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EXHIBIT 2.7
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
on this 13/th/ day of October, 2000, by and between TRANSCEND SERVICES, INC., a
Delaware corporation ("Seller"), and PROVIDER HEALTHNET SERVICES INC., a
Delaware corporation ("Buyer").
RECITALS:
A. Seller owns and operates a business engaged in medical records
facility management (the "Co-Sourcing Business") as well as a business offering
medical record coding services (the "CodeRemote Business") (the Co-Sourcing
Business and the CodeRemote Business being collectively referred to as the
"Subject Businesses").
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, pursuant to the terms and subject to the conditions of this Agreement,
the Subject Businesses and the assets relating thereto as more particularly set
forth in this Agreement.
AGREEMENT:
In consideration of the foregoing, the mutual promises herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS
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a. Purchased Assets. Subject to and upon the terms and conditions set
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forth in this Agreement, Buyer hereby purchases from Seller, and
Seller hereby sells, transfers, assigns and delivers to Buyer, all
right, title and interest in, to and under all of the assets, rights,
business, goodwill and other properties of Seller of every kind and
description wherever located and whether tangible or intangible, real
or personal or fixed or contingent, owned, held, used or offered for
sale by Seller and used exclusively in connection with the operation
of the Subject Businesses (collectively, the "Purchased Assets"). The
Purchased Assets shall include, but not be limited to, the following:
i. all rights, interests and benefits accruing to Seller under the
contracts and agreements with certain hospitals and other
healthcare providers (collectively, the "Assigned Medical
Contracts"), each of which are set forth in Schedule 1.a.i
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attached hereto; and all rights (including, without limitation,
rights of refund and offset), privileges, deposits, claims,
causes of action and options relating or pertaining to the
Assigned Medical
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Contracts, including, without limitation, all rights to receive
payment for products sold or services rendered on or after the
Closing Date, whether paid through escrow arrangements or
otherwise, and any escrow accounts related thereto, if any;
ii. all data, files and records, whether in print, electronic or
other media, pertaining to the Subject Businesses or Seller's
performance of the Assigned Medical Contracts and the Assigned
Contracts (as defined below) including, without limitation, (A)
all customer and mailing lists relating to the Subject
Businesses, (B) all supplier and vendor lists relating to the
Subject Businesses, (C) all administrative materials and data
relating exclusively to the Subject Business (provided, that as
to the employee files for the employees listed on Schedule 3.m
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attached hereto, to the extent permitted by applicable law, Buyer
may either (i) review the non-medical records of said employees
at Seller's office during normal business hours for a period of
ninety (90) days subsequent to the date hereof or (ii) if Buyer
so elects, obtain a copy of such non-medical records for those
employees of Seller that Buyer hires) and (D) correspondence and
other communications pertaining to Seller's performance or
services to be rendered in connection with the Assigned Medical
Contracts;
iii. all furniture, equipment, machinery, apparatus, tools,
appliances, supplies and all other tangible personal property of
every kind and description located either on the premises
utilized or occupied by Seller or elsewhere and owned or used
exclusively in connection with the Subject Businesses and set
forth in Schedule 1.a.iii attached hereto (the "Equipment");
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iv. all right, title and interest of Seller in, to and under all
technology, know-how, data, telephone numbers, licenses
(including, without limitation, one (1) IMNET license granted by
McKessonHBOC), franchises, distributorships, labels, covenants by
others not to compete, rights and other privileges used
exclusively or primarily in the conduct of the Subject
Businesses, and any right to recovery for infringement thereof
(including, without limitation, past infringement) and any and
all goodwill associated therewith or connected with the use
thereof and symbolized thereby (the "Purchased Proprietary
Rights"), including, without limitation, all of the items set
forth in Schedule 1.a.iv attached hereto;
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v. all goodwill of the Subject Businesses of Seller associated
exclusively with the Purchased Assets;
vi. all right, title and interest of Seller in and to the phrases
"Co-Sourcing" and "CodeRemote", or any derivation of the
foregoing phrases, and the goodwill associated therewith;
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vii. all right, title and interest of Seller in, to and under the
contracts, arrangements, leases, instruments, purchase orders
(as vendor or purchaser) and other agreements related to the
Subject Businesses (collectively, the "Assigned Contracts"),
each of which are set forth in Schedule 1.a.vii hereof, and all
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rights (including, without limitation, rights of refund and
offset), privileges, deposits, claims, causes of action and
options relating or pertaining to the Assigned Contracts,
including, without limitation, all rights to receive payment for
products sold or services rendered on or after the Closing,
whether paid through escrow arrangements or otherwise, and any
escrow accounts related thereto, if any;
viii. all right, title and interest of Seller in computer equipment,
hardware and software used exclusively in connection with the
Subject Businesses, including, without limitation, all central
processing units, terminals, disk drives, tape drives,
electronic memory units, printers, keyboards, screens,
peripherals (and other input/output devices), modems and other
communication controllers, and any and all parts and
appurtenances thereto, together with all intellectual property
used in the operation of such computer equipment and hardware,
including, without limitation, all software (including, without
limitation, all information, documentation and other
communication whether in paper or electronic format relating to
any custom developed software), all file layouts, all data
files, all of Seller's rights under any licenses related to
Seller's use, at any time, of such computer equipment, hardware
or software, and all leases pursuant to which Seller leases any
such computer equipment, hardware or software;
ix. a pro rata portion of all prepaid and deferred items of Seller
to the extent that such items relate to periods after the
Closing Date, including, without limitation, prepaid rentals,
commission advances, other prepaid expenses, bonds, deposits and
financial assurance requirements, and other current assets
relating exclusively to any of the Purchased Assets or the
Subject Businesses;
x. all right, title and interest of Seller in, to and under all
rights, privileges, claims, causes of action and options
relating or pertaining exclusively to the Subject Businesses or
the Purchased Assets; and
xi. except as set forth on Schedule 1.b, all other or additional
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privileges, rights, interests or properties and assets of every
kind and description and wherever located, that are used or
intended for use exclusively or primarily in connection with the
Subject Businesses as presently conducted.
b. Excluded Assets. Seller and Buyer hereby expressly acknowledge and
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agree that Seller is not selling to Buyer, and Buyer is not purchasing
from Seller, any of the
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assets and properties of Seller other than the Purchased Assets
expressly identified in Subparagraph (a) of this Paragraph 1,
including, without limitation:
i. any patents, trade secrets, processes, know how or other
intellectual property of Seller, other than those set forth in
Subparagraphs 1.a.iv, 1.a.vi and 1.a.vii above;
ii. any rights in or to the phrases "T2k", "Transcend Services",
"Cascade Health Information Software", or any derivation of any
of the foregoing phrases, or any rights in or to any of Seller's
other trademarks, tradenames, servicemarks or trade dress,
including but not limited to the goodwill related thereto, except
as expressly provided in Subparagraphs 1.a.iv, 1.a.vi or 1.a.vii
above;
iii. any accounts receivable of the Subject Businesses for services
rendered prior to the Closing Date, or other rights to payment
for services rendered by the Subject Businesses prior to the
Closing Date, including, without limitation, those which are not
evidenced by instruments or chattel paper, together with any and
all instruments and all documents of title representing any of
the foregoing, or any rights, title, security, or guaranties in
favor of Seller with respect to any of the foregoing, also
excepting, without limitation, any right of stoppage in transit;
iv. any assets which are used by the Subject Businesses and which are
owned by the customers of the Subject Businesses and furnished
for the use of the Subject Businesses by the customers of the
Subject Businesses, all of said assets being located only on the
premises of the customers and which include, without limitation,
office furniture, office space, computer equipment, postage
machines, copiers, facsimile machines, software and licenses
therefor;
v. all right, title and interest of Seller in, to and under that
certain agreement by and between Seller and Deaconess Medical
Center, dated October 29, 1999, and that certain agreement by and
between Seller and Catholic Health Initiatives, dated June 30,
1998; and
vi. any asset of Seller which is used in any other portion of
Seller's business operations.
The foregoing are collectively referred to as the "Excluded Assets".
Schedule 1.b sets forth any assets of Seller used in the Subject
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Businesses that would be required in order for Buyer to provide the
services to its customers under the Assigned Medical Contracts
following the Closing and which will not be transferred to Buyer.
