and Accounting Matters. To the knowledge of the Acquiror,
except for any action provided or contemplated by this Agreement or any
Transaction Document (as defined in Section 9.3), as to which the Acquiror makes
no representation or warranty, neither the Acquiror nor any of its affiliates
has taken or agreed to take any action that would prevent the transfer of the
equity interests in each entity listed on Schedule I and Schedule II hereto and
the Belgian Subsidiaries from constituting a reorganization within the meaning
of Section 368(a)(1) of the Code.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business. (a) Conduct of Business of
Transferred Subsidiaries. During the period from the date of this Agreement to
the Closing Date, except as otherwise expressly contemplated by the terms of
this Agreement or as reflected in the Pro Forma Balance Sheet, and except as
approved by the Acquiror, PMSI shall cause each of the Transferred Subsidiaries
to act and carry on its business in the ordinary course of business consistent
with past practice and to use its reasonable efforts to preserve substantially
intact its current business organizations, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and others having
significant business dealings with it. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Closing
Date, except as otherwise expressly contemplated by the terms of this Agreement,
PMSI shall not permit any of the Transferred Subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its Capital Stock, (y) split, combine
or reclassify any of its Capital Stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its Capital Stock, or (z) purchase, redeem or otherwise acquire
any shares of its Capital Stock or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its Capital Stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities or
any other securities or equity equivalents (including without limitation
stock appreciation rights);
(iii) amend its certificate of incorporation, by-laws or comparable
charter or organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(v) other than as set forth in Section 4.1(a)(v) of the PMSI
Disclosure Schedule with respect to the sale of certain assets at not less
than the fair market value thereof, sell, lease, license, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of any of
its properties or assets, except sales of inventory in the ordinary course
of business consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any of its debt securities, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary course
of business consistent with past practice or (B) make any loans, advances
or capital contributions to, or investments in, any other person;
(vii) acquire or agree to acquire any assets, other than inventory in
the ordinary course of business consistent with past practice, or make or
agree to make any capital expenditures, except capital expenditures that do
not exceed $25,000 in the aggregate with respect to all of the Transferred
Subsidiaries;
(viii) pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction of (x) liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as
in effect on the date hereof and other liabilities and obligations not
exceeding $50,000 individually or $100,000 in the aggregate with respect to
all of the Transferred Subsidiaries, or (y) claims settled or compromised
to the extent permitted by Section 4.1(a)(xii), or waive, release, grant,
or transfer any rights of material value or modify or change in any
material respect any existing material license, lease, contract or other
document, other than in the ordinary course of business consistent with
past practice;
(ix) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(x) enter into or amend any collective bargaining agreement;
(xi) change any material accounting principle used by it, except as
required by generally accepted accounting principles, or any policy or
procedure with respect to billing or payment practices;
(xii) settle or compromise any litigation or claim (whether or not
commenced prior to the date of this Agreement), other than settlements
or compromises of litigation or claims that neither provide for
injunctive or similar relief that could be material to the business or
operations of the Transferred Subsidiaries nor require payments (after
giving effect to insurance proceeds actually received or reasonably
believed by management of PMSI to be receivable) in settlement or
compromise exceeding $25,000, provided that the aggregate amount paid in
connection with the settlement or compromise of all such litigation matters
shall not exceed $50,000 with respect to the Transferred Subsidiaries;
(xiii) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, PMSI or any of
PMSI's other subsidiaries, including, without limitation, any transactions,
agreements, arrangements or understandings with any affiliate or other
Person covered under Item 404 of SEC Regulation S-K that would be required
to be disclosed under such Item 404;
(xiv) transfer to any person or entity any rights to its Intellectual
Property, other than the provision of data or the granting of end-user
licenses to customers in the ordinary course of business consistent with
past practice;
(xv) 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 its products or technology;
(xvi) authorize, or commit or agree to take, any of the foregoing
actions; or
(xvii) amend any Tax Return, change or make any election with respect
to Taxes, change any method of accounting with respect to Taxes, or settle
or compromise any liability with respect to Taxes.
(b) Changes in Employment Arrangements. PMSI shall not permit any of
the Transferred Subsidiaries or any of the Belgian Subsidiaries to (i) adopt or
amend (except as may be required by law) any plan, program, arrangement or
agreement for the benefit or welfare of any employee, officer, director or
former director, officer or employee or (ii) other than increases for
individuals (other than executive officers and directors) in the ordinary course
of business consistent with past practice, increase the compensation or fringe
benefits of any director, officer, employee or former director, officer or
employee or pay any benefit not required by any existing plan, program,
arrangement or agreement; provided that the foregoing shall not prohibit any
Transferred Subsidiary or any Belgian Subsidiary from entering into commitments
with respect to the payment of "stay bonuses" and similar incentive compensation
to employees (other than PMSI's senior executive officers) not exceeding
$100,000 with respect to any individual employee or $2.3 million (reduced by
commitments made or amounts paid to such persons, including employees of PMSI
and its Subsidiaries who are not employees of the Transferred Subsidiaries or
the Belgian Subsidiaries, since March 23, 1998) in the aggregate.
(c) Severance. Except as contemplated by the proviso to the
immediately preceding paragraph (c), PMSI shall not permit any of the
Transferred Subsidiaries or any of the Belgian Subsidiaries to grant any new or
modified severance or termination arrangement or increase or accelerate any
benefits payable under its severance or termination pay policies in effect on
the date hereof.
(d) Nominee Shares. PMSI shall cause any Person who owns any shares of
Capital Stock of any of the Transferred Subsidiaries or any of the Belgian
Subsidiaries, whether in trust or pursuant to any other nominee arrangement with
PMSI or any of its Subsidiaries, to transfer, effective not later than the
Closing (or the date of the Belgian Transfer, if applicable, in the case of the
Belgian Subsidiaries), all right, title and interest in and to such shares to
the Acquiror or any person designated by the Acquiror.
SECTION 4.2. Other Actions. Neither the Sellers, PMSI nor the Acquiror
shall, or shall permit any of their respective subsidiaries to, (i)
intentionally take any action or fail to take any action that, if taken or not
taken on or prior to the date of this Agreement, would have resulted in any of
its representations and warranties set forth in this Agreement being untrue in
any material respect, or (ii) intentionally take any action that would or
reasonably might be expected to result in any of the conditions set forth in
Article VI not being satisfied. Each of the Sellers and PMSI, on the one hand,
and the Acquiror, on the other hand, shall promptly advise the other party or
parties orally and in writing of (x) any action or failure to act of the type
set forth in clause (i) above, (y) the failure by such party or parties to
comply with any covenant, condition or agreement hereunder and (z) any event
that could reasonably be expected to cause the conditions set forth in Article
VI not being satisfied; provided, however, that no such notice shall affect the
representations, warranties, covenants and agreement of the parties or the
conditions to their obligations hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Access to Information; Confidentiality. (a) Each of PMSI
and the Acquiror shall, and shall cause its respective subsidiaries, officers,
employees, counsel, financial advisors and other representatives to, afford to
the other party and its representatives reasonable access during normal business
hours, during the period prior to the Closing Date, to its properties, books,
contracts, commitments, personnel and records, and, during such period, each of
PMSI and the Acquiror shall, and shall cause its respective subsidiaries,
officers, employees and representatives to, furnish promptly to the other party
(i) a copy of each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of Federal or state
securities laws and (ii) all other information concerning its business,
properties, financial condition, operations and personnel as such other party
may from time to time reasonably request. Each of PMSI and the Acquiror will
hold, and will cause its respective directors, officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates, successors
and assigns to hold, any nonpublic information in confidence to the extent
required by, and in accordance with, the provisions of the confidentiality
agreement, dated January 14, 1998, between the Assignor and PMSI (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect following the execution and delivery of this Agreement
notwithstanding any contrary provision thereof until the second anniversary of
either the Closing Date or the date of termination of this Agreement (and shall
be binding upon the Acquiror to the same extent as if it were an original party
thereto); provided that, following the Closing, (i) the Confidentiality
Agreement shall not be construed to require that the Acquiror or any of its
affiliates or representatives hold in confidence any information pertaining to
the Transferred Subsidiaries (or, following the date of the Belgian Transfer,
the Belgian Subsidiaries) and (ii) the Confidentiality Agreement shall be
construed to require PMSI and its affiliates to hold in confidence any
confidential information relating to the Transferred Assets (and, following the
date of the Belgian Transfer, the Belgian Subsidiaries) to the same extent PMSI
would be required to hold in confidence information pertaining to the Acquiror.
(b) No investigation pursuant to this Section 5.1 or otherwise shall
affect any representations or warranties of the parties herein or the conditions
to the obligations of the parties hereto.
