-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MwDiNQKTLa7D38pupiyFLYBlDgsvgE1c0UAehkoE97B3TECql3gsLOC0pzlMtw6q GVagh70ox2dS9Yhg3M7FPQ== 0000070033-97-000004.txt : 19970115 0000070033-97-000004.hdr.sgml : 19970115 ACCESSION NUMBER: 0000070033-97-000004 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL DATA CORP CENTRAL INDEX KEY: 0000070033 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 580977458 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12392 FILM NUMBER: 97505260 BUSINESS ADDRESS: STREET 1: NATIONAL DATA COPRORATION STREET 2: NATIONAL DATA PLAZA CITY: ATLANTA STATE: GA ZIP: 30329 BUSINESS PHONE: 4047282000 MAIL ADDRESS: STREET 1: NATIONAL DATA PLZ CITY: ATLANTA STATE: GA ZIP: 30329-2010 8-K 1 HCS 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 31, 1996 Commission File No. 001-12392 NATIONAL DATA CORPORATION ------------------------- (Exact name of registrant as specified in charter) DELAWARE 58-0977458 ---------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) National Data Plaza, Atlanta, Georgia 30329-2010 ------------------------------------- ---------- (Address of principal executive office (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 year) Item 2. Acquisition or Disposition of Assets ------------------------------------ On December 31, 1996, the Company acquired the capital stock of Health Communication Services, Inc. ("HCS"). The stock was purchased from Consolidated Healthcare, Inc., a subsidiary of Blue Cross and Blue Shield of Virginia, pursuant to a Stock Purchase Agreement ("Agreement") dated as of December 5, 1996. The purchase price paid for the HCS shares was $77,000,000 (subject to a final purchase price adjustment pursuant to Article 2.3 of the Agreement), funded from the Company's cash and cash equivalents. The net assets acquired consisted of tangible personal property, leased personal and real property, working capital, customer contracts, assembled work force and the goodwill of the business. The acquisition of Health Communication Services, Inc. will be accounted for using the purchase method of accounting. The Company is in the process of receiving an independent appraisal of the value of the assets acquired. HCS provides electronic data interchange ("EDI") services including electronic claims processing, remittance advice and funds transfers, and eligibility and benefit verification processing between health care participants, including hospitals, physicians, and health care payors. Item 7. Financial Statements and Exhibits --------------------------------- The following financial statements, pro forma financial information and exhibits are filed as part of this report. (a) Financial Statements of the Business Acquired. Not applicable. (b) Pro Forma Financial Information. Not applicable. (c) Exhibit. Exhibit No. Description 2 Stock Purchase Agreement dated December 5, 1996 (Pursuant to the regulations (the "Regulations") under the Securities and Exchange Act of 1934, as amended, the Registrant has omitted all schedules and similar attachments to the Stock Purchase Agreement. The Registrant agrees to furnish upon the request of the Commission and in accordance with the Regulations, copies of all such schedules and similar attachments.) 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. NATIONAL DATA CORPORATION (Registrant) Date: January 14, 1997 By: /s/ M.P. Stevenson, Jr. ------------------- ---------------------------------- M.P. Stevenson, Jr. Interim Chief Financial Officer EX-2 2 STOCK PURCHASE AGREEMENT NATIONAL DATA CORPORATION EXHIBIT 2 FORM 8-K STOCK PURCHASE AGREEMENT AMONG BLUE CROSS AND BLUE SHIELD OF VIRGINIA, CONSOLIDATED HEALTHCARE, INC. AND NATIONAL DATA CORPORATION December 5, 1996 TABLE OF CONTENTS PAGE ARTICLE I - DEFINITIONS 1.1 Definitions 2 ARTICLE II - PURCHASE AND SALE OF SHARES 2.1 Purchase and Sale of Shares 9 2.2 Purchase Price 9 2.3 Adjustment to the Purchase Price 9 ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER AND TRIGON 3.1 Organization of Seller 13 3.2 Authority Relative to this Agreement 13 3.3 Organization and Qualification of Company 13 3.4 Subsidiaries 14 3.5 Capitalization; Validity of Shares 15 3.6 No Violation 17 3.7 Consents and Approvals 18 3.8 Compliance with Law 18 3.9 Licenses and Permits 18 3.10 Financial Statements 19 3.11 Absence of Change 20 3.12 Tax Matters 22 3.13 Labor and Employment Matters 24 3.14 Litigation 25 3.15 Assets 25 3.16 Leases 26 3.17 Material Contracts 26 3.18 Intellectual Property 29 3.19 Insurance 30 3.20 Employee Benefit Plans 31 3.21 Finders 34 3.22 Representations as to Trigon Matters 35 ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER 4.1 Organization; Authority Relative to this Agreement 37 4.2 No Conflict 37 4.3 Consents and Approvals 38 4.4 Litigation 38 4.5 Investment Representation 39 4.6 Finders 39 4.7 No Reliance 39 ARTICLE V - ADDITIONAL AGREEMENTS 5.1 Conduct of Business of the Company 39 5.2 Forbearance by the Company 41 5.3 Investigation of Business and Properties 44 5.4 Confidentiality 45 5.5 Subsequent Events 47 5.6 HSR Filings 47 5.7 Expenses 48 5.8 Public Announcements 48 5.9 Efforts to Consummate 49 5.10 Pre-Closing Affiliate Transactions 49 5.11 Further Assurances 50 5.12 Preparation of Financial Statements 50 5.13 No Solicitation 51 5.14 Veritus Service Agreement 51 ARTICLE VI - EMPLOYEES AND EMPLOYEE MATTERS 6.1 Company Employees 52 6.2 Employee Incentive Plans 52 6.3 Administration 53 6.4 Severance Plan 54 ARTICLE VII - TAX MATTERS 7.1 Allocation of Tax Liability 55 7.2 Returns and Payments. 57 7.3 Cooperation and Exchange of Information. 59 7.4 Tax Sharing Indemnification. 60 7.5 Method of Asserting Tax Claims 61 7.6 Section 338(h)(10) Election; Allocation of Purchase Price 62 ARTICLE VIII - CONDITIONS TO OBLIGATIONS OF BUYER 8.1 Representations and Warranties 64 8.2 Performance of this Agreement 65 8.3 Corporate Authorization 65 8.4 Consents and Approvals 65 8.5 Injunction, Litigation, etc. 65 8.6 Legislation 66 8.7 Resignations 66 8.8 Opinion of Counsel of Seller 66 8.9 Expiration of HSR Waiting Period 66 8.10 Related Agreements 66 8.11 Release of Intercompany Obligations 66 ARTICLE IX - CONDITIONS TO OBLIGATIONS OF SELLER 9.1 Representations and Warranties 67 9.2 Performance of this Agreement 67 9.3 Corporate Authorization 68 9.4 Injunction, Litigation, etc. 68 9.5 Legislation 68 9.6 Opinion of Counsel for Buyer 68 9.7 Expiration of HSR Waiting Period 69 ARTICLE X - CLOSING 10.1 Time and Place of Closing 69 10.2 Deliveries by Seller 69 10.3 Deliveries by Buyer 70 ARTICLE XI - INDEMNIFICATION 11.1 Indemnification by Seller and Trigon 71 11.2 Indemnification by Buyer 72 11.3 Third Party Claims 72 11.4 Limitations on Indemnification 75 11.5 Survival; Investigation 77 11.6 Tax Benefits; Insurance Proceeds 77 11.7 Tax Characterization 78 ARTICLE XII - TERMINATION, AMENDMENT AND WAIVER 12.1 Termination 78 12.2 Effect of Termination 78 12.3 Amendment 79 12.4 Extension; Waiver 79 ARTICLE XIII - GENERAL PROVISIONS 13.1 Notices 79 13.2 Governing Law 81 13.3 Headings 81 13.4 Counterparts 81 13.5 Miscellaneous 81 13.6 Severability 81 SCHEDULES 1.1 - Certain Persons With Knowledge 3.4 - Subsidiaries 3.5 - Capitalization 3.6 - Violations 3.7 - Consents and Approvals 3.8 - Compliance with Laws 3.9 - Licenses and Permits 3.10 - Financial Statements 3.11 - Absence of Change 3.12 - Tax Matters 3.13 - Labor and Employment Matters 3.14 - Litigation 3.15 - Personal Property 3.16 - Leases 3.17 - Material Contracts 3.18 - Intellectual Property 3.19 - Insurance 3.20 - Employee Benefit Plans 6.1 - Company Employees 6.4(a) - Severance Payments for Certain Individuals 6.4(b) - Chicago Consolidation Terminated Employees 6.4(c) - Severance Plan EXHIBITS Exhibit A - Waiver of the First Right of Refusal by Veritus Inc. under the Veritus Service Agreement Exhibit B - EDI Open Network Service Agreement Exhibit C - Noncompetition Agreement Exhibit D - Sublease Exhibit E - Transition Services Agreement Exhibit F - Opinion of Counsel to Seller Exhibit G - Opinion of Counsel to Buyer STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December 5, 1996, is made among BLUE CROSS AND BLUE SHIELD OF VIRGINIA, a Virginia corporation doing business as Trigon Blue Cross Blue Shield ("Trigon"), CONSOLIDATED HEALTHCARE, INC., a Virginia corporation and a wholly-owned subsidiary of Trigon ("Seller"), and NATIONAL DATA CORPORATION, a Delaware corporation ("Buyer"). INTRODUCTION A. Seller owns all of the 100 issued and outstanding shares (the "Company Shares") of common stock of Health Communication Services, Inc., a Virginia corporation (the "Company"), and one share of the issued and outstanding capital stock of Health Communication Services (Bermuda) Ltd. (together with the Company Shares, the "Shares"). B. Seller desires to sell and Buyer desires to purchase the Shares on the terms and for the consideration hereinafter set forth. C. Seller has obtained from Veritus Inc. a waiver of a right of first refusal in favor of Veritus Inc. with respect to certain provider contracts in western Pennsylvania, which waiver is attached hereto as Exhibit A (the "Waiver"). NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS I.1 Definitions. The following terms, as used herein, have the following meanings: "Acceptance Notice" has the meaning set forth in Section 2.3. "Acquisition Proposal" has the meaning set forth in Section 5.13. "Adjusted Working Capital" shall mean (a) all current assets of the Company and its Subsidiaries on a consolidated basis (excluding for purposes of this calculation (i) cash, (ii) cash equivalents, (iii) accounts receivable of the Company and its Subsidiaries greater than sixty (60) days past due and (iv) all receivables or other amounts with respect to Intercompany Obligations owed to the Company or its Subsidiaries by Trigon and its Affiliates) less (b) all liabilities of the Company and its Subsidiaries on a consolidated basis (excluding for purposes of this calculation (i) all liabilities or other amounts with respect to Intercompany Obligations owed by the Company and its Subsidiaries to Trigon and its Affiliates and (ii) current and deferred income taxes attributable to periods ending on the Closing Date), each as would be reflected on the financial statements of the Company and its Subsidiaries on a consolidated basis prepared at any relevant time, as such terms are used in conformity with generally accepted accounting principles applied on a basis consistent with the basis on which the Audited Company Financial Statements have been prepared. "Adjusted Working Capital Schedule" has the meaning set forth in Section 2.3. "Affiliate" of a Person means a Person who, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Person. "Audited Company Financial Statements" has the meaning set forth in Section 3.10. "Chicago Consolidation" means the reorganization of the Company's Chicago, Illinois operations, which includes substantial reductions of its work force located in Chicago, offers to relocate a number of employees from Chicago to Richmond, Virginia and moving certain personal property to Richmond, which reorganization has been disclosed to Buyer and is intended to be completed by January 2, 1997. "Closing" has the meaning set forth in Section 10.1. "Closing Date" has the meaning set forth in Section 10.1. "Closing Date Adjusted Working Capital" has the meaning set forth in Section 2.3. "Closing Date Balance Sheet" has the meaning set forth in Section 2.3. "CMC Dispute" has the meaning set forth in Section 5.1. "Confidentiality Agreement" means the Confidentiality Agreement dated October 3, 1996 between Trigon and Buyer. "COBRA" has the meaning set forth in Section 3.20. "Company" has the meaning set forth in the Introduction. "Company Employees" has the meaning set forth in Section 6.1. "Company Information" has the meaning set forth in Section 5.4. "Company Shares" has the meaning set forth in the Introduction. "CPA Firm" has the meaning set forth in Section 2.3. "Deductible Amount" shall mean $1,540,000. "DOL" has the meaning set forth in Section 3.20. "EDI Open Network Service Agreement" means the EDI Network Service Agreement between Trigon and the Company, as amended, in the form of attached Exhibit B. "Encumbrances" means liens, mortgages, charges, security interests and other defects in title generally considered to be encumbrances. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" has the meaning set forth in Section 3.20. "Environmental Laws" means any federal, state, or local statute, law, rule, regulation, ordinance, decree, agreement, or order now or hereafter enacted or promulgated or issued by any governmental body, agency, or authority relating to environmental pollution or protection of the environment or employee health and safety, including, without limitation, the Comprehensive Environmental Recovery Compensation and Liability Act, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. ("RCRA"), and the Hazardous Materials Transportation Act, 49 U.S.C. Sec. 1802, each as amended, and rules and regulations promulgated thereunder. "Evaluation Material" has the meaning set forth in Section 5.4. "401(k) Plan" has the meaning set forth in Section 3.20. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Incentive Plans" has the meaning set forth in Section 3.20. "Intellectual Property" has the meaning set forth in Section 3.18. "Intercompany Obligations" means all accounts, liabilities and obligations, as shown on the general ledgers of Trigon or the Company and its Subsidiaries as of any relevant date, of (a) the Company and its Subsidiaries, on the one hand, to Trigon and its Affiliates, on the other hand, or (b) of Trigon and its Affiliates, on the one hand, to the Company and its Subsidiaries, on the other hand; provided, however, that Intercompany Obligations shall exclude any accounts, liabilities or obligations between the Company and its Subsidiaries or arising out of any of the EDI Open Network Service Agreement, the Sublease or the Transition Services Agreement. