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AGREEMENT AND PLAN OF MERGER
AMONG:
TRANSCEND SERVICES, INC., A DELAWARE CORPORATION,
DOCUMEDX, INC., A WASHINGTON CORPORATION,
AND
XXXXX XXXXXXXX, XXXX XXXXXXXX,
XXXX XXXXX, XXXXX XXXXXXX, XXXX XXXXXXX, AND XXXXXXX XXXXXXX
DATED AS OF APRIL 16, 1997
_________________________
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SCHEDULES
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Schedule 2.1 - Due Incorporation and Qualification
Schedule 2.2 - Outstanding Capital Stock
Schedule 2.3 - Options or Other Rights
Schedule 2.5 - Articles of Incorporation and By-Laws
Schedule 2.7 - Authority of the Company and the Shareholders
Schedule 2.8 - Financial Statements
Schedule 2.10 - Recent Developments
Schedule 2.11 - Litigation
Schedule 2.12 - Taxes
Schedule 2.13 - Title to Properties; Assets Complete
Schedule 2.14 - Compliance with Laws
Schedule 2.15 - Contracts, Etc.
Schedule 2.17 - Fixed Assets
Schedule 2.18 - Trade Names and Other Intangibles
Schedule 2.19 - Customers
Schedule 2.21 - Employee Manual
Schedule 2.22 - Officers, Directors and Key Employees
Schedule 2.24 - Franchises and Licenses
Schedule 2.25 - Transactions with Affiliated Parties
Schedule 2.26 - Bank Accounts and Powers of Attorney
Schedule 2.27 - Changes Prior to Closing Date
Schedule 3.2 - Certificate of Incorporation and By-Laws
Schedule 3.3 - Authority of Transcend
Schedule 3.4 - Transcend Material Changes
LIST OF EXHIBITS
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Exhibit A-1 - Employment Agreement (Xxxxx Xxxxxxxx)
Exhibit A-2 - Employment Agreement (Xxxx Xxxxxxxx)
Exhibit B - Form of Non-Compete Agreement
Exhibit C - Form of Subscription Agreement
Exhibit D - Form of Pledge Agreement
Exhibit E-1 - $88,100.00 Promissory Note
Exhibit E-2 - $20,000.00 Promissory Note
Exhibit E-3 - $104,301.00 Promissory Note
[THE COMPANY AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED SCHEDULE TO
THE COMMISSION UPON REQUEST.]
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER ("AGREEMENT") is made and entered into as of
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April 16, 1997, by and among: TRANSCEND SERVICES, INC., a Delaware corporation
("TRANSCEND"); DOCUMEDX, INC., a Washington corporation (the "COMPANY"); and
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XXXXX XXXXXXXX and XXXX XXXXXXXX (the "MAJORITY SHAREHOLDERS") and Xxxx Xxxxx,
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Xxxxx Xxxxxxx, Xxxx Xxxxxxx and Xxxxxxx Xxxxxxx (the "MINORITY SHAREHOLDERS"),
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residents of the State of Washington, all of whom are shareholders of the
Company (collectively the "SHAREHOLDERS").
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RECITALS
A. Transcend and the Company intend to effect a merger of the Company into
Transcend in accordance with this Agreement, the Delaware General Corporation
Law and the Washington Business Corporation Act (the "MERGER"). Upon
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consummation of the Merger, the Company will cease to exist, and Transcend will
continue to exist as the surviving corporation of the Merger.
B. It is intended that the Merger qualify as a tax-free reorganization within
the meaning of Section 368(a)(1)(a) of the Internal Revenue Code of 1986, as
amended (the "CODE").
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C. This Agreement has been adopted and approved by the respective boards of
directors of Transcend and the Company.
D. The capitalization of the Company consists of 2,000,000 authorized shares
of the voting common stock, having no par value, of which 1,000,000 shares are
issued and outstanding (the "COMPANY COMMON STOCK").
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AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF THE COMPANY INTO TRANSCEND. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), the Company shall be merged with and into Transcend, and the
separate existence of the Company shall cease. Transcend will continue as the
surviving corporation in the Merger (the "SURVIVING CORPORATION").
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1.2 EFFECT OF MERGER. The Merger shall have the effects set forth in this
Agreement and in the applicable provisions of the Delaware General Corporation
Law and the Washington Business Corporation Act.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
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of Xxxxxx Xxxxxxxxxxx & Oettinger, P.S., 0000 Xxxxxx Xxxxxxxx, 0000 0xx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000-0000, at 10:00 a.m., local time, on April 16, 1997
(the "CLOSING DATE"). Contemporaneously with or as promptly as practicable
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after the Closing, properly executed certificates of merger for the merger of
the Company into Transcend, conforming to the requirements of the Delaware
General Corporation Law and the Washington Business Corporation Act, shall be
filed with the Secretaries of State of the States of Delaware and Washington.
The Merger shall take effect at the time the last such certificate of merger is
filed with the Secretaries of State of the States of Delaware and Washington
(the "EFFECTIVE TIME").
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1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
the parties agree otherwise prior to the Effective Time:
(a) the Certificate of Incorporation of Transcend shall continue as the
Certificate of Incorporation of the Surviving Corporation;
(b) the Bylaws of Transcend shall continue as the Bylaws of the Surviving
Corporation; and
(c) the directors and officers of Transcend shall continue as the directors
and officers of the Surviving Corporation.
1.5 CONVERSION OF SHARES. Subject to Section 1.6(b), at the Effective Time,
by virtue of the Merger and without any further action on the part of Transcend,
the Company, or any Shareholder, all shares of Company Common Stock owned by
each Shareholder and outstanding immediately prior to the Effective Time shall
be canceled and retired and converted into such Shareholder's right to receive
the following (i) number of shares of the common stock of Transcend, $.01 par
value ("TRANSCEND COMMON STOCK"), (ii) amount of cash ("CASH CONSIDERATION"),
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and (iii) face amount of a promissory note, in substantially the form of
Exhibit E-1 attached hereto (in the case of Xxxxx Xxxxxxx) or aggregate face
amount of promissory notes, in substantially the forms of Exhibits E-2 and E-3
attached hereto (in the case of Xxxx Xxxxxxx) ("NOTES CONSIDERATION"):
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Transcend
Shareholder Common Stock Cash Notes
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Xxxxx Xxxxxxxx 254,885 shares None None
Xxxx Xxxxxxxx 254,885 shares None None
Xxxx Xxxxx 66,463 shares None None
Xxxxxxx Xxxxxxx 32,567 shares None None
Xxxxx Xxxxxxx None $50,000 $ 88,100
Xxxx Xxxxxxx None 20,000 124,301
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Totals 608,800 shares $70,000 $212,401
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1.6 EXCHANGE OF CERTIFICATES.
(a) At the Closing, each Shareholder shall surrender such Shareholder's
respective stock certificate(s) for Company Common Stock to the Surviving
Corporation, together with such transmittal documents as the Surviving
Corporation may reasonably require, and the Surviving Corporation shall deliver
to such Shareholder the certificates of Transcend Common Stock, if any, and Cash
Consideration, if any, to be delivered to such Shareholder at Closing pursuant
to Section 1.7.
(b) Transcend shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable to any holder or former holder of
Company Common Stock pursuant to this Agreement such amounts as Transcend may be
required to deduct or withhold therefrom under the Code or under any provision
of state, local or foreign tax law. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the party to whom such amounts would otherwise have been
paid.
1.7 MERGER CONSIDERATION. The aggregate consideration to be paid by
Transcend to the Shareholders in consideration of the Merger, subject to the
Post-Closing Adjustment as provided in Section 1.8, shall be 608,800 shares of
Transcend Common Stock, $70,000 in Cash Consideration and $212,401 in Notes
Consideration (the "MERGER CONSIDERATION").
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1.8 POST-CLOSING ADJUSTMENT. To the extent the Company's net assets as of
the close of business on the Closing Date is less than $70,000, the
consideration for the Merger shall be adjusted downward dollar for dollar by the
amount of such shortfall ("POST-CLOSING ADJUSTMENT"). For purposes of the Post-
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Closing Adjustment, the "net assets" of the Company as of the close of business
on the Closing Date shall mean the sum of all cash, accounts receivable,
recoverable deposits and fixed assets, minus the sum of all accounts payable,
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accrued payroll expenses, loans payable and accumulated depreciation on fixed
assets. In the event of any such adjustment, the Shareholders shall, at the
Shareholders' option, deliver to Transcend cash or shares of Transcend Common
Stock (valued at the same price per share as was applicable on the Closing Date,
regardless of fluctuation in market price subsequent to the Closing Date) in
amounts equal to the Post-Closing Adjustment, within ten (10) days following
final determination of net assets pursuant to Section 1.9.
