EXHIBIT 2 (C)
ASSET PURCHASE AGREEMENT
BY AND AMONG
CORE, INC.
TCM SERVICES, INC.
TRANSCEND CASE MANAGEMENT, INC.
AND
TRANSCEND SERVICES, INC.
MARCH __, 1998
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT is made and entered into as of the ____ day
of March, 1998 by and among CORE, INC., a Massachusetts corporation ("CORE"),
TCM SERVICES INC., a Delaware corporation and wholly-owned subsidiary of CORE
("Purchaser"), TRANSCEND CASE MANAGEMENT, INC., a Georgia corporation
("Seller"), and TRANSCEND SERVICES, INC., a Delaware corporation and owner of
all the capital stock of Seller ("Transcend").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller and Transcend own and operate a workers compensation case
management and ▇▇▇▇ audit business and related services and businesses
(collectively, as further defined herein, the "Business");
WHEREAS, Purchaser desires to purchase from Seller and Transcend and Seller
and Transcend desire to sell to Purchaser, on the Closing Date (as hereinafter
defined) substantially all assets used in operating the Business;
NOW, THEREFORE, in consideration of the covenants hereinafter set forth and
for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
PURCHASE OF ASSETS; CONSIDERATION; CLOSING
SECTION 1.1 PURCHASE OF ASSETS BY PURCHASER
(a) Sale of Assets. Subject to the provisions of this Agreement, Seller
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and Transcend agree to sell and Purchaser agrees to purchase, at the Closing (as
defined in Section 1.5 below), all of the properties, assets, rights, claims and
contracts used by Seller in the workers compensation case management and ▇▇▇▇
audit business and related services and businesses (collectively, the
"Business"), including, without limitation, the following:
(i) All property, plant, equipment machinery, furniture, fixtures
and other tangible personal property (including supplies and
inventories) used in the Business, including those assets
listed on Schedule 2.6 hereto;
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(ii) All computer and similar equipment and software used in the
Business, including the equipment and software listed on
Schedules 2.6 and 2.7 hereto;
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(iii) All patents, patent applications, trade secrets, processes
and techniques,
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know-how, designs, inventions, copyrights, discoveries and
other proprietary or intangible rights and intellectual
properties used in the Business, including the intellectual
property and Proprietary Rights listed on Schedule 2.7 hereto;
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(iv) All rights to the name and marks "▇▇▇▇▇▇▇▇ Health and
Rehabilitation Services" (including derivatives thereof) and
other trade names, service names, trademarks, service marks,
trademark applications and service ▇▇▇▇ applications used in
the Business, including those names, marks and rights listed on
Schedule 2.7 hereto, excluding, however, the name and ▇▇▇▇
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"Transcend Services, Inc." (including derivatives thereof) and
the Transcend Services corporate logo;
(v) All files, customer and supplier lists, mailing lists,
accounting records and other business records, all catalogs,
printed materials, telephone numbers (including 800 telephone
numbers), fax numbers and sales aids and all other data
relating to the Business;
(vi) Accounts receivable, refunds, deposits, prepaid expenses, short
and long term assets and instruments of every kind and
description related to the Business;
(vii) All rights of every kind under all contracts and agreements
inuring to Seller's benefit or with respect to the Business
including those rights under contracts listed on Schedule 2.10
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hereto (the "Assigned Contracts");
(viii) Rights under real estate leases as listed on Schedule 2.8
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hereto (the "Real Estate Leases");
(ix) All documents and information relating to the Business and the
operations of Seller, for the past five (5) years, including,
without limitation, customer lists and all books and records
relating to the operations of the Business; and
(x) Seller's cash and accounts receivable (net of doubtful
accounts) shown on the books and records of the Seller as of
the Closing Date in an amount at least equal to $220,000; and
The assets specified above to be sold to and purchased by Purchaser under
this Agreement are referred to collectively as the "Subject Assets". The Subject
Assets shall not include any assets listed on Schedule 1.1(x) (the "Excluded
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Assets").
Seller and Transcend jointly and severally represent and warrant to
Purchaser and CORE that the Subject Assets constitute all the assets utilized in
the Business.
SECTION 1.2 LIMITED ASSUMPTION OF LIABILITIES
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Subject to the provisions of this Agreement, at the Closing, Purchaser
shall assume only those debts, liabilities, obligations, commitments and
contracts of the Seller which are set forth on Schedule 1.2. THE PURCHASER IS
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NOT ASSUMING ANY OTHER LIABILITIES, OBLIGATIONS, COMMITMENTS OR CONTRACTS
WHATSOEVER.
The debts, liabilities, obligations, commitments and contracts specified
above to be assumed by Purchaser under this Agreement are referred to
collectively as the "Assumed Liabilities". The Assumed Liabilities shall,
without limitation, exclude all debts, liabilities, obligations, commitments and
contracts not specifically identified in Schedule 1.2; (i) all tort claims
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asserted against Seller or Transcend or the Business or claims against Seller or
Transcend or the Business for breach of contract or breach of warranty, which
are based on acts or omissions occurring before the Closing; (ii) all liability
related to environmental matters which originate prior to the Closing Date;
(iii) any contract or agreement of Seller not expressly listed as an assigned
contract on the Schedule 2.10 to this Agreement; (iv) any liabilities or
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obligations under any real property leases for periods prior to the Closing; (v)
any obligations or liabilities to any employee of any Seller unless expressly
set forth on Schedule 1.2 and then only in the amount set forth on said Schedule
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1.2; and (vi) any liabilities for taxes of any kind, including, without
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limitation, sales, income or withholding taxes resulting from the operation of
the Business prior to Closing.
SECTION 1.3 CONSIDERATION; CALCULATION OF NUMBER OF PURCHASE PRICE SHARES
(a) Subject to the terms and conditions set forth in this Agreement, the
consideration to be paid by Purchaser to Seller for the Business and the Subject
Assets shall be (i) shares of common stock of CORE, Inc., the number of which
shall be determined pursuant to Section 1.3(b), below (the "Purchase Price
Shares") and (ii) assumption of the liabilities and obligations of Seller and
Transcend listed on Schedule 1.2.
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(b) The number of Purchase Price Shares shall be equal to: (i) the
Purchaser's Net Annualized Revenue, divided by (ii) the Market Price of one
share of CORE Common Stock on the Designation Date (as each term is defined
below).
(c) For the purposes of the foregoing calculation,
(i) "Net Annualized Revenue" shall equal four times the Selected Quarterly
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Revenue (as defined below) reduced by (A) any unpaid Shortfall amount related to
uncollected accounts receivable described in Section 5.16; and (B) any unpaid
indemnification claims described in Article VII, if any.
(ii) "Selected Quarterly Revenue" shall mean Purchaser's gross revenue
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derived from workers compensation case management and workers compensation ▇▇▇▇
audit, net of allowance for doubtful accounts, as reported by Purchaser pursuant
to GAAP for a quarter ended March 31, 1999 through December 31, 2000 as selected
in writing by Transcend pursuant to the procedure described below.
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For purposes of calculating Purchaser's gross revenue, net of allowance for
doubtful accounts, the following revenue shall be excluded:
(A) revenue related to CORE's wholly-owned subsidiary Cost Review
Services, Inc. ("CRS") which also conducts workers compensation case
management and workers compensation ▇▇▇▇ audit unless such revenue
originates solely from the efforts of a sales representative who was
formerly an employee of Seller or a replacement thereof (a "Transcend Sales
Representative");
(B) revenue from any present or former customer of CRS (unless such
customer is as of the Closing Date also a customer of Seller, in which
event revenues shall be credited to Purchaser and CRS in the same
proportion as the current allocation);
(C) revenue from sources other than Seller's Business as operated by
Seller as of the Closing Date unless both of the following conditions are
met: (1) such revenue originates solely from the efforts of a Transcend
Sales Representative and (2) is performed by Purchaser or CRS;
(D) revenue which is directly attributable to services or products
purchased from a vendor or any other party other than Purchaser (a
"Rebillable"); provided, the difference between the revenue associated with
such Rebillable and the actual cost of such Rebillable (the "Margin") shall
be included in calculating Purchaser's gross revenue. (For example, and
without limitation, revenue from independent medical examinations ("▇▇▇▇"),
WorkAbility services, CORE's PRA services and CORE Analytic services and
other products or services for which Purchaser must pay or credit a vendor
or other person or entity shall be excluded from Purchaser's gross revenue
(except that the Margin on such purchases shall be included in gross
revenue)); and
(E) revenue from a client which is directly or indirectly acquired by CORE
to the extent such revenue exceeds the revenue for a quarterly period prior to a
letter of intent or public announcement of such acquisition by CORE.
Notwithstanding the foregoing, in no event shall excluded revenue be
deducted more than once in calculating Purchaser's gross revenue.
(iii) "Market Price" of a share of CORE common stock means the average of
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the closing bid prices of such stock sales as quoted on the NASDAQ - National
Market System ("NASDAQ-NMS") averaged over a period of 21 days consisting of the
day as of which "Market Price" is being determined and the 20 consecutive
business days prior to such day. If CORE common stock is not listed on NASDAQ-
NMS on the Designation Date, the Market Price shall equal the average of the
closing bid prices of such stock sales on all securities exchanges on which such
stock may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NAS DAQ System as of 4:00 P.M., New York time, or, if on any day such stock
is not quoted in the NASDAQ System, the average of the highest bid and lowest
asked
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prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" will be the fair value thereof determined in good faith jointly
by CORE and Transcend. If such parties are unable to reach agreement within a
reasonable period of time, such fair value will be determined by an appraiser
jointly selected by CORE and Transcend. The cost of such appraisal shall be paid
fifty percent (50%) by CORE and fifty percent (50%) by Transcend.
(d) Procedure. Within 5 business days following CORE's public
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announcement of financial results for each quarterly period beginning with the
quarterly period ending on June 30, 1998 and ending with the quarterly period
ending on December 31, 2000 (and in no event later than (i) 120 days following
the end of the quarterly periods ending December 31, 1999 and December 31, 2000
or (ii) 45 days following the end of each such quarterly period other than those
quarterly periods ending December 31, 1999 and December 31, 2000). Purchaser
shall deliver to Transcend Purchaser's quarterly gross revenue statement for
such preceding quarter, prepared in accordance with CORE's accounting procedures
and GAAP (the "Quarterly Revenue Statement"). Beginning with the quarter ended
March 31, 1999, within 20 days of CORE's delivery of each Quarterly Revenue
Statement, Transcend, may upon written notice to CORE designate the quarterly
revenue for such period as the Selected Quarterly Revenue, in which event the
revenue for such quarter, net of allowance for doubtful accounts, shall be the
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Selected Quarterly Revenue. The date of CORE's receipt of such written
designation by Transcend (provided such receipt is within the 20 day period)
shall be the Designation Date. Time is of the essence with respect to
Transcend's selection of the Selected Quarterly Revenue and Transcend shall not
have the right to make the foregoing selection after said 20 day period has
passed. If Transcend does not designate any period as the Selected Quarterly
Revenue, the quarterly revenue, net of doubtful, as reported on the Quarterly
Revenue Statement for the quarter ended December 31, 2000 shall be the Selected
Quarterly Revenue and April 1, 2001 shall be the Designation Date.
(e) Inspection of Books and Records. At Transcend's or Seller's request
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and for the purpose of verifying the information in Purchaser's Quarterly
Revenue Statement, Purchaser will make the work papers and back-up materials
used in preparing the Purchaser's Quarterly Revenue Statement available to the
Seller and Transcend and their accountants and other representatives at
reasonable times and upon reasonable notice.
(f) Corporate Reorganization If (i) CORE is to be consolidated with or
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acquired by another entity in a merger, sale of all or substantially all of
CORE's assets or otherwise or (ii) Purchaser or substantially all Purchaser's
assets are acquired by an entity unaffiliated with CORE or Transcend (hereafter
events described in (i) and (ii) shall be referred to as an "Acquisition"), the
board of directors of CORE or any entity assuming the obligations of CORE (the
"Successor Board"), shall, as to obligation to issue Purchase Price Shares
either (i) make appropriate provision for the continuation of such obligation to
issue Purchase Price Shares by substituting on an equitable basis for the CORE
common stock then subject to issuance securities of the
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successor or acquiring entity, or (ii) the Selected Quarterly Revenue shall be
deemed to be Purchaser's highest gross revenue, net of allowance for doubtful
accounts, (as calculated pursuant to Section 1.3(b)(ii)) for a calendar quarter
beginning with the calendar quarter ending March 31, 1999 and ending with the
most recent complete calendar quarter immediately preceding such Acquisition,
and based upon such deemed Selected Quarterly Revenue, Purchase Price Shares in
CORE common stock shall be issued to Transcend prior to the closing or planned
closing of the Acquisition.
SECTION 1.4 ALLOCATION OF PURCHASE PRICE
Purchaser will propose an allocation of the Purchase Price in accordance
with the allocation method required by Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code") and the regulations thereunder. Subject to
Seller's agreement with such allocation, which will not be unreasonably
withheld, Seller and Purchaser each agree to report the federal, state and local
income and other tax consequences of the transactions contemplated herein, and
in particular to report the information required by Code Section 1060(b), in a
manner consistent with such allocation.
