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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1997
REGISTRATION NO. 333-19177
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
TRANSCEND SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0378756
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3353 PEACHTREE ROAD, N.E.
SUITE 1000
ATLANTA, GEORGIA 30326
(404) 364-8000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
LARRY G. GERDES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
3353 PEACHTREE ROAD, N.E.
SUITE 1000
ATLANTA, GEORGIA 30326
(404) 364-8000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
HELEN T. FERRARO, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP
3343 PEACHTREE ROAD, N.E.,SUITE 1800
ATLANTA, GEORGIA 30326
(404) 264-2620
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
_________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION -- DATED APRIL 23, 1997
PROSPECTUS
1,424,346 SHARES
TRANSCEND SERVICES, INC.
COMMON STOCK
The 1,424,346 shares of Common Stock (the "Common Stock") of Transcend
Services, Inc. (the "Company") offered hereby are being sold by certain holders
of the Common Stock of the Company named herein under "Selling Shareholders."
Unless the context otherwise requires, the holders of the Common Stock selling
shares hereunder are hereinafter collectively referred to as the "Selling
Shareholders." The Company will not receive any proceeds from the sale of the
Common Stock by the Selling Shareholders. See "Selling Shareholders," "Plan of
Distribution" and "Use of Proceeds."
THE COMPANY HAS FILED THIS REGISTRATION STATEMENT IN ORDER TO FULFILL ITS
CONTRACTUAL OBLIGATIONS UNDER THE TERMS AND CONDITIONS OF DEMAND REGISTRATION
RIGHTS PROVIDED TO THE FORMER OWNERS OF TWO SMALL MEDICAL TRANSCRIPTION
COMPANIES ACQUIRED BY THE COMPANY IN JUNE 1996, IN STOCK FOR STOCK POOLING
TRANSACTIONS. AS PART OF THIS DEMAND REGISTRATION, A SMALL NUMBER OF
SHAREHOLDERS WHO PREVIOUSLY HAD BEEN GRANTED FULL PIGGYBACK REGISTRATION RIGHTS
(AS PART OF PREVIOUS TRANSACTIONS WITH THE COMPANY) HAVE ELECTED TO HAVE THEIR
OTHERWISE RESTRICTED SHARES REGISTERED. AS OF THE DATE OF THIS PROSPECTUS,
DIRECTORS OF THE COMPANY AND THEIR AFFILIATES WHOSE SHARES ARE BEING REGISTERED
HEREUNDER HAVE NO PRESENT INTENTION TO SELL SUCH SHARES.
The Common Stock of the Company is listed on The Nasdaq Stock Market's National
Market under the symbol "TRCR." On April 22, 1997, the last sale price of the
Common Stock as reported on the Nasdaq National Market was $3.25 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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OFFERING UNDERWRITING PROCEEDS TO PROCEEDS
PRICE TO DISCOUNTS AND SELLING TO
PUBLIC COMMISSIONS SHAREHOLDERS COMPANY
- --------------------------------------------------------------------------------
Per Share............. See Text See Text See Text See Text
Total................. Below Below Below Below
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The Selling Shareholders have advised the Company that they may elect
to offer for sale and to sell the Common Stock from time to time in one or more
transactions through brokers in the over-the-counter market, in private
transactions, or otherwise, in each case at market prices then prevailing or
obtainable. Accordingly, sales prices and proceeds to the Selling Shareholders
will depend upon price fluctuations and the manner of sale. The Selling
Shareholders may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, brokerage commissions or similar fees in amounts which
may vary from transaction to transaction. Except for the payment of such
brokerage commissions and charges and the legal fees, if any, of the Selling
Shareholders, the Company will bear all expenses in connection with registering
the shares offered hereby, which expenses are estimated to total approximately
$25,950. See "Plan of Distribution."
This Prospectus also relates to such additional shares as may be
issued to the Selling Shareholders because of future stock dividends, stock
distributions, stock splits or similar capital readjustments.
________________
The date of this Prospectus is __________, 1997
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AVAILABLE INFORMATION
The Company is subject to certain informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed
rates by writing to the Securities and Exchange Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a World Wide Web site, containing such reports, proxy and information
statements and other information regarding the Company, at http://www.sec.gov.
In addition, such reports, proxy statements and other information concerning the
Company may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006-1506.
The Company has filed a Registration Statement on Form S-3 (together
with all amendments and exhibits filed or to be filed in connection therewith,
the "Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant
to the 1934 Act are hereby incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Amendment No. 1 on Form 10-K/A dated April 22, 1997
to its Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
3. The Company's Amendment No. 2 on Form 10-K/A dated February 21,
1997 to its Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
4. The Company's Amendment No. 2 on Form 10-Q/A dated February 21, 1997 to
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
5. The Company's Amendment No. 2 on Form 10-Q/A dated February 21, 1997 to
its Quarterly Report on Form 10-Q for the quarter ended June 30, 1996;
6. The Company's Amendment No. 1 on Form 10-Q/A dated February 21, 1997 to
its Quarterly Report on Form 10-Q for the quarter ended September 30,
1996;
7. The Company's Current Report on Form 8-K dated January 28, 1997; and
8. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A as filed with the
Commission on January 8, 1990.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the respective dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified and superseded, to constitute a part of this Prospectus.
