10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the Quarterly Period Ended November 28, 2003

OR

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

For the transition period from              to             

Commission File No. 001-12392

NDCHealth Corporation

(Exact name of registrant as specified in charter)

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

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

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

None

(Former name, former address and former fiscal year, if

changed since last report)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨.

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Common Stock, Par Value $.125 – 35,703,918 shares

outstanding as of January 5, 2004

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

NDCHealth Corporation and Subsidiaries

(In thousands, except per share data)

	Three Months Ended
	November 28, 2003			November 29, 2002
Revenues	$	115,234		$	105,286
Operating expenses:
Cost of service		57,182			51,950
Sales, general and administrative		24,822			22,061
Depreciation and amortization		9,444			7,501
Restructuring, impairment and other charges		2,500			—
		93,948			81,512
Operating income		21,286			23,774
Other income (expense):
Interest and other income		189			467
Interest and other expense		(7,603	)		(3,676	)
Minority interest in losses		471			653
Early extinguishment of debt charges		—			(921	)
		(6,943	)		(3,477	)
Income before income taxes and equity in losses of affiliated companies		14,343			20,297
Provision for income taxes		5,369			7,307
Income before equity in losses of affiliated companies		8,974			12,990
Equity in losses of affiliated companies		(240	)		(313	)
Net income	$	8,734		$	12,677
Basic earnings per share:	$	0.25		$	0.37
Diluted earnings per share:	$	0.25		$	0.36

See Notes to Condensed Consolidated Financial Statements.

2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

NDCHealth Corporation and Subsidiaries

(In thousands, except per share data)

	Six Months Ended
	November 28, 2003			November 29, 2002
Revenues	$	224,125		$	205,368
Operating expenses:
Cost of service		112,334			103,751
Sales, general and administrative		48,008			42,214
Depreciation and amortization		18,758			15,110
Restructuring, impairment and other charges		3,999			—
		183,099			161,075
Operating income		41,026			44,293
Other income (expense):
Interest and other income		324			745
Interest and other expense		(15,316	)		(6,916	)
Minority interest in losses		623			1,031
Early extinguishment of debt charges		—			(921	)
		(14,369	)		(6,061	)
Income before income taxes and equity in losses of affiliated companies		26,657			38,232
Provision for income taxes		9,986			13,765
Income before equity in losses of affiliated companies		16,671			24,467
Equity in losses of affiliated companies		(583	)		(625	)
Net income	$	16,088		$	23,842
Basic earnings per share:	$	0.46		$	0.69
Diluted earnings per share:	$	0.45		$	0.68

See Notes to Condensed Consolidated Financial Statements.

3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NDCHealth Corporation and Subsidiaries

(In thousands)

	Six Months Ended
	November 28, 2003			November 29, 2002
Cash flows from operating activities:
Net income	$	16,088		$	23,842
Adjustments to reconcile net income to cash provided by operating activities:
Equity in losses of affiliated companies		583			625
Non-cash portion of restructuring, impairment and other charges		1,049			—
Non-cash early extinguishment of debt charges		—			805
Depreciation and amortization		18,758			15,110
Deferred income taxes		9,300			5,342
Provision for bad debts		1,791			1,544
Other, net		1,597			2,300
Changes in assets and liabilities which provided (used) cash, net of the effects of acquisitions:
Accounts receivable, net		(3,540	)		(4,029	)
Prepaid expenses and other assets		(245	)		370
Accounts payable and accrued liabilities		7,212			(4,275	)
Accrued interest on long-term debt		(22	)		862
Deferred revenue		1,449			(3,922	)
Income taxes		560			2,059
Net cash provided by operating activities		54,580			40,633
Cash flows from investing activities:
Capital expenditures		(23,721	)		(20,804	)
Proceeds from the sale of equipment		2,148			—
Investing activities and other non-current assets		(7,067	)		(10,244	)
Net cash used in investing activities		(28,640	)		(31,048	)
Cash flows from financing activities:
Net repayments under lines of credit		—			(91,000	)
Net principal payments under capital lease arrangements and other long-term debt		(2,030	)		(1,625	)
Net cash from refinancing activities		(395	)		165,945
Net proceeds from stock activities		2,645			1,227
Dividends paid		(2,820	)		(2,778	)
Net cash (used in) provided by financing activities		(2,600	)		71,769
Cash flows from discontinued operations:
Cash provided by tax benefits of discontinued operations		—			6,106
Cash used in discontinued operations		(859	)		(3,519	)
Net cash (used in) provided by discontinued operations		(859	)		2,587
Increase in cash and cash equivalents		22,481			83,941
Cash and cash equivalents, beginning of period		16,103			13,447
Cash and cash equivalents, end of period	$	38,584		$	97,388

See Notes to Condensed Consolidated Financial Statements.

4

CONDENSED CONSOLIDATED BALANCE SHEETS

NDCHealth Corporation and Subsidiaries

(In thousands, except share data)

	November 28, 2003			May 30, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	38,584		$	16,103
Accounts receivable		80,761			78,988
Allowance for doubtful accounts		(7,730	)		(6,785	)
Accounts receivable, net		73,031			72,203
Income tax receivable		639			1,199
Deferred income taxes		15,377			21,663
Prepaid expenses and other current assets		33,888			34,304
Total current assets		161,519			145,472
Property and equipment, net		124,493			116,678
Intangible assets, net		475,941			479,234
Deferred income taxes		2,312			5,018
Debt issuance cost		12,269			12,756
Investments		17,345			15,662
Other		13,757			12,432
Total Assets	$	807,636		$	787,252
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	6,590		$	6,558
Current portion of obligations under capital leases		921			1,028
Accounts payable and accrued liabilities		63,473			61,211
Accrued interest		13,259			13,281
Deferred revenue		37,042			38,137
Total current liabilities		121,285			120,215
Long-term debt		319,598			321,262
Obligations under capital leases		266			558
Deferred revenue		12,049			9,461
Other long-term liabilities		31,513			30,225
Total liabilities		484,711			481,721
Commitments and contingencies
Minority interest in equity of subsidiaries		8,396			9,019
Stockholders’ equity:
Preferred stock, par value $1.00 per share; 1,000,000 shares authorized, none issued		—			—
Common stock, par value $.125 per share; 200,000,000 shares authorized; 35,314,078 and 34,888,753 shares issued, respectively.		4,414			4,361
Capital in excess of par value		223,705			216,156
Retained earnings		92,496			79,228
Deferred compensation and other		(7,731	)		(4,301	)
Other comprehensive income		1,645			1,068
Total stockholders’ equity		314,529			296,512
Total Liabilities and Stockholders’ Equity	$	807,636		$	787,252

See Notes to Condensed Consolidated Financial Statements.

5

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Note 1 - Summary Of Significant Accounting Policies

NDCHealth Corporation, which may be referred to in this Report as the “Company”, “NDCHealth”, “we”, “our”, or “us”, provides network based information processing services and systems to healthcare providers and payers; and information management products and solutions primarily to pharmaceutical manufacturers. We classify our business into two reportable segments: Information Management and Network Services and Systems.

We have prepared the financial statements included herein, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In addition, certain reclassifications have been made to the fiscal 2003 consolidated financial statements to conform to the fiscal 2004 presentation.

You should read these financial statements in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K/A for the fiscal year ended May 30, 2003.

In the opinion of management, these financial statements reflect all adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Because of the seasonality inherent in our business, our interim results are not necessarily indicative of our anticipated results for the full fiscal year.

In accordance with Securities and Exchange Commission guidance, those accounting policies that management believes are the most critical and require complex management judgment are discussed below. Further discussion of the application of these critical accounting policies can be found under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K/A for the fiscal year ended May 30, 2003.

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

Within the Information Management segment, we have two primary sources of revenue: database information reporting and consulting services. Database information reporting typically involves the delivery of data providing pharmaceutical information. Revenue for our database information reporting products and services delivered over a period of time with multiple deliverables is recognized ratably over the term of the contract, typically using a straight-line model. Typically, the terms of these database information reporting contracts average 1 to 3 years. When we are able to support the fair value of the elements of the arrangement, and the undelivered elements are not essential to the delivered elements, revenue for these separable deliverable products and services is recognized based on the delivery of those elements. Revenue for single deliverable products and services is recognized when obligations to the customer have been fulfilled, which is typically upon delivery. Consulting services are typically structured as fixed price service contracts. Revenue for these services is recognized over the contract term as performance milestones specified in the contract are achieved. If it is determined that we will incur a loss on a contract, the loss is recognized at the time of determination. Typically, these service contracts average 3 to 12 months.

6

Within the Network Services and Systems segment, the primary source of revenue is transaction fees charged for network services. This revenue is recognized at the time services are rendered. In instances where we host web browser-based applications for our customers, fees charged per transaction include the use of the application software, network, and other value added services. Additionally, we receive revenue from the sale of software licenses and subscription fees from related maintenance and support agreements. Revenue related to software utilized by the customer to process transactions through our network is recognized ratably over the estimated life of the network services relationship beginning on the date of customer acceptance of the software. In instances where revenue is recognized over the term of a contract, or we have contractual minimums, and we incur discrete incremental installation or other costs, we defer these costs and recognize them ratably over the contract term. Revenue related to customer installed software with stand alone functionality (meaning that connection to our network is not required for the software to be functional) is recognized when the product is shipped. Revenue related to software with stand alone functionality that is installed by us or one of our affiliates is recognized upon the date that the software is in operation at the customer site where vendor specific objective evidence (“VSOE”) has been established for the undelivered elements of the customer contract, which typically are maintenance and customer support. In these cases, the maintenance and customer support revenue is recognized over the term of the contract. Where VSOE cannot be established for undelivered elements within the contract, the revenue is recognized upon acceptance over the remaining term of the contract.

In many cases, our physician systems are sold indirectly through value added resellers, or VARs. Because the VARs provide many of the services that we would otherwise provide (such as contract support, advertising, etc.), we provide them allowances to cover their cost of providing these services. We record revenue in accordance with Emerging Issues Task Force Issue (“EITF”) No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products,” which requires that certain allowances be treated as reductions in revenue and allows other allowances, for which we receive separable, identifiable and quantifiable benefits, to be recorded as revenue and operating expense.

Capitalized software – Capitalized software consists of development costs for software held for sale to our customers as well as software used internally to provide services to our customers. In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,” capitalization of costs begins when technological feasibility has been established, and ends when the product is available for general release to customers. Completed projects capitalized under SFAS No. 86 are amortized after reaching the point of general availability using the greater of the amount computed using the straight-line method or the ratio that current revenues bear to the total of current and anticipated revenues, based on the estimated useful life of the software, normally five years. The net realizable value of software capitalized under SFAS No. 86 is monitored to ensure that the investment will be recovered through the future sales of products.

In accordance with Statement of Position (“SOP”) 98-1, “Accounting for the Cost of Computer Software Developed or Obtained for Internal Use,” capitalization of costs begins when the application development phase has been initiated and ends when the product is available for general use. Completed projects capitalized under SOP 98-1 are amortized using the straight-line method, normally over five years. The net realizable value of software capitalized under SOP 98-1 is monitored to ensure that the investment will be recovered through its future use.

7

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

Investments in privately held entities are accounted for under either the cost, equity, or consolidation method, whichever is appropriate for the particular investment. The appropriate method is determined by our ability to exercise significant influence over the investee, through either voting stock or other means. These investments are regularly reviewed for impairment issues and propriety of current accounting treatment. In accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 18, “Equity Method of Accounting for Investments in Common Stock,” transition from the cost to equity method, due to changes in our ability to influence the investee or the level of investment, would require retroactive restatement of previously issued financial statements as if we had always accounted for the investment under the equity method. If our level of investment increases to a level such that we directly or indirectly control the entity, the entity’s results would be consolidated into our consolidated financial statements.

The entire purchase price for the second step of the TechRx acquisition, which closed during the fourth quarter of fiscal 2003, was allocated to intangible assets as the tangible assets and liabilities of TechRx had been consolidated into our financial statements under the first step of the acquisition. The purchase price under the first step was allocated to assets acquired and liabilities assumed based on their fair value on May 28, 2002. At that time, we determined that the fair value of the assets and liabilities were reasonably approximated by their carrying values. The purchase price allocation for the second step of the TechRx acquisition is preliminary and subject to change based on our final determination of the value of the acquired intangible assets.

Intangible assets - Intangible assets represent goodwill, customer base, and proprietary technology acquired in connection with acquisitions. Customer base acquired is amortized over the estimated useful life ranging from 5 to 15 years. Proprietary technology is amortized over the useful life ranging from 3 to 7 years. Goodwill represents the excess of the cost of acquired businesses over the fair market value of their identifiable net assets.

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS 141 eliminates pooling of interests accounting and requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. SFAS 142 deals with, among other things, the elimination of amortization of goodwill. We adopted these new standards in the first quarter of fiscal 2002. SFAS 142 requires that goodwill no longer be amortized but be reviewed for impairment at least annually. In accordance with SFAS 142, we conduct our annual impairment tests during the second quarter of each fiscal year. Additionally, we test at other times if events or circumstances occur that would more likely than not impact the fair value of a reporting unit. The goodwill impairment test has two steps. First, we compare the fair value of the reporting unit with its book value. If the fair value of the reporting unit exceeds its carrying value, the second step is not necessary. If the carrying value exceeds its fair value, the second step calculates the possible impairment by comparing the implied fair value of goodwill with the carrying amount. If the implied value of goodwill is less than the carrying amount, a write-down would be required.

8

We regularly evaluate whether events and circumstances have occurred that indicate the carrying amount of other intangibles may warrant revision or may not be recoverable. When factors indicate that intangibles with finite lives should be evaluated for possible impairment, we compare the estimated fair value to the carrying value in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” If such evaluation indicates a potential impairment, cash flows discounted using our internal borrowing rate or a risk free rate are used to measure fair value in determining the amount of these assets that should be written off.  

In management’s opinion, goodwill and identifiable intangible assets were appropriately valued at November 28, 2003 and May 30, 2003.

Other Accounting Policies

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

Data costs – We purchase data from a variety of sources primarily for use in our information products and services. These costs are typically held in deferred cost at the time of purchase and expensed during one, or over several months as products utilizing the data are delivered to customers. Occasionally product offerings are expanded by modifying current products for a new market. In these cases, additional or new types of data costs may be incurred in developing the database for these new products over several months during which the product cannot be sold and the additional data costs are deferred. These data costs are then amortized, beginning when sales of the new products commence, over the expected life of the customer relationships established around these new products, in all cases not to exceed three years.

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

9

Stock options - We have chosen the disclosure option under SFAS No. 123, “Accounting for Stock Based Compensation” and SFAS 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123,” and continue to apply APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for our plans. Accordingly, no compensation cost has been recognized for options granted under the plans. The weighted average fair value of options granted during the second quarter of fiscal 2004 and 2003 was $11.54 and $7.85, respectively. The weighted average fair value of options granted during the first six months of fiscal 2004 and 2003 was $9.20 and $11.01, respectively. Had compensation cost for these plans been recognized based on the fair value of the options at the grant dates for awards under the plans consistent with the method of SFAS No. 123, the effect on our Net income and earnings per share would have been as follows:

(In thousands, except per share data)	Three Months Ended,
	November 28, 2003			November 29, 2002
Net income:
As reported	$	8,734		$	12,677
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		404			216
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		(2,006	)		(1,835	)
Pro forma	$	7,132		$	11,058
Basic earnings per share:
As reported	$	0.25		$	0.37
Pro forma	$	0.20		$	0.32
Diluted earnings per share:
As reported	$	0.25		$	0.36
Pro forma	$	0.20		$	0.32
(In thousands, except per share data)	Six Months Ended,
	November 28, 2003			November 29, 2002
Net income:
As reported	$	16,088		$	23,842
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		854			419
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		(4,451	)		(3,766	)
Pro forma	$	12,491		$	20,495
Basic earnings per share:
As reported	$	0.46		$	0.69
Pro forma	$	0.36		$	0.59
Diluted earnings per share:
As reported	$	0.45		$	0.68
Pro forma	$	0.35		$	0.59

Note 2 - Earnings Per Share

Basic earnings per share is computed by dividing reported net earnings available to common stockholders by weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing reported net earnings available to common stockholders by weighted average shares outstanding during the period and the impact of securities that, if exercised, and convertible debt that, if converted, would have a dilutive effect on earnings per share. Our convertible debt was retired on December 26, 2002 and therefore can no longer be converted. All options with an exercise price less than the average market share price for the period have a dilutive effect on earnings per share.

10

The following table sets forth the computation of basic and diluted earnings (in thousands, except per share data):

	Three Months Ended
	November 28, 2003					November 29, 2002
	Income		Shares	Per Share		Income		Shares	Per Share
Basic EPS:
Income	$	8,734	34,824	$	0.25	$	12,677	34,559	$	0.37
Effect of dilutive securities:
Stock options and restricted stock		—	795				—	157
		8,734	35,619				12,677	34,716
Convertible debt		—	—				1,282	4,140
Diluted EPS:
Income plus assumed conversions	$	8,734	35,619	$	0.25	$	13,959	38,856	$	0.36
	Six Months Ended
	November 28, 2003					November 29, 2002
	Income		Shares	Per Share		Income		Shares	Per Share
Basic EPS:
Income	$	16,088	34,785	$	0.46	$	23,842	34,529	$	0.69
Effect of dilutive securities:
Stock options and restricted stock		—	582				—	370
		16,088	35,367				23,842	34,899
Convertible debt		—	—				2,564	4,140
Diluted EPS:
Income plus assumed conversions	$	16,088	35,367	$	0.45	$	26,406	39,039	$	0.68

Outstanding options to purchase 843,000 and 2,753,000 shares of the Company’s common stock were not included in the computation of diluted earnings per share for the three months ended November 28, 2003 and November 29, 2002, respectively, because the options’ exercise prices were greater than the average market price of NDCHealth common stock and therefore were antidilutive. Outstanding options to purchase 1,682,000 and 1,855,000 shares of the Company’s common stock were excluded for the six months ended November 28, 2003 and November 29, 2002, respectively, because they were antidilutive. For the three months ended November 28, 2003 and November 29, 2002 dividends declared per common share were $0.04. For the six months ended November 28, 2003 and November 29, 2002, dividends declared per common share were $0.08.

11

Note 3 – Intangible Assets

The table below presents goodwill and intangible assets by asset class:

(In thousands)	As of November 28, 2003							As of May 30, 2003
	Gross Carrying Amount		Accumulated Amortization			Total		Gross Carrying Amount		Accumulated Amortization			Total
Amortized intangible assets
Customer base	$	67,744	$	(18,143	)	$	49,601	$	67,744	$	(15,163	)	$	52,581
Proprietary technology		32,029		(13,083	)		18,946		32,029		(11,702	)		20,327
Other		900		(237	)		663		900		(167	)		733
Total		100,673		(31,463	)		69,210		100,673		(27,032	)		73,641
Unamortized intangible assets
Goodwill		406,731		—			406,731		405,593		—			405,593
Total Intangible Assets	$	507,404	$	(31,463	)	$	475,941	$	506,266	$	(27,032	)	$	479,234

The aggregate amortization expense for the three and six months ended November 28, 2003 and estimated amortization expense for the next five fiscal years is as follows:

Aggregate Amortization Expense

	(In thousands)
For the three months ended November 28, 2003	$	2,156
For the six months ended November 28, 2003		4,425

Estimated Amortization Expense

For year Ending May 28, 2004	$	8,737
For year Ending May 27, 2005		10,283
For year Ending June 02, 2006		9,968
For year Ending June 01, 2007		9,365
For year Ending May 30, 2008		9,225

The changes in the carrying amount of goodwill and other indefinite life unamortized intangibles for the six months ended November 28, 2003 are as follows:

Goodwill and other indefinite life unamortized intangibles

(In thousands)	Information Management		Network Services and Systems		Total
Balance as of May 30, 2003	$	74,489	$	331,104	$	405,593
Translation adjustment		422		716		1,138
Balance as of November 28, 2003	$	74,911	$	331,820	$	406,731

12

Note 4 – Segment Information

Segment information for the three and six months ended November 28, 2003 and November 29, 2002 is presented below. We operate our business as two reportable segments: Network Services and Systems, which we offer to healthcare providers and payers; and Information Management, which we offer primarily to pharmaceutical manufacturers. Network Services and Systems provides electronic connectivity to the NDCHealth intelligent network and system solutions throughout the healthcare industry. Information Management provides management information, research, and consulting services to pharmaceutical manufacturers, pharmacy chains and hospitals. Other includes certain portions of fiscal 2004 Restructuring, impairment and other charges. There has been no significant change in the composition of the reportable segments from the presentation of fiscal 2003 segment information included in our Annual Report on Form 10-K/A for the fiscal year ended May 30, 2003.

Quarter Ended November 28, 2003 (In thousands)	Information Management		Network Services and Systems		Other			Totals
Revenues	$	42,163	$	73,071	$	—		$	115,234
Income before income taxes and equity in losses of affiliated companies		5,297		10,468		(1,422	)		14,343
Depreciation and amortization		3,420		6,024		—			9,444
Segment assets		141,830		665,806		—			807,636
Quarter Ended November 29, 2002 (In thousands)	Information Management		Network Services and Systems		Other			Totals
Revenues	$	37,592	$	67,694	$	—		$	105,286
Income before income taxes and equity in losses of affiliated companies		6,848		14,370		(921	)		20,297
Depreciation and amortization		2,708		4,793		—			7,501
Segment assets		142,826		614,356		145,875			903,057

The following presents information about our operations from different geographic regions for and as of the three months ended November 28, 2003 and November 29, 2002:

(In thousands)	2003		2002
Revenues:
United States	$	107,835	$	100,597
All other		7,399		4,689
Total revenues	$	115,234	$	105,286
Long-lived assets:
United States	$	120,288	$	108,732
All other		4,205		2,668
Total long-lived assets	$	124,493	$	111,400

13

Six Months Ended November 28, 2003 (In thousands)	Information Management		Network Services and Systems		Other			Totals
Revenues	$	81,651	$	142,474	$	—		$	224,125
Income before income taxes and equity in losses of affiliated companies		8,735		20,843		(2,921	)		26,657
Depreciation and amortization		6,873		11,885		—			18,758
Segment assets		141,830		665,806		—			807,636
Six Months Ended November 29, 2002 (In thousands)	Information Management		Network Services and Systems		Other			Totals
Revenues	$	73,674	$	131,694	$	—		$	205,368
Income before income taxes and equity in losses of affiliated companies		11,605		27,548		(921	)		38,232
Depreciation and amortization		5,501		9,609		—			15,110
Segment assets		142,826		614,356		145,875			903,057

The following presents information about our operations from different geographic regions for and as of the six months ended November 28, 2003 and November 29, 2002:

(In thousands)	2003		2002
Revenues:
United States	$	208,994	$	196,128
All other		15,131		9,240
Total revenues	$	224,125	$	205,368
Long-lived assets:
United States	$	120,288	$	108,732
All other		4,205		2,668
Total long-lived assets	$	124,493	$	111,400

Note 5 – Commitments And Contingencies

We currently provide pharmaceutical information services solutions to our European customers, pharmaceutical companies, through our German business. In this regard we deliver the wholesale data we receive from our data suppliers in a variety of products to our customers to assist them in operating their businesses. We deliver this data to our customers in an electronic format. The specific electronic format within which such data is actually delivered to such pharmaceutical companies in Germany is the subject matter of the current litigation both before the European Commission and the German courts with IMS Health.

In the proceedings before the European Commission instituted by us on December 19, 2000, we are alleging that to the extent this format is copyrighted by IMS Health, the format constitutes an industry standard and an essential facility to competition and must be made available to competitors of IMS Health. We obtained a ruling as to our request for Interim Relief from the European Commission

14

whereby they ordered IMS Health to license its structure for organizing pharmaceutical sales data to us. However, subsequent to this decision, the Court of First Instance and later the European Court Of Justice stayed this decision pending a complete review of the underlying substantive matters. Those matters are still proceeding. The European Commission has recently withdrawn its ruling as to our request for Interim Relief finding that since the German Court of Appeals had found that IMS Health had no right to enforce any existent copyright in the structure that we could sufficiently compete in the marketplace.

In proceedings before the German courts instituted by IMS Health on December 21, 2000, IMS Health has alleged copyright infringement against each of Pharma Intranet Information AG, or PI, the company from whom we purchased certain assets of our German business, and us, and we each have contested the validity of IMS Health’s alleged copyright. In these proceedings, IMS Health obtained an injunction from the Frankfurt Regional Court to prevent each of PI and us from distributing data in the contested format. On August 13, 2002, the Frankfurt Court of Appeals ruled in our favor by dismissing the preliminary injunction against our use of the industry standard data structure. This decision is final and is not subject to further appeal by IMS Health. On September 17, 2002 the Frankfurt Court of Appeals issued a judgment in the main proceedings against PI. While validating a copyright in the structure, the Court held that IMS Health has no standing to sue to enforce the copyright. The Court also determined that IMS Health does not own the copyright. The Court further denied IMS Health’s claims under the EU Database Directive for protection of the data structure involved. Finally, the Court found that PI breached the German Act Against Unfair Trade Practices (UGW) by reason of identically copying the data structure. We have not sold or used the data structure initially used by PI. We do not own PI and PI is no longer actively conducting business. The case against us remains pending before the Frankfurt Regional Court at this time.

Several independent pharmacies filed a lawsuit on December 23, 2002 in the Twentieth Judicial Circuit Court, St. Clair County, Illinois, against IMS Health, Inc., or IMS, and sixty-two other defendants, including us (collectively the computer systems vendors). We were served with the lawsuit in May 2003. The pharmacies, Douglas & Ogden Medical Center Pharmacy, Inc. d/b/a Douglas Main Pharmacy, Timmerman & Associates, Inc. d/b/a Comprehensive Care Pharmacy, and John Hartman d/b/a Bittles Drug Store, allege that IMS violated the Illinois Trade Secrets Act and breached alleged contracts it had with the computer systems vendors by reselling what the plaintiffs claim to be proprietary drug information to a competing prescription drug provider. The plaintiffs have also alleged that the computer systems vendors, including us, violated the Illinois Trade Secrets Act and breached alleged contracts with the plaintiffs by providing what they claim to be proprietary pharmacy data to IMS. In connection with the class action that the plaintiffs are seeking, the plaintiffs are claiming damages in excess of $100 million, alleging that other independent pharmacies have similar relationships with IMS and the computer systems vendors.

We have denied all liability in the lawsuit, have objected to certification of the class and intend to defend the case vigorously. Our contracts with IMS provide for indemnification, and we have asserted a claim for indemnification against IMS. Based on our preliminary internal investigations, management does not currently anticipate that this case will have a material adverse impact on our financial position, liquidity or results of operations.

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

15

Note 6 - Supplemental Cash Flow Information

Supplemental cash flow disclosures are as follows:

	Six months ended
(in thousands)	November 28, 2003		November 29, 2002
Net income taxes paid	$	755	$	270
Interest paid		15,065		5,316

Note 7 – Comprehensive Income

The components of comprehensive income are as follows:

	Three months ended
(in thousands)	November 28, 2003			November 29, 2002
Net income	$	8,734		$	12,677
Foreign currency translation adjustment		5,178			409
Unrealized holding loss, net of tax		4			200
Pension liability adjustment, net of tax		—			—
Total comprehensive income	$	13,916		$	13,286
	Six months ended
(in thousands)	November 28, 2003			November 29, 2002
Net income	$	16,088		$	23,842
Foreign currency translation adjustment		1,285			2,395
Unrealized holding loss, net of tax		4			(82	)
Pension liability adjustment, net of tax		(712	)		—
Total comprehensive income	$	16,665		$	26,155

Note 8 –Restructuring, Impairment and Other Charges

In the fourth quarter of fiscal 2003, in conjunction with the completion of the TechRx acquisition, we began a review of the entirety of NDCHealth to identify opportunities for increased operational efficiencies. This ongoing review includes an assessment of our organizational structure as well as our physical operating locations. We have taken several actions in the first six months of fiscal 2004 as a result of this review.

In the Network Services and Systems segment, we have begun to streamline the management organizations of our pharmacy services and systems businesses and the application development organization in our hospital business. We completed the first step of the streamlining, in which we eliminated 16 positions, in the first quarter. In connection with the first step, we recorded approximately $1.0 million in severance related costs in the first quarter. Approximately $0.1 million of this severance cost was a non-cash charge related to modified stock options. We completed additional steps of this streamlining in the second quarter with the elimination of an additional 14 positions. In connection with the additional streamlining, we recorded approximately $1.5 million in severance related costs in the second quarter. Also in the second quarter, we recorded a charge of approximately $0.2 million for the impairment of a note receivable we received as partial consideration for the sale of a non-core operation in the second quarter of fiscal 2001.

16

During the first quarter of fiscal 2004, we made a decision to combine the sales organizations and streamline the development organizations within the Information Management segment. As a result of this reorganization, during the first quarter we eliminated 28 positions and reduced the size of two locations. Accordingly, we recorded approximately $0.4 million in severance related costs and $0.1 million of expense related to lease terminations in the first quarter. The reorganization of these sales organizations is substantially complete.

During the second quarter of fiscal 2004, we began the consolidation of our European operations. In the first step we began to streamline the management organization, and realign the focus, of our United Kingdom pharmacy systems business. In connection with the first step, we recorded charges of approximately $0.7 million for lease termination costs and the impairment of assets that are not aligned with the current focus of our United Kingdom business, and approximately $0.1 million in severance related costs, during the second quarter.

We expect to continue to review alternatives to reduce costs, including strategies to improve our profitability in Europe, in the second half of fiscal 2004.

Note 9 – Consolidating Financial Data of Subsidiary Guarantors

In fiscal year 2003, we issued $200 million aggregate principal amount of 10 ¹/2% senior subordinated notes due 2012. Our wholly-owned, material subsidiaries, which include NDC Health Information Services (Arizona) Inc. and NDC of Canada, Inc., have fully and unconditionally guaranteed the notes on a joint and several basis.

Presented below is our consolidating financial data, including the combined financial data for our subsidiary guarantors and our subsidiary non-guarantors.