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended. "Interim Unaudited Company Financial Statements" has the meaning set forth in Section 3.10. "Leases" has the meaning set forth in Section 3.16. "Legal Action" has the meaning set forth in Subsection 11.3(ii). "Licenses and Permits" has the meaning set forth in Section 3.9. "Losses" has the meaning set forth in Section 11.1. "Material Adverse Effect" means a material adverse effect on the assets, financial condition, business or results of operations of the Company and its Subsidiaries taken as a whole. "Material Contracts" has the meaning set forth in Section 3.17. "Non-Competition Agreement" means the Non-Competition Agreement between Trigon and Buyer in the form of attached Exhibit C. "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plans" has the meaning set forth in Section 3.20(a). "Permitted Encumbrances" means (i) statutory liens for current taxes or assessments not yet due or payable; (ii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of the Company or any of its Subsidiaries; (iii) purchase money security interests or other Encumbrances created in the ordinary course of business and (iv) such other Encumbrances as are not material in amount or character, individually or in the aggregate, to the operations of the Company and its Subsidiaries, taken as a whole. "Person" means an individual, a corporation, a partnership, an association, a labor union, a trust or any other entity or organization, including without limitation a government, a governmental body, a political subdivision or an agency or instrumentality thereof. "Purchase Price" has the meaning set forth in Section 2.2. "Related Agreements" means (i) the EDI Open Network Service Agreement,(ii) the Non-Competition Agreement, (iii) the Transition Services Agreement and (iv) the Sublease. "Restoration Plan" has the meaning set forth in Section 6.2. "Review Period" has the meaning set forth in Section 2.3. "Section 338(h)(10) Election" has the meaning set forth in Section 7.6. "SERP" has the meaning set forth in Section 6.2. "Settlement Period" has the meaning set forth in Section 2.3. "Shares" has the meaning set forth in the Introduction. "Sublease" means the Sublease of certain office space between Trigon, as sublessee, and the Company, as sublessor, in the form of attached Exhibit D. "Subsidiary" with respect to any party to this Agreement, means any corporation or other business entity, whether or not incorporated, of which at least 50% of the securities or interests having, by their terms, ordinary voting power to elect members of the Board of Directors, or other persons performing similar functions with respect to such entity, is held directly or indirectly by such party. "Survival Date" has the meaning set forth in Section 11.5. "Tax" or "Taxes" means all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sales and franchise taxes, imposed by the United States, or any state, county, local or foreign government or subdivision or agency thereof, and including any interest, penalties or additions attributable thereto. "Tax Indemnitee" has the meaning set forth in Section 7.5. "Tax Indemnitor" has the meaning set forth in Section 7.5. "to the knowledge of Seller" means to the actual knowledge of those persons listed on Schedule 1.1. "Transition Services Agreement" means the Transition Services Agreement between Trigon and the Company in the form of attached Exhibit E. "Trigon Information" has the meaning set forth in Section 5.4. "Valuation Report" has the meaning set forth in Section 2.3. "Veritus Service Agreement" shall mean that certain Service Agreement dated as of December 31, 1993 by and between the Company and Veritus Inc., a Pennsylvania non-profit corporation doing business as Blue Cross of Western Pennsylvania. "Waiver" has the meaning set forth in the Introduction. "Welfare Plans" has the meaning set forth in Section 3.20(a). ARTICLE II PURCHASE AND SALE OF SHARES II.1 Purchase and Sale of Shares. Subject to the terms and conditions of this Agreement, at the Closing, Seller agrees to sell the Shares to Buyer and Buyer agrees to purchase the Shares from Seller for the consideration hereinafter set forth. II.2 Purchase Price. Subject to adjustment as set forth in Section 2.3, the aggregate consideration to be paid for the Shares (the "Purchase Price") shall be $77,000,000. At the Closing, Buyer will pay Seller the Purchase Price in the manner hereinafter set forth in Article X. II.3 Adjustment to the Purchase Price. As promptly as practical, but in no event more than sixty (60) days after the Closing, Trigon shall prepare and deliver to Buyer a balance sheet of the Company as of the close of business on (i) December 31, 1996, if the Closing Date occurs on December 31, 1996 through and including January 10, 1997 and (ii) the Closing Date if the Closing Date occurs on or after January 11, 1997 (the "Closing Date Balance Sheet"), prepared in conformity with generally accepted accounting principles applied on a basis consistent with the basis on which the Audited Company Financial Statements have been prepared, except that the effect of the Company's adoption of FAS 121 shall not be reflected. In addition, Trigon shall prepare and deliver to Buyer a schedule of the Adjusted Working Capital of the Company as of the date of the Closing Date Balance Sheet and derived from the Closing Date Balance Sheet (the "Adjusted Working Capital Schedule"), which shall reflect Trigon's computation of the Adjusted Working Capital as of such date (the "Closing Date Adjusted Working Capital"). Buyer shall grant Trigon and its representatives reasonable access during normal business hours to the premises, systems, employees and books and records of the Company and its Subsidiaries, including any work papers, as may be reasonably necessary in order to permit Trigon to prepare the Closing Date Balance Sheet and the Closing Date Adjusted Working Capital Schedule. Buyer shall grant Trigon similar access during the Review Period (as hereinafter defined) and the Settlement Period (as hereinafter defined) in order to enable Buyer and Trigon to reach an understanding, if necessary, with respect to any disagreement regarding the computation of the Closing Date Adjusted Working Capital. Buyer shall review the Closing Date Balance Sheet and the Adjusted Working Capital Schedule during the thirty (30) day period commencing upon Buyer's receipt thereof (the "Review Period"). Buyer may accept the computation by Trigon of the Closing Date Adjusted Working Capital by giving Trigon written notice of such acceptance ("Acceptance Notice") at any time during the Review Period. If Buyer does not so accept, Trigon and Buyer shall meet as often as necessary during the fifteen (15) day period immediately following the Review Period (the "Settlement Period") in an attempt to agree upon a final computation of the Closing Date Adjusted Working Capital. During the Review Period and the Settlement Period, Trigon shall give Buyer reasonable access during normal business hours to its premises and any systems, employees and books and records of the Company and its Subsidiaries, including any work papers, to the extent that they are reasonably necessary to reach an understanding with respect to the computation of the Closing Date Adjusted Working Capital. If Buyer and Trigon are unable to agree on the computation of the Closing Date Adjusted Working Capital by the end of the Settlement Period, all matters in dispute (including any dispute over the Closing Date Balance Sheet) shall be referred to a nationally recognized public accounting firm (other than the respective independent auditors of Buyer and Trigon) upon which Buyer and Trigon mutually agree in writing (the "CPA Firm"), within five business days after the expiration of the Settlement Period. The CPA Firm, acting as experts and not as arbitrators, shall determine all matters in dispute and render a report thereon (the "Valuation Report") to Buyer and Trigon within thirty days from the date such matters are referred to it, or such other period of time (not to exceed an additional twenty (20) calendar days) as the CPA Firm may need to render such Valuation Report, and, upon delivery of the Valuation Report to Trigon and Buyer, it shall be final and binding on Trigon and Buyer. Buyer and Trigon each shall permit the CPA Firm such access to their respective premises and employees and the premises, systems, employees and books and records of or relating to the Company and its Subsidiaries, including any work papers, as the CPA Firm may reasonably require and shall render to the CPA Firm all such reasonable assistance as the CPA Firm may deem necessary or advisable in connection with discharging its duties as described in this Section 2.3. The fees and expenses of the CPA Firm shall be shared equally by Buyer and Trigon. By the third day (or the next succeeding business day if such day is not a business day) following (i) Trigon's receipt of an Acceptance Notice, (ii) agreement by Buyer and Trigon with respect to the computation of the Closing Date Adjusted Working Capital or (iii) the delivery by the CPA Firm of the Valuation Report to Buyer and Trigon, as the case may be, payment shall be made in accordance with the following paragraph. If the Closing Date Adjusted Working Capital is less than ($52,054) (i.e., the Adjusted Working Capital deficit is greater than the negative amount of $52,054), Seller shall pay to Buyer, in immediately available funds, the amount of such difference, without interest. If the Closing Date Adjusted Working Capital is greater than ($52,054) (i.e., the Adjusted Working Capital deficit is less than the negative amount of $52,054 or there is positive Adjusted Working Capital), Buyer shall pay to Seller, in immediately available funds, the amount of such difference, without interest. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND TRIGON Seller, on a several basis, represents and warrants to Buyer the following with respect to the matters referred to in Sections 3.1 through 3.21 and Trigon, on a several basis, represents and warrants to Buyer only the matters referred to in Section 3.22: III.1 Organization of Seller. Seller is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. III.2 Authority Relative to this Agreement. Seller has corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by Seller of this Agreement, the consummation by it of the transactions contemplated hereby and the performance by it of its obligations hereunder will have been duly authorized by the Board of Directors of Seller on or before the Closing Date, and no other corporate proceedings on the part of Seller will be necessary with respect thereto. This Agreement has been duly executed and delivered by Seller. This Agreement constitutes the valid and binding obligation of Seller, enforceable against Seller in accordance with its terms except as its terms may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors' rights generally or (ii) general principles of equity, whether considered in a proceeding in equity or at law. III.3 Organization and Qualification of Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has corporate power and authority to own, lease and use all of its properties and assets and to carry on its business as now being conducted. The Company is duly qualified and in good standing to do business in each jurisdiction in which the character of the property owned or leased by it, or the nature of the business conducted by it, makes such qualification necessary except in those jurisdictions where the failure to be duly qualified and in good standing does not and cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Seller has heretofore delivered to Buyer complete and correct copies of the Articles of Incorporation and Bylaws of the Company, as currently in effect. III.4 Subsidiaries. Each Subsidiary of the Company is listed on Schedule 3.4. Except for the one (1) share of capital stock of Health Communication Services (Bermuda) Ltd. to be transferred from Seller to Buyer at Closing in connection with the transactions contemplated hereby, the Company (or in certain cases noted in Schedule 3.4, a Subsidiary of the Company) owns all of the outstanding stock of each Subsidiary. Except as noted on Schedule 3.4, each such Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has corporate power and authority to own, lease and use all of its properties and assets and to carry on its business as now conducted. Each such Subsidiary is duly qualified and in good standing to do business in each jurisdiction in which the character of the property owned or leased by it, or the nature of the business conducted by it, makes such qualification necessary except in those jurisdictions where the failure to be duly qualified and in good standing does not and cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Seller has heretofore delivered to Buyer complete and correct copies of the Articles of Incorporation and Bylaws or comparable organizational documents of each of the Company's Subsidiaries, as currently in effect. III.5 Capitalization; Validity of Shares. (a) The authorized capital stock of the Company consists of 5,000 shares of common stock, $1.00 par value. The Company Shares, all of which are owned by Seller free of Encumbrances, are the only shares of the Company's capital stock issued and outstanding. All of the Company Shares are validly issued and outstanding, fully paid and nonassessable, have been issued in compliance in all material respects with applicable federal, state and local laws, rules and regulations and are owned, beneficially and of record, by Seller. There is no subscription right, option, warrant, convertible security or other right (contingent or otherwise) presently outstanding for the purchase, acquisition or sale of any shares of capital stock of the Company or any securities convertible into or exchangeable for such capital stock or other securities of the Company. There are no stock appreciation rights, phantom stock or similar rights in existence with respect to the Company's capital stock, no agreements purporting to restrict the transfer of such capital stock and no voting agreements, voting trusts, proxies or other arrangements restricting or affecting the voting of such capital stock. No shares of capital stock of the Company are currently pledged or held as security by any Person. At the Closing, Seller will convey to Buyer good and valid title to the Shares free of Encumbrances. (b) The authorized capital stock of each Subsidiary of the Company consists of the number of shares of capital stock shown opposite the name of such Subsidiary on Schedule 3.5. The number of shares of capital stock of each such Subsidiary that is issued and outstanding is as shown on Schedule 3.5, and all such issued and outstanding shares of capital stock are duly and validly issued, fully paid and nonassessable, have been issued in compliance in all material respects with applicable federal, state and local laws, rules and regulations and are owned, beneficially and of record, as indicated on Schedule 3.5. There is no subscription right, option, warrant, convertible security or other right (contingent or otherwise) presently outstanding for the purchase, acquisition or sale of any shares of capital stock of any Subsidiary of the Company or any securities convertible into or exchangeable for such capital stock or other securities of any such Subsidiary. There are no stock appreciation rights, phantom stock or similar rights in existence with respect to any such Subsidiary's capital stock, no agreements purporting to restrict the transfer of such capital stock and no voting agreements, voting trusts, proxies or other arrangements restricting or affecting the voting of such capital stock. No shares of capital stock of any Subsidiary of the Company are currently pledged or held as security by any Person. III.6 No Violation. Except as set forth in Schedule 3.6, the execution and delivery by Seller of this Agreement do not, and the consummation by Seller of the transactions contemplated hereby and the performance by Seller hereunder will not (i) violate, conflict with or result in a breach of any provision of the Articles of Incorporation or Bylaws of Seller, or the Articles of Incorporation or Bylaws or comparable organizational documents of the Company or any Subsidiary of the Company, (ii) except for consents or approvals required to be obtained as set forth in Schedule 3.7, constitute a breach of, result in a default or give rise to any right of termination, modification or acceleration under the provisions of any