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The Company will provide without charge to each person to whom a Prospectus
is delivered, upon written or oral request of such person, a copy of any and all
of the information that has been incorporated by reference in this Prospectus
(excluding exhibits unless such exhibits are specifically incorporated by
reference into such documents). Please direct such requests to the Secretary of
Transcend Services, Inc. at the Company's principal offices located at 3353
Peachtree Road, N.E., Suite 1000, Atlanta, Georgia 30326, telephone number (404)
364-8000.
THE COMPANY
The Company was incorporated in California in 1976 and was reorganized as a
Delaware corporation in 1988. On January 10, 1995, the Company, formerly known
as "TriCare, Inc.," acquired Transcend Services, Inc., then a Georgia
corporation, by the merger of Transcend Services, Inc. into First Western Health
Corporation ("First Western"), a subsidiary of the Company (the "Merger").
Prior to the Merger, Transcend Services, Inc., which was originally organized in
1984, provided consulting services for medical records management, quality and
utilization management, records coding and records management software. In 1992,
the former Transcend Services, Inc. developed, tested and marketed new lines of
business intended to capitalize on the increasing need for the outsourcing of
medical records, and by the end of 1992 had entered into its first long-term
agreement for the management of a hospital's medical records department. On May
31, 1995, Transcend Services, Inc. and Veritas Healthcare Management
("Veritas"), another subsidiary of the Company, merged into the Company, whose
name was then changed to "Transcend Services, Inc." The Merger was treated for
financial accounting purposes as the acquisition of TriCare, Inc. by Transcend
Services, Inc. and the historical financial statements of the former Transcend
Services, Inc. have become the financial statements of the Company and include
the businesses of both companies after the effective date of the Merger. The
Company has one wholly-owned subsidiary, Sullivan Health Management Services,
Inc. ("Sullivan"). When used in this Prospectus, the term "Company" or
"Transcend" shall mean Transcend Services, Inc. and Sullivan unless otherwise
stated in this Prospectus or unless the context otherwise requires.
The Company's executive offices are located at 3353 Peachtree Road, N.E.,
Suite 1000, Atlanta, Georgia 30326. Its telephone number is (404) 364-8000.
RISK FACTORS
IN ADDITION TO OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND
ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK OFFERED HEREBY.
THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE SUGGESTED IN THE FORWARD-LOOKING STATEMENTS,
INCLUDING, WITHOUT LIMITATION, THE EFFECT OF ECONOMIC CONDITIONS, INTEREST
RATES, PRODUCT DEMAND, COMPETITIVE PRODUCTS AND OTHER RISKS DETAILED HEREIN AND
IN THE COMPANY'S OTHER FILINGS WITH THE COMMISSION. PROSPECTIVE INVESTORS ARE
CAUTIONED THAT ANY SUCH FORWARD LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD LOOKING STATEMENTS.
OPERATING LOSSES
The Company has not operated profitably during its last six fiscal years.
At December 31, 1996, the Company had an accumulated deficit of $14,154,000. In
addition, the costs incurred by the Company early in the terms of its
outsourcing contracts in some instances exceed the revenues received by the
Company under such contracts and therefore, to achieve profitability, the
Company must develop operating efficiencies. There can be no assurance that the
Company will be able to attain the required operating efficiencies necessary to
achieve profitability.
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NEGATIVE CASH FLOWS
For the twelve months ended December 31, 1996, the Company had negative
cash flows from operations of $3,141,000. Negative cash flows from continuing
operations was $1,396,000 and negative cash flows from discontinued operations
was $1,745,000 for the year ending December 31, 1996, which included cash
outlays of $1,338,000 for capital expenditures. In order to achieve positive
cash flow, the Company has expanded its short term credit facilities from $2.2
million to approximately $3.8 million. See "Recent Developments." In addition,
the Company believes its cash flow position will improve because, pursuant to an
agreement with its legal counsel retained in connection with the civil lawsuit
filed against certain insurance companies, the Company will not be responsible
for legal fees incurred at the trial court level of the Lawsuit (as defined
herein) and will only be responsible for out-of-pocket expenses incurred in
connection with the Lawsuit and a portion of the legal fees incurred in
connection with the Company's appeal of the dismissal of the Lawsuit. See "--
Litigation." There can be no assurance, however, that the Company will achieve
positive cash flow. If the Company is unable to achieve positive cash flow it
may be unable to meet short term capital requirements or finance continuing
operations.
LIQUIDITY
As of December 31, 1996, the Company's current liabilities exceeded its
current assets by $1,551,000. Because the Company's current liabilities exceed
its current assets, the Company may be unable to meet short term capital
requirements or finance continuing operations. Although the Company has
recently established a working capital facility that provides the Company with a
current funding capacity of approximately $3.8 million, of which approximately
$2.9 million has been borrowed, this facility may not be sufficient to finance
continuing operations or fund the Company's short term capital requirements.
See "Recent Developments." In addition, there can be no assurance as to the
ability of the Company to generate cash sufficient to meets its capital needs or
to finance its anticipated growth, including the implementation of its new Data
Delivery Centers.
UNCERTAIN ABILITY TO MANAGE GROWTH
The Company's business strategy includes an intention to grow through
acquisitions and strategic alliances with other companies. Such a strategy
involves significant risks. The process of integrating acquired businesses into
the Company's operations may result in unforeseen difficulties and may require a
disproportionate amount of resources and management's attention. There can be no
assurance that the Company will be able to expand its market presence in its
current locations or successfully enter other markets through acquisitions or
that any such expansion will be profitable. If the Company's management is
unable to manage growth effectively, the Company's business, results of
operations and financial condition could be materially and adversely affected.