Schedule 1.c sets forth a list of Excluded Assets that have been used
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by Seller both in the conduct of the Subject Businesses prior to the
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Closing and in the conduct of Seller's medical records transcription
business, and that will be used jointly by Seller and Buyer in Buyer's
conduct of the Subject Businesses and Seller's conduct of its medical
records transcription business until the earlier of ninety (90) days
from the date of the Closing and such time as Buyer obtains reasonable
substitutes for such assets. No additional consideration shall be
payable by Buyer for joint use of such Excluded Assets during such
time period. Buyer covenants in good faith to use commercially
reasonable efforts to obtain substitutes for such assets promptly
after the Closing.
2. CONSIDERATION AND COVENANTS
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a. Base Purchase Price. The base consideration to be paid by Buyer to
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Seller for the Purchased Assets shall be the sum of Four Million Six
Hundred Forty Thousand Dollars ($4,640,000.00), plus the dollar amount
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of the Purchased Assets described under Subparagraph 1.a.ix above,
plus the dollar amount paid by Buyer pursuant to Subparagraph 2.c.iii
hereof, together with Buyer's assumption of the Assumed Liabilities
(as defined below) (the "Base Purchase Price"). On the Closing Date,
Buyer and Seller shall jointly agree upon the dollar amount of the
Purchased Assets described under Subparagraph 1.a.ix above in a
Closing Statement, and shall execute the Closing Statement as part of
the joint deliveries specified in Subparagraph 5.d below (the "Closing
Statement"). At Closing, Buyer shall pay the Base Purchase Price in
cash by wire transfer of immediately available U.S. funds pursuant to
the wire transfer instructions set forth on Exhibit 2.a.
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b. Contingent Purchase Price.
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i. Continuation of Existing Services. Within thirty (30) days after
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each anniversary of the Closing Date (each, an "Anniversary
Date") up to and including the fifth (5/th/) Anniversary Date,
Buyer shall pay to Seller an amount equal to (x) fifteen percent
(15%) of the Net Revenues (as defined below) in excess of One
Million Dollars ($1,000,000.00) that Buyer received during the
twelve (12)-month period (or applicable portion thereof)
immediately preceding the then-current Anniversary Date from the
CodeRemote Business; plus (y) fifteen percent (15%) of the Net
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Revenues that Buyer received during such period as payment for
services provided by Buyer pursuant to an extension or renewal of
any of the Assigned Medical Contracts; provided, however, that if
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after the Closing Date Buyer enters into an extension or renewal
of any Assigned Medical Contract for a period of twenty-four (24)
months or more (a "Multi-Year Renewal"), then Buyer shall instead
pay to Seller, within thirty (30) days after the first (1st)
anniversary of execution of such Multi-Year Renewal, an amount
equal to fifteen percent (15%) of the aggregate amount that the
customer is contractually obligated to pay to Buyer (net of
discounts, rebates, pass-through services and taxes, and not
including any amounts attributable to periods for which the
customer has the right to terminate the
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agreement other than for a breach or default by Buyer) for
services provided pursuant to such Multi-Year Renewal during the
five (5)-year period following the Closing Date. For periods
during the term of any such Multi-Year Renewal during which the
customer has the right to terminate the agreement other than for
a breach or default by Buyer, Buyer shall pay to Seller an amount
equal to fifteen percent (15%) of the Net Revenues that Buyer
received during such periods as payment for services provided by
Buyer pursuant to such Multi-Year Renewal in accordance with the
time periods set forth in the immediately preceding sentence,
without giving effect to the proviso at the end thereof. For
purposes of this Section 2.b., "Net Revenues" shall mean the
aggregate revenues received by Buyer (net of discounts, rebates,
pass-through services and taxes) pursuant to such extension or
renewal of any of the Assigned Medical Contracts.
ii. New Services to Existing Customers.
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(A) In the event that, during the twenty-four (24)-month period
commencing with the Closing Date, Buyer enters into an agreement
to provide to a customer under one of the Assigned Medical
Contracts a service that is not currently specified as a service
to be provided by Buyer pursuant to such Assigned Medical
Contract ("New Services") and such customer has continuously
remained a customer under such Assigned Medical Contract through
the date of contracting for the New Service (other than for a
single break in service under such Assigned Medical Contract of
six (6) months or less), then Buyer shall pay to Seller, within
(30) days after each Anniversary Date falling after the execution
of such agreement to provide New Services (up to and including
the fifth (5th ) Anniversary Date), an amount equal to eight
percent (8%) of the Net Revenues received by Buyer as payment for
such New Services during the twelve (12)-month period (or
applicable portion thereof) immediately preceding the then-
current Anniversary Date; provided, however, that if the
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agreement for New Services is for a period of twenty-four (24)
months or more (a "Multi-Year New Services Agreement"), then
Buyer shall instead pay to Seller, within thirty (30) days after
the first (1st) anniversary of execution of such Multi-Year New
Services Agreement, eight percent (8%) of the aggregate amount
that the customer is contractually obligated to pay to Buyer (net
of discounts, rebates, pass-through services and taxes, and not
including any amounts attributable to periods for which the
customer has the right to terminate the agreement other than for
a breach or default by Buyer) as payment for New Services
provided pursuant to such agreement prior to the fifth (5/th/)
Anniversary Date. For periods during the term of any such Multi-
Year New Services Agreement during which the customer has the
right to terminate such agreement other than for a breach or
default by Buyer, Buyer shall pay to Seller an amount
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equal to eight percent (8%) of the Net Revenues that Buyer
received during such periods as payment for New Services provided
by Buyer pursuant to such agreement in accordance with the time
periods set forth in the immediately preceding sentence, without
giving effect to the proviso at the end thereof.
(B) In the event that, during the thirty-six (36)-month period
commencing with the second (2nd) Anniversary Date and ending with
the fifth (5/th/) Anniversary Date, Buyer enters into an
agreement to provide New Services to a customer under one of the
Assigned Medical Contracts and such customer has continuously
remained a customer under such Assigned Medical Contract through
the date of contracting for the New Service (other than for a
single break in service of six (6) months or less), then Buyer
shall pay to Seller, within thirty (30) days after each
Anniversary Date falling after the execution of such agreement to
provide New Services (up to and including the fifth (5/th/)
Anniversary Date), an amount equal to four percent (4%) of the
Net Revenues received by Buyer as payment for such New Services
during the twelve (12)-month period (or applicable portion
thereof) immediately preceding the then-current Anniversary Date;
provided, however, that if such agreement for New Services is a
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Multi-Year New Services Agreement, then Buyer shall instead pay
to Seller, within thirty (30) days after the first (1/st/)
anniversary of execution of such Multi-Year New Services
Agreement, four percent (4%) of the amount that the customer is
contractually obligated to pay to Buyer (net of discounts,
rebates, pass-through services and taxes, and not including any
amounts attributable to periods for which the customer has the
right to terminate the agreement other than for a breach or
default by Buyer) as payment for New Services provided pursuant
to such Multi-Year New Services Agreement prior to the fifth
(5/th/) Anniversary Date. For periods during the term of any such
Multi-Year New Services Agreement during which the customer has
the right to terminate such agreement other than for a breach or
default by Buyer, Buyer shall pay to Seller an amount equal to
four percent (4%) of the Net Revenues that Buyer received during
such periods as payment for New Services provided by Buyer
pursuant to such Multi-Year New Services Agreement in accordance
with the time periods set forth in the immediately preceding
sentence, without giving effect to the proviso at the end
thereof.
(C) Each time prior to the fifth (5/th/) Anniversary Date that
Buyer enters into an agreement to provide New Services to a
customer under one of the Assigned Medical Contracts Buyer shall
send to Seller notification of such event in the form attached
hereto as Exhibit 2.b.ii(C).
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iii. Finder's Fee Agreement. At Closing, Buyer and Seller will enter
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into a finder's fee agreement substantially in the form of
Exhibit 2.b.iii attached hereto (the "Finder's Fee Agreement").