material agreement, indebtedness, lease, commitment, license, franchise, permit, authorization, arrangement, concession or other material instrument or obligation to which Seller, the Company or any Subsidiary of the Company is a party or by which it or any of its respective assets or the Shares may be bound, (iii) constitute an imposition of any material Encumbrance, restriction or charge upon the business or any assets of the Company or any of its Subsidiaries, or (iv) conflict with, violate or result in a breach of or constitute a default under any law or regulation, or any judgment, order or decree of any court, governmental body, commission, agency or arbitrator applicable to Seller, the Company, or any Subsidiary of the Company, their respective assets or the Shares, excluding from the foregoing clause (iv) such matters as do not and cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. III.7 Consents and Approvals. Except as set forth in Schedule 3.7, there is no requirement applicable to Seller, the Company or any of its Subsidiaries to make any filing or registration with, give any notice to, or obtain any authorization, permit, license, consent or approval of, any Person as a condition to the consummation of the transactions contemplated by this Agreement, excluding from the foregoing such filings, registrations, notices, authorizations, permits, licenses, consents or approvals which, if not made, given or obtained, would not have, individually or in the aggregate, a Material Adverse Effect. III.8 Compliance with Law. Except as set forth in Schedule 3.8 and in Schedule 3.9 relating to Licenses and Permits, to the knowledge of Seller, the Company has operated in substantial compliance with all applicable laws, statutes, rules and regulations, federal, state or local, domestic or foreign, including, without limitation, Environmental Laws, except for such violations thereof as do not and cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. III.9 Licenses and Permits. The term "Licenses and Permits" as used herein means governmental licenses, permits, approvals and authorizations, whether federal, state or local, domestic or foreign. Except as set forth in Schedule 3.9, to the knowledge of Seller, the Company and each of its Subsidiaries have all of the Licenses and Permits required to conduct their businesses as presently being conducted, except for such Licenses and Permits the failure of which to have does not and cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Schedule 3.9 contains a complete list of all material Licenses and Permits, all of which, to the knowledge of Seller, are in full force and effect. No notice of a violation of any such License or Permit has been received by Seller and, to the knowledge of Seller, no proceeding is pending or threatened to revoke any of them. III.10 Financial Statements. Attached as Schedule 3.10 are true, correct and complete copies of (i) the audited consolidated financial statements, including the notes thereto, of the Company and its Subsidiaries for the years ending December 31, 1994 and 1995, (the "Audited Company Financial Statements") together with the reports on such statements of the Company's auditors and (ii) the unaudited consolidated financial statements of the Company and its Subsidiaries for the nine month period ended September 30, 1996 (the "Interim Unaudited Company Financial Statements"). The Audited Company Financial Statements have been prepared from the books and records of the Company and its Subsidiaries and present fairly the consolidated financial position of the Company and its Subsidiaries as of such dates and the results of their operations and changes in financial position for such periods and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis. The Interim Unaudited Company Financial Statements have been prepared from the books and records of the Company and its Subsidiaries and, except as disclosed on Schedule 3.10, present fairly the consolidated financial position of the Company and its Subsidiaries as of the date indicated and the results of their operations and changes in financial position for the period indicated and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis. III.11 Absence of Change. Except as set forth in Schedule 3.11 or as otherwise contemplated by this Agreement, since September 30, 1996 there has not been: (i) any change, event or condition of any character (other than matters of public knowledge or other matters relating to general economic conditions or the industry or industries in which the Company or any of its Subsidiaries operates) including, without limitation, any damage, destruction or loss (whether or not covered by insurance) which has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (ii) any guarantee, obligation or liability incurred by the Company or any Subsidiary of the Company other than guarantees, obligations and liabilities arising in the ordinary course of business and Intercompany Obligations; (iii) any general increase in the compensation of the employees of the Company or any Subsidiary of the Company; (iv) any increase in the compensation or benefits paid or payable by the Company or any Subsidiary of the Company to any officer or director thereof; (v) any entry into or amendment to any employment agreement to which any employee of the Company or any Subsidiary of the Company is a party; (vi) any sale of assets of the Company or any Subsidiary of the Company other than de minimis sales or sales in the ordinary course of business; (vii) any direct or indirect redemption, purchase or other acquisition of any shares of the capital stock of the Company or any of its Subsidiaries; (viii) any split, combination or other similar change in the outstanding capital stock of the Company; (ix) any declaration, setting aside or payment of any dividend (whether in cash, capital stock or property) with respect to the Shares; (x) any issuance by the Company or any of its Subsidiaries of any shares of capital stock, or any securities or obligations convertible into or exchangeable for, or giving any Person the right to acquire from the Company or any of its Subsidiaries, any shares of its capital stock; (xi) any mortgage, pledge or imposition of any Encumbrance upon any of the Company's assets, tangible or intangible, other than Permitted Encumbrances; (xii) any sale, assignment, transfer, license or sublicense by the Company or any of its Subsidiaries to another Person of any Intellectual Property, other than in the ordinary course of business; (xiii) any change in the Company's accounting policies or practices; (xiv) any compromise, cancellation, waiver or release of any material claim other than in the ordinary course of business; (xv) any entry into by the Company or any of its Subsidiaries of any agreements with any Affiliate of the Company (other than a Subsidiary of the Company), any officer or director of the Company or any of its Subsidiaries or any Affiliate of any such officer or director, except for Intercompany Obligations and the Related Agreements; (xvi) any conduct by the Company or its Subsidiaries of its business other than in the ordinary and usual course and in a manner consistent with past practices; or (xvii) any agreement to do any of the foregoing. III.12 Tax Matters. The Company and its Subsidiaries have filed (or Trigon has filed on their behalf), in a timely manner, all federal, state, local and foreign Tax returns, reports and declarations required of them by applicable law and have paid or made provision for the payment of all Taxes which have or may become due on account of such filings. To the knowledge of Seller, such Tax returns are correct in all material respects. Neither the Company nor any of its Subsidiaries, nor any predecessor of any of the foregoing, has been a member of a group of corporations filing a consolidated or combined federal or state income Tax return other than a group the common parent of which is Trigon. Except as set forth in Schedule 3.12, neither the Company nor any of its Subsidiaries is a party to any Tax sharing or allocation agreement. The federal Tax returns for Seller and the Company have been audited by the Internal Revenue Service through 1991 and all Taxes resulting therefrom or from any concluded litigation regarding Taxes have been paid in full. Except as set forth in Schedule 3.12, neither the Company nor any of its Subsidiaries is being examined by any other Tax authority. Except as set forth in Schedule 3.12, neither the Company nor any of its Subsidiaries has received any assessment for unpaid Taxes or agreed to any extension of time for the assessment of any Taxes. Neither the Company nor any of its Subsidiaries has a liability for unpaid Taxes, other than with respect to (i) Taxes which will be accrued on the Closing Date Balance Sheet or (ii) Taxes which are, individually or in the aggregate, immaterial in amount. Seller will cause all required income Tax returns pertaining to the Company's operations for Tax reporting periods ending on or before the close of business on the Closing Date to be filed on a timely basis and in a materially correct manner and shall cause all applicable income Taxes with respect to such periods to be paid. Seller will cause Tax returns for all Taxes other than income Taxes to be filed if such returns are due prior to the Closing Date. There are no Tax liens upon any property or assets of the Company or the Subsidiaries except liens for current Taxes not yet due and payable. III.13 Labor and Employment Matters. Schedule 3.13 sets forth a complete and correct list of each employment and severance agreement (other than agreements delivered to Buyer as required by Section 3.17) to which the Company or any of its Subsidiaries is a party. Neither the Company nor any of its Subsidiaries is a party to nor is bound by any collective bargaining agreements, nor have any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes within the past five (5) years. There are no controversies, claims or grievances pending or, to the knowledge of Seller, threatened between the Company and Company Employees, which have or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To the knowledge of Seller, neither the Company nor any of its Subsidiaries is experiencing any organizational effort by or on behalf of any labor union. Copies of each of the agreements set forth on Schedule 3.13 have been delivered to Buyer. Schedule 3.13 sets forth a true, complete and correct list of all employees of the Company and its Subsidiaries as of the date of this Agreement. As of the date of this Agreement, the Company and its Subsidiaries have sufficient employees to conduct their businesses as currently being conducted. Except as set forth in Schedule 3.13, none of such employees are shared with or perform duties for any employer other than the Company or its Subsidiaries. III.14 Litigation. Except as set forth in Schedule 3.14, there are no actions, suits, claims, investigations or proceedings pending, or to the knowledge of Seller, threatened against the Company or any of its Subsidiaries, before any court, governmental body, commission, agency or arbitrator, domestic or foreign. Neither the Company nor any of its Subsidiaries is in default with respect to any judgment, order, writ, injunction or decree of any court or governmental agency, and there are no unsatisfied judgments against any of them. III.15 Assets. (a) The Company and its Subsidiaries do not own any real property. (b) Each of the Company and its Subsidiaries has good and valid title to all of the personal property, tangible or intangible, owned by it, free and clear of Encumbrances, except for Permitted Encumbrances. Schedule 3.15 contains a complete and accurate list in all material respects of all items of tangible personal property owned or leased by the Company and its Subsidiaries. As of the date of this Agreement, all items of tangible personal property owned or leased by the Company and its Subsidiaries are sufficient for the conduct of their respective businesses as currently being conducted. To the knowledge of Seller, the items of tangible personal property used by the Company and its Subsidiaries in their operations are, in the aggregate, in good working order and usable in a manner consistent with past use, reasonable wear and tear excepted, except for those matters which do not or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. III.16 Leases. Schedule 3.16 sets forth a complete list of each lease agreement to which the Company or any of its Subsidiaries is a party, whether as lessor or lessee, which relates to either real or personal property. The leases listed in Schedule 3.16 are referred to herein as the "Leases." Except as set forth in Schedule 3.16, to the knowledge of Seller, each Lease is in full force and effect, and no event has occurred or condition exists which constitutes a breach of the provisions of any Lease by the Company or any of its Subsidiaries, as the case may be, or to the knowledge of Seller, by any other party thereto. True, correct and complete copies of all of the Leases including all amendments thereto, have been previously delivered to Buyer. III.17 Material Contracts. Schedule 3.17 sets forth a complete and correct list of information, in the case of clauses (a) and (b), and, in the case of the remaining clauses of this Section 3.17, each of the following types of contracts, agreements or commitments to which the Company or any of its Subsidiaries is a party or by which it or its respective properties or assets are bound (to the extent such contracts, agreements or commitments are not otherwise disclosed in Schedules 3.12, 3.16, 3.18 and 3.20 to this Agreement): (a) customers of the Company and its Subsidiaries which have paid revenue to the Company and its Subsidiaries during the first nine months of 1996 or have entered into contracts, agreements or commitments with the Company or its Subsidiaries between October 1, 1996 and November 30, 1996; (b) vendors of the Company and its Subsidiaries which have been paid by the Company or its Subsidiaries during the first nine months of 1996 or with respect to which the Company or its Subsidiaries have incurred material obligations between October 1, 1996 and November 30, 1996; (c) contracts, agreements or commitments which provide for the sale, lease or other transfer, after the date hereof and other than in the ordinary course of business, of any of the material assets of the Company or any of its Subsidiaries; (d) contracts, agreements or commitments which relate to the employment, retirement or termination of the services of any officer or former officer of the Company or any of its Subsidiaries; (e) notes, debentures, bonds, equipment trust agreements, letter of credit agreements, loan agreements, or other contracts for the borrowing or lending of money, other than intercompany agreements with respect thereto involving Seller or its Affiliates (other than any Subsidiary of the Company); (f) contracts limiting or restraining the Company or any of its Subsidiaries from engaging or competing in any manner or in any business; (g) agreements with any Affiliate of the Company (other than any Subsidiary of the Company), any officer or director of the Company or any of its Subsidiaries or any Affiliate of any such officer or