UNDETERMINED MARKET ACCEPTANCE OF OUTSOURCING STRATEGY
The success of the Company will require acceptance by hospitals and other
healthcare providers of the concept of outsourcing their information management
departments. Such acceptance will depend on the ability of the Company to
alleviate the concerns of hospital management related to outsourcing, such as
loss of control, information quality, maintenance of confidentiality, and a bias
against outsourcing due to previous poor experiences. There can be no assurance
that the Company will be successful in alleviating these concerns and in
marketing its services. Failure of the Company to achieve market acceptance of
its services could have a material adverse effect on the Company's business,
financial condition and results of operations.
UNCERTAIN ABILITY TO RENEW EXISTING CONTRACTS AND IMPLEMENT NEW CONTRACTS
The Company derives a substantial portion of its revenues from 20
outsourcing contracts which have remaining terms ranging from one to five years.
Revenues from the Company's outsourcing contracts amounted to 53.3% of total
1995 revenues and 57.3% of total revenues for the year ended December 31,
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1996. At the end of each contract's duration, the Company must renegotiate a new
contract. Should the Company fail to retain an existing customer or fail to
adequately expand its base of contracts, the Company's future revenues could be
at substantial risk. There can be no assurance that the Company will be able to
renegotiate or renew its existing outsourcing contracts. With the exception of
one contract, the Company's existing outsourcing contracts are on a fixed
installment fee basis. In the early term of such a contract, the Company's
expenses in providing services frequently exceed the revenues received.
Although the Company prices all of its outsourcing contracts to be profitable as
quickly as possible from the date of contract inception, the Company's
outsourcing contracts are not typically profitable during the first three to six
months of a contract with a three to five year term as the new account is
implemented and resources are committed to ensure long term improvement,
viability and profitability of a particular customer. For such contracts to
become profitable, the Company must be able to lower operating expenses by
achieving operating efficiencies and economies of scale. There can be no
assurance that the Company will be able to lower operating expenses sufficiently
to achieve profitability.
The Company is considering an alternative volume-based pricing structure
for pricing its contract management contracts based upon a hospital customer's
activity levels such as the weighted average number of annual patient discharges
or a "per member per month" capitated pricing option. Because these pricing
methods do not provide a fixed amount of contract revenues, they introduce an
additional element of risk to the Company. The Company is also considering
pricing its contract management contracts, where possible, to provide for more
contingency sharing of either (i) the one-time cash flow savings that the
Company generates for its contract management customers through a reduction in
gross days receivables outstanding by processing bills being delayed in the
medical records department and/or (ii) increased revenues realized by hospital
customers as a result of the Company's favorable impact (through enhanced coder
and physician training) on the hospital's Case Mix Index (a measurement of the
hospital's severity/acuity level for DRG reimbursements under Medicare). Of its
20 contracts as of April 18, 1997, only 1 contract was priced under a
contingency sharing arrangement and there can be no guarantee that the Company
will be successful in pricing of its future contracts in this manner. There can
be no assurance that these pricing alternatives will be successful or that they
will generate sufficient revenues to operate profitably.
COMPETITION
The outsourcing or contract management of health information services
departments is still a relatively new concept in the hospital industry.
Management believes that the Company's greatest competition comes from existing,
internal medical records departments. To the Company's knowledge, there is
currently only one regional firm and one national firm engaged in the same
business. The Company expects that as the concept of outsourcing becomes more
widely accepted, it will encounter further competition from some or all of the
following sources: other traditional healthcare information management
consultants; coding consultants; multi-specialty healthcare services businesses
which currently provide contract management to clinical, housekeeping, dietary
or other non-medical services departments of hospitals; management information
services providers, particularly developers and vendors of management software;
and other parties in contract management businesses (for example, business or
financial management services) desiring to enter the healthcare field. The
Company expects that competitive factors will include reputation for expertise
in health information management, size and scope of referenceable accounts,
prior experience in outsourcing and pricing. Some of its potential competitors
are larger, better known and better capitalized than the Company, and such
factors could affect the Company's ability to withstand such competition over
the long term. There are also companies that operate in other areas of the
health information management spectrum, including admissions and the business
office. As the Company expands its scope of business into these other areas of
health information management, the Company will confront other, sometimes more
established competitors.
The Company also experiences significant competition with respect to its
transcription, consulting and case management businesses from a variety of
sources, including, in each case, both local and national businesses. The
markets both for medical transcription services and for medical records coding
and
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consultation services are highly fragmented, and no competitor or identifiable
group of competitors could be said to be dominant.
LITIGATION
On September 17, 1993, the Company and its healthcare subsidiaries and the
physician-owned medical groups which had contracts with the healthcare
subsidiaries initiated a lawsuit (the "Lawsuit") against 22 insurance carriers
seeking $115 million in compensatory damages plus punitive damages. The claims
arise out of the Company's former business, which prior to the merger with
Transcend Services, Inc., included the business of providing medical/legal
evaluations and medical treatment services (in association with managed medical
groups) in the workers' compensation industry in California. See "The
Company." In connection with the Lawsuit, seven of the insurance carriers have
filed cross complaints seeking restitution for funds previously paid by the
defendants, disgorgement of profits and punitive damages, based primarily upon
allegations of illegal corporate practice of medicine, illegal referral
arrangements and related improper conduct. The costs associated with the claims
asserted against the insurance companies and the defense of the cross complaints
cannot be ascertained with any certainty, but are expected to be substantial.