Statement of Operations for the Three Months Ended November 28, 2003 (in thousands)	NDCHealth Corporation			Subsidiary Guarantors			Subsidiary Non-Guarantors			Elimination			Consolidated
Revenues	$	62,551		$	42,415		$	10,268		$	—		$	115,234
Cost of service		23,082			25,520			8,580			—			57,182
Other operating expenses		22,807			11,048			2,911			—			36,766
Operating income (loss)		16,662			5,847			(1,223	)		—			21,286
Other income (expense)		(7,084	)		(57	)		216			(18	)		(6,943	)
Income (loss) before income taxes and equity in losses of affiliated companies		9,578			5,790			(1,007	)		(18	)		14,343
Provision for income taxes		3,507			2,171			(309	)		—			5,369
Income (loss) before equity in losses of affiliated companies		6,071			3,619			(698	)		(18	)		8,974
Equity in losses of affiliated companies		—			—			(240	)		—			(240	)
Net income (loss)	$	6,071		$	3,619		$	(938	)	$	(18	)	$	8,734

17

Statement of Operations for the Three Months Ended November 29, 2002 (in thousands)	NDCHealth Corporation			Subsidiary Guarantors		Subsidiary Non-Guarantors			Eliminations			Consolidated
Revenues	$	44,822		$	58,861	$	6,115		$	(4,512	)	$	105,286
Cost of service		15,280			34,197		4,954			(2,481	)		51,950
Other operating expenses		8,073			20,685		2,231			(1,427	)		29,562
Operating income (loss)		21,469			3,979		(1,070	)		(604	)		23,774
Other income (expense)		(2,753	)		9,254		523			(10,501	)		(3,477	)
Income (loss) before income taxes and equity in losses of affiliated companies		18,716			13,233		(547	)		(11,105	)		20,297
Provision for income taxes		6,738			4,986		(419	)		(3,998	)		7,307
Income (loss) before equity in losses of affiliated companies		11,978			8,247		(128	)		(7,107	)		12,990
Equity in losses of affiliated companies		(313	)		—		—			—			(313	)
Net income (loss)	$	11,665		$	8,247	$	(128	)	$	(7,107	)	$	12,677
Statement of Operations for the Six Months Ended November 28, 2003 (in thousands)	NDCHealth Corporation			Subsidiary Guarantors		Subsidiary Non-Guarantors			Eliminations			Consolidated
Revenues	$	121,594		$	81,683	$	20,848		$	—		$	224,125
Cost of service		44,896			50,741		16,697			—			112,334
Other operating expenses		42,974			22,127		5,664			—			70,765
Operating income (loss)		33,724			8,815		(1,513	)		—			41,026
Other income (expense)		(14,381	)		973		98			(1,059	)		(14,369	)
Income (loss) before income taxes and equity in losses of affiliated companies		19,343			9,788		(1,415	)		(1,059	)		26,657
Provision for income taxes		7,254			3,670		(938	)		—			9,986
Income (loss) before equity in losses of affiliated companies		12,089			6,118		(477	)		(1,059	)		16,671
Equity in losses of affiliated companies		—			—		(583	)		—			(583	)
Net income (loss)	$	12,089		$	6,118	$	(1,060	)	$	(1,059	)	$	16,088
Statement of Operations for the Six Months Ended November 29, 2002 (in thousands)	NDCHealth Corporation			Subsidiary Guarantors		Subsidiary Non-Guarantors			Eliminations			Consolidated
Revenues	$	88,006		$	111,612	$	13,714		$	(7,964	)	$	205,368
Cost of service		30,207			65,625		10,837			(2,918	)		103,751
Other operating expenses		16,283			39,285		5,331			(3,575	)		57,324
Operating income (loss)		41,516			6,702		(2,454	)		(1,471	)		44,293
Other income (expense)		(5,709	)		8,909		938			(10,199	)		(6,061	)
Income (loss) before income taxes and equity in losses of affiliated companies		35,807			15,611		(1,516	)		(11,670	)		38,232
Provision for income taxes		12,891			5,828		(752	)		(4,202	)		13,765
Income (loss) before equity in losses of affiliated companies		22,916			9,783		(764	)		(7,468	)		24,467
Equity in losses of affiliated companies		(625	)		—		—			—			(625	)
Net income (loss)	$	22,291		$	9,783	$	(764	)	$	(7,468	)	$	23,842

18

Statement of Cash Flows for the Six months Ended November 28, 2003 (in thousands)	NDCHealth Corporation			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	12,089		$	6,118		$	(1,060	)	$	(1,059	)	$	16,088
Adjustments to reconcile net income (loss) to cash provided by operating activities:		21,233			5,666			6,487			(308	)		33,078
Changes in assets and liabilities which provided (used) cash, net of the effects of acquisitions:		13,388			(9,182	)		901			307			5,414
Net cash provided by (used in) operating activities		46,710			2,602			6,328			(1,060	)		54,580
Cash flows from investing activities:		(22,194	)		(2,245	)		(4,201	)		—			(28,640	)
Cash flows from financing activities:		(882	)		(1,419	)		(1,359	)		1,060			(2,600	)
Cash flows from discontinued operations:		—			—			(859	)		—			(859	)
Increase (decrease) in cash and cash equivalents		23,634			(1,062	)		(91	)		—			22,481
Cash and cash equivalents, beginning of period		12,698			1,491			1,914			—			16,103
Cash and cash equivalents, end of period	$	36,332		$	429		$	1,823		$	—		$	38,584
Statement of Cash Flows for the Six Months Ended November 29, 2002  (in thousands)	NDCHealth Corporation			Subsidiary Guarantors			Subsidiary Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	22,291		$	9,783		$	(764	)	$	(7,468	)	$	23,842
Adjustments to reconcile net income (loss) to cash provided by operating activities:		23,365			10,415			(7,504	)		(550	)		25,726
Changes in assets and liabilities which provided (used) cash, net of the effects of acquisitions:		(12,836	)		(8,825	)		9,486			3,240			(8,935	)
Net cash provided by operating activities		32,820			11,373			1,218			(4,778	)		40,633
Cash flows from investing activities:		(16,014	)		(11,659	)		(3,375	)		—			(31,048	)
Cash flows from financing activities:		73,392			(5,924	)		(477	)		4,778			71,769
Cash flows from discontinued operations:		—			—			2,587			—			2,587
Increase (decrease) in cash and cash equivalents		90,198			(6,210	)		(47	)		—			83,941
Cash and cash equivalents, beginning of period		4,400			7,387			1,660			—			13,447
Cash and cash equivalents, end of period	$	94,598		$	1,177		$	1,613		$	—		$	97,388

19

Balance Sheet as of November 28, 2003 (in thousands)	NDCHealth Corporation		Subsidiary Guarantors			Subsidiary Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	36,332	$	429		$	1,823	$	—		$	38,584
Accounts receivable		52,736		16,310			3,985		—			73,031
Income taxes		15,951		65			—		—			16,016
Prepaid expenses and other current assets		31,227		10,189			6,048		(13,576	)		33,888
Total current assets		136,246		26,993			11,856		(13,576	)		161,519
Property and equipment, net		89,183		31,352			3,958		—			124,493
Intangible assets, net		388,174		38,069			55,077		(5,379	)		475,941
Investments		260,082		—			32,466		(275,203	)		17,345
Intercompany receivables		228,001		1,273			—		(229,274	)		—
Other		40,403		—			4,549		(16,614	)		28,338
Total Assets	$	1,142,089	$	97,687		$	107,906	$	(540,046	)	$	807,636
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	6,503	$	677		$	9,344	$	(9,013	)	$	7,511
Accounts payable and accrued liabilities		37,419		8,963			10,616		6,475			63,473
Accrued interest		13,259		—			—		—			13,259
Deferred income		19,143		15,746			2,153		—			37,042
Total current liabilities		76,324		25,386			22,113		(2,538	)		121,285
Long-term liabilities		556,085		26,558			36,079		(255,296	)		363,426
Total liabilities		632,409		51,944			58,192		(257,834	)		484,711
Minority interest in equity of subsidiaries		—		—			8,396		—			8,396
Stockholders’ equity		509,680		45,743			41,318		(282,212	)		314,529
Total Liabilities and Stockholders’ Equity	$	1,142,089	$	97,687		$	107,906	$	(540,046	)	$	807,636
Balance Sheet as of May 30, 2003 (in thousands)	NDCHealth Corporation		Subsidiary Guarantors			Subsidiary Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	12,698	$	1,491		$	1,914	$	—		$	16,103
Accounts receivable		48,570		20,052			3,581		—			72,203
Income taxes		21,137		1,721			4		—			22,862
Prepaid expenses and other current assets		24,937		12,827			5,050		(8,510	)		34,304
Total current assets		107,342		36,091			10,549		(8,510	)		145,472
Property and equipment, net		79,332		33,842			3,504		—			116,678
Intangible assets, net		391,590		39,012			54,011		(5,379	)		479,234
Investments		269,823		264			5,484		(259,909	)		15,662
Intercompany receivables		253,419		1,068			—		(254,487	)		—
Other		42,390		(2,329	)		9,033		(18,888	)		30,206
Total Assets	$	1,143,896	$	107,948		$	82,581	$	(547,173	)	$	787,252
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	6,809	$	663		$	5,889	$	(5,775	)	$	7,586
Accounts payable and accrued liabilities		37,294		8,781			9,507		5,629			61,211
Accrued interest		13,281		—			—		—			13,281
Deferred revenue		17,708		18,347			2,082		—			38,137
Total current liabilities		75,092		27,791			17,478		(146	)		120,215
Long-term liabilities		569,720		40,186			33,340		(281,740	)		361,506
Total liabilities		644,812		67,977			50,818		(281,886	)		481,721
Minority interest in equity of subsidiaries		—		—			9,019		—			9,019
Stockholders’ equity		499,084		39,971			22,744		(265,287	)		296,512
Total Liabilities and Stockholders’ Equity	$	1,143,896	$	107,948		$	82,581	$	(547,173	)	$	787,252

20

Note 10 – Recently Issued Accounting Pronouncements

We have adopted the provisions of EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables,” which requires companies to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. The adoption of this statement has resulted in an acceleration of the trend of deferring revenue as we provide more end-to-end solutions and the delay of revenue recognition at the time we enter into contracts with multiple deliverables.

In January 2003, the FASB issued FASB Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. We do not have arrangements which would meet the disclosure or consolidation requirements of FIN46.

Note 11 – Subsequent Events

On December 31, 2003 we entered into a seven-year exclusive license agreement with ArcLight Systems LLC, an information management company owned by a number of retail pharmacies and a major healthcare and distribution company. This agreement should allow us to enhance the quality, speed and accuracy of our base compensation and targeting products, create additional revenue streams by extending the capabilities of our new Insight solutions, reduce our data handling costs, and improve our revenue-to-data cost coverage ratio. As consideration for this exclusive license to ArcLight’s assets, we issued 381,098 shares of unregistered NDCHealth common stock and a five-year warrant to purchase an additional 381,098 shares of NDCHealth common stock at an exercise price of $26.24 per share. We will also pay ArcLight royalties on product sales utilizing ArcLight data. If the agreement is extended an additional three years, then ArcLight will receive an additional $10 million in either cash or NDCHealth common stock at ArcLight’s option.

On December 19, 2003 we amended our $225 million senior secured credit facility to reduce the interest rate and relax certain covenants to provide us added flexibility. More information regarding the amendment can be found under the heading Liquidity and Capital Resources in Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

21

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

For an understanding of the significant factors that influenced our results, the following discussion should be read in conjunction with the condensed consolidated financial statements and related notes appearing elsewhere in this report.

Business Strategy

Healthcare represents the largest segment of the United States economy, with total U.S. health expenditures estimated to reach $1.6 trillion in 2004, according to government estimates, and its percentage is expected to continue to grow as the country’s population ages. We believe NDCHealth plays an increasingly important role in providing automation, transaction processing and information solutions to improve the efficiency and effectiveness of healthcare.

We are executing a business strategy to evolve from a value-added intelligent network and information products provider to an integrated healthcare information solutions company. Our strategy is to continue to expand our markets and add new products and services as we offer our customers high quality, quantifiable value-added information solutions in healthcare. We seek to achieve this strategy by leveraging the assets of our two business segments, Network Services and Systems and Information Management, and growing a sustainable business model with a consistent base of recurring revenues.

The NDCHealth Intelligent Network is the cornerstone of our Network Services and Systems segment, transmitting information from pharmacies and hospitals to third party payers for reimbursement. We offer information processing, including claims submission and adjudication, customized validation and proprietary message editing, eligibility verification, remittance advice, referral authorization transactions, prescription ordering, and refill authorization transactions. Our point-of-service systems in pharmacies, hospitals, and physician offices serve as entry and exit points for information to and from our NDCHealth Intelligent Network. Through our network, we are partnering with our customers to improve efficiency and effectiveness in healthcare. Some examples include: real time eligibility verification, drug formulary and inventory management, and facilitation of prompt payment for products and services. We estimate that we process more than 45% of the electronic healthcare claims in the U.S. through our Network Services and Systems segment.

Our Information Management segment provides data solutions that can help pharmaceutical manufacturers better align and appropriately compensate their sales forces, analyze their markets, more effectively develop and position their product offerings, and ultimately better understand and enhance the efficacy of drug treatment. We estimate our Information Management segment has attained an approximate 30% market share in the United States based on the number of pharmaceutical sales representatives compensated utilizing our products. In addition, we are increasingly utilizing this segment’s information assets to provide solutions to other sectors of the healthcare market.

Our principal mission is to offer solutions to our customers that deliver quantifiable value in terms of cash flow acceleration and profit margin improvement through the reduction in accounts receivable days outstanding, the optimization of the prescription fulfillment process, higher inventory

22

turnover and valuable market insights. In addition, we believe our solutions improve the ability of our customers’ sales forces to experience enhanced revenue productivity (i.e. to generate more revenue per sales person.) We will work to achieve long-term growth in revenue, profitability and cash flow by leveraging the key strengths of our core assets and by introducing and expanding unique product sets to our customers.

In our 2003 Annual Report on Form 10-K/A, we outlined an eight-quarter plan that provides a detailed summary of key business strategies and goals for fiscal years 2004 and 2005. The goals of this eight-quarter plan are:

• To generate more than $100 million in free cash flow, defined as Net cash provided by operating activities less capital expenditures and dividends paid, over the eight-quarter period, which we expect to utilize to significantly reduce our levels of senior debt and interest expense, and lower our debt to capital ratio toward a target of 35%;

• To achieve sustainable low double digit to mid-teens revenue growth rates in both business segments as we exit fiscal 2005; and

• To expand operating margins by at least 100 basis points from the fourth quarter of fiscal 2003 to the fourth quarter of fiscal 2005; however, there could be a margin decline in fiscal 2004.

The three key elements to our eight-quarter plan are: 1) to increase revenue per claim by providing advanced edit processing and other value adding solutions; 2) to grow claims volume as healthcare grows and through gains in market share; and 3) in our Information Management segment, to take full advantage of our extensive claims processing resources and to position the business for an anticipated rebound in the pharmaceutical manufacturing industry.

Second Quarter Operating Summary

In order to achieve this plan, we have set our execution strategies to: grow revenue through the sales of integrated and value-adding solutions; control operational and administrative costs to realize margin improvement; and generate significant cash to reduce debt. In our second fiscal quarter ended November 28, 2003, we made solid progress against these execution priorities.

Revenue Growth:

• Total Network transaction volume increased approximately 30% over the second quarter of fiscal 2003 as we continued to increase our value-adding transaction services and grow our base claim volume;

• Pharmacy revenue per claim increased sequentially;

• Hospital and Pharmacy system sales, which are increasingly recorded on a per transaction basis after the product is installed, should continue to enhance our recurring revenue, with recognition of such revenue being spread over future periods, building revenue growth as new system sales are installed;

• We were notified that we are vendor-of-choice for our new pharmacy solutions by additional customers, and are in the process of negotiating new contracts with these large institutions. If these agreements are signed, our Pharmacy System revenue backlog would exceed $300 million, to be recognized over the life of these contracts, generally 5 to 10 years;

• The key component of our growth is the creation and development of new and enhanced products to help increase our customers’ profits. We received a further validation of our ability to develop these solutions when our new pharmacy system was selected for the Borland Software Customer Application of the Year Award based on the product development of our Enterprise solution for national chain pharmacies. We were recognized as a best practice in creating a high quality solution that addresses customer needs;

23

• We introduced a suite of value-adding pharmacy solutions into our Canadian transaction processing business that are gaining traction in that market;

• In our Hospital business, we sold more than 200 units in our second fiscal quarter and over 450 in the first half of this year, compared to a total of approximately 100 units during all of fiscal 2003. Due to the increased features and functionality of ePREMIS, the large majority of our new ePREMIS sales are at bundled per transaction rates that are 20 to 25% higher per transaction than the pricing under our current PREMIS contracts. Revenue per claim should begin to increase as transaction volumes grow following ePREMIS installations in the third and fourth quarters of fiscal 2004;

• In our Physician business, sales of our Lytec product upgrade showed good sequential growth, with over 1,500 upgrade units sold in the second quarter versus approximately 400 units sold in the first quarter of fiscal 2004;

• We experienced a 37% increase in physician transactions processed and continue to focus on growing our electronic prescription volumes from physician offices;

• Our Information Management segment continued to experience solid growth in continental Europe, with revenue increasing more than 100% over our second fiscal quarter last year. This segment also grew slightly better than expected in the U.S. due to increased sales of base compensation and targeting solutions as well as initial sales of our Insight and Impact product suites;

• During the quarter, we arranged for an exclusive license agreement, closed on December 31, 2003, with ArcLight Systems LLC, an information management partnership, that should improve our base compensation and targeting products and create additional revenue streams by extending our new Insight solutions; and

• Our Information Management segment continues to be impacted in the short term by lower discretionary spending levels from pharmaceutical manufacturers. We are, therefore, maintaining a cautious outlook for this business segment for the remainder of our fiscal 2004.

Cost Controls:

• Our gross profit margin, defined as Revenue less Cost of service and Depreciation and amortization, increased sequentially to 42.2% of revenue from 40.8% in the first quarter of fiscal 2004;

• We were able to hold our Cost of service relatively flat at 49.7% of total revenue versus 49.4% in the year-ago second quarter, in spite of a previously disclosed increase in data costs related to our activities in Europe;

• Compensation expense exclusive of Restructuring, impairment and other charges, continued to trend lower, comprising 24.0% of total revenue in the quarter compared to 25.3% in the first quarter of fiscal 2004 and 26.4% in the year-ago second quarter; and

• On December 22, 2003, we announced the renegotiation of our $225 million credit facility, which increases our financial flexibility and will lower our future net interest expense by approximately $525,000 per quarter. This reduction in interest expense is before any loan prepayments we may make in future periods.

Cash Generation:

• We continued to generate cash in the quarter. For the six-month period ended November 28, 2003, Net cash provided by operating activities increased 34.5%, to $54.6 million from $40.6 million in the same period a year ago;

• Free cash flow, as defined earlier, improved 63.7%, to $28.0 million from $17.1 million in the first six months of fiscal 2003; and

24

• Our Accounts receivable days outstanding (DSO) was 59 days at the end of the second quarter, which is a decrease of 5 days from the same period last year. Collections and cash management is a constant area of focus for us as we look to continue to sequentially increase our net cash from operations this year.

In summary, we believe NDCHealth delivered a very solid quarter of financial and operating performance, and we made significant progress toward achieving the goals of our eight-quarter plan.

Second Quarter Financial and Business Review

• Revenue grew 9.4%, to $115.2 million from $105.3 million in the same quarter last year. Revenue per claim increased in Pharmacy, and claims volume expanded as we grew market share. In our Hospital business, new sales at a higher revenue per claim rate increased significantly, with revenue to be recognized over time as transaction volume grows after installation of the units. In our Information Management segment, our German operation had solid growth, and we were successful in selling additional base compensation and targeting products as well as our new Insight and Impact solutions domestically. As expected, in comparison to the same quarter a year ago, revenue growth in our fiscal 2004 second quarter was impacted by our emphasis on solution selling in our Network Services and Systems segment resulting in an increase in recurring revenue as a percentage of total revenue but also delaying certain revenue recognition until later quarters.

• Second quarter Operating income was $21.3 million versus $23.8 million in the second quarter of fiscal 2003 resulting in an expected and previously announced decline in operating margin to 18.5% from 22.6% in the second quarter of fiscal 2003. These results were impacted by:

• The previously announced restructuring charge of $2.5 million, related primarily to compensation costs as a result of continued streamlining of the organization;

• An increase in Sales, general and administrative expense of $2.7 million due to higher corporate costs as previously disclosed; and

• An increase in Depreciation and amortization expense of $1.9 million due to increased amortization related to the second step of the TechRx acquisition completed in May 2003 and the rollout of new products.

• Income before income taxes and equity in losses of affiliated companies declined to $14.3 million from $20.3 million, due to the decline in Operating income and the increase in Other expense related to a $3.9 million increase in interest expense resulting from our refinancing in the second quarter of last year. The full impact of the increased interest expense is reflected in all quarters beginning with the third quarter of last fiscal year, so year-over-year comparisons of interest expense will be comparable going forward.

• As we indicated previously, our effective tax rate rose to approximately 37.5% in the second quarter of fiscal 2004 versus 36% in the second quarter of fiscal 2003 as a result of the consolidation of TechRx for tax purposes, and other factors.

• Net income, which was impacted by the above factors, was $8.7 million or $0.25 per diluted share, including a $0.04 per share after-tax restructuring charge related primarily to our organizational streamlining. This compares to $12.7 million or $0.36 per diluted share in the second quarter of fiscal 2003.

• Diluted common shares outstanding in the second quarter of fiscal 2004 increased 1.4% sequentially due to our rising stock price, which increase is reflected in our fully diluted per share results.

Network Services and Systems

Second quarter revenue in our Network Services and Systems segment increased 8.0% to $73.1 million from $67.7 million in the second quarter of fiscal 2003. This growth was due in part to a 30% increase in total network transaction volume as compared to the previous year’s second quarter, driven primarily by pharmacy claims, value-adding edits and transaction services. Continuing the trend from last quarter, revenue from our Pharmacy business unit grew at a low double-digit percentage rate, while both our Hospital and Physician business units showed single-digit revenue growth.

25

One of our strategies is to increase the percentage of predictable revenue in our Network segment by selling solutions and by shifting more of our systems to recurring revenue pricing models. Although this results in slower revenue growth in the short term as we transition to the new model and therefore delay the recognition of certain revenue to future periods, it helps to build a reliable revenue stream for future quarters. In the quarter, we were successful in selling new Pharmacy and Hospital systems and information solutions that will be recurring revenue recorded in future periods.

Despite higher revenue, Network segment Operating income decreased to $15.4 million from $16.4 million last fiscal year, reflecting the previously mentioned additional amortization resulting from the second step of the TechRx acquisition; expenses related to the roll-out of our new ePREMIS, e-prescribing and pharmacy system products; Restructuring, impairment and other charges of $1.4 million; and increased corporate costs.

We continued to experience success in our Pharmacy services business in our second fiscal quarter. Our pharmacy claims volume increased at a faster rate than the overall market due to gains in market share, a continuing market shift from cash transactions to adjudicated claims, and increased sales of value-adding solutions into our transaction customer base, which is reflected in an increase in our Pharmacy revenue per claim as we expected.

Our new Pharmacy systems business has given us great strategic advantages, and market acceptance of our integrated solutions platform by current and prospective pharmacy customers continues to be positive. Pharmacy systems revenue increasingly includes services related to our providing complete end-to-end pharmacy solutions. In the second quarter of fiscal 2004, we estimate that core Pharmacy systems revenue was roughly flat compared to its results in the second quarter of fiscal 2003 as we are continuing the initial roll out of our new independent pharmacy products. Going forward we will be unable to report on TechRx results as our Pharmacy services and systems businesses become increasingly integrated.

Our Hospital unit is still in the early stages of the product introduction and installation of our ePREMIS revenue cycle management solution for hospitals, and revenue from new sales will be recorded on a per transaction basis after the product is installed, consistent with our revenue recognition policy. Similar to our first quarter sales results, because of the increased features and functionality of ePREMIS, our revenue per claim on new units sold during our second quarter was higher than our current revenue per claim within our legacy hospital customer base and is higher than in our Pharmacy unit. ePREMIS product sales were strong for the second consecutive quarter as we continued to sell to and convert our existing base of over 1,500 hospital customers as well as add new customers. We sold over 200 units in our second quarter and maintained an installation rate of more than 20 units per month during that period.

NDCHealth’s Physician business released its Lytec 2004 product upgrade in October and sold more than 1,500 total units during the second fiscal quarter. Further sales increases are expected as the next version of Medisoft is delivered in the third fiscal quarter. Comparisons of our Physician business revenue to the same period in fiscal 2003 are negatively impacted by the discontinuation of lower margin hardware sales at the end of our fiscal second quarter last year.

26

Our Physician business experienced a 37% increase in processed transactions when compared to our second quarter in fiscal 2003. In addition, electronic prescription transactions continued to increase. We anticipate this volume should continue to grow if, as expected NDCHealth connects other practice management system and electronic medical records vendors and other physician aggregators to the network.

Information Management

Second quarter revenue in our Information Management segment grew 12.0% to $42.1 million from $37.6 million in the second quarter of fiscal 2003. Our second quarter revenue growth in this segment was the result of growth in continental Europe and sales of information products to domestic pharmaceutical manufacturer customers. Total segment growth was lower than the growth in information products due to lower research and consulting revenue as our pharmaceutical customers continued to limit their discretionary spending.

Information Management segment Operating income in the second quarter of fiscal 2004 decreased to $7.3 million from $7.4 million in the same quarter in fiscal 2003, reflecting expenses related to data costs associated with our European expansion, new product introductions such as our Intelligent Health Repository, and higher corporate costs.

During the quarter, we continued to actively pursue Information Management strategies that leverage data from our physician, pharmacy and hospital markets by capturing claim and related transaction information and combining it with data we purchase to create information solutions with unique business insights for pharmaceutical manufacturers. During the quarter, these recently introduced Insight and Impact solutions generated significant interest among our customers and increased sales opportunities for NDCHealth.

Outlook

Based on our progress during the first two quarters of our eight-quarter plan, we continue to believe the execution of our strategy will increase our Revenue, Net income and Net cash from operating activities as we move through the next several quarters.

In our Network segment, we expect to continue to grow revenue per claim and increase our claims volume. Industry wide, there is inherent growth in prescription volume and a continuing market shift to adjudicated claims from cash transactions. Both of these trends should increase our claims volume as we also continue to grow market share.

We believe we have a solid pipeline for pharmacy sales that should help to enhance our sequential growth. With our new pharmacy solutions improving our customers’ cash flow and profitability, we expect our pharmacy revenue per claim should continue to increase as we sell and install these solutions to existing customers and add new customers. Our total pharmacy transaction volume is also expected to continue to rise, indicating inherent growth in scripts, further penetration of our value-adding solutions into our claims base and continued market share gains.

In addition, as part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, beginning in the spring of 2004, millions of Medicare recipients should be able to purchase government-approved discount cards for use at retail pharmacies to help pay for prescription drugs. Any program that converts cash prescription purchases to third-party adjudicated transactions and also generates new prescription growth should benefit NDCHealth through increased network transaction volumes.

27

In our Pharmacy systems business, sales and installations of our integrated solution platform for independent and regional pharmacies are progressing well. We believe we have a strong pipeline of sales for the remainder of fiscal 2004, which should result in rising recurring revenue as sales and installations occur. Based on current and anticipated sales, we believe we will install or have slotted to install at least 700 units by the end of this fiscal year. A new opportunity emerged in the second quarter as a number of new customers and prospects are now also considering outsourcing to NDCHealth the host application and telecommunications network in addition to purchasing the in-store network application and transaction processing services. Selling and installing more of these new pharmacy outsourcing products should also increase our average revenue per claim and revenue growth in future periods as well.

We also feel confident about the market acceptance of our new pharmacy system platform for national chain drug stores. We have been named vendor-of-choice by two large institutions and have active negotiations underway with a number of large institutions and expect to have agreements signed within fiscal 2004. If we successfully complete definitive agreements with the two institutions that have named us vendor-of-choice, our pharmacy systems revenue backlog would exceed $300 million, to be recognized over five to ten years. We are on schedule with our internal product development and delivery timeline and we continue to expect our current national-chain customers to begin implementation of the pharmacy system in early fiscal 2005, with chain-wide installations expected to continue through the ensuing 18 to 24 months.

The combination of these factors, plus the recognition of revenue spread over future periods under our solution selling model, leads us to expect accelerated revenue growth in our Pharmacy business through the remainder of fiscal 2004.

In our Hospital unit, we expect to continue to gain market share and increase revenue per claim as ePREMIS continues to accelerate its penetration in the market. Approximately 75% of our ePREMIS sales so far this year have been to new name customers, indicating increasing market share. Sales of ePREMIS conversions into our existing customer base have also been strong. Our installation pipeline for the third fiscal quarter is full and is beginning to fill out for the fourth fiscal quarter. As we install these ePREMIS sales, we would expect to see transaction growth, which could also be positively impacted by regulations adopted under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

Because of its increased features and functionality, the large majority of our new ePREMIS sales are at bundled per transaction rates that are 20 to 25% higher per transaction than the transaction pricing under our current PREMIS contracts, which should increase revenue per claim as ePREMIS installations grow. As we continue to grow Hospital sales and install these new solutions, we expect Hospital to achieve low double digit or mid-teens growth as we move through the remainder of the eight-quarter plan. As the growth in our Hospital unit accelerates, we expect it should have a positive impact on Network revenue.

In our Physician business unit, we are anticipating improved revenue growth as we continue to sell our Lytec product upgrade and introduce the Medisoft product upgrade in the third fiscal quarter, and as our physician claims processing and e-prescribing revenue continues to grow over the remainder of the eight-quarter plan.

In our Information Management segment, we are pleased with our performance in continental Europe, the market acceptance of our new domestic solutions, and the current status of our sales pipeline. In Research and Consulting, we have new management in place and have reorganized the sales force. These actions are beginning to show results as the sales pipeline is stronger than in prior quarters, and we would expect performance to continue to improve. Further, we continue to be focused on generating revenue growth, controlling costs and eliminating losses currently being incurred by certain product lines in Europe and our new Intelligent Health Repository product.

28

As part of our positioning of our Information Management segment for accelerated growth, on December 31, 2003 we entered into a seven-year exclusive license agreement with ArcLight Systems LLC, an information management company owned by a number major participants in the pharmacy industry, including Alberton’s Inc., CVS Corporation, Cardinal Health, Inc., Kmart Corporation, and Wal-Mart Stores, Inc. This agreement should allow NDCHealth to enhance the quality, speed and accuracy of our base compensation and targeting products, create additional revenue streams by extending the capabilities of our new Insight and Impact solutions, reduce our data handling costs, and improve our revenue-to-data cost coverage ratio. When coupled with additional activities we have underway, the expanded solution set we will develop through this license should help our customers achieve their strategic objectives and further position our Information Management segment for sustainable low double-digit to mid-teen revenue growth as we near the end of our eight-quarter plan.

This agreement with ArcLight is expected to have no material impact on our fiscal 2004 operating results and should be accretive in 2005 and beyond. As consideration for this exclusive license to ArcLight’s assets, we issued 381,098 shares of unregistered NDCHealth common stock and a five-year warrant to purchase an additional 381,098 shares of NDCHealth common stock at an exercise price of $26.24 per share. We will also pay ArcLight royalties on product sales utilizing ArcLight data. If the agreement is extended an additional three years, then ArcLight will receive an additional $10 million in either cash or NDCHealth stock at ArcLight’s option.

We are continuing to maintain a cautious outlook for the Information Management segment for the remainder of our fiscal 2004 as pharmaceutical companies re-evaluate expenditures given the lack of new drug introductions, profitability and volume growth. While we have seen an increase by our customers in calendar year-end expenditures at the project level, we believe most pharmaceutical manufacturers will maintain a heavy emphasis on cost controls in calendar 2004.

As previously stated, we expect revenue in our Information Management segment to reach sustainable low double digit to mid-teen percentage growth by the end of the fourth quarter of fiscal 2005. We believe that as new drugs are approved by the FDA and introduced into the market, our customers’ discretionary spending levels should increase, stimulating growth in this segment. We will also continue to generate additional revenue streams as we bring to market new solutions and move beyond the traditional sales and compensation product lines.

We believe we are on track to achieve the goals outlined in our eight-quarter plan. Based on our first half performance, our financial guidance for fiscal 2004 is as follows:

• We estimate revenue will be approximately $475 to $490 million;

• We expect diluted earnings per share to be in the range of $1.08 to $1.25, including restructuring, impairment and other charges totaling $0.07 per share in the first half of this fiscal year;

• We expect to continue to be a strong generator of cash, with fiscal 2004 net cash provided by operating activities in the range of $105 to $115 million; and

• We expect free cash flow, as previously defined, to be in the range of $55 to $65 million.

In the second half of fiscal 2004, we expect to continue to actively review alternatives to reduce costs. The impact, if any, is not known. Included in our analysis will be a review of strategies to improve our profitability in Europe, recognizing that we expect our German operation to continue its strong growth.

Although there are risks in our business plan as outlined in our Annual Report on Form 10 K/A for the fiscal year ended May 30, 2003, a number of favorable macroeconomic trends in healthcare may benefit NDCHealth. First and foremost, a significant need to improve physician, pharmacy and hospital automation continues. We believe we are very well positioned with our existing systems to provide solutions to address many of the challenges healthcare providers currently face.

29

Given the financial constraints and challenges facing many healthcare institutions and businesses, we believe a substantial need exists for our new, value-adding solutions. For example, our new ePREMIS solution helps enable hospitals to comply with HIPAA by providing electronic transaction processing capabilities for additional HIPAA transactions, both enhancing the hospital’s workflow efficiency and cash collections and increasing our revenue per claim.

Separately, major pharmacy chains have continued to report an increase in same-store retail pharmacy sales. We believe continuation of this trend will benefit NDCHealth’s claims and total transaction volume. We also believe that healthcare transactions will continue to grow due to a greater use of medical care and treatment by an aging population. As part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, approximately 14 million people with low incomes — 35 percent of Medicare beneficiaries — will qualify for added financial assistance to purchase prescription drugs. While the new drug benefit does not become available until 2006, Medicare recipients should have access to preliminary assistance beginning in the spring of 2004, when they can purchase government-approved discount cards for use at retail pharmacies. Any program that converts cash prescription purchases to third-party adjudicated transactions and also generates new prescription growth should benefit NDCHealth through increased network transaction volumes.

The Medicare Act also includes a timeline and incentives for healthcare providers to adopt electronic prescribing, and the Department of Health and Human Services (HHS) is expected to develop a set of e-prescribing standards by September 2005 following a study by the Institute of Medicine. While a mandatory requirement for the adoption of e-prescribing standards may still be years away, we believe any highly regarded reports or studies that highlight the need to improve physician, pharmacy and hospital automation would be beneficial to NDCHealth, as we have many of the information technology solutions to meet these demands.

Due to the growth in prescriptions in the managed care market, additional opportunity may exist to accelerate sales of new pharmacy systems in this market. It is likely that the pricing in this market will be based on the more traditional software revenue model. We are pursuing a number of significant pharmacy system opportunities in this market and, should we be successful, we could gain additional revenue over the balance of our eight-quarter plan from long-term licensing, maintenance and support contracts.

While we expect these macro trends in healthcare to continue to present exciting, new opportunities to grow our business, some or all of these opportunities may not materialize.

Application of Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions. Critical accounting policies are those policies that can have a significant impact on our financial position and results of operations and require complex judgments and the most significant use of these subjective estimates and assumptions. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Specific risks inherent in our application of these critical policies are described below. For all of these policies, we caution that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment. These policies also often require difficult judgments on complex matters that may be subject to multiple sources of authoritative guidance. Additional information concerning our accounting policies can be found in Note 1 to our condensed consolidated financial statements.