director; (h) agreements not terminable upon ninety (90) days' notice covering the employment of any present employee or consultant of the Company or any of its Subsidiaries where the annual compensation of such employee or consultant is $50,000 or more; (i) agreements which obligate the Company or any of its Subsidiaries to act as a guarantor or surety; and (j) software license agreements and other agreements relating to the Intellectual Property that are material to the business of the Company or any of its Subsidiaries as such business is now being conducted. Each of (i) the contracts relating to customers specified in clause (a) of this Section 3.17 that generated greater than $100,000 of revenue, (ii) the vendor contracts specified in clause (b) of this Section 3.17 for which the Company paid amounts greater than $100,000 and (iii) the contracts, agreements or commitments set forth in the remaining clauses (c) through (j) of this Section 3.17 is referred to in this Agreement as a "Material Contract." Except as set forth in Schedule 3.17 and except for such matters as would not or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (x) all written contracts have been duly and validly executed by the Company or one of its Subsidiaries, as the case may be, and, to the knowledge of Seller, are in full force and effect as of the date hereof; (y) there exists no breach, violation or default by the Company or any of its Subsidiaries under any written contract, and to the knowledge of Seller, no event has occurred or condition or state of facts exists which, after notice or the passage of time or both, would constitute a default by the Company or any of its Subsidiaries under any such Material Contract; and (z) there has been no receipt of notice of actual cancellation, non-renewal or termination of any Material Contract. Complete copies of all Material Contracts have previously been delivered to Buyer or will be delivered to Buyer within 5 business days of the date hereof. III.18 Intellectual Property. The term "Intellectual Property" means the corporate name, trade names, trademarks, service marks, copyrights, inventions, trade secrets, software, and other property rights, including without limitation rights to telephone numbers generally considered to be intellectual property. As of the Closing Date, the Intellectual Property which the Company owns, or has valid rights to use, in conjunction with the services to be provided to the Company or its Subsidiaries by Trigon pursuant to the Transition Services Agreement, will be reasonably sufficient to permit the Company to conduct its business as presently conducted in all material respects, including the performance of the Company of its obligations under the EDI Open Network Services Agreement. Schedule 3.18 contains a complete and correct list of all Intellectual Property that is material to the operation of the business of the Company or to the operation of the business of any Subsidiary of the Company. No action suit, claim, investigation or proceeding is pending or, to the knowledge of Seller, threatened against Trigon, Seller, the Company or any of the Company's Subsidiaries alleging that the use of any of the Intellectual Property utilized in the conduct of the Company's business infringes upon the rights of any other Person. To the knowledge of Seller, (i) neither the Company nor any of its Subsidiaries is infringing upon any intellectual property right of any other Person, and (ii) no other Person is infringing upon any intellectual property rights of the Company or any of its Subsidiaries. III.19 Insurance. Schedule 3.19 sets forth a list of casualty insurance policies currently maintained by the Company or any of its Subsidiaries and all surety and other bonds to which the Company or any of its Subsidiaries are party. The Company is not in default in any material respect under any provision of any such policy or bond nor has it failed to give notice or present any material claim thereunder in a timely manner so as to bar recovery of any valid claim. Except as set forth in Schedule 3.19, there are presently no claims pending under such policies of insurance and to the knowledge of Seller, there exists no event that would cause the Company or any of its Subsidiaries to be required to give notice thereof in order to assert a claim under such policies. III.20 Employee Benefit Plans. (a) Schedule 3.20 lists all of the employee benefit plans and programs including, without limitation, all retirement, savings and other employee pension benefit plans as defined in Section 3(2) of ERISA ("Pension Plans") maintained, sponsored or contributed to by the Company or any of its Subsidiaries currently or within the five years preceding the date of this Agreement, all health, severance, insurance, disability and other employee welfare benefit plans as defined in Section 3(1) of ERISA ("Welfare Plans") and all bonus, deferred compensation, incentive, vacation and other similar plans ("Incentive Plans") that are maintained, sponsored or contributed to by the Company or by any Subsidiary of the Company. True and complete copies of all Pension Plans, Welfare Plans and Incentive Plans have been provided or made available to Buyer. (b) As to each of the Pension Plans, to the knowledge of Seller, the Company and each of its Subsidiaries have complied, in all material respects, with all governing documents and all applicable laws and regulations in administering such plans, including specifically the applicable provisions of Title I and Title IV of ERISA. The HCS 401(k) Plan sponsored by the Company (the "401(k) Plan") is the only Pension Plan intended to satisfy the requirements of Section 401(a) of the Internal Revenue Code and to have a trust exempt under Section 501(a) of the Internal Revenue Code. To the knowledge of Seller, the 401(k) Plan has been administered so as to comply, in all material respects, with the applicable qualification provisions of Section 401 of the Internal Revenue Code. The 401(k) Plan has heretofore been determined by the Internal Revenue Service to so qualify under the applicable qualification provisions of Section 401 of the Internal Revenue Code and the exemption provisions of Section 501(a) of the Internal Revenue Code. To the knowledge of Seller, nothing has occurred since the date of the most recent determination that would be reasonably likely to cause the 401(k) Plan or its trust to fail to qualify or be exempt under Sections 401(a) and 501(a) of the Internal Revenue Code. To the knowledge of Seller, no prohibited transaction, as defined in Section 4975 of the Internal Revenue Code, which is not exempt, has occurred with respect to the 401(k) Plan. (c) To the knowledge of Seller, each of the Welfare Plans and Incentive Plans have complied, in all material respects, with the governing document of such Welfare Plan and Incentive Plan and all applicable laws and regulations in the administration thereof including, without limitation, the provisions of ERISA when applicable. To the knowledge of Seller, neither the Company nor any of its Subsidiaries has any liability for retiree or life insurance benefits under any of the Welfare Plans (except for obligations under Section 4980B of the Internal Revenue Code and Sections 601 to 608 of ERISA ("COBRA")). To the knowledge of Seller, any Welfare Plan providing group health benefits to Company Employees that is subject to COBRA has been administered, in all material respects, in compliance with COBRA. (d) None of the Pension Plans is a "multiemployer plan" as defined in Section 3(37) of ERISA. (e) To the knowledge of Seller, there are no claims (other than claims for benefits in the ordinary course) which have been threatened, asserted or instituted against the Pension Plans, Welfare Plans or Incentive Plans, any related trust, or any fiduciary, administrator or sponsor of such Plan. (f) Except as set forth in Schedule 3.20 with respect to the HCS 401(k) Restoration Plan, neither the execution and delivery by Seller of this Agreement nor the consummation by Seller of the transactions contemplated hereby will (i) result in any material payment (including, without limitation, any severance payment or payment of unemployment compensation) by the Company or any of its Subsidiaries to any Company Employee or (ii) materially increase or accelerate any compensation or benefits otherwise payable by the Company or any of its Subsidiaries to any Company Employee. (g) To the knowledge of Seller, neither the Company nor any of its Subsidiaries is obligated, contingently or otherwise, to pay any amount which would be treated as an excess parachute payment, as defined in Section 280G(b)(1) of the Internal Revenue Code. (h) The Company shall not be obligated to contribute cash or other property to the trust under the SERP (as hereinafter defined) after the Closing Date or to fund such benefits outside of the trust. There are no restrictions on Buyer's rights to terminate the SERP as to benefits that have not accrued after the Closing Date. (i) As to the SERP and the Restoration Plan (as hereinafter defined), the Company has filed or caused to be filed with the Department of Labor ("DOL") the statement described in DOL Regulation section 2520.104-23(b), within one hundred and twenty (120) days after the earlier of the Company's adoption of such plan or its effective date. (j) Except as specifically set forth in Article VI, neither Buyer nor any ERISA Affiliate of Buyer shall have any liability or obligation with respect to (i) employment-related liabilities, whether contingent or otherwise, arising out of any individual's employment or working relationship with Seller or its ERISA Affiliates other than the Company; or (ii) any benefit plan, program, arrangement or policy maintained or contributed to by Seller or any ERISA Affiliate of Seller other than the Company. An "ERISA Affiliate" of any entity is any other entity which, together with such entity, would be treated as a single employer under Internal Revenue Code Section 414. III.21 Finders. Except for Ewing Monroe & Co. no broker, finder or investment banker is entitled to any fee or commission from Seller for services rendered on behalf of Seller in connection with the transactions contemplated by this Agreement. Seller is solely responsible for the fees and expenses of Ewing Monroe & Co. III.22 Representations as to Trigon Matters. (a) Trigon is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. (b) Trigon has corporate power and authority to execute and deliver this Agreement and the Related Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Trigon of this Agreement and the Related Agreements to which it is a party, the consummation by it of the transactions contemplated hereby and thereby and the performance by it of its obligations hereunder and thereunder have been duly authorized by the Board of Directors of Trigon, and no other corporate proceedings on the part of Trigon are necessary with respect thereto. This Agreement and the Related Agreements to which it is a party have been duly executed and delivered by Trigon. This Agreement and the Related Agreements to which Trigon is a party constitute the valid and binding obligations of Trigon, enforceable against Trigon in accordance with their respective terms except as such terms may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors' rights generally or (ii) general principles of equity, whether considered in a proceeding in equity or at law. (c) The execution and delivery by Trigon of this Agreement and the Related Agreements do not, and the consummation by Trigon of the transactions contemplated hereby and thereby, and the performance by Trigon hereunder and thereunder will not (i) violate, conflict with or result in a breach of any provision of the Articles of Incorporation or Bylaws of Trigon, (ii) except for consents or approvals required to be obtained as set forth in Schedule 3.7, constitute a breach of, result in a default or give rise to any right of termination, modification or acceleration under the provisions of any material agreement, indebtedness, lease, commitment, license, franchise, permit, authorization, arrangement, concession or other material instrument or obligation to which Trigon is a party relating to the EDI Open Network Service Agreement or the Transition Services Agreement, (iii) constitute an imposition of any material Encumbrance, restriction or charge upon the business or any assets of Trigon relating to the EDI Open Network Service Agreement or the Transition Services Agreement, or (iv) conflict with, violate or result in a breach of or constitute a default under any law or regulation, or any judgement, order or decree of any court, governmental body, commission, agency or arbitrator applicable to Trigon or its assets, excluding from the foregoing clause (iv) such matters as do not and cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (d) Except as set forth in Schedule 3.7, there is no requirement applicable to Trigon to make any filing or registration with, give any notice to, or obtain any authorization, permit, license, consent or approval of, any Person as a condition to the consummation of the transactions contemplated by this Agreement or the Related Agreements, excluding from the foregoing such filings, registrations, notices, authorizations, permits, licenses, consents or approvals which, if not made, given or obtained, would not have, individually or in the aggregate, a Material Adverse Effect. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller and Trigon the following: IV.1 Organization; Authority Relative to this Agreement. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has corporate power and authority to enter into this Agreement, to consummate the transactions contemplated hereby. The execution and delivery by Buyer of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of Buyer and no other corporate proceedings on the part of Buyer are necessary with respect thereto. This Agreement has been duly executed and delivered by Buyer. This Agreement constitutes a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms except as its terms may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors' rights generally or (ii) general principles of equity, whether considered in a proceeding in equity or at law. IV.2 No Conflict. The execution and delivery by Buyer of this Agreement does not, the consummation by Buyer of the transactions contemplated hereby and the performance by Buyer hereunder will not (i) violate or result in a breach of any provisions of the Certificate of Incorporation or Bylaws of Buyer, (ii) constitute a breach of, result in a default or give rise to any right of termination, modification or acceleration under the provisions of any material agreement, indebtedness, lease, or other material instrument or obligation to which Buyer is a party or by which it or any of its respective assets may be bound, or (iii) conflict with, violate or result in a breach of or constitute a default under any material law or regulation, or any material judgment, order or decree of any court, governmental body, commission, agency or arbitrator applicable to Buyer or its assets. IV.3 Consents and Approvals. Except for the applicable provisions of the HSR Act, there is no requirement applicable to Buyer to make any filing with, or to obtain the consent or approval of any governmental agency or other Person as a condition to the consummation of the transactions contemplated by this Agreement, except for any such filing, consent or approval which if not made, given or obtained, would not have, individually or in the aggregate, a material adverse effect on Buyer's ability to consummate the transactions contemplated by this Agreement. IV.4 Litigation. No action, suit, claim, investigation or proceeding is pending or, to the knowledge of Buyer, threatened against Buyer which seeks to prevent, restrict or delay consummation of the transactions contemplated by this Agreement. IV.5 Investment Representation. Buyer is acquiring the Shares for investment and not with a view to their sale or distribution other than in a sale or distribution which is registered under applicable securities laws or is exempt from such registration, and Buyer will accept certificates for the Shares with a legend thereon in form and substance reasonably satisfactory to Buyer indicating this fact. IV.6 Finders. No broker, finder or investment banker is entitled to any fee or commission from Buyer for services rendered on behalf of Buyer in connection with the transactions contemplated by this Agreement. IV.7 No Reliance. Buyer represents and warrants that in entering into this Agreement Buyer has relied solely on the representations, warranties and covenants of Seller and Trigon contained in this Agreement, the Schedules hereto and any documents delivered by Seller to Buyer pursuant to Article III hereof and has not relied on any other information provided to Buyer by Seller, Trigon, the Company, any Subsidiaries or Affiliates of the Company or the officers, directors, agents or representatives of any of them. ARTICLE V ADDITIONAL AGREEMENTS V.1 Conduct of Business of the Company. From the date hereof until the Closing and except as otherwise specified herein or in a Schedule hereto, Seller will cause the Company to (i) conduct its business only in the ordinary and usual course and in a manner substantially consistent with past practices, (ii) maintain in good repair, at its expense, all of its material properties necessary to the operation of the business of the Company and its Subsidiaries, and (iii) use its commercially reasonable best efforts to preserve its present relationships with licensors, suppliers, dealers, customers and others having material business relationships with the Company or any of its Subsidiaries and maintain the material rights and franchises of the Company and its Subsidiaries. Trigon and Seller will cause the management of the Company to meet with Buyer as reasonably requested on a regular basis to discuss the general status of the ongoing operations of the Company and any material developments relating to its business. Trigon and Seller will as promptly as practicable notify Buyer (w) of any emergency or material change in the normal conduct of the business or operations of the Company and its Subsidiaries, (x) of the threat of, or initiation of, any litigation involving the Company or any of its Subsidiaries, (y) of the initiation of any investigation of the Company or any of its Subsidiaries by any party, whether private or governmental, and (z) of any material budget revisions involving the business of the Company and its Subsidiaries; will keep Buyer reasonably informed of developments with respect to such events; and will afford Buyer's representatives access that is reasonable under the circumstances to all materials in its possession relating thereto upon reasonable notice. Notwithstanding the foregoing, Seller and its Affiliates (other than the Company and its Affiliates) may, in their sole discretion and without any need to consult with Buyer, take any action they deem appropriate with respect to any litigation, arbitration or other proceeding Seller and such Affiliates may be a party to, whether actual or threatened, relating to disputes with the selling shareholders of Computerized Medical Communications, Inc. and its affiliate CMC Technologies Corp. (collectively, the "CMC Dispute"), including, but not limited to, settlement, indemnification, release or forbearance; provided, however, that no such action shall restrict or adversely affect the Company or any of its Subsidiaries. To the extent reasonably requested by Seller or such Affiliates after the Closing Date, Buyer will make available to Seller or such Affiliates on a timely basis and during normal business hours such books, records, documents and employees of the Company and its Subsidiaries as Seller may deem necessary or advisable in order to deal with the CMC Dispute. Any reasonable third-party out-of- pocket expenses incurred by the Company or its Affiliates as a result of the preceding sentence shall be reimbursed by Trigon as promptly as practicable after presentation of a reasonably detailed invoice describing such expenses. V.2 Forbearance by the Company. Except as contemplated by this Agreement, from the date hereof until the Closing, without written consent of Buyer, neither Trigon nor Seller will permit the Company or any of the Company's Subsidiaries to: (i) sell or dispose of a material portion of its assets except in the ordinary and usual course of business; (ii) incur any obligations for borrowed money, or mortgage, pledge or otherwise encumber any of its assets or suffer the imposition of any Encumbrance or allow any Encumbrance to exist (except for Permitted Encumbrances) upon such assets except in the ordinary and usual course of business consistent with past practice, except for Intercompany Obligations; (iii) enter into, amend, terminate or assign any Material Contract or Lease or waive, release, compromise or assign any material rights or claims (other than in connection with the CMC Dispute); (iv) make any capital expenditures or incur any obligation or liability for borrowed money, other than in the ordinary and usual course of business; (v) merge or consolidate with, acquire any or all of the capital stock or assets of or make any material investment in any other Person, other than in the ordinary and usual course of business; (vi) assume, guarantee, endorse or otherwise become responsible for the obligations of any other Person, or make loans or advances to any other Person, except in the ordinary and usual course of business consistent with past practice; (vii) increase in any manner the compensation or benefits of any Company Employees unless such action is required by an existing agreement, a copy of which has previously been provided to Buyer, except for normal increases for Company Employees (other than executive officers) based on length of employment with the Company or any of its Subsidiaries consistent with past practices; (viii) commence or settle any litigation (other than the CMC Dispute) involving any liability of the Company or any of its Subsidiaries for money damages or restrictions upon its operations; (ix) change in any manner the Company's accounting policies or practices; (x) split, combine or otherwise change its capital stock, or redeem or otherwise acquire any of its shares; (xi) with respect only to the Company, declare, set aside or pay any dividend or other distribution (whether in cash or property) with respect its capital stock; (xii) issue or sell any shares of its capital stock or any securities or obligations convertible into or exchangeable for, or giving any Person any right to acquire any shares of its capital stock; (xiii) amend its Articles of Incorporation or Bylaws; (xiv) cancel or allow any of its existing insurance policies covering the Company or its Subsidiaries to lapse unless such policies are simultaneously replaced by policies with comparable coverage; (xv) adopt any new plan, program, policy or arrangement which, if it existed as of the Closing Date, would constitute a Pension Plan or Welfare Plan; (xvi) enter into any agreements with any Affiliate of the Company (other than a Subsidiary of the Company), any officer or director of the Company or any of its Subsidiaries or any Affiliate of any such officer or director, except for Intercompany Obligations and the Related Agreements; or (xvii) enter into an agreement to do any of the things described in clauses (i) through (xvi) above. V.3 Investigation of Business and Properties. From the date hereof until the Closing, Trigon and Seller will, and will cause the Company to, afford Buyer and its representatives, including, without limitation, its attorneys, accountants and financial advisors, upon reasonable notice, full reasonable access during normal business hours to the officers, employees, properties, contracts, and books and records of the Company, in order to enable Buyer to make a full investigation of the condition of the Company. In addition Seller and the Company will, and will cause the Company to, furnish Buyer with such financial, operating and additional data relating to the Company and its Subsidiaries as Buyer may reasonably request in making such investigation. V.4 Confidentiality. (a) The information which Buyer has acquired about the Company or its Subsidiaries pursuant to the Confidentiality Agreement or acquires about the Company or its Subsidiaries as a result of the investigations permitted by this Agreement is termed "Evaluation Material." Buyer agrees that neither it nor any of its representatives will use any such material for any purpose not related to the transactions contemplated by this Agreement and will not disclose any such material to anyone except its representatives who may need such information to perform their respective duties and have been informed of its confidential nature and directed to treat it confidentially. If the transactions contemplated by this Agreement are not consummated, Buyer agrees that it and its representatives will return any written Evaluation Material in their possession, or will destroy and will not retain any such material, any copies thereof or any notes or memoranda made using such material. (b) Information which Buyer or its Affiliates (including, as of the Closing Date, the Company and its Subsidiaries) has acquired or is in possession of about Trigon and its Affiliates and their respective businesses and affairs as of the Closing Date is termed "Trigon Information". Buyer agrees that, for a period of three years after the Closing Date, neither it nor any of its Affiliates (including, after the Closing Date, the Company and its Affiliates) will use any such Trigon Information for any purpose not relevant to the transactions contemplated by this Agreement or the Related Agreements and will not disclose any such information to anyone except its representatives who need to know such information to perform their respective duties and have been informed of its confidential nature and directed to treat it confidentially. (c) Information which Trigon and its Affiliates (other than the Company and its Subsidiaries) has acquired or is in their possession of about the business and affairs of the Company and its Subsidiaries as of the Closing Date is termed "Company Information". Trigon and its Affiliates agree that, for a period of three years after the Closing Date, neither Trigon, its Affiliates nor any of their representatives will use any such Company Information for any purposes not related to the transactions contemplated by this Agreement or the Related Agreements and will not disclose any such information to anyone except their representatives who need to know such information to perform their respective duties and have been informed of its confidential nature and directed to treat it confidentially; provided, however, that the foregoing shall not prevent in any manner Trigon's ability to conduct its business, other than Company-related business, as such was conducted prior to the Closing Date. (d) The parties agree that monetary damages alone would not be a satisfactory remedy for a breach of this Section 5.4 by a party hereto, and that if any provision of this Section 5.4 is breached, the non-breaching party is entitled to injunctive relief as well as monetary damages. (e) Notwithstanding the foregoing provisions of this Section 5.4, a party hereto may use and disclose Evaluation Material and information obtained from the Evaluation Material, Trigon Information or Company Information, as applicable, to the extent that (i) it acquired such information on a non- confidential basis prior to receipt thereof from another party hereto or a representative of another party hereto or (ii) such information has become generally available to the public other than as a result of a breach of this Agreement. Furthermore, a party hereto may disclose such information to the extent that it is required to do so to comply with a governmental or judicial order or decree, but upon receiving notice that any such order or decree has been issued or is being sought, it will promptly notify the other parties hereto and will, at such other party's expense, cooperate with such other party's efforts to contest the issuance of such order or decree. V.5 Subsequent Events. If any event shall occur prior to the Closing which, had it occurred prior to the execution of this Agreement, should have been disclosed by a party to this Agreement in a representation and warranty or otherwise, then upon the happening of such event, such party shall promptly disclose the happening of such event to the other party hereto. V.6 HSR Filings. On or before December 5, 1996, Seller and Buyer will each use its best efforts to file with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice, pursuant to the HSR Act, Notification and Report Forms with respect to the transactions contemplated by this Agreement and each of them will respond as promptly as is practicable to all inquiries received from either agency for additional information or documentation. Buyer shall pay all the filing fees under the HSR Act. V.7 Expenses. Except as otherwise provided in this Agreement and the Related Agreements, all costs and expenses incurred in connection with this Agreement and the Related Agreements and the transactions contemplated hereby and thereby will be paid by the party incurring such costs and expenses, it being understood that Seller (and not the Company or its Subsidiaries) shall be responsible for paying the fees and expenses of Seller's and its Affiliate's counsel and accountants in connection with such transactions and any payments required in obtaining the consents listed on Schedule 3.7. V.8 Public Announcements. The parties will consult with one another before issuing any press releases or otherwise making any public statements with respect to this Agreement and the transactions contemplated hereby and will not issue any such press release or make any such public statement without the consent of the other unless such action is deemed necessary or advisable by counsel to the issuing party in order to satisfy such party's disclosure obligations imposed by law, in which case the party deeming it necessary or advisable to make such release or statement shall provide a copy thereof to the other party before it is publicly released or made. V.9 Efforts to Consummate. Each of the parties agrees to use its commercially reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate, as