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iv. Maximum Contingent Purchase Price. Notwithstanding any other
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provision of this Agreement, the maximum amount that Buyer shall
be obligated to pay to Seller pursuant to this Section 2.b
(excluding any fees earned pursuant to the Finder's Fee
Agreement and any interest earned on amounts held in escrow
pursuant to Section 2.b.v below) shall be Four Million Three
Hundred Thousand Dollars ($4,300,000.00).
v. Escrow Agreement. At Closing, Buyer, Seller and SunTrust Bank,
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N.A., as Escrow Agent, will enter into an Escrow Agreement
substantially in the form of Exhibit 2.b.v attached hereto (the
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"Escrow Agreement"), pursuant to which Buyer shall deposit into
an escrow account an amount equal to Two Million Eight Hundred
Thousand Dollars ($2,800,000.00) (the "Escrow Cash") to be held
and distributed in accordance with the terms of the Escrow
Agreement as a non-exclusive source for the payment to Seller by
Buyer of any sums due pursuant to this Subparagraph 2.b and a
non-exclusive source for the payment of indemnification claims
pursuant to Subparagraphs 7.b and 7.c hereof.
vi. Additional Conditions Precedent to Contingent Payments. In
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addition to the other conditions to payment set forth in this
Section 2.b, except as provided in the next sentence, Seller
shall be entitled to receive contingent payments only if, at the
time any such payment becomes due, Seller (a) provides medical
records transcription services on behalf of Buyer to the
customer of Seller to whom a New Service is being provided or
that is named in the Assigned Medical Contract that is the
subject of such renewal or extension, as the case may be, if
Seller was providing medical records transcriptions services to
such customer at the time of the Closing; (b) has not filed and
has not taken any steps toward filing (or had creditors file or
take any steps toward filing) a petition in bankruptcy or
similar proceedings seeking protection from creditors; (c) has
not suffered to occur any cessation or permanent termination of
active business operations; (d) has not been delisted or
suffered to occur any steps toward delisting from a national
securities exchange or the Nasdaq national market; and (e) has
not undergone a change in management resulting in the cessation
of Larry Gerdes' active involvement in the management of Seller
and direction of Seller's policies and has not undergone a
change-in-control (as defined under the Securities Exchange Act
of 1934, as amended). Notwithstanding the immediately preceding
sentence, Seller shall continue to be entitled to receive
contingent payments provided for in Subparagraph 2.b.i hereof
notwithstanding the occurrence of an event specified in clause
(d) or clause (e) of the immediately preceding sentence,
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provided that all other conditions precedent to receipt of such
contingent payments have been satisfied. Notwithstanding
anything in this Agreement to the contrary, Seller acknowledges
and agrees that the decision whether to enter into an extension
or renewal of any Assigned Medical Contract as contemplated by
Subparagraph 2.b.i hereof or an agreement for New Services as
contemplated by Subparagraph 2.b.ii hereof will be made by Buyer
in its sole and absolute discretion.
c. Assumed Liabilities.
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i. Assumption. As additional consideration for the Purchased
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Assets, Buyer hereby assumes and agrees to discharge and perform
when lawfully due only the following obligations of Seller: (A)
all liabilities and obligations pursuant to the Assigned
Contracts and Assigned Medical Contracts applicable to the
Subject Businesses first accruing from and after the Closing
Date; and (B) all sales and use, intangibles, real property,
personal property and other taxes payable with respect to the
operation of the Subject Businesses first accruing on or after
the Closing Date (collectively, the "Assumed Liabilities").
ii. No Other Assumed Liabilities. Except for the Assumed
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Liabilities, Buyer shall not assume, and Seller shall be and
remain liable for, any and all obligations, liabilities, and
indebtedness of Seller, whether due or to become due, absolute or
contingent, direct or indirect, or asserted or unasserted, and
whether relating to the Subject Businesses or otherwise,
regardless of whether any such liability is disclosed herein or
in any Schedule attached hereto (collectively, the "Excluded
Liabilities").
iii. Greenwich Medical Center Project. Seller acknowledges that
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Seller is obligated to complete a microfilming project pursuant
to an agreement by and between Seller and the Greenwich Medical
Center dated as of September 27, 1996 (the "Greenwich Medical
Center Contract"). Buyer shall pay at Closing directly to the
vendor providing services to Greenwich Medical Center in order to
fulfill Seller's obligation to complete a micro-filming project
under the Greenwich Medical Center Contract, an amount equal to
Sixty Thousand Dollars ($60,000.00). It is anticipated by Buyer
and Seller that completion of such micro-filming project will
involve expenditures by Buyer of an additional Thirty-Five
Thousand Dollars ($35,000.00), or a total of Ninety-Five Thousand
Dollars ($95,000.00) (including the $60,000.00 payment made by
Buyer pursuant to this Subparagraph 2.c.iii). Buyer shall be
responsible for expenditures in connection with such micro-
filming project up to such Ninety-Five Thousand Dollar
($95,000.00) amount. Seller shall pay any additional amounts
necessary to complete such micro-filming project under the
Greenwich Medical Center Contract and Buyer shall have no
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responsibility therefor. Seller hereby represents that, as of
the date hereof, other than the above-referenced micro-filming
project, there are no other liabilities or obligations
outstanding in connection with the Greenwich Medical Center
Contract other than performance in the ordinary course under the
Greenwich Medical Center Contract.
d. No Expansion of Third Party Rights. The assumption by Buyer of the
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Assumed Liabilities and the transfer thereof by Seller shall in no way
expand the rights or remedies of any third party against Buyer or
Seller as compared to the rights and remedies which such third party
would have had against Seller had Buyer not assumed such liabilities.
Without limiting the generality of the preceding sentence, the
assumption by Buyer of the Assumed Liabilities shall not create any
third party beneficiary rights.
e. Allocation of Purchase Price. The parties hereto acknowledge and agree
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that the transactions contemplated hereunder must be reported in
accordance with Section 1060 of the Internal Revenue Code of 1986.
The parties agree to use their reasonable best efforts to agree upon
the allocation of the Purchase Price among the Purchased Assets in
accordance with their fair market values by no later than October 31,
2000. Upon having reached such agreement, each party shall complete
Form 8594, Asset Acquisition Statement of Allocation ("Form 8594"),
consistent with such allocation, shall provide such form to the other
party and shall file a copy of such form with their respective federal
income tax return for the period that includes the Closing Date. The
parties hereto further agree to file all initial reports and returns
required by federal, state and local tax laws and, except as required
by law, continue to file any such future returns and reports
consistent with such mutually agreed upon allocation. Notwithstanding
the foregoing, in the event that the parties are unable to agree upon
the allocation of the Purchase Price among the Purchased Assets, then
each party shall complete Form 8594, and all additional reports and
returns required by federal, state and local tax laws in accordance
with such allocation as such party believes in good faith to be
correct.
f. Accounts Receivable Payments and Adjustments. Any payment received
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from a customer of the Subject Businesses by Buyer that is
attributable to accounts receivable of the Subject Businesses for
services rendered prior to the Closing Date shall be remitted by Buyer
to Seller. Any payment received from a customer of the Subject
Businesses by Seller that is attributable to accounts receivable of
the Subject Businesses for services rendered after the Closing Date
shall be remitted by Seller to Buyer. For the first three months
after the Closing Date, Buyer and Seller shall settle all amounts
payable pursuant to this Subparagraph 2.f on a monthly basis, with
payment to be made within five days after the end of each month.
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3. REPRESENTATIONS AND WARRANTIES OF SELLER. As a material inducement to
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Buyer to enter into this Agreement, Seller hereby represents and warrants
to Buyer as follows:
a. Organization and Qualification of Seller.
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i. Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Seller
has all requisite legal power, authority and right to own,
operate, lease and license its properties and to carry on the
Subject Businesses as and where the same are now being conducted.
ii. Seller is duly licensed or qualified to do business as a foreign
corporation, and is in good standing, in each jurisdiction in
which the character of the properties owned or leased by it with
respect to the Subject Businesses, or the nature of the Subject
Businesses, makes such qualification necessary.
iii. None of Seller's subsidiaries owns any of the Purchased Assets or
conducts any part of the Subject Businesses.
b. Authorization; Binding Nature of Agreement. Seller has all requisite
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right, power and authority to enter into this Agreement and the other
agreements, instruments and documents contemplated hereby to be
executed and delivered by Seller in connection with the transactions
contemplated by this Agreement and to perform its obligations
hereunder and thereunder (such other agreements, instruments and
documents are sometimes hereinafter referred individually as a
"Seller's Instrument" or collectively as the "Seller's Instruments").