There can be no assurance as to the outcome of this litigation, including
potential recovery, if any, of the Company's claims or damages, if any.
On March 21, 1997, the Los Angeles County Superior Court sustained the
defendant insurance companies' demurrer to the Third Amended and Supplemental
Complaint of the Company and certain of its subsidiaries, without leave to
further amend the complaint. The Court determined in such ruling that exclusive
jurisdiction with respect to the claims contained in the Lawsuit resides with
the California Workers' Compensation Appeals Board and that the Superior Court
of the State of California is an improper forum. The Company has been advised by
counsel that there is no remedy for the damages claimed in the Lawsuit from the
California Workers' Compensation Appeals Board. A final order dismissing the
Lawsuit will be entered by the Court, and the Company will appeal the ruling to
the California Court of Appeals. There can be no assurance that the Company
will be successful appealing such dismissal. By stipulation, the carriers'
cross-complaints against the plaintiffs were stayed pending resolution of the
plaintiffs' appeal. The Company believes that the trial court's ruling, if
upheld by the appellate court, also would result in dismissal of the cross-
complaints. There can be no assurance, however, that such cross complaints
would be dismissed. The cross complaints expose the Company to risk of
liability which, if the Company is unsuccessful in the defense of such cross
complaints, could have a materially adverse impact on the Company's results of
operations for a particular period. The Company believes that the final
resolution of the cross complaints will not have a material adverse effect on
the Company's financial condition, results of operations or liquidity; however,
there can be no assurance that the Company will be successful in the defense of
such cross complaints.
RISKS ASSOCIATED WITH COLLECTIBILITY OF NET ASSETS OF DISCONTINUED OPERATIONS
As of December 31, 1996, net assets related to discontinued operations of
the Company's former healthcare subsidiaries, First Western Health Corporation
("First Western") and Veritas Healthcare Management ("Veritas") totalled
$2,577,000 in net accounts receivable, approximately 16.0% of total assets. The
net accounts receivable from the discontinued operations represent
reimbursements that are owed the Company by certain insurance companies for
applicant/legal evaluation services provided by FWHC Medical Group, Inc. and
Veritas Medical Group, Inc., two managed medical groups associated with the
Company's former subsidiaries, First Western and Veritas. The Company expects
to collect the accounts receivable from discontinued operations over the next
several years under the provisions of a sale and service agreement that the
Company has entered into with a third party for servicing and collecting the
remaining accounts receivable balance. Payment of the remaining gross
receivables, however, is contested by the insurance companies. The collection
of these contested accounts receivable is therefore subject to resolution by the
California Workers' Compensation Appeals Board, an administrative body charged
with determining an insurance company's liability for the payment of
medical/legal evaluation services. In estimating net accounts receivable, the
Company believes that it has made adequate provisions as to the estimated amount
of gross receivables that the Company can expect to collect upon resolution by
the California Workers'
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Compensation Appeals Board of the collectibility of the receivables. There can
be no assurance, however, that the Company will be able to collect all or a
portion of the contested receivables. The Company will continue to re-evaluate
the net realizability of the net assets related to discontinued operations on an
on-going basis. Any such re-evaluation could result in an adjustment that may
potentially be material to the carrying value of the asset. In addition, due to
the current backlogs in the California workers' compensation system, it may take
years before the Company is able to collect the outstanding receivables.
HEALTHCARE INDUSTRY AND UNCERTAINTY OF REFORM
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the outsourcing practices and other
operational aspects of hospitals in the Company's target market. The levels of
revenues and profitability of the Company may be affected by the continuing
efforts of government and third party payors to contain or reduce the costs of
healthcare through various means. In the United States there have been, and the
Company expects that there will continue to be, a number of federal and state
proposals to control healthcare costs. Substantial restructuring of the nation's
healthcare system could have an adverse impact on the Company's outsourcing
services, although the impact of such changes cannot be predicted with any
certainty. During the past several years, the healthcare industry has been
subject to an increase in governmental regulation of, among other things,
reimbursement rates and certain capital expenditures, and future proposals may
increase governmental involvement in healthcare, lower reimbursement rates, and
otherwise change the operating environment for the Company's healthcare provider
customers. Cost containment measures instituted by healthcare providers could
have an adverse effect on the Company's business if the Company is forced to
reduce the fees it charges for its services. In addition, the healthcare
industry is currently undergoing significant consolidation, resulting in a
smaller number of larger healthcare providers. The changing industry profile
produced by this consolidation could have an adverse impact on the Company's
margins and profitability due to increased competition, and could cause the
Company to lose existing customers. In July 1996, the Company lost one of its
outsourcing contracts principally due to the merger of its customer with another
hospital.
DEPENDENCE ON KEY PERSONNEL
The success of the Company has been largely dependent on the skills,
experience and efforts of its senior management and especially its President and
Chief Executive Officer, Larry G. Gerdes, its Chief Financial Officer, David W.
Murphy, its Executive Vice-President, Outsourcing Services, G. Scott Dillon and,
more recently, its Executive Vice-President, Services Group, Todd S. Mann. The
Company does not have an employment agreement with any of the foregoing persons.