promptly as practicable, the transactions contemplated hereby, including, but not limited to, the obtaining of all necessary consents, waivers, authorizations, orders and approvals of third parties, whether private or governmental, required of it. Each party agrees to cooperate fully with the other party in assisting it to comply with the provisions of this Section. Notwithstanding the foregoing, neither party shall be required to initiate any litigation, make any substantial payment or incur any material economic burden, except for a payment otherwise required of it, to obtain any consent, approval or waiver. V.10 Pre-Closing Affiliate Transactions. (a) Immediately prior to Closing, Seller and the Company will eliminate and pay off all Intercompany Obligations. In paying off or otherwise eliminating such Intercompany Obligations, the Company may use any and all cash or cash equivalents in the possession of the Company and shall set off against such Intercompany Obligations owed by it any amounts of Intercompany Obligations owed to the Company by Seller or its Affiliates. If, after giving effect to the foregoing, any cash or cash equivalents are in the Company's possession, the Company will declare a special dividend in an amount equal to such cash or cash equivalents to be paid to Seller immediately prior to Closing. (b) If the Closing Date Balance Sheet is as of a date other than the Closing Date, the Company may use cash and cash equivalents to pay off or otherwise eliminate Intercompany Obligations or declare a special dividend as provided in paragraph (a) above, but only in an amount equal to cash and cash equivalents on hand as of the date of the Closing Date Balance Sheet. V.11 Further Assurances. Each party shall, upon request of the other, at any time and from time to time execute, acknowledge, deliver and perform all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and instruments of further assurances as may reasonably be necessary or appropriate to carry out the provisions and intent of this Agreement. V.12 Preparation of Financial Statements. Seller and Trigon shall cooperate with Buyer in connection with the preparation or delivery of any audited financial statements relating to the Company and its Subsidiaries as may be required to be included in a current report on Form 8-K to be filed by Buyer with the Securities and Exchange Commission in connection with the transactions contemplated by this Agreement, such financial statements to be in form and with such consents as may be necessary under the rules and regulations applicable to current reports on Form 8-K. Buyer shall reimburse Seller and Trigon for all out-of-pocket third party expenses incurred in connection with such cooperation as promptly as practicable after presentation of a reasonably detailed invoice describing such expenses. V.13 No Solicitation. After the execution of this Agreement and until its termination, neither Trigon nor Seller shall, nor shall it authorize or permit any officer, director or employee of or any investment banker, attorney or other advisor or representative of Trigon or Seller to (i) solicit or initiate, or encourage the solicitation of, any Acquisition Proposal (other than from Buyer), (ii) participate in any discussions or negotiations regarding, or furnish to any Person (other than Buyer) any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that would constitute, or may reasonably be expected to constitute, any Acquisition Proposal or (iii) enter into any agreement or understanding with any Person (other than Buyer) with respect to an Acquisition Proposal. "Acquisition Proposal" shall mean a proposal relating to an acquisition of the Company or any of its Subsidiaries, whether structured in the form of a sale of capital stock, a sale of all or substantially all of the assets of the Company and its Subsidiaries, a merger, a consolidation or a share exchange. Trigon and its Affiliates agree to notify Buyer promptly upon the receipt of an unsolicited Acquisition Proposal. V.14 Veritus Service Agreement. Buyer will cooperate in good faith with Trigon's and Seller's efforts to make mutually satisfactory arrangements to release Trigon, and substitute Buyer, as guarantor of the Company's obligations under the Veritus Service Agreement arising after the Closing Date. ARTICLE VI EMPLOYEES AND EMPLOYEE MATTERS VI.1 Company Employees. Seller has delivered to Buyer Schedule 6.1 which is a list of all of the employees of the Company and its Subsidiaries ("Company Employees") as of November 27, 1996, whether salaried or hourly. At and after the Closing Date except as expressly provided in this Article VI, the Company will be responsible for wages, salaries and other employee benefits for the Company Employees. VI.2 Employee Incentive Plans. (a) Participation in Buyer's Plans. Effective as of the Closing Date, Buyer will make its employee benefit plans, arrangements and programs available to Company Employees on the same terms applicable to Buyer's employees. Buyer agrees to credit Company Employees with their terms of service with the Company, any Subsidiary of the Company or Seller or Trigon for purposes of eligibility to participate in Buyer's employee benefit plans as defined in Section 3(3) of ERISA and any other compensatory plans or programs of Buyer. (b) The Company's Pension Plans. The Company shall maintain its 401(k) Plan through the Closing Date. The Company shall retain all rights and obligations to maintain the Company's Supplemental Executive Retirement Plan (the "SERP") after the Closing Date. Prior to the Closing Date, the SERP shall be amended, with the consent of each participant, to constitute a defined contribution plan, rather than a defined benefit plan, so that each participant's benefits are based solely on the amount credited to such participant's account under the SERP. In connection with maintaining the SERP, at the Closing, Buyer shall replace the trustees of the HCS Supplemental Retirement Trust. After the Closing Date, Buyer will ensure that all payments under the HCS 401(k) Restoration Plan (the "Restoration Plan") will be made to the beneficiaries of the Restoration Plan in accordance with its terms, after which time Buyer may terminate the Restoration Plan in accordance with its terms. (c) COBRA. Trigon and Trigon's Welfare Plans shall be responsible for obligations under COBRA with respect to qualifying events of Company Employees and their dependents through the Closing Date, and Buyer and Buyer's welfare plans shall be responsible for such COBRA obligations effective as of the date following the Closing Date. VI.3 Administration. Trigon and Buyer shall each make its appropriate employees available to the other at such reasonable times as may be necessary for the proper administration by the other of any and all matters relating to Company Employees. If, as a result of the transactions contemplated by this Agreement, reports to any governmental agency are required to be filed with respect to any of Trigon's Pension Plans, Welfare Plans or Incentive Plans, Trigon will file such reports and Buyer shall cooperate to the extent necessary for the preparation of such filings. VI.4 Severance Plan. (a) The Company shall be responsible for any severance payments for Company Employees who are terminated prior to the Closing Date including any Company Employees terminated in connection with the Chicago Consolidation. Trigon shall or Trigon shall cause Seller to be responsible for any severance payments for the individuals listed on attached Schedule 6.4(a) arising under the employment agreements of such individuals listed on Schedule 3.17 hereto. Trigon shall or Trigon shall cause Seller to be responsible for any severance payments that are not adequately accrued or reserved on the Closing Date Balance Sheet for Company Employees listed on Schedule 6.4(b) terminated in connection with the Chicago Consolidation after the Closing Date. For a period of six months following the Closing Date, Buyer agrees to honor the severance arrangements contained in the employment agreements with Carl Bertram and Michael Holdren delivered to Buyer and, as to all other Company Employees, to provide severance benefits which are not less favorable than the benefits provided under the Company's Severance Plan as in existence on the Closing Date as set forth on Schedule 6.4(c). (b) Seller and its Affiliates agree that for a period of one year from the Closing Date, Seller and its Affiliates will not solicit for employment or employ any employees of the Company and its Subsidiaries unless such employees are terminated by Buyer, the Company or any Subsidiary. If a Company Employee is terminated by Buyer, the Company or its Affiliates within six months after the Closing Date and is subsequently hired by Seller or its Affiliates during such six-month period, Seller or such Affiliate shall be responsible and hereby agrees to pay any such severance with respect to which Buyer or the Company would otherwise be responsible under Section 6.4(a) above. ARTICLE VII TAX MATTERS VII.1 Allocation of Tax Liability. (a) Seller and Trigon shall indemnify and hold Buyer, the Company and its Subsidiaries harmless from (i) any liability of the Company for Taxes related or allocable to a period ending on or before the Closing Date (including any Taxes related to the election described in Section 7.6) and (ii) any liability of Seller or any member of its affiliated group other than the Company or the Subsidiaries whenever arising. Buyer shall indemnify and hold Seller and Trigon harmless from and against any Liability for Taxes of the Company or any of its Subsidiaries related to any period following the Closing Date. (b) Subject to the provisions of Section 7.2(f) below, in the case of Taxes that are payable with respect to a taxable period that begins before the Closing Date and ends after the Closing Date, the portion of any such Tax that is allocable to the portion of the period ending on the Closing Date shall: (i) in the case of Taxes that are either (x) based upon or related to income or receipts or (y) imposed in connection with any sale, other transfer or assignment or any deemed sale, transfer or assignment of property (real or personal, tangible or intangible), be deemed equal to the amount that would be payable if the taxable year ended on the Closing Date, and (ii) in the case of Taxes imposed on a periodic basis with respect to the assets of the Company or otherwise measured by the level of any item, be deemed to be the amount of such Taxes for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period) multiplied by a fraction the numerator of which is the number of calendar days in the portion of such period ending on the Closing Date and the denominator of which is the number of calendar days in the entire period. For purposes of clause (i) above, any exemption, deduction, credit or other item that is calculated on a periodic basis shall be allocated to the period beginning before the Closing Date and, pursuant to clause (i) treated as ending on the Closing Date, based on the pro rata portion of such item determined by multiplying the total amount of such item times a fraction, the numerator of which is the number of calendar days in the period up to and include the Closing Date and the denominator of which is the total number of calendar days in the entire period. (c) On or prior to the Closing Date, Trigon and Seller shall release the Company and its Subsidiaries from any and all Tax sharing agreements and such agreements shall have no further force and effect with respect to the Company and its Subsidiaries. From and after the Closing Date, any Tax-related obligations between the Company and its Subsidiaries and Seller shall be evidenced solely by the terms of this Agreement. VII.2 Returns and Payments. (a) With respect to any Tax return required to be filed with respect to the Company after the Closing Date and as to which Tax is exclusively allocable to Seller under Section 7.1, Seller shall have exclusive authority to report for Tax purposes the operations of the Company. The Company will furnish Tax information to Seller for inclusion in its federal consolidated income Tax Return for the period that includes the Closing Date in accordance with Company's past custom and practice. Buyer shall be responsible for preparing and filing all other Tax returns. (b) Seller and Buyer shall each pay or cause to be paid when due and payable all Taxes that have not been paid as of the Closing Date that are allocable to them pursuant to the provisions of Section 7.1. (c) Payment of any amounts due under this Article shall be made (i) with respect to agreed amounts, at least three calendar days before the payment of any such Tax is due, provided that no such payment shall be due prior to 10 business days following receipt of written notice that payment of such Tax is due, or (ii) within 10 business days following either an agreement between Seller and Buyer that an amount is payable by Seller or Buyer to the other or a "determination" as defined in section 1313(a) of the Code. (d) All Taxes paid by Seller pursuant to this Section 7.2 shall be repaid to Seller by Buyer or the Company to the extent of amounts for Taxes accrued on the Closing Date Balance Sheet and included in the computation of Adjusted Working Capital. Any payment pursuant to the preceding sentence shall be reduced by the amount of any Taxes paid by Buyer or the Company that were not accrued on the Closing Date Balance Sheet and that were allocated to Seller pursuant to this Section 7.1. (e) Seller shall have the authority to amend any Tax returns relating to Taxes of the Company or its Subsidiaries for any period before the Closing Date and Buyer waives any right that it may have to amend any such returns and shall cause the Company to refrain from amending such Tax returns. Buyer shall promptly pay to Seller any refunds of Taxes received by the Company, the Subsidiaries or Buyer with respect to Taxes allocable to Seller, and Seller shall be entitled to all benefits with respect to such refunds or any right to receive such refunds, including without limitation any refunds arising from amended returns filed for any period before the Closing Date. Any amendment by Seller may only be made in a manner that causes any Tax return so amended to continue to be correct in all material respects. (f) If any audit, amended Tax return, or other action results in a reduction of Taxes, such reduction (including any interest paid thereon) when realized shall be paid promptly: (i) to Seller if the deduction, loss or other item giving rise to the refund is attributable to operations occurring on or before the Closing Date and (ii) to the Company or Buyer if such deduction, loss or other item is attributable to operations occurring after the Closing Date. The parties shall lend mutual assistance to each other in taking such action as may be necessary to obtain a refund including the preparation, filing and processing of any requisite amended Tax return or other documents. (g) Seller and Buyer agree to the "closing of the books" election under Treasury Regulation Section 1.382-6(b). Seller shall use the Closing Date Balance Sheet in the preparation of Tax returns of the Company for periods before the Closing Date and Buyer shall use