The execution and delivery of this Agreement and each of Seller's
Instruments by Seller and the performance of its obligations hereunder
and thereunder have been duly authorized by all necessary corporate
action on the part of Seller. This Agreement has been duly and
validly executed and delivered by Seller and is, and, each of Seller's
Instruments to be executed and delivered by Seller, when executed and
delivered, will be, legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms,
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally,
and by general equitable principles (regardless of whether enforcement
is sought in a proceeding at law or in equity).
c. No Violation. Except as set forth on Schedule 3.c attached hereto,
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neither the execution and delivery of this Agreement or any of
Seller's Instruments nor the consummation by Seller of the
transactions contemplated hereby and thereby will (i) violate or
conflict with, (ii) constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under,
(iii) result in the termination of, (iv) accelerate the performance
required by or (v) result in the creation of any Lien upon any of the
Purchased Assets under any charter
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provision, bylaw, contract, lease, agreement, instrument, order,
judgment, decree, law or regulation to which Seller is a party or by
which Seller, or any of the Purchased Assets, may be bound or
affected.
d. Consents, Authorizations and Approvals. Except as set forth on
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Schedule 3.d attached hereto, no consent, authorization or approval
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of, or declaration, filing or registration with, any Governmental
Authority or any other person or entity is necessary in order for
Seller to enter into and perform its obligations under this Agreement
or Seller's Instruments.
e. Financial Statements; Absence of Undisclosed Liabilities.
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i. Schedule 3.e contains copies of the following financial
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statements which include, without limitation, the financial
information of the Subject Businesses: (a) the audited balance
sheet of Seller at December 31, 1997, 1998 and 1999, and the
related statements of income for the fiscal years ended December
31, 1997, 1998 and 1999, and (b) the unaudited balance sheet of
Seller at June 30, 2000 and the related unaudited statement of
income for the six month period then ended (the "Interim
Financial Statements"). All of such financial statements fairly
present the financial position of Seller as of the dates shown
and the results of the operations of Seller for the respective
fiscal periods or as of the respective dates therein, in each
case subject, as to the Interim Financial Statements, to changes
resulting from year-end adjustments (none of which will be
material in amount and effect) and the absence of notes thereto.
All of such financial statements have been prepared in accordance
with generally accepted accounting principles consistently
applied during the periods involved, except as otherwise set
forth in the notes thereto.
ii. As of the date hereof and except as otherwise contemplated by
this Agreement, Seller has no liabilities or obligations related
to the Purchased Assets and the Subject Businesses of any nature
(absolute, accrued, contingent or otherwise), whether due or to
become due, which are not fully reflected or reserved against in
the balance sheet at June 30, 2000 included in the Interim
Financial Statements, except for liabilities that may have arisen
in the ordinary course of business and consistent with past
practice.
iii. Except as disclosed in the Interim Financial Statements, Seller
is not in default with respect to any liabilities or obligations
that are related to the Purchased Assets or the Subject
Businesses, and all such liabilities or obligations reflected in
the Interim Financial Statements or incurred or accrued
subsequent thereto have been, or are being, paid or discharged as
they become due, and all such liabilities and obligations were
incurred in the ordinary course of business.
12
<PAGE>
f. Securities Filings. Seller has filed all reports, registration
------------------
statements, proxy statements, schedules, forms and other documents,
together with any amendments and supplements required to be made with
respect thereto, that were required to be filed with (i) the
Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933 or the Securities Exchange Act of 1934 and (ii)
any applicable state securities authorities (all such reports,
statements, schedules, forms and other documents are referred to
herein collectively as the "Securities Filings"). As of their
respective dates, the Securities Filings, including, without
limitation, any financial statements contained therein, complied in
all material respects with all of the rules and regulations of the
Commission promulgated under the Securities Act of 1933 or the
Securities Exchange Act of 1934 and of any other regulatory authority
with which they were filed. None of the Securities Filings contained
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading and were complete and accurate in all
material respects. There are no facts known to Seller existing as of
the date hereof relating to Seller or the Subject Businesses or the
Purchased Assets which Seller has not disclosed in the Securities
Filings or to Buyer or its counsel in writing which, either
individually or in the aggregate, could reasonably be expected to have
a material adverse effect on the Subject Businesses or the Purchased
Assets.
g. Taxes.
-----
i. All taxes owed and due by Seller, if any, with respect to the net
income of the Subject Businesses (whether or not shown on any tax
return) have been paid or will be timely paid by Seller. There
are no Liens on any of the Purchased Assets that arose in
connection with any failure (or alleged failure) to pay any tax
when due. Seller has withheld and paid when due all taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent
contractor or other third party.
ii. All federal, state, foreign, county, local and other tax returns
(collectively, "Tax Returns") required to be filed by or on
behalf of Seller have been timely filed and, when filed, were
true and correct in all respects, and the taxes shown as due
thereon were paid or adequately accrued. Seller has duly
withheld and paid all taxes that it is required to withhold and
pay relating to salaries and other compensation heretofore paid
to its employees of the Subject Businesses.
h. Title to and Sufficiency of Purchased Assets.
--------------------------------------------
13
<PAGE>
i. Seller has, and pursuant to this Agreement is conveying to Buyer,
good and marketable title to all of the Purchased Assets free and
clear of all liens, claims, security interests, pledges,
mortgages, deeds of trust, rights of first refusal, restrictions
and other encumbrances ("Liens") other than (i) the Liens set
forth on Schedule 3.h.i attached hereto, which Liens shall be
--------------
released contemporaneously with the Closing, and (ii) the Assumed
Liabilities.
ii. Other than the Excluded Assets or as disclosed on Schedule 1.b,
------------
the Purchased Assets constitute all of the rights, properties and
assets of every kind, character and description, wherever located
and whether tangible or intangible, real or personal or fixed or
contingent, that are owned, held, used, conceived, developed or
offered for sale or license by Seller exclusively or primarily in
connection with the conduct of the Subject Businesses.
iii. Except as disclosed on Schedule 1.b, the Purchased Assets are
------------
adequate and sufficient for the conduct of the Subject Businesses
as now conducted.
i. No Litigation. There are currently no pending and Seller is not aware
-------------
of any threatened, action, suit, arbitration proceeding, investigation
or inquiry against Seller, the Purchased Assets or the Subject
Businesses or which is likely to prevent, impede or impair the
purchase and sale of the Purchased Assets and the Subject Businesses
in accordance with the terms of this Agreement. Neither Seller nor
any of its assets or properties is subject to any judgment, order,
writ or injunction of any court, arbitrator or federal, state,
foreign, municipal or other governmental department, commission,
board, bureau, agency or instrumentality.
j. Compliance with Laws.
--------------------
i. Seller is in compliance with all applicable federal, state, local
and foreign laws, ordinances, orders, rules and regulations
relating to the Subject Businesses (collectively, "Laws").
Seller has not received notice of any violation or alleged
violation of Laws relating to the Subject Businesses. Seller is
not subject to liability (whether accrued, absolute, contingent,
direct or indirect) for any past or continuing violation of any
Laws relating to the Subject Businesses.
ii. Seller has all material licenses, permits, approvals,
authorizations and consents of all governmental and regulatory
authorities (collectively, "Licenses") required for the conduct
of the Subject Businesses as presently conducted. All such
Licenses are in full force and effect as of the date hereof.
k. Proprietary Rights.
------------------
14
<PAGE>
i. Except as disclosed on Schedule 1.b, the Purchased Proprietary
------------
Rights include, without limitation, all proprietary rights of
Seller used exclusively or primarily in the operation of the
Subject Businesses other than such proprietary rights that are
not used exclusively or primarily in the Subject Businesses and,
if not transferred to Buyer, will not have an adverse effect on
the business, financial condition or results of operations of the
Subject Businesses following the Closing.
ii. Except as set forth in Schedule 3.k.ii attached hereto, Seller
---------------
owns all right, title and interest in and to all of the Purchased
Proprietary Rights; Seller has not received notice and has no
knowledge that there are any claims made against Seller for the
assertion of the invalidity, abuse, misuse or enforceability of
any such rights, and, to Seller's knowledge there are no grounds
for the same; Seller has not received a notice of conflict with
the asserted rights of others within the last five years; to the
knowledge of Seller, the conduct of Seller's business has not
infringed upon any asserted rights of any person; and Seller is
not aware of any infringement by any person of any of the
Purchased Proprietary Rights.
l. Contracts and Commitments.
-------------------------
i. Other than the agreements listed in Subparagraph 1.b.v of this
Agreement, the Assigned Contracts and the Assigned Medical
Contracts include all of the contracts and agreements to which
Seller is a party or by or to which Seller or the Purchased
Assets are bound or subject and which are necessary for the
conduct of the Subject Businesses as presently conducted.