30

Revenue

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

In our Information Management segment, we have two primary sources of revenue: database information reporting and consulting services. Database information reporting typically involves the delivery of products providing pharmaceutical information. These include products with a single delivery and products where multiple deliveries are made over a period of time. Revenue for products involving a single delivery is recognized when obligations to the customer have been fulfilled, which is typically upon delivery. Products with multiple deliveries over a period of time, usually 1 to 3 years, are generally unique in nature and therefore require more complex judgment to determine appropriate revenue recognition. In most cases, information of a similar type is delivered at equal intervals over a fixed period of time in which case revenue is recognized over the term of the contract using a straight-line model.

Our consulting services are typically provided for a fixed fee over a specific period of time. Because the terms of these contracts generally include multiple performance milestones, revenue for these services is recognized over the contract term as performance milestones specified in the contract are achieved. If we determine that we will incur a loss on a contract, we recognize the loss at the time the determination is made. These contracts typically average 3 to 12 months.

In our Network Services and Systems segment, the primary source of revenue is fees charged for network services. We provide these services to our pharmacy, hospital, physician, and payer customers. These fees are generally based on the volume of services we provide to each individual customer. In most instances, this fee is charged per transaction and type of transaction while in some instances, these services are provided to large customers for a fixed monthly fee, regardless of each month’s actual transaction volume for a portion of the contract term. We have begun the rollout of hosted web browser based applications for our hospital and pharmacy customers. The per transaction charge for these services includes charges for the use of the application software, network, and other value added services. Revenue for these services is recognized each month as the services are rendered.

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

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

31

The software we license to our customers is generally one of two types. The most common software type performs functions such as scheduling and billing and is used by our customers to manage their businesses and connect to our network. Because this type of software has stand alone functionality (meaning that connection to our network is not required for the software to be functional), we recognize revenue for sales of products of this type that are customer installed when the product is shipped. For products of this type that are installed by us or one of our affiliates, we recognize revenue when the software is installed. The other type of software is used by our customers to process transactions through our network. Because this software provides value to our customers only to the extent that they are utilizing our network services, revenue is recognized over the estimated life of the network services contract rather than when the software is installed. In instances where revenue is recognized over the term of a contract, or we have contractual minimums, and we incur discrete incremental costs in providing the initial deliverable, we defer these costs and recognize them ratably over the contract term.

We provide software maintenance and customer support to our customers on both an as needed and long-term basis. Services provided outside a maintenance contract are on an as requested basis and revenue is recognized as the services are provided. Revenue for services provided on a long-term basis is recognized ratably over the terms of the contract.

Many of our physician systems are sold indirectly through value added resellers, or VARs. Because the VARs provide many of the services that we would otherwise provide (such as contract support, advertising, etc.), we provide them allowances to cover their cost of providing these services. We record revenue in accordance with EITF Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products,” which requires that certain allowances be treated as reductions in revenue and allows other allowances, for which we receive separable, identifiable and quantifiable benefits, to be recorded as revenue and operating expense.

Capitalized software

Internally developed software held as property on our balance sheet consists of two types: software that we develop for sale to our customers and software that we develop that is for internal use in providing services to our customers. The costs associated with developing this software are capitalized differently depending on whether the software is for sale or for internal use. In each instance, in accordance with SFAS 86 or SOP 98-1, costs are capitalized only when the project has reached the point of technological feasibility or the application development stage. Costs incurred prior to this point are charged to earnings as research and development expense.

For software sold to our customers, in accordance with SFAS 86 we capitalize both direct and indirect development costs such as programmers’ salaries and benefits, outside contractor costs, computer time, and allocated facility costs. Completed projects capitalized under SFAS 86 are amortized after reaching the point of general availability using the greater of the amount computed using the straight-line method or the ratio that current revenues bear to the total of current and anticipated revenues, based on the estimated useful life of the project, normally five years. The life used for amortization is based on the projected period of time that we will either sell the product or use the product to provide services, typically five years.

For software used internally, in accordance with SOP 98-1 direct development costs such as programmers’ salaries and benefits, and fees paid to others for development are capitalized. Completed

32

projects capitalized under SOP 98-1 are amortized using the straight-line method. The life used for amortization is based on the projected period of time that we will use the software to provide services, typically five years.

The actual useful life of the product or software may be longer or shorter than the estimated useful life. If the actual life is longer, we would continue to realize value from the asset while no longer recognizing a corresponding expense. If the actual life is shorter or we determine that the investment will not be recovered through the future sales of products or services, the remaining carrying amount may need to be amortized over a shorter period or a non-cash charge to earnings could be required. The net realizable value of capitalized software is monitored on a periodic basis to ensure that the investment will be recovered through the future sale of products or in the case of internal software, through use.

Investments

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

Our investments in privately held entities are accounted for under either the cost, equity, or consolidation method, whichever is appropriate for the particular investment. The appropriate method is determined by our ability to exercise significant influence over the investee, through either quantity of voting stock or other means. We regularly review our investments for impairment issues and propriety of current accounting treatment. The primary method we use to determine whether or not an impairment issue exists is to compare the valuation of our investment with the underlying value of the entity in which we have an investment. We determine the underlying value of the entity based on a number of factors, including: the execution of business strategy and the steps that it has and is taking in the execution of that strategy, and the entity’s subsequent financing activity. If we determine that an impairment issue exists, we would realize the loss in Other income (expense) in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” If we determine that our accounting treatment should change from the cost to equity method, in accordance with the provisions of Accounting Principles Board Opinion No. 18, “Equity Method of Accounting for Investments in Common Stock,” we would retroactively restate our previously issued financial statements as if we had always accounted for the investment under the equity method. If our level of investment increased to a level such that we directly or indirectly controlled the entity, we would consolidate the entity’s results into our consolidated financial statements.

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

Intangible assets

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

33

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

SFAS 142, “Goodwill and Other Intangible Assets,” requires that goodwill no longer be amortized but be reviewed for impairment on a regular basis. The goodwill impairment test has two steps. The first step is to compare the fair value of each reporting unit with its book value. Our reporting units are defined as our Pharmacy, Hospital, and Physician businesses in our Network Services and Systems segment plus our total Information Management segment. If the estimated current value of future cash flows of any reporting unit is calculated as being lower than its book value, the second step would be to calculate the possible impairment by comparing the implied fair value of goodwill with the carrying amount. Any impairment would require a non-cash charge to earnings in the period in which the impairment was identified.

We completed our annual impairment testing during the second quarter of fiscal 2004. For each of our reporting units, we found that the estimated fair value exceeded the net book value of the unit and therefore the second step was not necessary. We will conduct these same tests going forward at least annually during our second fiscal quarter to determine that goodwill carried on our balance sheet is properly valued.

Recently Issued Accounting Pronouncements

We have adopted the provisions of EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables,” which requires companies to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. The adoption of this statement has resulted in an acceleration of the trend of deferring revenue as we provide more end-to-end solutions and the delay of revenue recognition at the time we enter into contracts with multiple deliverables.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. We do not have arrangements which would meet the disclosure or consolidation requirements of FIN46.

34

Financial Review

We operate our business as two fundamental segments: Network Services and Systems, and Information Management. Network Services and Systems provides electronic connectivity to our NDCHealth Intelligent Network and system solutions throughout the healthcare industry. Information Management provides management information, research, and consulting services to pharmaceutical manufacturers and pharmacy chains. Other Operating income includes restructuring, impairment and other charges in fiscal 2004. More information concerning segments can be found in Note 4 of the Notes to our Condensed Consolidated Financial Statements.

(In millions, except per share data)	Second Quarter Ended,
	November 28, 2003			November 29, 2002		Change
Revenue:
Information Management	$	42.1		$	37.6	$	4.5		12.0	%
Network Services and Systems		73.1			67.7		5.4		8.0	%
Total revenue	$	115.2		$	105.3	$	9.9		9.4	%
Operating income:
Information Management	$	7.3		$	7.4	$	(0.1	)	(1.4	)%
Network Services and Systems		15.4			16.4		(1.0	)	(6.1	)%
Other		(1.4	)		—		(1.4	)	n/m
Total operating income	$	21.3		$	23.8	$	(2.5	)	(10.5	)%
Net income	$	8.7		$	12.7	$	(4.0	)	(31.5	)%
Diluted earnings per share	$	0.25		$	0.36	$	(0.11	)	(30.6	)%
(In millions, except per share data)	Six Months Ended,
	November 28, 2003			November 29, 2002		Change
Revenue:
Information Management	$	81.6		$	73.7	$	7.9		10.7	%
Network Services and Systems		142.5			131.7		10.8		8.2	%
Total revenue	$	224.1		$	205.4	$	18.7		9.1	%
Operating income:
Information Management	$	13.1		$	12.7	$	0.4		3.1	%
Network Services and Systems		30.8			31.6		(0.8	)	(2.5	)%
Other		(2.9	)		—		(2.9	)	n/m
Total operating income	$	41.0		$	44.3	$	(3.3	)	(7.4	)%
Net income	$	16.1		$	23.8	$	(7.7	)	(32.4	)%
Diluted earnings per share	$	0.45		$	0.68	$	(0.23	)	(33.8	)%

35

Revenue

Total revenue increased $9.9 million, or 9.4%, to $115.2 million in the second quarter of fiscal 2004 from $105.3 million in the second quarter of fiscal 2003. On a segment basis, Information Management revenue grew $4.5 million, or 12.0%, to $42.1 million in the second quarter of fiscal 2004 from $37.6 million in the second quarter of fiscal 2003. Network Services and Systems revenue grew $5.4 million, or 8.0%, to $73.1 million in the second quarter of fiscal 2004 from $67.7 million in the second quarter of fiscal 2003. The increases in revenue, but relatively lower year-over-year growth, are due to the reasons discussed in “Second Quarter Operating Summary.”

Total revenue for the first six months of fiscal 2004 increased $18.7 million, or 9.1% to $224.1 million from $205.4 million in the first six months of fiscal 2003. On a segment basis, Information Management revenue grew $7.9 million, or 10.7%, to $81.6 million in the first six months of fiscal 2004 from $73.7 million in the first six months of fiscal 2003. Network Services and Systems revenue grew $10.8 million, or 8.2%, to $142.5 million in the first six months of fiscal 2004 from $131.7 million in the first six months of fiscal 2003. Revenue in this period grew due to growth in our German and domestic business in our Information Management segment, and increased transactions volume and greater market share in our Network Services and Systems business.

Operating Expenses

Our significant expenses are compensation, data costs, depreciation and amortization, and communications expense. Together, these expenses represented 62% of our operating expenses, exclusive of Restructuring, impairment and other charges in the second quarter of fiscal 2004, compared to 65% in the second quarter of fiscal 2003. For the first six months of fiscal 2004 these expenses represented 63% of our operating expenses, exclusive of Restructuring, impairment and other charges, compared to 65% for the first six months of fiscal 2003. Cost of service includes certain compensation, computer operations, data costs, consulting services, telecommunications, customer support, and application maintenance expenses. Sales, general and administrative expense includes certain compensation, sales, marketing, administration, and corporate overhead expenses.

Compensation Expense

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

As a percent of revenue, compensation expense exclusive of Restructuring, impairment and other charges, which includes incentive pay, commissions, and related fringe benefits, and is net of capitalized labor, has been decreasing. This decrease is due to increased productivity as a result of our training initiatives and cost control efforts as well as the scalability of our business model. We have also achieved compensation savings through the streamlining of our Pharmacy Services & Systems, Hospital, and Information Management businesses begun in the first quarter. We will continue to look for ways to improve efficiencies, including centralization, in our businesses.

36

(In millions)	Second Quarter Ended,
	November 28, 2003			November 29, 2002
Compensation expense, net of capitalized labor	$	27.7		$	27.8
Revenue	$	115.2		$	105.3
Percent of revenue		24.0	%		26.4	%
(In millions)	Six Months Ended,
	November 28, 2003			November 29, 2002
Compensation expense, net of capitalized labor	$	55.2		$	56.4
Revenue	$	224.1		$	205.4
Percent of revenue		24.6	%		27.5	%

Cost of Service

Cost of service, or COS, includes certain compensation, computer operations, data costs, consulting services, telecommunications, customer support, and application maintenance expenses. COS increased $5.2 million, or 10.0%, to $57.2 million in the second quarter of fiscal 2004 from $52.0 million in the second quarter of fiscal 2003. In the first six months of fiscal 2004, COS increased $8.5 million, or 8.2%, to $112.3 million from $103.8 million in the first six months of 2003. The increase was due primarily to increased data costs discussed below. As a percent of revenue, during the second quarters of fiscal 2004 and 2003 COS expense was 49.7% and 49.4%, respectively. During the first six months of fiscal 2004 and 2003 COS expense as a percent of revenue was 50.1% and 50.5%, respectively. We expect that COS, as a percentage of revenue, will be relatively flat in the remainder of fiscal 2004.

Data Costs

We buy data from various sources to supplement our own data collection efforts. Data costs increased $3.1 million, or 24.8%, to $15.6 million in the second quarter of fiscal 2004 from $12.5 million in the second quarter of fiscal 2003. Data costs increased $6.2 million, or 25.5%, to $30.5 million in the first six months of fiscal 2004 from $24.3 million in the first six months of fiscal 2003. The increase was due to the purchase of additional data types for our new German informatics products, an increase in volume of other data purchased, and an increase in the costs of such data. As a percent of revenue, data costs increased from fiscal 2003 to fiscal 2004. We are actively pursuing programs to continue to contain data costs, including exploring new areas of opportunity where data is less costly.

(In millions)	Second Quarter Ended,
	November 28, 2003			November 29, 2002
Data costs	$	15.6		$	12.5
Revenue	$	115.2		$	105.3
Percent of revenue		13.5	%		11.9	%

37

(In millions)	Six Months Ended,
	November 28, 2003			November 29, 2002
Data costs	$	30.5		$	24.3
Revenue	$	224.1		$	205.4
Percent of revenue		13.6	%		11.8	%

Communications Costs

Communications costs decreased as a percent of revenue to 3.6% in the second quarter of fiscal 2004 from 4.7% in the second quarter of fiscal 2003 and decreased as a percent of revenue to 3.7% in the first six months of fiscal 2004 from 4.3% in the first six months of fiscal 2003. This reduction in costs as a percentage of revenue results from our conversion to new technologies that allow us to provide superior service to our customers at reduced cost. Because competition in the telecommunications industry has resulted in historically low communications costs, we do not expect significant future reductions in communications costs.

(In millions)	Second Quarter Ended,
	November 28, 2003			November 29, 2002
Communication costs	$	4.1		$	4.9
Revenue	$	115.2		$	105.3
Percent of revenue		3.6	%		4.7	%
(In millions)	Six Months Ended,
	November 28, 2003			November 29, 2002
Communication costs	$	8.3		$	8.8
Revenue	$	224.1		$	205.4
Percent of revenue		3.7	%		4.3	%

Software Costs

The primary engine of growth for NDCHealth is the creation of new and enhanced products. Software costs are related to the development of new products and maintenance and enhancement of existing products. As such, software costs are an investment in the growth engine of the company and are essentially our investment in future growth. Our approach, which we believe is succeeding, is to learn what the market needs and correlate these needs with the disciplined development of products. As these new products are sold and installed, we expect to grow revenue, gross profit (defined as Revenue, less Cost of sales and Depreciation and amortization) and increase cash flow. We capitalize the cost of developing software held for sale to our customers as well as software used internally to provide services to our customers. Depreciation expense associated with capitalized software are discussed below under Depreciation and Amortization. Our current focus is developing new products such as our new pharmacy systems, Next Generation Projection, ePrescribing, Weekly SNR, Canada PPE, Dynamic Claims Analyzer, Future Rx, Payment Optimizer, Fraud & Abuse, and additional RX Safety Advisor modules.

Due to the previously discussed positive market acceptance of our new integrated pharmacy solutions platform, we have accelerated the development of these systems. This acceleration led to a sequential increase in development costs capitalized as a percentage of total development costs in the second quarter. Development costs capitalized as a percentage of total development costs increased to 79% in the second quarter of fiscal 2004 from 71% in the first quarter of fiscal 2004 and 78% in the

38

second quarter of fiscal 2003. For the first six months of fiscal 2004, development costs capitalized as a percentage of total development costs declined to 75% from 79% in the first six months of fiscal 2003. Despite the increase in the second quarter, we would expect a declining trend as we roll out our new pharmacy system and other new products currently in development.

Total costs associated with software development for our new pharmacy system was $5.0 million in the second quarter of fiscal 2004 versus $4.0 million in the second quarter of fiscal 2003. Approximately $4.2 million of these development costs were capitalized resulting in net development expense associated with our new pharmacy system of approximately $0.8 million in the second quarter of fiscal 2004. For the first six months of fiscal 2004, total costs associated with software development for our new pharmacy system were $9.5 million versus $7.6 million in the first six months of fiscal 2003. Approximately $7.6 million of these development costs were capitalized resulting in net development expense associated with our pharmacy system of approximately $1.9 million in the first six months of fiscal 2004. Pharmacy system software maintenance expense was $0.4 million in the second quarter of fiscal 2004. For the first six months of fiscal 2004 pharmacy system software maintenance expense was $0.8 million.

(In millions)	Second Quarter Ended,
	November 28, 2003			November 29, 2002
Total costs associated with software development	$	11.0		$	9.2
Less: capitalization of internally developed software		(8.7	)		(7.2	)
Net software development expense		2.3			2.0
Software maintenance expense		2.5			2.5
Total net software expense	$	4.8		$	4.5
Revenue	$	115.2		$	105.3
Capitalization of internally developed software as a % of revenue		7.6	%		6.8	%
Total net software expense as a % of revenue		4.2	%		4.3	%

39

(In millions)	Six Months Ended,
	November 28, 2003			November 29, 2002
Total costs associated with software development	$	21.8		$	18.0
Less: capitalization of internally developed software		(16.4	)		(14.3	)
Net software development expense		5.4			3.7
Software maintenance expense		4.6			5.0
Total net software expense	$	10.0		$	8.7
Revenue	$	224.1		$	205.4
Capitalization of internally developed software as a % of revenue		7.3	%		7.0	%
Total net software expense as a % of revenue		4.5	%		4.2	%

Sales, General and Administrative Expense

Sales, general and administrative, or SG&A, expense consists primarily of salaries, wages and expenses relating to sales, marketing, administrative and management employees, employee training costs, and occupancy of leased space directly related to these functions. SG&A expense increased $2.7 million, or 12.2%, to $24.8 million in the second quarter of fiscal 2004 from $22.1 million in the second quarter of fiscal 2003. In the first six months of fiscal 2004, SG&A increased $5.8 million, or 13.7%, to $48.0 million from $42.2 million in the first six months of 2003. As a percent of revenue, during the second quarters of fiscal 2004 and 2003 SG&A expense was 21.5% and 21.0%, respectively. During the first six months of fiscal 2004 and 2003 SG&A expense as a percent of revenue was 21.4% and 20.5%, respectively. The increase was due to the previously disclosed increases in governance and other corporate costs. We expect that SG&A expense, as a percentage of revenue, will be similar for the remainder of fiscal 2004 due to increased corporate governance expenses and continued new investment in our sales and marketing programs to support the roll out of new products.

Depreciation and Amortization

Depreciation and amortization expense increased in the second quarter of fiscal 2004 from the second quarter of fiscal 2003, and increased in the first six months of fiscal 2004 from the first six months of fiscal 2003. The increase was due to increased amortization related to the second step of the TechRx acquisition completed in May 2003 and the roll out of new products. Depreciation and amortization expense will increase in the remainder of fiscal 2004 as newly developed products are placed in service and intangible assets acquired in the TechRx acquisition are amortized.

40

(In millions)	Second Quarter Ended,
	November 28, 2003			November 29, 2002
Depreciation and amortization	$	9.4		$	7.5
Revenue	$	115.2		$	105.3
Percent of revenue		8.2	%		7.1	%
(In millions)	Six Months Ended,
	November 28, 2003			November 29, 2002
Depreciation and amortization	$	18.8		$	15.1
Revenue	$	224.1		$	205.4
Percent of revenue		8.4	%		7.4	%

Operating Income

Operating income decreased $2.5 million, or (10.5%), to $21.3 million in the second quarter of fiscal 2004 from $23.8 million in the second quarter of fiscal 2003. Operating income decreased $3.3 million, or (7.4%), to $41.0 million in the first six months of fiscal 2004 from $44.3 million in the first six months of fiscal 2003. Operating income decreased due to Restructuring, impairment and other charges of $4.0 million, increased depreciation and amortization, increased data costs, and higher corporate costs.

In the fourth quarter of fiscal 2003, in conjunction with the completion of the TechRx acquisition, we began a review of the entirety of NDCHealth to identify opportunities for increased operational efficiencies. This ongoing review includes an assessment of our organizational structure as well as our physical operating locations. We have taken several actions in the first six months of fiscal 2004 as a result of this review.

In the Network Services and Systems segment, we have begun to streamline the management organizations of our pharmacy services and systems businesses and the application development organization in our hospital business. We completed the first step of the streamlining, in which we eliminated 16 positions, in the first quarter. In connection with the first step, we recorded approximately $1.0 million in severance related costs in the first quarter. Approximately $0.1 million of this severance cost was a non-cash charge related to modified stock options. We completed additional steps of this streamlining in the second quarter with the elimination of an additional 14 positions. In connection with the additional streamlining, we recorded approximately $1.5 million in severance related costs in the second fiscal quarter. Also in the second fiscal quarter, we recorded a charge of approximately $0.2 million for the impairment of a note receivable we received as partial consideration for the sale of a non-core operation in the second quarter of fiscal 2001.

During the first quarter of fiscal 2004, we made a decision to combine the sales organizations and streamline the development organizations within the Information Management segment. As a result of this reorganization, during the first fiscal quarter we eliminated 28 positions and reduced the size of two locations. Accordingly, we recorded approximately $0.4 million in severance related costs and $0.1 million of expense related to lease terminations in the first quarter. The reorganization of these sales organizations is substantially complete.

During the second quarter of fiscal 2004, we began the consolidation of our European operations. In the first step we began to streamline the management organization, and realign the focus, of our United

41

Kingdom pharmacy systems business. In connection with the first step, we recorded charges of approximately $0.7 million for lease termination costs and the impairment of assets that are not aligned with the current focus of our United Kingdom business, and approximately $0.1 million in severance related costs, during the second quarter.

We expect to continue to review alternatives to reduce costs, including strategies to improve our profitability in Europe, in the second half of fiscal 2004.

Provision for Income Taxes

Our estimated effective tax rate in the first six months of fiscal 2004 was 37.5% compared to 36% in the first six months of fiscal 2003. We have increased our estimated effective tax rate for fiscal 2004 as a result of the consolidation of TechRx for tax purposes, and other factors.

Interest and Other Expense

Interest and other expense consists of interest expense, amortization of debt issuance costs and other miscellaneous non-operating expense. Interest and other expense as a percent of revenue increased to 6.6% in the second quarter of fiscal 2004 from 3.5% in the second quarter of fiscal 2003. Interest and other expense as a percent of revenue increased to 6.8% in the first six months of fiscal 2004 from 3.4% in the first six months of fiscal 2003. As discussed in Liquidity and Capital Resources below, we completed a refinancing at the end of the second quarter of fiscal 2003. Because the full impact of the increased interest expense resulting from the refinancing is reflected in all quarters beginning with the third quarter of fiscal 2003, year over year interest expense will be more comparable going forward.

Liquidity and Capital Resources

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

Our operating cash requirements are generally satisfied with our customer receipts because we receive a higher level of cash from our customers than we expend for payments of salaries and other recurring operating costs. Excess cash that we generate after satisfying all of our continuing operating requirements is shown on our statement of cash flows as Net cash provided by operating activities. This measure takes into account items such as non-cash expenses included in our operating income, cash used to extend credit to our customers, and cash provided by our vendors extending credit to us.

Net cash provided by operating activities was $54.6 million for the first six months of fiscal 2004, an increase of $14.0 million from $40.6 million in the first six months of fiscal 2003. Net income adjusted for non-cash items including Equity in losses of affiliated companies, Restructuring, impairment and other charges, Non-cash early extinguishment of debt charges, and Depreciation and amortization was $36.5 million in the first six months of fiscal 2004 compared to $40.4 million in the first six months of fiscal 2003. As a result of our acquisition of TechRx, in the first three months of fiscal 2004 we began to recognize the benefit of Net operating loss carry-forwards, or NOLs, previously generated by TechRx of approximately $55 to $60 million. We expect to be able to utilize approximately half of this benefit in fiscal 2004 thereby reducing our cash tax payments by approximately $9 to $11 million in fiscal 2004,

42

positively impacting Net cash provided by operating activities. Utilization of these, and other NOLs related to our continuing operations, allowed us to reduce our cash tax payments by $9.3 million in the first six months of fiscal 2004 compared to $5.3 million in the first six months of fiscal 2003.

The significant differences in Net cash provided by operating activities in the first six months of fiscal 2004 compared to the first six months of fiscal 2003 include an improvement of five days in our DSO and Accounts payable and accrued liabilities. Accounts payable and accrued liabilities provided $7.2 million of cash in the first six months of fiscal 2004 and used $4.3 million of cash in the first six months of fiscal 2003. This difference was the result of management’s increased focus on minimizing working capital requirements. Another significant difference between the first six months of fiscal 2004 and the first six months of fiscal 2003 was changes in Deferred revenue. These changes in Deferred revenue provided $1.4 million of cash in the first six months of fiscal 2004 and used $3.9 million of cash in the first six months of fiscal 2003. These changes in working capital are the result of the timing of our payments to vendors and the timing difference between receipts from our customers for services as required by their contracts and our recognition of related revenue. In our Network Systems and Services segment, our strategy is to market a complete set of solutions rather than individual products that we emphasized in the past. As a result, more of our network contracts are subject to EITF Issue 00-21, “Revenue Arrangements with Multiple Deliverables.” The impact is an increase in Deferred revenue as the customer remits payment in advance even though revenue is recognized in future periods.

The nature of an information services business is such that it requires a substantial continuing investment in technology equipment and product development in order to expand the business. Creation of new and enhanced products is the engine of growth for NDCHealth and we continue to invest in our future growth through focus on product development. We are generally able to fund these investments internally from excess cash generated from operations. Additionally, historically we have also expanded our business through acquisitions and strategic investments in other businesses. The cash we use to expand our business is shown as Net cash used in investing activities. Capital expenditures, which reflect our investment in equipment and product development such as software costs discussed above, were $23.7 million in the first six months of fiscal 2004, including $16.4 million in capitalized software costs and $1.4 million in capitalized interest; and $20.8 million in the first six months of fiscal 2003, including $14.3 million in capitalized software costs and $0.6 million in capitalized interest. Capital expenditures were funded from cash from operations in both years. As we continue the roll-out of new products and solutions during fiscal 2004, we expect to reduce the capital expenditure run rate while also improving our revenue growth, gross profit and ultimately, cash flow. In addition, capital expenditures in the first six months of fiscal 2004 included some costs that we would not expect to repeat. As a result, the level of capital expenditures in the first six months of fiscal 2004 is not indicative of the expected full-year capital expenditure level, which is still expected to be in the $40 to $45 million range, including approximately $31.0 million in capitalized software costs.

We used $7.1 million of cash in the first six months of fiscal 2004 for other investing activities, primarily the payment of transaction costs related to the completion of our acquisition of TechRx at the end of fiscal 2003 and additional investment in InstantDx, a provider of technology that allows physicians to write electronic prescriptions using mobile phones, desktop computers, and other web-enabled devices. During the first six months of fiscal 2003, we used cash totaling $10.2 million for the payment of merger related costs associated with our acquisition of a controlling interest in TechRx at the end of fiscal 2002 and for the acquisition of German pharmaceutical data related to the development of a new informatics product.

We currently have in place a $225 million senior credit facility, consisting of a $100 million five-year revolving credit facility and a $125 million six-year term loan, and have $200 million in senior subordinated notes outstanding. Details of our indebtedness are discussed below. We believe that our current level of cash on hand, future cash flows from operations, and our credit facility are sufficient to meet our operating needs in fiscal 2004.

43

In November 2002, we completed a refinancing that included a new $225 million senior secured credit facility and the issuance of $200 million of 10 ½% Senior Subordinated Notes due 2012 in an unregistered offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933. On September 2, 2003 we completed an exchange offer whereby we exchanged all of the unregistered notes for substantially identical registered senior subordinated notes. As of November 28, 2003, the fair market value of the notes was approximately $223.0 million.

On December 19, 2003, after the close of the second quarter, the credit facility was amended to reduce the interest rate and relax certain covenants to provide us added flexibility. As of November 28, 2003, $123.4 million was outstanding under the term loan, which bore interest at a weighted average annual interest rate equal to 6% during the second quarter. The $100 million revolving credit facility is available for working capital and general corporate purposes and has a variable interest rate based on market rates. As of November 28, 2003 there were no borrowings outstanding under the revolving credit facility. The credit facility contains certain financial and non-financial covenants customary for financings of this nature. As of November 28, 2003, we were in compliance with all restrictive covenants and expect to remain in compliance with the amended covenants in the foreseeable future.

Borrowings under the amended credit facility bear interest, at our option, at a rate based on either (1) the applicable margin plus the base rate, which is the higher of the per annum rate, which the administrative agent publicly announces from time to time to be its prime lending rate, and the federal funds rate, as published by the Federal Reserve Bank of New York, plus 0.5%, or (2) the applicable margin plus a 1, 2, 3 or 6 month “LIBOR” rate. The amended credit facility eliminates the LIBOR minimum of 2.00% for term loan borrowings contained in the original facility. The applicable margin with respect to term loan borrowings is a percentage per annum equal to 3.00% for base rate borrowings and 2.75% for LIBOR borrowings. The applicable margin with respect to borrowings under the revolving credit facility is a percentage per annum equal to 2.00% for base rate borrowings and 2.50% for LIBOR borrowings. The applicable margin is subject to adjustments based on our financial performance. Under the credit agreement there is no cap on the interest rate applicable to the term loan or the revolving credit facility.

We intend to reduce our level of senior debt during fiscal 2004 and 2005, and believe that free cash flow, defined as Net cash provided by operating activities less Capital expenditures and Dividends paid, is a meaningful measure of our ability to generate cash for this use. Free cash flow is not a GAAP measurement and may not be comparable to free cash flow reported by other companies. Free cash flow improved to $28.0 million in the first six months of fiscal 2004 from $17.1 million in the first six months of fiscal 2003.

Stock activities provide us an additional source of liquidity. Stock activities are primarily related to the exercises of employee stock options and issuances under the employee stock purchase plan. In the first six months of fiscal 2004, issuance of shares of our common stock generated $2.6 million versus $1.2 million in the first six months of fiscal 2003. Although the issuance of additional shares provides us with liquidity, it results in a dilution of each individual stockholder’s equity. Another use of cash is the payment of dividends, which totaled $2.8 million in the first six months of both fiscal 2004 and 2003.

Discontinued operations used $0.9 million in the first six months of fiscal 2004, primarily in the settling of liabilities, versus $3.5 million in the first six months of fiscal 2003. Net operating loss carry-forwards related to our discontinued operations allowed us to reduce our cash tax payments by $6.1 million in the first six months of fiscal 2003.

44

Forward-Looking Information

This report contains forward-looking statements. The statements related to the Company’s expected business outlook and the Company’s guidance for fiscal year 2004 are forward-looking statements. In general, forward-looking statements may include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend,” or similar expressions. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements. Among other things, the Company’s business outlook and the projected results for the remainder of fiscal year 2004 are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management’s control. Some of management’s assumptions that underlie the Company’s forward-looking statements include, among others, assumptions regarding demand for the Company’s products, the cost and timing of product upgrades and new product introductions, gains in market share, industry conditions affecting the Company’s customers, expected pricing levels, expected growth of revenue and net income, the timing and cost of planned capital expenditures, expected outcomes of pending litigation and expected synergies relating to acquisitions, joint ventures and alliances.

Additional factors that could cause results to materially differ from current expectations include, but are not limited to, the following:

• intense competition could damage our sales and profitability;

• our substantial indebtedness could adversely affect our financial health;

• we may lose customers or revenue due to consolidation in the healthcare industry;

• our profitability could suffer if we are unable to continue our expansion in new and existing markets;

• failure to install our backlog of pharmacy and hospital systems could negatively impact our revenue and profitability;

• defaults in payment or a material reduction in purchases of our products by large customers could have a significant negative impact on our financial condition, results of operations and liquidity;

• we may spend significant resources developing and promoting new products or solutions that may not meet the demands of our customers;

• interruptions may occur in some of our information services;

• proprietary technology protections may not be adequate and proprietary rights may infringe on rights of third parties;

• recent and future combinations and strategic relationships may not be profitable;

• complex state and federal regulations could depress the demand for information products or impact the availability to us of certain data, and we could incur redesign costs or be subject to penalties;

• changes in the United States healthcare environment could have a material negative impact on our revenues;

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

• we may need additional capital to continue our growth and expansion; and

• our data suppliers may restrict or modify access to their data.

45

For further discussion of the factors noted above and other relevant factors, please see the information set forth under the caption “Additional Factors That May Affect Future Performance” in Item 7 of our Annual Report on Form 10-K/A for the fiscal year ended May 30, 2003, which are incorporated herein by this reference.