SECTION 1.5 CLOSING DATE
The parties agree that time is of the essence and the closing under this
Agreement (the "Closing") will take place at 10:00 a.m. local time, on Tuesday,
March 3, 1998, or at such other time and place as the parties may otherwise
agree upon (such time and such date being herein referred to as the "Time of
Closing" and such date being herein referred to as the "Closing Date"), at the
offices of CORE, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (or at
such other place as the parties may otherwise agree upon).
Notwithstanding the foregoing, CORE shall have the right in its absolute
discretion to postpone the Closing under this Agreement for a period of not more
than thirty days following the later of (i) ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇) the date all
Schedules hereto are delivered by Seller and Transcend to CORE, or (iii) the
date Seller's audited financial statements are delivered to CORE, in which event
such date shall be referred to as the "Closing Date".
SECTION 1.6 ACTIONS TO BE TAKEN AT CLOSING
(a) At the Closing, Seller and Transcend shall deliver or cause to be
delivered to Purchaser the following:
(i) a ▇▇▇▇ of Sale from Seller and Transcend in the form attached as
Exhibit A;
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(ii) instruments of assignment of each of the Assigned Contracts in
the form set forth in Exhibit B, with such changes to such form
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approved by Purchaser and Seller (the "Contract Assignments"),
pursuant to which Purchaser will assume all obligations under
each such Assigned Contract accruing after the Closing Date;
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(iii) original, executed UCC termination statements in a form
acceptable to Purchaser and acceptable for filing for any
Temporary Encumbrances (as defined in Section 2.5) not yet
terminated;
(iv) an opinion of counsel to Seller covering the matters set forth
on Exhibit C in form reasonably satisfactory to Purchaser;
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(v) compliance certificates of Seller and Transcend, as described
in Section 9.3, dated the Closing Date, as to the fulfillment
of the conditions set forth in Sections 9.1 and 9.2;
(vi) written consents of all third parties required by any and all
agreements or documents to which Seller, is a party and by
which the Subject Assets are bound in order to consummate the
transactions contemplated hereby;
(vii) certified resolutions of the Board of Directors of Seller and
Transcend and certified votes of the stockholder of Seller duly
and legally authorizing the execution and performance of this
Agreement and the Ancillary Documents to which it is a party;
(viii) certificates of all Continuing Employees in the form of Exhibit
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H-1 and as described in Section 5.6;
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(ix) acknowledgments of CORE's policies from each Continuing
Employee in the form of Exhibit H-2 and as described in Section
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5.6;
(x) Consent and Amendment of Employment Agreements from certain
persons as described in Section 9.13;
(xi) all such other documents, assignments and other instruments as,
in the opinion of Purchaser's counsel, are necessary to vest in
Purchaser title to the Subject Assets to be transferred to it
pursuant to this Agreement; and
(xii) all other documents, endorsements, assignments, instruments,
writings and other items required to be delivered by Seller and
Transcend at or prior to the Closing pursuant to this Agreement
or otherwise required or reasonably requested in connection
herewith.
(b) At the Closing, Purchaser will deliver or cause to be delivered to
Seller, the following:
(i) an opinion of counsel to Purchaser and CORE covering the
matters set forth on Exhibit D in form reasonably satisfactory
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to Seller;
(ii) a compliance certificate of the Purchaser and CORE as described
in Section 8.3, dated the Closing Date, as to the fulfillment
of the conditions
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set forth in Sections 8.1 and 8.2;
(iii) certified resolutions of the Board of Directors of Purchaser
and CORE duly and legally authorizing the execution and
performance of this Agreement and the Ancillary Documents to
which it is a party; and
(iv) all other documents, endorsements, assignments, instruments,
writings and other items required to be delivered by Purchaser
or CORE at or prior to the Closing pursuant to this Agreement
or otherwise required or reasonably requested in connection
herewith.
(c) At the Closing, CORE, Purchaser, Transcend and Seller shall execute,
and deliver the following to each other
(i) a Registration Rights Agreement between CORE and Transcend in
the form attached as Exhibit E (the "Registration Rights
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Agreement").
(ii) a Tradename License Agreement concerning the use of the
tradename "Transcend Case Management" for a period of one year, in the form
attached as Exhibit F (the "Tradename License Agreement").
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All instruments, agreements, certificates and other documents delivered at
Closing or otherwise delivered pursuant to this Agreement other than this
Agreement shall be referred to as the "Ancillary Documents".
SECTION 1.7 FURTHER ASSURANCES
From time to time after the Closing at the request of Purchaser and without
further consideration, Seller and Transcend shall execute and deliver further
instruments of transfer and assignment (in addition to those delivered under
Section 1.6) and take such other action as Purchaser may require or request to
more effectively transfer and assign to, and vest in, Purchaser each of the
Subject Assets. To the extent that the assignment of any contract or right
shall require the consent of other parties thereto, this Agreement shall not
constitute an assignment thereof; however, Seller and Transcend shall use all
reasonable efforts before and after the Closing to obtain any necessary consents
or waivers and to otherwise assure Purchaser of the benefits of the assigned
contracts.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND TRANSCEND
Seller and Transcend, jointly and severally, hereby represent and warrant
to Purchaser and CORE that:
SECTION 2.1 ORGANIZATION
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Each of Seller and Transcend is, and on the Closing Date will be, duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation or organization; have, and on the Closing
Date will have, the power and authority to conduct all of the activities
conducted by them and to own or lease all of the assets owned or leased by them.
Each of Seller and Transcend is qualified as a foreign corporation (or otherwise
qualified to do business) in all states and jurisdictions in which such
qualification is required, except in the case of Transcend where the lack of
such qualification would not have a material adverse effect on the business,
results of operation or financial condition (a "Material Adverse Effect") of
Seller. A complete and correct copy of the Certificate of Incorporation and all
amendments thereto and the Bylaws of Seller and Transcend have been delivered to
CORE and no changes have been made thereto since the date delivered.
Each of Seller and Transcend do not and will not on the Closing Date
directly or indirectly own any shares of stock or any other securities, of any
corporation or have any direct or indirect interest in any firm, partnership,
limited liability company association or other entity which, in any way,
directly or indirectly, are related to the Business.
SECTION 2.2 AUTHORIZATION OF TRANSACTION
Seller and Transcend each has the power and authority to execute and
deliver this Agreement, to consummate the transactions hereby contemplated and
to take all other actions required to be taken by each of them pursuant to the
provisions hereof. This Agreement is valid, binding and enforceable against each
of Seller and Transcend in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions hereby contemplated will (a) contravene or conflict with the
Certificate of Incorporation or By-laws of Seller or Transcend; (b) constitute
any violation or breach of any material provision of any material contract or
other instrument to which Seller or Transcend is a party or by which any of the
assets of the Business may be affected or secured; (c) constitute any violation
or breach of any order, writ, judgment, injunction, decree, statute, rule or
regulation or will result in the creation of any lien, charge or encumbrance
binding on or applicable to or contravene or conflict with the organizational
documents of Seller or Transcend or the Subject Assets; or (d) conflict with, or
constitute a default under, or result in the termination or cancellation of, or
right to accelerate, any material agreement, contract or other instrument
binding upon Seller or Transcend or any material license, franchise, permit or
other similar authorization held by Seller or Transcend.
The execution, any delivery and performance by Seller and Transcend of this
Agreement and the consummation of the transactions by Seller and Transcend
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority.
SECTION 2.3 CAPITALIZATION
The authorized capital stock of Seller and a complete and accurate list of
stockholders of Seller is set forth in Schedule 2.3 hereto. There are not
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authorized or outstanding any options,
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warrants or other rights to purchase any shares of capital stock of Seller.
SECTION 2.4 FINANCIAL STATEMENTS
Schedule 2.4 attached hereto consists of the following financial statements
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(the "Financial Statements"): (i) unaudited financial statements of Seller,
which includes the balance sheets of Seller, as of December 31, 1996 and 1997,
and the related statements of income for the years ended December 31, 1995, 1996
and 1997, (the balance sheet of Seller, as of December 31, 1997, is hereinafter
referred to as the "Balance Sheet") and (ii) unaudited financial statement for
each month ending after December 1997. The financial statements included in
Schedule 2.4 are in accordance with the books and records of Seller, are
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complete and correct in all material respects and fairly present the financial
position of Seller as of the dates therein indicated and the results of the
operations of Seller for the periods so ended, all in conformity with generally
accepted accounting principles and practices applied on a consistent basis with
prior periods ("GAAP") (except as may be indicated in the notes thereto) subject
to normal year end adjustments and the absence of footnotes in the case of any
interim financial statements. The notes and accounts receivable reflected in
the Balance Sheet, net of reserves therein reflected, are, except to the extent
heretofore collected, fully collectible and subject to no counterclaims or set-
offs.
SECTION 2.5 TITLE TO ASSETS; ENCUMBRANCES; CONDITIONAL SALES
Except for the liens, mortgages, pledges and encumbrances set forth in
Schedule 2.5 hereto (the "Temporary Encumbrances"), either Seller or Transcend
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have good and marketable title to all of the Subject Assets. All Temporary
Encumbrances shall be terminated at or before Closing and at Closing Seller and
Transcend shall have good and marketable title to the Subject Assets. Without
limiting the generality of the foregoing, no officer, director, stockholder,
partner or affiliate of Seller or Transcend (or any member of their families)
own any asset, tangible or intangible, which is used in the Business. None of
the Subject Assets is held or will be held on the Closing Date by Seller or
Transcend as lessee under any lease or as conditional sale vendee under a
conditional sale contract or other title retention agreement, except as set
forth in Schedule 2.5 or as otherwise expressly permitted herein.
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Seller and Transcend, jointly and severally, represent that the ▇▇▇▇ of
Sale and other documents and instruments of transfer delivered to Purchaser at
Closing shall effectively vest in Purchaser good and marketable title to the
Subject Assets, free and clear of all liens, restrictions and encumbrances.
Except for the Excluded Assets listed on Schedule 1.1(x), at Closing, the
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Subject Assets shall include all the assets which are used by Seller or
Transcend in the operation of the Business.
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SECTION 2.6 MACHINERY, EQUIPMENT, FIXTURES
Attached hereto as Schedule 2.6 is a complete and correct list and a brief
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description of all machinery, vehicles, equipment and fixtures, office equipment
and furniture and/or other personal property owned by Seller or used in the
Business on December 31, 1997, each with a book value or fair market value more
than $1,000.
SECTION 2.7 PROPRIETARY RIGHTS; PATENTS; TRADEMARKS; SOFTWARE; ETC.
For the purposes of this Agreement, "Proprietary Rights" means any of the
following which are material to or used in the Business: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice), (ii) trademarks, service marks, trade
dress, trade names and corporate names and registrations and applications for
registration thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data and documentation, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, know-how, manufacturing and production processes
and techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vii) other
intellectual property rights, and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
Schedule 2.7 attached hereto contains a complete and accurate list of (i)
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all patented and registered Proprietary Rights owned by Seller (or owned by
Transcend or a Transcend affiliate and used in the Business), (ii) all pending
patent applications and applications for registrations of other Proprietary
Rights filed by Seller (or filed by Transcend or a Transcend affiliate and used
in the Business), (iii) all trade names and corporate names owned or used by
Seller, (iv) all trademarks, service marks, copyrighted works and computer
software which are material to the financial condition, operating results,
assets, operations or business prospects of Seller or the Business, and (v) all
licenses and other rights granted by Seller to any third party with respect to
any Proprietary Rights and all licenses and other rights granted by any third
party to Seller, with respect to any Proprietary Right. Except as set forth in
Schedule 2.7, Seller owns and possesses all right, title and interest in and to,
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or has the right to use pursuant to a valid license, all Proprietary Rights
necessary for the operation of the Business as currently conducted and as
currently proposed to be conducted. All of such Proprietary Rights of Seller or
the Business will remain in effect and good standing as and to the extent
existing on the date of this Agreement, notwithstanding the consummation of the
transactions contemplated by this Agreement. Except as set forth on Schedule
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2.7, the loss or expiration of any Proprietary Right or related group of
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Proprietary Rights would not have a material adverse effect on the financial
condition, operating results, assets, operations or Business prospects of Seller
and no such loss or expiration is threatened, pending or reasonably foreseeable.
Seller and Transcend have taken all actions which Seller and Transcend, in their
reasonable business judgment, have deemed necessary and desirable to maintain
and protect the Proprietary Rights which Seller owns or the Business uses.
Except as indicated on Schedule 2.7, (i) there have been no claims which have
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been made or are currently outstanding or are threatened against Seller or
Transcend asserting the invalidity,
11
misuse, unenforceability, or contesting the ownership, of any of the Proprietary
Rights which Seller owns or the Business uses, and, after reasonable inquiry,
there are no grounds for the same, (ii) the conduct of Seller's Business has not
infringed, misappropriated or otherwise conflicted with, and does not infringe,
misappropriate or otherwise conflict with, any Proprietary Rights of other
persons or entities, and present conduct of the Seller will not infringe,
misappropriate or conflict with any Proprietary Rights of other persons or
entities, and (iii) the Proprietary Rights owned or used by Seller have not been
infringed or misappropriated by, or otherwise conflict with, other persons or
entities.