Contemporaneously with the execution and delivery of this
Agreement, Seller has delivered to Buyer a true and complete copy
of each such contract and agreement certified as such by a duly
authorized officer of Seller.
ii. The Assigned Contracts and the Assigned Medical Contracts are
valid, binding and in full force and effect, and upon assignment
and assumption will be enforceable by Buyer as of the Closing
Date in accordance with their respective terms. No act of Seller
has occurred, nor has there been any failure to act on the part
of Seller that, in either case, has caused, or with the passage
of time or giving of notice would cause, nor has the execution of
this Agreement caused, or will the transactions contemplated
under this Agreement cause (with or without the passage of time
or giving of notice), Seller to be in default under any
provision, or give rise to a right of acceleration, material
adverse change or modification, or termination under any of the
Assigned Contracts or the Assigned Medical Contracts or any other
obligation relating to the Subject Businesses. To the knowledge
of Seller, no other party to an Assigned Contract or an Assigned
Medical Contract has breached any provision of, or is in default
15
<PAGE>
under, the terms thereof. No party has made or, to Seller's
knowledge, threatened any claim against Seller for breach of or
failure to perform under such contracts and no disputes exist
regarding any of the Assigned Contracts or the Assigned Medical
Contracts. Other than the Assigned Contracts, the Assigned
Medical Contracts, and other than the agreements specified in
Subparagraph 1.b.v of this Agreement, Seller is not a party to
any contract or agreement pursuant to which Seller has performed
or expects to perform either medical records facility management
or medical records outsourcing or medical record coding services.
m. Employees. Schedule 3.m attached hereto contains a list of all
--------- ------------
current employees of the Subject Businesses as of the date hereof,
including, without limitation, the commencement date of their
employment and each employee's current compensation. Seller is not a
party to any collective bargaining agreements or other contract with a
labor union or other labor or employee group as such relates to
employees of the Subject Businesses. Seller is in full compliance
with all federal, state or other applicable laws, domestic or foreign,
regarding employment and employment practices, terms and conditions of
employment and wages and hours as such relate to the Subject
Businesses.
n. No Adverse Change. Since June 30, 2000, the Subject Businesses have
-----------------
been operated in the ordinary course consistent with past practice and
there has not been any material adverse change in the business,
operations, assets or liabilities or the condition, financial or
otherwise, or prospects of the Subject Businesses or Seller, other
than changes in the ordinary course of business and consistent with
past practice, nor has there occurred any other event or condition of
any character which has adversely affected or which could adversely
affect the business, operations, properties, assets or liabilities,
the condition, financial or otherwise, or prospects of the Subject
Businesses or adversely affected or which could materially adversely
affect the business, operations, properties, assets or liabilities,
the condition, financial or otherwise, or prospects of Seller.
o. Absence of Changes. Since the date of the Interim Financial
------------------
Statements, and except as set forth on Schedule 3.o, Seller has not:
------------
i. transferred, assigned, conveyed or liquidated any of the assets
related to the Subject Businesses or entered into any transaction
or incurred any liability or obligation which affects the
Purchased Assets or the Subject Businesses, other than in the
ordinary course of its business;
ii. suffered, permitted or incurred the imposition of any Lien upon
any of the Purchased Assets or the Subject Businesses;
iii. committed, suffered, permitted or incurred any default in any
liability or obligation which has had or will have an adverse
effect upon the Purchased Assets or the Subject Businesses;
16
<PAGE>
iv. made or agreed to any change in the terms of the Assigned
Contracts or the Assigned Medical Contracts;
v. paid, agreed to pay or incurred any obligation for any payment
for, any contribution or other amount to, or with respect to, any
employee benefit plan, or paid any bonus to, or granted any
increase in the compensation of, the employees of the Subject
Businesses (unless made at times and in amounts consistent with
the historical practices), or made any increase in the pension,
retirement or other benefits of Seller's directors, officers,
agents, field representatives or other employees of the Subject
Businesses;
vi. committed, suffered, permitted or incurred any transaction or
event which would increase Seller's tax liability for any prior
taxable year which would attach to or become the liability of the
Purchased Assets or the Subject Businesses; or
vii. incurred any other liability or obligation or entered into any
transaction other than in the ordinary course of the business of
the Subject Businesses;
p. No Broker or Finder's Fees. Neither Seller nor any of Seller's
--------------------------
officers, directors, employees or agents has retained, employed or
used any broker or finder in connection with the transaction provided
for herein or in connection with the negotiation thereof.
q. Disclosure. No representation or warranty by Seller contained in this
----------
Agreement, nor any Seller's Instrument furnished or to be furnished by
or on behalf of Seller pursuant to this Agreement, nor any document or
certificate delivered to Buyer pursuant to this Agreement or in
connection with the transactions contemplated hereby, contains or
shall contain any untrue statement of material fact or omits, or will
omit, a material fact necessary to make the statements contained
therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement to
---------------------------------------
Seller to enter into and perform its obligations under this Agreement,
Buyer represents and warrants to Seller as follows:
a. Organization and Qualification of Buyer.
---------------------------------------
i. Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware and has all
requisite legal power, authority and right to own, operate and
lease its properties and to carry on its business as and where
the same is now being conducted and as proposed to be conducted.
ii. Buyer is duly licensed or qualified to do business as a foreign
corporation, and is in good standing, in each jurisdiction in
which the character of the
17
<PAGE>
properties owned or leased by it, or the nature of its business,
makes such qualification necessary.
b. Authorization; Binding Nature of Agreement. Buyer has all requisite
------------------------------------------
right, power, and authority to enter into this Agreement and the other
agreements, instruments and documents contemplated hereby to be
executed and delivered by Buyer and to perform its obligations
hereunder and thereunder (such other agreements, instruments and
documents are sometimes hereinafter referred to individually as a
"Buyer's Instrument" or collectively as the "Buyer's Instruments").
The execution and delivery of this Agreement and each of Buyer's
Instruments and the performance by Buyer of its obligations hereunder
and thereunder, have been duly authorized by all necessary corporate
action on the part of Buyer. This Agreement has been duly and validly
executed and delivered by Buyer and is, and, each of Buyer's
Instruments to be executed and delivered by Buyer, when executed and
delivered, will be, legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally
and by general equitable principles (regardless of whether enforcement
is sought in a proceeding at law or in equity).
c. No Violation. Neither the execution and delivery of this Agreement or
------------
Buyer's Instruments by Buyer, nor the performance of Buyer's
obligations hereunder or thereunder will (i) result in a breach of,
constitute a default under, or in any manner release any party thereto
from any obligation under any material agreement, document, or
instrument to which Buyer is a party, or by which it or its assets may
be bound or affected; (ii) violate any order, writ, injunction, or
decree of any court, administrative agency, or governmental body or
require the approval, consent, or permission of any governmental or
regulatory body or authority; or (iii) violate any provision of the
Certificate of Incorporation or Bylaws of Buyer.
d. Approval of Third Parties. No consent, authorization, or approval of,
-------------------------
or declaration, filing or registration with, any Governmental
Authority or any other third party is necessary in order to enable
Buyer to enter into and perform its obligations under this Agreement
or Buyer's Instruments.
e. No Litigation. There is no action, suit, arbitration, proceeding,
-------------
investigation or inquiry pending before any court, arbitrator or
federal, state, foreign, municipal or other governmental department,
commission, board, bureau, agency or instrumentality or, to the
knowledge of Buyer, threatened against Buyer which would likely
prevent, impede or impair the purchase and sale of the Purchased
Assets in accordance with the terms hereof. Neither Buyer nor any of
its assets or properties is subject to any judgment, order, writ or
injunction of any court,
18
<PAGE>
arbitrator or federal, state, foreign, municipality or other
governmental department, commission, board, bureau, agency or
instrumentality.
f. No Brokers or Finders. Neither Buyer nor any of its officers,
---------------------
directors, employees or agents has retained, employed or used any
broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
g. Disclosure. No representation or warranty by Buyer contained in this
----------
Agreement, nor any Buyer's Instrument furnished or to be furnished by
or on behalf of Buyer pursuant to this Agreement, nor any document or
certificate delivered by Buyer to Seller pursuant to this Agreement or
in connection with the transactions contemplated hereby, contains or
shall contain any untrue statement of material fact or omits, or will
omit, a material fact necessary to make the statements contained
therein not misleading.