Forward-looking statements speak only as of the date they are made, and the Company disclaims any obligation to update or amend these statements in light of new information, future events or otherwise. Forward-looking statements are only predictions and are not guarantees of performance.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our market risk from that disclosed in our Annual Report on Form 10-K/A for the year ended May 30, 2003.

ITEM 4 – CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of November 28, 2003. Based on that evaluation, our chief executive officer and our chief financial officer have concluded that, as of November 28, 2003, our disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There has been no change in our internal control over financial reporting during the quarter ended November 28, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II

ITEM 1 - LEGAL PROCEEDINGS

We currently provide pharmaceutical information services solutions to our European customers, pharmaceutical companies, through our German business. In this regard we deliver the wholesale data we receive from our data suppliers in a variety of products to our customers to assist them in operating their businesses. We deliver this data to our customers in an electronic format. The specific electronic format within which such data is actually delivered to such pharmaceutical companies in Germany is the subject matter of the current litigation both before the European Commission and the German courts with IMS Health.

In the proceedings before the European Commission instituted by us on December 19, 2000, we are alleging that to the extent this format is copyrighted by IMS Health, the format constitutes an industry standard and an essential facility to competition and must be made available to competitors of IMS Health. We obtained a ruling as to our request for Interim Relief from the European Commission whereby they ordered IMS Health to license its structure for organizing pharmaceutical sales data to us. However, subsequent to this decision, the Court of First Instance and later the European Court Of Justice stayed this decision pending a complete review of the underlying substantive matters. Those matters are still proceeding. The European Commission has recently withdrawn its ruling as to our request for Interim Relief finding that since the German Court of Appeals had found that IMS Health had no right to enforce any existent copyright in the structure that we could sufficiently compete in the marketplace.

46

In proceedings before the German courts instituted by IMS Health on December 21, 2000, IMS Health has alleged copyright infringement against each of Pharma Intranet Information AG, or PI, the company from whom we purchased certain assets of our German business, and us, and we each have contested the validity of IMS Health’s alleged copyright. In these proceedings, IMS Health obtained an injunction from the Frankfurt Regional Court to prevent each of PI and us from distributing data in the contested format. On August 13, 2002, the Frankfurt Court of Appeals ruled in our favor by dismissing the preliminary injunction against our use of the industry standard data structure. This decision is final and is not subject to further appeal by IMS Health. On September 17, 2002 the Frankfurt Court of Appeals issued a judgment in the main proceedings against PI. While validating a copyright in the structure, the Court held that IMS Health has no standing to sue to enforce the copyright. The Court also determined that IMS Health does not own the copyright. The Court further denied IMS Health’s claims under the EU Database Directive for protection of the data structure involved. Finally, the Court found that PI breached the German Act Against Unfair Trade Practices (UGW) by reason of identically copying the data structure. We have not sold or used the data structure initially used by PI. We do not own PI and PI is no longer actively conducting business. The case against us remains pending before the Frankfurt Regional Court at this time.

Several independent pharmacies filed a lawsuit on December 23, 2002 in the Twentieth Judicial Circuit Court, St. Clair County, Illinois, against IMS Health, Inc., or IMS, and sixty-two other defendants, including us (collectively the computer systems vendors). We were served with the lawsuit in May 2003. The pharmacies, Douglas & Ogden Medical Center Pharmacy, Inc. d/b/a Douglas Main Pharmacy, Timmerman & Associates, Inc. d/b/a Comprehensive Care Pharmacy, and John Hartman d/b/a Bittles Drug Store allege that IMS violated the Illinois Trade Secrets Act and breached alleged contracts it had with the computer systems vendors by reselling what the plaintiffs claim to be proprietary drug information to a competing prescription drug provider. The plaintiffs have also alleged that the computer systems vendors, including us, violated the Illinois Trade Secrets Act and breached alleged contracts with the plaintiffs by providing what they claim to be proprietary pharmacy data to IMS. In connection with the class action that the plaintiffs are seeking, the plaintiffs are claiming damages in excess of $100 million, alleging that other independent pharmacies have similar relationships with IMS and the computer systems vendors.

We have denied all liability in the lawsuit, have objected to certification of the class and intend to defend the case vigorously. Our contracts with IMS provide for indemnification, and we have asserted a claim for indemnification against IMS. Based on our preliminary internal investigations, management does not currently anticipate that this case will have a material adverse impact on our financial position, liquidity or results of operations.

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

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

On September 2, 2003 we completed an exchange offer whereby we exchanged $200 million of 10 ¹/2% senior subordinated notes due 2012, which have been registered under the Securities Act of 1933, for a like principal amount of our 10 ¹/2% senior subordinated notes due 2012, which were issued on November 26, 2002 in an unregistered offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933. After the closing of the exchange offer, no unregistered 10 ¹/2% senior subordinated notes due 2012 issued pursuant to Rule 144A remain outstanding.

47

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon our senior securities during the quarter ended November 28, 2003

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The 2003 Annual Meeting of Stockholders of NDCHealth Corporation was held at the Company’s offices in Atlanta, Georgia on October 23, 2003. At the annual meeting, the stockholders of the Company approved the following item:

1. Election of two directors in Class II to serve until the annual meeting of stockholders in 2006, or until a successor is duly elected and qualified. Votes cast were as follows: Walter M. Hoff, For 31,310,354, Withheld 1,316,905; and Neil Williams, For 32,129,575, Withheld 497,684. Besides Walter M. Hoff and Neil Williams, elected at the 2003 Annual Meeting of Stockholders, the terms of office as directors of J. Veronica Biggins, Terri A. Dial, Dr. Jeffrey P. Koplan, Kurt M. Landgraf, and James F. McDonald continued after the meeting.

ITEM 5 - OTHER INFORMATION

On December 18, 2003, Laurie H. Glimcher, M. D. and Steven J. Shulman were appointed to NDCHealth Corporation’s Board of Directors. Laurie Glimcher is the Irene Heinz Given Professor of Medicine at the Harvard School of Public Health and Professor of Immunology at Harvard Medical School. Dr. Glimcher will serve as a member of NDCHealth’s Compensation and Governance Committees.

Steve Shulman is chairman-elect and chief executive officer of Magellan Health Services. Mr. Shulman will serve as a member of NDCHealth’s Audit, Compensation and Governance Committees.

48

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

3(ii) Amended and Restated By-laws of the Corporation adopted on December 18, 2003.

10(i) Amendment No. 3 to Credit Agreement dated as of December 19, 2003 by and among the Registrant, Merrill Lynch Capital, and the Lenders and agents from time to time party thereto.

10(ii) NDC Exclusive License Agreement entered into on December 31, 2003 by and between the Registrant and ArcLight Systems, LLC.

10(iii) NDC Registration Rights Agreement entered into on December 31, 2003 by and between the Registrant and ArcLight Systems, LLC.

10(iv) NDC Warrant Agreement dated December 31, 2003 by and between the Registrant and ArcLight Systems, LLC.

31(i) Rule 13a-14(a)/15d-14(a) Certification of Walter M. Hoff

31(ii) Rule 13a-14(a)/15d-14(a) Certification of Randolph L.M. Hutto

32 Section 1350 Certification

(b) Reports on Form 8-K were filed during the quarter ending November 28, 2003. The items reported, any financial statements filed, and the dates of any such reports are listed below.

(i) NDCHealth Corporation’s Current Report on Form 8-K filed on October 1, 2003, reporting as an exhibit under Item 7 the Company’s press release dated October 1, 2003; under Item 9 Management’s discussion of its’ business position and strategy; and under Item 12 the Company’s release of financial results for the quarter ended August 29, 2003.

49

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NDCHealth Corporation

                (Registrant)

By: /s/ Randolph L.M. Hutto

Randolph L.M. Hutto

Chief Financial Officer

(Authorized Signing Officer and Principal Financial Officer)

Date: January 7, 2004

50

NDCHEALTH CORPORATION

FORM 10-Q

INDEX TO EXHIBITS

Exhibit Numbers	Description
3(ii)	Amended and Restated By-laws of the Corporation adopted on December 18, 2003.
10(i)	Amendment No. 3 to Credit Agreement dated as of December 19, 2003 by and among the Registrant, Merrill Lynch Capital, and the Lenders and agents from time to time party thereto.
10(ii)	NDC Exclusive License Agreement entered into on December 31, 2003 by and between the Registrant and ArcLight Systems, LLC.
10(iii)	NDC Registration Rights Agreement entered into on December 31, 2003 by and between the Registrant and ArcLight Systems, LLC.
10(iv)	NDC Warrant Agreement dated December 31, 2003 by and between the Registrant and ArcLight Systems, LLC.
31(i)	Rule 13a-14(a)/15d-14(a) Certification of Walter M. Hoff
31(ii)	Rule 13a-14(a)/15d-14(a) Certification of Randolph L.M. Hutto
32	Section 1350 Certification

51

EX-3.II

Exhibit 3(ii)

BY-LAWS

OF

NDCHEALTH CORPORATION

(As Amended Through December 18, 2003)

BY-LAWS

of

NDCHEALTH CORPORATION

TABLE OF CONTENTS

ARTICLE I
OFFICES
Section 1.	Registered Office	1
Section 2.	Other Offices	1
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1.	Place of Meetings	1
Section 2.	Date of Meetings	1
Section 3.	Notice of Meetings	1
Section 4.	Nature of Business at Meetings of Stockholders	1
Section 5.	Nomination of Directors	3
Section 6.	List of Stockholders	4
Section 7.	Special Meetings	4
Section 8.	Notice of Special Meetings	4
Section 9.	Limitations on Special Meetings	4
Section 10.	Quorum and Adjournment	4
Section 11.	Voting Rights	5
Section 12.	Proxies and Voting Rights	5
Section 13.	Conduct of Meetings	5
Section 14.	Inspectors of Election	6
ARTICLE III
DIRECTORS
Section 1.	Number, Election and Term of Office	6
Section 2.	Vacancies	6
Section 3.	Powers of Directors	6
Section 4.	Place of Meetings	6
Section 5.	Time of Meetings	7
Section 6.	Regular Meetings	7
Section 7.	Special Meetings	7

i

Section 8.	Resignations and Removals of Directors	7
Section 9.	Quorum	7
Section 10.	Participation by Conference Telephone	7
Section 11.	Action by Consent	8
Section 12.	Executive and Other Committees	8
Section 13.	Minutes of Meetings	8
Section 14.	Compensation	8
ARTICLE IV
NOTICES
Section 1.	Procedure	9
Section 2.	Waiver and Consent	9
ARTICLE V
OFFICERS
Section 1.	General	10
Section 2.	Election of Officers	10
Section 3.	Additional Officers	10
Section 4.	Tenure	10
Section 5.	Chairman of the Board	10
Section 6.	President	10
Section 7.	Vice Presidents—Powers and Duties	11
Section 8.	Secretary—Powers and Duties	11
Section 9.	Assistant Secretary	11
Section 10.	Treasurer—Powers and Duties	11
Section 11.	Treasurer—Disbursements and Accounting	12
Section 12.	Assistant Treasurer	12
Section 13.	Bonds	12
ARTICLE VI
CERTIFICATES OF STOCK
Section 1.	Right to Certificate	12
Section 2.	Classes of Stock—Rights	12
Section 3.	Officers’ Signatures	13
Section 4.	Lost Certificates	13
Section 5.	Transfers of Stock	13

ii

Section 6.	Fixing of Record Date	13
Section 7.	Registered Stockholders	14
ARTICLE VII
GENERAL PROVISIONS
Section 1.	Dividends	14
Section 2.	Reserves	14
Section 3.	Annual Statements	14
Section 4.	Checks	15
Section 5.	Fiscal Year	15
Section 6.	Seal	15
Section 7.	Indemnification	15
Section 8.	Miscellaneous	16
ARTICLE VIII
AMENDMENTS
	Amendments	16

iii

BY-LAWS

of

NDCHEALTH CORPORATION

(As Amended Through December 18, 2003)*

ARTICLE I

OFFICES

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

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

ARTICLE II

MEETINGS OF STOCKHOLDERS

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

Section 2. Date of Meetings. Annual meetings of stockholders shall be held on such date as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which stockholders shall elect a Board of Directors and transact such other business as may be properly brought before the meeting. Elections of Directors need not be by written ballot.

Section 3. Notice of Meetings. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given by or at the direction of the Board of Directors to each stockholder entitled to vote at such meeting not less than ten (10) days nor more than sixty (60) days before the date of the meeting.

Section 4. Nature of Business at Meetings of Stockholders. No business may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at

* These By-Laws were adopted by the Board of Directors on November 30, 1977 and have been amended from time to time thereafter. Restated to reflect all amendments on and through December 18, 2003.

the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) otherwise properly brought before the annual meeting by any stockholder of the corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 4 and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 4.

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the corporation.

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs.

To be in proper written form, a stockholder’s notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 4; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 4 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

2

Section 5. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the corporation, except as may be otherwise provided in the certificate of incorporation with respect to the right of holders of preferred stock of the corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 5 and on the record date for the determination of stockholders entitled to notice of and to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 5.

In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the corporation.

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the corporation (a) in the case of an annual meeting, not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.

To be in proper written form, a stockholder’s notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that

3

such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 5. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

Section 6. List of Stockholders. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at the place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 7. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the Chairman of the Board or the President and shall be called by the Chairman of the Board or the President or Secretary at the request in writing of a majority of the members of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

Section 8. Notice of Special Meetings. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given by or at the direction of the Board of Directors not less than ten (10) or more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting.

Section 9. Limitations on Special Meetings. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 10. Quorum and Adjournment. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person

4

or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. A quorum, once established, shall not be broken by the subsequent withdrawal of any stockholder entitled to vote thereat, present in person or represented by proxy. If a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 11. Voting Rights. When a quorum is present at the meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of applicable law or the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question.

Section 12. Proxies and Voting Rights. Each stockholder shall at every meeting of the stockholders be entitled to one (1) vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer period.

Section 13. Conduct of Meetings. The Board of Directors of the corporation may adopt by resolution such rules and regulations for the conduct of any meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the Chairman of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such Chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the Chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the Chairman of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (vi) limitations on the time allotted to questions or comments by participants.

5

Section 14. Inspectors of Election. In advance of any meeting of the stockholders, the Board of Directors, by resolution, the Chairman or the President shall appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of the stockholders, the Chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable law, inspectors may be officers, employees or agents of the corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by applicable law.

ARTICLE III

DIRECTORS

Section 1. Number, Election and Term of Office. The number of Directors constituting the whole Board shall be as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of Directors shall not be less than three (3) and that the number shall not be reduced so as to shorten the term of any Director in office. The Directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article III, and each Director elected shall hold office until his or her successor is elected and qualified. Directors need not be stockholders.

Section 2. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a majority of the Directors then in office, though less than a quorum, or by a sole remaining Director, and any Director so chosen shall hold office until the next election of the class for which such Director shall have been chosen and until his or her successor shall be elected and qualify, or until such Director’s earlier death, resignation or removal. If there are no Directors in office, then an election of Directors may be held in the manner provided by statute.

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

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

6

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

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

Section 7. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board or the President on forty-eight (48) hours’ notice to each Director, if notice is given by mail, or on twenty-four (24) hours’ notice to each Director, if such notice is given personally or by telephone, facsimile or electronic mail; special meetings of the Board shall be called by the Chairman of the Board or Secretary in like manner and on like notice on the written request of a majority of the Directors.

Section 8. Resignations and Removals of Directors. Any Director of the corporation may resign at any time, by giving notice in writing or by electronic transmission to the Chairman of the Board of Directors, the President or the Secretary of the corporation. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by applicable law and subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any Director or the entire Board of Directors may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of at least eighty percent (80%) of all classes of stock of the corporation entitled to vote in the election of Directors, considered for the purposes of this Section 8 as one class.

Section 9. Quorum. At all meetings of the Board a majority of the Directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 10. Participation by Conference Telephone. Members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of the Board or of such committee by means of

7

conference telephone or similar communications equipment through which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting.

Section 11. Action by Consent. Unless otherwise restricted by the certificate of incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

Section 12. Executive and Other Committees. The Board of Directors may, by resolution adopted by a majority of the whole Board of Directors, appoint three (3) or more of its members to constitute an Executive Committee which to the extent provided by the Board of Directors shall have and exercise all of the authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. All action taken by the Executive Committee shall be reported to the Board of Directors at its first meeting thereafter. The Board of Directors may also from time to time by resolution passed by a majority of the whole Board appoint other committees from among its members, and such committee or committees shall have such powers and duties, to the fullest extent permitted by Section 141(c)(2) of the General Corporation Law of the State of Delaware, to be exercised under the control and direction of the Board of Directors as the latter may from time to time prescribe. Unless otherwise provided by the Board of Directors, a majority of the members of any committee appointed by the Board of Directors pursuant to this Section 12 shall constitute a quorum at any meeting thereof and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of such committee. Action may be taken by any such committee without a meeting by a writing as provided in Section 11 of this Article III. Any such committee shall, subject to any rules prescribed by the Board of Directors, prescribe its own rules for calling, giving notice of and holding meetings and its method of procedure at such meetings and shall keep a written record of all action taken by it.

Section 13. Minutes of Meetings. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

Section 14. Compensation. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

8

ARTICLE IV

NOTICES

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

Section 2. Waiver and Consent.

(a) Whenever any notice is required to be given under the provisions of applicable law, the certificate of incorporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. A person’s attendance or participation at any meeting shall constitute a waiver of notice unless the person objects, at the beginning of the meeting or promptly upon his or her arrival, to holding the meeting or transacting business at the meeting, and thereafter does not vote on or assent to actions taken at the meeting.

(b) Notice of all stockholders’ meetings, whether annual or special, shall be given in writing or by electronic transmission in accordance with applicable law, and may be given by the Chairman of the Board or the President or the Secretary. The notice shall state the general nature of the business to be transacted at the meeting and the place, day and hour thereof. If such notice is mailed, it shall be deemed to have been given when deposited in the United States mail, or if given by electronic transmission, it shall be deemed given at the time specified by applicable law. If any meeting is adjourned to another time or place, no notice as to such adjourned meeting or of the business to be transacted thereat need be given other than by announcement at the meeting at which such adjournment is given, except as otherwise expressly provided in Section 10 of Article II.

9

ARTICLE V

OFFICERS

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

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

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

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

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

Section 6. President. The President shall be the Chief Executive Officer of the corporation and shall have general supervision and control over the business and affairs of the corporation and its officers and employees, subject to the

10

authority granted to the Board of Directors by law and by these By-Laws. The President shall see that all orders and resolutions of the Board of Directors are carried into effect. In the event the Board of Directors does not elect a Chairman of the Board, or in the absence of the Chairman of the Board or his or her inability to act, the President shall preside at meetings of the stockholders and the Board of Directors and shall have all other powers and responsibilities of the Chairman of the Board under these By-Laws. The President shall also have such other duties and powers as may be assigned to or vested in him or her from time to time by the Board of Directors or by the Executive Committee.

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

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

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

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

11

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

Section 12. Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

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

ARTICLE VI

CERTIFICATES OF STOCK

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

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

12

Section 3. Officers’ Signatures. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such Chairman of the Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation.

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

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

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

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

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

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

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

Section 6. Fixing of Record Date. The Board of Directors may fix in advance a date, not less than ten (10) nor more than sixty (60) days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meetings, and any adjournment

13

thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. If no record date is fixed by the Board of Directors, the record date for the determination of the stockholders entitled to notice of, and to vote at, any such meetings, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock, shall be at the close of business on the day preceding the day on which notice is given, or if notice is waived, at the close of business on the day preceding the day on which the meeting is held.

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

ARTICLE VII

GENERAL PROVISIONS

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

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

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

14

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

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

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

Section 7. Indemnification.

(a) The corporation shall indemnify, to the fullest extent allowed by Delaware law, each director, officer, employee or agent of the corporation, and each person who at the request of the corporation has served as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise (individually, an “Indemnified Person” and collectively, the “Indemnified Persons”), shall be indemnified by the corporation against those expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement, which are actually and reasonably incurred in connection with any action, suit or proceeding, pending or threatened, in which such person may be involved by reason of his or her being or having been a director, officer, employee, or agent of this corporation or of such other enterprises. Such indemnification shall be made only in accordance with the laws of the State of Delaware and subject to the conditions prescribed therein. The corporation may purchase and maintain insurance on behalf of any such Indemnified Persons against any liabilities asserted against such persons whether or not the corporation would have the power to indemnify such Indemnified Persons against such liability under the laws of the State of Delaware.

(b) Expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Section 7. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.

(c) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 7 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation, these By-Laws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being

15

the policy of the corporation that indemnification of the persons specified in this Section 7 shall be made to the fullest extent permitted by law. The provisions of this Section 7 shall not be deemed to preclude the indemnification of any person who is not specified in Section 7 but whom the corporation has the power or obligation to indemnify under applicable law, or otherwise.

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

ARTICLE VIII

AMENDMENTS

These By-Laws may be altered or repealed at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration or repeal be contained in the notice of such special meeting. No By-Law adopted by vote of the stockholders shall be subject to amendment by the Board of Directors if such By-Law so provides.

16

EX-10.I

Exhibit 10(i)

AMENDMENT NO. 3 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this “Amendment”) is made and entered into as of December 18, 2003 by and among NDCHealth Corporation, a Delaware corporation (the “Borrower”), the lenders (the “Lenders”) party hereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Administrative Agent (in such capacity, the “Administrative Agent”) and Swing Line Lender (in such capacity, the “Swing Line Lender”), Credit Suisse First Boston, as Syndication Agent (in such capacity, the “Syndication Agent”), Bank of America, N.A., as Documentation Agent (in such capacity, the “Documentation Agent”) and LaSalle Bank National Association, as L/C Issuer (in such capacity, the “L/C Issuer”).

W I T N E S S E T H:

WHEREAS, the Borrower, the Lenders, the Administrative Agent, the Swing Line Lender, the Syndication Agent, the Documentation Agent and the L/C Issuer are parties to that certain Credit Agreement, dated as of November 26, 2002, as amended by Letter Amendment and Waiver No. 1, dated as of May 27, 2003, and as amended by Letter Amendment No. 2, dated as of August 26, 2003 (as so amended and otherwise modified, the “Credit Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement), pursuant to which the Lenders, the Swing Line Lender and the L/C Issuer have made certain financial accommodations available to the Borrower;

WHEREAS, the Borrower desires to create a new class of Term Loans under the Credit Agreement (the “Term A Loans”) having identical terms with, having the same rights and obligations under the Loan Documents as, and in the same aggregate principal amounts as, the Term Loans, as set forth in the Loan Documents, except as such terms are amended hereby;

WHEREAS, each Term Lender who executes and delivers this Amendment shall be deemed, on and concurrently with the occurrence of the Amendment No. 3 Effective Date (as defined herein), to have exchanged its Term Commitment and Term Loans (which Term Commitment and Term Loans shall thereafter be deemed terminated and refinanced in full) for a Term A Commitment (a “Term A Commitment”) and Term A Loans in at least the same aggregate principal amount as such Lender’s outstanding Term Loans and as set forth in Schedule I to this Amendment, and such Lender shall thereafter become a Term A Lender (each, a “Term A Lender”);

WHEREAS, each Person who executes and delivers this Amendment as an Additional Term A Lender (each, an “Additional Term A Lender”), will make a Term A Loan on the Amendment No. 3 Effective Date (as defined herein) (each, an “Additional Term A Loan”) to the Borrower in an aggregate principal amount equal to the amount set forth opposite its name on Schedule I to this Amendment, the proceeds of which will be used by the Borrower to

1

refinance in full the outstanding principal amount of Term Loans of Term Lenders, if any, who do not execute and deliver this Amendment;

WHEREAS, the Borrower shall pay to each Term Lender all accrued and unpaid interest on its Term Loans to (but not including) the Amendment No. 3 Effective Date on the Amendment No. 3 Effective Date;

WHEREAS, the Borrower desires to create a new class of Revolving Credit Loans under the Credit Agreement (the “Revolving Credit A Loans”) having identical terms with, having the same rights and obligations under the Loan Documents as, and in the same aggregate principal amounts as, the Revolving Credit Loans, as set forth in the Loan Documents, except as such terms are amended hereby;

WHEREAS, each Revolving Credit Lender who executes and delivers this Amendment shall be deemed, on and concurrently with the occurrence of the Amendment No. 3 Effective Date, to have exchanged its Revolving Credit Commitment and its Revolving Credit Loans (which Revolving Credit Commitment and Revolving Credit Loans shall thereafter be deemed terminated and refinanced in full) for a Revolving Credit A Commitment (a “Revolving Credit A Commitment”) and Revolving Credit A Loans in at least the same respective aggregate principal amounts as such Lender’s outstanding Revolving Credit Commitments and Revolving Credit Loans and as respectively set forth in Schedule I to this Amendment, and such Lender shall thereafter become a Revolving Credit A Lender (each, a “Revolving Credit A Lender”);

WHEREAS, each Person who executes and delivers this Amendment as an Additional Revolving Credit A Lender (each, an “Additional Revolving Credit A Lender”), will have a Revolving Credit A Commitment and will make a Revolving Credit A Loan on the Amendment No. 3 Effective Date (each, an “Additional Revolving Credit A Loan”) to the Borrower in the respective aggregate principal amounts equal to the respective amounts set forth opposite its name on Schedule I to this Amendment, the proceeds of such Revolving Credit A Loans being used by the Borrower to refinance in full the outstanding principal amount of Revolving Credit Loans (and such Revolving Credit A Commitments to replace the Revolving Credit Commitments) of Revolving Credit Lenders, if any, who do not execute and deliver this Amendment;

WHEREAS, the Borrower shall pay to each Revolving Credit Lender all accrued and unpaid interest on its Revolving Credit Loan to (but not including) the Amendment No. 3 Effective Date on the Amendment No. 3 Effective Date; and

WHEREAS, to effectuate the foregoing and a number of other modifications to the Credit Agreement (including, without limitation, to eliminate the floor for Eurodollar Rate Loans), the Borrower has requested that the Lenders, the Administrative Agent, the Swing Line Lender, the Syndication Agent, the Documentation Agent and the L/C Issuer amend certain provisions of the Credit Agreement and waive certain Events of Default, and subject to the terms and conditions hereof, the Lenders, the Administrative Agent, the Swing Line Lender, the Syndication Agent, the Documentation Agent and the L/C Issuer are willing to do so;

2

NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt of all of which are acknowledged, the Borrower, the Lenders, the Administrative Agent, the Swing Line Lender, the Syndication Agent, the Documentation Agent and the L/C Issuer agree as follows:

1. Amendments.

(a) Section 1.01 of the Credit Agreement is hereby amended by replacing the definition of “Applicable Rate” in its entirety with the following definition:

“Applicable Rate” means (a) with respect to Term Loans, a percentage per annum equal to (i) for Eurodollar Rate Loans, the Eurodollar Rate then in effect for such Term Loans plus 2.75%; and (ii) for Base Rate Loans, the Base Rate then in effect for such Term Loans plus 1.75%; (b) with respect to Revolving Credit Loans (including Letters of Credit), a percentage per annum equal to, from time to time, the following percentages per annum, based upon the Consolidated Total Leverage Ratio as set forth below and (c) with respect to the Commitment Fee, a percentage per annum equal to 0.50%:

Applicable Rate
		Eurodollar Rate +
Pricing Level	Consolidated Total Leverage Ratio	Letters of Credit		Base Rate
I	Greater than or equal to 3.00:1.00	2.75	%	1.75	%
II	Greater than or equal to 2.50:1.00 but less than Level I	2.50	%	1.50	%
III	Greater than or equal to 2.00:1.00 but less than Level II	2.25	%	1.25	%
IV	Less than 2.00:1.00	2.00	%	1.00	%

3

The Applicable Rate for each Revolving Credit Loan, commissions on Letters of Credit and Commitment Fees shall be determined by reference to the Consolidated Total Leverage Ratio in effect from time to time; provided, that if at any time the actual or implied rating of the Borrower’s senior long-term unsecured debt is at or above Ba2 from Moody’s and at or above BB from S&P, then, for Revolving Credit Loans and commissions on Letters of Credit, the Applicable Rate for Revolving Credit Loans and commissions on Letters of Credit shall be the percentage per annum specified in the grid above minus 0.25%; provided, however, that (A) no change in the Applicable Rate shall be effective until five Business Days after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to Section 6.01(a) or (b), as the case may be, and a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower demonstrating such Consolidated Total Leverage Ratio and (B) the Applicable Rate shall be at Pricing Level I for so long as the Borrower has not submitted to the Administrative Agent the information described in clause (A) of this proviso as and when required under Section 6.01(a) or (b), as the case may be, and, in the case of Revolving Credit Loans and Letters of Credit, for so long as an Event of Default shall have occurred and be continuing if requested by the Required Lenders.

(b) Section 1.01 of the Credit Agreement is hereby further amended by amending the definition of “Change of Control” to delete the following phrase from the beginning of the first sentence of clause (c) thereof:

“the Borrower shall have entered into a contract or arrangement that, upon consummation thereof, will result in”

(c) Section 1.01 of the Credit Agreement is hereby further amended by replacing the definition of “NDC Plaza Transaction” in its entirety with the following definition:

“NDC Plaza Transaction” means the potential sale or sale and leaseback of the NDC Plaza Property or any portion thereof.

(d) Section 1.01 of the Credit Agreement is hereby further amended by inserting the following new definitions therein in the appropriate alphabetical order:

“Additional Revolving Credit A Borrowing” means a borrowing consisting of simultaneous Additional Revolving Credit A Loans of the same Type made by the Additional Revolving Credit A Lenders.

“Additional Revolving Credit A Commitment” means, with respect to an Additional Revolving Credit A Lender, the commitment of such Additional Revolving Credit A Lender to make Revolving Credit A Loans that are Additional Revolving Credit A Loans from and after the Amendment No. 3 Effective Date, in an amount in Dollars set forth next to

4

the name of such Additional Revolving Credit A Lender under the heading “Revolving Credit A Commitment” on Schedule I to Amendment No. 3. The aggregate amount of the Additional Revolving Credit A Commitments shall equal the amount of the Revolving Credit Commitments of Revolving Credit Lenders that do not execute and deliver Amendment No. 3 on or prior to the Amendment No. 3 Effective Date.

“Additional Revolving Credit A Lender” means a Person with an Additional Revolving Credit A Commitment to make Additional Revolving Credit A Loans to the Borrower from and after the Amendment No. 3 Effective Date.

“Additional Revolving Credit A Loan” means a revolving credit loan or revolving credit loans in Dollars made pursuant to Section 2.04A of this Agreement from and after the Amendment No. 3 Effective Date, such Loans being a subset of the Revolving Credit A Loans.

“Additional Term A Borrowing” means a borrowing consisting of simultaneous Additional Term A Loans of the same Type made by the Additional Term A Lenders.

“Additional Term A Commitment” means, with respect to an Additional Term A Lender, the commitment of such Additional Term A Lender to make Additional Term A Loans on the Amendment No. 3 Effective Date, in an amount in Dollars set forth next to the name of such Additional Term A Lender on Schedule I to Amendment No. 3. The aggregate amount of the Additional Term A Commitments shall equal the outstanding principal amount of Term Loans of Term Lenders that do not execute and deliver Amendment No. 3 on or prior to the Amendment No. 3 Effective Date.

“Additional Term A Lender” means a Person with an Additional Term A Commitment to make Additional Term A Loans to the Borrower on the Amendment No. 3 Effective Date.

“Additional Term A Loan” means a term loan or term loans in Dollars made pursuant to Section 2.02A of this Agreement on the Amendment No. 3 Effective Date, such Loans being a subset of the Term A Loans.

“Amendment No. 3” means Amendment No. 3, dated as of December 18, 2003 to this Agreement among the Borrower, the Lenders, the Administrative Agent, the Swing Line Lender, the Syndication Agent, the Documentation Agent and the L/C Issuer.

“Revolving Credit A Borrowing” means a borrowing consisting of simultaneous Revolving Credit A Loans of the same Type made by the Revolving Credit A Lenders.

5

“Revolving Credit A Commitment” means, with respect to a Revolving Credit Lender, the agreement of such Revolving Credit Lender to exchange its Revolving Credit Commitments for an equal aggregate amount of Revolving Credit A Commitments on the Amendment No. 3 Effective Date, as evidenced by such Revolving Credit Lender executing and delivering Amendment No. 3; provided, that each such Revolving Credit Lender’s Revolving Credit Commitment shall be deemed terminated concurrently with the exchange for its Revolving Credit A Commitment, if any, on and concurrently with the occurrence of the Amendment No. 3 Effective Date.

“Revolving Credit A Facility” means, at any time, the aggregate amount of the Revolving Credit A Lenders’ Commitments at such time.

“Revolving Credit A Lender” means, collectively, (a) each Revolving Credit Lender that executes and delivers Amendment No. 3 on or prior to the Amendment No. 3 Effective Date and (b) each Additional Revolving Credit A Lender.