SECTION 2.8 REAL PROPERTY
Schedule 2.8 includes a complete and correct list of all real property
------------
which is presently owned or leased by Seller and which will be owned or leased
by Seller on the Closing Date together with a brief description of all plants
and structures thereon. None of such owned real property is subject to any
liens, encumbrances or restrictions whether of record or otherwise, except as
particularly described in said Schedule 2.8. The real estate leases set forth
------------
in Schedule 2.8 are in full force and effect and will continue to be in full
------------
force and effect on identical terms following consummation of the transactions
contemplated in this Agreement.
SECTION 2.9 INSURANCE
Seller presently maintains and shall continue to maintain through the
Closing Date the insurance described in Schedule 2.9 attached hereto, including
------------
the term, premium, policy limits, exclusions and deductibles in each case
applicable thereto, as well as whether such policies are "occurrences" or
"claims made", and all of the policies set forth therein are in full force and
effect. True and complete copies of all insurance policies of Seller have been
provided to CORE.
SECTION 2.10 CONTRACTS
Attached hereto as Schedule 2.10 is a brief description of all contracts
-------------
and other agreements related to the Business, whether written or oral, if any,
to which Seller or Transcend is a party or which are binding on Seller with the
exception of the following:
(a) contracts or commitments for services, the purchase of materials,
inventory and supplies by Seller entered into in the ordinary and
usual course of business which do not individually exceed one thousand
dollars ($1,000.00);
(b) contracts or commitments for the sale of services, goods or products
by Seller entered into in the ordinary and usual course of business
which do not individually involve an amount or value in excess of one
thousand dollars ($1,000.00).
Schedule 2.10 also contains a separate list of all contracts or agreements
-------------
relating to the Business, whether written or oral, valid within the past 36
months or in the future pursuant to which Seller (or Transcend with respect to
the Business) is a party on the one hand, and any affiliate of Seller or
Transcend, including, without limitation, any director, officer, partner or
stockholder of Seller or Transcend (or any member of their respective families)
is a party on the
12
other hand.
Except as set forth in Schedule 2.10, Seller and Transcend are not in
-------------
default under any material provision of said contracts and agreements nor is any
default or failure to perform by Seller or Transcend alleged by any party to any
such contracts and agreements, and no act or event has occurred which with
notice or lapse of time, or both, would constitute a default by Seller or
Transcend under any such contracts and agreements or permit modification,
cancellation, acceleration or termination of any such contract or agreement or
result in the creation of any security interest upon, or any person or entity
obtaining any right to acquire any property, assets or rights of Seller or the
Business.
Seller and Transcend have delivered to Purchaser a correct and complete
copy of each written contract listed on Schedule 2.10 (including all
-------------
amendments). Each such contract and agreement is in full force and effect and is
valid and legally binding in accordance with its terms. To the best knowledge of
Seller and Transcend, there are no unresolved disputes involving or with respect
to any such agreement, and no party to any such agreement has advised Seller or
Transcend that it intends either to terminate a material agreement or to refuse
to renew a material agreement upon the expiration of the term thereof.
SECTION 2.11 OTHER MATERIAL CONTRACTS
Seller and Transcend do not have any contract not specified in this
Agreement or the Schedules hereto which is binding on Seller or Transcend or on
any other party and which might materially (adversely or favorably) affect the
properties, business or the financial condition of Seller or the Business.
SECTION 2.12 EMPLOYEES
Schedule 2.12 attached hereto contains (a) a true and correct list of the
-------------
names of each employee and consultant of Seller and the current annual rate of
regular compensation and all bonuses or anticipated bonuses paid or payable by
Seller (or Transcend with respect to the Business) not otherwise described in
item (b) (including payments which are not reflected on the records of Seller to
each such employee and consultant); and (b) a list and/or description of all
pension, retirement, incentive, bonus, profit sharing, vacation, holiday,
health, life insurance or other plans or policies for the benefit of any
employees or consultants of Seller. Except as shown on Schedule 2.12, there are
-------------
no currently effective employment or consulting or other material agreements
with individual employees or consultants to which Seller is a party. Except as
set forth on Schedule 6.1, to the best of Transcend's and Seller's knowledge, no
------------
executive, key employee, or group of employees has any plans to terminate
employment with Seller and no such executive or employee intends to refuse
Purchaser's offer of employment as described in Section 6.1. Seller is not a
party to nor bound by any collective bargaining agreement. There is no pending
or threatened material dispute between Seller and any of its respective
employees. Seller has fully complied with the verification requirements and the
recordkeeping requirements of the Immigration Reform and Control Act of 1986.
The individual licenses of each employee and consultant of Seller or
Transcend
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performing services for the Business, if so required based upon their particular
employment or service requirements, including, without limitation, all nursing
licenses, are current and valid and will be current and valid as of the Closing
Date and for a period of sixty (60) days following the Closing Date. No employee
or consultant affiliated with Seller is presently on suspension or subject to
pending suspension or revocation, which was or may be imposed by any private or
governmental body. Except as expressly set forth on Schedule 2.12 all employees
-------------
of the Seller are employees at will.
SECTION 2.13 EMPLOYEE PLANS
Seller does not have or participate in any pension, retirement, bonus,
deferred compensation, stock purchase, profit sharing, insurance or similar plan
or arrangement for the benefit of employees, oral or written other than
arrangements described in Schedule 2.12 attached hereto. In connection with any
-------------
such plan or arrangement listed in said Schedule 2.12, there have not been, and
-------------
on the Closing Date there will not have been, any "prohibited transactions"
within the meaning of Section 406(a) of the Employee Retirement Income Security
Act of 1974 ("ERISA"), and there have not been, and on the Closing Date there
will not have been, any "reportable events" within the meaning of Section
4043(b) of ERISA. All contributions (including all employer contributions and
employee salary reduction contributions) which are due to date have been paid to
each such plan or arrangement, and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each such plan
or arrangement or listed as an Assumed Liability on Schedule 1.2. All premiums
------------
or other payments for all periods ending on or before the Closing Date have been
paid (or will be paid by Seller prior to Closing) with respect to each such plan
or arrangement. All reports and filings with respect to said fringe benefit
plans required to be made pursuant to state or federal law have been, and on the
Closing Date will have been, timely filed.
Seller does not have any oral or written contract or agreement of
employment with any officer, salesman or other employee, or agency, territorial
franchise, sales representative or other service agreement, not terminable
without penalty on notice of one month or less, or with any labor union, except
those described in Schedule 2.12 attached hereto.
-------------
SECTION 2.14 GOVERNMENTAL LICENSES AND PERMITS; GOVERNMENT RELATIONS
Seller has been granted all certificates, licenses, permits, authorities
and franchises from any federal, state or municipal or other governmental
instrumentality, agency or commission or similar body which may be necessary to
carry on the Business lawfully. Schedule 2.14 contains a list of all such
-------------
certificates, permits, licenses and franchises.
All certificates, licenses, permits, authorities and franchises of the
Business are validly held by Seller. Seller has complied with all requirements
in connection therewith and the same will not be subject to suspension or
revocation as a result of this Agreement or the consummation of the transactions
contemplated hereby. All certificates, licenses, permits, authorities and
franchises issued or granted by local, state or federal authorities or agencies
which are necessary for the conduct of the Business and which are held in the
name of any employee, officer,
14
director, shareholder, partner, agent or otherwise of the Business shall be
deemed included under this representation and warranty, and Seller and Transcend
warrant that such certificates, licenses, permits, authorizations and franchises
shall be duly and validly transferred to the Purchaser (to the extent such
certificates, licenses, permits, authorities and franchises are transferable),
without additional consideration at Closing.
Neither the Seller nor any director, officer, agent, employee or other
person acting on behalf of the Seller or the Business has used any funds for
improper or unlawful contributions, payments, gifts or entertainment, or made
any improper or unlawful expenditures relating to political activity to domestic
or foreign government officials or others. Neither the Seller nor any current
director, officer, agent, employee or other person acting on behalf of the
Seller or the Business, has accepted or received any improper or unlawful
contributions, payments, gifts or expenditures. The Company has at all times
complied, and is in compliance, in all material respects with the federal
Foreign Corrupt Practices Act and in all material respects with all foreign laws
and regulations relating to prevention of corrupt practices.
SECTION 2.15 LIABILITIES
Except as set forth in Schedule 2.15, Seller (or Transcend with respect to
-------------
the Business) has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent or otherwise) and there is no
basis for any present or future action, suit, claim or demand against Seller (or
Transcend with respect to the Business) giving rise to any liability or
obligation except for (a) liabilities or obligations disclosed or provided for
in the Balance Sheet (including the notes thereto); or (b) liabilities or
obligations incurred since the date of the Balance Sheet in the ordinary and
usual course of business or which would not, individually or in the aggregate,
have a material adverse effect on the financial condition of Seller or on the
conduct of its Business and, to the extent such liabilities or obligations arose
prior to the date thereof, are set forth in the monthly balance sheets delivered
to CORE pursuant to Section 5.12 hereof; or (c) liabilities under this
Agreement.
SECTION 2.16 TAXES
Seller and Transcend have prepared and filed when due all appropriate
federal, state, local and other tax returns of every kind and nature for all
periods on or before the due dates of such returns (as extended by any valid
extensions of time) and have paid all taxes shown to be due by said returns or
on any assessments received by Seller (or by Transcend and related to the
Business) or have made adequate provision for the payment thereof. Seller has
delivered to CORE complete and accurate copies of Seller's federal, state and
local tax returns for the years 1995-1996. All such tax returns are materially
correct.
15
The provisions for taxes (federal, state, local and other), and interest
and penalties, if any, with respect thereto, reflected in the Balance Sheet of
Seller are adequate to cover any and all taxes and any interest and penalties in
connection therewith which have been or may be assessed with respect to the
properties, business and operations of Seller, respectively, for the period
ended on the date of said Balance Sheet and all prior periods. No claim or
liability is pending or has been assessed or threatened against Seller in
connection with any such taxes except as reflected in the Balance Sheet.
Seller is not, and on the Closing Date will not be, a consenting
corporation within the meaning of Section 341(f) of the Internal Revenue Code.
All taxes or other assessments and levies which Seller (or Transcend with
respect to the Business) is or was required by law to withhold or collect have
been duly withheld and collected, and have been paid over to the proper
governmental authorities or are held by Seller (or Transcend with respect to the
Business) in separate bank accounts for such payment and all such withholdings
and collections and all other payments due in connection therewith are duly set
forth on the books of Seller.
SECTION 2.17 LITIGATION; COMPLIANCE WITH LAWS
Except as set forth in Schedule 2.17 attached hereto, there are no actions,
-------------
suits, or proceedings pending or threatened against or affecting Seller, the
Business, the Subject Assets or the property of Seller in any court or before
any federal, state, municipal or other governmental department, commission,
board or other instrumentality or before any arbitrators (all of which claims
are adequately covered by insurance, or are adequately reserved for in Seller's
financial statements).
Seller (and Transcend with respect to the Business) has complied in all
material respects with all applicable laws including, without limitation,
environmental laws (including applicable rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof) and
there are no pending or, to the best knowledge of Seller and Transcend,
threatened governmental investigations involving Seller or the Business,
including inquiries, citations, or complaints by any federal, state, local or
foreign government and agencies thereof. There are no outstanding orders,
decrees or stipulations to which Seller or Transcend is a party affecting
Seller, the Business or the Subject Assets and Seller and Transcend are not in
default with respect to any judgment, order, decree, award, rule or regulation
of any court of any such department, commission, board or other instrumentality
or arbitrators affecting Seller, the Business or the Subject Assets.
16
SECTION 2.18 ACCOUNTS RECEIVABLE; OPEN CASES
The accounts receivable set forth in the Balance Sheet are and the accounts
receivable set forth in the monthly financial statements delivered to CORE
pursuant to Section 5.12 will be bona fide, collectible in amounts set forth in
Section 5.16 hereof (except to the extent previously collected and except for
any reserves set forth in the Balance Sheet) and arose in the ordinary course of
business.
Attached hereto as Schedule 2.18 is a list of all Seller's clients and
-------------
cases in processes (including capitated fee cases), including the status of the
cases.
Seller and Transcend know of no fact or pending or proposed change in laws,
regulations or procedures relating to Seller's Business which would materially
and adversely affect Purchaser's continued services in connection with the
clients or the open cases. Accordingly, to best of Seller's and Transcend's
knowledge, future fees from the open cases (including capitated fee cases) are
expected to be consistent with the Seller's past experience with similar cases
(including capitated fee cases).
SECTION 2.19 POWERS OF ATTORNEY; GUARANTIES
There are no outstanding powers of attorney executed on behalf of Seller
(or on behalf of Transcend with respect to the Business). Seller is not a
guarantor or otherwise liable for any liability or obligation (including
indebtedness) of any third party.
SECTION 2.20 SERVICE WARRANTIES
Every service provided by Seller or the Business (collectively, "Seller's
Services") has been in substantial conformity with all material applicable
contractual commitments and all express and implied warranties, and Seller and
Transcend have no liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any liability) for warranty work or
other additional related services or other damages in connection therewith. The
Seller's Services are not subject to any guaranty, warranty, or other indemnity
beyond the applicable standard terms and conditions of sale, license or lease.
Schedule 2.20 hereto includes copies of the standard terms and conditions of
-------------
sale, license or lease for the Seller's Services.