5. CLOSING.
-------
a. The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place contemporaneously on the date of the
execution hereof (the "Closing Date"). The parties acknowledge and
agree that the Closing shall take place by the forwarding of signature
pages via facsimile transmission to Buyer's counsel on the Closing
Date with original signatures to be forwarded to Buyer's counsel on
the Closing Date via overnight delivery. Buyer's counsel shall send
Buyer's executed counterpart signature pages to Seller's counsel via
facsimile transmission on the Closing Date. Buyer's counsel will
collate signature pages and transaction documents and distribute them
to Buyer and Seller.
b. Seller's Deliveries. On the Closing Date, Seller shall execute and/or
-------------------
deliver to Buyer (or to the Escrow Agent, as indicated below) all of
the following:
i. a bill of sale with respect to the Purchased Assets in
substantially the form attached hereto as Exhibit 5.b.i (the
-------------
"Bill of Sale");
ii. physical possession of all of the Purchased Assets;
iii. an assignment and assumption agreement with respect to the
Assumed Liabilities in substantially the form attached hereto as
Exhibit 5.b.iii (the "Assignment and Assumption Agreement");
---------------
iv. services agreements in substantially the form attached as Exhibit
-------
5.b.iv (the "Services Agreements"), whereby Transcend will
------
provide certain medical transcription services to Buyer for a
term co-terminus with the Assigned Medical Contract relating to
such services;
v. a management agreement substantially in the form of Exhibit 5.b.v
-------------
attached hereto (the "Management Agreement");
19
<PAGE>
vi. all consents, authorizations and approvals set forth in Schedule
--------
3.d (including, without limitation, consents to the assignment
---
of each of the Assigned Medical Contracts from Seller to Buyer);
vii. certified copies of resolutions duly adopted by the Board of
Directors of Seller authorizing the execution, delivery and
performance of this Agreement and each of Seller's Instruments
and all corporate action necessary to enable Seller to comply
with the terms of this Agreement and each of Seller's
Instruments;
viii. certificates of good standing and existence for Seller;
ix. a license agreement from Cascade Health Information Software,
Inc. in favor of Buyer, said license agreement to be in the form
attached hereto as Exhibit 5.b.ix (the "License Agreement");
--------------
x. a letter from creditors demonstrating the release of any Liens
shown on Schedule 3.h.i contemporaneously with receipt by wire
--------------
transfer of that portion of the Base Purchase Price sent to such
creditors in accordance with the wire transfer instructions set
forth on Exhibit 2.a;
-----------
xi. to Buyer and the Escrow Agent, a duly executed Escrow Agreement
in the form attached hereto as Exhibit 2.b.v; and
-------------
xii. a duly executed Finder's Fee Agreement in the form attached
hereto as Exhibit 2.b.iii.
---------------
c. Buyer's Deliveries. On the Closing Date, Buyer shall execute and/or
------------------
deliver to the Seller (or to the Escrow Agent, as indicated below) all
of the following:
i. the Base Purchase Price;
ii. the Assignment and Assumption Agreement with respect to the
Assumed Liabilities;
iii. the Services Agreements;
iv. the Management Agreement;
v. certified copies of resolutions duly adopted by the Board of
Directors of Buyer, authorizing the execution, delivery and
performance of this Agreement and each of Buyer's Instruments
and all corporate action necessary to enable Buyer to comply
with the terms of this Agreement and each of Buyer's
Instruments;
20
<PAGE>
vi. to Seller and the Escrow Agent, a duly executed Escrow Agreement
in the form attached hereto as Exhibit 2.b.v;
-------------
vii. to the Escrow Agent, the Escrow Cash;
viii. a duly executed Finder's Fee Agreement in the form attached
hereto as Exhibit 2.b.iii; and
---------------
ix. a certificate of good standing for Buyer from the jurisdiction
of its incorporation.
d. Joint Delivery. On the date of Closing, the parties shall have agreed
--------------
upon and executed the Closing Statement.
6. COVENANTS OF THE PARTIES
------------------------
a. Employee Matters. Buyer and Seller shall enter into at the Closing a
----------------
Management Agreement substantially in the form of Exhibit 5.b.v
-------------
attached hereto.
b. Existing Customer Contracts. Subject to the last sentence of
---------------------------
Subparagraph 2.b.vi hereof, Buyer agrees to use its commercially
reasonable efforts and shall act in good faith in attempting to renew
or extend the Assigned Medical Contracts such that Seller will enjoy
the benefit of that portion of the contingent purchase price set forth
in Subparagraph 2.b above.
c. Further Assurances. From and after the date hereof, Seller and Buyer
------------------
covenant and agree to deliver and acknowledge (or cause to be
executed, delivered and acknowledged), from time to time, at the
request of any other party and without further consideration, all such
further instruments and to take all such further actions as may be
necessary or reasonably appropriate to transfer more effectively to
Buyer, or to enable Buyer to use the Purchased Assets or to otherwise
to confirm or carry out the provisions and intent of this Agreement.
d. Confidentiality and Non-Competition.
------------------------------------
i. The Confidentiality Agreement dated July 5, 2000 between Seller
and Buyer (the "Confidentiality Agreement") shall survive
execution and delivery of this Agreement.
ii. In furtherance, but not in limitation of the foregoing, in the
event that the transactions contemplated by this Agreement are
not consummated, Buyer agrees, until the fifth (5) anniversary of
the date of this Agreement, not to solicit the business of or
render services in competition with Seller in the Subject
Businesses to any customer or prospective customer of Seller
where the identity of such customer or prospective customer was
disclosed to Buyer during the course of its due diligence
investigation. The
21
<PAGE>
foregoing sentence shall not apply to the extent that any such
customer or prospective customer was already a customer of Buyer
prior to the date hereof.
iii. Seller covenants and agrees that, during the period in which any
contingent purchase price is payable to Seller by Buyer pursuant
to Subparagraph 2.b, Seller will not, directly or indirectly,
compete with Buyer by carrying on a business that is
substantially similar to either of the Subject Businesses within
the United States of America (the "Territory"). For purposes of
this Subparagraph d.iii, the term "compete" shall mean with
respect to the Subject Businesses: (i) managing, supervising or
otherwise participating in a management or ownership capacity in
the provision of medical records facility management, medical
records outsourcing services or medical records coding services
(except as a stockholder holding less than a five percent (5%)
interest in a corporation whose shares are actively traded on a
regional or national securities exchange or in the over-the-
counter market); (ii) calling on, soliciting, taking away or
accepting as a client or customer any individual or entity that
was a client or customer of the Subject Businesses during the
twelve-month period prior to such act or that becomes a customer
of the Subject Businesses after the Closing; or (iii) entering
into or attempting to enter into, directly or indirectly, any
business substantially similar to either of the Subject
Businesses within the Territory, either or alone or with any
third party. Notwithstanding the foregoing, the term "compete"
shall not include (i) the provision by Seller of services
pursuant to the terms of the agreements listed in Subparagraph
1.b.v of this Agreement, as in effect on the date hereof; or (ii)
the sale or license by Seller of medical records coding software
(including on an ASP basis, so long as the terms of any such
license provide only for remote access by the customer to
Seller's software and do not provide for the provision of coding
services, directly or indirectly, by Seller).
e. No Trading. Buyer acknowledges and agrees that, during the course of
----------
its due diligence investigation, it may have been exposed to material
non-public information about Seller. Accordingly, Buyer agrees that,
without the prior written consent of Seller, neither it nor any of its
affiliates (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934) acting alone or as part of a group, will from
the date hereof until Transcend files its next quarterly report on
Form 10-Q with the Commission (i) purchase or sell to or from any
person any capital stock or securities of Seller, (ii) suggest that
others trade in any capital stock or securities of Seller, or (iii)
fail to keep confidential the disclosures made to it pursuant to the
Confidentiality Agreement.
f. No Public Disclosure. Buyer understands and agrees that due to the
--------------------
publicly-held nature of Seller, Buyer will not issue any press release
or make any public
22
<PAGE>
disclosure concerning this Agreement or the transactions contemplated
thereby without the prior consent of Seller, which will not be
unreasonably withheld. At the Closing, Buyer will cooperate with
Seller in the formulation and dissemination of an appropriate press
release regarding the closing of the transactions contemplated by this
Agreement.