SECTION 5.2. Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement, including (i) obtaining all
consents, approvals, waivers, licenses, permits or authorizations as are
required to be obtained (or, which if not obtained, would result in an event of
default, termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any Governmental
Entities or third parties in connection with the transactions contemplated by
this Agreement, (ii) defending any lawsuits or other proceedings challenging
this Agreement, (iii) accepting and delivering additional instruments necessary
to consummate the transactions contemplated by this Agreement and (iv) for a
period of four months commencing on the Closing Date, providing such assistance,
if any, with respect to the methods of operation of PMSI and its subsidiaries
(other than the Transferred Subsidiaries), on the one hand, and the Transferred
Subsidiaries and the Belgian Subsidiaries, on the other hand, as may be
necessitated by the transactions contemplated by this Agreement.
SECTION 5.3. Public Announcements. Neither the Acquiror, on the one
hand, nor any of the Sellers or PMSI, on the other hand, will issue any press
respect to the transactions contemplated by this Agreement without the other
release or public statement with party's prior consent (such consent not to be
unreasonably withheld or delayed), except as may be required by applicable law,
court process or by obligations pursuant to any agreement with any securities
exchange or quotation system on which securities of the disclosing party are
listed or quoted. In addition to the foregoing, the Acquiror and PMSI will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any such press release or other public statements
with respect to such transactions. The parties agree that the initial press
release or releases to be issued with respect to the transactions contemplated
by this Agreement shall be mutually agreed upon prior to the issuance thereof.
SECTION 5.4. Benefit and Related Matters. (a) Prior to the Closing
Date, the Acquiror shall establish an employee stock option plan, having terms
and conditions consistent with this paragraph (a) and otherwise comparable in
all material respects to PMSI's Stock Option and Restricted Stock Purchase Plan,
pursuant to which it will grant, as of the Closing Date:
(i) options to purchase shares of IMS Health Common Stock (the
"Series A Substitute Options") to certain employees of the Transferred
Subsidiaries and other individuals named in a letter previously delivered
to PMSI by the Acquiror and designated therein as Series A employees (each
such individual, a "Series A Designated Optionee"); provided that the
Designated Optionee agrees in writing, in consideration of such grant, to
the cancellation (without payment of consideration by PMSI) of all options
to purchase PMSI Common Stock ("PMSI Options") held by such Designated
Optionee immediately prior to the Closing Date; and
(ii) options to purchase shares of IMS Health Common Stock to
certain employees of the Transferred Subsidiaries and other individuals who
are named in a letter delivered to PMSI by the Acquiror and designated as
Series B Designated Optionees and, within 30 days of the Closing, are
offered employment or continued employment with the Transferred
Subsidiaries or with the Acquiror or one of its Affiliates (each such
individual, a "Series B Designated Optionee", together with the Series A
Designated Optionees, the "Designated Optionees"), so long as such employee
confirms acceptance of such offer of employment within 5 days of receipt
thereof and agrees to the cancellation (without payment of consideration by
PMSI) of all options to purchase PMSI Options held by such Series B
Designated Optionee as of the date of acceptance (such options, together
with any PMSI Options held by such Series B Designate Optionee that were
outstanding on the Closing Date and subsequently expired by their terms
without exercise or payment of consideration by PMSI, being referred to as
the "Series B Substitute Options"; together with the Series A Substitute
Options, the "Substitute Options"); provided that the Series B Designated
Optionee continues to be employed for 30 days from the date of commencement
of his or her employment.
Except as herein provided, the grant of the Substitute Options shall be subject
to terms and conditions comparable in all material respects to the PMSI Options.
The number of shares of IMS Health Common Stock covered by a Substitute Option
granted to Designated Optionees shall be equal to 22.36% of the number of shares
of PMSI Common Stock covered by the corresponding PMSI Option. The exercise
price of a Substitute Option granted to Designated Optionees shall be equal to
the exercise price of the corresponding PMSI Option (reduced by $3.00 per share
of PMSI Common Stock purchasable pursuant thereto) multiplied by 4.4719.
(b) Within 30 days after the Closing, the Acquiror shall deliver to
PMSI a list of holders of PMSI Options who: (i) are either employees of the
Transferred Subsidiaries (excluding Designated Optionees) or mutually agreed
individuals who are employees of PMSI or other subsidiaries of PMSI; and (ii)
are being offered continued employment with the Transferred Subsidiaries or
employment with the Acquiror or one of its other subsidiaries (collectively, the
"Supplemental Optionees"). The Acquiror will grant Substitute Options (the
"Supplemental Substitute Options") to such of the Supplemental Optionees as
confirm to the Acquiror, within 5 days after the date of receipt of such letter:
(i) that they accept such offer of continued employment or employment and (ii)
that they agree to the cancellation (without payment of consideration by PMSI)
of all PMSI Options held by such Supplemental Optionee as of the date of such
acceptance (such options, together with any PMSI Options held by such
Supplemental Optionee that were outstanding on the Closing Date and subsequently
expired by their terms without exercise or payment of consideration by PMSI,
being referred to as the "Measurement Options"). The number of shares of IMS
Health Common Stock covered by a Supplemental Substitute Option shall be equal
to 18.73% of the number of shares of PMSI Common Stock covered by the
corresponding Measurement Options. The exercise price of a Supplemental
Substitute Option shall be equal to the exercise price of the corresponding PMSI
Option (reduced by $3.00 per share of PMSI Common Stock purchasable pursuant
thereto) multiplied by 5.3395.
(c) Employees of the Transferred Subsidiaries as of the Closing Date
who (i) are neither Designated Optionees nor Supplemental Optionees or (ii) are
Supplemental Optionees who do not confirm to the Acquiror, within 5 days after
the Closing Date (the "Payment Date"), that they have accepted an offer of
continued employment ("Cash Payees"), shall be paid, 10 days after the Closing
Date, an amount in cash equal to (x) the number of PMSI Options held by such
Cash Payee on the Payment Date that were vested on the Closing Date, so long as
the Cash Payee has agreed to the cancellation of such PMSI Options (without
payment of consideration by PMSI), multiplied by (y) the excess of $11.725 over
the exercise price of the applicable PMSI Option.
(d) On the Closing Date, the Acquiror will offer to grant, as of the
Closing Date, options to purchase shares of IMS Health Common Stock, at fair
market value as of the Closing Date, to certain employees of the Transferred
Subsidiaries pursuant to the Acquiror's 1998 Key Employees Stock Incentive Plan;
the names of such employees and the number of options to be offered to each have
been set forth in a letter delivered by the Acquiror to PMSI.
(e) The Acquiror shall cause the Transferred Subsidiaries to maintain
employee benefit plans (as defined in Section 3(3) of ERISA) for the benefit of
employees of the Transferred Subsidiaries, which are, in the aggregate, no less
favorable than those that cover similarly situated employees of the Acquiror.
(f) The Acquiror shall cause the Transferred Subsidiaries to (i) waive
all limitations as to preexisting conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
employees of the Transferred Subsidiaries under any Acquiror welfare plan that
such employees may be eligible to participate in after the Closing Date and (ii)
provide each employee of the Transferred Subsidiaries with credit for any
co-payments and deductibles paid prior to the Closing Date in satisfying any
applicable deductible or out-of-pocket requirements under any Acquiror welfare
plans that such employees are eligible to participate in after the Closing.
(g) The Acquiror acknowledges that it intends to offer employment
agreements to those employees of PMSI who will become employees of the Acquiror
or one of its subsidiaries (including the Transferred Subsidiaries) immediately
following the Closing and who are parties to employment agreements with PMSI or
its subsidiaries disclosed in writing to the Acquiror prior to the execution of
this Agreement (the "PMSI Employment Agreements"). The Acquiror shall use
reasonable efforts to negotiate mutually acceptable employment agreements with
such employees with employment, severance and benefit terms comparable to a
equivalent level employee of the Acquiror and its subsidiaries, but in no event
shall the Acquiror or any of its subsidiaries (including the Transferred
Subsidiaries) have any liability or obligation with respect to the PMSI
Employment Agreements.
SECTION 5.5. Stock Exchange Listing. The Acquiror shall use all
reasonable efforts to cause the IMS Health Shares and the shares of IMS Health
Common Stock issuable upon exercise of the Substitute Options to be approved for
listing on the NYSE, subject to official notice of issuance.