1.9 DETERMINATION OF NET ASSETS. The Company's net assets as of the close
of business on the Closing Date shall be determined by Transcend's independent
certified public accountants within 120 days following the Closing Date (the
"NET ASSET DETERMINATION"). Within five (5) business days after receiving the
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Net Asset Determination, Transcend shall deliver same to the Shareholders. If
the Shareholders do not deliver a list of written objections to the Net Asset
Determination ("OBJECTION NOTICE") to Transcend within 30 days following
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delivery to the Shareholders, the Net Asset Determination shall become final and
binding upon the parties. If the Shareholders deliver
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an Objection Notice (the "OBJECTING SHAREHOLDERS") within such 30 day period,
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the parties will endeavor to reconcile any differences and agree upon a final
Net Asset Determination. If the parties are unable to agree upon a final Net
Asset Determination within 30 days following delivery of the Objection Notice,
at the request of either the Surviving Corporation or any of the Objecting
Shareholders the outstanding matters shall be submitted for resolution by a
mutually acceptable accounting firm of recognized national standing with offices
in the Atlanta area. If the parties are unable to agree upon a mutually
acceptable accounting firm, one will be selected at random from a list of the 6
largest Atlanta offices of certified public accounting firms having no prior
relationship with Transcend, the Company, the Surviving Corporation or the
Shareholders. The group of the Objecting Shareholders who have not agreed upon
the Net Asset Determination and the Surviving Corporation shall each bear 50% of
the fees and expenses of the accounting firm so selected. Such accounting firm
shall promptly prepare a final Net Asset Determination, and its conclusions
shall be final and binding upon each of the parties to this Agreement.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section
368(a)(1)(a) of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections 1.368-
2(g) and 1.368-3(a) of the United States Treasury Regulations.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Transcend to be necessary or desirable to carry out the
purposes of this Agreement or to vest Transcend or the Surviving Corporation
with full right, title and possession of and to all rights and property of the
Company, the officers and directors of Transcend shall be fully authorized (in
the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Transcend to enter into this Agreement and to consummate
the transactions contemplated hereby, and with the knowledge that Transcend
shall rely thereon, the Company and the Majority Shareholders, jointly and
severally, represent to Transcend, the Minority Shareholders, jointly and
severally, represent, to the extent of their information and belief, to
Transcend, and the Company and the Shareholders, jointly and severally, warrant
to Transcend, the following (both as of the Closing Date and as of the date
hereof):
2.1 DUE INCORPORATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington, and has the corporate power and lawful authority to carry on its
business as now being conducted, and to own or lease and operate its properties
and assets as now owned, leased or operated by it. The Company is duly
qualified or otherwise authorized as a foreign corporation to transact business
and is in good standing in each jurisdiction set forth on Schedule 2.1 annexed
hereto, which are the only jurisdictions in which such qualification or
authorization is required by law. Except as set forth on Schedule 2.1 annexed
hereto, the Company does not file and is not required to file franchise, income
or other tax returns in any other jurisdiction based upon the ownership or use
of property therein or
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the conduct of business or derivation of income therefrom. The Company does not
own or lease property or maintain any resident employee in any jurisdiction
other than the jurisdictions set forth on Schedule 2.1 annexed hereto.
2.2 OUTSTANDING CAPITAL STOCK. The title, par value, number of authorized
shares and number of issued and outstanding shares of each class of capital
stock of the Company are set forth on Schedule 2.2 annexed hereto. No other
class of capital stock of the Company is authorized or outstanding. All of the
issued and outstanding shares of Company Common Stock are duly authorized and
are validly issued, fully paid and non-assessable.
2.3 OPTIONS OR OTHER RIGHTS. Except as described in Schedule 2.3, there is
no outstanding right, subscription, warrant, conversion right, call, unsatisfied
preemptive right, commit ment, option or other agreement or right of any kind
pursuant to which any person or entity has the right or option to purchase or
otherwise to receive from the Company any shares of Company Common Stock or any
shares of the capital stock or any other security of the Company and there is no
outstanding security of any kind convertible into or redeemable or exchangeable
for any shares of the capital stock or any other security of the Company. There
is no shareholders' agreement, voting trust or similar agreement or arrangement
to which the Company or any Shareholder is a party which affects or restricts in
any way the Shareholders' rights and obligations with respect to the Company
Common Stock.
2.4 SUBSIDIARIES AND INVESTMENTS. The Company has no subsidiaries and does
not own, directly or indirectly, any capital stock or other equity or ownership
or proprietary interest in, or have any investment in, any other corporation,
partnership, association, trust, joint venture or other entity.
2.5 ARTICLES OF INCORPORATION AND BY-LAWS. Schedule 2.5 annexed hereto
contains true and complete copies of the Articles of Incorporation of the
Company, including all amendments thereto (certified by the Secretary of State
of its jurisdiction of incorporation), and By-laws of the Company, including all
amendments thereto (certified by its corporate secretary), as in effect on the
date hereof, and such By-Laws and Articles of Incorporation will not be amended,
rescinded or otherwise modified between the date hereof and the Closing Date.
2.6 BOOKS AND RECORDS. The corporate minute books, stock certificate books,
stock registers and other corporate records of the Company are true, correct and
complete in all material respects. The corporate minute books of the Company
contain materially true and complete records of all meetings, and consents in
lieu of meetings, of the Board of Directors and Stockholders of the Company
since its incorporation. All actions reflected in said books and records were
duly and validly taken in material compliance with the laws of the state of
incorporation of the Company. None of the Company's records, systems, controls,
data or information are recorded, stored, maintained or operated by, or
otherwise are wholly or partly dependent upon or held by, any person or entity
or media (including any electronic, mechanical or photographic process) which
are not under the exclusive ownership and direct control of the Company
(including for purposes of this paragraph, its employees) including all means of
access.
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2.7 AUTHORITY OF THE COMPANY AND THE SHAREHOLDERS. This Agreement has
been approved by all necessary action on the part of the Board of Directors and
Shareholders of the Company. The Company and each Shareholder has full power
and legal capacity to execute and deliver this Agreement and the other
agreements required to be executed and delivered by the Company or such
Shareholder hereunder (this Agreement and such other agreements being herein
called the "COMPANY DOCUMENTS") and to carry out the transactions contemplated
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hereby. The Company Documents are valid and binding agreements of the Company
and each Shareholder enforceable against the Company and such Shareholder in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditor's rights generally as well as
general principles of equity. Except as described in Schedule 2.7 annexed
hereto, no consent, authorization or approval of, or declaration, filing or
registration with, any governmental or regulatory authority, or any consent,
authorization or approval of any other third party, is necessary in order to
enable the Company or any Shareholder to enter into and perform the Company's or
such Shareholder's obligations under the Company Documents, and neither the
execution and delivery of the Company Documents nor the consummation of the
transactions contemplated thereby will:
(a) conflict with, require any consent under, result in the violation
of, or constitute a breach of any provision of the Articles of Incorporation or
By-Laws of the Company;
(b) conflict with, require any consent under, result in the violation
of, constitute a breach of, permit the termination of or accelerate the
performance required on the part of the Company or any Shareholder by the terms
of, any evidence of indebtedness, lease (of real or personal property) or
material agreement to which the Company or any Shareholder is a party, in each
case with or without notice or lapse of time or both, or permit the termination
of any such material agreement by another person;
(c) result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon, or restriction on the use of, any
property or assets of the Company or Company Common Stock under any agreement or
commitment to which the Company or any Shareholder is bound;
(d) accelerate, or constitute an event entitling, or which would, on
notice or lapse of time or both, entitle the holder of any indebtedness of the
Company or any Shareholder to accelerate the maturity of any such indebtedness;
(e) conflict with or result in the breach or violation of any writ,
judgment, order, injunction, decree or award of any court or governmental body
or agency or arbitration tribunal that is binding on the Company or any
Shareholder;
(f) constitute a violation by the Company or any Shareholder of any
statute, law or regulation of any jurisdiction; or
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(g) violate or cause any revocation of or limitation on any Permit (as
defined in Section 2.24 hereof).
2.8 FINANCIAL STATEMENTS. The Company has heretofore furnished Transcend
with (a) true and complete copies of the balance sheets and related statements
of income of the Company as of and for the fiscal years ended on December 31,
1995 and December 31, 1996, internally prepared by the Company's certified
public accountant; and (b) internally prepared balance sheet and related
statement of income of the Company as of and for the quarter ended March 31,
1997 (the "BALANCE SHEET DATE") (hereinafter, the financial statements referred
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to in subsections (a) and (b), are referred to as the "FINANCIAL STATEMENTS").
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Copies of such Financial Statements have been annexed hereto as Schedule 2.8
with ten pages of initialed addenda. The Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied (except that the interim Financial Statements are subject
to normal and year-end adjustments, which will not, individually or in the
aggregate, be material in magnitude). Except as disclosed in Schedule 2.12, the
Financial Statements fairly present the financial condition of the Company at
the dates thereof and, except as indicated therein, reflect all claims against,
and all debts and liabilities of the Company, fixed or contingent, as at the
dates thereof, and the related statements of income, fairly present the results
of the operations of the Company for the periods indicated.
2.9 NO UNDISCLOSED LIABILITIES. Except as reflected and reserved against
in the Financial Statements or otherwise disclosed on the schedules attached
hereto, as of the Balance Sheet Date the Company did not have any liabilities or
obligations (whether long term or current and whether accrued, absolute or
contingent) and, except for liabilities and obligations incurred since the
Balance Sheet Date in the ordinary course of business and disclosed to Transcend
in writing as of the Closing Date, the Company will not have any liabilities or
obligations (whether long term or current and whether accrued, absolute or
contingent) which, individually or in the aggregate, are material.
2.10 RECENT DEVELOPMENTS. Except as described on Schedules 2.10 or 2.12
annexed hereto, since the Balance Sheet Date there has not been, and to the
knowledge of the Company or the Shareholders, no fact or condition exists, which
might reasonably be expected to cause (a) any adverse change in the assets or
liabilities, business, results of operations, condition (financial or otherwise)
or prospects of the Company, other than immaterial changes in the ordinary
course of business, (b) any notice of termination of any material agreement
given by a third party to the Company or any relinquishment by the Company of
any rights of material value, or any material adverse change in the relations of
the Company with its key employees, lessors, customers, suppliers, or others
having business relations with the Company, (c) any claim against the Company
for, or any liability incurred by the Company in respect of, any damages or
alleged damages for any actual or alleged negligence or other tort, breach of
contract or violation of property rights in excess of $10,000, (d) any capital
expenditure or commitment therefor by the Company in excess of $10,000, (e) any
indebtedness incurred by the Company for borrowed money which would result in
the Company being indebted at the Closing Date in an amount exceeding its
indebtedness for borrowed money on the Balance Sheet Date or any commitment of
the Company to borrow or lend
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money, (f) any increase in the compensation paid or payable, to any of the
Company's employees other than normal merit increases consistent with past
Company practice which do not exceed 5% of the applicable employee's previous
compensation, (g) any change in the Company's accounting methods, principles, or
practices, (h) any change in the capital stock of the Company or any dividend
paid or declared with respect to such capital stock, or (i) any other event or
circumstance which has materially and adversely affected the business of the
Company or the operation thereof.