The loss of the services of Messrs. Gerdes, Murphy, Dillon or Mann or other
members of the Company's senior management could have a material adverse effect
on the Company's business and prospects. The Company believes that its future
success will also depend in part upon its ability to attract, retain and
motivate qualified personnel. Competition for such personnel is intense. There
can be no assurance that the Company will be successful in attracting and
retaining such personnel. The loss of key personnel, or inability to hire or
retain qualified personnel, could have an adverse effect on the Company's
business, financial condition and results of operations. The Company does not
carry any "key-man" insurance on the life of any officer of the Company.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation, as amended, authorizes the
issuance of up to 21,000,000 shares of Preferred Stock, issuable in series, the
relative rights and preferences of which may be designated by the Board of
Directors. The issuance of Preferred Stock could make it more difficult for a
third party to acquire a majority of the outstanding voting stock. Accordingly,
the issuance of Preferred Stock may be used as an "anti-takeover" device
without further action on the part of the shareholders of the Company. No shares
of Preferred Stock have been issued, and the Company has no present plans to
issue any shares of Preferred Stock. See "Description of Capital Stock."
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NO DIVIDENDS
The Company has not previously paid any dividends on its Common Stock and
for the foreseeable future intends to retain earnings to finance the development
and expansion of its business. Pursuant to the terms of certain financing
agreements, the Company is restricted from paying dividends to its shareholders.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock could be subject to significant
fluctuations in response to the Company's operating results and other factors,
and there can be no assurance that the market price of the Common Stock will not
decline below the public offering price herein. In addition, the stock market
has from time to time experienced extreme price and volume volatility. These
fluctuations may be unrelated to the operating performance of particular
companies whose shares are traded and may adversely affect the market price of
the Common Stock.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of shares of
the Common Stock by the Selling Shareholders. See "Selling Shareholders" for a
list of those persons who will receive the proceeds from such sales. Certain of
the shares of the Common Stock to be sold by the Selling Shareholders represent
Common Stock underlying warrants to purchase Common Stock and the Company's 8%
Convertible Subordinated Debentures (the "Debentures"). Although the Company
will not receive any proceeds from the sale of the Common Stock by the Selling
Shareholders, the Company will receive proceeds upon the exercise of such
warrants in an amount equal to the product of the number of warrants exercised
multiplied by their exercise price. In addition, for every 286 shares of Common
Stock issued upon conversion of the Debentures, the Company will benefit in an
amount equal to a $1,000 reduction in the indebtedness outstanding under the
Debentures. Such proceeds will be used for general corporate purposes and
working capital.
RECENT DEVELOPMENTS
On April 4, 1997, the Company established a working capital facility with
Coast Business Credit, a California-based asset based lender (and a division of
Southern Pacific Thrift and Loan Association) to provide the Company a $5.0
million working capital facility. A portion of the facility was used to pay off
Silicon Valley Bank, the Company's prior lender with which the Company had two
separate credit facilities, in full upon initial funding. The new Coast
facility does not contain any financial covenants and is based on a funding
formula (for determining funding limits) as follows: 1.5 times monthly
contractual contract management revenues, plus 80% of all medical transcription
receivables under 90 days (aging). Based on current monthly contractual
contract management revenues and 80% of all medical transcription receivables
under 90 days as of April 4, 1997, this would provide the Company with a current
funding capacity of approximately $3.8 million. The facility has a term of two
years and is priced at prime plus 2.25% declining to prime plus 1.75% upon two
consecutive quarters of achievement and ongoing maintenance of debt service
coverage of not less than 1.5 times measured on an EBITA basis including all
principal and interest (excluding depreciation). The facility is secured by a
first security interest on all Company assets.
8
<PAGE>
SELLING SHAREHOLDERS
Except as indicated otherwise, the following table sets forth certain
information regarding the beneficial ownership of the Company's Common Stock as
of March 22, 1997 by the shareholders of the Company who are offering securities
pursuant to this Prospectus (the "Selling Shareholders"). "Beneficial
Ownership" includes shares for which an individual, directly or indirectly, has
or shares voting or investment power or both. All of the listed persons have
sole voting and investment power over the shares listed opposite their names
unless otherwise indicated in the notes below. Shares shown as beneficially
owned after the offering assumes that all shares offered hereby by the Selling
Shareholder are sold.
THE COMPANY HAS FILED THIS REGISTRATION STATEMENT IN ORDER TO FULFILL ITS
CONTRACTUAL OBLIGATIONS UNDER THE TERMS AND CONDITIONS OF DEMAND REGISTRATION
RIGHTS PROVIDED TO THE FORMER OWNERS OF TWO SMALL MEDICAL TRANSCRIPTION
COMPANIES ACQUIRED BY THE COMPANY IN JUNE 1996, IN STOCK FOR STOCK POOLING
TRANSACTIONS. AS PART OF THIS DEMAND REGISTRATION, A SMALL NUMBER OF
SHAREHOLDERS WHO PREVIOUSLY HAD BEEN GRANTED FULL PIGGYBACK REGISTRATION RIGHTS
(AS PART OF PREVIOUS TRANSACTIONS WITH THE COMPANY) HAVE ELECTED TO HAVE THEIR
OTHERWISE RESTRICTED SHARES REGISTERED. AS OF THE DATE OF THIS PROSPECTUS,
DIRECTORS OF THE COMPANY AND THEIR AFFILIATES WHOSE SHARES ARE BEING REGISTERED
HEREUNDER HAVE NO PRESENT INTENTION TO SELL SUCH SHARES.