“Revolving Credit A Loan” means a revolving credit loan or revolving credit loans in Dollars made pursuant to Sections 2.03A or 2.04A of this Agreement on or after the Amendment No. 3 Effective Date.

“Revolving Credit A Note” means a promissory note of the Borrower payable to the order of any Revolving Credit A Lender, in substantially the form of Exhibit C-1 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the Revolving Credit A Loan made by such Lender, as amended, endorsed or otherwise modified from time to time.

“Revolving Credit A Outstandings” means the aggregate Outstanding Amount of all Revolving Credit A Loans, all L/C Obligations and all Swing Line Loans.

“Term A Borrowing” means a borrowing consisting of simultaneous Term A Loans of the same Type made by the Term A Lenders.

“Term A Commitment” means, with respect to a Term Lender, the agreement of such Term Lender to exchange its Term Loans for an equal aggregate principal amount of Term A Loans on the Amendment No. 3 Effective Date, as evidenced by such Term Lender executing and delivering Amendment No. 3; provided, that each such Term Lender’s Term Loan shall be deemed refinanced concurrently with the exchange for its Term A Loans, if any, on and concurrently with the occurrence of the Amendment No. 3 Effective Date.

6

“Term A Facility” means, at any time, the aggregate amount of the Term A Lenders’ and Additional Term A Lenders’ Commitments at such time.

“Term A Lender” means, collectively, (a) each Term Lender that executes and delivers Amendment No. 3 on or prior to the Amendment No. 3 Effective Date and (b) each Additional Term A Lender.

“Term A Loan” means a term loan or term loans in Dollars made pursuant to Sections 2.01A or 2.02A of this Agreement on the Amendment No. 3 Effective Date.

“Term A Note” means a promissory note of the Borrower payable to the order of any Term A Lender in substantially the form of Exhibit C-2 hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the Term A Loan made by such Lender, as amended, endorsed or otherwise modified from time to time.

“Term A Outstandings” means, on any date, the aggregate outstanding principal amount of all Term A Loans after giving effect to any borrowings and prepayments or repayments of Term A Loans occurring on such date.

(e) Section 2.02(a) of the Credit Agreement is hereby amended by replacing the fourth and fifth sentences thereof in their entirety with the following sentences:

“Each Committed Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $250,000 in excess thereof. Except as provided in Section 2.03(c), each Committed Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $250,000 or a whole multiple thereof in excess thereof.”

(f) Section 2.05(a) of the Credit Agreement is hereby amended by replacing the first sentence thereof in its entirety with the following sentence:

“(a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Loans in whole or in part and such prepayments shall be without premium or penalty (but subject to Section 3.05); provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $250,000 or a whole multiple thereof in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $250,000 or a whole multiple thereof in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.”

7

(g) Section 2.06 of the Credit Agreement is hereby amended by:

(i) replacing clause (b)(iii) thereof in its entirety with the following:

“(iii) the sale or issuance by any Loan Party or any of its Subsidiaries of any Equity Interests (including, without limitation, receipt of any capital contribution and excluding issuances of Equity Interests by the Borrower generating up to $100,000,000 in Net Cash Proceeds; provided, that the first $70,000,000 of the Net Cash Proceeds thereof are applied to prepay the Senior Subordinated Notes; and provided further, that up to an additional $30,000,000 in such Net Cash Proceeds are used to make Investments permitted under Section 7.02).”; and

(ii) adding at the end thereof the following new subsection (h) to read as follows:

“(h) Notwithstanding any provision to the contrary contained in this Section 2.06, all prepayments of principal under Section 2.06(b)(ii) (including by reason of exchanges or roll-overs or re-tranching) shall be in an amount equal to 101% of the principal amount so prepaid (or exchanged, rolled-over or re-tranched) if such prepayment (exchange, roll-over or re-tranching) is made within one year after the Amendment No. 3 Effective Date.”

(h) Article II of the Existing Credit Agreement is hereby amended by adding the following new Sections 2.01A through 2.05A thereto:

“SECTION 2.01A. Term Loan Exchange. Subject to the terms and conditions hereof, each Term Lender with a Term A Commitment severally agrees to exchange its Term Loan for at least a like principal amount in Dollars of Term A Loans on the Amendment No. 3 Effective Date, and from and after the Amendment No. 3 Effective date such Term Loan shall be deemed refinanced in full.

“SECTION 2.02A Additional Term A Loans. Subject to the terms and conditions hereof, each Additional Term A Lender severally agrees to make Additional Term A Loans in Dollars to the Borrower on the Amendment No. 3 Effective Date in a principal amount not to exceed its Additional Term A Commitment on the Amendment No. 3 Effective Date. The Borrower shall refinance all Term Loans of Term Lenders that do not execute and deliver the Amendment No. 3 on the Amendment No. 3 Effective Date with the gross proceeds of the Additional Term A Loans.

SECTION 2.03A Revolving Credit Loan Exchange. Subject to the terms and conditions hereof, each Revolving Credit Lender with a Revolving Credit A Commitment severally agrees to exchange its Revolving Credit Loans outstanding on the Amendment No. 3 Effective Date for at least a like principal amount in Dollars of Revolving Credit A Loans on and concurrently with the

8

occurrence of the Amendment No. 3 Effective Date, and from and after the Amendment No. 3 Effective Date (a) such Revolving Credit Loans shall be deemed refinanced in full and (b) the Revolving Credit A Lenders agree to make Loans to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed such Lender’s Revolving Credit A Commitment; provided, however, that after giving effect to any Revolving Credit A Borrowing, (i) the Revolving Credit A Outstandings (including all Additional Revolving Credit A Loans) shall not exceed the Revolving Credit A Facility and (ii) the aggregate Outstanding Amount of the Revolving Credit A Loans of any Revolving Credit A Lender plus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit A Commitment. Within the limits of each Revolving Credit A Lender’s Revolving Credit A Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.03A, prepay under Section 2.05 of this Agreement, and reborrow under this Section 2.03A. Revolving Credit A Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

SECTION 2.04A. Additional Revolving Credit A Loans. Subject to the terms and conditions hereof, each Additional Revolving Credit A Lender severally agrees to make Additional Revolving Credit A Loans in Dollars to the Borrower on the Amendment No. 3 Effective Date in a principal amount not to exceed its Additional Revolving Credit A Commitment on the Amendment No. 3 Effective Date. The Borrower shall refinance all Revolving Credit Loans of Revolving Credit Lenders that do not execute and deliver the Amendment No. 3 on the Amendment No. 3 Effective Date with the gross proceeds of the Additional Revolving Credit A Loans. From and after the Amendment No. 3 Effective Date, the Additional Revolving Credit A Lenders agree to make Loans to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed such Lender’s Additional Revolving Credit A Commitment; provided, however, that after giving effect to any Additional Revolving Credit A Borrowing, (i) the Revolving Credit A Outstandings, together with the Outstandings under Section 2.03A, shall not exceed the Revolving Credit A Facility and (ii) the aggregate Outstanding Amount of the Additional Revolving Credit A Loans of any Additional Revolving Credit A Lender plus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Additional Lender’s Revolving Credit A Commitment. Within the limits of each Additional Revolving Credit A Lender’s Additional Revolving Credit A Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04A, prepay under Section 2.05 of this Agreement, and reborrow under this Section 2.04A. Additional Revolving Credit A Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

9

SECTION 2.05A Refinancing ; Interest, Etc. On the Amendment No. 3 Effective Date the Borrower shall use (a) 100% of the proceeds of all Term A Loans to refinance the Term Loans and the Borrower shall pay all accrued and unpaid interest due and payable on the Term Loans on the Amendment No. 3 Effective Date to the Term Lenders and (b) 100% of the proceeds of all Revolving Credit A Loans to refinance the Revolving Credit Loans and the Borrower shall pay all accrued and unpaid interest due and payable on the Revolving Credit Loans on the Amendment No. 3 Effective Date to the Revolving Credit Lenders. In addition, on the Amendment No. 3 Effective Date, the Borrower shall pay any breakage loss or expense owing to such Term Lenders and Revolving Credit Lenders pursuant to Section 10.04 of this Agreement.”

(i) Section 7.02 of the Credit Agreement is hereby amended by deleting the word “and” at the end of subsection (f), renumbering subsection (g) as new subsection (h) and inserting after subsection (f) a new subsection (g) to read in full as follows:

“(g) Investments in (i) ArcLight Systems, LLC, (ii) the OmniLink Product Line of McKesson Corporation and (iii) InstantDX, LLC, in an amount not to exceed $50,000,000 for any such Investment and in an aggregate amount invested not to exceed $75,000,000 for all such Investments; provided that, in any event, with respect to Investments made under this clause (g): (A) any newly acquired or organized Subsidiary of the Borrower or any of its Subsidiaries shall be a wholly-owned Subsidiary thereof; (B) immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom; (C) any company or business acquired or invested in pursuant to this clause (g) shall be in the same line of business as the business of the Borrower or any of its Subsidiaries; (D) immediately after giving effect to the acquisition of a company or business pursuant to this clause (g), the Borrower shall be in pro forma compliance with the covenants contained in Section 7.11, calculated based on the financial statements most recently delivered to the Lenders pursuant to Section 6.01 and as though such acquisition had occurred at the beginning of the four-quarter period covered thereby, as evidenced by a certificate of a Responsible Officer of the Borrower delivered to the Lenders demonstrating such compliance; and (E) the Borrower and such Subsidiary shall comply with the provisions of Section 6.12.”

(j) Section 7.02(h) (as renumbered) of the Credit Agreement is hereby amended by replacing each reference to “this clause (g)” therein with a reference to “this clause (h)”, by replacing the amount $15,000,000” appearing in clause (i) thereof with the amount “$20,000,000” and by replacing the amount “$25,000,000” appearing in clause (ii) thereof with the amount “$50,000,000”.

10

(k) Section 7.03 of the Credit Agreement is hereby amended by deleting the word “and” at the end of subsection (j), replacing the “.” at the end of subsection (k) with “; and”, and adding the following new subsection (l) thereof:

“(l) without duplication of Section 7.13(a), Indebtedness of any Person that becomes a Subsidiary after the date of this Agreement; provided, that (i) such Indebtedness exists at the time that such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary, (ii) no Default shall have occurred and be continuing or would result from the acquisition of such Person and (iii) immediately after giving effect to the acquisition of such Person, the Borrower shall be in pro forma compliance with the covenants contained in Section 7.11, calculated based on the financial statements most recently delivered to the Lenders pursuant to Section 6.01 and as though such acquisition of such Person had occurred at the beginning of the four-quarter period covered thereby, as evidenced by a certificate of a Responsible Officer of the Borrower delivered to the Lenders demonstrating such compliance.”

(l) Section 7.05 of the Credit Agreement is hereby amended by replacing subsection (g) of such Section in its entirety with the following:

“Dispositions by the Borrower of National Data Corporation of Canada, NDC Health Limited, Infopharm Ltd., HealthTran LLC and MedPrint; for fair value and at least 75% in cash, with the Net Cash Proceeds thereof to be applied pursuant to Section 2.06(b).”

(m) Section 7.11 of the Credit Agreement is hereby amended by replacing subsections (a), (b) and (c) of such Section in their entirety with the following:

“(a) Maximum Consolidated Total Leverage Ratio. Permit at any time a Consolidated Total Leverage Ratio of more than the amount set forth below during each period set forth below:

Quarter Ending	Ratio
February 28, 2004	3.00:1.00
May 31, 2004	3.00:1.00
August 31, 2004 and thereafter	2.75:1.00

(b) Maximum Consolidated Senior Leverage Ratio. Permit at any time a Consolidated Senior Leverage Ratio of more than the amount set forth below during each period set forth below:

Quarter Ending	Ratio
February 28, 2004	1.75:1.00
May 31, 2004 and thereafter	1.75:1.00

11

(c) Minimum Consolidated Fixed Charge Coverage Ratio. Permit at any time a Consolidated Fixed Charge Coverage Ratio of less than the amount set forth below during each period set forth below:

Quarter Ending	Ratio
February 28, 2004	1.25:1.00
May 31, 2004	1.25:1.00
August 31, 2004	1.25:1.00
November 30, 2004	1.25:1.00
February 28, 2005	1.25:1.00
May 31, 2005	1.25:1.00
August 31, 2005	1.50:1.00
November 30, 2005	1.50:1.00
February 28, 2006	1.50:1.00
May 31, 2006 and thereafter	1.50:1.00

(n) Section 7.12 of the Credit Agreement is hereby amended by replacing the table therein in its entirety with the following table:

Fiscal Year	Amount
2003	$	45,000,000
2004	$	60,000,000
2005	$	70,000,000
2006	$	80,000,000
2007	$	90,000,000
2008	$	100,000,000

(o) Section 7.13 of the Credit Agreement is hereby restated in its entirety to read as follows:

“Lease Obligations. Create, incur, assume or suffer to exist any obligations as lessee (a) for the rental or hire of real or personal property of any kind under leases or agreements to lease (excluding capital leases) having an original term of one year or more that would cause the direct and contingent liabilities of the Borrower and its Subsidiaries, on a Consolidated basis, in respect of all such obligations to exceed $20,000,000 payable in any Fiscal Year or (b) for up to an additional $5,000,000 in any Fiscal Year for any such obligations as lessee, to the extent arising from (i) lease obligations of any Person that becomes a Subsidiary after the date of this Agreement (but in any case without duplication of Section 7.03(l)); provided, that such lease obligation of such Person exists at the time that such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (ii) the rental or hire of real or personal property in connection with any sale and leaseback transaction, except for the NDC Plaza Transaction.”

(p) Section 7.21 of the Credit Agreement is hereby amended by replacing the phrase “impair the value of the interest or rights of any Loan Party thereunder or that would

12

impair the interest or rights of any Agent or any Lender” at the end thereof in its entirety with the following:

“reasonably be expected to have a Material Adverse Effect.”

2. Conditions to Effectiveness of this Amendment. This Amendment and the amendments contained herein shall become effective on the date (the “Amendment No. 3 Effective Date”) when each of the conditions set forth below shall have been fulfilled to the satisfaction of the Administrative Agent:

(a) The Administrative Agent shall have received counterparts of this Amendment, duly executed and delivered on behalf of each of (i) the Borrower, (ii) the Administrative Agent, (iii) the Guarantors, (iv) the Required Lenders, (v) each Term A Lender, or in lieu of one or more Term A Lenders, one or more Additional Term A Lenders providing Additional Term A Commitments in an amount sufficient to refinance all of the principal of the Term Loans owed to the non-consenting Term Lenders and (vi) each Revolving Credit A Lender, or in lieu of one or more Revolving Credit A Lenders, one or more Additional Revolving Credit A Lenders providing Additional Revolving Credit A Commitments in an amount sufficient to refinance all of the principal of the Revolving Credit Loans owed to the non-consenting Revolving Credit Lenders, or as to any of the foregoing parties, advice reasonably satisfactory to the Administrative Agent that each of the foregoing parties has executed a counterpart of this Amendment;

(b) The Borrower shall have provided the Administrative Agent with a notice in accordance with the requirements of Section 2.05(a) of the Credit Agreement three Business Days prior to the Amendment No. 3 Effective Date with respect to the refinancing in full of any Term Loans and Revolving Credit Loans from the proceeds of Additional Term A Loans and Additional Revolving Credit A Loans made by Additional Term A Lenders and Additional Revolving Credit A Lenders;

(c) The Borrower shall have provided the Administrative Agent with a Committed Loan Notice in accordance with the requirements of Section 2.02(a) of the Credit Agreement three Business Days prior to the Amendment No. 3 Effective Date with respect to the borrowing of the Term A Loans and Revolving Credit A Loans to be made on the Amendment No. 3 Effective Date;

(d) The Borrower shall have paid (i) all reasonable costs and expenses (including the reasonable fees, charges and disbursements of counsel to the Administrative Agent) incurred in connection with the preparation, negotiation and execution of this Amendment and (ii) all fees previously agreed with the Administrative Agent;

(e) Each Term A Lender and Revolving Credit A Lender shall have received, if requested, one or more Notes payable to the order of such Lender duly executed by the Borrower in substantially the form of Exhibits C-1 and C-2 respectively to the Credit Agreement, as modified by this Amendment, evidencing the Term A Loans and the Revolving Credit A Loans;

(f) The Borrower shall have paid to all the Term Lenders and all the Revolving Credit Lenders all accrued and unpaid interest on the Term Loans and the Revolving Credit

13

Loans to (but not including) the Amendment No. 3 Effective Date plus any breakage, loss or expense due pursuant to Section 10.04 of the Credit Agreement;

(g) The Administrative Agent shall have received certified copies of (i) the resolutions of the Board of Directors of each Loan Party evidencing approval for this Amendment and all matters contemplated hereby and (ii) all documents evidencing other necessary corporate action and governmental and other third party approvals and consents if any, with respect to this Amendment and the matters contemplated hereby;

(h) The Administrative Agent shall have received favorable opinions of (i) David Oles, senior attorney of the Loan Parties, and (ii) King & Spalding, special counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to the matters set forth in this Amendment (and the Credit Agreement as amended hereby) and such other matters concerning the Loan Parties, the Loan Documents and this Amendment as the Administrative Agent or Lenders may reasonably request; and

(i) The Administrative Agent shall have received a certificate signed by a Responsible Officer of the Loan Parties certifying (i) the identity, authority and capacity of each Responsible Officer of the Loan Parties authorized to sign this Amendment and the other documents to be delivered hereunder, (ii) that no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body, or any third party to any agreements and instruments of any Loan Party is required for the due execution, delivery or performance by the Loan Parties of this Amendment, (iii) that the representations and warranties contained in this Amendment are true and correct as of the Amendment No. 3 Effective Date and (iv) that no event has occurred and is continuing that constitutes a Default.

3. Replacement. Immediately upon the satisfaction of the conditions precedent set forth in Section 2, the following shall be given effect, all of which shall be deemed to occur simultaneously:

(a) All Term Commitments of Term Lenders executing this Amendment shall be converted into Term A Commitments; all Term Loans held by Term Lenders executing this Amendment shall be converted into Term A Loans;

(b) The Additional Term A Commitments shall be effective; Additional Term A Loans shall be funded by Additional Term A Lenders, and proceeds of such Additional Term A Loans shall be applied to refinance the Term Loans of Term Lenders not executing this Amendment, leaving no Term Loans or Term Commitments outstanding;

(c) All Revolving Credit Commitments of Revolving Credit Lenders executing this Amendment shall be converted into Revolving Credit A Commitments; all Revolving Credit Loans held by Revolving Credit Lenders executing this Amendment shall be converted into Revolving Credit A Loans;

(d) The Additional Revolving Credit A Commitments shall be effective; Additional Revolving Credit A Loans shall be funded by Additional Revolving Credit A Lenders, and the proceeds of such Additional Revolving Credit A Loans shall be applied to

14

refinance in full the Revolving Credit Loans of Revolving Credit Lenders not executing this Amendment, leaving no Revolving Credit Loans outstanding;

(e) All Letters of Credit and Swing Line Loans shall be deemed to be outstanding under the Revolving Credit A Commitments, rather than under the Revolving Credit Commitments;

(f) The Revolving Credit Commitments of Revolving Lenders not executing this Amendment shall terminate;

(g) The Term A Loans shall have the same terms, rights and obligations as the Term Loans as set forth in the Loan Documents, except as modified by this Amendment, and all references to “Term Borrowing”, “Term Commitment”, “Term Facility”, “Term Lender”, “Term Loan”, “Term Note” and “Term Outstandings” in the Loan Documents shall be deemed to be references to “Term A Borrowing”, “Term A Commitment”, “Term A Facility”, “Term A Lender”, “Term A Loan”, “Term A Note” and “Term A Outstandings”, respectively;

(h) The Revolving Credit A Commitments and Revolving Credit A Loans shall have the same terms, rights and obligations as the Revolving Credit Commitments and Revolving Credit Loans as set forth in the Loan Documents, except as modified by this Amendment, and all references to “Revolving Credit Borrowing”, “Revolving Credit Commitment”, “Revolving Credit Facility”, “Revolving Credit Lender”, “Revolving Credit Loan”, “Revolving Credit Note” and “Revolving Credit Outstandings” in the Loan Documents shall be deemed to be references to “Revolving Credit A Borrowing”, “Revolving Credit A Commitment”, “Revolving Credit A Facility”, “Revolving Credit A Lender”, “Revolving Credit A Loan”, “Revolving Credit A Note” and “Revolving Credit A Outstandings”, respectively.

4. Representations and Warranties. To induce the Lenders and the Administrative Agent to enter into this Amendment, each Loan Party hereby represents and warrants to the Lenders and the Administrative Agent that:

(a) The execution, delivery and performance by such Loan Party of this Amendment have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of or default under, or the creation of any Lien under or require any payment to be made under, (i) any material Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law;

(b) This Amendment has been duly executed and delivered for the benefit of or on behalf of each Loan Party and constitutes a legal, valid and binding obligation of each Loan Party, enforceable against such Loan Party in accordance with its terms except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally; and

15

(c) After giving effect to this Amendment, the representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date (provided that, for this purpose, (i) the reference to the Borrower’s May 31, 2002 Audited Financial Statements in Section 5.05(a) of the Credit Agreement shall be deemed a reference to the Borrower’s May 31, 2003 Audited Financial Statements and (ii) the reference to the date August 31, 2002 in Section 5.05(b) of the Credit Agreement shall be deemed a reference to August 31, 2003) and no Default or Event of Default has occurred and is continuing as of the date hereof.

5. Reaffirmations of Guaranty. Each Guarantor consents to the execution and delivery by the Borrower of this Amendment and jointly and severally in all respects ratifies and confirms the terms of the Guaranty with respect to the indebtedness now or hereafter outstanding under the Credit Agreement as amended hereby and all promissory notes issued thereunder. Each Guarantor acknowledges that, notwithstanding anything to the contrary contained herein or in any other document evidencing any indebtedness of the Borrower to the Lenders or any other obligation of the Borrower, or any actions now or hereafter taken by the Lenders with respect to any obligation of the Borrower, the Guaranty (i) is and shall continue to be a primary obligation of the Guarantors, (ii) is and shall continue to be an absolute, unconditional, joint and several, continuing and irrevocable guaranty of payment, and (iii) is and shall continue to be in full force and effect in accordance with its terms. Nothing contained herein to the contrary shall release, discharge, modify, change or affect the original liability of the Guarantors under the Guaranty.

6. Effect of Amendment. Except as set forth expressly herein, all terms of the Credit Agreement, the Notes and each of the other Loan Documents as amended hereby, shall be and remain in full force and effect, are hereby ratified and confirmed and shall continue to constitute the legal, valid, binding and enforceable obligations of the Borrower to the Lenders and the Administrative Agent. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of the Obligations of the Loan Parties under the Loan Documents, in each case as amended by this Amendment. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under the Credit Agreement or any other Loan Document, nor constitute a waiver of any provision of the Credit Agreement or any other Loan Document. This Amendment shall constitute a Loan Document for all purposes of the Credit Agreement.

On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment.

7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York and all applicable federal laws of the United States of America.

16

8. No Novation. This Amendment is not intended by the parties to be, and shall not be construed to be, a novation of the Credit Agreement or an accord and satisfaction in regard thereto.

9. Fees, Costs and Expenses. The Borrower agrees to pay on demand all fees, costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the reasonable fees and expenses of outside counsel for the Administrative Agent with respect thereto.

10. Counterparts. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by facsimile transmission or by electronic mail shall be as effective as delivery of a manually executed counterpart hereof.

11. Binding Nature. This Amendment shall be binding upon and inure to the benefit of the parties hereto, their respective successors, successors-in-titles, and assigns.

12. Entire Understanding. This Amendment sets forth the entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto.

[Signature Pages To Follow]

17

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.

BORROWER:
NDCHEALTH CORPORATION
By:
	Name: Title:
GUARANTORS:
NDC HEALTH INFORMATION SERVICES (ARIZONA) INC.
By:
	Name: Title:
NDC OF CANADA, INC.
By:
	Name: Title:
[UPDATE GUARANTORS]

LENDERS:
MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc., as Administrative Agent, Swing Line Lender and as a Lender
By:
Name: Title:
CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch, as Syndication Agent and as a Lender
By:
Name: Title:
By:
Name: Title:
BANK OF AMERICA, N.A., as Documentation Agent and as a Lender
By:
Name: Title:
LASALLE BANK NATIONAL ASSOCIATION, as L/C Issuer and as a Lender
By:
	Name: Title:

Lenders:
, as a Lender [Insert Name of Financial Institution]
By
	Title:

Schedule I

To Amendment No. 3

List of Lenders and Loan Commitments and Loan Outstanding Percentages and Amounts

EX-10.II

Exhibit 10 (ii)

EXCLUSIVE LICENSE AGREEMENT

THIS EXCLUSIVE LICENSE AGREEMENT (the “Agreement”) is made and entered into this 31st day of December, 2003, by and between NDCHEALTH CORPORATION, a Delaware corporation (“NDCHealth”), and ARCLIGHT SYSTEMS LLC, a Delaware limited liability company (“Arclight”).

BACKGROUND:

A. Arclight receives Member Data from each Arclight Member and has certain data processing protocols and products relating to such Member Data.

B. NDCHealth receives similar pharmacy retail data from certain Arclight Members and from other sources and has similar data processing protocols and products relating to such data.

C. NDCHealth desires to license on an exclusive basis certain data, products, trademarks and technology from Arclight, and Arclight desires to grant such license to NDCHealth, all subject to and in accordance with the terms and conditions contained in this Agreement.

NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises, covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. DEFINITIONS.

“Additional Contingent Exclusivity Fee” shall have the meaning specified in Section 8.2.

“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common ownership or control with such Person. As used herein, “control” means the power to direct the management and affairs of a Person, and “ownership” means the beneficial ownership of 50% or more of the voting equity securities or other equivalent voting interests of the Person.

“Agreement to be Bound” shall have the meaning specified in Section 3.2.

“Annual Term” shall have the meaning specified in Section 6.2.

“Applicable Percentage” shall have the meaning specified in Section 8.5.

“Arclight” shall have the meaning set forth in the preamble.

“Arclight Data” shall mean all Member Data provided to Arclight (or to NDCHealth on Arclight’s behalf) by all Arclight Members at any time prior to the termination or expiration of this Agreement (including all Member Data provided prior to the date hereof).

“Arclight Member” shall mean all current equity owner members of Arclight. The Arclight Members as of the date hereof are listed on Exhibit A.

“Arclight Product” shall mean each of the Arclight products listed on Exhibit B.

“Arclight Representative” shall have the meaning specified in Section 6.2.

“Arclight System” shall mean the system to be established by NDCHealth (at its sole cost and expense) and located within its data center in Atlanta, Georgia, designed to receive and perform initial processing of Arclight Data as contemplated by Exhibit F, and which system shall (i) be separate and independent from NDCHealth’s Information Management Business and (ii) be operated and maintained by personnel who are neither employed by nor subject to the management control of the Information Management Business.

“Arclight Technology” shall mean all copyrights and copyright applications, copyrightable works, mask works, patents and patent applications, processes, inventions, computer programs, trade secrets, confidential information and materials, goodwill and other intellectual property owned by Arclight (and all specifications, functionality requirements and instructions therefor and all Improvements thereto owned by Arclight pursuant to Section 2.6), including its data quality control process (which encompasses receipt, edits and cleansing for accuracy and reporting consistency), its projection and statistical analysis methodology, its database and report production process, its encryption technology, and its process which matches prescription data to de-identified patients across Arclight Members other than Wal-Mart (and matches prescription data to de-identified patients within Wal-Mart), but specifically excluding (i) all intellectual property rights licensed to Arclight and (ii) all Arclight Technology relating exclusively to the ScriptLine business previously operated by Arclight.

“Arclight Trademarks” shall mean the trademarks, service marks, logos, trade dress and trade names set forth on Exhibit J and any applications and registrations therefor.

“Average Closing Price” shall have the meaning specified in Section 8.1.

“Closing” shall have the meaning specified in Section 17.1.

“Closing Date” shall mean the date and time on which the Closing actually occurs.

“Confidential Information” shall mean the proprietary and confidential data or information of a party, other than its Trade Secrets, which is of tangible or intangible value to such party and is not generally known by or available to the competitors of such party. Notwithstanding the foregoing, Confidential Information shall not include any data or information used in accordance with the terms of this Agreement which (i) at the time of disclosure to the receiving party is in the public domain or thereafter enters the public domain through no wrongful act or omission of the receiving party; (ii) is already known by the receiving party at the time of disclosure by the disclosing party and such data or information is not otherwise subject to confidentiality obligations of the receiving party; (iii) is received from a third party who, to the receiving party’s knowledge, may disclose such data or information without violation of any confidentiality obligation; or (iv) is independently developed by the

2

receiving party without reference to the disclosing party’s Confidential Information or Trade Secrets.

“Coordinating Committee” shall have the meaning specified in Section 6.1.

“Core Product” shall mean each of the NDCHealth products listed on Exhibit C.

“Data Contribution Agreements” shall mean those certain Data Contribution Agreements listed on Exhibit D pursuant to which the Arclight Members who are parties thereto deliver Member Data to Arclight.

“Data Delivery Agreement” shall mean that certain Data Delivery Agreement between NDCHealth and Arclight dated as of May 29, 2002, as amended from time to time.

“DDA Amendment” shall have the meaning specified in Section 7.

“Dispute” shall have the meaning specified in Section 19.1.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder).

“First Committee Meeting” shall have the meaning specified in Section 6.3.

“Fiscal Year” shall mean NDCHealth’s fiscal year which begins on the Saturday closest to June 1 of a particular year and ends on the Friday closest to June 1 of the following year. NDCHealth’s 2005 Fiscal Year means May 29, 2004, through May 27, 2005.

“GAAP” shall have the meaning specified in Section 10.4.

“HIPAA” shall have the meaning specified in Section 9.

“HSR Act” shall mean the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (together with the rules and regulations promulgated thereunder).

“Improvements” shall have the meaning specified Section 2.6.

“Information Management Business” shall mean the information management business which provides decision-support solutions to pharmaceutical manufacturers based on data from retail pharmacies, drug wholesalers and pharmaceutical manufacturers operated by NDCHealth Information Services (Arizona), Inc. (or any successor thereto), which entity performs, except as set forth in the proviso below, (i) all direct sales activities and (ii) all customer service and relationship management for NDCHealth’s information management business; provided, however, the parties acknowledge that certain administrative and management functions with respect to NDCHealth’s information management business are performed by NDCHealth’s senior executive officers located at NDCHealth’s headquarters in Atlanta, Georgia.

“Initial Exclusivity Fee” shall have the meaning specified in Section 8.1.

“Initial NDCHealth Shares” shall have the meaning specified in Section 11.4.

3

“Licensed Items” shall mean the Arclight Data, the Arclight Products, the Arclight Technology and the Arclight Trademarks.

“Longitudinal Product” shall mean any product which matches prescription data to de-identified patients across a group of retail pharmacies.

“Material Adverse Effect” shall mean any event, change or effect that individually or when taken together with all other such events, changes or effects is or could reasonably be expected (as far as can be foreseen at the time) to be materially adverse to the business, assets, liabilities, financial condition, or results of operations of NDCHealth.

“Member Data” shall mean all prescription and related data provided to Arclight (or to NDCHealth on Arclight’s behalf) by any Arclight Member at any time prior to the termination or expiration of this Agreement (including all such data provided prior to the date hereof). The data elements and format of Member Data as of the date hereof are set forth on Exhibit E.

“NDCHealth” shall have the meaning specified in the preamble.

“NDCHealth Common Stock” shall mean the $0.01 par value common stock of NDCHealth.

“NDCHealth Representative” shall have the meaning specified in Section 6.2.

“NDCHealth Products” shall mean Core Products, Non-Core Products and R&C Studies.

“Net Revenue” shall mean NDCHealth’s consolidated gross revenues from the sale of NDCHealth Products, less any applicable sales allowances and discounts, all determined in accordance with generally accepted accounting principles (in the manner applied by NDCHealth in its SEC Documents as of the date of this Agreement).

“Non-Core Product” shall mean any product (including all Longitudinal Products) other than a Core Product which is sold by NDCHealth or any of its Affiliates to any third party and into which Arclight Data (whether or not such data is also purchased by NDCHealth pursuant to separate agreements with Arclight Members or third party aggregators) is commingled, combined, aggregated or disaggregated or in connection with which any other Licensed Item (excluding all Arclight Technology other than Arclight’s longitudinal data linking processes) is used, but specifically excluding R&C Studies.

“NYSE” shall mean the New York Stock Exchange, Inc.

“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or other entity.

“Potential Infringement” shall have the meaning specified in Section 2.9(a).

“R&C Studies” shall mean de-identified patient research and tracking studies which are sold by NDCHealth or any of its Affiliates to any third party and into which Arclight Data (whether or not such data is also purchased by NDCHealth pursuant to separate agreements with

4

Arclight Members or third party aggregators) is commingled, combined, aggregated or disaggregated or in connection with which any other Licensed Item (excluding all Arclight Technology other than Arclight’s longitudinal data linking processes) is used.

“Registration Rights Agreement” shall mean that certain Registration Rights Agreement, dated as of the Closing Date, by and between Arclight and NDCHealth, substantially in the form attached hereto as Exhibit K.