SECTION 2.21 EVENTS SUBSEQUENT TO BALANCE SHEET DATE
Except as set forth on Schedule 2.21, since December 31, 1997, the date of
-------------
the Balance Sheet, there has not been (except as otherwise disclosed in the
Schedules hereto or expressly contemplated herein) and will not be on the
---------
Closing Date:
(a) Any material adverse change in assets, liabilities, financial
condition, business, business organization or personnel of Seller or
the Business, taken as a whole, or in relationships with suppliers,
customers, clients, landlords or others;
17
(b) Any disposition, sale or issuance by Seller of any of its capital
stock or grant of any option or right to acquire any of its capital
stock or any acquisition or retirement for consideration by Seller of
any of its capital stock or any declaration or payment by Seller of
any dividend or other distribution of or with respect to its capital
stock;
(c) Any sale, mortgage, pledge or other disposition of any material asset
owned by Seller or used in the Business as of the close of business on
the date of the Balance Sheet, or acquired by Seller or the Business
since said date other than in the ordinary and usual course of
business;
(d) Any material expenditure or commitment by Seller or the Business for
the acquisition of assets of any kind, other than inventories and
supplies acquired in the ordinary course of business;
(e) Any damage, destruction or loss (whether or not insured) materially
and adversely affecting the Business;
(f) Any general wage or salary increase by Seller or to Continuing
Employees (as defined in Section 6.1) outside the ordinary course of
business;
(g) Any increase in the compensation payable or to become payable by
Seller (or Transcend with respect to the Business) to any officer or
key employee;
(h) Any loans or advances by or to Seller other than renewals or
extensions of existing indebtedness or any increase in indebtedness
for borrowed money or capitalized leases of Seller, except in the
ordinary course of business;
(i) Any cancellation by Seller of any material indebtedness owing to it or
any cancellation or settlement by Seller of any material claims
against others;
(j) Any sale, assignment or transfer by Seller (or Transcend with respect
to the Business) of any material patent, trademark, tradename,
copyright, license, franchise, certificate, permit or other intangible
asset used in connection with the Business;
(k) Any acceleration, termination, modification or cancellation of any
agreement, contract, lease or license involving more than $5,000 to
which Seller (or Transcend with respect to the Business) is a party or
by which Seller is bound;
(l) Any delay or postponement of the payment of accounts payable or other
liabilities of Seller outside the ordinary course of business;
(m) Any loan or other transaction between Seller, on one hand, and any
director, officer, partner or stockholder of Seller on the other hand;
(n) Any transaction of Seller (or Transcend with respect to the Business)
any kind not
18
in the ordinary and usual course of business, except as otherwise
provided in this Agreement;
(o) Any amendment of any term of any outstanding securities or equity of
Seller;
(p) Any material reduction in the amounts of coverage provided by existing
casualty and liability insurance policies with respect to the business
of Seller;
(q) Any new or amendment to or alteration of any existing bonus, incentive
compensation, severance, stock option, stock appreciation right,
pension, matching gift, profit-sharing, employee stock ownership,
retirement, pension group insurance, death benefit, or other fringe
benefit plan, arrangement or trust agreement adopted or implemented by
Seller or Transcend which would result in a material increase in cost
to Seller; or
(r) Any commitment by Seller or Transcend to any of the foregoing.
SECTION 2.22 NO BROKER
No agent or broker or other person acting pursuant to authority of Seller
or Transcend is entitled to any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
SECTION 2.23 OFFICERS AND DIRECTORS
The officers and directors of Seller are as listed in Schedule 2.23
-------------
attached hereto.
SECTION 2.24 BOARD OF DIRECTORS AND STOCKHOLDER APPROVAL
The execution, delivery and performance of this Agreement has been duly
authorized by (i) the Board of Directors and the stockholder of Seller; and (ii)
the Board of Directors of Transcend.
SECTION 2.25 TRADE NAMES
Schedule 2.25 hereto sets forth (a) all business names and addresses used
-------------
by Seller or the Business within the past five years and (b) names and addresses
of business entities from which Seller or the Business acquired significant
assets within the past five years. Seller and Transcend have always conducted
the Business only under the names set forth on Schedule 2.25. Except as set
-------------
forth in Schedule 2.25, Seller (and Transcend with respect to the Business) has
-------------
never operated under or used an assumed or fictitious name. Seller and
Transcend have not received notice that the manner in which they conduct the
Business conflicts with any rights of third parties to trade names, trademarks,
trademark applications, trademark registrations, trademark licenses and
sublicenses, service marks, service ▇▇▇▇ applications, service ▇▇▇▇
registrations, service ▇▇▇▇ licenses and sublicenses, copyrights, copyright
applications, copyright registrations, copyright
19
licenses and sublicenses, patents, patent applications and patent licenses and
sublicenses. Purchaser's use of the marks "Transcend Case Management" and
"▇▇▇▇▇▇▇▇ Health and Rehabilitation Services" after the Closing in the manner
consistent with Seller's (and Transcend's with respect to the Business) use of
such marks prior to the Closing will not subject Purchaser to any claim from
third parties.
Seller shall not use any other business name or address from the date of
this Agreement through the Closing Date. Schedule 2.25 also contains all
-------------
locations of the Subject Assets and Seller's places of business and chief
executive offices.
SECTION 2.26 ARMS LENGTH TRANSACTIONS
Except as set forth on Schedule 2.26, all transactions by the Seller (and
-------------
Transcend with respect to the Business) with outside parties have been conducted
on an arms length basis, and no affiliate, director, stockholder or officer of
Seller or Transcend (or any members of their respective families) has since
January 1, 1995 had any material direct or indirect ownership of or a profit
participation in any outside business enterprises with which the Seller or the
Business had significant purchases, sales or business dealings.
SECTION 2.27 OTHER LIABILITIES OF SELLER AND TRANSCEND
Seller and Transcend shall retain all of their liabilities other than the
Assumed Liabilities (the "Retained Liabilities"). Seller and Transcend shall
make timely payment of all the Retained Liabilities so that all liabilities of
Seller and the Business to the creditors (other than the Assumed Liabilities)
shall have been discharged. Neither Purchaser nor CORE shall have any liability
whatsoever for any of the Retained Liabilities.
SECTION 2.28 INVESTMENT
Seller and Transcend each understand that the Purchase Price Shares have
not been, and, except as otherwise provided in the Registration Rights
Agreement, will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering. Transcend
(i) is acquiring the Purchase Price Shares solely for its own account for
investment purposes, and not with a view to the distribution thereof: (ii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iii) has received certain information concerning CORE and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Purchase Price Shares, (iv) is able
to bear the economic risk and lack of liquidity inherent in holding the Purchase
Price Shares, and (v) is an Accredited Investor as defined in Regulation D
promulgated under the Securities Act of 1933, as amended. Immediately prior to
the issuance of the Purchase Price Shares, Transcend shall execute certificates
and agreements confirming the foregoing and addressing other matters to assure
compliance with or exemption from federal and other security laws.
SECTION 2.29 DISCLOSURE; EFFECT OF TRANSACTION
20
Neither this Agreement nor any statement, list or certificate furnished or
to be furnished by Seller or Transcend or their representatives to Purchaser or
CORE pursuant hereto or in connection with this Agreement or any of the
transactions hereby contemplated, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances in which they are made, not misleading. To the best of Seller's
and Transcend's knowledge, there is no fact regarding Seller, the Business or
Transcend or their respective prospects which a reasonable buyer would
reasonably consider material in making a decision with respect to the purchase
of the Subject Assets which has not been disclosed to CORE or Purchaser in this
Agreement including the Schedules hereto.
No creditor, employee, consultant, client or other customer or other person
having a material business relationship with Seller or the Business has informed
Seller or Transcend that such person or entity intends to change the
relationship because of the purchase and sale of the Subject Assets as
contemplated hereby, which change would have a material adverse effect on
Business.
SECTION 2.30 SUPPLEMENTAL DISCLOSURE
Prior to and through Closing, Seller and Transcend shall have the
continuing obligation promptly to supplement or amend the Schedules hereto with
respect to any material matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in such Schedules; provided, however, that for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended disclosure shall not be deemed to have been disclosed as
of the date of this Agreement unless expressly so agreed to in writing by
Purchaser and CORE.
SECTION 2.31 REPRESENTATIONS AND WARRANTIES AT CLOSING
On the Closing Date, all of the representations and warranties of Seller
and Transcend contained in this Agreement will be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as though made at and as of the Closing Date, except for changes contemplated or
permitted by this Agreement.
SECTION 2.32 SURVIVAL OF REPRESENTATIONS
The representations and warranties of the Seller and Transcend contained in
this Agreement and any Ancillary Documents shall survive the Closing hereunder
notwithstanding any investigation which may be made by or on behalf of Purchaser
or CORE, for a period ending the earlier of (i) three years from the Closing
Date, or (ii) the date CORE delivers the Purchase Price Shares to Transcend, or
(iii) the date Purchaser retransfers assets to Transcend pursuant to Section 6.3
of this Agreement. Notwithstanding the foregoing limitation to the
representations and warranties of Seller and Transcend in the prior sentence,
without limitation as to time, in no event shall Purchaser's liabilities assumed
from Seller or Transcend exceed the Assumed Liabilities listed in Schedule 1.2.
------------
21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CORE
CORE and Purchaser, jointly and severally, hereby represent and warrant to
Seller and Transcend that:
SECTION 3.1 ORGANIZATION
CORE is, and on the Closing Date will be, a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts; and has, and on the Closing Date will have, the power and
authority to conduct all of the activities conducted by it and to own or lease
all of the assets owned or leased by it. CORE is qualified as a foreign
corporation in all states and jurisdictions in which such qualification is
required, except where the lack of such qualification would not materially and
adversely affect the ability to do business or financial condition of CORE.
A complete and correct copy of the Articles of Organization and all
amendments thereto and the Bylaws of CORE have been made available to Seller and
Transcend.
SECTION 3.2 AUTHORIZATION OF TRANSACTION
CORE has the power and authority to execute and deliver this Agreement, to
consummate the transactions hereby contemplated and to take all other actions
required to be taken by it pursuant to the provisions hereof. This Agreement is
valid, binding and enforceable against CORE in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions hereby contemplated will (a) contravene or conflict with the
Articles of Organization or By-laws of CORE, (b) constitute any violation or
breach of any material provision of any material contract or other instrument to
which CORE is a party; (c) constitute any violation or breach of any order,
writ, judgment, injunction, decree, statute, rule or regulation, (d) conflict
with, or constitute a default under, or result in the termination or
cancellation of, or right to accelerate, any material agreement, contract or
other instrument binding upon CORE.
The execution, any delivery and performance by CORE of this Agreement and
the consummation of the transactions by CORE require no action by or in respect
of, or filing with, any governmental body, agency, official or authority.
SECTION 3.3 BROKER
No agent or broker or other person acting pursuant to authority of CORE is
entitled to any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
SECTION 3.4 BOARD OF DIRECTORS APPROVAL
22
The Board of Directors of CORE has duly authorized the execution and
delivery and performance of this Agreement by CORE.
SECTION 3.5 DISCLOSURE
Neither this Agreement nor any statement, list or certificate furnished or
to be furnished to Transcend or Seller by or on behalf of CORE pursuant hereto
or in connection with the transactions contemplated hereby contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances on which they are made, not misleading.
SECTION 3.6 REPRESENTATIONS AND WARRANTIES AT CLOSING
On the Closing Date, all of the representations and warranties of CORE
contained in this Agreement will be true and correct in all material respects at
and as of the Closing Date with the same force and effect as though made at and
as of the Closing Date, except for changes contemplated or permitted by this
Agreement.
SECTION 3.7 SURVIVAL OF REPRESENTATIONS
The representations and warranties of CORE contained in this Agreement and
any Ancillary Documents shall survive the Closing hereunder notwithstanding any
investigation which may be made by or on behalf of Seller or Transcend for a
period ending the earlier of (i) of three from the Closing Date, (ii) the date
CORE delivers the Purchase Price Shares to Transcend, or (iii) the date
Purchaser retransfers assets to Transcend pursuant to Section 6.3 of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and CORE, jointly and severally, hereby represent and warrant to
Seller and Transcend that:
SECTION 4.1 ORGANIZATION
Purchaser is, and on the Closing Date will be, a corporation duly
organized, validly existing and in good standing under the laws of or the state
of Delaware; and has, and on the Closing Date will have, the power and authority
to conduct all of the activities conducted by it and to own or lease all of the
assets owned or leased by it. Purchaser is qualified as a foreign corporation in
all states and jurisdictions in which such qualification is required, except
where the lack of such qualification would not materially and adversely affect
the ability to do business or
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financial condition of Purchaser.
A complete and correct copy of the Certificate of Incorporation and the
Bylaws of Purchaser have been made available to Seller and Transcend.
SECTION 4.2 AUTHORIZATION OF TRANSACTION
Purchaser has the power and authority to execute and deliver this
Agreement, to consummate the transactions hereby contemplated and to take all
other actions required to be taken by it pursuant to the provisions hereof, and
this Agreement is valid, binding and enforceable against Purchaser in accordance
with its terms.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions hereby contemplated will (a) contravene or conflict with the
Certificate of Incorporation or By-laws of Purchaser, (b) constitute any
violation or breach of any material provision of any material contract or other
instrument to which Purchaser is a party; (c) constitute any violation or breach
of any order, writ, judgment, injunction, decree, statute, rule or regulation,
(d) conflict with, or constitute a default under, or result in the termination
or cancellation of, or right to accelerate, any material agreement, contract or
other instrument binding upon Purchaser.