2.11 LITIGATION. Except as described in Schedule 2.11 annexed hereto,
there is no action, suit, proceeding at law or in equity by any person or
entity, or any arbitration, or any administrative or other proceeding by or
before any governmental or other instrumentality or agency, pending, or, to the
knowledge of the Company or any Shareholder, threatened, against or affecting
the Company, any Shareholder, or any of their respective properties, assets or
rights, and neither the Company nor any Shareholder knows of any valid basis for
any such action, proceeding or investigation. Neither the Company nor any
Shareholder is subject to any judgment, order, award or decree entered in any
lawsuit or proceeding which may have an adverse effect on any of the operations
or business practices of the Company or on its ability to acquire any property
or conduct business in any area.
2.12 TAXES. Except as disclosed in Schedule 2.12 annexed hereto, the
Company has filed or has caused to be filed, within the times and in the manner
prescribed by law, all federal, state, local, foreign and other income,
estimated, import, sales, use, license, franchise, gross receipts, excise, real
and personal property, employment and payroll-related, and other tax returns and
tax reports ("TAX RETURNS") which are or were required to be filed by, or with
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respect to, the business and assets of the Company. Such Tax Returns are true,
correct and complete, reflect accurately all liability for taxes of the Company
for the periods covered thereby, all amounts shown as owing thereon or otherwise
due from or payable by the Company have been fully paid or adequately disclosed
and fully provided for by adequate reserves on the books and on the Financial
Statements of the Company, and as of the Closing Date all Tax Returns required
to be filed by the Company prior to such date will have been filed and all
amounts shown as owing thereon will have been paid or disclosed to Transcend in
writing. Except as described in Schedule 2.12, there has been no prior
examination or investigation of any Tax Return of the Company and no such
examination or inves tigation is in progress, and neither the Company nor any
Shareholder has knowledge of any events or circumstances which could lead to an
examination or investigation of any Tax Return. Except as described on Schedule
2.12 annexed hereto, there are no outstanding agreements or waivers in effect
with respect to any Tax Returns including any agreements or waivers extending
the statutory period of limitation applicable to any Tax Return or permitting
the deferral of the assessment or payment of any taxes now due to be paid or
assessed to any future period.
2.13 TITLE TO PROPERTIES; ASSETS COMPLETE. The Company has good, valid
and marketable title to all of its material properties and assets (tangible and
intangible), including without limitation, all properties and assets shown on
the Financial Statements as of the Balance Sheet Date and all properties and
assets purchased or acquired by the Company since the Balance Sheet Date; in
each case subject to no encumbrance, lien, charge or other restriction of any
kind, except for (a) liens reflected on the Financial Statements, (b) liens for
current taxes, assessments or governmental
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charges or levies on property not yet due or delinquent, and (c) liens described
on Schedule 2.13 attached hereto (liens of the type described in (a), (b) and
(c) above being sometimes described as "PERMITTED LIENS"). Except for the
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property referenced in Schedule 2.7 and any additional leased or licensed
property subject to real and personal property leases or software licenses or
agreements described in Schedule 2.13, the Company owns outright, and is in
exclusive possession of, all assets, properties or rights currently used in the
business of the Company or necessary for the operation of the Company's business
as currently conducted.
2.14 COMPLIANCE WITH LAWS. The Company is not in violation of any
applicable order, judgment, injunction, award or decree of any court or
governmental or regulatory body or agency, or arbitration tribunal. Except as
described on Schedule 2.14 or as qualified or limited on Schedule 2.12 annexed
hereto, the Company is not in violation of any federal, state, local or foreign
law, ordinance, rule, directive, or regulation, or any other requirement of any
governmental or regulatory body or agency, court or arbitrator applicable to the
business of the Company. Without limiting the generality of the foregoing,
except as described on Schedule 2.14 annexed hereto, (a) there is not pending,
or, to the knowledge of the Company or any Shareholder, threatened, any
notification of any governmental or regulatory body, agency or authority that
the Company is or was not in compliance with applicable laws and regulations
respecting employment and employment practices, occupational safety and health
laws and regulations, and neither the Company nor any Shareholder knows of any
basis therefor, and (b) the Company has not received any such notification of
past violations of such laws or regulations that can reasonably be expected to
result in future claims against the Company, and neither the Company nor any
Shareholder knows of any basis therefor.
2.15 CONTRACTS, ETC. In addition to the matters disclosed in Schedules 2.7
and 2.13, Schedule 2.15 attached hereto consists of a true and complete list of
all other material written contracts, agreements and other instruments to which
the Company is a party or by which it or its assets or properties are bound or
which are necessary for the Company to conduct its business as presently
conducted (the "CONTRACTS"), including but not limited to all customer
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contracts, real and personal property leases, maintenance contracts and software
agreements. Unless attached to Schedule 2.13 or Schedule 2.15, the Company has
previously delivered to Transcend a true and complete copy of each Contract.
All of the Contracts are valid and binding upon the Company and the other
parties thereto, are in full force and effect and enforceable in accordance with
their terms, and neither the Company nor, to the knowledge of the Company or any
Shareholder, any other party to any such Contract has breached any provision of,
or is in default in any respect under, the terms thereof. Unless disclosed in
Schedule 2.10, neither the Company nor, to the knowledge of the Company or any
Shareholder, any other party to any Contract intends during the initial term of
such Contract to terminate, materially reduce or materially modify the terms of
any of its obligations or commitments thereunder, and neither the Company nor
any Shareholder has any reason to believe that any party to a Contract is likely
to terminate, materially reduce or materially modify the terms of any of its
obligations or commitments thereunder. Neither the Company nor any Shareholder
has received any payment from any contracting party in connection with or as an
inducement for entering into any Contract, or other agreement or instrument,
except for payment for actual services rendered or to be rendered by the Company
consistent with amounts historically charged for such
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services.
2.16 ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes receivable
reflected on the Financial Statements, and all accounts and notes receivable
arising subsequent to the Balance Sheet Date, have arisen in the ordinary course
of business of the Company, represent valid obligations due to the Company and,
subject only to the reserve for bad debts shown on the Company's books and
records and computed in a manner consistent with past practice, are collectible
in the ordinary course of business of the Company in the aggregate recorded
amounts thereof in accordance with their terms and in any event not later than
90 days from the Closing Date. None of such notes and accounts receivable or
other debts is or will at the Closing Date be subject to any counterclaim or
set-off except to the extent of the aforementioned reserve, or is or at the
Closing will be subject to any lien, claim, encumbrance, charge or restriction
whatsoever. There has been no material change since the Balance Sheet Date in
the amount of accounts receivable or other debts due the Company or the reserves
for bad debts relating thereto from that reflected in the Financial Statements.
2.17 FIXED ASSETS. Schedule 2.17 annexed hereto contains a complete and
accurate list of all machinery, equipment, tools, furniture, leasehold
improvements, trade fixtures, vehicles, struc tures, or any related capitalized
items and other tangible property material to the operation of the business of
the Company (the "FIXED ASSETS") and all such Fixed Assets are reflected in the
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Financial Statements (except any such tangible property acquired since the
Balance Sheet Date by the Company). Since the Balance Sheet Date the Company
has not disposed of any Fixed Assets except in the ordinary course of the
Company's business. The Fixed Assets are in good operating condition and
repair, subject to normal wear and tear from normal use thereof, and the Company
has not received notice that any of the Fixed Assets or the Company's use
thereof is in violation of any existing law or any building, zoning, health,
fire, safety or other ordinance, code or regulation.
2.18 TRADE NAME AND OTHER INTANGIBLES. Except for shrink-wrap licenses
for the use of third-party off-the-shelf software, Schedule 2.18 annexed hereto
contains a complete and accurate list of all patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights, service marks,
service xxxx rights, and copyrights ("INTELLECTUAL PROPERTY") which are either
---------------------
(a) wholly or partly owned or licensed by the Company, or (b) used in the
conduct of the business of the Company. Except as described on Schedule 2.18
annexed hereto, no person or entity, other than the Company, has any rights
under or in respect of, and to the knowledge of the Company and the
Shareholders, no person is infringing or otherwise acting adversely with respect
to, the Company's rights under or in respect of the Intellectual Property, and
the Company is the exclusive owner of such rights, and there is no claim for
damages or any proceeding pending or, to the knowledge of the Company or any
Shareholder, threatened, with respect thereto. Except as previously and
specifically disclosed in writing by the Company to Transcend, the Company is
not infringing or otherwise acting adversely to the right of any person under or
in respect to Intellectual Property, and there is no claim for damages or any
proceeding pending, or, to the knowledge of the Company or any Shareholder,
threatened, with respect thereto.