g. Outsourcing. After the Closing, Buyer agrees to enter into good faith
-----------
negotiations with Seller regarding a possible outsourcing by Buyer to
Seller of a portion of Buyer's transcription business. A factor in
these negotiations will be an evaluation by Buyer, in Buyer's sole
discretion, of the degree to which Seller is able to provide such
transcription services with the same or better quality, timeliness,
accuracy, convenience and cost that Buyer provides to its customers.
h. Services Agreement. Contemporaneously with the execution of this
------------------
Agreement, Buyer and Seller shall enter into the Services Agreement
whereby Seller agrees to provide as a subcontractor of Buyer certain
medical transcription services to Buyer's customers under the Assigned
Medical Contracts in accordance with and subject to the terms and
conditions set forth in such Assigned Medical Contracts. Under the
terms of the Services Agreement, in the event of the Seller's breach
thereof, Buyer shall have the right to terminate the Services
Agreement and to directly or through a third party contractor provide
the medical transcription services to Buyer's customers under the
Assigned Medical Contracts.
i. Accounts Payable after Closing. Buyer and Seller shall cooperate with
------------------------------
each other after the Closing in forwarding invoices or other requests
for payment with respect to the accounts payable of the Subject
Businesses to the party responsible for payment thereof as determined
in accordance with the terms of this Agreement.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
a. Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties contained in this Agreement or in any
of Buyer's Instruments or Seller's Instruments are material, have been
relied upon and shall survive for a period of 18 months following the
date hereof other than the representations and warranties set forth in
Subparagraphs 3.a, 3.b, 3.h.i and 3.p and 4.a, 4.b and 4.f, which
shall survive for the longest period under applicable law. Any claim
for a breach of a representation and warranty must be initiated within
the foregoing period, after which time the claiming party's right to
bring a claim for breach of a representation or warranty shall expire.
Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully
rely on the representations, warranties, covenants and agreements of
the other parties contained in this Agreement or in any other
documents delivered in connection herewith. Each representation,
warranty, covenant, and
23
<PAGE>
agreement of the parties contained in this Agreement is independent of
each other representation, warranty, covenant and agreement.
b. Indemnification by Seller. Subject to the provisions of Subparagraph
-------------------------
7.d below, Seller shall indemnify, defend and hold Buyer and its
directors, officers, employees, stockholders, agents, affiliates and
assigns (collectively, the "Buyer Indemnified Parties") harmless from
and against and, to the extent the same constitute out-of-pocket
expenditures by any Buyer Indemnified Party, to promptly reimburse the
Buyer Indemnified Parties for, all losses, liabilities, indebtedness,
damages, actions, judgments, penalties, fines, costs, costs of defense
and settlement, obligations, taxes, expenses, and fees, including,
without limitation, all reasonable attorneys' fees and court costs
("Losses"), incurred by or asserted against any Buyer Indemnified
Party, resulting from, arising out of, relating to, in the nature of
or caused by (i) the breach of any representation, warranty, covenant
or agreement of Seller set forth in this Agreement or any Seller's
Instrument (other than the Service Agreement, the License Agreement or
the Management Agreement); (ii) the Excluded Assets and Excluded
Liabilities; (iii) any suit, action, claim, proceeding or
investigation pending or threatened against or affecting the Purchased
Assets or the Subject Businesses arising from any matter or state of
facts existing prior to the Closing, regardless of whether it is
disclosed by Seller in this Agreement; (iv) the cost and expense of
defending any action, demand, or claim by any third party (a "Third
Party Claim") against or affecting any Buyer Indemnified Party, the
Subject Businesses, the Purchased Assets, which, if true or
successful, would give rise to a breach of any of the representations,
warranties, covenants or agreements of Seller set forth in this
Agreement or any Seller's Instrument or would cause any Buyer
Indemnified Party or the Purchased Assets to be subject to any
obligation, liability or indebtedness referred to in clause (ii)
above; (v) any failure of Seller to comply with any bulk sales laws;
provided that the foregoing shall not be construed as a determination
by either party that any such acts are applicable to the transactions
contemplated by this Agreement; or (vi) any costs incurred by Buyer in
excess of the Ninety-Five Thousand Dollar ($95,000.00) amount budgeted
for completion of the micro-filming project to be performed under the
Greenwich Medical Center Contract. In addition to any other rights or
remedies Buyer may have, Buyer shall be entitled to make claims
against the Escrow Cash pursuant to the terms and procedures set forth
in the Escrow Agreement for the amount of any Losses that it has
sustained or that it reasonably believes it may sustain, and to offset
from the Escrow Cash any amount ultimately determined to be due and
owing to Buyer by way of indemnification pursuant to this Section, all
in accordance with the terms of the Escrow Agreement.
c. Indemnification by Buyer. Subject to the provisions of Subparagraph
------------------------
7.d below, Buyer shall indemnify, defend and hold Seller and its
directors, officers, employees, stockholders, agents, affiliates and
assigns (collectively, the "Seller Indemnified Parties") harmless from
and against and, to the extent the same
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constitute out-of-pocket expenditures by any Seller Indemnified Party,
to promptly reimburse the Seller Indemnified Parties for, all Losses
incurred by or asserted against any Seller Indemnified Party resulting
from, arising out of, relating to, in the nature of or caused by (i)
the breach of any representation, warranty, covenant or agreement of
Buyer set forth in this Agreement; (ii) the Assumed Liabilities; or
(iii) the cost and expense of defending any action, demand or claim by
any third party against or affecting any Seller Indemnified Party, the
Subject Businesses or the Purchased Assets, which, if true or
successful, would give rise to a breach of any of the representations,
warranties, covenants or agreement of Buyer or would cause any Seller
Indemnified Party or the Purchased Assets to be subject to any
obligation, liability or indebtedness referred to in clause (ii)
above.
d. Limitations on Right to Indemnification.
---------------------------------------
i. Notwithstanding anything to the contrary set forth in this
Agreement, an indemnifying party hereunder shall have no
obligation to indemnify a party entitled to indemnification
hereunder pursuant to Subparagraph 7.b and 7.c above unless and
until the aggregate amount of any and all Losses of such
indemnification claims made by a party entitled to
indemnification hereunder exceeds Ten Thousand Dollars
($10,000.00) (the "Minimum Aggregate Liability Amount"), after
which time indemnification claims may be made for amounts above
and below the Minimum Aggregate Liability Amount.
ii. Seller on the one hand, and Buyer on the other hand, shall have
no obligation to indemnify a party pursuant to Subparagraph 7.b
and 7.c above for any amounts or Losses that when aggregated with
all other amounts or Losses paid by such party exceeds the sum of
(i) the Base Purchase Price plus (ii) the sum of the contingent
----
purchase price payments actually earned by Seller pursuant to
Subparagraph 2.b hereof plus (iii) all costs and expenses of
----
defending any action, suit, demand or claim by such party for
which indemnification is sought pursuant to Subparagraph 7.b or
Subparagraph 7.c above (the sum of such amounts referred to in
clauses (i), (ii) and (iii) being referred to herein as the
"Maximum Aggregate Liability Amount"). In the event that either
Seller or Buyer, as the case may be, has previously paid to the
other for indemnification claims pursuant to this Section 7 an
amount in the aggregate equal to the Base Purchase Price (plus
all costs and expenses of defending the action(s), suit(s),
demand(s) or claim(s) for which indemnification was sought), then
such party shall have further liability for indemnification
pursuant to this Section 7 only to the extent that contingent
purchase price payments have been (prior to the date any
additional claims arise) or are in the future (after the date any
additional claims arise) earned by Seller pursuant to
Subparagraph 2.b hereof.