“SEC” shall mean the Securities and Exchange Commission, including any governmental authority or agency succeeding to the functions thereof.

“SEC Documents” shall have the meaning specified in Section 10.3.

“Securities Act” shall mean the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder).

“Trade Secret” shall mean each “trade secret” of a party as defined under applicable law.

“Transaction” shall have the meaning specified in Section 15.4.

“Transition Agreement” shall mean that certain Transition Agreement, dated as of the Closing Date, by and between NDCHealth and Arclight, substantially in the form attached hereto as Exhibit I.

“VAN” shall mean NDCHealth’s “value-added network” pursuant to which NDCHealth provides pharmacies with transaction-based services.

“Wal-Mart” shall mean Wal-Mart Stores, Inc.

“Warrant Agreement” shall mean that certain Warrant Agreement, dated as of the Closing Date, by and between NDCHealth and Arclight, substantially in the form attached hereto as Exhibit L.

2. LICENSES.

2.1 Arclight Data. Subject to the terms and conditions of this Agreement, Arclight hereby licenses to NDCHealth, and NDCHealth hereby accepts from Arclight an exclusive, perpetual (with respect to Arclight Data received prior to the termination of this Agreement), worldwide right and license to use, collect, organize, re-format, translate, analyze, copy, sell, sublicense, exploit, modify, and create derivative works of all Arclight Data received by NDCHealth pursuant to this Agreement to enable NDCHealth to: (a) integrate such Arclight Data into one or more Core Products and/or Non-Core Products in connection with the marketing, license or sale of such products; (b) develop one or more Non-Core Products; and (c) use such Arclight Data in connection with the conduct and commercialization of R&C Studies.

2.2 Arclight Products. Subject to the terms and conditions of this Agreement, Arclight hereby licenses to NDCHealth, and NDCHealth hereby accepts from Arclight, an exclusive, worldwide right and license to use, sell (either directly or through its distribution

5

channels), modify, sublicense (but only within its distribution channels and to its customers) and create derivative works of all Arclight Products during the term of this Agreement.

2.3 Arclight Technology. Subject to the terms and conditions of this Agreement, Arclight hereby licenses to NDCHealth, and NDCHealth hereby accepts from Arclight, an exclusive, worldwide right and license to use, copy, modify and create derivative works of all Arclight Technology during the term of this Agreement. Upon the request of Arclight in each instance, NDCHealth shall file and prosecute patent applications (or continue to prosecute pending patent applications) on behalf of, in the name of and in accordance with the instructions of Arclight for any portion of the Arclight Technology; provided, however, Arclight shall be responsible for all out-of-pocket costs and expenses incurred by NDCHealth in connection therewith.

2.4 Limitations on Use by NDCHealth. Notwithstanding anything else contained herein to the contrary, NDCHealth shall not: (a) present or report outside of the Arclight System any identifiable Arclight Member or Arclight Member pharmacy-specific information, data or derivatives thereof; or (b) disassemble, modify, isolate or separate any Arclight Data to learn the market share or sales volume or other non-public information of Arclight’s individual or collective data sources; provided, however, NDCHealth shall have the right to deliver Arclight Member data and store identifiable data to the Arclight Member who provided the underlying Member Data, but only to the extent permitted in any written agreement between NDCHealth and such Arclight Member. Notwithstanding anything else contained herein to the contrary, NDCHealth shall not commingle, combine, aggregate or disaggregate any Arclight Data in any Non-Core Product or any R&C Studies product suite offered for license or sale by NDCHealth or its Affiliates without the approval required by Section 6.4.

2.5 Exclusivity. Notwithstanding anything else contained herein to the contrary, except as set forth on Schedule 2.5, Arclight hereby covenants and agrees not to use and not to license, transfer, sell, assign or give to any person or entity (other than NDCHealth) during the term of this Agreement any of the Licensed Items (or any rights therein), without the prior written consent of NDCHealth in each instance (which consent may be granted or withheld by NDCHealth in its sole discretion).

2.6 Ownership. Except for the limited rights expressly granted herein, all right, title and interest in and to the Licensed Items are reserved by Arclight, and, except as expressly granted herein, nothing contained in this Agreement shall be construed as conferring any right, title, interest or license with respect to the Licensed Items upon NDCHealth, by implication, estoppel or otherwise. As between Arclight and NDCHealth, Arclight shall own all right, title and interest, including all intellectual property rights, in and to the Licensed Items. Any and all improvements, updates, modifications, revisions, variants and derivative works to any Licensed Items (and all intellectual property rights therein and thereto) (collectively “Improvements”) shall be owned by the party hereto which developed them; provided, however, NDCHealth hereby grants Arclight a non-exclusive, worldwide, perpetual, royalty-free, irrevocable right and license to use, copy, sell (either directly or through its distribution channels), sublicense (but only within its distribution channels and to its customers), modify and create derivative works of all NDCHealth-owned Improvements; provided further, that Arclight shall not exercise such right and license until the expiration or termination of this Agreement.

6

2.7 Marketing and Sales. NDCHealth shall use commercially reasonable efforts to promote, market and sell the NDCHealth Products during the term of this Agreement, including, (i) issuing a public announcement of the transactions contemplated hereby after the Closing (jointly sponsored and agreed upon with Arclight and any Arclight Member referenced in such announcement), (ii) continuation of NDCHealth’s current level of sales and marketing efforts (including participation in trade shows), and (iii) cooperation with certain Arclight Members in sales and marketing activities (to the extent deemed appropriate by NDCHealth and such Arclight Members).

2.8 Arclight Trademarks.

(a) Arclight hereby grants to NDCHealth an exclusive, worldwide right and license to use, modify, sublicense (but only within its distribution channels) the Arclight Trademarks during the term of this Agreement.

(b) All uses of the Arclight Trademarks by NDCHealth shall materially conform to the standards and specifications used by Arclight as of the Closing. At the reasonable request of Arclight from time to time, NDCHealth shall, at its sole cost and expense, submit to Arclight samples of its uses of the Arclight Trademarks. NDCHealth shall (a) comply with all reasonable requests made by Arclight to maintain the quality standards and goodwill of all products and services containing the Arclight Trademarks sold or provided by NDCHealth in keeping with Arclight’s use of the Arclight Trademarks prior to the execution of this Agreement and (b) consult with Arclight regarding the maintenance of such quality standards and goodwill. NDCHealth agrees that services and products provided in connection with the Arclight Trademarks shall be of high quality, reflecting the prestige of the Arclight Trademarks and maintaining Arclight’s image at the same level and prestige as heretofore maintained.

(c) NDCHealth shall be solely responsible for ensuring that all products and services containing the Arclight Trademarks sold or provided by NDCHealth comply with all applicable laws and regulations and have received any required governmental approvals.

(d) All uses of the Arclight Trademarks by NDCHealth, and all goodwill generated by such uses, shall inure to the benefit of Arclight.

(e) NDCHealth shall affix or cause to be affixed to all uses of the Arclight Trademarks such trademark or service mark notices as may be supplied by Arclight or as may otherwise be reasonably directed by Arclight.

(f) NDCHealth shall not at any time contest Arclight’s right, title or interest in the Arclight Trademarks or, at any time during the term of this Agreement or after the expiration or termination hereof, use, register or apply for any trade name, domain name or any other name, mark or trade dress that is the same as or confusingly similar to or which dilutes any of the Arclight Trademarks.

7

2.9 Infringement.

(a) NDCHealth shall promptly notify the Coordinating Committee in the event NDCHealth determines that any Arclight Trademark or Arclight Technology is being infringed, misappropriated, violated or adversely affected by any unauthorized or unlawful use by any third party (each, a “Potential Infringement”). The Coordinating Committee shall then meet as soon as reasonably practicable to discuss such Potential Infringement.

(b) In the event both NDCHealth and Arclight elect to take action to prevent such Potential Infringement and to prosecute the Person(s) responsible therefor, then the parties shall cooperate in good faith with respect thereto and share equally the costs thereof and all recoveries therefrom (except to the extent otherwise agreed by the parties).

(c) In the event Arclight, but not NDCHealth, elects to take action to prevent such Potential Infringement and to prosecute the Person(s) responsible therefor, then all costs thereof shall be borne by Arclight, and all recoveries therefrom shall be the sole and exclusive property of Arclight. NDCHealth shall, upon the request of and at the cost of Arclight, assist Arclight to the extent reasonably necessary in any action taken pursuant to this Section 2.9(c).

(d) In the event NDCHealth, but not Arclight, elects to take action to prevent such Potential Infringement and to prosecute the Person(s) responsible therefor, then all costs thereof shall be borne by NDCHealth, and all recoveries therefrom shall be the sole and exclusive property of NDCHealth. Arclight shall, upon the request of and at the cost of NDCHealth, assist NDCHealth to the extent reasonably necessary in any action taken pursuant to this Section 2.9(d). Notwithstanding the foregoing, NDCHealth shall not take any action pursuant to this Section 2.9(d) unless and until it delivers to Arclight written advice of outside counsel that the Potential Infringement is reasonably likely to materially impair NDCHealth’s rights under this Agreement.

(e) Notwithstanding anything to the contrary set forth in this Section 2.9, NDCHealth shall not settle any suits or actions in any matter relating to a Potential Infringement or any of the Licensed Items without obtaining the prior written consent of Arclight, which consent shall not be unreasonably withheld or delayed. Arclight shall not settle any suits or actions in any manner relating to a Potential Infringement or any of the Licensed Items without the prior written consent of NDCHealth, which consent shall not be unreasonably withheld or delayed.

3. COMPOSITION OF ARCLIGHT DATA.

3.1 Arclight Members. Arclight hereby warrants to NDCHealth, as of the date hereof, that each of the Arclight Members listed on Schedule 3.1 has agreed in writing to continue to provide its Member Data to Arclight royalty-free until December 31, 2013. In addition, during the period from the date hereof until the Closing, Arclight shall use its commercially reasonable efforts to obtain the agreement of each Arclight Member not listed on Schedule 3.1 (excluding the Arclight Members listed on Schedule 8.5(a)) to continue to provide its Member Data to Arclight royalty-free until December 31, 2013. Upon the request of

8

NDCHealth, Arclight shall provide to NDCHealth copies of any documents evidencing the agreements contemplated by this Section 3.1.

3.2 Wal-Mart. During the period from the date hereof until the Closing, Arclight shall in good faith cooperate with NDCHealth in connection with any discussions between NDCHealth and Wal-Mart regarding the continued provision of Wal-Mart’s Member Data to Arclight. In addition, in the event Wal-Mart resigns as an Arclight Member in accordance with the terms of the Agreement To Be Bound, dated as of April 16, 2001 (the “Agreement To Be Bound”), between Arclight and Wal-Mart at any time during the term of this Agreement, then, (a) Arclight shall not terminate Wal-Mart’s Data Contribution Agreement pursuant to Section 4 of the Agreement To Be Bound without NDCHealth’s prior written consent; and (b) NDCHealth shall reimburse Arclight for the cost of any Wal-Mart Member Data provided to Arclight pursuant to Section 3(a) of Wal-Mart’s Data Contribution Agreement (as modified by Section 1(c) of the Agreement To Be Bound) after the date of Wal-Mart’s resignation. Notwithstanding anything else contained herein to the contrary, NDCHealth shall have no obligation to reimburse Arclight for any amounts owed by Arclight to Wal-Mart pursuant to Section 3(a)(ii) of Wal-Mart’s Data Contribution Agreement (as modified by Section 1(c) of the Agreement To Be Bound).

3.3 Waiver of Certain Rights. With respect to the period of time beginning at the Closing and continuing until any termination or expiration of this Agreement, Arclight hereby waives its rights to require NDCHealth to comply with Sections 8.4(a) and 8.4(c) of that certain Asset Purchase Agreement, dated as of May 29, 2002, between NDCHealth and Arclight (and Arclight hereby acknowledges and agrees that any failure by NDCHealth to comply therewith as contemplated hereby shall not constitute a breach or default thereof by NDCHealth).

4. TRANSMISSION OF ARCLIGHT DATA.

4.1 Security. In connection with its use of the Arclight Data hereunder, NDCHealth shall implement the security measures set forth on Exhibit F, and such other measures as may be necessary for NDCHealth to comply with applicable laws and regulations. In addition, upon the request of Arclight or any Arclight Member (but no more frequently than once per quarter, regardless of who requests it), NDCHealth shall, at its sole cost and expense, engage an independent third party to perform a security audit with respect to NDCHealth’s use of Arclight Data. Arclight and any Arclight Member may participate in any such audit and shall hold all Confidential Information and Trade Secrets of NDCHealth obtained during any such audit in confidence, except to the extent reasonably necessary for Arclight or any Arclight Member to enforce its rights under this Agreement or as otherwise required to be disclosed by law. Arclight or any Arclight Member shall give NDCHealth at least five (5) business days advance written notice of any requested audit. The parties shall cooperate in the conduct of the audit, and Arclight and any Arclight Member shall comply with the reasonable security procedures of NDCHealth in connection therewith. Any such audit shall be conducted during normal business hours and in a manner that does not interfere unreasonably with NDCHealth’s operations.

4.2 Quality Control. Arclight hereby represents and warrants to NDCHealth that, as of the date hereof, Exhibit G sets forth the quality control procedures applicable to each Arclight Member with respect to the Member Data it provides.

9

5. DATA CONTRIBUTION AGREEMENTS. The parties hereto hereby acknowledge that Arclight has certain obligations pursuant to the Data Contribution Agreements to de-identify and aggregate the Member Data it receives pursuant to such agreements. In connection with the transactions contemplated by this Agreement, Arclight hereby authorizes, empowers and engages NDCHealth to, and NDCHealth agrees to, encrypt all source and patient identification data embedded in all Member Data received by it hereunder from any Arclight Member and aggregate all such Member Data with the Member Data received by it hereunder from other Arclight Members (provided NDCHealth shall also have the right to aggregate all such Arclight Data with data received by it from other sources in accordance with the terms of this Agreement).

6. COORDINATING COMMITTEE.

6.1 General. The parties hereto shall establish and, during the term of this Agreement, maintain a “Coordinating Committee” to periodically review the relationship between the parties and their respective performance of this Agreement, all as contemplated by this Section 6.

6.2 Composition of Coordinating Committee. The Coordinating Committee shall be comprised of the managers of Arclight (each such manager an “Arclight Representative” and, together, the “Arclight Representatives”) and at least three (3) representatives of NDCHealth (each an “NDCHealth Representative” and, together, the “NDCHealth Representatives”), and each party may change its representatives on the Coordinating Committee on an annual basis (an “Annual Term”) or as otherwise agreed by the parties; provided, that, if any Arclight Representative or any NDCHealth Representative resigns voluntarily or is otherwise unable to serve, the party appointing such representative shall designate a replacement therefor to serve for the remainder of the then-applicable Annual Term; provided, further, that the Chief Executive Officer of NDCHealth shall be an NDCHealth Representative during each and every Annual Term. The initial chairperson of the Coordinating Committee shall be Brendan A. Ford, who shall, among other things, facilitate and organize the First Committee Meeting (as defined in Section 6.3).

6.3 Meetings. The Coordinating Committee shall meet on a quarterly basis to review the prior quarter’s activities and royalties (as provided in Section 8.3), to discuss activities in future periods and to consider such other matters as may be reasonably requested by a majority of the Arclight Representatives or a majority of the NDCHealth Representatives. At the last quarterly meeting during each Fiscal Year, NDCHealth shall make a presentation to the Coordinating Committee regarding its operating plan with respect to NDCHealth Products for the following Fiscal Year. The first meeting of the Coordinating Committee shall be held within ninety (90) days after the Closing (the “First Committee Meeting”), and, at such meeting, the Coordinating Committee shall adopt appropriate procedures to govern the conduct of its meetings.

6.4 Approval Rights. Notwithstanding anything else contained herein to the contrary, NDCHealth shall not commingle, combine, aggregate or disaggregate any Arclight Data in any Non-Core Product or R&C Studies product suite offered for license or sale by NDCHealth to any third party without the prior approval of a majority of the Arclight Representatives then serving

10

on the Coordinating Committee, either in writing or at a duly convened meeting of the Coordinating Committee.

7. OTHER AGREEMENTS. The Data Delivery Agreement shall not be affected by this Agreement and shall continue in full force and effect according to its terms; provided, however, that at the Closing, the parties shall enter into an amendment to the Data Delivery Agreement (the “DDA Amendment”). The DDA Amendment shall provide that: (a) in the event this Agreement is still in effect at the end of the Initial Term (as such term is defined in the Data Delivery Agreement, i.e., May 29, 2005), the term of the Data Delivery Agreement shall be extended to be co-terminus with this Agreement; (b) for a period of three (3) years after the Closing, Arclight shall continue to pay to NDCHealth in cash all fees owed by Arclight to NDCHealth pursuant to Section 5.1 of the Data Delivery Agreement; (c) for all years subsequent to the third anniversary of the Closing, Arclight shall pay no such fees to NDCHealth, and NDCHealth instead shall reduce the royalties it pays to Arclight pursuant to Section 8.3 hereof, by an amount equal to the amount Arclight otherwise would be required to pay to NDCHealth pursuant to Section 5.1 of the Data Delivery Agreement; (d) notwithstanding anything in this Agreement to the contrary, beginning with NDCHealth’s Fiscal Year 2005 and continuing with respect to each Fiscal Year thereafter, Arclight shall not be required to pay (or be deemed to pay as contemplated by subsection (c) above) any fees to NDCHealth pursuant to Section 5.1 of the Data Delivery Agreement to the extent any such fees would exceed the royalties paid by NDCHealth to Arclight pursuant to Section 8.3 hereof with respect to such Fiscal Year; (e) the timing of payments to be made pursuant to the Data Delivery Agreement will be changed from monthly to quarterly beginning with NDCHealth’s 2005 Fiscal Year; and (f) notwithstanding the provisions of Section 2.1 of the Data Delivery Agreement, NDCHealth shall not have the right after the Closing to add any new “NDCHealth Data Providers” (as defined in the Data Delivery Agreement), without the prior written consent of Arclight.

8. COMPENSATION.

8.1 Initial Exclusivity Fee. At the Closing, NDCHealth shall issue to Arclight as the “Initial Exclusivity Fee” a number of shares of unregistered NDCHealth Common Stock equal to the quotient resulting from (a) $10,000,000, divided by (b) the average closing price of NDCHealth Common Stock for the twenty (20) trading days immediately preceding the third trading day prior to the Closing (the “Average Closing Price”). In addition, at the Closing NDCHealth and Arclight shall enter into: (y) the Registration Rights Agreement, pursuant to which NDCHealth shall grant, with respect to the shares of NDCHealth Common Stock to be received by Arclight pursuant to this Agreement or upon its exercise of the Warrant Agreement: (i) piggyback registration rights and (ii) one (1) demand registration, which shall only be exercisable if Arclight terminates this Agreement pursuant to Section 18.2 or 18.3 within the nine (9) month period beginning as of the Closing; and (z) the Warrant Agreement, pursuant to which NDCHealth shall grant to Arclight the right to purchase, in exchange for an aggregate exercise price of $10,000,000, the same number of shares of NDCHealth Common Stock as are issued to Arclight at the Closing as the Initial Exclusivity Fee pursuant to this Section 8.1; provided, however, Arclight shall not have the right to exercise its purchase rights under the Warrant Agreement until the third anniversary of the Closing, and the Warrant Agreement shall expire on the fifth anniversary of the Closing. As soon as reasonably practicable after the Closing, NDCHealth shall, to the extent required by the rules of the NYSE, file with the NYSE a

11

listing application or other notice as may be required with respect to the shares of NDCHealth Common Stock issued to Arclight at the Closing as the Initial Exclusivity Fee and use its commercially reasonable efforts to obtain approval for the listing of such shares.

8.2 Additional Contingent Exclusivity Fee. Provided that each of the following conditions is satisfied on or before the third anniversary of the Closing, then on such date, NDCHealth shall issue or pay (as the case may be) to Arclight the “Additional Contingent Exclusivity Fee” (as hereinafter defined):

(a) the term of this Agreement is extended until December 31, 2013, pursuant to Section 18.1; and

(b) Wal-Mart has not resigned as an Arclight Member in accordance with the terms of the Agreement To Be Bound.

For purposes of this Agreement, and subject to Section 8.5, the “Additional Contingent Exclusivity Fee” shall mean, at Arclight’s election: (y) a number of unregistered shares of NDCHealth Common Stock equal to the quotient resulting from (i) $10,000,000, divided by (ii) the average closing price for NDCHealth Common Stock for the twenty (20) trading days immediately preceding the third trading day prior to December 31, 2006; or (z) a cash fee in the amount of $10,000,000 (such amount to be paid via wire transfer of immediately available funds to the bank account specified by Arclight and in lieu of any shares of NDCHealth Common Stock). Notwithstanding the foregoing, in the event Arclight elects to receive the Additional Contingent Exclusivity Fee pursuant to subsection (y) above, Arclight shall deliver to NDCHealth an investment letter in form reasonably acceptable to NDCHealth addressing the same matters set forth in Section 11.4, but with respect to the NDCHealth Common Stock to be issued as the Additional Contingent Exclusivity Fee. As soon as reasonably practicable after the issuance thereof, NDCHealth shall to the extent required by the rules of the NYSE, file with NYSE a listing application or other notice as may be required with respect to any shares of NDCHealth Common Stock issued to Arclight as the Additional Contingent Exclusivity Fee and use its commercially reasonable efforts to obtain approval for the listing of such shares.

8.3 Royalties. NDCHealth shall also pay to Arclight royalties calculated and paid in accordance with Exhibit H.

8.4 Audit Rights Regarding Royalties. Arclight shall have the right, (i) once per calendar year and (ii) at any such time as Arclight reasonably believes that NDCHealth has violated Section 8.3 of this Agreement, at its sole cost and expense, to engage an independent accounting firm to audit NDCHealth’s applicable books, records and computer systems for verification of the royalties paid by NDCHealth pursuant to Section 8.3 hereof. Arclight and its auditors shall hold all Confidential Information and Trade Secrets of NDCHealth obtained during any such audit in confidence, except to the extent reasonably necessary for Arclight to enforce its rights under this Agreement or as otherwise required to be disclosed by law. Arclight shall give NDCHealth at least five (5) business days advance written notice of any requested audit. The parties shall cooperate in the conduct of the audit, and Arclight and its auditors shall comply with the reasonable security procedures of NDCHealth in connection therewith. Any such audit shall be conducted during normal business hours and shall not interfere unreasonably with

12

NDCHealth’s operations. If, as a result of any such audit, it is determined that NDCHealth has underpaid Arclight, NDCHealth shall promptly pay the past due amount, plus interest accruing on such amount from the date such payment became due until the time such payment is made (the interest rate to be determined by the prime rate as published in the Wall Street Journal on the date such payment became due). If any such audit reveals NDCHealth underpaid Arclight by an amount greater than or equal to five percent (5%) of the amount owed for the period audited, then NDCHealth shall reimburse Arclight for its reasonable out-of-pocket costs associated with such audit.

8.5 Adjustment Based on Member Data. In the event any Arclight Member, other than any Arclight Member set forth on Schedule 8.5(a), ceases to provide (on a royalty-free basis) its Member Data to Arclight for inclusion in the Arclight Data prior to the third anniversary of the Closing, then: (a) Arclight shall, at its election, either (I) pay to NDCHealth in immediately available funds, within thirty (30) days thereafter an amount equal to the “Applicable Percentage” (as defined below) of $10,000,000 or (II) transfer to NDCHealth (together with stock powers duly executed in blank), within 30 days thereafter an amount equal to the Applicable Percentage of the shares of NDCHealth Common Stock received by Arclight pursuant to Section 8.1(a); and (b) the references to $10,000,000 (or such lesser amount as may have been previously determined pursuant hereto) contained in Sections 8.2 (y)(i) and 8.2(z) shall be changed to an amount equal to (i) $10,000,000 (or such lesser amount as may have been previously determined pursuant hereto) less (ii) an amount equal to the Applicable Percentage of $10,000,000. Notwithstanding the foregoing, no adjustment pursuant to subsections (a) and (b) above shall be made in the event an Arclight Member ceases to provide (on a royalty-free basis) its Member Data to Arclight because NDCHealth refused for any reason to extend the term of, or enter into a replacement agreement with respect to (which extension or replacement may be on new or different terms), any written agreement in effect as of the date hereof between NDCHealth and such Arclight Member (or, if applicable, a third party aggregator) pursuant to which NDCHealth purchases prescription data generated by such Arclight Member (either directly or through such third party aggregator) comparable to the Member Data. For purposes of this Agreement, “Applicable Percentage” shall mean, with respect to any Arclight Member: (x) in the event Wal-Mart has not then previously resigned as an Arclight Member in accordance with the Agreement To Be Bound, the current applicable percentage with respect to such Arclight Member set forth on Part I of Schedule 8.5(b); and (z) in the event Wal-Mart has then previously resigned as an Arclight Member in accordance with the Agreement To Be Bound, the applicable percentage (excluding Wal-Mart) with respect to such Arclight Member set forth on Part II of Schedule 8.5(b). Notwithstanding anything else contained herein to the contrary, but subject to Section 18.3(b), the remedy provided pursuant to this Section 8.5 shall be NDCHealth’s sole and exclusive remedy in the event an Arclight Member ceases to provide its Member Data to Arclight on a royalty-free basis for any reason at any time after the date hereof. Except as set forth in Section 3.2(b), Arclight shall not be required to purchase data from an Arclight Member to comply with its obligations hereunder.

9. COMPLIANCE WITH LAWS. In the performance of this Agreement, each party shall comply with all applicable federal, state and local laws, rules and regulations, including the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”).

13

10. NDCHEALTH WARRANTIES. NDCHealth represents and warrants to Arclight on the date hereof as follows:

10.1 Power and Authority. (a) It is duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) It has full corporate power and authority to execute, deliver and perform this Agreement. (c) This Agreement, once validly executed by both parties, is a valid and binding obligation of NDCHealth, enforceable in accordance with its terms. (d) The execution, delivery and performance of this Agreement by NDCHealth shall not result in any violation of any formation or governing documents of NDCHealth or any applicable law, rule, regulation, order, writ, judgment, decree of any court or governmental or regulatory agency or authority, or any agreement, document or instrument to which NDCHealth is a party, by which it is bound or to which it is subject. (e) All shares of NDCHealth Common Stock issued hereunder, when issued in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and nonassessable.

10.2 Rights In NDCHealth Products. (a) All Core Products perform in accordance with all applicable laws and regulations in existence as of the date hereof, except to the extent any nonperformance would not materially impair NDCHealth’s ability to meet the Net Revenue minimum thresholds set forth on Exhibit H. (b) No Core Product infringes, misappropriates or violates any rights or claimed rights of any third party, including copyrights, patents, trademarks, service marks, trade secrets and other proprietary rights. (c) As of the Closing, it will hold or have obtained, as applicable, all licenses, consents and authorizations required to perform its obligations under this Agreement.

10.3 SEC Documents. NDCHealth has made available to Arclight (a) its annual report on Form 10-K for its fiscal year ended May 30, 2003, (b) its quarterly report on Form 10-Q for its quarter ended August 29, 2003, (c) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of NDCHealth since May 30, 2003, and (d) all of its other reports, statements, schedules and registration statements filed with the SEC since May 30, 2003 (all of the documents in subsections (a) - (d) being referred to herein collectively as the “SEC Documents”). As of its filing date, each SEC Document complied in all material respects with the Securities Act or Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder. None of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent any such misstatement or omission has been superseded by a subsequent report or other document filed with the SEC prior to the date hereof.

10.4 Financial Statements. As of the applicable filing date, the consolidated financial statements (including, in each case, any related notes) of NDCHealth included in the SEC Documents complied as to form and substance in all material respects with applicable accounting requirements of the SEC and the published rules and regulations of the SEC or other applicable SEC or NYSE rules and regulations with respect thereto. Such financial statements were prepared in accordance with generally accepted accounting principles of the United States (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent that they may include footnotes, may be condensed or

14

summary statements) and fairly presented in all material respects, the financial position of NDCHealth as of the respective dates thereof and the results of operations and cash flows for the periods indicated (subject, in the case of unaudited statements, to normal year-end audit adjustments).

10.5 Absence of Material Adverse Effect. Since August 29, 2003, no Material Adverse Effect has occurred or exists and to NDCHealth’s knowledge, no event or circumstance has occurred that, with notice or passage of time or both, is reasonably likely to result in a Material Adverse Effect with respect to NDCHealth.

10.6 HSR. NDCHealth is its own sole “ultimate parent entity” (as defined in 16 C.F.R. § 801.1(a)(3)). The fair market value of the assets deemed to be acquired under the HSR Act pursuant to this Agreement have, within the sixty (60) day period prior to the Closing, been determined in good faith to be $50 million or less, by the Board of Directors of NDCHealth or by an entity delegated that function by such Board of Directors.

11. ARCLIGHT WARRANTIES. Arclight represents and warrants to NDCHealth as of the date hereof as follows:

11.1 Power and Authority. (a) It is duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) It has full limited liability company power and authority to execute, deliver and perform this Agreement; (c) This Agreement, once validly executed by both parties, is a valid and binding obligation of Arclight, enforceable in accordance with its terms; and (d) Except as set forth on Schedule 11.1, the execution, delivery and performance of this Agreement by Arclight shall not result in any violation of any formation or governing document of Arclight or any applicable law, rule, regulation, order, writ, judgment, decree of any court or governmental or regulatory agency or authority, or any agreement, document or instrument to which Arclight is a party, by which it is bound or to which it is subject.

11.2 Data Contribution Agreements. (a) Exhibit D contains a correct and complete list of all Data Contribution Agreements. (b) Except as set forth on Schedule 11.2, each Data Contribution Agreement is in full force and effect, is valid and enforceable in accordance with its terms, and constitutes a legal and binding obligation of each party thereto. (c) Arclight has neither given nor received any notice of default, termination or partial termination under any Data Contribution Agreement to which an Arclight Member is a party, and, except as set forth on Schedule 11.2, there is no existing or continuing default by Arclight or, to its knowledge, any other party in the performance of any obligation under any such Data Contribution Agreement which would give rise to any right to terminate such Data Contribution Agreement. (d) Arclight has complied with the provisions of each Data Contribution Agreement, except to the extent its failure to comply would not give rise to any right to terminate such Data Contribution Agreement.

11.3 Rights in Licensed Items. (a) All Licensed Items perform in accordance with all applicable laws and regulations in existence as of the date hereof, except to the extent any nonperformance would not have a material adverse effect on NDCHealth’s ability to use the Licensed Items or give rise to a material obligation of NDCHealth. (b) No Licensed Item

15

infringes, misappropriates or violates any rights or claimed rights of any third party enforceable in the United States, including copyrights, patents, trademarks, service marks, trade secrets and other proprietary rights. (c) No Licensed Item contains (i) any software code that is designed to be capable of disrupting, disabling or self-limiting the computer hardware or software associated with performing, or used in connection with, the Licensed Items, including locks, time bombs, and trap doors, (ii) any malicious software code that is designed to disrupt, cause damage to or deplete the resources of any computer hardware or software associated with performing the Licensed Items by self-duplicating, altering any files or otherwise, including viruses, Trojan horses, or worms, or (iii) any hidden communication capacity not reflected in this Agreement, except in the case of subsection (i), (ii) or (iii) above, to the extent it would not have a material adverse effect on NDCHealth’s ability to use the Licensed Items or give rise to a material obligation of NDCHealth. (d) Except as set forth on Schedule 11.3(d), as of the Closing, it will hold or have obtained, as applicable, all licenses, consents and authorizations required to perform its obligations under this Agreement.

11.4 Investment Intent. Arclight understands and acknowledges that the shares of NDCHealth Common Stock to be issued to it as the Initial Exclusivity Fee (the “Initial NDCHealth Shares”): (a) will not have been registered under the Securities Act or under any state securities laws; and (b) must be held indefinitely, unless and until subsequently registered or an exemption from registration becomes available (and the certificate(s) representing such shares shall bear an appropriate restrictive legend noting the same). Arclight is acquiring the Initial NDCHealth Shares for its own account, for investment purposes only, and not with a view to any distribution or resale thereof. Arclight has received the SEC Documents and all other information about NDCHealth requested by it in order to evaluate the merits and risks inherent in holding the Initial NDCHealth Shares. Arclight is a sophisticated investor with knowledge and experience in financial matters, is capable of evaluating the merits and risks of an investment in the Initial NDCHealth Shares, has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement, is able to bear the economic risk of its investment in the Initial NDCHealth Shares, is presently able to afford the complete loss of such investment, and is an “accredited investor” (as defined in Rule 501 of Regulation D promulgated under the Securities Act).

12. EXCLUSION OF OTHER WARRANTIES. THE WARRANTIES CONTAINED IN SECTIONS 10 AND 11 ABOVE ARE IN LIEU OF ANY AND ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL (INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY OF THE DATA, TITLE AND NON-INFRINGEMENT) OF EITHER PARTY HERETO. THIS DISCLAIMER SHALL NOT AFFECT OR DIMINISH IN ANY WAY THE OBLIGATION OF EITHER PARTY TO COMPLY WITH THE PRIVACY AND SECURITY REQUIREMENTS ENACTED BY THE DEPARTMENT OF HEALTH AND HUMAN SERVICES UNDER HIPAA.