9
<PAGE>
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
-------------------------------- ------------------------
NUMBER AMOUNT OF NUMBER
NAME OF BENEFICIAL BENEFICIALLY PERCENT SECURITIES TO BENEFICIALLY PERCENT
OWNER OWNED /(1)/ OF CLASS BE OFFERED OWNED OF CLASS
- ------------------ -------------------------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Pamela S. Barkell.................... 138,000 * 138,000 0 0%
Steven R. Barkell.................... 92,000 * 92,000 0 0
Linda Greiner........................ 43,903 * 43,903 0 0
Paul Greiner......................... 43,903 * 43,903 0 0
Silicon Valley Bank.................. 25,000 /(2)/ * 25,000 0 0
Wanda Jones and Howard Jones......... 66,250 /(3)/ * 60,000 6,250 *
Richard M. Lucas Cancer Foundation... 397,801 /(4)/ 2.04 172,850 224,951 1.15
Transylvania University.............. 257,514 /(5)/ 1.32 114,400 143,114 *
Alex G. Campbell..................... 57,200 /(6)/ * 57,200 0 *
James Lauritsen...................... 156,000 /(7)/ * 143,000 13,000 *
W.L. Rouse IRA....................... 28,600 /(8)/ * 28,600 0 0
Brendan Joseph Cassin and
Isabel B. Cassin, as Co-
Trustees for the Cassin
Family Trust........................ 151,349 /(9)/ * 67,566 83,783 *
B.J. Cassin, Conservator
for Robert Cassin................... 65,490 /(10)/ * 39,860 25,630 *
Monmouth College..................... 14,614 /(11)/ 1.10 71,500 143,114 *
St. Mary's College................... 11,260 /(12)/ * 11,260 0 0
Alexandra Ertola..................... 22,260 /(12)/ * 11,260 11,000 *
Don Grierson......................... 22,522 /(13)/ * 22,522 0 0
Paul Joas............................ 94,758 /(13)/ * 22,522 72,236 *
Roy Kirkorian........................ 00,280 /(14)/ * 45,044 55,236 *
RWI Group, LP........................ 79,566 /(15)/ * 67,566 12,000 0
John Warren Lucas and
Genevieve Marie Lucas, as
Co-Trustees of the Lucas
Family Trust........................ 22,522 /(13)/ * 22,522 0 0
Noel P. Rahn......................... 25,897 /(13)/ * 22,522 3,375 *
Nancy Thibodeau...................... 24,260 /(12)/ * 11,260 13,000 *
Greg Vaughn.......................... 11,260 /(12)/ * 11,260 0 0
Gerald Down.......................... 51,260 /(12)/ * 11,260 40,000 *
Charles Thoele....................... 64,180 /(16)/ * 22,522 41,658 *
George Caldwell...................... 112,767 /(17)/ * 45,044 67,723 *
---------
Total.......................... 1,424,346
=========
*Less than 1%.
- --------------------
</TABLE>
/(1)/ On August 15, 1995, the Company raised $2 million through the private
placement of 8% Subordinated Convertible Debentures (the "Debentures").
The Debentures are unsecured and subordinated to all other debt of the
Company. The interest rate on the Debentures is 8%, payable semi-annually,
and the principal amount is due in full on August 15, 2000. The Debentures
are convertible into Common Stock by the holder at any time prior to
August 15, 2000, at a rate of 286 shares of Common Stock for each $1,000
in principal amount and are convertible by the Company at any time when
the Common Stock trades at $10.50 per share for 30 consecutive trading
days. The Company may redeem the Debentures at any time upon 30 to 60 days
notice to the holder of a Debenture. On April 30, 1996, the Company
granted a warrant to purchase shares of its Common Stock to Silicon Valley
Bank, a California-chartered bank (the "Silicon Valley Warrant"), in
connection with two credit facilities the Company established with Silicon
Valley East, a Division of Silicon Valley Bank. The Silicon Valley Warrant
entitles the holder to purchase an aggregate of 25,000 shares of the
Company's Common Stock, subject to certain adjustments, at an exercise
price of $11.25 per share. The Silicon Valley Warrant expires on April 30,
2001. In addition, on September 5, 1996, the Company sold an aggregate of
522,000 warrants to purchase common stock (the "Warrants") in a private
placement (the "Private Placement"). The Warrants expire on September 5,
2001 and are presently exercisable at an exercise price of $4.44 per
share. The Warrants are redeemable by
10
<PAGE>
the Company at any time with 30 days written notice. For the purpose of
this Prospectus, it is assumed that the holder exercises 100% of the
Silicon Valley Warrant or Warrants issued in the Private Placement or
converts 100% of the Debentures, as the case may be. "Beneficial
Ownership" includes shares for which an individual, directly or
indirectly, has or shares voting or investment power or both and also
includes options which are exercisable within sixty days of the date
hereof. Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 of the Securities Exchange Act
of 1934. The percentages are based upon 19,495,202 shares outstanding,
except for certain parties who hold currently exercisable options to
purchase shares. The percentages for those parties who hold currently
exercisable options are based upon the sum of 19,495,202 shares plus the
number of shares subject to currently exercisable options held by them,
as indicated in the following notes.
/(2)/ Represents 25,000 shares to be sold upon exercise of the Silicon Valley
Warrant.
/(3)/ Includes 6,250 shares subject to outstanding options to purchase Common
Stock that are exercisable within 60 days issued to Wanda Jones pursuant
to the Company's 1992 Stock Option Plan, as amended.
/(4)/ Includes 50,675 shares to be sold upon exercise of Warrants and 71,500
shares to be sold upon conversion of Debentures. Donald L. Lucas, the
chairman of the Board of Directors of the Company, is the trustee of the
Richard M. Lucas Cancer Foundation.