The execution, delivery and performance by Purchaser of this Agreement and
the consummation of the transactions by Purchaser require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority.
SECTION 4.3 BROKER
No agent or broker or other person acting pursuant to authority of
Purchaser is entitled to any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
SECTION 4.4 BOARD OF DIRECTORS APPROVAL
The Board of Directors of Purchaser has duly authorized the execution and
delivery and performance of this Agreement and the ancillary agreements by
Purchaser.
SECTION 4.5 GOVERNMENTAL LICENSES AND PERMITS; GOVERNMENT RELATIONS
Purchaser has been granted all certificates, licenses, permits, authorities
and franchises from any federal, state or municipal or other governmental
instrumentality, agency or commission or similar body which may be necessary to
carry on the Business lawfully.
All certificates, licenses, permits, authorities and franchises of the
Purchaser are validly held by Purchaser. Purchaser has complied with all
requirements in connection therewith and the same will not be subject to
suspension or revocation as a result of this Agreement or the
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consummation of the transactions contemplated hereby.
Neither the Purchaser nor any director, officer, agent, employee or other
person acting on behalf of the Purchaser or the Business has used any funds for
improper or unlawful contributions, payments, gifts or entertainment, or made
any improper or unlawful expenditures relating to political activity to domestic
or foreign government officials or others. Neither the Purchaser nor any
current director, officer, agent, employee or other person acting on behalf of
the Purchaser or the Business, has accepted or received any improper or unlawful
contributions, payments, gifts or expenditures. The Purchaser has at all times
complied, and is in compliance, in all material respects with the federal
Foreign Corrupt Practices Act and in all material respects with all foreign laws
and regulations relating to prevention of corrupt practices.
SECTION 4.6 LITIGATION; COMPLIANCE WITH LAWS
There are no actions, suits, or proceedings pending or threatened against
or affecting Purchaser or the property of Purchaser in any court or before any
federal, state, municipal or other governmental department, commission, board or
other instrumentality or before any arbitrators.
Purchaser has complied in all material respects with all applicable laws
including, without limitation, environmental laws (including applicable rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) and there are no pending or, to the best knowledge of
Purchaser, threatened governmental investigations involving Purchaser including
inquiries, citations, or complaints by any federal, state, local or foreign
government and agencies thereof. There are no outstanding orders, decrees or
stipulations to which Purchaser is a party affecting Purchaser, and Purchaser is
not in default with respect to any judgment, order, decree, award, rule or
regulation of any court of any such department, commission, board or other
instrumentality or arbitrators affecting Purchaser.
SECTION 4.7 DISCLOSURE
Neither this Agreement nor any statement, lists or certificate furnished or
to be furnished to Seller by or on behalf of Purchaser pursuant hereto or in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances on which they are made, not misleading.
SECTION 4.8 REPRESENTATIONS AND WARRANTIES AT CLOSING
On the Closing Date, all of the representations and warranties of Purchaser
contained in this Agreement will be true and correct in all material respects at
and as of the Closing Date with the same force and effect as though made at and
as of the Closing Date, except for changes contemplated or permitted by this
Agreement.
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SECTION 4.9 SURVIVAL OF REPRESENTATIONS
The representations and warranties of Purchaser contained in this Agreement
and any Ancillary Documents shall survive the Closing hereunder notwithstanding
any investigation which may be made by or on behalf of Seller or Transcend for a
period ending the earlier of (i) three years from the Closing Date, or (ii) the
date CORE delivers the Purchase Price Shares to Transcend, or (iii) the date
Purchaser retransfers assets to Transcend pursuant to Section 6.3 of this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS OF SELLER AND TRANSCEND
Seller and Transcend each, jointly and severally, covenants and agrees as
follows:
SECTION 5.1 OPERATION OF BUSINESS
Seller will, subsequent to the date hereof and prior to the Closing Date:
(a) continue in all material respects to conduct its business, maintain
its assets, carry on its business practices and keep its books of
account, records and files in the ordinary course;
(b) use commercially reasonable efforts to preserve the good will of its
suppliers and customers and others having business relations with it;
(c) use commercially reasonable efforts to continue the employment of key
personnel (except as otherwise permitted by Purchaser in writing);
(d) pay and perform all of its debts, obligations and liabilities as and
when due under all leases, agreements, contracts and other commitments
to which it is a party in accordance with the terms and provisions
thereof and in the ordinary course of business; and
(e) comply in all material respects with all laws and/or other
governmental regulations that may be applicable to its business.
SECTION 5.2 NEGATIVE COVENANTS
Seller will not, subsequent to the date hereof and prior to the Closing
Date, without the express written consent of Purchaser,
(a) enter into any leases, agreements, contracts or other commitments,
whether written or oral, other than commitments for the purchase of
inventory or supplies or for the furnishing of services, in each case
entered into in the ordinary course of business and not of unusual
size or duration;
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(b) make any change in its corporate charter, bylaws, or other
organizational agreements and documents;
(c) sell, assign, lease or otherwise transfer or dispose of or encumber
any property (real or personal) or equipment, except for replacement
of any worn-out equipment in the ordinary course of business;
(d) merge or consolidate with or into any other corporation or entity;
(e) grant any options, warrants or other rights to purchase or obtain any
of its capital stock, or equity interests, or issue, sell or otherwise
dispose of any of its capital stock, or equity interests (except upon
the conversion or exercise of options, warrants, and other rights
currently outstanding);
(f) declare, set aside or pay any dividend or distribution with respect to
its capital stock (whether in cash or in kind), or redeem, repurchase,
or otherwise acquire any of its capital stock, or equity interests;
(g) issue any note, bond, or other debt security or create, incur, assume,
or guarantee any indebtedness for borrowed money or capitalized lease
obligation outside the ordinary course of business;
(h) make any capital investment in, make any loan to, or acquire the
securities or assets of any other person or entity;
(i) make any change in employment terms for any of its directors,
officers, partners and employees;
(j) conduct its business or take any other action other than in the
ordinary course of business;
(k) amend or change the period of exercisability or accelerate the
exercisability of any outstanding options or warrants to acquire
shares of its capital stock, or equity interests; or
(l) agree or commit to any of the foregoing.
SECTION 5.3 NO BREACHES OF REPRESENTATIONS AND WARRANTIES
Seller and Transcend will not take any action which would cause or
constitute a breach, or would, if it had been taken immediately prior to the
date hereof, have caused or constituted a breach, of any of the representations
and warranties of Seller or Transcend set forth herein. Seller and Transcend
will, in the event of, and promptly after the occurrence of or the impending or
threatened occurrence of, any event which would cause or constitute a breach or
would, if it had occurred immediately prior to the date hereof, have caused or
constituted a breach of any of
27
the representations and warranties of Seller or Transcend set forth herein, give
detailed notice to CORE; and Seller and Transcend will use their best efforts to
prevent or promptly to remedy such breach.
SECTION 5.4 FORM 8-K
Seller and Transcend each agree to provide information to CORE and
otherwise assist CORE with respect to disclosures concerning Seller to be
included in the Form 8-K to be filed by CORE with the Securities and Exchange
Commission following the Closing of the transaction described in this Agreement.
SECTION 5.5 ACCESS TO INFORMATION
Seller and Transcend will give to CORE and its representatives, from and
after the date of execution of this Agreement, full access during normal
business hours to all of the properties, books, contracts, documents and records
of Seller and the Business, and will furnish to CORE and its representatives all
additional financial statements, all information with respect to its business
affairs, and copies of all relevant contracts and other documents, which CORE
may reasonably request.
SECTION 5.6 RELEASES AND ACKNOWLEDGMENT OF EMPLOYEES
Seller will deliver or cause to be delivered to Purchaser at the Closing
(i) the certificate of each Continuing Employee (as defined in Section 6.1) that
he or she has no claims of any kind against Seller or Transcend, except for his
or her unpaid salary with respect to the month in which the Closing occurs
accrued to the Closing, and (ii) CORE shall have received from each Continuing
Employee and key consultant of Seller a binding agreement, in form acceptable to
CORE, which sets forth an acknowledgement of CORE's policies concerning non-
disclosure and an acknowledgment of CORE's ownership of the intellectual
property of Seller being transferred to CORE.
SECTION 5.7 MAINTAIN BUSINESS ORGANIZATION
Seller and Transcend will use their best efforts until the Closing to
preserve the Business's organization intact, and to preserve the relationships
of Seller with employees, suppliers, customers, landlords, and others, all to
the end that the going business of Seller will be unimpaired at the Time of
Closing.
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SECTION 5.8 FINANCIAL STATEMENT ITEMS
(a) Minimum Cash and Accounts Receivable. For the purposes of this
-------------------------------------
Agreement "Cash and A/R Account" shall consist of cash, cash equivalents and
accounts receivable (net of reserves) of Seller transferred to Purchaser at
Closing. Transcend and Seller agree that the amount of the Cash and A/R Account
transferred to Purchaser at Closing shall be an amount at least equal to
$220,000.
(b) Maximum Assumed Liabilities. Transcend and Seller agree that the
----------------------------
amount of Assumed Liabilities transferred to Purchaser at Closing shall be less
than $68,760.
SECTION 5.9 MAINTAIN INSURANCE AND PROPERTIES
Seller and Transcend will use their best efforts to cause the existing
liability and property damage, fire, casualty and other insurance of Seller
described in Schedule 2.9 to be continued in force up to and through the Closing
------------
Date.
Seller will use all commercially reasonable efforts to maintain its
properties, equipment and operations in good repair and operating condition
through the Time of Closing Date.
SECTION 5.10 EXCLUSIVITY
Until the earlier to occur of the Closing of this Agreement or the
termination of this Agreement pursuant to Article X hereof, neither Transcend
nor Seller nor any of their respective officers, directors, employees, partners,
agents, affiliates or representatives will solicit, initiate, or encourage the
submission of any proposal or offer relating to the acquisition of any capital
stock, equity interest, partnership interest or other voting securities, or any
substantial portion of the assets of Seller or the Business. Additionally,
Seller and Transcend will notify CORE immediately if any person or entity
contacts Seller or Transcend with any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
SECTION 5.11 POST-CLOSING COOPERATION
To the extent reasonably requested by Purchaser and at Purchaser's expense,
Seller and Transcend will cooperate and use reasonable efforts to have the
present officers, directors and employees of the Seller and Transcend cooperate
with Purchaser on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
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SECTION 5.12 MONTHLY FINANCIAL STATEMENTS; AUDITED FINANCIAL STATEMENTS
(a) Monthly Financial Statements. On the 10th day of each month prior to
----------------------------
Closing, Seller shall deliver to CORE a balance sheet and related statements of
income and retained earnings and cash flows for the interim period ending at the
end of the prior month, which financial statements shall not reflect any
material adverse change in the financial condition or liabilities of Seller.
Such financial statements, when delivered to CORE, shall be in accordance with
the books and records of Seller, will be complete and correct in all material
respects and fairly present the financial position of Seller as of dates therein
indicated and the results of the operations of Seller for the periods so ended
all in conformity with GAAP (subject to normal year end adjustments and the
absence of footnotes).
(b) Audited Financial Statements. At least 3 days prior to the Closing,
----------------------------
Seller shall deliver to CORE financial statements of Seller audited by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP for the one year ended December 31, 1997 and audited statements of
operations and cash flows for the same years and any other period deemed
necessary or appropriate by CORE in connection with CORE's disclosure
obligations under the federal securities laws (the "Audited Financial
Statements"). Such Audited Financial Statements shall be substantially similar
to the unaudited financial statements of Seller set forth in Schedule 2.4 hereof
------------
for the same periods and include Seller's independent auditors' opinion in a
form reasonably satisfactory to CORE. Without limiting the generality of the
foregoing, the Audited Financial Statements shall not be substantially similar
to the unaudited financial statements of Seller if for any period revenues or
net income vary by more than 5%.
SECTION 5.13 BULK SALES LAW
Seller and Transcend shall, jointly and severally, indemnify and hold
Purchaser and CORE harmless from any loss, cost or liability (including
reasonable attorneys' fees) incurred by Purchaser or CORE as a result of non-
compliance with any applicable bulk sales law, fraudulent conveyance law or
similar law with respect to the transactions contemplated herein.
SECTION 5.14 SHORT-TERM LICENSE OF TRADENAMES; USE OF MARKETING MATERIALS
Transcend, Seller and Purchaser shall at closing enter into a Tradename
License Agreement in the form attached hereto as Exhibit F pursuant to which
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Transcend and Seller shall (i) license to Purchaser, for one year, the right to
use the tradename "Transcend Case Management"; and (ii) permit Purchaser to use
all tradenames and trademarks on any marketing or related material delivered to
Purchaser as a Subject Asset.