SECTION 5.6. Noncompetition. (a) Each of the Sellers and PMSI agrees
that, in consideration of the acquisition of the Transferred Subsidiaries by the
Acquiror hereunder, it shall not and shall cause each of its subsidiaries and
their respective successors and assigns not to, at any time prior to the
applicable Expiration Date (as hereinafter defined), directly or indirectly
(including, without limitation, providing assistance to any Person to take any
of the following actions): (1) own, manage, operate, control or invest in any
business, venture or activity (i) engaged, anywhere in Europe (including Eastern
Europe but excluding Belgium until such time, if any, as the Belgian
Subsidiaries are purchased pursuant to Section 1.2) or Japan, in the Market
Research Business (as hereinafter defined), or (2) engaged, anywhere in the
world, in the development, use or exploitation of Pharmaceutical Databases (as
hereinafter defined) for one or more of the following activities: (A) management
of sales forces; (B) measurement of sales force performance or product
performance; or (C) creation of physician profiles (whether based on actual
prescribing activity or surveys) for targeting purposes (all of the foregoing
being herein referred to as "PD Businesses" and, together with the Market
Research Business with respect to the territories described, as "Restricted
Businesses"); or (ii) develop at any time prior to the applicable Expiration
Date, Pharmaceutical Databases for use in any Restricted Business following the
applicable Expiration Date. Notwithstanding anything in this Section 5.6 that
may be construed to the contrary, the restrictions contained in this paragraph
(a) shall not apply to any third party that currently is not an affiliate of
PMSI and that hereafter acquires PMSI or any of its subsidiaries (it being
agreed, however, that no such acquisition shall relieve PMSI or any of its
subsidiaries from any of their obligations hereunder). For purposes of this
Section 5.6 the following terms have the specified meanings:
"Expiration Date" means (i) the second anniversary of the Closing
Date in the case of the Market Research Business and (ii) the third
anniversary of the Closing Date in the case of the PD Businesses;
"Market Research Business" means development, use or exploitation
of national pharmacy sales audits, medical indices (national diagnosis and
therapy studies similar to the Scott-Levin Physician Drug and Diagnosis
Audit) or prescription audit (similar to Scott-Levin Source Prescription
Audit); and
"Pharmaceutical Databases" means (i) pharmacy-derived
prescription databases, (ii) databases measuring sales of ethical or
over-the-counter drugs into or out of pharmacies or hospitals and (iii)
databases derived from surveys of physicians used to create syndicated
profiles of prescribing physicians.
(b) Each of the Sellers and PMSI further agrees that, for a period of
one year after the Closing Date, neither the Sellers nor PMSI will, without the
prior written consent of the Acquiror, directly or indirectly (including,
without limitation, providing assistance to any Person to take any of the
following actions), solicit (otherwise than by way of advertisements placed in
general circulation that are not targeted at persons to whom this paragraph
applies) the employment of, or hire or otherwise employ, or attempt to solicit,
hire or otherwise employ, any person who was an employee of any of the
Transferred Subsidiaries or of the Acquiror or any of its affiliates on the
Closing Date to leave the employ of the Acquiror or its affiliates (including
the Transferred Subsidiaries) unless such person's employment has been
terminated by the Acquiror or such affiliate or unless such person has left the
Acquiror's or such affiliate's employment more than six months prior thereto.
(c) The Acquiror agrees that, for a period of one year after the
Closing Date, it will not, without the prior written consent of PMSI, directly
or indirectly (including, without limitation, providing assistance to any Person
to take any of the following actions), solicit (otherwise than by way of
advertisements placed in general circulation that are not targeted at persons to
whom this paragraph applies) the employment of, or hire or otherwise employ, or
attempt to solicit, hire or otherwise employ, any person who was an employee
of PMSI or any of its Subsidiaries (other than the Transferred Subsidiaries) on
the Closing Date to leave the employ of PMSI or its Subsidiaries unless such
person's employment has been terminated by PMSI or such Subsidiary or unless
such person has left PMSI's or such Subsidiary's employment more than six months
prior thereto.
(d) Each of the Sellers and PMSI further agrees that it will not sell,
license or otherwise transfer or assign any of its subsidiaries, or any of the
assets of PMSI, any Seller or any of their respective subsidiaries, unless, in
connection therewith and as a condition thereto, full and effective provision is
made whereby the transferee thereof agrees that none of the proprietary rights
(including, without limitation, Intellectual Property) or other assets of PMSI,
such Seller or subsidiary will be used in any manner whatsoever by such
transferee, successor or assignee or any of its affiliates (including, without
limitation, PMSI, any Seller or any of their respective subsidiaries), prior to
the date which is three years after the Closing Date, in any Restricted Business
or in the development at any time prior to the applicable Expiration Date of
Pharmaceutical Databases for use in any Restricted Business following the
applicable Expiration Date.
SECTION 5.7. Termination of Certain Obligations. (a) PMSI agrees that,
effective upon the Closing Date, all obligations (including, without limitation,
all guarantees, letters of comfort, intercompany payables and other intercompany
liabilities) owed by any of the Transferred Subsidiaries to PMSI or any of its
subsidiaries (other than another Transferred Subsidiary) or any of its
directors, officers or employees shall no longer be in force and shall have no
further force or effect other than as may be expressly set forth in the
Allocation Agreement. PMSI further agrees that it will cause each of its
subsidiaries to execute and deliver to the relevant Transferred Subsidiary such
subsidiary's agreement that all obligations of any Transferred Subsidiary to
such subsidiary shall, at and after the Closing Date, no longer be in force or
have any force or effect other than as may be expressly set forth in the
Allocation Agreement.
(b) PMSI agrees that, effective as of June 24, 1998, all obligations
of Walsh International Inc. ("WII") or any of its subsidiaries to PMSI or any of
its subsidiaries (other than the promissory note issued by WII to PMSI in an
aggregate principal amount of $1.2 million (the "Walsh Note")), outstanding as
of such date shall no longer be in force and shall have no further force or
effect. PMSI further agrees that it will cause each of its subsidiaries to
execute and deliver to WII such subsidiary's agreement that all such obligations
of WII or any of its subsidiaries to such subsidiary shall, as of June 24, 1998,
no longer be in force or have any force or effect. The preceding sentence shall
not be construed to terminate the Pharbase License Agreement, dated as of July
1, 1997 (the "Pharbase Agreement"), by and between WII and PMSI. PMSI and the
Acquiror hereby agree, and the Acquiror shall cause WII to agree, that the
Pharbase Agreement is hereby amended as of the Closing Date as follows: (i) by
deleting Clause 2 in its entirety and substituting in lieu thereof the
following: "The term of the license shall commence on the date hereof and
continue until July 31, 1999.", (ii) by deleting the first and second sentences
of Clause 3(a) in their entirety and substituting in lieu thereof the following:
"In consideration for each license right granted to PMSI hereunder, PMSI shall
pay to Walsh a fee of $230,000 for each fiscal year up to and including the year
ended June 30, 1998, $20,000 for the period from July 1, 1998 to July 31, 1998
and $50,000 for the period from August 1, 1998 to June 30, 1999 and (iii) the
Territories (as such term is defined in the Pharbase Agreement) shall be deemed
to include only Belgium. The second sentence of this subparagraph also shall not
be construed to affect any obligation of PMSI or any of its subsidiaries to WII
or any of its subsidiaries pursuant to leases and sub-leases.
SECTION 5.8. Taxes. PMSI and the Sellers shall pay all Taxes of PMSI
and its affiliates, the Transferred Subsidiaries, the Belgian Subsidiaries and
the Acquiror and its Affiliates resulting from (i) actions taken prior to or on
the Closing Date by PMSI or any of its subsidiaries in contemplation of this
Agreement (including Section 5.11 hereof) and (ii) any actions undertaken by any
of PMSI or its affiliates or any of the Acquiror or its affiliates to effect the
transfer of the Capital Stock of the Transferred Subsidiaries and the Belgian
Subsidiaries and with respect to the transfer and/or capitalization of the
intercompany indebtedness of any of the Transferred Subsidiaries or Belgian
Subsidiaries in connection with this Agreement whether prior, on or subsequent
to the Closing, other than taxes resulting from actions of the Acquiror or its
affiliates not contemplated by this Agreement or taxes resulting from a
reduction, limitation or change in any net operating loss or other tax attribute
of the Transferred Subsidiaries or the Belgian Subsidiaries. Notwithstanding the
foregoing, all transfer, sales or similar taxes, and all documentary or other
stamp taxes, arising out of or related to the transfer of capital stock of the
Transferred Subsidiaries or the Belgian Subsidiaries shall be allocated between
the Sellers, on the one hand, and the Acquiror, on the other hand, pursuant to
the law of the jurisdiction of the applicable Transferred Subsidiary or Belgian
Subsidiary, as the case may be.
SECTION 5.9. Scott-Levin Data Supply Agreement. (a) In the event that,
at any time following the Closing and prior to June 30, 2002, as a result of a
Change of Control Event (as hereinafter defined), Source Informatics America
Inc. ("Source America") ceases to provide data to PMSI Scott-Levin Inc.
("Scott-Levin") pursuant to the Services Agreement dated as of December 15, 1997
among Source America, Scott-Levin and PMSI (such agreement, as in effect on the
date hereof, being hereinafter referred to as the "Source Agreement"), the
Acquiror agrees to provide the Replacement Data (as hereinafter defined) to
Scott-Levin upon the terms and for the period hereinafter specified in this
Section 5.9.
(b) Subject to the terms and conditions herein (including, without
limitation, the terms and conditions set forth in Exhibit D), the Acquiror shall
provide the Replacement Data for a period beginning as promptly as practicable
following notice in writing from PMSI to the Acquiror of the cessation of data
provision under the circumstances described in paragraph (a) above and for the
period set forth in Exhibit D.
(c) The Acquiror shall provide the Replacement Data at the prices and
substantially on the terms set forth in Exhibit D hereto.