the Closing Date Balance Sheet in the preparation of Tax returns of the Company for periods after the Closing Date. VII.3 Cooperation and Exchange of Information. Seller and Trigon, on the one hand, and Buyer, on the other hand, will provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax return, amended return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes or a right to a refund of Taxes or participating in or conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of relevant Tax returns or portions thereof, together with accompanying schedules and related work papers and documents relating to rulings or other determinations by taxing authorities, but in no event shall Seller or Buyer be required to disclose to the other any information relating to the operations of either, as the case may be, other than information relating to a liability for Taxes of the Company. Trigon, Seller and Buyer shall make their respective employees available on a mutually convenient basis to provide explanations of any documents or information provided hereunder. Trigon, Seller and Buyer will retain all Tax returns, schedules and work papers and all material records or other documents relating to Tax matters of the Company for its taxable period first ending after the Closing Date and for all prior taxable periods until the expiration of the statute of limitations of the taxable periods to which such returns and other documents relate, without regard to extensions (but taking into account any extended statute of limitations applicable to a year in which a net operating loss is reported) except to the extent notified by the other party in writing of such extensions for the respective Tax periods. After such time, before Buyer shall dispose of any of such books and records, at least 90 calendar days prior written notice to such effect shall be given by Buyer to Seller, and Seller shall be given an opportunity, at its cost and expense, to remove and retain all or any part of such books and records as Seller may select. Any information obtained under this Section 7.3 shall be kept confidential, except as may be otherwise necessary in connection with the filing of returns or claims for refund or in conducting an audit or other proceeding. VII.4 Tax Sharing Indemnification. Trigon and Seller agree to indemnify Buyer from and against any loss Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any liability of the Company for Taxes of any person other than the Company or any of its Subsidiaries (i) under Reg. Sec. 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. VII.5 Method of Asserting Tax Claims. (a) After the closing, Buyer and Seller each shall promptly notify the other party in writing of the commencement of any Tax audit or administrative or judicial proceeding affecting the Taxes of the Company, which, if determined adversely to the taxpayer or after the lapse of time would be grounds for indemnification of either Seller or Buyer ("Tax Indemnitee") by the other party ("Tax Indemnitor"). Such notice shall contain factual information describing the asserted Tax liability in reasonable detail and shall include copies of any notice or other document received from any taxing authority in respect of any such asserted Tax liability. If either Buyer or Seller fails to give the other party prompt notice of an asserted Tax liability as required by this Section, then (a) if the Tax Indemnitor is precluded by the failure to give prompt notice from contesting the asserted Tax liability in the appropriate administrative or judicial forums, then such party shall not have any obligation to indemnify the other party for any loss or damage arising out of such asserted Tax liability, or (b) if the Tax Indemnitor is not so precluded from contesting the asserted Tax liability but such failure to give prompt notice results in a detriment to the Tax Indemnitor, then any amount which the Tax Indemnitor is otherwise required to pay with respect to such liability shall be reduced by the amount of such detriment. (b) With respect to any Tax return for which Seller is responsible, Seller shall have exclusive authority to supervise any Tax audit and have final decision authority with respect to settlement of any audit adjustments of the Company and its Subsidiaries. Seller will allow the Company to participate at its own expense in any audits of any Tax returns to the extent that such returns relate to the Company. Seller will not settle any such audit in a manner that would have a Material Adverse Effect on the Company after the Closing Date unless such settlement would be reasonable in the case of a person that owned the Company both before and after the Closing Date. (c) With respect to any Tax return for which Buyer is responsible, Buyer shall have exclusive authority to supervise any Tax audit and have final decision authority with respect to settlement of any audit adjustments of the Company and its Subsidiaries. Buyer will not settle any such audit in a manner that would have a Material Adverse Effect on the Company's Taxes for the period prior to the Closing, unless such settlement would be reasonable in the case of a person that owned the Company, both before and after the Closing Date. VII.6 Section 338(h)(10) Election; Allocation of Purchase Price. Seller and Buyer hereby acknowledge and agree, at Buyer's election, to make an election pursuant to Section 338(h)(10) of the Code and any corresponding election under applicable state law (collectively, the "Section 338(h)(10) Election") in connection with the purchase of the Company Shares and to take any and all actions required to properly effect the Section 338(h)(10) Election, including filing any applicable forms and/or statements with the Internal Revenue Service, and Seller agrees not to take any action before or after the Closing inconsistent with the Section 338(h)(10) Election. In addition, Seller and Buyer agree to make, at the option of Buyer, a Section 338(h)(10) Election, and to take any and all actions required to properly effect the Section 338(h)(10) Election, with respect to all Subsidiaries of the Company other than Computerized Medical Communications, Inc. Trigon shall acknowledge, agree, and consent to the making of the Section 338(h)(10) Election, and to take any and all actions required to properly effect the Section 338(h)(10) Election, including filing any applicable forms and/or statements with the Internal Revenue Service. Seller agrees that pursuant to Section 338(h)(10) of the Code, Seller shall not recognize gain or loss for federal income Tax purposes (and, where applicable, for state income Tax purposes) with respect to the sale of the Company Shares contemplated by this Agreement. Instead, the Company shall recognize gain or loss as if it had sold all of its assets to Buyer in a single transaction as of the Closing Date. Such gain or loss shall be reported by the Company on its federal income Tax return for the year which ends as of the Closing Date and which is included in the consolidated federal and, if applicable, state income Tax return of Trigon. Seller shall be liable for and shall pay all Taxes in connection with the Section 338(h)(10) Election and as provided in the consolidated return regulations then in effect. In connection with the Section 338(h)(10) Election, Buyer shall provide Seller with a proposed allocation of the Purchase Price among the assets of the Company which shall reflect an agreed fair market value of at least $6 million for the stock of Computerized Medical Communications, Inc. Seller, Buyer and the Company shall cooperate in agreeing to the Purchase Price allocation within ninety (90) days following the Closing. ARTICLE VIII CONDITIONS TO OBLIGATIONS OF BUYER The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject, to the satisfaction of each of the following conditions all or any of which may be waived, in whole or in part, by Buyer for the purpose of consummating such transactions, but without prejudice to any other right or remedy which Buyer may have hereunder as a result of any misrepresentation by, or breach of any agreement, covenant or warranty of Seller contained in this Agreement: VIII.1 Representations and Warranties. Except for changes expressly contemplated by this Agreement, each of the representations and warranties of Seller contained in this Agreement (which representations and warranties include the information in the Schedules corresponding thereto) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing, except to the extent that any representation or warranty is made as of a specific date, in which case such representation or warranty shall be true in all material respects as of such date, and Seller shall have delivered to Buyer a certificate to that effect signed by a duly authorized officer. VIII.2 Performance of this Agreement. Seller shall have, and shall have caused the Company to have, performed and complied in all material respects with all of the agreements, covenants, stipulations, terms and conditions applicable to it under this Agreement required to be performed or complied with by Seller on or prior to Closing and shall have delivered to Buyer a certificate to that effect signed by a duly authorized officer. VIII.3 Corporate Authorization. All corporate action required to be taken by Seller in connection with the transactions contemplated hereby shall have been taken, all documents incident thereto shall be reasonably satisfactory in substance and form to Buyer and Buyer shall have received such originals or copies of such documents as it may reasonably request. VIII.4 Consents and Approvals. The consents and approvals listed on Schedule 3.7 shall have been obtained and all waiting periods specified by law with respect thereto shall have passed. VIII.5 Injunction, Litigation, etc. No order of any court or governmental agency shall be in effect which restrains or prohibits the consummation of the transactions contemplated by this Agreement or which would limit or affect the ability of Buyer to own and control the Company, and there shall not be pending nor shall there have been threatened, any investigation, action or proceeding by or before any such court or governmental agency seeking to prohibit or delay or challenging the validity of the transactions contemplated by this Agreement. VIII.6 Legislation. No statute, rule or regulation shall have been proposed or enacted which prohibits or might prohibit, restrict or delay the consummation of the transactions contemplated by this Agreement. VIII.7 Resignations. Such directors of the Company as Buyer shall request shall have resigned as of the Closing. VIII.8 Opinion of Counsel of Seller. Buyer shall have received an opinion from McGuire, Woods, Battle & Boothe, L.L.P., Richmond, Virginia, counsel for Seller, in substantially the form attached hereto as Exhibit F. VIII.9 Expiration of HSR Waiting Period. Any waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act shall have expired or been terminated. VIII.10 Related Agreements. To the extent that Seller, or Trigon is a party thereto, all Related Agreements shall have been executed and delivered by Seller or Trigon and the other parties thereto. VIII.11 Release of Intercompany Obligations. Buyer shall have received a complete release from Seller and the Company of all Intercompany Obligations dated as of the Closing Date in form and substance reasonably satisfactory to Buyer. VIII.12 Veritus Waiver. The Waiver shall be in full force and effect. ARTICLE IX CONDITIONS TO OBLIGATIONS OF SELLER The obligations of Seller and Trigon to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction of each of the following conditions all or any of which may be waived, in whole or in part, by Seller and Trigon for the purpose of consummating such transactions, but without prejudice to any other right or remedy which Seller and Trigon may have hereunder as a result of any misrepresentation by, or breach of any agreement, covenant or warranty of Buyer contained in this Agreement. IX.1 Representations and Warranties. Except for changes expressly contemplated by this Agreement, each of the representations and warranties of Buyer contained in this Agreement (which representations and warranties include the information in the schedules corresponding thereto) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing and Buyer shall have delivered to Seller a certificate to that effect signed by a duly authorized officer. IX.2 Performance of this Agreement. Buyer shall have performed and complied with in all material respects all of the agreements, covenants, stipulations, terms and conditions applicable to it under this Agreement required to be performed or complied with by Buyer on or prior to Closing and shall have delivered to Seller a certificate to that effect signed by a duly authorized officer. IX.3 Corporate Authorization. All corporate action required to be taken by Buyer in connection with the transactions contemplated in this Agreement shall have been taken, all documents incident thereto shall be reasonably satisfactory in substance and form to Seller, and Seller shall have received all such originals or copies of such documents as it may reasonably request. IX.4 Injunction, Litigation, etc. No order of any court or governmental agency shall be in effect which restrains or prohibits the consummation of the transactions contemplated by this Agreement and there shall not be pending nor shall there have been threatened any investigation, action or proceeding by or before any such court or governmental agency seeking to prohibit or delay or challenging the validity of any of the transactions contemplated by this Agreement. IX.5 Legislation. No statute, rule or regulation shall have been proposed or enacted which prohibits or might prohibit, restrict or delay the consummation of the transactions contemplated hereby. IX.6 Opinion of Counsel for Buyer. Seller shall have received an opinion from E. Michael Ingram, general counsel for Buyer, in substantially the form attached hereto as Exhibit G. IX.7 Expiration of HSR Waiting Period. Any waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act shall have expired or been terminated. IX.8 Related Agreements. To the extent that Buyer or the Company is a party thereto, all Related Agreements shall have been executed and delivered by Buyer or the Company, as the case may be. ARTICLE X CLOSING X.1 Time and Place of Closing. The closing (the "Closing") shall take place at the offices of McGuire, Woods, Battle & Boothe, L.L.P. in Richmond, Virginia, beginning at 10:00 a.m. local time on (i) December 31, 1996 if all of the closing conditions have been fulfilled or waived, (ii) as soon as reasonably possible after the last of the closing conditions is fulfilled or waived if the Closing does not take place on December 31, 1996, or (iii) such other date as may be agreed upon by the Parties (any of which dates is referred to as the "Closing Date"). The Closing shall be effective as of the close of business on the Closing Date. X.2 Deliveries by Seller. At the Closing, Seller shall deliver to Buyer the following: (i) the certificates representing the Shares duly endorsed or with blank stock powers attached thereto duly signed by Seller; (ii) the certificates required by Sections 8.1 and 8.2; (iii) evidence that the corporate