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SECTION 5.15 NON-COMPETITION; NON-SOLICITATION
Transcend and Seller each hereby agrees that, from and after the Closing
Date through December 31, 2002 neither of them shall (a) serve, directly or
indirectly, as an operator, owner, partner, consultant, officer, director, or
employee of any firm, entity or business or corporation engaged in the business
presently being conducted by Seller (or any business related thereto) within the
United States; (b) solicit or attempt to solicit, or accept business from, any
entity which is a client or customer of CORE, Purchaser, Seller (including
CORE's subsidiaries) or which at any time during the twelve month period prior
to the Closing Date, was a client or customer of any of the Business, for the
purpose of doing business with such client or customer in competition with
Purchaser or CORE (including CORE's subsidiaries) (for the purpose of this
covenant, the clients and customers of Purchaser shall include those entities
with which Seller had held discussions or negotiations concerning the Business
within the twelve month period prior to the Closing Date), or (c) solicit,
attempt to hire, or hire any employee or consultant of Purchaser (including
Continuing Employees) or CORE (including CORE's subsidiaries), or assist in such
solicitation or hiring by any other person or entity, or encourage any employee
or consultant or Purchaser (including Continuing Employees) or CORE (including
CORE's subsidiaries) to terminate his or her relationship with Purchaser or
CORE.
It is agreed that the remedy at law for any breach of the foregoing shall
be inadequate and that CORE and Purchaser shall be entitled to any other remedy
permitted by law. In the event that this Section shall be determined by
arbitrators or by any court of competent jurisdiction to be unenforceable by
reason of its extending for too great a period of time or over too large a
geographic area or over too great a range of activities, it shall be interpreted
to extend only over the maximum period of time, geographic area or range of
activities as to which it may be enforceable. Nothing herein contained shall
prevent Transcend or Seller from holding or making an investment in securities
listed on a national securities exchange or sold in the over-the-counter market,
provided such investments do not exceed in the aggregate five percent (5%) of
the issued and outstanding capital stock of a corporation which is a competitor
within the meaning of this Section.
SECTION 5.16 ACCOUNTS RECEIVABLE
(a) Transfer and Guaranty of Accounts Receivable. Seller and Transcend
---------------------------------------------
shall guarantee that at Closing the accounts receivable of Seller transferred to
Purchaser shall in no event be less than $280,000 (the "Guaranteed Receivables
Amount") and that the Guaranteed Receivables Amount will be collected during the
Collection Period. In the event the accounts receivable collected during the
Collection Period are less than 90% of the Guaranteed Receivables Amount, then
either (i) the Net Annualized Revenue set forth in Section 1.3(b) shall be
reduced by an amount equal to the difference between the Guaranteed Receivables
Amount and the amount of the accounts receivable actually collected (the
"Shortfall") or (ii) Seller and Transcend shall pay to Purchaser the Shortfall
amount in cash.
(b) Collection of Accounts Receivable. Purchaser agrees to use reasonable
----------------------------------
collection efforts with respect to such Accounts Receivable (except that the
Purchaser shall not be obligated to institute litigation) through December 31,
1998 (the "Collection Period").
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SECTION 5.17 BEST EFFORTS
Seller and Transcend each will use their reasonable efforts to effectuate
the transactions hereby contemplated, to perform all the covenants and
agreements contained herein and to fulfill the conditions of CORE's and
Purchaser's obligations under this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS OF CORE AND PURCHASER
SECTION 6.1 EMPLOYMENT ARRANGEMENTS AND EMPLOYEE BENEFITS
(a) Purchaser intends to offer employment, commencing as of the Closing
Date, at substantially the same wages, salary, benefits, hours and conditions in
effect immediately prior to the Closing, to all employees listed on Schedule
--------
2.12 with such changes in the ordinary course of business of which Seller
----
notifies Purchaser (other than those employees listed on Schedule 6.1 (the
------------
"Excluded Employees") including Purchaser's revisions to Schedule 6.1 at or
------------
prior to Closing); provided, however, Purchaser reserves the right to make
changes to such wages, salary, benefits, hours and conditions. Those employees
who shall accept said offer of employment with Purchaser and who shall actually
commence active employment with Purchaser shall collectively be referred to as
the "Continuing Employees."
Notwithstanding the foregoing, and without breaching the foregoing,
Purchaser reserves the right to review staffing levels, wages, benefits and
conditions of employment after the Closing, and to make appropriate changes, if
in its judgment such changes are necessary in light of then existing business
conditions.
(b) Unless expressly listed as an Assumed Liability, Seller and Transcend
shall retain responsibility for any hospital, medical, dental, life insurance,
disability, workers' compensation and other employee welfare benefit plan
premiums due and payable for coverage prior to the Closing Date. Hospital,
medical, dental, life insurance, disability, workers' compensation and other
employee welfare benefit plans listed on Schedule 2.12 for which premiums will
-------------
be accrued and payable for coverage of the Continuing Employees on or after the
Closing Date shall be the responsibility of Purchaser. Unless expressly listed
as an Assumed Liability on Schedule 1.2, Seller shall remain responsible for
------------
paying all unpaid wages, salaries, vacation, sick-leave or other time-off pay
accrued by all employees through the Closing Date.
(c) Unless expressly listed as an Assumed Liability on Schedule 1.2,
------------
Seller shall pay to all Continuing Employees all benefits accrued to such
employees prior to the Closing Date (including, without limitation, vacation pay
and time-off pay) as soon as practicable after Closing, but in no event more
than 14 days after Closing.
(d) No provision of this Section 6.1 shall create any third-party-
beneficiary rights in any employee or former employee (including any beneficiary
thereof) of any Seller or Purchaser.
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SECTION 6.2 REGISTRATION RIGHTS AGREEMENT; CURRENT PUBLIC INFORMATION.
At the Closing, CORE and Transcend will enter into a registration rights
agreement (the "Registration Rights Agreement") in the form attached hereto as
-----------------------------
Exhibit E granting to Transcend so-called "piggy-back" registration rights with
---------
respect to the Purchase Price Shares subject to the terms and conditions set
forth therein.
CORE will file all reports required to be filed by it under the Securities
Act and the Securities Exchange Act and the rules and regulations adopted by the
Securities and Exchange Commission thereunder, and will take such further action
as Transcend may reasonably request, all to the extent required to enable
Transcend to sell the Purchase Price Shares of CORE stock issued and delivered
in connection with this Agreement pursuant to Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission.
SECTION 6.3 OPERATION OF BUSINESS OF PURCHASER
Purchaser will, from the Closing Date until the date upon which the value
of the Purchase Price Shares shall be determined in accordance with this
Agreement:
(a) in all material respects, conduct its business, maintain its assets,
carry on its business practices and keep its books of account, records and
files in the ordinary course, including, without limitation, the following:
(i) cause CRS to have not Purchaser has at least in the Business to
require Purchaser to more than one (1) sales five (5) sales (provided,
however, maintain at least five (5) representative unless
representatives employed that this covenant sales representatives);
exclusively shall not be deemed
(ii) acquire and maintain for the Business; such insurance as may be
commercially practicable
(iii) establish and maintain Business; commercially practicable
operating hours for the
(iv) use, operate, maintain Business in a normal and repair all of
the business manner; and property and equipment of the
(v) preserve, account and Business as a separate maintain adequate
books revenue center within and records for the Purchaser;
(b) use commercially reasonable efforts to preserve the good will of its
suppliers and customers and others having business relations with it;
(c) pay and perform all of its debts, obligations and liabilities as and
when due under
33
all leases, agreements, contracts and other commitments to which it is a party
in accordance with the terms and conditions thereof in the ordinary course of
business;
(d) provide unaudited monthly income statements to Transcend within a
reasonable period of time after the end of each month; and
(e) comply in all material respects with all laws and/or other
governmental regulations that may be applicable to its business.
The foregoing obligations of Purchaser shall be limited to those times when
Purchaser is operating the Business at a profit.
Notwithstanding the foregoing or any other term or condition in this
Agreement or any Ancillary Agreement or Document, neither CORE nor Purchaser are
obligated to continue the operation of the Business if the Business is
generating a loss (i) in excess of $60,000 in any three month period or (ii) in
excess of $100,000 in any period less than three months as determined by
Purchaser or CORE. In determining losses for this Section 6.3, CORE and
Purchaser shall consider the business net income before taxes calculated in
accordance with generally accepted accounting principles ("GAAP") adjusted to
reflect reasonable corporate allocations (equal to 2% of revenues) and exclusive
of one-time, non-recurring extraordinary expenses.
In the event that Purchaser elects to discontinue the business due to
losses as described above, Purchaser shall provide Transcend 10 working days
advance written notice of the scheduled date of such discontinuance and
Transcend shall have the option to purchase from Purchaser all Subject Assets
still owned by Purchaser and other assets of Purchaser used exclusively by
Purchaser in the Business. If Transcend elects in writing to purchase such
assets of Purchaser by notifying Purchaser in writing of such election within
such 10 business day period: (i) the closing of the purchase and sale shall
occur as soon as practicable after such notice but in no event later than 30
days after Purchaser's scheduled date of discontinuance; (ii) such assets shall
be sold "where is" and "as is" without any representation or warranties by
Purchaser other than representations and warranties concerning Purchaser's title
to the assets being sold; (iii) the book value of the assets transferred to
Transcend shall equal $220,000 (a) minus the amount of all net losses incurred
by Purchaser between the Closing Date of this Agreement and the subsequent
retransfer of such assets to Transcend, if any, or (b) plus 50% of the amount of
all net income earned by Purchaser between the Closing Date of this Agreement
and the subsequent retransfer of such assets to Transcend, if any, (c) minus
Purchaser's current liabilities relating to the Business not assumed by
Transcend in connection with the acquisition of assets; and (v) Purchaser shall
continue to operate the Business for up to said 30 day period in accordance with
this Section 6.3, and Transcend shall promptly reimburse Purchaser for any
losses incurred during such period if for any reason the transfer of assets and
liabilities to Transcend does not occur.
SECTION 6.4 FORM 8-K
CORE and Purchaser each agree to provide information to Transcend and
otherwise assist
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Transcend with respect to disclosures concerning Seller to be included in the
Form 8-K to be filed by Transcend with the Securities and Exchange Commission
following the Closing of the transaction described in this Agreement.
SECTION 6.5 NO BREACHES OF REPRESENTATIONS AND WARRANTIES
Between the date hereof and Closing, neither CORE nor Purchaser will take
any action which would cause or constitute a breach, or would, if it had been
taken immediately prior to the date hereof, have caused or constituted a breach,
of any of the representations and warranties of CORE and Purchaser set forth
herein. CORE or Purchaser, as appropriate, will, in the event of, and promptly
after the occurrence of or the impending or threatened occurrence of, any event
which would cause or constitute a breach or would, if it had occurred
immediately prior to the date hereof, have caused or constituted a breach of any
of the representations and warranties of CORE or Purchaser set forth herein,
give detailed notice to Seller; and CORE or Purchaser, as appropriate, will use
their reasonable best efforts to prevent or promptly to remedy such breach.
SECTION 6.6 BEST EFFORTS
CORE and Purchaser will use their reasonable best efforts to effectuate the
transactions hereby contemplated, to perform all the covenants and agreements
contained herein, and to fulfill the conditions of CORE's and Purchaser's
obligations under this Agreement.
ARTICLE VII
INDEMNITY BY THE SELLER AND TRANSCEND
SECTION 7.1 INDEMNIFICATION
Seller and Transcend, jointly and severally, hereby agree to indemnify,
defend, save and hold CORE and Purchaser harmless from and against, and will
reimburse CORE and its subsidiaries and Purchaser, and any person serving as
officers, directors, agents, counsel or employees thereof, as the case may be,
for all losses, liabilities, costs, damages, assessments, taxes, judgments,
deficiencies, and expenses of any nature whatsoever (including reasonable
attorneys' fees and other costs and expenses incident to any suit, action or
proceeding) incurred by CORE or Purchaser which shall arise out of or result
from or constitute any breach of any representation, warranty, covenant, or
agreement of Seller or Transcend in this Agreement, or in any certificate,
schedule or exhibit delivered pursuant hereto, and for any undisclosed
liabilities of Seller or Transcend incurred prior to the Closing Date. Seller
and Transcend hereby release each other from any obligation of contribution,
indemnity or the like relating to any claims under this Article.
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Subject to the provisions of Section 7.6 hereof, the amount of the
indemnity to which CORE and Purchaser shall be entitled hereunder shall be
measured by the sum of (a) the amount of cash required to restore the
circumstances or condition which constitutes the breach of any such
representation, warranty, covenant or agreement or non-fulfillment of any such
obligation to what it would have been on the Closing Date had such breach or
non-fulfillment not occurred, and (b) all reasonable attorneys' fees and other
costs and expenses incident to any suit, action or proceeding relating thereto.
SECTION 7.2 DETERMINATION OF LIABILITY
In the event that at any time or from time to time, CORE shall determine
that it or Purchaser is entitled to indemnification under Section 7.1 hereof, it
shall give written notice to the Seller and Transcend specifying the cause, the
amount of such claim and the 20 day objection period described in the next
sentence. Seller or Transcend may object to the claim by delivering written
notice thereof to CORE within twenty (20) days after receipt of CORE's written
notice. Failure on the part of Seller or Transcend so to object shall constitute
an acceptance of CORE's claim and if the amount to which CORE or Purchaser is
entitled is not paid by Seller or Transcend within ten (10) days of such
determination, then CORE shall have the right to satisfy all or part of such
indemnification obligations by reducing the Net Annualized Revenue (as
calculated in Section 1.3(b)) by an amount equal to such indemnification claim.