(d) In addition to the terms and conditions set forth in Exhibit D, it
also will be a condition to the obligation of the Acquiror to provide
Replacement Data pursuant to this Section 5.9 that Scott-Levin (i) shall have
ceased (and thereafter shall continue to refrain from) all data provision to
Source America and its affiliates pursuant to the Source Agreement or otherwise,
(ii) shall not be permitted to use the Source name and, at the option of the
Acquiror, may be required to use the name "IMS Health" or "IMS", in a manner
reasonably acceptable to PMSI, in connection with the packaging, distribution or
marketing (internally or externally) of any product or service that utilizes
such Replacement Data and (iii) such data shall not be available from any single
provider other than Source America or the Acquiror. Further, PMSI agrees that it
will cause Scott- Levin to utilize all Replacement Data solely and exclusively
in accordance with the terms and conditions set forth in Exhibit D and to
refrain from utilizing any of the Replacement Data (whether internally or
otherwise) for any other purpose whatsoever (including, without limitation,
other products now or hereafter developed or marketed by PMSI, Scott-Levin or
any of their affiliates or successors).
(e) For purposes of this Section 5.9: (i) the term "Change of Control
Event" means a change of control of Scott- Levin within the meaning of Section
5(b) of the Source Agreement (other than a change of control arising in any
transaction or series of transactions (A) as a result of which Scott-Levin or
any of its successors becomes a direct or indirect affiliate of National Data
Corporation or Source America or any of their respective successors or
affiliates or (B) the principal purpose of which is the re-sourcing of data
utilized for purposes of the products that as of the Closing Date utilize the
data supplied by Source America pursuant to the Source Agreement); and (ii)
"Replacement Data" means data described in Exhibit D that is to be supplied by
the Acquiror, but only to the extent such data can be provided in a manner that
(x) will not cause significant disruption of other business operations of the
Acquiror and its subsidiaries, (y) will utilize data collected and maintained by
the Acquiror and its subsidiaries for purposes other than satisfying its
obligations set forth in this Section 5.9 and (z) will not violate or conflict
with any Requirement of Law or any material Contractual Obligation (each as
defined in Section 9.3) (but excluding Contractual Obligations entered into by
the Acquiror for the purpose of evading its obligations hereunder) of the
Acquiror or any of its affiliates.
SECTION 5.10. Covenants With Respect to Holding and Disposition of IMS
Health Shares and the Bugamor Shares. (a) In furtherance of the intention of
PMSI and the Sellers to hold the IMS Health Shares and the Bugamor Shares
exclusively for investment pending any disposition thereof, PMSI and the Sellers
agree that, for so long as any IMS Health Shares and the Bugamor Shares are
beneficially owned by any of them or any other controlled affiliate of PMSI
(PMSI, the Sellers and such affiliates being referred to as the "PMSI Group"):
(i) no member of the PMSI Group shall deposit any IMS Health
Shares or Bugamor Shares in a voting trust or subject any IMS Health Shares
and the Bugamor Shares to any arrangement or agreement with respect to the
voting of such IMS Health Shares or Bugamor Shares;
(ii) no member of the PMSI Group shall solicit proxies or become
a "participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the Exchange Act);
(iii) no member of the PMSI Group shall, directly or indirectly,
acquire any Capital Stock of IMS Health so long as any member of the PMSI
Group or any of its affiliates owns any of the IMS Health Shares or Bugamor
Shares;
(iv) no member of the PMSI Group shall join a partnership,
limited partnership, syndicate or other group, or otherwise act in concert
with any other person, for the purpose of acquiring, holding, voting or
disposing of shares of IMS Health Common Stock, or otherwise become a
"person" within the meaning of Section 13(d)(3) of the Exchange Act (in
each case other than solely with members of the PMSI Group exclusively in
their capacity as beneficial owners of the IMS Health Shares or Bugamor
Shares); and
(v) no member of the PMSI Group will have any right to (A)
participate in the formulation, determination or direction of any business
decisions of the Acquiror, (B) nominate candidates to the board of
directors of the Acquiror or any of its affiliates, (C) propose corporate
action requiring the approval of the stockholders of the Acquiror, (D) have
a controlling stockholder, director, officer or employee of any member of
the PMSI Group simultaneously serve as an officer or director of the
Acquiror or any of its affiliates, (E) inspect or otherwise obtain access
to the books and records of the Acquiror under the Delaware General
Corporation Law or otherwise or (F) otherwise obtain information from the
Acquiror or any of its affiliates, other than publicly available documents.
(b) PMSI and the Sellers represent and warrant that they intend to
cause all members of the PMSI Group to dispose of all of the IMS Health Shares
and the Bugamor Shares in an orderly manner promptly following the Closing,
subject to compliance with applicable federal and state securities laws. Subject
to market conditions or other circumstances that would affect the fiduciary
obligations of the board of directors of PMSI (and assuming compliance by the
Acquiror with its obligations under the Registration Rights Agreement), PMSI
agrees that it will cause all members of the PMSI Group to dispose of all of the
IMS Health Shares and Bugamor Shares (in public, private or other transactions)
not later than 18 months after the Closing Date.
SECTION 5.11. Capital Contributions of Intercompany Debt. (a) Pursuant
to the forms of agreement attached as Exhibit G hereto (the "Capital
Contribution Agreements"), the Seller has caused the intercompany indebtedness
owed by each Transferred Subsidiary shown on Schedule IV to be contributed to
the capital of such Transferred Subsidiary. As expeditiously as possible
following the Closing, the Acquiror shall take all ministerial action under the
law of the relevant foreign jurisdiction to reflect the contribution to capital
of such intercompany indebtedness. PMSI and the Sellers shall pay all expenses
incurred in connection with the capitalization of such intercompany
indebtedness, whether incurred prior to, on or subsequent to the closing.
SECTION 5.12. Reorganization Treatment. Except for actions provided or
contemplated by this Agreement or any Transaction Document (as to which the
Acquiror makes no covenant or agreement), neither the Acquiror nor any of its
affiliates will take any action that would, solely as a result thereof, prevent
the transfer of the equity interests in each entity listed on Schedules I and II
hereto and each of the Belgian Subsidiaries to the Acquiror and its affiliates
from constituting a reorganization within the meaning of Section 368(a)(1) of
the Code.
SECTION 5.13. Bugamor Building. As promptly as practicable after the
Closing Date, PMSI shall arrange for the sale of the building owned by PMSI
Database B.V. After the consummation of such sale, the Acquiror shall issue
shares of IMS Health Common Stock (the "Bugamor Shares") to PMSI in a number of
shares (rounded to be nearest whole share), calculated using the average of the
closing sales prices of IMS Health Common Stock on the New York Stock Exchange
Composite Transaction Tape on ten consecutive trading days immediately preceding
the second trading date prior to the day on which the sale of the Bugamor
Building is closed, equal to the proceeds of such sale minus (a) all Taxes,
costs, expenses and liabilities incurred by the Acquiror or any of affiliates in
connection with such sale minus (b) the sale currency equivalent of $2 million.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Obligations of Each Party to Effect the
Transactions to Be Effected at the Closing. The obligations of each party to
effect the transactions to be effected on the Closing Date shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions,
any or all of which may be waived, in whole or in part, to the extent permitted
by applicable law:
(a) No Order. No Governmental Entity or federal, state or foreign
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which materially restricts, prevents or prohibits consummation of
the transactions to be effected on the Closing Date; provided, however, that the
parties shall use all reasonable efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted.
(b) NYSE Listing. The IMS Health Shares to be issued in accordance
with this Agreement on the Closing Date shall have been authorized for listing
on the NYSE upon official notice of issuance.
(c) Other Approvals. All authorizations, consents, waivers, orders or
approvals required to be obtained, and all filings, notices or declarations
required to be made, by PMSI, the Sellers and the Acquiror prior to the
consummation of the transactions to be effected on the Closing Date shall have
been obtained from, and made with, all required Governmental Entities except for
such authorizations, consents, waivers, orders, approvals, filings, notices or
declarations the failure to obtain or make would not have a Material Adverse
Effect with respect to the Acquiror (with respect to obligations of the
Acquiror) or PMSI (with respect to the obligations of PMSI and the Sellers).
SECTION 6.2. Additional Conditions to Obligations of the Acquiror. The
obligation of the Acquiror to effect the transactions to be effected on the
Closing Date are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties (including the Designated Representations) of the Sellers and PMSI
contained in this Agreement that is qualified as to "materiality," "Material
Adverse Change" or "Material Adverse Effect" shall be true and correct, and each
of the other representations and warranties (including the Designated
Representations) of the Sellers and PMSI contained in this Agreement shall be
true and correct in all material respects, in each case as of the Closing Date
as though made on and as of the Closing Date, except (i) for changes
specifically permitted by this Agreement and (ii) that those representations and
warranties that address matters only as of a particular date shall have been
true and correct as of such date. The Acquiror shall have received a certificate
of the chief executive officer or chief financial officer of PMSI to such
effect.
(b) Agreements and Covenants. Each Seller and PMSI shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date. The Acquiror shall have received a certificate of the chief
executive officer or chief financial officer of PMSI to that effect.