/(5)/ Includes 114,400 shares to be sold upon conversion of Debentures.
/(6)/ Includes 57,200 shares to be sold upon conversion of Debentures.
/(7)/ Includes 143,000 shares to be sold upon conversion of Debentures.
/(8)/ Includes 28,600 shares to be sold upon conversion of Debentures.
/(9)/ Includes 33,783 shares to be sold upon exercise of Warrants.
/(10)/ Includes 28,600 shares to be sold upon conversion of Debentures and 5,360
shares to be issued upon exercise of Warrants.
/(11)/ Includes 71,500 shares to be sold upon conversion of Debentures.
/(12)/ Includes 5,630 shares to be sold upon exercise of Warrants.
/(13)/ Includes 11,261 shares to be sold upon exercise of Warrants.
/(14)/ Includes 22,522 shares to be sold upon exercise of Warrants.
/(15)/ Includes 33,783 shares to be sold upon exercise of Warrants.
/(16)/ Includes 28,000 shares subject to outstanding options to purchase Common
Stock that are exercisable within 60 days under the Company's 1992 Stock
Option Plan, as amended, and 11,261 shares to be sold upon exercise of
Warrants. Mr. Thoele serves on the Board of Directors of the Company.
/(17)/ Includes 16,000 shares subject to outstanding options to purchase Common
Stock that are exercisable within 60 days under the Company's 1992 Stock
Option Plan, as amended, and 22,522 shares to be sold upon exercise of
Warrants. Mr. Caldwell serves on the Board of Directors of the Company.
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby for the benefit of the Selling
Shareholders represent either (i) shares underlying certain outstanding stock
purchase warrants issued to certain Selling Shareholders, (ii) shares underlying
the Debentures issued to certain of the Selling Shareholders and, (iii) shares
of Common Stock held by certain of the Selling Shareholders issued in private
transactions. See "Selling Shareholders." The Company has agreed to register
such shares for resale by the Selling Shareholders. The Company will not receive
any of the proceeds from the sale of such shares by the Selling Shareholders.
See "Use of Proceeds."
11
<PAGE>
The Selling Shareholders have advised the Company that they may elect to
offer for sale and to sell Common Stock from time to time in one or more
transactions through brokers in the over-the-counter market, in private
transactions, or otherwise, in each case at market prices prevailing at the time
of sale or at prices and terms then obtainable, in block transactions,
negotiated transactions, or otherwise. Accordingly, sales prices and proceeds to
the Selling Shareholders will depend upon market price fluctuations and the
manner of sale.
The Selling Shareholders may effect such transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, brokerage commissions or
similar fees in amounts which may vary from transaction to transaction. The
Selling Shareholders will pay such brokerage commissions and charges, as well as
the fees and expenses of any counsel retained by them in connection with this
offering. The Company will bear all other expenses in connection with
registering the shares offered hereby, which expenses are estimated to total
approximately $25,950.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue up to 30,000,000 shares of Common
Stock, $.01 par value per share, and up to 21,000,000 shares of Preferred
Stock $.01 par value per share.
COMMON STOCK
Subject to the rights of any holder of Preferred Stock, each holder of
Common Stock is entitled to one vote per share for the election of directors as
well as on other matters, to dividends as and when declared by the Company's
Board of Directors, and upon liquidation to share in the net assets of the
Company pro rata in accordance with his or her holdings. The Common Stock has no
preemptive, redemption, conversion or subscription rights, and all outstanding
shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 21,000,000 shares of $.01 par
value Preferred Stock, none of which is outstanding. The Board of Directors has
the power, without further action by the shareholders, to divide any and all
shares of Preferred Stock into series and to fix and determine the relative
rights and preferences of the Preferred Stock, such as the designation of series
and the number of shares constituting such series, dividend rights, redemption
and sinking fund provisions, liquidating and dissolution preferences, conversion
or exchange rights and voting rights, if any. Issuances of Preferred Stock by
the Board of Directors may result in such shares having senior dividend and/or
liquidation preferences to the holders of shares of Common Stock and may dilute
the voting rights of such holders. Issuances of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
rights of holders of the Common Stock. In addition, the issuance of Preferred
Stock could make it more difficult for a third party to acquire a majority of
the outstanding voting stock. Accordingly, the issuance of Preferred Stock may
be used as an "anti-takeover" device without further action on the part of the
shareholders of the Company. No shares of Preferred Stock have been issued and
the Company has no present plans to issue any shares of Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is
SunTrust Bank, Atlanta, Georgia.
12
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Smith, Gambrell & Russell, LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements and schedule of Transcend
Services, Inc. and subsidiaries, incorporated by reference in this Prospectus
and elsewhere in the Registration Statement to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
13
<PAGE>
- -------------------------------------------------------------------------------
No dealer, representative or any other person has been authorized to
give information or to make any representations other than those contained in
this Prospectus, and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or by the
Underwriters. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any date subsequent to the date
hereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any securities offered hereby by anyone in any jurisdiction
in which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to anyone to whom
it is unlawful to make such offer or solicitation.
------------
TABLE OF CONTENTS
------------
PAGE
----
Available Information........................................ 2
Incorporation of Certain Documents by Reference.............. 2
The Company.................................................. 3
Risk Factors................................................. 3
Use of Proceeds.............................................. 8
Recent Developments.......................................... 8
Selling Shareholders......................................... 9
Plan of Distribution......................................... 11
Description of Capital Stock................................. 12
Legal Matters................................................ 13
Experts...................................................... 13
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRANSCEND SERVICES, INC.