In the event such claim exceeds the amount of the Purchase Price Shares, or
the Purchase Price Shares have previously been delivered, or the Purchase Price
Shares are otherwise insufficient to satisfy fully such claim, Transcend and
Seller shall be jointly and severally liable to CORE and Purchaser for payment
of such claim.
In the event that Seller or Transcend shall so object and CORE and Seller
or Transcend shall fail to reach an agreement as to the entitlement of CORE or
Purchaser to indemnification or the amount thereof within sixty (60) days after
the written notice by Seller or Transcend objecting to the claim, then so much
of the matter as may be in dispute shall be submitted to the American
Arbitration Association in Orange County, California for settlement in
accordance with its rules, and the decision as to the disputed matter rendered
by the arbitrator or arbitrators shall be binding on all parties to this
Agreement. CORE, Purchaser, Seller and Transcend shall act upon such award in
like manner as though it constituted an agreement reached between the parties.
CORE or Purchaser, on one hand, and Seller and Transcend on the other hand,
shall each bear fifty percent (50%) of the arbitrators' fees.
36
SECTION 7.3 DEFENSE OF CLAIMS
After receipt by CORE or Purchaser of notice of the existence of any claim
made or threatened by a third party, to which the indemnification obligations
hereunder apply, CORE shall give written notice thereof to Seller and Transcend,
but the omission to so notify Seller and Transcend will not relieve Seller and
Transcend from any liability except to the extent that Seller and Transcend
shall have been materially prejudiced as a result of the failure in giving such
notice. Such notice shall state the information then available regarding the
amount and nature of such claim and shall specify the provision or provisions of
this Agreement under which the liability or obligation is asserted. If within
twenty (20) days after receiving such notice, Seller or Transcend gives written
notice to CORE stating that it disputes and intends to defend against such claim
at Seller's or Transcend's own cost and expense (subject to the consent of CORE
which consent shall not be unreasonably withheld but which consent may be
conditional upon bonding or other evidence of ability to pay upon a judgment)
provided Seller's or Transcend's counsel in such defense is acceptable to CORE,
then CORE shall make no payment on such claim as long as Seller or Transcend is
conducting a good faith and diligent defense. Notwithstanding anything herein
to the contrary, CORE and Purchaser shall at all times have the right to
participate fully in such defense at CORE's and Purchaser's own expense directly
or through counsel; provided, however, if the named parties to the action
include both (i) either Seller or Transcend and (ii) Purchaser or CORE and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the expense of one separate
counsel for CORE or Purchaser shall be paid by Seller and Transcend. If no
timely notice of intent to dispute and defend is given by Seller or Transcend,
or if such diligent good faith defense is not being or ceases to be conducted,
after written notice to Transcend and Seller and the failure of Seller and
Transcend to initiate or conduct such a defense within twenty (20) days after
such notice, CORE, at the expense of Transcend and Seller, shall undertake the
defense of such claim, liability or expense, and shall have the right to
compromise or settle the same. If such claim, liability or expense is one that
by its nature cannot be defended solely by Transcend or Seller then CORE and
Purchaser shall make available all information and assistance that Transcend or
Seller may reasonably request and shall cooperate with Transcend or Seller in
such defense; provided, Transcend or Seller shall reimburse CORE and Purchaser
for their costs and expenses in providing such assistance.
SECTION 7.4 RECOURSE TO SELLER AND TRANSCEND
Any amounts offset against the Purchase Price Shares shall in no way limit
CORE's or Purchaser's rights in law or equity to recover from Transcend and
Seller in respect of any claims of CORE or Purchaser not fully satisfied by such
offsets.
SECTION 7.5 NOTIFICATION
To simplify notification and communications pursuant to this Article,
Seller hereby appoints Transcend to act as its agent and attorney-in-fact to
receive and deliver notices under this Article VII and to negotiate settlements
on its behalf. Accordingly, a notice by CORE or Purchaser to either Transcend or
to Seller shall be deemed to be a notice to each of Transcend and Seller.
Similarly, an instruction notice, waiver or objection from either Transcend or
Seller
37
shall be deemed to be an instruction, notice, waiver or objection from each of
Transcend and Seller.
SECTION 7.6 LIMITATION ON RIGHTS OF INDEMNIFICATION
No party shall have the right to indemnification under this Agreement VII
unless the aggregate amount of any and all such indemnification claims made by
such party under this Agreement exceeds $20,000.00 (the "Threshold") and then
the entire amount of such claim(s), shall be subject to indemnification,
provided, however, that the Threshold shall not apply to claims arising out of
-------- -------
Guaranteed Accounts Receivable, Assumed Liabilities, fraud or the intentional
acts of Seller or Transcend.
The aggregate liability of the Seller and Transcend, pursuant to Article
VII of this Agreement shall not exceed an amount equal to the value of the
Purchase Price Shares.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER AND TRANSCEND
The obligations of Seller and Transcend to consummate the transactions
contemplated by this Agreement on the terms and conditions contained herein
shall be subject to the fulfillment at or prior to the Closing Date of each of
the following conditions, any or all of which may be waived in whole or in part
by Transcend or Seller but only in a writing signed by Seller and Transcend:
SECTION 8.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of CORE and Purchaser contained in this
Agreement expressly made as of the Closing Date shall be true at and as of the
Closing Date in all material respects, and all of the other representations and
warranties contained shall be true in all material respects at and as of the
Closing Date as though such representations and warranties were made at and as
of such time.
SECTION 8.2 COMPLIANCE BY CORE AND PURCHASER
CORE and Purchaser shall have performed and complied with all agreements
and conditions on its part required by this Agreement to be performed or
complied with prior to or at the Closing Date.
SECTION 8.3 CLOSING CERTIFICATES
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Seller shall have received certificates of CORE and Purchaser executed by
the President and Chief Financial Officer of each corporation dated the Closing
Date, certifying to the fulfillment of the conditions specified in Sections 8.1
and 8.2 of this Article VIII and such other evidence with respect to the
fulfillment of any said conditions as Seller may reasonably request upon
reasonable prior notice.
SECTION 8.4 LEGAL OPINION
Seller shall have received an opinion of Rich, May, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
P.C., counsel for CORE and Purchaser, dated the Closing Date, reasonably
satisfactory in form and substance to counsel for Seller substantially to the
effect as set forth on Exhibit D.
---------
Such opinion shall cover such related matters as Seller may reasonably
require, and may contain customary assumptions and exceptions.
SECTION 8.5 CERTIFIED RESOLUTIONS
CORE and Purchaser shall have furnished to Seller certified resolutions and
resolutions of their respective Boards of Directors duly and legally authorizing
the execution, performance of this Agreement by CORE and Purchaser, and such
other documentation as Seller shall reasonably request.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF CORE AND PURCHASER
The obligations of CORE and Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date of each of the following conditions, any or all of which may
be waived in whole or in part by CORE and Purchaser but only in a writing signed
by CORE and Purchaser:
SECTION 9.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of Seller and Transcend contained in
this Agreement expressly made as of the Closing Date, and all of the other
representations and warranties of Seller and Transcend contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date.
SECTION 9.2 COMPLIANCE BY SELLER AND TRANSCEND
Seller and Transcend shall have performed and complied with all agreements,
covenants and conditions on their part required by this Agreement to be
performed or complied with prior to or at the Closing Date.
39
SECTION 9.3 CLOSING CERTIFICATE
CORE shall have received a certificate of Seller and Transcend executed by
the President and Chief Financial Officer of Seller and Transcend and dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Sections 9.1 and 9.2 of this Article IX; and such other evidence with respect to
the fulfillment of any said conditions as CORE may reasonably request upon
reasonable prior notice.
SECTION 9.4 LEGAL OPINION
CORE and Purchaser shall have received an opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLP, counsel for Seller and Transcend, dated the Closing Date,
reasonably satisfactory in form and substance to counsel for CORE, substantially
to the effect as set forth on Exhibit C.
---------
Such opinion shall cover such related matters, as CORE or Purchaser may
reasonably require, and may contain customary assumptions and exceptions.
SECTION 9.5 CERTIFIED RESOLUTIONS AND VOTES
Seller shall have furnished CORE with certified resolutions and votes of
its Board of Directors and stockholders duly and legally authorizing the
execution and performance of this Agreement, and such other documentation as
CORE shall reasonably request.
Transcend shall have furnished CORE with certified resolutions of its Board
of Directors duly and legally authorizing the execution and performance of this
Agreement, and such other documentation as CORE shall reasonably request.
SECTION 9.6 NO LITIGATION
Between the date of this Agreement and the Closing Date, no suit or action
or legal, administrative, arbitration or other proceeding shall have been
instituted, or threatened, against Seller or Transcend or which might adversely
affect the financial condition of Seller or the conduct of the Business.
SECTION 9.7 PRESERVATION OF BUSINESS
The going business of Seller and its business organization and personnel
shall have been substantially preserved intact and shall not have been
materially impaired. Between the date of this Agreement and the Closing Date,
the key employees of Seller shall have continued in the employ of Seller, Seller
shall not have discontinued any lines of business or changed in any material
respect the nature of its business from those existing on the date hereof. There
shall have been no material adverse change in Seller since December 31, 1997.
SECTION 9.8 RELATIONSHIPS WITH CUSTOMERS
40
The relations of Seller with its customers, suppliers, landlords and others
shall have been substantially preserved intact and not materially impaired.
SECTION 9.9 ADDITIONAL DOCUMENTATION; MONTHLY FINANCIAL STATEMENTS
Seller and Transcend shall have provided CORE with such additional
documentation as CORE shall reasonably request.
CORE shall have received the monthly financial statements and the Audited
Financial Statements of Seller as described in Section 5.12 hereof.
SECTION 9.10 CORPORATE AND OTHER RECORDS
There shall have been delivered to CORE the books and records of Seller as
described in Section 1.1(e) and (i).
SECTION 9.11 MAINTENANCE OF ASSETS
At the Closing, Seller shall have good and marketable title to all of the
Subject Assets, including personal property, real estate, intellectual property,
free and clear of all liens, mortgages, pledges and encumbrances. The
properties, machinery and equipment of Seller shall have been maintained in good
repair and operating condition, ordinary wear and tear excepted.
SECTION 9.12 RELEASES AND ACKNOWLEDGMENTS OF EMPLOYEES
CORE shall have received from all Continuing Employees the certificates and
acknowledgements described in Section 5.6, in substantially the forms set forth
in Exhibit H-1 and H-2 hereto.
-------------------
SECTION 9.13 CONSENT AND AMENDMENT TO EMPLOYMENT AGREEMENTS
Each of the persons listed on Schedule 9.13 shall have executed a Consent
-------------
and Amendment to Employment Agreement with Purchaser in substantially the form
annexed hereto as Exhibit G.
---------
SECTION 9.14 CONSENTS
Seller shall have delivered to CORE and Purchaser all consents of third
parties required by any and all agreements or documents to which any Seller is a
party or bound, in order to give effect to the transactions contemplated hereby.
Without limiting the generality of the foregoing, to the extent required or
requested by CORE and Purchaser, such consents shall include consents of (i) the
parties to the contracts and agreement listed on Schedule 2.10; (ii) the
-------------
employees or consultants with whom Seller has contracts or agreements; and (iii)
landlords of the Real Estate Leases. There shall have been delivered to CORE
all assignments, deeds, bills of sale, insurance policies, contracts, leases,
franchises, permits and all other documents pertaining to the Subject Assets.
41
SECTION 9.15 PROCEEDINGS
All corporate or other proceedings taken or required to be taken in
connection with the transactions contemplated hereby at or prior to the Closing
and all documents incident thereto shall be reasonably satisfactory in form and
substance to CORE and its counsel.
SECTION 9.16 FINANCIAL STATEMENT ITEMS; PURCHASE PRICE ADJUSTMENT
(a) The Business shall be operating at a profit as shown on the most
recent monthly financial statements of Purchaser delivered to CORE pursuant to
Section 5.12 hereof.
(b) On the Closing Date, the financial statement items set forth in
Section 5.8 shall have been maintained and satisfied.
(c) Within 90 days of the Closing Date or as soon thereafter as reasonably
practicable, Purchaser shall prepare and deliver to Transcend and Seller a
balance sheet for the Business as of the Closing Date (the "Closing Balance
Sheet"). The Closing Balance Sheet shall be prepared in accordance with GAAP.
If the Closing Balance Sheet indicates that the financial conditions set
forth in Section 5.8 were not satisfied at Closing, then Transcend and Seller
shall immediately, upon written notice from Purchaser, pay to Purchaser, in
cash, an amount equal to the deficiency in the Minimum Cash and A/R Account.
(d) In no event will any amount, if any, owed to Purchaser or CORE by
Seller or Transcend as a result of the Shortfall amount related to uncollected
accounts receivable described in Section 5.16, any indemnification claim
described in Article VII or any Purchase Price deduction described in this
Section 9.16 be double-counted in connection with such reduction, claim or
deduction.
SECTION 9.17 GOVERNMENTAL CONSENT AND APPROVALS; STATUTES, LICENSES, PERMITS,
ETC.