(c) No Litigation. There shall not be pending by any Governmental
Entity any suit, action or proceeding (i) challenging or seeking to restrain or
prohibit the consummation of the transactions to be effected on the Closing Date
or seeking to obtain from the Acquiror, any of its affiliates or any of the
Transferred Subsidiaries any material amount of damages, (ii) seeking to
prohibit or limit the ownership or operation by the Acquiror or any of its
affiliates of any material portion of their business or assets or to dispose of
or hold separate any material portion of their business or assets, as a result
of the transactions to be effected on the Closing Date, (iii) seeking to impose
limitations on the ability of the Acquiror to acquire or hold, or exercise full
rights (including voting rights) of ownership of, any shares of the capital
stock of any of the Transferred Subsidiaries or (iv) seeking to prohibit the
Acquiror or any of its subsidiaries from effectively controlling in any material
respect the business or operations of any of the Transferred Subsidiaries.
(d) Third Party Approvals. All consents, waivers or approvals required
to be obtained from third parties under contracts, agreements or similar
instruments to which PMSI or any of its subsidiaries is a party, or by which any
of them is bound, in connection with the transactions to be effected on the
Closing Date shall have been obtained, except to the extent that the failure to
obtain such consents, waivers or approvals would not, in the aggregate, result
in violations, defaults (with or without notice or lapse of time or both),
rights of termination, cancellation or acceleration, or losses of benefit that
would have a Material Adverse Effect with respect to the Acquiror.
(e) Registration Rights Agreement, Allocation Agreement and Capital
Contribution Agreement. On or prior to the Closing Date, PMSI shall have
delivered and caused to be delivered to the Acquiror (i) the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A and executed
by an executive officer of PMSI, (ii) the Allocation Agreement, substantially in
the form attached hereto as Exhibit B and executed by executive officers of PMSI
and each of its subsidiaries signatory thereto, and (iii) the Capital
Contribution Agreement, substantially in the form attached hereto as Exhibit G
and executed by an executive officer of PMSI and each of its subsidiaries
signatory thereto.
(f) Noncompetition Agreements. On or prior to the Closing Date, Mr.
Handel E. Evans shall have delivered to the Acquiror a Confidentiality and
Noncompetition Agreement, substantially in the form attached hereto as Exhibit
E, duly executed by such individual.
SECTION 6.3. Additional Conditions to Obligations of PMSI and the
Sellers. The obligations of PMSI and each of the Sellers to effect the
transactions to be effected on the Closing Date are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Acquiror contained in this Agreement that is qualified as to
"materiality," "Material Adverse Change" or "Material Adverse Effect" shall be
true and correct, and each of the other representations and warranties of the
Acquiror contained in this Agreement shall be true and correct in all material
respects, in each case as of such Closing Date as though made on and as of the
Closing Date, except (i) for changes specifically permitted by this Agreement
and (ii) that those representations and warranties that address matters only as
of a particular date shall remain true and correct as of such date. PMSI and the
Sellers shall have received a certificate of a duly authorized officer of the
Acquiror to such effect.
(b) Agreements and Covenants. The Acquiror shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date. PMSI and the Sellers shall have received a certificate of a duly
authorized officer of the Acquiror to such effect.
(c) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding challenging or seeking to
restrain or prohibit the consummation of the transactions to be effected on the
Closing Date or seeking to obtain from PMSI or any of its affiliates any
material amount of damages. No suit, action or proceeding by any other person
shall be pending that seeks any such relief as to which there is a reasonable
possibility of success or that otherwise could reasonably be expected to have a
Material Adverse Effect with respect to PMSI.
(d) Registration Rights Agreement, Allocation Agreement and the
Capital Contribution Agreement. On or prior to the Closing Date, the Acquiror
shall have delivered to PMSI (i) the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A and executed by an
executive officer of the Acquiror, (ii) the Allocation Agreement, substantially
in the form attached hereto as Exhibit B and executed by an executive officer of
the Acquiror, and (iii) the Capital Contribution Agreement, substantially in the
form attached hereto as Exhibit G and executed by an executive officer of the
Acquiror.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and
abandoned at any time prior to the Closing:
(a) by mutual written consent of the Acquiror and PMSI; or
(b) by either the Acquiror or PMSI if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Closing and such order,
decree, ruling or other action shall have become final and nonappealable; or
(c) by PMSI if the Closing shall not have occurred on or before August
15, 1998 (other than due to the failure of PMSI or any of the Sellers to perform
its obligations under this Agreement required to be performed at or prior to the
Closing), or by the Acquiror if the Closing shall not have occurred on or before
August 15, 1998 (other than due to the failure of the Acquiror to perform its
obligations under this Agreement required to be performed at or prior to the
Closing).
SECTION 7.2. Effect of Termination. In the event of termination of
this Agreement by either PMSI or the Acquiror as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of the Acquiror, PMSI or any Seller, other than the
provisions of Section 3.1(i), Section 3.2(g), the last sentence of Section 5.1
(a) (and the provisions of the Confidentiality Agreement referred to therein),
5.7(b), this Section 7.2, Section 9.1, Section 9.6 and Section 9.7. Nothing
contained in this Section shall relieve any party for any breach of the
representations, warranties, covenants or agreements set forth in this Agreement
(including, without limitation, liability for damages as a result of any such
breach that gives rise to an inability to satisfy any of the conditions to any
Closing set forth in Article VI).
SECTION 7.3. Amendment. This Agreement may be amended by the parties
hereto at any time. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 7.4. Extension; Waiver. At any time, the parties hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights. No single or partial exercise of any right, remedy,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. Any
waiver shall be effective only in the specific instance and for the specific
purpose for which given and shall not constitute a waiver to any subsequent or
other exercise of any right, remedy, power or privilege hereunder.
SECTION 7.5. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.1, an amendment of
this Agreement pursuant to Section 7.3 or an extension or waiver pursuant to
Section 7.4 shall, in order to be effective, require in the case of the
Acquiror, PMSI or any Seller, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
SECTION 8.1. Survival of Representations and Warranties. (a) Except as
otherwise provided in paragraph (b) of this Section 8.1, none of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Closing and all such
representations and warranties will be extinguished on consummation of the
Closing and neither the Acquiror, PMSI, any Seller nor any officer, director or
employee or stockholder of any of them shall be under any liability whatsoever
with respect to any such representation or warranty after such time.
(b) The representations and warranties of the Sellers and of PMSI
contained in paragraphs (c), (e), (h), (k) and (n) of Section 3.1, and the
representations and warranties of the Acquiror contained in paragraphs (b) and
(c) of Section 3.2, shall survive the Closing for a period of two years
thereafter except for (i) paragraph (c)(i) of Section 3.1, which shall survive
without limitation as to time, and (ii) paragraph (h) of Section 3.1, which
shall survive the Closing for the applicable statute of limitations, plus 30
days. The representations and warranties of the Sellers and of PMSI contained in
clause (iv) of paragraph (g) of Section 3.1 shall survive the Closing until
April 30, 1999, after which time such representations and warranties shall be of
no further force or effect (except with respect to claims for indemnification
theretofore made in respect thereof pursuant to Section 8.2).
(c) This Section 8.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Closing.
SECTION 8.2. Indemnification by Sellers and PMSI. Subject to the
provisions of this Article VIII, PMSI and each of the Sellers, jointly and
severally, shall indemnify and hold harmless the Acquiror, any affiliate of the
Acquiror (including, without limitation, the Transferred Subsidiaries and the
Belgian Subsidiaries), the respective officers, directors, shareholders,
employees, agents and representatives of the Acquiror and its affiliates, and
each such person's successors and assigns (each, an "Acquiror Indemnitee") from
and after the Closing from and against any Damages (as defined in Section 9.3)
incurred or suffered by such Acquiror Indemnitee as a result of or arising from
(a) any inaccuracy in any of the representations and warranties made by PMSI or
any of the Sellers in clause (iv) of paragraph (g) of Section 3.1 or in
paragraphs (c), (e), (k) and (n) of Section 3.1, (b) any breach of any of the
covenants or agreements made by PMSI or any of the Sellers in this Agreement or
in the Allocation Agreement, (c) any liability with respect to Taxes owed by any
Transferred Subsidiary to Governmental Entities in France with respect to
additional Taxes due in respect of certain intercompany transactions between
Medi-Diff S.A. and Logimed S.A. (as described in Section 3.1(h) of the PMSI
Disclosure Schedule) to the extent that such liability exceeds $1.5 million,
notwithstanding the accrual of any liability relating thereto on the Pro Forma
Balance Sheet, (d) any liability arising out of or relating to the sale by PMSI
of its business in Austria and (e) any liability arising out of or relating to
any bonus (including, without limitation, all stay, incentive or similar
bonuses) payable to any director, officer, consultant or employee of PMSI or any
of its subsidiaries accrued or otherwise attributable through the period ending
June 30, 1998, all stay, incentive or similar bonuses in connection with the
Merger Agreement, this Agreement or the transactions relating thereto and all
bonuses for the period from June 30, 1998 to the Closing Date to the extent such
bonuses are in excess of plans in effect as of March 23, 1998. Notwithstanding
anything in this Article VIII to the contrary, PMSI and the Sellers shall not be
obligated to indemnify any Acquiror Indemnitee and hold such Acquiror Indemnitee
harmless from and against Damages as a result of or arising from any inaccuracy
in any of the representations and warranties made by PMSI or any of the Sellers
in paragraphs (e), (k) or (n) of Section 3.1, until the aggregate amount of
such Damages exceeds $1,000,000 (and, in such event, only to the extent of such
excess).