1,424,346 Shares
COMMON STOCK
PROSPECTUS
______________, 1997
3353 Peachtree Road, N.E.
Suite 100
Atlanta, Georgia 30326
(404) 364-8000
______________, 1997
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of issuance and distribution of the Common
Stock, other than underwriting discounts, are as follows:
Securities and Exchange Commission Registration Fee.............. $ 2,450
Legal Fees and Expenses.......................................... 10,000
Accounting Fees and Expenses..................................... 5,000
Printing, Material, and Postage.................................. 5,000
Transfer Agent Fees.............................................. 1,000
Blue Sky Qualification Fees and Expenses......................... 500
Miscellaneous.................................................... 2,000
-------
TOTAL...................................................... $25,950
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws permit it to indemnify a director and officer who
was or is a party to any threatened, pending or completed action, suit or other
type of proceeding, whether civil, criminal, administrative or investigative
(other than an action by or any right of the Company) by reason of the fact that
he or she is or was a director or officer or is or was serving at the request of
the Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding.
These indemnification rights apply if the director or officer acted in good
faith and in a manner in which he or she reasonably believed to be in or not
opposed to the best interest of the Company and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that a person did not act in a manner
which he or she reasonably believed to be in the best interests of the Company,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his or her conduct was unlawful.
In addition, under the Bylaws, the Company may indemnify an officer or
director who was or is a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he or she is or was an officer or director of another
corporation, joint venture, trust or other enterprise against expenses
(including attorney's fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such proceeding. These
indemnification rights apply if the director or officer acted in good faith and
in a manner in which he or she reasonably believed to be in or not opposed to
the best interest of the Company, except no indemnification shall be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to have been liable to the Company unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances, such person is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
The Company's Bylaws provide that indemnification of the costs and
expenses of defending any action is required to be made to any officer or
director who is successful (on the merits or otherwise) in defending an action
of the type referred to in the immediately preceding paragraphs. Except with
regard to the costs and expenses of successfully defending an action as may be
ordered by a court, indemnification as described
II-1
<PAGE>
in the previous paragraph is only required to be made to a director or officer
if a determination is made that indemnification is proper under the
circumstances. Such determination shall be made: (i) by the Company's Board by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding; or (ii) if such quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors, by independent legal counsel
in a written opinion, or (iii) by the affirmative vote of a majority of shares
entitled to vote.
The Bylaws of the Company further provide for the expenses (including
attorneys' fees) incurred by any officer or director in defending a civil or
criminal action, suit or proceeding to be paid in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
him or her to repay all amounts so advanced, if it shall ultimately be
determined that such officer or director is not entitled to be indemnified by
the Company as authorized in the proceeding paragraphs. No security shall be
required for such undertaking.
The Bylaws of the Company also permit the Company to purchase and
maintain insurance on behalf of any person who was or is a director or officer
of the Company, or is or was serving at the request of the Company as a officer
or director of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against the officer or director and
incurred by him or her in any such capacity, or arising out of his or her status
as such, whether or not the Company would have the power to indemnify the
director or officer against such liability.
Limitation of Liability. The Certificate of Incorporation also
provides that directors of the Company shall not be liable to the Company or its
shareholders for monetary damages for a breach of fiduciary duty as a director,
except for liability (i) for any breach of the Director's duty of loyalty to the
Company or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived any improper personal benefit. This provision
would have no effect on the availability of equitable remedies or non-monetary
relief, such as an injunction or rescission for breach of the duty of care. In
addition, the provision applies only to claims against a director arising out of
his role as a director and not in any other capacity (such as an officer or
employee of the Company). Further, liability of a director for violations of the
federal securities laws will not be limited by this provision.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
*5 Opinion of Smith, Gambrell & Russell, LLP.
*10.1 Letter Agreement dated December 5, 1996 by and between the
Registrant and VHA, Inc.
*10.2 Services Agreement dated December 5, 1996 by and between the
Registrant and VHA, Inc.
+23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Smith, Gambrell & Russell, LLP (contained in their
opinion filed as Exhibit 5).
- ------------------
* Previously filed.
+ Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that the undertakings set forth in paragraphs
(i) and (ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at the time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable ground to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on this 21st day of April,
1997.
Transcend Services, Inc.
By: /s/ Larry G. Gerdes
-------------------------------------
Larry G. Gerdes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
- ------------------------------------------------- Chairman of the Board of April __, 1997
Donald L. Lucas Directors
/s/ Larry G. Gerdes President, Chief April 21, 1997
- ------------------------------------------------- Executive Officer
Larry G. Gerdes and Director (Principal
Executive Officer)
/s/ David W. Murphy Chief Financial Officer, April 21, 1997
- ------------------------------------------------- Secretary and Treasurer
David W. Murphy (Principal Financial and
Accounting Officer)
* Director April 21, 1997
- -------------------------------------------------
George B. Caldwell
* Director April 21, 1997
- -------------------------------------------------
Walter S. Huff, Jr.
* Director April 21, 1997
- -------------------------------------------------
Charles E. Thoele
By: /s/ Larry G. Gerdes
---------------------------------------------
Larry G. Gerdes, as Attorney-in-Fact
pursuant to a Power of Attorney contained
on the original signature page to this
Registration Statement
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
S-K REFERENCE
NUMBER DESCRIPTION PAGE
- ------------- ----------- ----
23.1 Consent of Arthur Andersen LLP.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Atlanta, Georgia
April 22, 1997