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iii. The limitations set forth in clauses (i) and (ii) of this
Subparagraph 7.d shall not apply to (A) Losses proximately
related to the breaching party's fraud or intentionally wrongful
acts, (B) damages proximately related to a breach of Seller's
representations and warranties set forth in Subparagraph 3.a,
3.b, 3.h.i and 3.p above, or Buyer's representations and
warranties set forth in Subparagraph 4.a, 4.b, and 4.f above, or
(C) damages proximately related to a party's breach of any
covenant contained herein.
e. Conditions of Indemnification. The obligations and liabilities of the
-----------------------------
parties under Subparagraphs 7.b and 7.c with respect to claims or
demands resulting from the assertion of any Third Party Claim shall be
subject to the following terms and conditions:
i. The party hereby seeking indemnification (the "Indemnitee") will
give the other party hereto (the "Indemnitor") written notice of
any such claims or demands promptly after the Indemnitee receives
notice thereof, such notice to specify the provisions of this
Agreement giving rise to the right to indemnification and a
summary of all facts then known in support of such Third Party
Claim (but such recitation of facts shall not compromise the
claiming party's right to supplement such notice as additional
facts become known and available). If the Indemnitor admits in
writing its obligation to indemnify the Indemnitee for the Third
Party Claim, which admission shall conclusively establish for
purposes of this Agreement that claims asserted in such Third
Party Claim are within the scope of, and subject to,
indemnification under this Section 7 (to the extent that the
amount of the Third Party Claim does not exceed the maximum
amount set forth in Subparagraph 7.d.ii above), the Indemnitor
may accept the defense thereof by counsel of its own choosing
reasonably acceptable to the Indemnitee; provided, however, the
failure to give such notice shall not relieve the Indemnitor of
its obligations hereunder except and to the extent it is
prejudiced thereby.
ii. In the event that the Indemnitor, within a reasonable time after
notice of any such claim, fails to defend against such claim or
demand or fails to admit its obligation to indemnify as provided
above, the Indemnitee (upon further written notice to the
Indemnitor) will have the right to undertake the defense,
compromise or settlement of such claim or demand on behalf of and
for the account and risk of the Indemnitor.
iii. Anything in this Subparagraph 7.e to the contrary
notwithstanding, and assuming the Indemnitor is assuming the
defense of any claim in good faith, (i) if the Indemnitee shall
so elect, the Indemnitee shall have the right, at its sole cost
and expense, to defend, compromise or settle such claim or demand
or to participate in the defense of any such claim or demand
being defended by the Indemnitor, (ii) the Indemnitor shall not,
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<PAGE>
without the Indemnitee's written consent, settle or compromise
any such claim or demand or consent to entry of any judgment
which does not include an unconditional term thereof giving the
Indemnitee a release from all liability in respect of such claim
or demand by the claimant or the plaintiff, and (iii) the
Indemnitor agrees to act in good faith with due regard to the
Indemnitee's on-going business interests to the extent compatible
with an efficient and cost effective resolution of the dispute.
iv. Notwithstanding anything in this Section 7 to the contrary, the
Indemnitor shall not be entitled to participate in, and the
Indemnitee shall be entitled to sole and absolute control over
the defense, compromise or settlement of, any claim to the extent
that the claim seeks an injunction or other similar equitable or
nonmonetary relief against the Indemnitee.
f. Exclusive Remedies.
------------------
i. The indemnification rights, remedies, provisions, procedures and
limitations of this Agreement shall be the exclusive rights,
remedies, procedures and limitations relating thereto available
to any party as a result of one or more breaches of the
representations, warranties, covenants, agreements and
obligations contained in this Agreement or any of Seller's
Instruments or Buyer's Instruments (other than the Service
Agreement, the License Agreement and the Management Agreement);
provided, however, this limitation shall not apply to (A) any act
of fraud perpetrated upon a party or by another party hereto or
(B) any equitable remedy available to a party hereto as a result
of any such breach.
ii. Notwithstanding anything to the contrary contained herein, the
parties hereto hereby acknowledge and agree that the sole and
exclusive rights, remedies, procedures and limitations with
respect to breaches of the representations, warranties,
covenants, agreements and obligations contained in each of the
Service Agreement, the License Agreement and the Management
Agreement, respectively, are found in such agreements, and the
provisions of this Section 7 shall not apply to any such breach.
8. MISCELLANEOUS PROVISIONS
------------------------
a. Notices. All notices, requests, demands, or other communications hereunder
-------
(including, without limitation, notices of all asserted claims or
liabilities) shall be in writing and shall be either delivered personally,
by messenger service or by prepaid guaranteed overnight delivery service,
or mailed by U.S. mail, certified or registered, with appropriate postage
prepaid, to the addressees and addresses herein designated, or such other
address as may be designated in writing by notice given in the manner
provided herein, and shall be effective (a) upon personal delivery thereof,
if delivered personally or by messenger service, (b) one (1) business day
after delivery to the overnight delivery service for next
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business day delivery, if delivered by overnight delivery service, or (c)
three (3) days following deposit in the U.S. mail if sent by mail postage
paid, whether or not delivery is accepted:
If to Seller: Transcend Services, Inc.
945 East Paces Ferry Road
Resurgens Plaza Suite 1475
Atlanta, Georgia 30326
Attention: Mr. Larry G. Gerdes,
Chief Executive Officer
With copy to: Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
Attention: Richard G. Greenstein, Esq.
If to Buyer: Provider HealthNet Services Inc.
15851 Dallas Parkway, Suite 925
Dallas, Texas 75001
Attention: Richard K. Kneipper,
Chief Administrative Officer
With copy to: Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree St., N.E.
Atlanta, Georgia 30308
Attention: Barry J. Stein, Esq.
b. Assignability; Binding Effect. This Agreement shall be binding upon
-----------------------------
and inure to the benefit of the parties hereto and their permitted
successors and assigns. This agreement may not be assigned by either
party without the prior written consent of the other party.
c. Governing Law. This Agreement shall be construed and governed in
-------------
accordance with the internal laws of the State of Delaware, without
regard to its choice of law principles.
d. Representation and Warranties Complete; Disclaimer. EXCEPT FOR THE
--------------------------------------------------
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH HEREIN, SELLER
MAKES NO OTHER REPRESENTATIONS AND WARRANTIES, AND ALL OTHER
REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED, ARE HEREBY
EXPRESSLY DISCLAIMED AS TO ANY OTHER INFORMATION OR MATTERS,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
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<PAGE>
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE PURCHASED ASSETS.
e. Dispute Resolution.
i. Mediation. If any dispute, controversy or claim arising out of
---------
or relating to this Agreement is not resolved by negotiation of
the parties or if the parties are unable to mutually agree on any
matter as provided in this Agreement, the parties will endeavor
to settle the dispute or matter by non-binding mediation with the
participation of at least one officer of each party under the
then current presently effective Center for Public Resources
Model for Mediation of Business Disputes.
ii. Arbitration. Any dispute, controversy or claim that has not been
-----------
resolved as hereinabove provided or otherwise by agreement of the
parties will be finally settled by arbitration conducted
expeditiously in accordance with Exhibit 8.e.ii.
--------------
iii. Qualifications. The parties agree that all mediators and
--------------
arbitrators selected for a mediation or arbitration,
respectively, pursuant to this Subparagraph 8.e. will have some
prior healthcare experience.
f. Counterparts. This Agreement may be executed by facsimile signature
------------
and in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
Agreement.
g. Entire Agreement. This Agreement and the Exhibits and Schedules and
----------------
the Confidentiality Agreement hereto constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersede all prior communications, writings, and other documents with
regard thereto. No modification, amendment, or waiver of any
provision hereof shall be binding upon any party hereto unless it is
in writing and executed by the parties hereto or, in the case of a
waiver, by the party waiving compliance. The course of conduct or
course of dealing of the parties shall not serve to waive, amend, or
modify the provisions of this Subparagraph.
h. Waiver. The waiver by either party of any breach, default,
------
misrepresentation, or breach of any warranty or covenant hereunder,
whether intentional or not, shall not be deemed to extend to any prior
or subsequent breach, default, misrepresentation, or breach of any
warranty or covenant hereunder and shall not affect in any way any
rights arising by virtue of any such prior or subsequent occurrence.
i. No Strict Construction. Each of the parties has been represented by
----------------------
separate counsel with respect to this Agreement and the language
herein represents the language chosen by the parties after
consultation with such counsel. Thus, no rule
29
<PAGE>
of strict construction shall be applied against either party in
interpreting this Agreement.
j. Fees and Expenses. Each of the parties hereto shall be responsible for
-----------------
their own fees, expenses, and other charges incurred in connection
with the transactions contemplated hereby.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused their duly
appointed representatives to execute this Agreement, under seal, on the date
first above written.
"BUYER"
PROVIDER HEALTHNET SERVICES INC.
By: /s/ Richard K. Kneipper
------------------------------------------------
Richard K. Kneipper, Chief Administrative
Officer
"SELLER"
TRANSCEND SERVICES, INC.
By: /s/ Larry G. Gerdes
------------------------------------------------
Larry G. Gerdes, Chief Executive Officer
31