2.19 CUSTOMERS. Schedule 2.19 annexed hereto contains a complete and
accurate list of any customer or client which purchased during the last fiscal
year of the Company $5,000 or more
10
in services from the Company. Except as set forth on Schedule 2.19, and to the
knowledge of the Company and the Shareholders, the Company enjoys good relations
with all customers listed on Schedule 2.19, and except as listed on Schedule
2.19 and Schedule 2.10, no customer listed on Schedule 2.19 has notified the
Company or any Shareholder of such customer's intention to terminate or
materially reduce use of the Company's services, and neither the Company nor any
Shareholder has any reason to believe any such customer is likely to terminate
the services of the Company on account of the transactions contemplated
hereunder.
2.20 LABOR RELATIONS; EMPLOYEES. Other than amounts which have not yet
become payable in accordance with the Company's customary practices, which will
be paid in a timely manner, (a) the Company has paid in full to its full and
part-time employees all wages, salaries, commissions, bonuses and other direct
compensation for all services performed by them to date, and (b) the Company has
paid, or will pay in a timely manner, all severance pay, if any, and benefits,
FICA, withholding taxes and vacation pay, if any, for all of its employees and
is not subject to any claim for non-payment or non-performance of any of the
foregoing. Pay periods end on the 8th and 23rd days of each month with payment
made on the 15th and last day of the month. The Financial Statements do not
reflect the accrual of wages, salaries, commissions, bonuses or other
compensation, however described, which accrued from the 24th through the end of
the month. In addition, severance pay, employee benefits, vacation pay, and
sick pay are not reflected on the Financial Statements. By the first sentence
of this paragraph, neither the Company nor the Shareholders undertake to
discharge or satisfy any such accruals which are not due and payable before
Closing, and such obligations which become due and payable after Closing are the
obligation of solely the Surviving Corporation, subject to the Shareholders'
obligations with respect to any breaches of warranty and/or representation
relating to the information with respect to such obligations set forth in
Schedule 2.8 including the Financial Statements and addenda annexed. The
Company is in compliance with all federal, state and local laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. The Company has not improperly characterized as
an independent contractor or consultant any individual who should have been
treated as an employee of the Company for tax withholding or any other purpose.
No employees of the Company are subject to any collective bargaining agreement.
2.21 EMPLOYEE BENEFIT PLANS.
(a) All Employee Benefit Plans (as defined below) of the Company have
been maintained in substantial compliance with the requirements of the Code and
ERISA (as defined below) and any regulations issued thereunder, including the
provisions of Part 6 of Title 1 of ERISA and Section 4980B of the Code to the
extent applicable.
(b) the Company does not maintain, contribute to, and is not obligated
to contribute to any pension plan subject to the provisions of Title IV of ERISA
(including any multiemployer plan).
(c) As of Closing, none of the assets of the Company will be subject
to any liens arising under ERISA or the Code, and the Company will not have any
liability in respect of any Employee Benefit Plan for which the Surviving
Corporation will be liable.
11
(d) There is no written or oral employment agreement with any employee
or agent of the Company that is not terminable at will and without penalty, and
the Company has previously delivered to Transcend copies of all of its Employee
Benefit Plans and employee policy manuals of the Company, whether or not
delivered to any employee.
For purposes of this Agreement, the term "EMPLOYEE BENEFIT PLANS" shall mean all
----------------------
pension, retirement, profit sharing, deferred compensation, stock ownership,
stock purchase, stock option, restricted stock, bonus, severance or termination
pay, payroll practice, vacation, medical, hospital, life, health, accident,
disability, death, or other employee benefit plans or arrangements, including
(without limitation) any pension plan (within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
-----
welfare plan (within the meaning of Section 3(1) of ERISA), whether funded or
unfunded, whether formal or informal, whether written or unwritten, and whether
legally binding or not, covering any present or former employees, consultants,
officers or directors of the Company or to which the Company is or was a party
or bound or by which the Company otherwise may have any liability to any present
or former employee, consultant, officer or director of the Company.
2.22 OFFICERS, DIRECTORS AND KEY EMPLOYEES. Schedule 2.22 describes the
name and total annual compensation (and benefit costs) from the Company of each
officer and director of the Company. Similar information has been previously
furnished to Transcend for each other employee of the Company. Other than as
disclosed in Schedule 2.10, the Company has not made a commit ment or agreement
to increase the compensation. The Company has not made a commitment or
agreement to modify the conditions or terms of employment of any employee. No
employee has communicated to the Company or to any of its officers or directors
that such person intends to cancel or otherwise terminate such person's
relationship with the Company as a result of the consummation of the
transactions contemplated hereby.
2.23 RESTRICTIVE DOCUMENTS. Neither the Company nor any Shareholder is
subject to, or a party to, any charter, by-law, mortgage, lien, lease, license,
permit, agreement, contract, instrument, law, rule, ordinance, regulation,
order, judgment or decree, or any other restriction of any kind, unless
disclosed in this Agreement, including its annexed schedules, which materially
and adversely affects the business practices, operations or condition of the
Company or any of its assets or property, or which would prevent consummation of
the transactions contemplated by this Agreement, compliance by the Company with
the terms, conditions and provisions hereof, or the continued operation of the
Surviving Corporation's business after the Closing Date on substantially the
same basis as heretofore operated by the Company or which would restrict the
ability of the Surviving Corporation to acquire any property or conduct business
in any area.
2.24 FRANCHISES AND LICENSES. With the exception of those matters
addressed in Schedule 2.12, the Company possesses all franchises, concessions,
permits, licenses, orders, and other governmental authorizations and approvals
("PERMITS") required to permit the Company to carry on its business as it is
-------
presently being conducted. All such Permits described on Schedule 2.24
12
annexed hereto, are in the name of the Company and are in full force and effect,
and no modification, termination, suspension or cancellation of any of them is
threatened. No such Permits prevent or prohibit the consummation of the
transactions contemplated hereby without modification thereof and without the
consent of the issuing authority but all such Permits may require reissuance
after notification to the issuing governmental authority after Closing.
2.25 TRANSACTIONS WITH AFFILIATED PARTIES. Except as described on Schedule
2.25 annexed hereto no Shareholder, nor any member of any Shareholder's
immediate family, nor any company or other entity controlled by any of the
foregoing (collectively "AFFILIATES" or individually an "AFFILIATE"): (a) has
---------- ---------
any ownership interest, directly or indirectly, in any competitor, supplier or
customer of the Company, (b) has any outstanding loan to or receivable in either
event to or from the Company, or (c) is a party to or has any interest in any
contract or agreement with the Company.
2.26 BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 2.26 annexed hereto
contains an accurate and complete list showing (a) the name and address of each
bank in which the Company has an account or safe deposit box, the number of any
such account or any such box and the names of all persons authorized to draw
thereon or to have access thereto, and (b) the names of all persons, if any,
holding powers of attorney from the Company and a summary statement of the terms
thereof.
2.27 NO CHANGES PRIOR TO CLOSING DATE. During the period from the Balance
Sheet Date to and including the Closing Date, except as expressly contemplated
hereby or as described on Schedule 2.27, the Company will not have (a) incurred
any liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise), except in the ordinary course of business, (b) permitted any of
its assets to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, (c) sold, transferred or
otherwise disposed of any assets except product inventory sold in the ordinary
course of business, (d) made any capital expenditure or commitment therefor, (e)
declared or paid any dividend or made any distribution on any shares of its
capital stock, or redeemed, purchased or otherwise acquired any shares of its
capital stock or granted or canceled any option, warrant or other right to
purchase or acquire any such shares, (f) made any bonus or profit sharing
distribution or similar payment of any kind, (g) increased its indebtedness for
borrowed money, or made any loan to any person, (h) except in the ordinary
course of business, consistent with past practices of the Company, made or
permitted any amendment or termination of any contract, agreement or license to
which the Company is a party or by which it or any of its assets and properties
are subject or bound, (i) entered into any agreement or arrangement granting any
preferential rights to purchase any of the Company's assets or properties or
requiring the consent of any party to the transfer and assignment of any of the
Company's assets or properties, (j) written off as uncollectible any notes or
accounts receivable, except write-offs in the ordinary course of business
charged to applicable reserves, none of which individually or in the aggregate
is material to the Company, (k) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any executive employee or other
employees, except in the ordinary course of business, (l) canceled or waived any
claims or rights of substantial value, (m) made any change in any method of
accounting or auditing practice, (n) otherwise conducted its business or entered
into any transaction, except in the usual and ordinary manner and in the
ordinary course of its business,
13
or (o) agreed, whether or not in writing, to do any of the foregoing.
2.28 DISCLOSURE. Neither this Agreement, nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof by or on behalf of the
Company or the Shareholders, or by any of the Company's directors or officers,
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit any
statement of a material fact necessary in order to make the statements contained
herein or therein not misleading. There is no fact known to the Company or any
Shareholder which materially and adversely affects the business, prospects
(financial or otherwise) or financial condition of the Company or its respective
properties or assets, which has not been set forth in this Agreement or in the
Schedules or Exhibits or certificates furnished in connection with the
transactions contemplated by this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF TRANSCEND
As an inducement to the Company and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, and with the
knowledge that the Company and the Shareholders shall rely thereon, Transcend
represents and warrants to the Company and the Shareholders the following (both
as of the Closing Date and as of the date hereof):
3.1 INCORPORATION AND QUALIFICATION. Transcend is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and lawful authority to carry on its
business as now being conducted, and to own, lease and operate its properties
and assets as now owned, leased or operated by it. Transcend is duly qualified
or otherwise authorized to transact business and is in good standing in each
jurisdiction in which failure to be so qualified or authorized would have a
material adverse effect upon the business or assets of Transcend.
3.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. Schedule 3.2 annexed hereto
contains true and complete copies of the Certificate of Incorporation of
Transcend, including all amendments thereto (certified by the Secretary of State
of Delaware), and By-Laws of Transcend, including all amendments thereto
(certified by its corporate Secretary), as in effect on the date hereof and such
By-Laws and Certificate of Incorporation will not be amended, rescinded or
otherwise modified between the date hereof and the Closing Date.