All statutory requirements for the valid consummation of the transaction
described in this Agreement shall have been complied with, including the receipt
of all required authorizations, consents and approvals of federal and state
governmental agencies. No statute, rule, regulations, executive order, decree,
injunction or restraining order shall have been enacted, promulgated or enforced
(and not repealed, superseded or otherwise made inapplicable) by any court or
governmental authority which prohibits the consummation of the transaction
described in this Agreement.
Purchaser shall have received or have been granted any and all necessary
certificates, licenses, permits authorities and franchises by the appropriate
local, state and federal government agencies in order for Purchaser to conduct
the Business (the "Permits and Licenses") Seller and Transcend shall cooperate
and employ their best effort to assist Purchaser in receiving the Permits and
Licenses.
42
Section 9.18 Due Diligence
CORE and Purchaser shall have completed its due diligence investigation of
Seller and the Business, including, without limitation, review of financial
statements, assets, liabilities, products, services, inventory, methods of
accounting, margins and financial and other business records and investigation
of Seller's customers and suppliers. In this connection, Seller and Transcend
agree to make necessary information available and to authorize reasonable visits
during normal business hours and upon advance written notice to Seller to
Seller's premises with such staff, consultants and experts as Purchaser deems
necessary or desirable. Purchaser and CORE agree to coordinate closely all such
activities with Seller and to conduct any such inquiries with appropriate
discretion and sensitivity to Seller's relationships with its employees,
customers and suppliers. Such due diligence shall include a valuation of all
the assets and goodwill of Seller and an allocation of the Purchase Price over
such Assets including goodwill. A satisfactory conclusion, in the opinion of
CORE (in its sole discretion), of this due diligence study (including accounting
treatment of the transaction by CORE) is a condition to CORE and Purchaser
consummating the transactions contemplated by this Agreement.
ARTICLE X
TERMINATION OR ABANDONMENT
SECTION 10.1 TERMINATION OR ABANDONMENT
This Agreement and the transactions contemplated herein may be terminated
and abandoned at any time prior to the Effective Date:
(a) by mutual consent of CORE, Purchaser, Transcend and Seller;
(b) by CORE if (i) any of the representations or warranties of Seller or
Transcend contained herein shall have been untrue or incorrect in any material
respect on the date hereof or (ii) Seller or Transcend shall be in material
breach of any of its covenants, agreements or obligations hereunder and such
breach shall continue uncured until the earlier of (x) the scheduled Closing
Date, or (y) the third day following the receipt by the breaching party of
notice thereof;
(c) by Transcend or Seller if (i) any of the representations or warranties
of CORE or Purchaser contained herein shall have been untrue or incorrect in any
material respect on the date hereof or (ii) CORE or Purchaser shall be in
material breach of any of its covenants, agreements or obligations hereunder and
such breach shall continue uncured until the earlier of (x) the scheduled
Closing Date, or (y) the third day following the receipt by the breaching party
of notice thereof;
(d) by either Transcend, Seller, Purchaser or CORE if, without fault of
such terminating party, the Closing has not become effective by April 1, 1998,
or such other date, if any, as Seller and CORE shall agree upon in writing;
43
(e) by CORE if the conditions set forth in Article IX hereof have not been
satisfied on or prior to the Closing Date;
(f) by Transcend or any Seller if the conditions set forth in Article VIII
hereof have not been satisfied on or prior to the Closing Date.
SECTION 10.2 EFFECT OF TERMINATION OR ABANDONMENT
In the event of the termination and abandonment of this Agreement pursuant
to Section 10.1, written notice thereof shall forthwith be given to the other
parties and this Agreement shall become void and have no effect without
liability of any party to any other party except as set forth below, except the
provisions of Section 11.10 (Expenses); and Section 11.6 (Confidentiality; Press
Releases and Public Announcements), shall survive.
The parties hereto acknowledge that the Closing hereunder is subject to
further due diligence and contingencies. Accordingly, the parties agree that no
fee, penalty or other damages shall be due or payable for termination of this
Agreement, with or without cause, by any party hereto.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1 CONFIDENTIALITY
CORE will use its reasonable best efforts to keep confidential any and all
information furnished to it by Seller or Transcend or its independent public
accountants in connection with the transactions contemplated by this Agreement,
and the business and financial review and investigation conducted by CORE,
except to the extent any such information may be generally available to the
public; provided, however, that (i) any disclosure of such information may be
made by CORE to the extent required by applicable law or regulation or judicial
or regulatory process, and (ii) such information may be used by CORE as evidence
in or in connection with any pending or threatened litigation relating to this
Agreement or any transaction contemplated hereby.
SECTION 11.2 CLOSING DOCUMENTS
The parties will make every good faith effort to reach agreement as to the
form of the documentation to be delivered in connection with the Closing
hereunder, except as provided in 9.18 concerning CORE and Purchaser's acceptance
and review of due diligence matters which remain in CORE's and Purchaser's sole
discretion.
44
SECTION 11.3 NO THIRD PARTY BENEFICIARIES
This Agreement shall not confer any rights or remedies upon any person or
entity other than the parties hereto.
SECTION 11.4 WAIVERS; BEST KNOWLEDGE
Seller, Transcend, CORE or Purchaser may extend the time for or waive the
performance of any of the obligations of the other, waive any inaccuracies in
the representations or warranties of the other, or waive compliance by the other
with any of the covenants or conditions contained in this Agreement. Any such
extension or waiver shall be in writing and signed by a duly authorized officer
of the extending or waiving party.
SECTION 11.5 NOTICES
Except as otherwise provided herein, whenever it is provided in this
Agreement that any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon any of the parties
by another, or whenever any of the parties desires to give or serve upon another
any communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be (a) in
writing and shall be deemed to be given (i) when delivered in person, (ii) on
the third business day after deposit in a regularly maintained receptacle of the
United States mail as registered or certified mail, return receipt requested,
postage prepaid, (iii) one business day after deposit with a recognized national
private courier service, or (iv) on the day on which the party to whom such
notice is addressed refuses delivery by mail or by private courier service, and
(b) addressed as follows:
if to CORE or
Purchaser to: CORE, INC.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇. - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Executive Vice President and Chief
Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Rich, May, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
45
if to Seller or
Transcend to:
Transcend Services, Inc.
Transcend Case Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Executive Vice President and Chief
Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇ - ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as may be designated in writing by either party from
time to time in accordance herewith.
To simplify notices and communications hereunder, Transcend and Seller
agree that notices or communications addressed, sent to or received by Transcend
or Seller shall be deemed to be addressed, sent or received by Transcend and
Seller.
SECTION 11.6 CONFIDENTIALITY; PRESS RELEASES AND PUBLIC ANNOUNCEMENTS
All parties hereto acknowledge that CORE and Transcend are publicly-traded
corporations and accordingly, disclosure of information and news concerning CORE
and Transcend must be effected in a systematic, controlled manner. Accordingly,
all parties hereto shall keep confidential and not disclose to any person or
entity (except for their respective tax, accounting and legal advisors and any
employee on a "need to know" basis and then only when the confidentiality and
non-disclosure obligations have been fully explained and accepted by such
persons) any information about this Agreement, the proposed transaction or any
related matter, provided, however, that (i) any disclosure of such information
may be made to the extent required by applicable law or regulation or judicial
or regulatory process, and (ii) such information may be used as evidence in or
in connection with any pending or threatened litigation relating to this
Agreement or any transaction contemplated hereby.
Without limiting the generality of the foregoing, no party hereto shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of both CORE and
Transcend; provided, however, that CORE and Transcend may make any public
disclosure it believes in good faith is required by or prudent
46
under applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case CORE and Transcend will consult the
other prior to making the disclosure).
SECTION 11.7 SUCCESSORS, ASSIGNS;
This Agreement may not be transferred, assigned or hypothecated by any
party hereto other than by operation of law or with the prior written consent of
the other parties. All covenants and agreements contained in this Agreement by
or on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors, heirs, personal representatives and permitted assigns
of the parties hereto.
SECTION 11.8 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
SECTION 11.9 GOVERNING LAW; AMENDMENTS
This Agreement shall be governed by and construed in accordance with the
laws of Delaware applicable to contracts made and to be performed therein and
cannot be changed, amended or terminated orally, but only in writing duly signed
on behalf of all parties hereto.
SECTION 11.10 EXPENSES
Except as provided otherwise herein, the parties shall bear their own
expenses with respect to the transactions contemplated by this Agreement.
SECTION 11.11 HEADINGS AND CAPTIONS
The section headings and captions contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.12 RESTRICTIONS ON TRANSFERABILITY OF THE PURCHASE PRICE SHARES.
The Purchase Price Shares of CORE stock to be issued and delivered in
connection with the transactions contemplated hereby will not have been
registered under the Securities Act or under the securities laws of any state.
Accordingly, those Purchase Price Shares of CORE stock (together with any other
shares received pursuant to conversions, exchanges, stock splits, stock
dividends or other reclassification or changes thereof, or consolidations or
reorganizations of CORE) will not be transferable except pursuant to compliance
with or exemption from federal and state securities laws.
Each certificate representing Purchase Price Shares of CORE issued to
Transcend hereunder shall bear a legend in substantially the following form:
47
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR UNDER THE SECURITIES LAWS
OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
HYPOTHECATED OR DISTRIBUTED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE ACT, OR (B) PURSUANT TO A VALID
EXEMPTION FROM SUCH REGISTRATION UNDER THE ACT AND UNDER THE SECURITIES LAW OF
ANY STATE AND UPON RECEIPT BY CORE INC. OF AN OPINION OF COUNSEL SATISFACTORY IN
FORM AND SUBSTANCE TO IT THAT ANY SUCH SALE IS IN COMPLIANCE WITH, OR NOT
SUBJECT TO, THE ACT AND STATE SECURITIES LAWS."
SECTION 11.13 SEVERABILITY
Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity of
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
SECTION 11.14 INCORPORATION OF SCHEDULES AND EXHIBITS
The Schedules and Exhibits identified in this Agreement are incorporated
herein by reference and made a part hereof.
SECTION 11.15 ENTIRE AGREEMENT
This Agreement (including the documents referred to herein) constitutes the
entire agreement among the parties and supersedes any prior understandings,
agreements, or representations by or among the parties, written or oral, to the
extent they have related in any way to the subject matter hereof. Each of the
parties hereto acknowledges that they have participated in the drafting of this
Agreement, and agrees that no provision of this Agreement shall be construed for
or against any party solely on the basis of its contribution, or lack of
contribution, to the drafting of such provision.
SECTION 11.16 ARBITRATION
Except for injunctive relief or other equitable remedies described in
Section 5.15, any dispute arising out of or related to this Agreement, or the
breach thereof, that the parties are unable to resolve shall be submitted to
arbitration in Orange County, California (or another location if mutually
unanimously agreed to by the parties) before a single arbitrator in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The decision of the arbitrator shall be rendered in writing and shall state the
reasons on which it is based and shall bear the signature of the arbitrator. The
decision of the arbitrator shall be final and binding upon the parties and
judgment on the award may be entered in any court having jurisdiction thereof.
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In connection with such arbitration, the arbitrator may, but it is not
required, to award the prevailing party or parties all or a portion of the
costs, including reasonable legal and arbitration fees and other damages,
associated with efforts to enforce this Agreement or recover damages for
violation or breach of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CORE, INC.
("CORE")
Attest:
By:__________________________ By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Assistant Clerk Executive Vice President and Chief
Financial Officer
Attest: TCM SERVICES, INC
("Purchaser")
By:__________________________ By:_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Assistant Secretary Treasurer
Attest: TRANSCEND CASE MANAGEMENT, INC.
("Seller")
By:__________________________ By:_____________________________________
Name:________________________ Name:___________________________________
Title: ______________________ Title: _________________________________
Attest: TRANSCEND SERVICES, INC.
("Transcend")
By:__________________________
Name:________________________
Title:_______________________ By: ___________________________________
Name: _________________________________
Title: _________________________________
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LIST OF EXHIBITS
----------------
Exhibit Description
------- -----------
A Form of ▇▇▇▇ of Sale
B Form of Contract Assignment
C Form of Legal Opinion of [Seller counsel]
D Form of Legal Opinion of Rich, May, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
E Registration Rights Agreement
F Trademark License Agreement
H-1 Certificate of Continuing Employees re: claims
H-2 Acknowledgment of CORE's Policies
I Form of Consent and Amendment of Employment Agreement for Certain
Employees
LIST OF SCHEDULES
-----------------
Schedule Description
-------- -----------
1.1(x) Excluded Assets
1.2 Assumed Liabilities
2.3 Capitalization of Seller
2.4 Financial Statements
2.5 Temporary Encumbrances (Liens, mortgages, pledges)
2.6 Machinery, equipment, fixtures, etc.
2.7 Proprietary Rights
2.8 Real Property
2.9 Insurance
2.10 Contracts
2.12 Employees and Employee Plans
2.14 Certificates, Permits, Licenses
2.15 Liabilities other than listed on Balance Sheet
2.17 Litigation; Compliance with Laws
2.20 Service Warranties
2.21 Events Subsequent to Balance Sheet Date
2.23 Officers and Directors of Seller
2.25 Trade Names, Addresses of Seller and location of Subject Assets;
2.26 Transactions with Affiliated Parties
6.1 * Excluded Employees
9.13 * Persons to enter into Consent and Amendment of Employment Agreement
__________
*to be prepared by Purchaser
51