16

13. INDEMNIFICATION.

13.1 Indemnification by NDCHealth. NDCHealth shall indemnify, defend and hold Arclight and its Affiliates, and their respective officers, directors, managers, agents and employees, harmless from and against any and all liabilities, damages, losses, expenses, claims, demands, suits, fines or judgments, including reasonable attorneys’ fees, and costs and expenses incidental thereto, which may be suffered by, accrued against, charged to or recoverable from Arclight or any of its Affiliates, or any of their respective officers, directors, managers, agents or employees, arising out of or resulting from: (a) the marketing, license or sale of NDCHealth Products (excluding any matter for which Arclight is providing indemnification hereunder); (b) NDCHealth’s use of the Licensed Items, other than as permitted by this Agreement; (c) any breach of any representation, warranty, covenant or agreement in this Agreement by NDCHealth (other than any willful breach for which NDCHealth shall indemnify Arclight in accordance with subsection (e) below); (d) NDCHealth’s violation of any applicable federal, state, local or other laws, regulations, rules, ordinances or codes (including any violation of HIPAA or similar state privacy laws) in the performance of this Agreement, except to the extent caused by Arclight or any Arclight Member (but only to the extent such violation is caused by the failure of any Arclight Member to comply with the terms of its respective Data Contribution Agreement); or (e) the gross negligence or willful misconduct of NDCHealth.

13.2 Indemnification by Arclight. Arclight shall indemnify, defend and hold NDCHealth and its Affiliates, and their respective officers, directors, managers, agents and employees, harmless from and against any and all liabilities, damages, losses, expenses, claims, demands, suits, fines or judgments, including reasonable attorneys’ fees, and costs and expenses incidental thereto, which may be suffered by, accrued against, charged to or recoverable from NDCHealth or any of its Affiliates, or any of their respective officers, directors, managers, agents or employees, arising out of or resulting from: (a) any breach of any representation, warranty, covenant or agreement in this Agreement by Arclight (other than any willful breach for which Arclight shall indemnify NDCHealth in accordance with subsection (d) below); (b) a third party claim that Arclight has insufficient rights to provide any Arclight Data to NDCHealth in the manner required by this Agreement and/or to allow NDCHealth to use the same as permitted hereunder; (c) Arclight’s violation of any applicable federal, state, local or other laws, regulations, rules, ordinances or codes in the performance of this Agreement; or (d) the gross negligence or willful misconduct of Arclight.

13.3 Indemnification Process. The indemnification obligations hereunder shall require that promptly after either party receives a threat of any such action, or a notice of the commencement or filing of any action which may be subject to the provisions of this Section 13, NDCHealth or Arclight, as applicable, shall notify the indemnifying party and tender the matter to the indemnifying party for resolution or litigation, at the indemnifying party’s sole cost and expense. The failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 13, except to the extent it has been materially prejudiced by such failure. The indemnifying party shall keep the other party reasonably apprised of the continuing status of the claims or actions covered by this Section, including any lawsuits resulting therefrom, and shall permit the other party, upon its written request, to participate (at the indemnified party’s own expense) in the defense or settlement of any such claim or action. Each indemnified party, as a condition of the indemnity obligations contained in this Section 13 shall

17

cooperate with the indemnifying party in the defense and settlement of any such claim or action. In any claim or action, the defense of which is controlled by the indemnifying party, the indemnifying party shall not, without the indemnified party’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned), compromise or settle such claim if: (a) such compromise or settlement would: (i) impose an injunction or other equitable relief upon the indemnified party (except with regard to the use of any infringing intellectual property); and/or (ii) result in any finding, admission or the like with respect to the indemnified party or its business, assets or properties; or (b) such compromise or settlement does not include a release of the indemnified party (fully funded under this Section 13 by the indemnifying party) from all liability relating to such claim for which the indemnified party is entitled to be indemnified.

14. DAMAGES AND LIMITATION OF LIABILITY.

14.1 EXCEPT FOR CLAIMS ARISING OUT OF A BREACH OF CONFIDENTIALITY PROVIDED FOR IN ARTICLE 15 AND FOR INDEMNIFICATION PURSUANT TO SECTIONS 13.1(a), 13.1(b), 13.1(e), 13.2(b), or 13.2(d), IN NO EVENT SHALL NDCHEALTH OR ARCLIGHT BE LIABLE FOR ANY PUNITIVE, INCIDENTAL, CONSEQUENTIAL, OR ANY OTHER INDIRECT LOSS OR DAMAGE, INCLUDING LOST PROFITS, ARISING OUT OF THIS AGREEMENT OR ANY OBLIGATION RESULTING THEREFROM, WHETHER IN AN ACTION FOR OR ARISING OUT OF ANY CAUSE WHATSOEVER, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT INCLUDING NEGLIGENCE, STRICT LIABILITY OR OTHERWISE. NO ACTION OR PROCEEDING HEREUNDER OR RELATING HERETO MAY BE COMMENCED MORE THAN TWO YEARS AFTER THE DATE THE INJURED PARTY BECOMES AWARE OF THE CAUSE OF ACTION.

14.2 EXCEPT FOR (a) CLAIMS ARISING OUT OF A BREACH OF CONFIDENTIALITY PROVIDED FOR IN SECTION 15 AND FOR INDEMNIFICATION PURSUANT TO SECTIONS 13.1(a), 13.1(b), 13.1(c) (BUT ONLY WITH RESPECT TO A BREACH OF THE REPRESENTATIONS CONTAINED IN SECTION 10.6)), 13.1(d), 13.1(e), 13.2(b), 13.2(c), and 13.2(d), AND (b) ANY PAYMENT OBLIGATIONS AS SET FORTH IN THIS AGREEMENT (OTHER THAN PURSUANT TO SECTION 13), EACH OF NDCHEALTH’S AND ARCLIGHT’S CUMULATIVE AGGREGATE LIABILITY ARISING UNDER THIS AGREEMENT, FOR ANY AND ALL CLAIMS, LOSSES, DAMAGES, OR EXPENSES, FROM ANY CAUSE WHATSOEVER, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT OR TORT INCLUDING NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, SHALL BE LIMITED TO DIRECT, PROVEN DAMAGES IN AN AMOUNT NOT TO EXCEED TWO MILLION DOLLARS ($2,000,000); PROVIDED, HOWEVER, ARCLIGHT SHALL BE LIABLE FOR UP TO AN ADDITIONAL EIGHT MILLION DOLLARS ($8,000,000) OF DAMAGES WITH RESPECT TO ANY CLAIM UNDER SECTION 13.2(a) FOR ANY BREACH OF SECTION 11.3(b); PROVIDED FURTHER, NDCHEALTH SHALL ONLY BE ENTITLED TO OFFSET ANY SUCH DAMAGES AGAINST THE ROYALTIES OWED BY IT PURSUANT TO SECTION 8.3.

18

14.3 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY DAMAGES, HOWEVER DESIGNATED, FOR FAILURE TO PERFORM UNDER THIS AGREEMENT TO THE EXTENT SUCH FAILURE TO PERFORM WAS CAUSED BY ANY ACT OR OMISSION TO ACT BY THE OTHER PARTY OR SUCH OTHER PARTY’S EMPLOYEES, AGENTS, REPRESENTATIVES OR MEMBERS (IN THEIR CAPACITY AS SUCH).

15. CONFIDENTIALITY.

15.1 Confidentiality Obligations. In recognition of the other party’s need to protect its legitimate business interests, each party hereto hereby covenants and agrees that it shall regard and treat each item of information or data constituting a Trade Secret or Confidential Information of the other party as strictly confidential and wholly owned by such other party and that it will not use, distribute, disclose, reproduce or otherwise communicate any such item of information or data to any Person for any purpose other than in connection with its performance of this Agreement (and in accordance with the terms of this Article 15). The covenant contained in the preceding sentence shall apply: (i) with respect to Confidential Information, at all times during the term of this Agreement and for a period of three (3) years thereafter; and (ii) with respect to Trade Secrets, at all times such data or information constitutes a “trade secret” under applicable law.

15.2 Permitted Disclosure. Each party may disclose Confidential Information and Trade Secrets of the other party to those of its officers, directors, employees, agents, independent contractors and advisors who need to know such Confidential Information or Trade Secrets in order to enable such party to perform its obligations under this Agreement or any other document or instrument executed in connection with the consummation of the transactions contemplated hereby. Notwithstanding anything in this Agreement to the contrary, Arclight shall be permitted to disclose this Agreement and all matters related hereto to the Arclight Members; provided, however: (a) Arclight shall not disclose any Confidential Information or Trade Secrets of NDCHealth regarding any agreement between NDCHealth and an Arclight Member to any other Arclight Member; and (b) Arclight shall not disclose any Confidential Information or Trade Secrets of NDCHealth to any Arclight Member unless and until such Arclight Member has agreed in writing to maintain the confidentiality thereof on terms no less favorable than those contained in this Section 15. Each party shall be responsible for ensuring the continued confidentiality of all Trade Secrets and Confidential Information of the other party known by, disclosed or made available to such of its officers, directors, employees, agents, independent contractors and advisors, including, without limitation, instructing its officers, employees, independent contractors, agents and advisors to maintain the confidentiality of such Confidential Information and Trade Secrets.

15.3 Required Disclosure. Subject to Section 15.4 below, if a party becomes legally compelled to disclose any Confidential Information or Trade Secrets of the other party (whether by judicial or administrative order, applicable law, rule or regulation, or otherwise), such party will use its reasonable efforts to provide the other party with prior notice thereof so that the other party may seek a protective order or other appropriate remedy to prevent such disclosure; provided, however, that such party will use its reasonable efforts (at the other party’s expense) to maintain the confidentiality of such Confidential Information and Trade Secrets. If such protective order or other remedy is not obtained prior to the time such disclosure is required,

19

such party will only disclose that portion of such Confidential Information and Trade Secrets which it is legally required to disclose.

15.4 Tax Treatment and Tax Structure. Notwithstanding anything to the contrary set forth herein, except as reasonably necessary to comply with applicable securities laws, any parties to the transactions contemplated by this Agreement (referred to in this paragraph as the “Transaction”) (and each employee, representative, or other agent of such parties) may disclose to any and all persons, without limitation of any kind, the Tax Treatment and Tax Structure of the Transaction and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such Tax Treatment and Tax Structure. For purposes of this provision, “Tax Treatment” is strictly limited to the purported or claimed U.S. federal income tax treatment of the Transaction contemplated by this Agreement and “Tax Structure” is strictly limited to any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the Transaction, and neither term includes information relating to the identity of any party to the Transaction or any of such party’s representatives, the existence and status of negotiations between the parties, or financial, business, legal or other information regarding a party (or any of its Representatives), to the extent not related to the Tax Treatment or Tax Structure of the Transaction. This authorization of tax disclosure is retroactively effective to the commencement of the first discussions between the parties regarding the Transaction contemplated herein. These provisions are meant to be interpreted so as to prevent the Transaction from being treated as offered under “conditions of confidentiality” within the meaning of the Internal Revenue Code and the Treasury Regulations thereunder.

15.5 Return of Information. Upon termination of this Agreement, or promptly upon receipt of written notice from the other party, each party shall return to the other party all copies, versions or abstracts of written or descriptive materials of any kind that contain or discuss any Confidential Information or Trade Secrets of such other party, and the confidentiality obligations of this Agreement shall continue in full force and effect.

16. CONDITIONS TO CLOSING.

16.1 Arclight Conditions to Closing. The obligations of Arclight under this Agreement are subject to the fulfillment prior to or at the Closing of each of the following conditions:

(a) Each of the representations and warranties of NDCHealth contained in this Agreement that is qualified by materiality shall be true and correct on and as of the Closing as if made on such date and each of the representations and warranties that is not so qualified shall be true and correct in all material respects on and as of the Closing as if made on and as of such date;

(b) NDCHealth shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; and

(c) The Managers of Arclight shall have approved this Agreement and the transactions contemplated hereby.

20

16.2 NDCHealth Conditions to Closing. The obligations of NDCHealth under this Agreement are subject to the fulfillment prior to or at the Closing of each of the following conditions:

(a) Each of the representations and warranties of Arclight contained in this Agreement that is qualified by materiality shall be true and correct on and as of the Closing as if made on such date and each of the representations and warranties that is not so qualified shall be true and correct in all material respects on and as of the Closing as if made on and as of such date;

(b) Arclight shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing;

(c) The Board of Directors of NDCHealth shall have approved this Agreement and the transactions contemplated hereby;

(d) The Arclight Members (other than any Arclight Member set forth on Schedule 8.5(a)) shall have agreed in writing to continue to provide their respective Member Data to Arclight on a royalty-free basis until December 31, 2013, as contemplated by Section 3.1; and

(e) Arclight shall have obtained all required consents to transfer and assign to NDCHealth the agreements listed on Schedule 16.2 pursuant to the terms of the Transition Agreement.

16.3 Reasonable Efforts. Each party hereto shall use all reasonable efforts to take or cause to be taken all actions and to do or cause to be done all things necessary, proper or advisable to enable the Closing to occur as soon as reasonably practical after the date hereof.

17. CLOSING AND DELIVERIES AT CLOSING.

17.1 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall be held as soon as reasonably practicable (but in any event within five (5) business days) after the satisfaction of the conditions contained in Section 16 on such date and at such time and place as the parties shall mutually agree.

17.2 Arclight Deliveries at Closing. At the Closing, Arclight shall deliver to NDCHealth each of the following, in form and substance reasonably satisfactory to NDCHealth:

(a) The Registration Rights Agreement, duly executed by Arclight.

(b) The Warrant Agreement, duly executed by Arclight.

(c) The Transition Agreement, duly executed by Arclight.

(d) The DDA Amendment, duly executed by Arclight.

21

(e) Any other information, documents or certificates reasonably requested by NDCHealth to give effect to the transactions contemplated hereby.

17.3 NDCHealth Deliveries at Closing. At the Closing, NDCHealth shall deliver to Arclight each of the following, in form and substance reasonably satisfactory to Arclight:

(a) The Initial Exclusivity Fee as contemplated by Section 8.1.

(b) The Registration Rights Agreement, duly executed by NDCHealth.

(c) The Warrant Agreement, duly executed by NDCHealth.

(d) The Transition Agreement, duly executed by NDCHealth.

(e) The DDA Amendment, duly executed by NDCHealth.

(f) Any other information, documents or certificates reasonably requested by Arclight to give effect to the transactions contemplated hereby.

18. TERM AND TERMINATION.

18.1 Term. The term of this Agreement shall commence as of the date hereof and continue until December 31, 2010; provided, however, that the provisions of Section 2 shall not become effective until the Closing; provided, further, the term of this Agreement shall be automatically extended to December 31, 2013, in the event NDCHealth is required to pay aggregate royalties to Arclight pursuant to Section 8.3 in excess of $3,700,000 with respect to the periods ending on or before December 31, 2005.

18.2 Termination for Breach. Either party may terminate this Agreement by delivering a written termination notice to the other party in the event such other party fails to correct or cure any material breach of any covenant or agreement contained herein to be performed by such other party after the Closing within ninety (90) days after its receipt of written notice of such breach from such party.

18.3 Special Termination Rights.

(a) Notwithstanding anything else contained herein to the contrary, in the event (i) NDCHealth materially breaches in an intentional, reckless or grossly negligent manner the provisions contained in Sections 2.4, 5 or 9 (but, with respect to Section 9, only as it relates to a violation of HIPAA or similar state privacy laws and except to the extent caused by Arclight or any Arclight Member), (ii) Arclight does not earn royalties pursuant to Section 8.3 (without regard to any offset thereto or reduction thereof contemplated by this Agreement) in an amount equal to at least $1,000,000 with respect to NDCHealth’s 2005 Fiscal Year or at least $2,000,000 with respect to any Fiscal Year thereafter, or (iii) there is a sale, lease, license, combination or other disposition by NDCHealth of any material asset(s) used in its Information Management Business to any Person not an Affiliate of NDCHealth (whether by sale of stock or assets, merger, consolidation or otherwise) which would adversely affect Net Revenues, then, in each

22

case, Arclight shall have the right to terminate this Agreement upon delivery of a written termination notice to NDCHealth (which, in the case of clause (ii), must be made within 120 days after the end of the applicable Fiscal Year).

(b) Notwithstanding anything else contained herein to the contrary, in the event Arclight is required to pay to NDCHealth at least $5,000,000 in the aggregate pursuant to Section 8.5(a), then NDCHealth shall also have the right to terminate this Agreement upon delivery of a written termination notice to Arclight (which notice must be delivered to Arclight within 120 days after NDCHealth becomes aware thereof).

18.4 Insolvency. Either party may terminate this Agreement by written notice to the other party, effective immediately upon receipt, if the other party (a) shall file a petition in bankruptcy, (b) shall be adjudicated as bankrupt, (c) shall take advantage of the insolvency laws of any jurisdiction to which it is subject, (d) shall make an assignment for the benefit of creditors, (e) shall be voluntarily or involuntarily dissolved, (f) shall admit in writing its inability to pay debts as they come due, or (g) shall have a receiver, trustee or other court officer appointed for its property.

18.5 Early Termination Right. Either party may terminate this Agreement by delivering a written termination notice to the other party in the event the Closing shall not have occurred on or before December 31, 2003; provided, however, a party shall not be entitled to exercise its rights pursuant to this Section 18.5 in the event the failure to close is caused by any breach of this Agreement by such party. If this Agreement is terminated prior to the Closing, neither party shall have any further obligations under this Agreement (other than pursuant to Sections 15 and 20.16), provided that nothing herein shall relieve either party from liability for its willful breach of this Agreement.

18.6 Consequences of Termination. Upon expiration or termination of this Agreement after the Closing:

(a) NDCHealth shall deliver to Arclight copies of all NDCHealth-owned Improvements. With respect to NDCHealth-owned Improvements that are computer code, such Improvements shall be delivered in both source code and object code formats, and together with any related documentation;

(b) Arclight shall be deemed to have exercised the right and license granted by NDCHealth pursuant to Section 2.6 hereof;

(c) Each party hereto shall return the Confidential Information and Trade Secrets of the other party, in accordance with Section 15.5;

(d) NDCHealth shall pay to Arclight all unpaid fees due to Arclight in accordance with the terms hereof; and

(e) The following sections shall survive the termination or expiration of this Agreement for any reason: 2.1 (but only with respect to Arclight Data received prior to the termination of this Agreement), 2.4, 2.6, 2.9, 8.4 (for a period of six months after termination or expiration of this Agreement), 12, 13, 14, 15, 18.6, 19 and 20.

23

provided, that, if the Closing occurs and this Agreement is duly terminated by Arclight pursuant to Sections 18.2, 18.3(a) or 18.4 within nine (9) months thereafter, NDCHealth shall pay to Arclight an amount equal to $3,000,000 in immediately available funds within two (2) business days after such termination.

19. DISPUTE RESOLUTION. Disputes arising under this Agreement shall be resolved as follows:

19.1 Negotiation between Representatives. If the parties hereto are unable to agree on any substantive matter under this Agreement (a “Dispute”), the parties shall attempt to resolve the Dispute promptly by negotiations between the NDCHealth Representatives and the Arclight Representatives for a period of 60 days after notification of a Dispute.

19.2 Preservation of Status Quo; Ongoing Performance. Notwithstanding anything to the contrary set forth herein, neither party shall be required to submit any Dispute regarding the interpretation of any provision of this Agreement, the performance by either party of such party’s obligations under this Agreement or a default hereunder to the mechanism set forth above in connection with any temporary restraining order or other temporary or preliminary relief to preserve the status quo pending final resolution of the Dispute pursuant to this Section 19. Each party agrees to continue performing its obligations under this Agreement pending the resolution of any Dispute that is being resolved hereunder (including if the Dispute relates to the propriety of a termination by a party), unless and until such obligations are terminated or expire in accordance with the provisions of this Agreement.

20. MISCELLANEOUS.

20.1 Notices.

(a) All notices, consents, requests and other communications hereunder shall be in writing and shall be sent by hand delivery, by certified or registered mail (return-receipt requested), or by a recognized national overnight courier service as set forth below:

If to Arclight:	Arclight Systems LLC
	c/o Brendan A. Ford
	Executive Vice President – Corporate Development
	Cardinal Health Inc.
	7000 Cardinal Place
	Dublin, Ohio 43017
with a copy to:	Gary D. Gerstman
	Sidley Austin Brown & Wood LLP
	Bank One Plaza
	10 S. Dearborn Street
	Chicago, Illinois 60603

24

If to NDCHealth:	NDCHealth Corporation
	NDC Plaza
	Atlanta, Georgia 30329-2010
	Attention: Chief Executive Officer
with a copy to:	NDCHealth Corporation
	NDC Plaza
	Atlanta, Georgia 30329-2010
	Attention: General Counsel
and a copy to:	Stephen E. Lewis
	Troutman Sanders LLP
	Bank of America Plaza
	600 Peachtree Street, NE - Suite 5200
	Atlanta, Georgia 30308-2216

(b) Notices delivered pursuant to Section 20.1(a) shall be deemed given: (i) at the time delivered, if personally delivered; (ii) at the time received, if mailed; and (iii) one (1) business day after timely delivery to the courier, if by overnight courier service.

(c) Either party hereto may change the address to which notice is to be sent by written notice to the other party in accordance with this Section 20.1.

20.2 Survival of Representations and Warranties. The representations and warranties of NDCHealth and Arclight in this Agreement (and any claims of breach or misrepresentation with respect thereto) shall survive in full force and effect after the Closing; provided, however, the representations and warranties contained in Sections 10.3, 10.4, 10.5, 11.3(c), 11.3(d) and 11.4 shall only survive for a period of one (1) year after the Closing.

20.3 Entire Agreement; Third-Party Beneficiaries. This Agreement, including all Exhibits and Schedules hereto (all of which are incorporated herein by this reference), contains the entire agreement and understanding concerning the subject matter hereof between the parties and specifically supersedes any other agreement or understanding among the parties related to the subject matter hereof. Except for (i) the Arclight Members (and only with respect to Sections 4.1, 13.1, 20.3 and 20.16) and (ii) those persons entitled to indemnification under Section 13 (and only to the extent of such indemnification), who are expressly made third-party beneficiaries of this Agreement, nothing in this Agreement, express or implied, is intended to confer on any Person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities.

20.4 Waiver; Amendment. No waiver, termination or discharge of this Agreement, or any of the terms or provisions hereof, shall be binding upon either party unless confirmed in a writing signed by such party. No waiver by either party of any term or provision of this Agreement or of any default hereunder shall affect such party’s rights thereafter to enforce such term or provision or to exercise any right or remedy in the event of any other default, whether or

25

not similar. This Agreement may not be modified, amended or supplemented except through a writing signed by both parties.

20.5 Severability. If any provision of this Agreement shall be held void, voidable, invalid or inoperative, no other provision of this Agreement shall be affected as a result thereof, and, accordingly, the remaining provisions of this Agreement shall remain in full force and effect as though such void, voidable, invalid or inoperative provision had not been contained herein. The parties hereto further agree that, in the event such provision is an essential part of this Agreement, they will immediately begin good faith negotiations for a suitable replacement provision.

20.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to the principles of conflicts of laws.

20.7 Assignment. Neither party hereto may assign this Agreement, in whole or in part, without the prior written consent of the other party, and any attempted assignment not in accordance herewith shall be null and void and of no force or effect.

20.8 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns.

20.9 Headings. The titles, captions and headings contained in this Agreement are inserted for convenience of reference only and are not intended to be a part of or to affect in any way the meaning or interpretation of this Agreement.

20.10 Reference with Agreement. Numbered or lettered articles, sections, paragraphs, subsections, schedules and exhibits herein contained refer to articles, sections, paragraphs, subsections, schedules and exhibits of this Agreement unless otherwise expressly stated. The words “herein,” “hereof,” “hereunder,” “hereby,” “this Agreement” and other similar references shall be construed to mean and include this Agreement and all Exhibits and Schedules and all amendments to any of them unless the context shall clearly indicate or require otherwise. The word “including” (and all derivations thereof) shall be construed to mean “including, without limitation.”

20.11 Enforcement. In the event of any litigation to enforce the terms of this Agreement, the prevailing party in such dispute will have the right to recover its reasonable attorneys’ fees and litigation costs from the other party.

20.12 Interpretation. This Agreement shall not be construed more strictly against either party regardless of which party is responsible for its preparation.

20.13 Relationship. It is expressly agreed by the parties hereto that each is at all times acting and performing hereunder as an independent contractor and not as an agent for the other, and that no act of commission or omission of either party hereto shall be construed to make or render the other party its principal, agent, joint venturer or associate, except to the extent specified herein. Neither party hereto shall have the authority to act in the other party’s name except as is expressly provided in this Agreement.

26

20.14 Further Assurances. Upon the reasonable request of the other party, each party agrees to take any and all actions necessary or appropriate to give effect to the terms and conditions set forth in this Agreement.

20.15 Counterparts; Fax Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute the same Agreement. Any signature page of any such counterpart, or any electronic facsimile thereof, may be attached or appended to any other counterpart to complete a fully executed counterpart of this Agreement, and any telecopy or other facsimile transmission of any signature shall be deemed an original and shall bind such party.

20.16 Public Announcements. Neither NDCHealth nor Arclight shall, without the prior written approval of the other, make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that NDCHealth or any of its Affiliates shall be so obligated by law or the rules of any stock exchange, in which case NDCHealth shall use its commercially reasonable efforts to provide advance notice thereof to Arclight. NDCHealth shall not make any press release or other public announcement concerning the transactions contemplated by this Agreement that references any Arclight Member without the prior written consent of such Arclight Member, except as and to the extent that NDCHealth or any of its Affiliates shall be so obligated by law or the rules of any stock exchange, in which case NDCHealth shall use its commercially reasonable efforts to provide advance notice thereof to such Arclight Member.

20.17 Payment and Reimbursement of Expenses; Offsets. The parties acknowledge that the royalty payments owed by NDCHealth to Arclight pursuant to Section 8.3 may be subject to offset in accordance with the terms of Sections 7 and 14.2 of this Agreement. Except as specifically provided in Sections 7 and 14.2, each party hereto shall reimburse the other for any amounts required to be reimbursed by such party pursuant to this Agreement within thirty (30) days after its receipt of a written invoice therefor from such other party (together with any supporting documentation or other evidence therefor reasonably requested by such party). Except for any setoff pursuant to and in accordance with Sections 7 and 14.2 of this Agreement, it is understood and agreed by the parties that neither party shall be entitled to set off any amounts owing to the other party hereunder for any reason, unless and until any proposed offset (i) has been agreed to in writing by such other party or (ii) has been finally determined by a court of competent jurisdiction.

27

IN WITNESS WHEREOF, the undersigned have caused their respective duly authorized representatives to execute this Agreement as of the day and year first above written.

“Arclight” ARCLIGHT SYSTEMS LLC
By:
	Mike Buettner, Chief Financial Officer

“NDCHealth” NDCHEALTH CORPORATION
By:
	Randolph L.M. Hutto, Executive Vice President and Chief Financial Officer

28

EX-10.III

Exhibit 10 (iii)

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into this 31st day of December, 2003, by and between NDCHEALTH CORPORATION, a Delaware corporation (“NDCHealth”), and ARCLIGHT SYSTEMS LLC, a Delaware limited liability company (“Arclight”).

BACKGROUND:

A. NDCHealth and Arclight have entered into (i) an Exclusive License Agreement, dated as of December 31, 2003 (the “License Agreement”), and (ii) a Warrant Agreement, dated as of the date hereof (the “Warrant Agreement”), pursuant to each of which NDCHealth may issue shares of “Common Stock” (as defined below) to Arclight.

B. In connection with the transactions contemplated by the License Agreement, NDCHealth has agreed to grant to Arclight certain registration rights with respect to such shares, all as more particularly described in this Agreement.

NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises, covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the License Agreement. As used in this Agreement, the following terms shall have the following respective meanings:

1.1 “Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of Georgia.

1.2 “Common Stock” shall mean the $0.01 par value common stock of NDCHealth.

1.3 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.4 “Holder” shall mean Arclight and any permitted transferee of Arclight.

1.5 “Person” shall mean any individual, partnership, corporation, trust or other entity.

1.6 The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or order by the SEC of the effectiveness of such registration statement.

1.7 “Registrable Securities” shall mean (i) the Shares and (ii) any other shares of Common Stock issued by way of (or issuable upon conversion or exercise of any warrant, right or other security which is issued as) a dividend, stock split, combination of shares, recapitalization, restructuring, merger, consolidation or other distribution with respect to or exchange for or replacement of the Shares; provided, however, that the term “Registrable Securities” shall not include (i) any Shares that have been registered and sold pursuant to a registration, or (ii) any Shares that have been sold, or could then be sold within any three (3) month period, pursuant to Rule 144 promulgated under the Securities Act.

1.8 “Securities Act” shall mean the Securities Act of 1933, as amended.

1.9 “SEC” shall mean the Securities and Exchange Commission.

1.10 “Shares” shall mean (i) the shares of Common Stock issued to Arclight as the “Initial Exclusivity Fee” (as such term is defined in Section 8.1 of the License Agreement), (ii) any shares of Common Stock issued to Arclight upon Arclight’s exercise of the Warrant Agreement and (iii) any Shares of Common Stock issued to Arclight as the “Additional Contingent Exclusivity Fee” (as such term is defined in Section 8.2 of the License Agreement).

ARTICLE II

DEMAND REGISTRATION

2.1 Demand Registration.

(a) From and after the date hereof for a period of 270 days (plus any additional days during which a registration has been postponed pursuant to Section 2.1(f), but in no event beyond one (1) year after the date hereof), the Holder shall be entitled to have NDCHealth effect one (1) demand registration on Form S-3 (or any applicable substitute, replacement or successor form that may be adopted by the SEC) of the Registrable Securities then owned of record and beneficially by such Holder; provided, however, (i) that such demand registration shall only be exercisable if Arclight has terminated the License Agreement pursuant to Section 18.2 or Section 18.3 thereof within the nine (9) month period beginning as of the Closing, and (ii) that NDCHealth shall not be required to effect a demand registration unless the Registrable Securities for which demand is made constitutes all of the Registrable Securities acquired by Arclight as the Initial Exclusivity Fee. A request for such demand registration (a “Registration Request”) must be made in writing by the Holder.

(b) NDCHealth shall use its best efforts to cause the Registrable Securities specified in the Registration Request to be registered as soon as reasonably practicable so as to permit the sale thereof and, in connection therewith, shall, within thirty (30) days after the Holder provides

2

NDCHealth with such notice, prepare and file a registration statement with the SEC under the Securities Act to effect such registration.

(c) Such registration statement shall contain such required information pursuant to the rules and regulations promulgated under the Securities Act and such additional information as deemed necessary by the managing underwriter or, if there is no managing underwriter, as deemed under the Securities Act to be necessary by NDCHealth.

(d) In connection with the preparation of the registration statement, the Holder shall:

(i) Specify the number of Registrable Securities intended to be offered and sold by the Holder;

(ii) Express the Holder’s intention to offer or cause the offering of such shares for distribution;

(iii) Describe the nature or method of the proposed offer and sale thereof by the Holder; and

(iv) Undertake to provide all such information and materials and take all such action as may be required in order to permit NDCHealth to comply with all applicable requirements of the SEC and to obtain any desired acceleration of the effective date of such registration statement.

(e) Notwithstanding the foregoing, if NDCHealth shall furnish to the Holder a certificate signed by a duly authorized officer of NDCHealth stating that in the good faith judgment of the Board of Directors of NDCHealth it would be seriously detrimental to NDCHealth for such registration statement to be filed on or before the date such filing would be required, then NDCHealth shall be entitled to postpone the filing of the registration statement for up to ninety (90) days; provided, that no period of postponement shall be counted in tolling the 270-day period referred to in Section 2.1 (except that the one (1) year outside date contained therein shall continue to apply).

(f) If a registration has become effective but is withdrawn before completion of the offering contemplated thereby because of adverse business developments at NDCHealth that were not known to the Holder when it requested that NDCHealth initiate such registration proceedings, or which developments came into existence subsequent to such request, such registration shall not count as the demand registration referred to in the first sentence of this Section 2.1.

(g) If a registration is filed on behalf of the Holder and such registration is withdrawn at the request of the Holder for any reason other than adverse business developments at NDCHealth that were not known to the Holder, such registration shall count as the demand registration referred to in the first sentence of this Section 2.1.

3

(h) NDCHealth shall not cause the registration under the Securities Act of any other shares of Common Stock to become effective (other than the registration of an employee stock plan, or registration in connection with any Rule 145 or similar transaction) during the effectiveness of a registration requested hereunder.