3.3 AUTHORITY OF TRANSCEND. Transcend has full power and legal capacity
to execute and deliver this Agreement and the other agreements required to be
executed and delivered by it hereunder (this Agreement and such other agreements
being herein called the "TRANSCEND DOCUMENTS") and to carry out the transactions
-------------------
contemplated hereby. The execution, delivery and
14
performance of the Transcend Documents by Transcend have been duly authorized by
all necessary action on the part of Transcend. The Transcend Documents are
valid and binding agreements of Transcend enforceable against Transcend in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally as well as
general principles of equity. Except as set forth in Schedule 3.3 annexed
hereto, no consent, authorization or approval of, or declaration, filing or
registration with, any governmental or regulatory authority, or any consent,
authorization or approval of any third party, is necessary in order to enable
Transcend to enter into and perform its obligations under the Transcend
Documents, and neither the execution and delivery of the Transcend Documents nor
the consummation of the transactions contemplated thereby will:
(a) conflict with, require any consent under, result in the violation
of, or constitute a breach of any provision of the Certificate of Incorporation
or By-Laws of Transcend;
(b) conflict with, require any consent under, result in the violation
of, constitute a breach of, or accelerate the performance required on the part
of Transcend by the terms of, any evidence of indebtedness or material agreement
to which Transcend is a party, in each case with or without notice or lapse of
time or both, or permit the termination of any such agreement by another person;
(c) result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon, or restriction on the use of, any
property or assets of Transcend under any agreement or commitment to which
Transcend is bound;
(d) accelerate, constitute an event entitling, or which would, on
notice or lapse of time or both, entitle the holder of any indebtedness of
Transcend to accelerate the maturity of such indebtedness;
(e) conflict with or result in the breach of or violation of any writ,
judgment, order, injunction, decree or award of any court or governmental body
or agency or arbitration tribunal that is binding on Transcend; or
(f) constitute a violation by Transcend of any statute, law, or
regulation of any jurisdiction.
3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Transcend has delivered to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement (on
a form other than Form S-8) and definitive proxy statement filed by Transcend
with the United States Securities and Exchange Commission ("SEC") between
---
January 1, 1996, and the date of this Agreement (the "TRANSCEND SEC DOCUMENTS").
-----------------------
As of the time it was filed with the SEC (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing):
(i) each of the Transcend
15
SEC Documents complied in all material respects with the applicable requirements
of the Securities Act of 1933 or the Exchange Act of 1934 (as the case may be);
and (ii) none of the Transcend SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Transcend
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered, except as may be indicated in
the notes to such financial statements and (in the case of unaudited statements)
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end audit adjustments (which will not, individually or in the aggregate, be
material in magnitude); and (iii) fairly present the consolidated financial
position of Transcend as of the respective dates thereof and the consolidated
results of operations of Transcend for the periods covered thereby.
(c) Except as otherwise disclosed in the Transcend SEC documents or in
Schedule 3.4 attached hereto, since March 31, 1997, there has been no material
adverse change in the assets or liabilities, business, results of operations,
condition or prospects of Transcend.
3.5 VALID ISSUANCE. The Transcend Common Stock to be issued as Merger
Consideration will, when issued in accordance with the provisions of this
Agreement, be validly issued, fully paid and nonassessable.
3.6 PENDING ACTIONS. There are no actions, suits, claims or proceedings
pending, or to the knowledge of Transcend, threatened, against Transcend at law
or in equity or by any governmental agency or instrumentality, domestic or
foreign, which materially adversely affect or are likely to materially adversely
affect, (a) Transcend's financial condition, (b) Transcend's right or ability
to carry on its business substantially as now conducted, considering such
condition and business as being the condition and business of Transcend and its
subsidiary companies taken as a whole, or (c) Transcend's ability to consummate
the Merger and to perform its obligations to be performed hereunder.
3.7 RESTRICTIVE DOCUMENTS. Except as otherwise disclosed in the Transcend
SEC Documents, Transcend is not subject to, or a party to, any charter, by-law,
mortgage, lien, lease, license, permit, agreement, contract, instrument, law,
rule, ordinance, regulation, order, judgment or decree, or any other restriction
of any kind, which adversely affects the business practices, operations or
condition of Transcend or any of its assets or property, or which would prevent
consummation of the transactions contemplated by this Agreement, compliance by
Transcend with the terms, conditions and provisions hereof, or the continued
operation of the Surviving Corporation's business after the Closing Date on
substantially the same basis as heretofore operated by Transcend.
16
SECTION 4. COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The Company and the Shareholders covenant and agree that between the date
hereof and the Closing Date:
4.1 OPERATION IN ORDINARY COURSE. From the date hereof to the Closing
Date, the Shareholders shall cause the Company to, and the Company shall, (a)
conduct its business only in the ordinary course and in substantially the same
manner as conducted at the date hereof, (b) use its reasonable best efforts to
preserve its business organization intact and to retain the services of its
present officers, key employees, purchasing and sales personnel and
representatives, (c) use its reasonable best efforts to preserve favorable
relations with its employees, customers, suppliers and others having business
relations with it, (d) use its reasonable best efforts to comply with all laws,
ordinances and regulations applicable to it in the conduct of its business, (e)
not enter into, amend in any material respect or terminate any lease, contract
or agreement, and (f) conduct its business in such a manner that the
representations and warranties contained in Section 2 shall continue to be true
and correct on and as of the Closing Date as if made on and as of the Closing
Date.
4.2 NOTICE OF EVENTS. The Company and the Shareholders shall promptly
notify Transcend of (a) any event, condition or circumstance occurring from the
date hereof through the Closing Date that would constitute a violation or breach
of this Agreement, (b) any event, occur rence, transaction or other item which
would have been required to have been disclosed on any Schedule or statement
delivered hereunder, had such event, occurrence, transaction or item existed on
the date hereof, other than items arising in the ordinary course of business
which would not render any representation or warranty of the Company or the
Shareholders misleading, and (c) any lawsuits, claims, proceedings or
investigations which after the date hereof are threatened or commenced against
the Company or any officer, director, employee, consultant, agent or Shareholder
with respect to the affairs of the Company.
4.3 EXCLUSIVE DEALING. During the period from the date of this Agreement
to the Closing Date, the Shareholders shall not take, and the Shareholders shall
cause the Company to refrain from taking, any action to directly or indirectly
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any corporation, partnership, person, or other entity or
group, other than Transcend, the Company's landlords or other third party
expressly approved in writing by Transcend, concerning the merger of the Company
with any other entity, the purchase and sale of the assets and properties of the
Company, the purchase and sale of Company Common Stock, or any transaction
similar to the foregoing involving the Company.
4.4 EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing Date, the
Company shall permit Transcend, through its employees and representatives,
including, without limitation, its counsel, Xxxxx, Xxxxxxxx & Xxxxxxx, LLP, and
Transcend's accountants, to make such investigation of the assets, properties,
business and operations of the Company, and such examination of the books,
records and financial condition of the Company as Transcend wishes. Any such
investigation
17
and examination shall be conducted at reasonable times and under reasonable
circumstances and the Shareholders shall cause the Company to cooperate fully
therein. No investigation by Transcend shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Company or the
Shareholders under this Agreement, or Transcend's rights under Section 8 of this
Agreement. If this Agreement terminates, Transcend, its employees and
representatives shall keep confidential and shall not use in any manner any
information or documents obtained from the Company concerning its assets,
properties, business and operations, including without limitation its customers
and employees, unless readily ascertainable from public or published
information, or trade sources, or subsequently developed by Transcend
independent of any investigation of the Company, or received from a third party
not under an obligation to the Company or the Shareholders to keep such
information confidential. If this Agreement terminates, any documents obtained
from the Company or the Shareholders shall be returned.
4.5 AFFILIATE INDEBTEDNESS OWED TO THE COMPANY. At or prior to the
Closing, the Shareholders shall, and shall cause each Affiliate to, pay to the
Company any amounts owed by such person to the Company and any amounts owed by
the Shareholders or any such Affiliate to any other person if such indebtedness
is guaranteed by, or secured by any of the assets or properties of the Company.
4.6 AFFILIATE INDEBTEDNESS OWED BY THE COMPANY. Any and all indebtedness
of the Company to the Shareholders, and any Affiliate and any director, officer
or employee of any of the foregoing (including all intercompany accounts) shall
be repaid or contributed to the capital of the Company as of the Closing Date.
4.7 ACCOUNTING TREATMENT OF TRANSACTION. The Shareholders shall cause the
Company to take, and the Company shall take, all actions necessary or
appropriate in or to qualify the Merger for "pooling of interests" treatment for
financial accounting purposes.
SECTION 5. CONDITIONS PRECEDENT TO THE OBLIGATION OF TRANSCEND TO CLOSE
The obligation of Transcend to enter into and complete the Merger is
subject, at Transcend's option, to the fulfillment on or prior to the Closing
Date of the following conditions, any one or more of which may be waived by
Transcend only in writing:
5.1 REPRESENTATIONS AND COVENANTS. The representations and warranties of
Transcend, the Company and the Shareholders contained in this Agreement shall be
true in all material respects on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date. The Company and the
Shareholders shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by the Company and the Shareholders on or prior to the Closing Date. The
Company and the Shareholders shall deliver to Transcend a certificate dated the
Closing Date to such effect signed by an executive officer of the Company and
each Shareholder.