SECTION 8.3. Indemnification by Acquiror. Subject to the provisions of
this Article VIII, the Acquiror shall indemnify and hold harmless PMSI and each
Seller, any affiliate of PMSI, the respective officers, directors, shareholders,
employees, agents and representatives of PMSI and its affiliates, and each such
person's successors and assigns (each, a "PMSI Indemnitee") from and after the
Closing from and against any Damages incurred or suffered by such PMSI
Indemnitee as a result of or arising from (a) any inaccuracy in any of the
representations and warranties made by the Acquiror in paragraphs (b) and (c) of
Section 3.2, (b) any breach of any of the covenants or agreements made by the
Acquiror in this Agreement or in the Allocation Agreement and (c) the failure of
the Transferred Subsidiaries to perform or discharge any of their respective
liabilities or obligations reflected on the Pro Forma Financial Statements or
set forth in the Allocation Agreement.
SECTION 8.4. Claims Procedures. In the case of any Damages for which
indemnification is sought hereunder, the party seeking indemnification (the
"Indemnitee") shall promptly notify the party from whom indemnification is
sought (the "Indemnifying Party") in writing of the existence and nature of such
Damages, as well as the claim, demand, action or proceeding, if any, out of
which the Damages arise (a "Claim"); provided, however, that no failure or delay
by the Indemnitee in the performance of the foregoing shall reduce or otherwise
affect the obligation of the Indemnifying Party to indemnify and hold the
Indemnitee harmless, except to the extent the Indemnitee's failure to give or
delay in giving the required notice materially impairs the Indemnifying Party's
ability to indemnify or defend or to mitigate its Damages, in which case the
Indemnifying Party shall have no obligation to indemnify the Indemnitee to the
extent of Damages, if any, caused by such failure to give or delay in giving the
required notice. If such Damages arise out of a Claim by a third person, the
Indemnitee must give the Indemnifying Party a reasonable opportunity to defend
the same or prosecute such action to conclusion or settlement satisfactory to
the Indemnifying Party at the Indemnifying Party's sole cost and expense and
with counsel of its own selection, and the Indemnifying Party shall pay any
resulting settlements (including all associated Damages), satisfy any judgments
or comply with any decrees; provided, further, however, that the Indemnitee
shall at all times also have the right fully to participate in the defense at
Indemnitee's sole cost and expense so long as such participation occurs without
hindering or impairing the defense of the Indemnifying Party. Notwithstanding
the foregoing, without the prior written consent of the Indemnitee, the
Indemnifying Party shall not compromise or settle any Claim if (i) the terms
thereof impose any liability or obligations on the Indemnitee, or (ii) the terms
thereof fail to include an unconditional general release of the Indemnitee with
respect to all liabilities and obligations in respect of such Claim. If the
Indemnifying Party shall, within a reasonable time after said notice, fail to
defend, the Indemnitee shall have the right, but not the obligation, and without
waiving any rights against the Indemnifying Party, to undertake the defense of,
and with the consent of the Indemnifying Party (such consent not to be
withheld unreasonably), to compromise or settle the Claim on behalf, for the
account, and at the risk and expense, of the Indemnifying Party and shall be
entitled to collect the amount of any settlement or judgment or decree and all
costs and expenses (including, without limitation, reasonable attorney's fees)
in connection therewith from the Indemnifying Party. Except as provided in the
preceding sentence, the Indemnitee shall not compromise or settle any Claim.
SECTION 8.5. Subrogation. Following indemnification as provided for
hereunder, the Indemnifying Party shall be subrogated to all rights of the
Indemnitee with respect to all persons relating to the matter for which
indemnification has been made.
SECTION 8.6. Insured Losses. The amount of any Damages for which
indemnification is provided under this Article VIII shall be net of any
duplicative amounts recovered by the Indemnitee under insurance policies or from
unaffiliated third persons with respect to such Damages.
SECTION 8.7. Tax Indemnification. (a) From and after the Closing Date,
without duplication, PMSI and each of Sellers, jointly and severally, shall
indemnify and hold harmless the Acquiror, any affiliate of the Acquiror
(including, without limitation, the Transferred Subsidiaries and their
affiliates and, if the Belgian Subsidiaries are acquired by the Acquiror or any
of its affiliates, the Belgian Subsidiaries and their affiliates) against all
Taxes (including, without limitation, reasonable attorneys' and accountants'
fees and other reasonable out-of-pocket expenses incurred in connection
therewith and all Taxes relating to the unwinding of intercompany transactions
involving any of the Transferred Subsidiaries or Belgian Subsidiaries), other
than any Taxes accrued (to the extent of the accrual) as a liability on the Pro
Forma Balance Sheet, imposed on or payable by the Transferred Subsidiaries (or,
if the Belgian Subsidiaries are acquired by the Acquiror or any of its
affiliates, the Belgian Subsidiaries) (i) with respect to any taxable period or
portion thereof that ends on or before the Closing Date including any Taxes
allocated to such period under Section 8.7(d) hereof); (ii) by reason of the
Transferred Subsidiaries (or, if the Belgian Subsidiaries are acquired by the
Acquiror or any of its affiliates, the Belgian Subsidiaries) being included in
any consolidated, affiliated, combined or unitary or other similar group of
companies at any time on or before the Closing Date; (iii) any Damages arising
out of a breach of representations and warranties contained in Section 3.1(h);
or (iv) pursuant to any contract or agreement with any third party for
indemnification of Taxes.
(b) From and after the Closing Date (or, with respect to the Belgian
Subsidiaries if they are acquired by the Acquiror or any of its affiliates, from
and after the date on which all right, title and interest in the Belgian
Subsidiaries is transferred to the Acquiror or any of its affiliates (the
"Belgium Closing Date")), without duplication, the Acquiror shall, and shall
cause the Transferred Subsidiaries (or the Belgian Subsidiaries, as the case may
be) to, indemnify PMSI and the Sellers against all Taxes (including, without
limitation, reasonable attorneys' and accountants' fees and other reasonable
out-of-pocket expenses incurred in connection therewith) imposed on the
Transferred Subsidiaries (or, if the Belgian Subsidiaries are transferred to the
Acquiror or any of its affiliates, on the Belgian Subsidiaries), which Taxes are
not subject to indemnification pursuant to Section 8.7(a).
(c) Payment by the indemnitor of any amount due under this Section 8.7
shall be made within ten days following written notice by the indemnitee that
payment of such amounts to the appropriate Tax Authority is due, provided that
the indemnitor shall not be required to make any payment earlier than five days
before it is due to the appropriate Tax Authority. In the case of a Tax that is
contested in accordance with the provisions of Section 8.8, payment of the Tax
to the appropriate Tax Authority will not be considered to be due earlier than
the date a final determination to such effect is made by the appropriate Taxing
Authority or court. Final determination shall have the meaning as set forth in
Section 1313(a) of the Code or the comparable provision of the appropriate
foreign tax statute, regulation or law.
(d) Each of PMSI, the Sellers and the Acquiror shall, to the extent
permitted by applicable law and except as otherwise provided herein, elect with
the relevant Taxing Authority to close the taxable period of the Transferred
Subsidiaries at the end of the day on the Closing Date (and, if the Belgian
Subsidiaries are transferred to the Acquiror or any of its affiliates, to close
the taxable period of the Belgian Subsidiaries on the Belgian Closing Date). For
purposes of this Agreement, in the case of any Tax that is imposed on a periodic
basis and is payable for a taxable period that begins before the Closing Date
and ends after the Closing Date (or that begins before the Belgian Closing Date
and ends after the Belgian Closing Date, as the case may be), the portion of
such Taxes which is payable for the portion of such taxable period ending on the
Closing Date (or the Belgian Closing Date, as the case may be) shall be (i) in
the case of any real or personal property Tax or similar Tax, the amount of such
Tax for the entire taxable period (or, in the case of such Taxes determined on
an arrears basis, the amount of such Tax for the immediately preceding period)
multiplied by a fraction, the numerator of which is the number of days in the
portion of such taxable period ending on the Closing Date (or the Belgian
Closing Date, as the case may be) and the denominator of which is the number of
days in the entire taxable period and (ii) in the case of any other Tax, on the
basis of the actual activities of the Transferred Subsidiaries (and, if
applicable, the Belgian Subsidiaries) determined from their books and records as
if the relevant taxable period ended on the Closing Date (or the Belgian Closing
Date, as the case may be). Any credit or refund resulting from an overpayment of
Taxes shall be prorated based upon the method employed in the immediately
preceding sentence. In the case of any Tax based upon or measured by capital
(including net worth or long-term debt) or intangibles, any amount thereof
required to be allocated under this Section 8.7(d) shall be computed by
reference to the level of such items on the Closing Date (or the Belgian Closing
Date, as the case may be).