action described in Section 8.3 has been taken; (iv) copies of the consents required by Section 8.4; (v) the resignations required by Section 8.7; (vi) a certificate from the State Corporation Commission of Virginia of the Company's good standing in Virginia as of the most recent date obtainable; (vii) the Opinion of Counsel required by Section 8.8; (viii) executed originals of each of the Related Agreements to which Seller, Trigon or the Company is a party; and (ix) such additional documents as Buyer may reasonably request. X.3 Deliveries by Buyer. At the Closing Buyer shall deliver to Seller the following: (i) the Purchase Price by wire transfer of immediately available funds; (ii) the certificates required by Sections 9.1 and 9.2; (iii) evidence that the corporate action described in Section 9.3 has been taken; (iv) the Opinion of Counsel required by Section 9.6; (v) executed originals of each of the Related Agreements to which Buyer or the Company is a party; and (vi) such additional documents as Seller may reasonable request. ARTICLE XI INDEMNIFICATION XI.1 Indemnification by Seller and Trigon. Subject to Article VII and the limitations contained in this Article, Seller and Trigon will, jointly and severally, indemnify and hold Buyer harmless from any claim, damage, loss, liability, penalty or expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys fees) (collectively, "Losses") arising out of: (i) any breach of a representation or warranty made by Seller or Trigon in this Agreement; (ii) the breach of any agreement of Seller or Trigon contained in this Agreement; (iii) the CMC Dispute; (iv) (a) employment-related liabilities, whether contingent or otherwise, arising out of any individual's employment or working relationship with the Seller or its ERISA Affiliates other than the Company or any of the Company's Subsidiaries and (b) any benefit plan, program arrangement or policy maintained or contributed to by the Seller or any ERISA Affiliate of the Seller other than the Company or any of its Subsidiaries; or (v) any liabilities, obligations or debts of the Company or any of its Subsidiaries of any nature incurred or arising from the operations of the Company or its Subsidiaries prior to the Closing Date, whether accrued, absolute or contingent, or whether due or to become due, except as shown or adequately reserved against in the Closing Date Balance Sheet or disclosed as a liability, obligation or debt in a Schedule hereto. XI.2 Indemnification by Buyer. Subject to the limitations contained in this Article, Buyer will indemnify and hold Seller and Trigon harmless from any Losses arising out of: (i) any breach of a representation or warranty made by Buyer in this Agreement; (ii) the breach of any agreement of Buyer contained in this Agreement; or (iii) the performance by the Company, or failure by the Company to perform, after the Closing Date of its obligations under the Veritus Service Agreement. XI.3 Third Party Claims. Except as provided in Article VII, if any party is obligated to indemnify another under Sections 11.1 or 11.2 of this Agreement with respect to claims with respect to Losses resulting from the assertion of liability by Persons not parties to this Agreement (including governmental claims for penalties, fines and assessments), such obligation shall be subject to the following terms and conditions: (i) The indemnified party shall give prompt written notice to the indemnifying party of any assertion of liability by a third party which might give rise to a claim for indemnification based on the foregoing provisions of this Article, which notice shall state the nature and basis of the assertion and the amount thereof, to the extent known, provided, however, that no delay on the part of the indemnified party in giving notice shall relieve the indemnifying party of any obligation to indemnify unless and only to the extent that the indemnifying party is materially prejudiced by such delay. (ii) If any action, suit or proceeding (a "Legal Action") is brought against any party with respect to which the other may have liability under the foregoing provisions of this Article, the Legal Action shall be defended by the indemnifying party and such defense shall include all proceedings for appeal or review which counsel shall deem appropriate. (iii) Notwithstanding the provisions of the previous subsection of this Agreement, until the indemnifying party shall have assumed the defense of any such Legal Action, the defense shall be handled by the indemnified party. Furthermore, if the Legal Action primarily involves other than money damages and seeks injunctive or other equitable relief, the indemnifying party shall not be entitled to assume the defense of the Legal Action and the defense shall be handled by the indemnified party. If the defense of the Legal Action is handled by the indemnified party under the provisions of this subsection, the indemnifying party shall pay all legal and other expenses reasonably incurred by the indemnified party in conducting such defense. (iv) In any Legal Action initiated by a third party and defended by the indemnifying party (A) the indemnified party shall have the right to be represented by advisory counsel and accountants, but at its own expense, unless (1) the indemnifying party has failed or refused to perform its obligations under this Section 11.3, (2) the indemnifying party's defense would result in a conflict of interest under which it would not be appropriate under legal ethics rules for counsel for the indemnifying party to represent the indemnified party or (3) the employment of such counsel and the payment of such fees and expenses by the indemnifying party shall have been specifically authorized by the indemnifying party in connection with the defense of such action, suit or proceeding, (B) the indemnifying party shall keep the indemnified party fully informed as to the status of such Legal Action at all stages thereof, whether or not the indemnified party is represented by its own counsel, (C) the indemnifying party shall make reasonably available to the indemnified party, and its attorneys, accountants and other representatives, all books and records of the indemnifying party relating to such Legal Action and (D) the parties shall render to each other such assistance as may be reasonably required in order to ensure the proper and adequate defense of such Legal Action. (v) Subject to the provisions of Section 5.1 with respect to the CMC Dispute, in any Legal Action initiated by a third party and defended by the indemnifying party, the indemnifying party shall not make any settlement of any claim without the written consent of the indemnified party, which consent shall not be unreasonably withheld. Without limiting the generality of the foregoing, it shall not be deemed unreasonable to withhold consent to a settlement involving injunctive or other equitable relief against the indemnified party or its assets, employees or business, or relief which the indemnified party reasonably believes could establish a custom or precedent which will be materially adverse to the best interests of its continuing business. XI.4 Limitations on Indemnification. (a) Notwithstanding the foregoing provisions of this Article, neither Trigon nor Seller shall be liable under Section 11.1(i) and 11.1(v)unless and until the aggregate amount of Losses thereunder exceeds the Deductible Amount, and thereafter Buyer shall be entitled to indemnification thereunder only for the aggregate amount of such liability in excess of the Deductible Amount; provided, however, that each individual claim of $5,000 or less shall not be indemnifiable, and shall not be included in determining whether the Deductible Amount has been reached, and provided further that the limitations in this paragraph (a) shall not apply to a breach of the representation and warranty contained in Section 3.4(a) (b) Notwithstanding the foregoing provisions of this Article, Buyer shall not be liable under Section 11.2(i) unless and until the aggregate amount of Losses thereunder exceeds the Deductible Amount and thereafter Seller shall be entitled to indemnification thereunder only for the aggregate amount of such liability in excess of the Deductible Amount. (c) Seller's indemnification obligations for breaches of representations and warranties contained in this Agreement, excluding a breach of the representations and warranties contained in Section 3.4(a), and for the matters referred to in Section 11.1(v), shall be limited to $25,667,000 in the aggregate, and Seller's obligation for breach of the representations and warranties contained in Section 3.4(a) shall be limited to the Purchase Price. (d) All damages to which an indemnified party may be entitled pursuant to the provisions of this Article shall be net of any insurance coverage with respect thereto in accordance with Section 11.6. No director or officer of an indemnifying party shall have any liability to an indemnified party as a result of a breach of a representation or warranty contained in this Agreement. XI.5 Survival; Investigation. The representations and warranties of a party contained in this Agreement and the obligation of Seller set forth in Section 11.1(v) shall survive any investigation by the other party and shall not terminate until the date that is twenty (20) months after the Closing Date (the "Survival Date") at which time they shall lapse; provided, however, that the representations and warranties set forth in Sections 3.4(a) and 3.12 shall survive the Closing for the applicable statute of limitations. The indemnification provided by Sections 11.1(ii), 11.2(ii) and 11.2(iii) shall survive the Closing for the applicable statute of limitations and that provided by Sections 11.1(iii) and (iv) herein shall survive indefinitely. Notwithstanding the provisions of the preceding sentence, any representation or warranty in respect of which indemnification may be sought under Section 11.1(i) or Section 11.2(i) or any obligation under Section 11.1(v) shall survive the Survival Date if written notice, given in good faith, of the specific breach thereof or claim thereunder is given to the indemnifying party prior to the Survival Date, whether or not liability has actually been incurred. XI.6 Tax Benefits; Insurance Proceeds. In determining the amount of any Losses for which any party is entitled to indemnification under this Agreement, the gross amount thereof will be adjusted for any correlative Tax benefit or insurance benefit or proceeds realized or to be realized by such party (such correlative insurance benefit shall be net of any retroactive insurance premium which becomes due as a result of such claim). XI.7 Tax Characterization. The payment of indemnified liabilities pursuant to this Agreement shall be considered adjustments to the Purchase Price for Tax purposes. ARTICLE XII TERMINATION, AMENDMENT AND WAIVER XII.1 Termination. This Agreement may be terminated at any time prior to the Closing: (i) by mutual consent of Seller and Buyer; (ii) by either party if there has been a material breach by the other party of a representation, warranty or agreement contained herein or if any condition which must be met by the other party becomes impossible to fulfill; (iii) by Seller or Buyer if the Closing has not occurred by February 11, 1997; provided, however, that in the event that approval under the HSR Act is not obtained by such date, then if the Closing has not occurred by March 15, 1997. XII.2 Effect of Termination. If this Agreement is terminated as provided in Section 12.1, it shall become wholly void and of no further force and effect and there shall be no further liability or obligation on the part of either party except to pay such expenses as are required of it hereunder and to comply with the confidentiality provisions of Section 5.4, but such termination shall not constitute a waiver by either party of any claims it may have for damages caused by reason of a material breach of a representation, warranty or agreement made by the other party. XII.3 Amendment. This Agreement and the Exhibits hereto may be amended at any time prior to the Closing provided that any such amendment is approved in writing by each of the parties. All representations and warranties of Seller and Buyer which are true and correct as modified pursuant to the preceding sentence shall be deemed true and correct for the purposes of Sections 8.1 and 9.1. XII.4 Extension; Waiver. At any time prior to the Closing either party to this Agreement may (i) extend the time for the performance of any of the obligations of the other party, (ii) waive a breach of a representation or warranty of the other party, or (iii) waive compliance by the other party with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in a written instrument signed by the party giving the extension or waiver. ARTICLE XIII GENERAL PROVISIONS XIII.1 Notices. All notices and other communications given hereunder shall be in writing. Notices shall be effective when delivered, if delivered personally. Otherwise, they shall be effective when sent to the parties at the addresses or numbers listed below, as follows: (i) on the business day delivered (or the next business day following delivery if not delivered on a business day) if sent by a local or long distance courier, prepaid telegram, telefax or other facsimile means, or (ii) three days after mailing if mailed by registered or certified U.S. mail, postage prepaid and return receipt requested. If to Seller to: Trigon Blue Cross Blue Shield 2221 Edward Holland Drive Richmond, Virginia 23230 Attention: Mr. Thomas G. Snead, Chief Financial Officer Telefax No.: 804-354-2470 with a copy to: McGuire, Woods, Battle & Boothe, L.L.P. 1 James Center, 901 East Cary Street Richmond, Virginia 23219 Attention: R. Gordon Smith, Esq. Telefax No.: 804-775-1061 If to Buyer to: National Data Corporation One National Data Plaza Atlanta, Georgia 30329 Attention: Robert A. Yellowlees with a copy to: National Data Corporation One National Data Plaza Atlanta, Georgia 30329 Attention: E. Michael Ingram Alston & Bird 1201 W. Peachtree Street, N.W. Atlanta, Georgia 30309-3424 Attention: Joel J. Hughey Any Person may change the address or number to which notices are to be delivered to him, her or it by giving the other Persons named above notice of the change in the manner set forth above. XIII.2 Governing Law. This Agreement shall be governed in all respects by the laws of the Commonwealth of Virginia without regard to its choice of law rules. XIII.3 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of the Agreement. XIII.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. XIII.5 Miscellaneous. This Agreement (i) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; (ii) is not intended to and shall not confer upon any Person, other than the parties hereto, any rights or remedies with respect to the subject matter hereof; and (iii) shall not be assigned by operation of law or otherwise. XIII.6 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. BLUE CROSS AND BLUE SHIELD OF VIRGINIA By: /s/ Thomas G. Snead Title: Senior Vice President & Chief Financial Officer CONSOLIDATED HEALTHCARE, INC. By: /s/ Thomas G. Snead Title: Treasurer NATIONAL DATA CORPORATION By: /s/ E. Michael Ingram Title: Secretary -----END PRIVACY-ENHANCED MESSAGE-----