18
5.2 LITIGATION. No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body, or instituted or threatened
by any governmental or regulatory body, to restrain, modify or prevent the
carrying out of the transactions contemplated by this Agreement or to seek
damages or a discovery order in connection with such transactions, or that has
or could reasonably be expected to have, in the opinion of Transcend, a
materially adverse effect on the assets, properties, business, operations or
financial condition of the Company.
5.3 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful consummation of the
Closing and as required from requisite Delaware authorities and from the
Corporations Division of the Secretary of State of Washington for the continued
operation of the business of the Surviving Corporation shall have been obtained.
5.4 THIRD PARTY CONSENTS. All consents, permits, waivers and approvals
from parties to material contracts or other agreements with the Company or the
Shareholders, including, without limitation, the leases between the Company and
those lessors identified on Schedule 2.7 (the "LEASES"), that may be required in
------
connection with the performance by the Company or the Shareholders of their
respective obligations under this Agreement or the continuance of such contracts
or other agreements with the Surviving Corporation without material modification
after the Closing shall have been obtained (with satisfactory written evidence
thereof, and in recordable form where necessary, to be furnished to Transcend at
the Closing), provided that no such consent otherwise required pursuant to this
Section 5.4 shall be required in connection with any Lease of premises in the
event that the owner of such premises shall have agreed to enter into, with the
Surviving Corporation, contemporaneously with the Closing, a lease of such
premises satisfactory to Transcend in its sole discretion.
5.5 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there shall be
no material adverse change in the assets or liabilities, the business or
condition, (financial or otherwise) of the Company, its employees or customers
regardless of reason, including, but not limited, to those changes that are as a
result of any legislative or regulatory change, revocation of any license or
rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, riot, storm, condemnation or act of God or other public force or
otherwise. The Company shall have delivered to Transcend a certificate, dated
the Closing Date, to such effect except for legislative and regulatory changes
enacted or promulgated by states other than Washington and Oregon.
5.6 EMPLOYMENT AGREEMENTS. Transcend and Xxxxx Xxxxxxxx shall have
executed an Employment Agreement in substantially the form of Exhibit A-1 and
Transcend and Xxxx Xxxxxxxx shall have executed an Employment Agreement in
substantially the form of Exhibit A-2.
5.7 NON-COMPETE AGREEMENT. Simultaneously with the Closing of the
transactions contemplated hereby, each of the Shareholders shall have executed
and delivered to Transcend a Non-Competition Agreement in substantially the form
attached as Exhibit B hereto, with such variations as shall have been agreed to
by Transcend and each such Shareholder.
19
5.8 SUBSCRIPTION AGREEMENT. Simultaneously with the Closing of the
transactions contemplated hereby, each of the Shareholders (other than Xxxxx
Xxxxxxx and Xxxx Xxxxxxx) shall have executed and delivered to Transcend a
Subscription Agreement in substantially the form attached as Exhibit C hereto.
5.9 GOOD STANDING CERTIFICATES, ETC. The Company and the Shareholders
shall have delivered all certified resolutions, certificates, documents or
instruments with respect to the Company's corporate existence and authority as
Transcend may have reasonably requested prior to the Closing Date.
5.10 PLEDGE AGREEMENTS. Simultaneously with the Closing of the
transactions contemplated hereby, each Shareholder (other than Xxxxx Xxxxxxx and
Xxxx Xxxxxxx) shall have executed and delivered to Transcend a Pledge Agreement
in substantially the form attached as Exhibit D, whereby such Shareholder grants
to Transcend a security interest in the following numbers of shares of Transcend
Common Stock:
Shareholder Number of Shares
----------- ----------------
Xxxxx Xxxxxxxx 25,488
Xxxx Xxxxxxxx 25,488
Xxxxxxx Xxxxxxx 3,256
Xxxx Xxxxx 6,646
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Total 60,878
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SECTION 6. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY AND THE
SHAREHOLDERS TO CLOSE
The obligation of the Company and the Shareholders to enter into and
complete the Merger is subject, at the Shareholders' option, to the fulfillment
of the following conditions, any one or more of which may be waived by the
Shareholders only in writing:
6.1 REPRESENTATIONS AND COVENANTS. The representations and warranties of
Transcend contained in this Agreement shall be true in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date. Transcend shall have performed and complied with in all
material respects all covenants and agreements required by this Agreement to be
performed or complied with by them on or prior to the Closing Date. Transcend
shall deliver to the Shareholders a certificate dated the Closing Date to such
effect signed by an executive officer of Transcend.
6.2 LITIGATION. No action, suit or proceeding shall have been instituted
before any court or governmental or regulatory body, or instituted or threatened
by any governmental or regulatory body, to restrain, modify or prevent the
carrying out of the transactions contemplated hereby, or to seek damages or a
discovery order in connection with such transaction, or that has or could
20
reasonably be expected to have, in the opinion of the Shareholders, a materially
adverse effect on the assets, properties, business, operations or financial
condition of Transcend.
6.3 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful consummation of the
Closing and the continued operation of the business of the Surviving Corporation
shall have been obtained.
6.4 RESOLUTIONS. There shall have been delivered to the Shareholders a
copy of the resolutions duly adopted by the board of directors of Transcend,
certified accurate by an executive officer of Transcend as of the Closing Date,
authorizing and approving the execution and delivery by Transcend of this
Agreement, and the consummation by Transcend of the transactions contemplated
hereby.
6.5 GOOD STANDING CERTIFICATES, ETC. Transcend shall have delivered all
such certified resolutions, certificates, documents or instruments with respect
to the corporate existence and authority of Transcend as Shareholders' various
counsel may have reasonably requested prior to the Closing Date.
6.6 EMPLOYMENT AGREEMENTS. Transcend and Xxxxx Xxxxxxxx shall have
executed an Employment Agreement in substantially the form of Exhibit A-1 and
Transcend and Xxxx Xxxxxxxx shall have executed an Employment Agreement in
substantially the form of Exhibit A-2.
6.7 NON-COMPETE AGREEMENTS. Simultaneously with the Closing of the
transactions contemplated hereby, Transcend shall have executed and delivered to
each Shareholder a Non-Competition Agreement in substantially the form attached
as Exhibit B, with such variations as shall have been agreed to by Transcend and
each such Shareholder.
6.8 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there shall be
no material adverse change in the assets or liabilities, the business or
condition (financial or otherwise), of Transcend, its employees or customers
regardless of reason, including, but not limited to those changes that are as a
result of any legislative or regulatory change, revocation of any license or
rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, riot, storm, condemnation or act of God or public force or otherwise.
Transcend shall have delivered to the Company a certificate dated the Closing
Date to such effect.
SECTION 7. ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which shall be
conditioned on completion of all the others and all of which shall be deemed to
have taken place simultaneously:
7.1 MERGER CONSIDERATION. Transcend (i) shall deliver to each
Shareholder the shares of Transcend Common Stock, if any, to be issued at
Closing to such Shareholder in accordance with the terms of Sections 1.5 and 1.7
of this Agreement, (ii) shall deliver to such Shareholder the Note
Consideration, if any, to be issued at Closing to such Shareholder in accordance
with the terms of Sections 1.5 and 1.7 of this Agreement, (iii) shall pay to
such Shareholder by cashier's check or by
21
wire transfer the Cash Consideration, if any, payable at Closing to such
Shareholder in accordance with the terms of Sections 1.5 and 1.7 of this
Agreement, and (iv) shall pay to such Shareholder by cashier's check or by wire
transfer the cash payment (aggregating $49,866.66 for all Shareholders) due such
Shareholder at Closing under the Non-Competition Agreements.
7.2 OPINION OF COUNSEL TO THE SHAREHOLDERS. The Shareholders shall
deliver to Transcend an opinion of Xxxxxx Xxxxxxxxxxx & Oettinger, P.S., counsel
to the Company and the Majority Shareholders, dated the Closing Date, in form
and substance reasonably satisfactory to counsel for Transcend.
7.3 OPINION OF COUNSEL TO TRANSCEND. Transcend shall deliver to the
Company and the Shareholders an opinion of Xxxxx, Xxxxxxxx & Xxxxxxx, LLP,
counsel to Transcend, dated the Closing Date, in form and substance reasonably
satisfactory to the various counsel for the Shareholders.
7.4 CLOSING CERTIFICATE OF THE COMPANY AND THE SHAREHOLDERS. The Company
and the Shareholders shall deliver to Transcend a closing certificate signed by
the Company and the Shareholders, dated the Closing Date, in a form reasonably
satisfactory to Transcend.
7.5 CLOSING CERTIFICATE OF TRANSCEND. Transcend shall deliver to the
Shareholders a closing certificate signed by executive officers of Transcend,
dated the Closing Date, in a form reasonably satisfactory to the Shareholders.
7.6 OTHER DOCUMENTS AND CERTIFICATES. Transcend, the Company and the
Shareholders shall deliver certificates, agreements, permits, approvals and
other documents reasonably requested by counsel for such other parties to
satisfy, or to evidence the satisfaction of, as the case may be, the conditions
precedent to Closing set forth in Sections 5 and 6.
7.7 CERTIFICATES OF MERGER. The parties shall execute, deliver and cause
to be filed certificates of merger as contemplated in Section 1.3 hereof.
SECTION 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company, the Shareholders and Transcend
contained in this Agreement shall survive the Closing for a period of one year
from the Closing Date, with the following exceptions:
(a) the representations and warranties of the Company and the
Shareholders in Sections 2.1, 2.2, 2.3 and 2.7, and of Transcend in Sections
3.1, 3.2, 3.3 and 3.5 shall survive indefinitely; and
(b) the representations and warranties of the Company and the
Shareholders in Sections 2.12, 2.20 and 2.21 shall survive until 90 days
following expiration of the statutes of limitation applicable to any third party
claim (including claims of government agencies) alleging
22
facts which would constitute a breach of such representations and warranties.