2.2 Inclusion of Additional Shares.

(a) NDCHealth may include in a registration pursuant to this Article II securities for its own account and by other third parties (including officers and employees of NDCHealth or any party to whom similar registration rights have been granted), in amounts as determined by NDCHealth’s Board of Directors. To the extent NDCHealth includes in such registration statement securities for its own account or held by other parties, NDCHealth shall take all actions it deems reasonably necessary to ensure that security holders of NDCHealth, whether or not holding contractual registration rights, shall not have the right to exclude from any registration initiated pursuant to this Article II any Registrable Securities of the Holder.

(b) NDCHealth may enter into an underwriting agreement in customary form with the underwriter or representative of the underwriters selected for such underwriting. Notwithstanding any other provision of this Section 2.2, if the underwriter or underwriters’ representative advises the Holder in writing that marketing factors require a limitation on the number of shares to be underwritten, the securities of NDCHealth, the securities held by officers or directors of NDCHealth and the securities held by other third parties shall be excluded from the underwriting by reason of the underwriter’s marketing limitation to the extent so required by such limitation. No securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration.

(c) If the Holder disapproves of the terms of the underwriting, the Holder’s sole remedy shall be to withdraw therefrom by written notice to NDCHealth and the underwriter or the underwriters’ managing representative. The Holder shall be deemed to have withdrawn if the Holder fails to execute underwriting documents in customary form requested by the underwriter or the underwriters’ managing representative within the time period requested for execution of such documents.

ARTICLE III

PIGGYBACK RIGHTS

3.1 Notice of Registration. If at any time or from time to time NDCHealth proposes to register (including for this purpose a registration effected by the Company for stockholders of the Company other than the Holder) under the Securities Act any class of NDCHealth’s equity securities for sale to the public on a registration statement on Form S-1, S-2, S-3 or any applicable substitute, replacement or successor form that may be adopted by the SEC for the sale of equity securities to the public, then and in each such case NDCHealth, subject to the terms and conditions contained herein, shall:

(a) Promptly give to the Holder written notice thereof; and

4

(b) Include in such registration (and any related qualification under blue sky laws or other compliance) and underwriting, the Registrable Securities (subject to cutback as set forth in Section 3.2) specified in a written request or requests made within thirty (30) days after receipt of such written notice from NDCHealth by the Holder (the “Piggyback Request”).

3.2 Priority in Piggyback Registrations. In connection with any offering involving an underwriting of shares of NDCHealth’s equity securities as described in Section 3.1, NDCHealth shall not be required under this Section 3.2 to include any of the Registrable Securities in such underwriting unless the Holder accepts the terms of the underwriting as agreed upon between NDCHealth and the underwriters selected by it. If the underwriters determine that the amount of Registrable Securities requested to be included in such registration would jeopardize the success of such offering, then NDCHealth shall be required to include in the offering only that number of Registrable Securities which the underwriters determine in their sole discretion will not jeopardize the success of the offering. Allocation of securities to be sold in any such offering shall be made first to NDCHealth (unless the offering is pursuant to a contractual demand right, in which case the allocation shall be made first to the stockholders exercising such demand right) and thereafter, to the extent any other securities are to be included, on a pro-rata basis among the Holder and any other selling stockholders who have contractual rights to include shares in such offering according to the total number of designated Registrable Securities requested by the Holder and securities requested by such other selling stockholders to be included in such offering and entitled to inclusion therein on the basis of this Agreement or such other contractual agreement. To facilitate the allocation of shares in accordance with the above provisions, NDCHealth may round the number of Registrable Securities allocated to the Holder or of securities allocated to each other selling stockholder to the nearest one hundred (100) shares. Notwithstanding anything to the contrary in this Agreement, but subject to the next sentence, the Holder agrees to delay the sale of any Registrable Securities not sold in such registration for the period requested by the underwriter or managing agent up to ninety (90) days (or such lesser amount of time if permitted by such underwriter or managing agent) following the effective date of the registration statement. The foregoing restriction shall not apply to the number of Registrable Securities, if any, requested by the Holder to be included in a registration but which are excluded from such registration at the discretion of the underwriters as set forth in this Section 3.2.

3.3 Underwriting. The right of the Holder to registration pursuant to this Article III shall be conditioned upon the Holder’s participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. If the Holder proposes to distribute its securities through such underwriting, the Holder shall (together with NDCHealth and any other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by NDCHealth.

3.4 Right to Terminate Registration. NDCHealth shall have the right to terminate or withdraw any registration initiated by it under this Article III prior to the effectiveness of such registration, whether or not the Holder has elected to include securities in such registration.

5

ARTICLE IV

OBLIGATIONS OF NDCHEALTH

4.1 Obligations of NDCHealth. Whenever NDCHealth is required by the provisions of this Agreement to use its best efforts to effect the registration of the Registrable Securities, NDCHealth shall:

(a) Prepare and file with the SEC a registration statement with respect to the Registrable Securities, and use its best efforts to cause such registration statement to become effective and to remain effective until the earlier of (i) the sale of the Registrable Securities so registered or (ii) ninety (90) days subsequent to the effective date of such registration; provided that, not less than three (3) days before filing with the SEC any registration statement or prospectus or not less than one (1) day before filing with the SEC any amendments or supplements thereto, NDCHealth will furnish to the Holder and its counsel copies of all such documents proposed to be filed, including, without limitation, documents incorporated by reference in the prospectus and, if requested by the Holder, the exhibits incorporated by reference therein, and the Holder shall have the opportunity to object to any information pertaining solely to the Holder that is contained therein and NDCHealth will make the corrections reasonably requested by the Holder with respect to such information prior to filing any registration statement or amendment thereto or any prospectus or any supplement thereto. NDCHealth will not include or name the Holder in any registration statement or prospectus without the consent of the Holder, unless required to do so by the Securities Act and the rules and regulations promulgated thereunder; provided, however, that NDCHealth may withdraw any registration of its securities at any time prior to the effective date of the registration statement relating thereto; provided, further, that in the event of any such withdrawal such registration shall not count as the demand registration referred to in the first sentence of Section 2.1;

(b) Prepare and, as soon as reasonably practicable, file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to make and to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities proposed to be registered in such registration statement for the applicable period set forth in the foregoing paragraph (a);

(c) Furnish to the Holder such number of copies of the registration statement (including any amendment or supplement thereto) and prospectus (including any preliminary prospectus and any amended or supplemented prospectus), in conformity with the requirements of the Securities Act and the rules and regulations promulgated thereunder, as the Holder may reasonably request in order to effect the offering and sale of the Registrable Securities to be offered and sold, but only while NDCHealth shall be required under the provisions hereof to cause the registration statement to remain current;

(d) If necessary, use its best efforts to register or qualify the Registrable Securities covered by such registration statement under the securities or blue sky laws of such states as the Holder shall reasonably request (provided, however, that NDCHealth shall not be

6

obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified), maintain any such registration or qualification current until the earlier of the sale of the Registrable Securities so registered or ninety (90) days subsequent to the effective date of the registration statement, and take any and all other actions either necessary or advisable to enable the Holder to consummate the public sale or other disposition of the Registrable Securities in jurisdictions where the Holder desires to effect such sales or other disposition;

(e) NDCHealth shall promptly notify the Holder of any stop order issued by the SEC and use its best efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement;

(f) NDCHealth shall use its best efforts to cause all Registrable Securities covered by each registration statement to be listed subject to notice of issuance, prior to the date of the first sale of such Registrable Securities pursuant to such registration statement, on each securities exchange on which the Common Stock is then listed and admitted to trading on;

(g) In the case of an underwritten offering, NDCHealth shall cause to be delivered to the Holder and the underwriters, if any, copies of opinions of counsel to NDCHealth in customary form, covering such matters as are customarily covered by opinions for an underwritten public offering as the underwriters may request and addressed to the underwriters;

(h) NDCHealth shall provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;

(i) NDCHealth shall cause to be delivered, immediately prior to the effectiveness of the registration statement (and, in the case of an underwritten offering, at the time of delivery of any Registrable Securities sold pursuant thereto), letters from NDCHealth’s independent certified public accountants addressed to each underwriter, if any, stating that such accountants are independent public accountants within the meaning of the Securities Act and the applicable published rules and regulations promulgated thereunder, and otherwise in customary form and covering such financial and accounting matters as are customarily covered by letters of the independent certified public accountants delivered in connection with primary or secondary underwritten public offerings, as the case may be;

(j) NDCHealth will notify the Holder at any time when a prospectus relating to a registration statement for any Registrable Securities is required to be delivered under the Securities Act, upon NDCHealth’s discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of the Holder prepare and furnish to the Holder and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state

7

a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; and

(k) Take all such other actions either necessary or desirable to permit the Registrable Securities held by the Holder to be registered and disposed of in accordance with the method of disposition described herein.

4.2 Condition Precedent to NDCHealth’s Obligations. It shall be a condition precedent to the obligation of NDCHealth to take any action pursuant to this Agreement in respect of the securities which are to be registered at the request of the Holder that the Holder shall furnish to NDCHealth such information regarding the securities held by the Holder and the intended method of disposition thereof as NDCHealth shall reasonably request and as shall be required in connection with the action taken by NDCHealth.

ARTICLE V

DISCONTINUANCE OF USE OF PROSPECTUS

The Holder agrees by acquisition of the Shares that, upon receipt of any written notice from NDCHealth of the occurrence of any event of the kind described in Section 4.1(j), the Holder will forthwith discontinue the Holder’s offer of Shares pursuant to the registration statement relating to such Shares until the Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4.1(j) and, if so directed by NDCHealth, will deliver to NDCHealth all copies, other than permanent file copies, then in the Holder’s possession of the prospectus relating to such Shares at the time of receipt of such notice. In the event that the Holder uses a prospectus in connection with the offering and sale of any of the Shares covered by such prospectus, the Holder will use only the latest version of such prospectus provided by NDCHealth.

ARTICLE VI

EXPENSES OF REGISTRATION

NDCHealth shall pay all of the expenses incurred in connection with any registration statements that are initiated pursuant to this Agreement, including, without limitation, all SEC and blue sky registration and filing fees, printing expenses, transfer agent and registrar fees, stock exchange qualification fees, the fees and disbursements of NDCHealth’s outside counsel and independent accountants, including expenses incurred in connection with any special audits incidental to or required by such registration. Any underwriting discounts, fees and disbursements of counsel to the Holder, selling commissions and stock transfer taxes applicable to the Registrable Securities registered on behalf of the Holder shall be borne by the Holder.

ARTICLE VII

INDEMNIFICATION AND CONTRIBUTION

7.1 Indemnification by NDCHealth. In the case of each registration effected by NDCHealth pursuant to this Agreement in which the Holder’s Registrable Securities are

8

included, NDCHealth agrees to indemnify and hold harmless the Holder and each party, if any, that controls the Holder within the meaning of the Securities Act and the Holder’s and any such party’s directors and officers against any and all losses, claims, damages or liabilities to which they or any of them may become subject under the Securities Act or any other statute or common law, including any amount paid in settlement of any litigation, commenced or threatened, if such settlement is effected with the written consent of NDCHealth, and to reimburse them for any reasonable legal or other reasonable expenses incurred by them in connection with the investigation of any claims and defenses of any actions, insofar as any such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the registration statement, (ii) any preliminary prospectus or final prospectus contained therein, or (iii) any amendment or supplement thereto or any document incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the indemnification agreement contained in this Section 7.1 shall not (i) apply to such losses, claims, damages, liabilities or actions of the Holder arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon and in conformity with information furnished to NDCHealth in writing by the Holder for use in connection with the preparation of the registration statement or any preliminary prospectus or final prospectus contained in the registration statement or any such amendment thereof or supplement thereto or any document incorporated by reference therein, or (ii) inure to the benefit of any party to the extent such party’s claim for indemnification hereunder arises out of or is based on any violation by such party of applicable law.

7.2 Indemnification by the Holder. In the case of each registration effected by NDCHealth pursuant to this Agreement in which the Holder’s Registrable Securities are included, the Holder shall be obligated, in the same manner and to the same extent as set forth in Section 7.1, to indemnify and hold harmless NDCHealth and each party, if any, who controls NDCHealth within the meaning of the Securities Act, and NDCHealth’s and any such party’s directors and officers, and the underwriters for such offering, and each person, if any, who controls any such underwriter within the meaning of the Securities Act, with respect to any untrue statement or alleged untrue statement of a material fact in, or omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading from, such registration statement or any post-effective amendment thereof or any preliminary prospectus or final prospectus (as amended or supplemented, if amended or supplemented as aforesaid) contained in such registration statement, if such statement or omission was made in reliance upon and in conformity with information furnished in writing to NDCHealth by such indemnifying party for use in connection with the preparation of such registration statement or any preliminary prospectus or final prospectus contained in such registration statement or any such amendment thereof or supplement thereto; provided, however, that (x) the indemnification required by this Section 7.2 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or expense if settlement is effected without the consent of the Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 7.2 exceed the net proceeds from the applicable offering received by the Holder.

9

7.3 Defense of Claims. Each party entitled to indemnification under this Article VII (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld) and the Indemnified Party may participate in such defense at the Indemnified Party’s expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the fees and expenses of counsel shall be at the expense of the Indemnifying Party), and provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article VII unless, and only to the extent that, the Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

7.4 Contribution. If the indemnification provided for in this Article VII is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other hand in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue) statement of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding anything in this Section 7.4 to the contrary, in no event shall the Holder’s aggregate liability pursuant to this Agreement exceed the net proceeds from the applicable offering received by the Holder.

7.5 Limitation. The foregoing indemnity and contribution agreements of NDCHealth and the Holder are subject to the condition that, insofar as they relate to any loss, claim, liability or damage arising from any misstatement or omission made in a preliminary prospectus, but eliminated or remedied in the amended or supplemented prospectus on file with the SEC at the time the registration statement in question becomes effective or the amended or supplemented prospectus is filed with the SEC pursuant to SEC Rule 424(b) (the “Final Prospectus”), such

10

indemnity or contribution agreement shall not inure to the benefit of any underwriter or the Holder if a copy of the Final Prospectus was furnished to the underwriter or the Holder and was not furnished to the Person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act.

ARTICLE VIII

SELECTION OF MANAGING UNDERWRITERS

Subject to the obligations of NDCHealth under agreements existing on the date hereof, the managing underwriter or underwriters for any offering of Registrable Securities to be registered pursuant to the terms and conditions hereof shall be selected by NDCHealth. The Holder may not participate in any underwritten offering hereunder unless the Holder: (i) agrees to sell its Registrable Securities on the basis provided in any underwriting arrangements approved by NDCHealth; (ii) completes and executes powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; (iii) complies with all reasonable requests made by NDCHealth or its counsel with respect to the registration of the Holder’s Registrable Securities, including, without limitation, providing such information regarding the Holder and the distribution of the Holder’s Registrable Securities.

ARTICLE IX

RULE 144 REPORTING

With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Registrable Securities to the public without registration, NDCHealth agrees to use its best efforts to:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; and

(b) File with the SEC in a timely manner all reports and other documents required of NDCHealth under the Securities Act and the Exchange Act.

ARTICLE X

TERMINATION

This Agreement shall terminate (except with respect to Article VII and this Article X, which are intended to survive any termination of this Agreement) upon the earlier to occur of: (a) the first day after the fifth (5th) anniversary of the Closing on which there are no longer any Registrable Securities; or (b) the seventh (7th) anniversary of the Closing.

11

ARTICLE XI

MISCELLANEOUS

11.1 No Waiver. No failure or delay on the part of any party in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

11.2 Entire Agreement; Amendment. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof. This Agreement may be amended only by an agreement in writing executed by NDCHealth and the Holder.

11.3 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, the remaining provisions shall remain in full force and effect. It is declared to be the intention of the parties hereto that they would have executed the remaining provisions without including any that may be declared unenforceable.

11.4 Headings; References. Article and Section headings are for convenience only and will not control or affect the meaning or construction of any provision of this Agreement. Any references to specific Articles or Sections shall be references to Articles or Sections of this Agreement unless expressly stated otherwise.

11.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute the same Agreement, and any signature page of any such counterpart, or any electronic facsimile thereof, may be attached or appended to any other counterpart to complete a fully executed counterpart of this Agreement, and any telecopy or other facsimile transmission of any signature shall be deemed an original.

11.6 Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one (1) business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed to the address of such party as set forth beneath such party’s signature hereto, or at such other address as a party may designate by ten days’ advance written notice to the other parties hereto pursuant to the provisions of this Section 11.6.

11.7 Successors and Assigns; Assignment. This Agreement shall bind the successors and assigns of the parties hereto, and shall inure to the benefit of any successor or assign of any of the parties hereto. This Agreement may not be assigned by any party hereto without the prior written consent of the other party or parties; provided, however, that Holder may assign its rights and obligations under this Agreement (other than under Article II) without such consent to any

12

transferee of Registrable Securities who is an “Arclight Member” (as such term is defined in the License Agreement), provided such Arclight Member agrees to be bound by the terms of this Agreement as a “Holder.”

11.8 Governing Law. The validity and effect of this Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Delaware.

IN WITNESS WHEREOF, the undersigned have caused their respective duly authorized representatives to execute this Agreement as of the day and year first above written.

“NDCHealth”
NDCHEALTH CORPORATION
By:
Name:	Randolph L.M. Hutto
Title:	Executive Vice President and Chief Financial Officer
Address:	NDCHealth Corporation NDCHealth Plaza Atlanta, Georgia 30329

“Arclight”
ARCLIGHT SYSTEMS LLC
By:
Name:	Mike Buettner
Title:	Chief Financial Officer
Address:	Arclight Systems LLC c/o Brendan A. Ford Executive Vice President - Corporate Department Cardinal Health Inc. 7000 Cardinal Place Dublin, Ohio 43017

13

EX-10.IV

Exhibit 10 (iv)

NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE ACQUIRED UPON THE EXERCISE OF THIS WARRANT: (A) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS; AND (B) MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT (INCLUDING ANY RULES OR REGULATIONS THEREUNDER) AND ANY APPLICABLE STATE SECURITIES LAWS.

NDCHEALTH CORPORATION

WARRANT AGREEMENT

THIS CERTIFIES that, for value received, ARCLIGHT SYSTEMS LLC, a Delaware limited liability company (the “Holder”), shall be entitled to acquire from NDCHEALTH CORPORATION, a Delaware corporation (the “Company”), subject to the terms and conditions contained herein, at any time during the period from 9:00 A.M. (Eastern Standard Time) on January 1, 2007, through 5:00 P.M. (Eastern Standard Time) on December 31, 2008 (the “Exercise Period”), 381,098 shares (individually, a “Warrant Share” and collectively, the “Warrant Shares”) of “Common Stock” (as hereinafter defined), at a purchase price of $26.24 per share (the “Exercise Price”), subject to adjustment from time to time pursuant to the provisions of Section 2. For purposes of this Warrant, the term “Common Stock” shall mean the $0.01 par value common stock of the Company.

1. Exercise of Warrants.

1.1 Method of Exercise. The Warrant evidenced hereby may be exercised by the Holder, in whole or in part, by the delivery at the principal office of the Company (or at such other office or agency of the Company as it may designate by notice in writing to the Holder), during normal business hours, of this Warrant and the Form of Exercise attached hereto as Schedule A, duly completed and executed by the Holder, and payment (by wire transfer of immediately available United States federal funds or by bank certified, treasurer’s or cashier’s check payable to the order of the Company) of the aggregate Exercise Price for the Warrant Shares covered by such exercise.

1.2 Cashless Exercise. In lieu of exercising the Warrant evidenced hereby pursuant to Section 1.1 above, the Holder shall have the right at any time to exercise this Warrant, in whole or in part, by requiring the Company to convert this Warrant (the “Conversion Right”), into Warrant Shares by surrendering this Warrant to the Company accompanied by the Form of Conversion Notice attached hereto as Schedule B, duly completed and executed by the Holder. Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any cash in respect of the Exercise Price) that number of Warrant Shares which is equal to the amount obtained by dividing (x) an amount equal to the difference

between (A) the aggregate Market Price for the Warrant Shares as to which the Conversion Right is then being exercised (the “Conversion Shares”), determined as of the exercise of the Conversion Right, minus (B) the aggregate Exercise Price then applicable to the Conversion Shares (such difference, the “Conversion Amount”), by (y) the Market Price of one share of Common Stock determined as of the exercise of the Conversion Right. Any references in this Warrant to the “exercise” of this Warrant, and the use of the term “exercise” herein, shall be deemed to include, without limitation, any exercise of the Conversion Right.

1.3 Partial Exercise. In the event this Warrant is not exercised in full, the total number of Warrant Shares shall be reduced by the number of Warrant Shares subject to such partial exercise, and the Company shall promptly issue and deliver to the Holder a new Warrant of like tenor in the name of the Holder, reflecting such adjusted number of Warrant Shares.

1.4 Delivery of Certificates. The certificate for the Warrant Shares issued upon exercise of this Warrant by the Holder pursuant to Sections 1.1 or 1.2 shall be delivered to the Holder as soon as practicable after the exercise of this Warrant. The certificate evidencing the Warrant Shares shall bear a restrictive legend substantially in the form set forth below:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE: (A) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS; AND (B) MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT (INCLUDING ANY RULES OR REGULATIONS THEREUNDER) AND ANY APPLICABLE STATE SECURITIES LAWS.”

1.5 No Fractional Shares. In lieu of issuing any fractional shares of Common Stock, the Company shall pay to the Holder cash in an amount equal to the same fraction of the Market Price of one share of Common Stock determined as of the exercise date of this Warrant.

2. Adjustments to Exercise Price and Warrant Shares. The Exercise Price and the number of Warrant Shares issuable upon the exercise of the Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 2.

2.1 Adjustment for Change in Capital Stock. If the Company shall (i) declare a dividend on the Common Stock in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class), (ii) split or subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares or (iv) engage in a recapitalization, reorganization, exchange of shares, spin-off or similar change in capitalization or event, this Warrant shall entitle the Holder to receive the aggregate number and kind of shares which, if this Warrant had been exercised immediately prior to such time, the Holder would have owned or have become entitled to receive by virtue of such change in capitalization or event at an Exercise Price adjusted for such change in the number of shares purchasable. Such adjustment shall be made successively whenever any event listed above shall occur and, if a dividend which

2

is declared is not paid, this Warrant shall again entitle the Holder to receive the number of shares of Common Stock as would have been the case had such dividend not been declared. Notwithstanding anything to the contrary in this Section 2.1, in no event shall an adjustment to the Exercise Price pursuant to this section result in an aggregate increase in the Exercise Price. This Section 2.1 shall not apply to any transaction to which Section 2.2 is applicable.

2.2 Adjustment for Certain Transactions. If the Company consolidates or merges with or into, or sells, transfers or leases all or substantially all of its assets to, any Person, upon consummation of such transaction this Warrant shall automatically become exercisable in full for the kind and amount of securities, cash or other assets which the Holder of a Warrant would have been entitled to receive in connection with the consolidation, merger, sale, transfer or lease if the Holder had exercised the Warrant immediately before the effective date of such transaction provided, however, that in the case of a consolidation or merger which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) at least 50% of the surviving corporation immediately after the closing thereof, this Warrant shall remain exercisable only during the Exercise Period. Concurrently with the consummation of such transaction, the Person formed by or surviving any such consolidation or merger (if other than the Company), or the Person to which such sale, transfer or lease shall have been made, shall enter into a supplemental Warrant so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 2. The successor Person shall send to the Holder a notice describing the supplemental Warrant. If the issuer of securities deliverable upon exercise of the supplemental Warrant is an Affiliate (as defined in Section 13 hereof) of the formed, surviving, transferee or lessee Person, that issuer shall join in the supplemental Warrant. Notwithstanding anything to the contrary in this Section 2.2, in no event shall there be an aggregate increase in the Exercise Price.

2.3 Termination of License Agreement. If the Holder terminates the License Agreement pursuant to Section 18.2, 18.3 or 18.4 of such agreement, this Warrant shall automatically become exercisable in full.

2.4 Notices to Holder.

(a) Upon any adjustment of this Warrant pursuant to this Section 2, the Company shall promptly thereafter (i) cause a certificate to be executed by the Company setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares issuable after such adjustment in the Exercise Price, upon exercise of the Warrant in full and payment of the adjusted Exercise Price, and (ii) notify the Holder of such adjustments by sending it a copy of the certificate referenced in the preceding clause (i). Where appropriate, such notice may be given in advance.

3

(b) The failure to give the notice required by this Section 2.4 or any defect therein shall not affect the legality or validity of the transaction to which it relates.

3. Payment of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon exercise of the Warrant. The Company shall not, however, be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance and delivery of this Warrant, or any supplemental or replacement Warrant, or any certificate for Warrant Shares or other securities, and the Company shall not be required to issue or deliver any such supplemental or replacement Warrants or certificates unless and until the Person(s) requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

4. Certain Covenants.

4.1 The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of this Warrant, the maximum number of Warrant Shares which may then be deliverable upon the exercise in full of this Warrant.

4.2 The Company shall (i) use its best efforts to comply with the current public information requirements of Rule 144 (“Rule 144”) under the Securities Act and (ii) at all times Rule 144 is available for use by Holder, furnish the Holder upon request with all information within the possession of the Company, required for the preparation and filing of Form 144. As soon as reasonably practicable after January 1, 2007, or at such time as the Warrant Shares otherwise become exercisable pursuant to the terms hereof, NDCHealth shall, to the extent required by the rules of the NYSE, file with the NYSE a listing application or other notice as may be required with respect to the Warrant Shares and use its commercially reasonable efforts to obtain approval for the listing of such shares.

5. Representations and Warranties.

5.1 The Company hereby represents and warrants to the Holder as follows:

(a) This Warrant has been duly authorized by all necessary corporate action on the part of the Company and has been duly executed by a duly authorized officer of the Company and constitutes a valid and binding obligation of the Company.

(b) Neither the execution and delivery of this Warrant, nor the consummation of the transactions contemplated hereby, will violate or result in any violation of or be in conflict with or constitute a default under any term of the charter or bylaws of the Company or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to the Company.

4

(c) All Warrant Shares which may be issued upon the exercise of this Warrant, when issued in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and nonassessable.

5.2 The Holder hereby represents and warrants to the Company (which shall be affirmed by the Holder on the date of the exercise of this Warrant) that (a) this Warrant and the Warrant Shares issuable upon exercise of this Warrant (collectively, the “NDCHealth Securities”) are being acquired for the Holder’s own account, for investment purposes only, and not with a view to any distribution or resale thereof; and (b) the Holder is a sophisticated investor with knowledge and experience in financial matters, is capable of evaluating the merits and risks of an investment in the NDCHealth Securities, has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement, is able to bear the economic risk of its investment in the NDCHealth Securities, is presently able to afford the complete loss of such investment, and is an “accredited investor” (as defined in Rule 501 of Regulation D promulgated under the Securities Act).

6. Holder; No Rights as Shareholder. The Holder shall be deemed the owner of this Warrant for all purposes. The Holder shall not be entitled by virtue of ownership of this Warrant to any rights whatsoever as a shareholder of the Company with respect to the Common Stock issuable upon exercise of this Warrant, either at law or in equity, including, without limitation, the right to vote and to receive dividends and other distributions.

7. Restrictions on Transfer.

7.1 The Holder may not Transfer this Warrant to any Person other than an Affiliate without the express prior written consent of the Company, and any Transfer in violation of this Section 7 shall be void and of no force or effect. In the event that the Company consents to any Transfer requested by the Holder to any Person (a “Proposed Transferee”), such Transfer shall be conditioned upon the receipt of an opinion of counsel reasonably satisfactory to the Company that such Transfer to a Proposed Transferee would not result in a violation of the provisions of the Securities Act and applicable state securities laws.

7.2 Each Holder of this Warrant and any Warrant Shares issued upon exercise of this Warrant, by taking or holding the same, consents to and agrees to be bound by the provisions of this Section 7.

8. Lost Warrant. Upon receipt by the Company at its principal office of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and in the case of any such loss, theft, or destruction, upon delivery of indemnity reasonably satisfactory to the Company or, in case of any such mutilation, upon surrender and cancellation of this Warrant, the Company will issue a new Warrant of like tenor in lieu of this Warrant.

9. Expiration. This Warrant, in all events, shall be wholly void and have no effect after 5:00 P.M. (Eastern Standard Time) on December 31, 2008.

5

10. Notices. All notices, consents or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered personally, or (b) one business day after being sent by a reputable overnight delivery service, postage or delivery charges prepaid (provided that confirmation of delivery is obtained from such service), to the parties at their respective addresses set forth below:

If to the Company:

NDCHealth Corporation

NDC Plaza

Atlanta, Georgia 30329-2010

Attention: Chief Executive Officer

with a copy to:

Stephen E. Lewis

Troutman Sanders LLP

600 Peachtree Street, NE, Suite 5200

Atlanta, Georgia 30308-2216

If to the Holder:

Arclight Systems LLC

c/o Brendan A. Ford

Executive Vice President-Corporate Development

Cardinal Health Inc.

7000 Cardinal Place

Dublin, Ohio 43017

with a copy to:

Gary D. Gerstman

Sidley Austin Brown & Wood LLP

Bank One Plaza

10 S. Dearborn Street

Chicago, Illinois 60603

Notices may also be given by prepaid telegram or facsimile and shall be effective on the date transmitted if confirmed within 24 hours thereafter by a signed original sent in the manner provided above. Any party may change its address for notice and the address to which copies must be sent by giving notice of the new addresses to the other parties in accordance with this Section 10, except that any such change of address notice shall not be effective unless and until received.

6

11. Severability. In the event that one or more of the provisions of this Warrant shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Warrant, but this Warrant shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

12. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be entirely performed within such State without giving effect to principles of conflicts of laws.

13. Definitions. As used in this Agreement:

(a) “Affiliate” means any Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. The terms “control,” “controlled by” and “under common control with” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as general partner, as a limited partner with a right to receive fifty percent (50%) or more of the income or assets of a limited partnership, by contract or otherwise.

(b) “Market Price” means as of the date of determination, the last sale price for the Common Stock on the principal securities market or exchange on which the Common Stock is listed or admitted to trading averaged over a period of ten (10) consecutive trading days ending on the last trading day prior to the date of the exercise of this Warrant. If at any time the Common Stock is not listed on any market or exchange, the Market Price of the Common Stock shall be deemed to be the higher of (i) the book value thereof, as determined in accordance with generally accepted accounting principles consistent with those then being applied by the Company by any firm of independent certified public accountants (which may be the regular auditors of the Company) of recognized national standing selected by the Board of Directors of the Company, as of the last day of the month ending within thirty-one (31) days preceding the date of the exercise of this Warrant, and (ii) the fair market value thereof as of a date which is within fifteen (15) days preceding the date of the exercise of this Warrant, as determined by an independent material brokerage firm selected by the Company and reasonably acceptable to the Holder.

(c) “NYSE” means the New York Stock Exchange, Inc.

(d) “Person” means any individual, sole proprietorship, joint venture, partnership, corporation, association, cooperative, trust, estate, governmental body, administrative agency, regulatory authority or other entity of any nature.

(e) “Transfer” means to dispose of or part with all or any portion of an interest (legal or equitable) by any means, direct or indirect, absolute or conditional, voluntary or involuntary, including, but not limited to, by sale, assignment, disposition, court order, operation of law, dissolution, merger, consolidation, division, spin-off, dividend, distribution, equitable or other distribution after divorce or separation, settlement, exchange, waiver, abandonment, gift, alienation, bequest, pledge, hypothecation, encumbrance or disposal.

7

14. Neutral Construction. The parties have negotiated this Warrant and all of the terms and conditions contained in this Warrant in good faith and at arms’ length, and each party has been represented by counsel during such negotiations. No term, condition, or provision contained in this Agreement shall be construed against any party or in favor of any party because such party or such party’s counsel drafted such term, condition, or provision. Furthermore, all terms, conditions, and provisions contained in this Warrant shall be construed and interpreted in a manner which is consistent with all other terms, conditions, and provisions contained in this Warrant.

15. Counterparts. This Warrant may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, NDCHealth Corporation and the Holder have caused this Warrant to be signed by a duly authorized officer and dated as of December 31, 2003.

NDCHEALTH CORPORATION
By:
	Randolph L.M. Hutto, Executive Vice President and Chief Financial Officer

ARCLIGHT SYSTEMS LLC
By:
	Mike Buettner, Chief Financial Officer

8

EX-31.I

Exhibit 31 (i)

CERTIFICATIONS

I, Walter M. Hoff, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NDCHealth Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 7, 2004

/s/ Walter M. Hoff

Walter M. Hoff

Chief Executive Officer

EX-31.II

Exhibit 31 (ii)

CERTIFICATIONS

I, Randolph L.M. Hutto, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NDCHealth Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 7, 2004

/s/ Randolph L.M. Hutto

Randolph L.M. Hutto

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NDCHealth Corporation (the “Company”) on Form 10-Q as filed with the Securities and Exchange Commission on the date hereof, (the “Report”), we the undersigned certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ Walter M. Hoff

Walter M. Hoff, Chairman and

Chief Executive Officer

(Principal Executive Officer)

January 7, 2004

By: /s/ Randolph L.M. Hutto

Randolph L.M. Hutto

Chief Financial Officer

(Principal Financial Officer)

January 7, 2004