SECTION 8.8. Contests. (a) After the Closing Date, each of Sellers and
the Acquiror shall promptly notify the other party in writing upon receipt of
written notice of the commencement of any Tax audit or administrative or
judicial proceeding or of any demand or claim on a PMSI Indemnitee, the Acquiror
or the Transferred Subsidiaries or the Belgian Subsidiaries which, if determined
adversely to the taxpayer or after the lapse of time, would be grounds for
indemnification by the other party under Section 8.7. Such notice shall contain
factual information (to the extent known to the notifying party) describing the
asserted Tax liability in reasonable detail and shall include copies of any
notice or other document received from any Taxing Authority in respect of any
such asserted Tax liability. Failure by any indemnitee under Section 8.7 to give
any indemnitor under Section 8.7 prompt notice of an asserted Tax liability as
required by this Section 8.8 shall not affect the indemnification obligation of
such indemnitor except to the extent such failure to give notice results in a
actual material detriment to the indemnitor.
(b) In the case of an audit or administrative or judicial proceeding
that relates to a period ending on or before the Closing Date with respect to
the Transferred Assets, PMSI and Sellers shall have the sole right, at their
expense, to control the conduct of such audit or proceeding; provided, however,
that PMSI and Sellers shall consult with the Acquiror to the extent any proposed
adjustment may have a material effect on the Taxes of the Acquiror or the
Transferred Subsidiaries for taxable periods beginning after the Closing Date.
The Acquiror shall control the defense and settlement of any contest relating to
taxable periods or portions thereof relating to the Transferred Assets that
begin on or after the Closing Date, provided, however, the Acquiror shall
consult with PMSI and the Sellers to the extent any proposed adjustment may have
a material effect on the Taxes of PMSI or the Sellers for taxable periods
beginning before the Closing Date.
(c) In the case of an audit or administrative or judicial proceeding
that relates to a period ending on or before the Belgian Closing Date with
respect to the Belgian Subsidiaries, the Sellers shall have the sole right, at
their expense, to control the conduct of such audit or proceeding; provided,
however, that PMSI and the Sellers shall consult with the Acquiror to the extent
any proposed adjustment may have a material effect on the Taxes of the Acquiror,
the Belgian Subsidiaries or the Transferred Subsidiaries for taxable periods
beginning after the Belgian Closing Date. The Acquiror shall control the defense
and settlement of any contest relating to taxable periods or portions thereof
with respect to the Belgian Subsidiaries that begin on or after the Belgian
Closing Date, provided, however, the Acquiror shall consult with PMSI and the
Sellers to the extent any proposed adjustment may have a material effect on the
Taxes of PMSI and the Sellers for taxable periods with respect to the Belgian
Subsidiaries beginning before the Belgian Closing Date.
(d) With respect to periods beginning before the Closing Date and
ending after the Closing Date with respect to the Transferred Assets (and with
respect to periods beginning before the Belgian Closing Date and ending after
the Belgian Closing Date with respect to the Belgian Subsidiaries), (i) each
party may participate in an audit or proceeding which relates to any such period
and (ii) such audit or proceeding shall be controlled by that party which would
bear the burden of the greater portion of the sum of the adjustment; provided
that neither party shall settle any such audit or proceeding without the consent
of the other, which consent shall not be unreasonably withheld. The principle
set forth in the preceding sentence shall govern also for purposes of deciding
any issue that must be decided jointly (in particular, choice of judicial forum)
in situations in which separate issues are otherwise controlled hereunder by the
Acquiror, PMSI and the Sellers.
SECTION 8.9. Preparation of Tax Returns. (a) PMSI and each of the
Sellers shall (i) prepare or cause to be prepared and timely file any Tax
Returns that are due (including extensions) prior to (A) the Closing Date with
respect to the Transferred Subsidiaries and (B) the Belgian Closing Date with
respect to the Belgian Subsidiaries (collectively the "Seller Returns") and (ii)
timely pay when due all Taxes relating to such Returns. The Seller Returns shall
be prepared in a manner consistent with the prior practice of the Transferred
Subsidiaries and the Belgian Subsidiaries. In the case of any Tax Return due
after the Closing Date with respect to the Transferred Assets (or any Tax Return
due after the Belgian Closing Date with respect to the Belgian Subsidiaries) for
a (i) period ending on or prior to the Closing Date or, in the case of the
Belgian Subsidiaries, the Belgian Closing Date, or (ii) period that includes,
but does not end on or prior to, the Closing Date or, in the case of the Belgian
Subsidiaries, the Belgian Closing Date (Tax Returns described in (i) and (ii)
collectively, the "the Acquiror Returns"), the Acquiror shall prepare or cause
the Transferred Subsidiaries or the Belgian Subsidiaries, as the case may be, to
prepare such Acquiror Returns and the Acquiror shall deliver such Acquiror
Returns to PMSI at least 21 days before such return is due to be filed (taking
into account any extensions of time to file such return that have been properly
obtained) for PMSI's review and comment. PMSI and the Sellers shall reimburse
the Acquiror for any Taxes on the Acquiror Return owed by PMSI or the Sellers
pursuant to Sections 8.7(a) and 8.7(d), other than Taxes accrued (to the extent
of the accrual) as a liability on the Pro Forma Balance Sheet. The Acquiror
shall prepare and file or cause the Transferred Subsidiaries and the Belgian
Subsidiaries to prepare and file any Tax return relating to the Transferred
Subsidiaries and the Belgian Subsidiaries for any taxable periods that begin on
or after the Closing Date or on and after the Belgian Closing Date, as the case
may be.
(b) PMSI and the Sellers shall have the right to object to any items
set forth on the Acquiror Returns within ten days of the delivery of a
particular return. In the event of such an objection, the parties shall attempt
in good faith to resolve the dispute. If the parties cannot resolve any such
dispute, the items remaining in dispute shall be submitted to an independent
accounting firm of international reputation selected by, and mutually acceptable
to, PMSI and the Acquiror. The independent accounting firm so selected shall
determine the proper amounts for the items remaining in dispute and the Acquiror
and PMSI and the Sellers shall be bound by the determination of the independent
accounting firm absent manifest error. The independent accounting firm shall
make any such determination within 10 days after submission of the remaining
disputed items. If a Tax Return is due before the date a disputed item is
resolved hereunder, it shall be filed as prepared and resolved items shall be
reflected on an amended return.
(c) PMSI, the Sellers and the Acquiror shall prepare and file all
applicable Tax Returns for which they are responsible hereunder or otherwise on
the basis that the transfer of the interests in each entity listed on Schedule I
and Schedule II hereto and the Belgian Subsidiaries separately qualifies as a
reorganization under the provisions of Section 368(a) of the Code, and neither
PMSI, the Sellers nor the Acquiror shall take any position inconsistent
therewith on any Tax Return. Except as otherwise provided or contemplated by the
Agreement or any Transaction Document, the Acquiror shall make no tax election
or otherwise take any action on or after the Closing Date which could materially
affect the liability of any of the Sellers or of PMSI for any Taxes of the
Transferred Subsidiaries or the Belgian Subsidiaries under this Agreement or
otherwise without the prior written consent of the Sellers and PMSI, which
consent shall not be unreasonably withheld. The Acquiror shall not file any
amended Tax Returns with respect to any taxable period (or portion thereof) of
any of the Transferred Subsidiaries on the Belgian Subsidiaries ending on or
prior to the Closing Date without the prior written consent of the Sellers and
PMSI, which consent shall not be unreasonably withheld.
SECTION 8.10. Cooperation and Exchange of Information. PMSI, the
Acquiror and each of the Sellers will provide each other with such cooperation
and information as any of them reasonably may request of the other in filing any
Tax Return, amended return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes, participating in or conducting any audit
or other proceeding in respect of Taxes or determining any Tax attribute or the
Tax basis in any asset. Any information obtained under this Section 8.10 shall
be kept confidential, except as may be otherwise necessary in connection with
the filing of returns or claims for refund or in conducting an audit or other
proceeding.
SECTION 8.11. Tax Sharing Arrangements. Any and all existing Tax
sharing, allocation, compensation or like agreements or arrangements, whether or
not written, that include the Transferred Subsidiaries or the Belgian
Subsidiaries shall be terminated as of the Closing Date (pursuant to a writing
executed on or before the Closing Date by all parties concerned) and shall have
no further force or effect. All liabilities of the Transferred Subsidiaries and
the Belgian Subsidiaries or any affiliate of PMSI (for Taxes or otherwise
pursuant to such agreements or arrangements) shall be canceled on or prior to
the Closing Date. Any and all powers of attorney relating to Tax matters
concerning the Transferred Subsidiaries and the Belgian Subsidiaries shall be
terminated as to the Transferred Subsidiaries and the Belgian Subsidiaries on or
prior to the Closing Date and shall have no further force or effect.