The expiration of a representation or warranty pursuant to the foregoing shall
not affect any claim for breach of such representation, provided the party
--------
making such claim has given good faith notice of such claim in accordance with
this Section 8 prior to the date of expiration.
8.2 SHAREHOLDERS' INDEMNITY AGREEMENT. Subject to the provisions of
Section 8.4 hereof, the Shareholders, jointly and severally, shall defend,
indemnify and hold harmless Transcend and the Surviving Corporation (and their
respective directors, officers, employees, agents, affiliates, successors and
assigns) from and against any and all direct or indirect requests, demands,
claims, payments, defenses, obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, actions, liens, causes of action, suits,
proceedings, judgments, losses, damages (including without limitation punitive,
exemplary or consequential damages, lost income and profits, interruptions of
business and diminution in the value of the Surviving Corporation), liabilities,
costs, and expenses of any kind (including without limitation (i) interest,
penalties and reasonable attorneys' fees and expenses, (ii) attorneys' fees and
expenses necessary to enforce their rights to indemnification hereunder, and
(iii) consultants' fees and other costs of defending or investigating any claim
hereunder), and interest on any amount payable as a result of the foregoing,
whether accrued, absolute, contingent, known, unknown, or otherwise as of the
Closing Date or thereafter asserted against, imposed upon or incurred by
Transcend, the Surviving Corporation or any of their respective directors,
officers, employees, agents, affiliates, successors or assigns (a "LOSS OF
-------
TRANSCEND") by reason of, resulting from, arising out of, based upon, awarded or
---------
asserted against in respect of or otherwise in respect of:
(a) any breach of any representation or warranty contained in this
Agreement or any misrepresentation in or omission on the part of the Company or
any Shareholder contained in any certificate furnished or to be furnished to
Transcend by the Company or any Shareholder pursuant to this Agreement;
(b) any breach or nonfulfillment on the part of the Company or any
Shareholder of any covenant contained in this Agreement;
(c) the failure of the Surviving Corporation to collect any accounts
receivable of the Company existing on the Closing Date, net of the reserve for
bad debts, if any, set forth in the Financial Statements, within 180 days
following the Closing Date; provided that upon receipt of full payment from the
--------
Shareholders, the Surviving Corporation shall reassign to the Shareholders any
such account receivable;
(d) any federal, state, local or foreign taxes, including any interest
and penalties thereon, due from the Company or the Shareholders with respect to
any period prior to the Closing Date, other than amounts accrued therefor on the
Financial Statements, including amounts due, if any, with respect to the
transactions contemplated herein; or
(e) the failure of the Northwest Region Division of the Surviving
Corporation to generate a net operating contribution, before taxes, interest,
one time new customer charges,
23
depreciation, legal and accounting fees, capital equipment purchases, and
relocation charges, for the period commencing on April 1, 1997, and continuing
through and including July 31, 1997 (the "NORTHWEST REGION NET OPERATING
------------------------------
CONTRIBUTION"), of at least the amount by which the sum paid by Transcend at
------------
Closing to satisfy the Company's indebtedness to U.S. Bank of Washington exceeds
the sum of $250,000 (such excess referred to herein as the "EXCESS BANK CLOSING
-------------------
PAYMENT").
------
8.3 INDEMNITY AGREEMENT OF TRANSCEND AND THE SURVIVING CORPORATION.
Transcend and the Surviving Corporation shall indemnify and hold harmless the
Shareholders (and their respective successors and assigns) from and against any
and all direct or indirect requests, demands, claims, payments, defenses,
obligations, recoveries, deficiencies, fines, penalties, interest, assessments,
actions, liens, causes of action, suits, proceedings, judgments, losses, damages
(including without limitation punitive, exemplary or consequential damages and
lost income and profits and interruptions of business), liabilities, costs, and
expenses of any kind (including without limitation (a) interest, penalties and
reasonable attorneys' fees and expenses, (b) attorneys' fees and expenses
necessary to enforce their rights to indemnification hereunder, and (c)
consultants' fees and other costs of defending or investigating any claim
hereunder, and interest on any amount payable as a result of the foregoing)
whether accrued, absolute, contingent, known, unknown or otherwise as of the
Closing Date or thereafter asserted against, imposed upon or incurred by the
Shareholders or their respective successors, representatives or assigns, (a
"LOSS OF SHAREHOLDERS") by reason of, resulting from, arising out of, based
---------------------
upon, awarded or asserted against in respect of or otherwise in respect of any
breach of any representation or warranty or nonfulfillment of any covenant or
agreement on the part of Transcend or the Surviving Corporation contained in
this Agreement, or any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of Transcend or the Surviving Corporation contained
in any certificate furnished or to be furnished to the Shareholders by Transcend
or the Surviving Corporation pursuant to this Agreement.
8.4 INDEMNIFICATION PROCEDURE.
(a) Upon obtaining knowledge thereof, the party to be indemnified
hereunder (the "INDEMNITEE") shall promptly notify the indemnifying party
----------
hereunder (the "INDEMNITOR") in writing of any damage, claim, loss, liability or
----------
expense or other matter which the Indemnitee has determined has given or could
give rise to a claim for which indemnification rights are granted hereunder
(such written notice referred to as the "NOTICE OF CLAIM"). The Notice of Claim
---------------
shall specify, in all reasonable detail, the nature and estimated amount of any
such claim giving rise to a right of indemnification, to the extent the same can
reasonably be estimated. Any failure on the part of an Indemnitee to give
timely notice to the Indemnitor of a claim shall not affect the right of the
Indemnitee to obtain indemnification from the Indemnitor with respect to such
claim unless the Indemnitor is actually harmed by such failure to timely notify,
and only to the extent of such actual harm.
(b) With respect to any matter set forth in a Notice of Claim relating
to a third party claim the Indemnitor shall defend, in good faith and at its
expense, any such claim or demand, and the Indemnitee, at its expense, shall
have the right to participate in the defense of any such third party claim. So
long as Indemnitor is defending, in good faith, any such third party claim, the
Indemnitee shall not settle or compromise such third party claim. The
Indemnitee shall make
24
available to the Indemnitor or its representatives all records and other
materials reasonably required by them for use in contesting any third party
claim and shall cooperate fully with the Indemnitor in the defense of all such
claims. If the Indemnitor does not defend any such third party claim or if the
Indemnitor does not provide the Indemnitee with prompt and reasonable assurances
that the Indemnitor will satisfy the third party claim, the Indemnitee may, at
its option, elect to defend any such third party claim, at the Indemnitor's
expense. An Indemnitor may not settle or compromise any claim without obtaining
a full and unconditional release of the Indemnitee, unless the Indemnitee
consents in writing to such settlement or compromise. Notwithstanding the
foregoing, if there is a reasonable probability that a third party claim for
which Transcend and the Surviving Corporation has indemnification rights against
the Shareholders hereunder will materially and adversely affect Transcend or the
Surviving Corporation other than as a result of money damages or other payments,
Transcend or the Surviving Corporation shall be entitled to conduct the defense
of such claim at the Shareholders' expense.
8.5 SET-OFF. Transcend and the Surviving Corporation shall have the right
to set-off and apply against all amounts due and owing any Shareholder under
this Agreement and the Non-competition Agreement with such Shareholder all sums
in respect of which such Shareholder may be liable pursuant to Section 8.2
hereof, such right of set-off to be in addition to and not in lieu of or an
election against any and all other remedies available to Transcend and the
Surviving Corporation under this Agreement or at law or in equity.
8.6 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding the provisions of Section 8 of this Agreement,
neither party (with Transcend and the Surviving Corporation being considered one
party and the Shareholders being considered the other party) shall be entitled
to claim, receive or collect, and the other party shall not be obligated to pay
or defend against, any Loss of Transcend (in the case of Transcend and the
Surviving Corporation) or any Loss of Shareholders (in the case of the
Shareholders), except to the extent that the Loss of Transcend or Loss of
Shareholders, as the case may be, exclusive in either case of the costs and
expenses of collection, including attorneys' fees and expenses, exceeds $10,000
(the "BASKET"), at which time the aggrieved party shall be entitled to claim,
------
receive or collect, and the other party shall be obligated to pay or defend
against, all Losses of Transcend or Losses of Shareholders, as the case may be,
back to the first dollar of the Basket. Thereafter, the Basket shall no longer,
as to claims made by such aggrieved party, apply, and Losses of Transcend or
Losses of Shareholders, as the case may be, may be asserted as they are incurred
without reference to the Basket; provided, however, that the limitation
contained in this paragraph (a) shall not apply to any Loss of Transcend arising
by reason of the circumstances set forth in Section 8.2 (e) above, it being the
understanding and agreement of the parties that the Shareholders' obligation
under said Section 8.2 (e) hereof shall be to pay the Surviving Corporation,
subject only to the limitation with respect to Minority Shareholders set forth
in paragraph (b) of this Section 8.6, the amount, if any, by which the Excess
Bank Closing Payment exceeds the Northwest Region Net Operating Contribution.
(b) The liability of each Minority Shareholder under this Section 8
shall be limited to an amount equal to the aggregate sum of the Cash
Consideration, the face amount of the
25
Notes Consideration and shares of Transcend Common Stock (valued at the same
price per share as was applicable on the Closing Date, regardless of fluctuation
in market price subsequent to the Closing Date) paid or payable, whether or not
due, to such Minority Shareholder by Transcend or the Surviving Corporation
pursuant to this Agreement and the Non-competition Agreement with such Minority
Shareholder, plus the costs and expenses of collection from or enforcement
against such Minority Shareholder, including attorneys' fees and expenses.
SECTION 9. TERMINATION OF AGREEMENT
9.1 TERMINATION. This Agreement may be terminated prior to the Closing as
follows:
(a) at the election of the Company, if any one or more of the
conditions to the obligations of Transcend to close has not been fulfilled as of
the Closing Date, or if Transcend has breached any representation, warranty,
covenant or agreement contained in this Agreement;
(b) at the election of Transcend, if any one or more of the conditions
to its obligations to close has not been fulfilled as of the Closing Date, or if
the Company or the Shareholders have breached any representation, warranty,
covenant or agreement contained in this Agreement;
(c) at the election of the Company or Transcend, if any legal
proceeding is commenced or threatened by any governmental or regulatory body or
other person directed against the consummation of the Closing or any other
transaction contemplated under this Agreement and either the Company or
Transcend, as the case may be, reasonably and in good xxxxx xxxx it impractical
or inadvisable to proceed in view of such legal proceeding or threat thereof; or
(d) at any time on or prior to the Closing Date, by mutual written
consent of the parties hereto.
9.2 SURVIVAL. If this Agreement is terminated pursuant to Section 9.1,
this Agreement shall become void and of no further force and effect, except for
the provisions of Section 4.4 relating to the obligation of Transcend to keep
certain information confidential, Section 10.1 (relating to publicity), Section
10.4 (relating to expenses), and Section 10.5 (relating to indemnification of
brokerage), and none of the parties hereto shall have any liability in respect
of such termination, except that any party shall be liable to the extent that
failure to satisfy the conditions of Sections 5, 6 or 7 results from such
party's acting in bad faith or from the intentional or willful violation of the
representations, warranties, covenants or agreements of such party under this
Agreement.
SECTION 10. MISCELLANEOUS
10.1 PUBLICITY. Except as otherwise required by law or stock exchange
rules, prior to Closing none of the parties hereto shall issue any press release
or make any other public statement, in each case relating to or in connection
with or arising out of this Agreement or the matters
26
contained herein, without obtaining the prior written approval of all parties
hereto as to the contents and manner of presentation and publication thereof.
10.2 KNOWLEDGE. Where any representation or warranty contained in this
Agreement is expressly qualified by reference to the knowledge, information or
belief of the Company or the Shareholders, the Company and the Majority
Shareholders confirm that such party has made due and diligent inquiry as to the
matters that are the subject of such representations and warranties.
10.3 GENDER. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
10.4 EXPENSES. The parties hereto shall pay their own respective
expenses, including the fees and disbursements of their respective counsel in
connection with the negotiation, preparation and execution of this Agreement
and the consummation of the transactions contemplated hereby ("MERGER
------
EXPENSES"). The Company shall pay the Merger Expenses of the Company and the
--------
Shareholders up to $16,500. Any Merger Expenses of the Company or the
Shareholders in excess of such $16,500 limit shall be borne exclusively by the
Shareholders.
10.5 BROKERAGE COMMISSIONS AND FINDER'S FEES. Each of the parties
represents and warrants to the others that such party has not hired, retained or
dealt with any broker, finder or investment banker or in connection with the
transactions contemplated by this Agreement, and will defend, indemnify and hold
the other parties harmless from and against any and all claims for finder's fees
or brokerage or other commissions which may at any time be asserted against any
of such other parties founded upon a claim which is inconsistent with the
aforesaid representation and warranty of the indemnifying party, together with
any and all losses, damages, costs and expenses (including reasonable attorneys'
fees) relating to such claims or arising therefrom or incurred by the
indemnified party in connection with the enforcement of this indemnification
provision.
10.6 ENTIRE AGREEMENT. This Agreement, including all schedules and
exhibits hereto, constitutes the entire agreement of the parties with respect to
the subject matter hereof, supersedes all prior agreements, negotiations or
letters of intent, and may not be modified, amended or terminated except by a
written instrument specifically referring to this Agreement signed by each of
the parties hereto.
10.7 WAIVERS AND CONSENTS. All waivers and consents given hereunder shall
be in writing. No waiver by any party hereto of any breach or anticipated
breach of any provision hereof by any other party shall be deemed a waiver of
any other contemporaneous, preceding or succeeding breach or anticipated breach,
whether or not similar, on the part of the same or any other party.
10.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given only if and when (i) personally
delivered or (ii) three (3) business days after mailing, postage prepaid, by
certified mail or (iii) when delivered (as evidenced by a receipt) by a
nationally recognized overnight delivery service, or (iv) by facsimile (as
evidenced by written confirmation of transmission and receipt) addressed in each
case as follows:
27
(a) If to the Company or the Majority Shareholders:
00000 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx 00000
with a copy in like manner to:
Xxxxxx Xxxxxxxxxxx & Xxxxxxxxx, X.X.
0000 0xx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
If to the Minority Shareholders:
Xxxx Xxxxx
5605 Kootenai
Xxxxx, Xxxxx 00000
Xxxxx Xxxxxxx
0000 XX 000xx Xxxxx
Xxxxxxx Xxx, Xxxxxxxxxx 00000
Xxxx Xxxxxxx
0000 X Xxxxxx XX
Xxxxxx, Xxxxxxxxxx 00000
Xxxxxxx Xxxxxxx
00 Xxx Xxxx Xxxxx XX
Xxxxxx, Xxxxxxxxxx 00000
(b) If to Transcend or the Surviving Corporation, to:
Transcend Services, Inc.
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
with a copy in like manner to:
28
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
Each party may change its address for the giving of notices and communications
to it, and/or copies thereof, by written notice to the other parties in
conformity with the foregoing.
10.9 RIGHTS OF THIRD PARTIES. All conditions of the obligations of the
parties hereto, and all undertakings herein, are solely and exclusively for the
benefit of the parties hereto, the Surviving Corporation and their respective
successors and assigns, and no other person or entity shall have standing to
require satisfaction of such conditions or to enforce such undertakings in
accordance with their terms, or be entitled to assume that any party hereto will
refuse to consummate the purchase and sale contemplated hereby in the absence of
strict compliance with any or all thereof, and no other person or entity shall,
under any circumstances, be deemed a beneficiary of such conditions or
undertakings, any or all of which may be freely waived in whole or in part, by
mutual consent of the parties hereto at any time, if in their sole discretion
they deem it desirable to do so.
10.10 HEADINGS. The Table of Contents and Section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.11 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of
the state of Georgia.
10.12 JURISDICTION. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto may be brought, at the election of the party bringing the
proceeding, in the courts of either Georgia or Washington, or in the United
States District Court for either the Northern District of Georgia or the Western
District of Washington, and, by execution and delivery of this Agreement, each
of the parties to this Agreement accepts for himself, herself or itself the
exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
10.13 PARTIES IN INTEREST. After the Closing, Transcend and the Surviving
Corporation may transfer and assign this Agreement and all other agreements and
instruments to be entered into at the Closing, and its rights hereunder and
thereunder to any purchaser of, or other successor to, the business or assets of
the Surviving Corporation. Except as expressly stated above, this Agreement may
not be transferred, assigned, pledged or hypothecated by any party hereto, other
than by operation of law or with the consent of the other parties. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
29
10.14 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
10.15 SEVERABILITY. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
10.16 ARBITRATION.
(a) Any controversy or claim arising out of or relating to this
Agreement, the agreements to be entered into between or among the parties hereto
pursuant to this Agreement or the transactions contemplated hereby and thereby,
shall be submitted to and be finally resolved by arbitration in Minneapolis,
Minnesota, pursuant to the provisions of the United States Arbitration Act (9
U.S.C. (S) 1 et seq.), to be conducted by the American Arbitration Association
("AAA"), in accordance with the AAA's Commercial Arbitration Rules then in
effect. Each party hereby irrevocably agrees that service of process, summons,
notices or other communications related to the arbitration procedure shall be
deemed served and accepted by the other party if given in accordance with
Section 10.8. The arbitrators shall render a judgment of default against any
party who fails to appear in a properly noticed arbitration proceeding. The
arbitration shall be conducted by a panel of three arbitrators selected pursuant
to AAA Rules. Any award or decision rendered in such arbitration shall be final
and binding on both parties, and judgment may be entered thereon in any court of
competent jurisdiction if necessary.
(b) Notwithstanding subsection (a) above to the contrary, any party
may seek temporary or preliminary injunctive relief against the other party in
any court or proper jurisdiction as defined in Section 10.12 hereof with respect
to any and all preliminary injunctive or restraining procedures pertaining to
this Agreement or the breach thereof, pending the outcome of any arbitration
proceeding.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of
the date first above written.
Transcend:
---------
TRANSCEND SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------
Title: CFO
[CORPORATE SEAL]
Company:
-------
30
DOCUMEDX, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------
Title: President
By: /s/ Xxxx Xxxxxxxx
-----------------
Title: Secretary
Shareholders:
------------
MAJORITY SHAREHOLDERS
/s/ Xxxxx Xxxxxxxx (L.S.)
------------------
Xxxxx Xxxxxxxx
/s/ Xxxx Xxxxxxxx (L.S.)
-----------------
Xxxx Xxxxxxxx
MINORITY SHAREHOLDERS
/s/ Xxxx Xxxxx, by Xxxxx Xxxxxxxx (L.S.)
---------------------------------
Xxxx Xxxxx, by Xxxxx Xxxxxxxx,
her attorney-in-fact
/s/ Xxxxx Xxxxxxx (L.S.)
---------------------------------
Xxxxx Xxxxxxx
/s/ Xxxx Xxxxxxx (L.S.)
---------------------------------
Xxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx (L.S.)
---------------------------------
Xxxxxxx Xxxxxxx
31