SECTION 8.12. Insured Losses. The amount of any Damages for which
indemnification is provided under this Article VIII shall be net of any
duplicative amounts recovered by the Indemnitee under insurance policies or from
unaffiliated third persons with respect to such Damages.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Fees and Expenses. Except as otherwise expressly provided
herein, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses.
SECTION 9.2. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) or transmitted by confirmed facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Acquiror, to
IMS Health Incorporated
200 Nyala Farms
Westport, CT 06880
Attention: General Counsel
Fax Number: (203) 222-4313
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Richard A. Garvey, Esq.
Fax Number: (212) 455-2502
(b) if to PMSI or any of the Sellers, to
Pharmaceutical Marketing Services Inc.
45 Rockefeller Plaza
New York, NY 10111
Attention: General Counsel
Fax Number: (212) 841-5760
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, NY 10111
Attention: Robert A. Schwed, Esq.
Fax Number: (212) 841-5725
SECTION 9.3. Definitions. In addition to terms defined elsewhere
herein (as indicated in Exhibit F hereto), for purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Business Day" means a day other than Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close;
(c) "Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation (including, without limitation, any and all rights to indebtedness
owed by Transferred Subsidiaries that PMSI or any of its subsidiaries has (i)
contributed to the capital or exchanged for equity interests in such Transferred
Subsidiary or (ii) entered into an agreement to effect such a contribution or
exchange, in each case pursuant to the Capital Contribution Agreements), any and
all equivalent ownership interests in a Person (other than a corporation) and
any and all warrants, rights or options to purchase any of the foregoing;
(d) "Contractual Obligation" means, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
(e) "Damages" means any and all demands, actions, causes of action,
assessments, claims, losses, liabilities, damages, judgments, settlements,
expenses, remedial actions, Taxes, fines, penalties, sanctions and deficiencies,
including attorneys' fees and disbursements, interest, and all other reasonable
costs of investigation and defense;
(f) "Designated Representations" means each of the representations of
PMSI set forth in Section 3.1 of the Merger Agreement utilizing the defined
terms contemplated thereby (copies of each of which are attached hereto as
Exhibit C), except for the representations set forth in paragraphs (c), (d),
(f), (n), (o), (p), (q), (r), (s) and (t) thereof, to the extent that any of
such representations directly or indirectly in any manner relate to, or directly
or indirectly pertain to any matters that in any respect whatsoever may affect:
(i) the business, properties, financial condition, assets, liabilities,
personnel, operations, results of operations or prospects of any of the
Transferred Subsidiaries or any subsidiaries thereof; (ii) the value of the
Capital Stock of the Transferred Subsidiaries to be acquired pursuant to this
Agreement; (iii) the consummation of the transactions contemplated by this
Agreement;
(g) "$ or "dollars" means lawful currency of the United States of
America unless otherwise expressly indicated;
(h) "IMS Health Common Stock" means the common stock, par value $.01
per share, of IMS Health Incorporated;
(i) "IMS Health Common Stock Price" means the average of the closing
sales prices of IMS Health Common Stock on the New York Stock Exchange Composite
Transactions Tape on the 10 consecutive trading days immediately preceding the
second trading day prior to the Closing Date;
(j) "indebtedness" means, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (B) all obligations
of such person evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations of such person under conditional sale or other title retention
agreements relating to property purchased by such person, (D) all obligations of
such person issued or assumed as the deferred purchase price of property or
services (excluding obligations of such person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of such
person's business), (E) all capitalized lease obligations of such person, (F)
all obligations of others secured by any Lien on property or assets owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (G) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof), (H) all letters
of credit issued for the account of such person and (I) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person;
(k) "Intellectual Property" means all rights, privileges and
priorities provided under federal, state, foreign and multinational law relating
to intellectual property, whether registered or unregistered, including, without
limitation, all (i) (a) inventions, discoveries, processes, formulae, designs,
methods, techniques, procedures, concepts, developments, technology, and
confidential information, new and useful improvements thereof and know-how
relating thereto, whether or not patented or eligible for patent protection; (b)
copyrights and copyrightable works, including computer applications, programs,
Software, Databases and related items; (c) trademarks, service marks, trade
names, brand names, product names, corporate names, logos and trade dress, the
goodwill of any business symbolized thereby, and all common-law rights relating
thereto; and (d) trade secrets, data and other confidential information; and
(ii) all registrations, applications, recordings, and licenses or other similar
agreements related to the foregoing;
(l) "knowledge" means, with respect to any matter, (i) in the case of
the Acquiror, the knowledge of any executive officer or the General Counsel of
the Acquiror after due inquiry into such matter and (ii) in the case of PMSI or
any of the Sellers, the knowledge of Messrs. Dennis M.J. Turner, Handel E.
Evans, Raymond Davies and Warren J. Hauser after due inquiry into such matter;
(m) "Material Adverse Change" means, when used with respect to PMSI or
the Acquiror, any change that, either individually or in the aggregate with all
other such changes, is materially adverse either to the Transferred Subsidiaries
or to the Acquiror and its subsidiaries taken as a whole, as the case may be;
(n) "Material Adverse Effect" means, when used with respect to PMSI or
the Acquiror, any change, effect, event or occurrence that, either individually
or in the aggregate with all other such changes, effects, events and
occurrences, either (a) is materially adverse to the business, properties,
financial condition or results of operations of either the Transferred
Subsidiaries or the Acquiror and its subsidiaries taken as a whole, as the case
may be (or, in the case of Sections 6.1(c) and 6.3(c), PMSI and its subsidiaries
(other than the Transferred Subsidiaries) taken as a whole), or (b) will be
materially adverse to the business, properties, financial condition or results
of operations of the Acquiror and its subsidiaries (including the Transferred
Subsidiaries) taken as a whole following the Closing Date;
(o) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(p) "Requirement of Law" means, as to any Person, the certificate of
incorporation or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Entity, 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.
(q) "Subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person;
(r) "Tax or Taxes" means all taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, capital stock, franchise, profits, license,
environmental (including taxes under Code Section 59(A)) withholding, payroll,
employment, unemployment, disability, social security (or similar), transfer,
net worth, excise, severance, stamp, occupation, premium, value added, property,
alternative or add-on minimum or windfall profits taxes, customs, duties or
similar fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any governmental authority, domestic or foreign;
(s) "Tax Return" means any return, report or statement required to be
filed with any governmental authority with respect to Taxes;
(t) "Territories" means each jurisdiction in the continent of Europe
(including Eastern Europe, but excluding Belgium until such time, if any, as the
Belgian Transfer occurs) and Japan;
(u) "Transaction Documents" means the collective reference to this
Agreement, the Registration Rights Agreement, the Confidentiality and
Noncompetition Agreement, the Allocation Agreement and the Capital Contribution
Agreement; and
(v) "Year 2000 Compliant" means, when used with respect to any
software or database, that such software or database will operate accurately
and, without interruption, accept, possess and in all manner retain full
functionality when referring to, or involving, any year or date in the twentieth
or twenty-first centuries.
SECTION 9.4. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 9.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other agreements referred to herein constitute the entire
agreement, and, except as otherwise expressly provided herein, supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement. This Agreement is not
intended to confer upon any person other than the parties any rights or
remedies.
SECTION 9.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND ANY RELATED DOCUMENTS TO WHICH IT
IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS, AND WAIVES TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW
OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO THE PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.2 OR AT SUCH
OTHER ADDRESS OR TO THE ATTENTION OF SUCH OTHER PERSON , AS ANY PARTY SHALL
HAVE SPECIFIED BY NOTICE IN WRITING TO THE OTHER PARTIES;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
(v) WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
REFERRED TO IN PARAGRAPH (i) ABOVE.
SECTION 9.8. Assignment. Except as provided in paragraph (b) below,
neither this Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties hereto without the prior written consent of the
other parties hereto. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 9.9. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
SECTION 9.10. Termination of Merger and Stock Option Agreements. PMSI
and the Acquiror agree that, effective upon the execution and delivery of this
Agreement (and without further action on the part of PMSI, the Acquiror or New
Sierra Merger Corp., a Delaware corporation and a wholly owned subsidiary of the
Acquiror), except with respect to the provisions hereof incorporating the
Designated Representations (which shall be effective as herein provided), the
Merger Agreement and the Stock Option Agreement shall be terminated and of no
further force or effect, without any liability or obligation on the part of any
party thereto.
IN WITNESS WHEREOF, each of the undersigned caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
IMS HEALTH INCORPORATED
By: /s/ Kenneth S. Siegel
Name: Kenneth S. Siegel
Title: Senior Vice President, General
Counsel and Secretary
PHARMACEUTICAL MARKETING SERVICES
INC.
By: /s/ Warren J. Hauser
Name: Warren J. Hauser
Title:
PMSI HOLDINGS LIMITED
By: /s/ Warren J. Hauser
Name: Warren J. Hauser
Title:
SOURCE INFORMATICS EUROPEAN
HOLDINGS L.L.C.
By: /s/ Warren J. Hauser
Name: Warren J. Hauser
Title: