Document:

Amendment to Option Agreement

 Exhibit 10.11 
 FIRST AMENDMENT TO OPTION AGREEMENT TO PURCHASE STOCK 
 THIS FIRST AMENDMENT TO OPTION AGREEMENT TO
PURCHASE STOCK (this “Amendment”) is made and entered into as of December 21, 2005, by and between TRANSCEND SERVICES, INC., a Delaware corporation (the “Company”), and SUSAN McGROGAN, an individual resident of
the State of Florida (“McGrogan”). 
 RECITALS: 
 WHEREAS, the Company and McGrogan have previously entered into that certain Option Agreement to Purchase Stock dated as of August 15, 2005 (the
“Option Agreement”); and 
 WHEREAS, the parties hereto wish to amend the terms of the Option Agreement as more fully set
forth below. 
 NOW, THEREFORE, for and in consideration of the premises and agreements contained herein, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 
 1.
Definitions. Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Option Agreement. 
 2. Article I of the Option Agreement is hereby amended by deleting such article in its entirety and replacing such article with the following (it being acknowledged that Option #1 has already been exercised): 
 “The Company hereby irrevocably grants to McGrogan five (5) options (each an “Option” and collectively “Options”) to purchase
shares of the Stock in accordance with the schedule set forth below and subject to the conditions set forth in this Agreement. The number of shares of Stock to be acquired upon the exercise of each Option is determined in Article V below.

  

															
	 	  	 Effective Date of Exercise
	  	 Notice Period Commencement Date
	  	Total
Exercise
Price	  	Cash
Consideration	  	Amount
Applied in
Reduction of
Note
Principal	 
	 Option #1
	  	August 15, 2005	  	immediately	  	$	200,000	  	$	100,000	  	$	100,000	 
	 Option #2
	  	December 26, 2005	  	December 15, 2005	  	$	300,000	  	$	0	  	$	300,000	 
	 Option #3
	  	February 15, 2006	  	February 1, 2006	  	$	100,000	  	$	100,000	  	$	0	 
	 Option #4
	  	August 15, 2006	  	August 1, 2006	  	$	100,000	  	$	100,000	  	$	0	 
	 Option #5
	  	February 15, 2007	  	January 31, 2007	  	$	100,000	  	$	100,000	  	$	0	”

 3. Article II of the Option Agreement is hereby amended by deleting such article in its entirety and replacing such
article with the following: 
 “The total exercise price for all shares acquired for each Option (the “Exercise Price”) shall be as set
forth in Article I above. The Exercise Price for each Option shall be comprised of the following: (i) cash in the amount, if any, set forth in Article I above as “Cash Consideration” with respect to the applicable Option (the
“Cash Portion”) which Cash Portion, if applicable, shall be payable in immediately available funds on the Effective Date of Exercise and (ii) a reduction in the outstanding principal balance of the Note by the amount, if any,
set forth in Article I above as “Amount Applied in Reduction of Note Principal” with respect to the applicable Option.” 
 4. Exercise of
Option #2: By executing this Amendment, McGrogan hereby expresses her intent to exercise Option #2 set forth in Article I above in accordance with the terms and provisions of the Option Agreement and this Amendment. McGrogan hereby agrees that the
outstanding principal balance of the Note shall be reduced by an amount equal to Three Hundred Thousand Dollars ($300,000) on the Effective Date of Exercise in payment for the exercise of this Option #2 and that for purposes of principal payments
due under the terms of the Note, the aforesaid $300,000 shall be deducted from the principal amount which would otherwise be due on the Note on the next payment date under Section 1.2 of the Promissory Note. 
 5. Article IV of the Option Agreement is hereby amended by deleting the first sentence thereof and replacing such sentence with the following: 
 “The exercise of each Option shall be by written notice delivered to the Company in the form of Exhibit A attached hereto with respect to Option #1 set forth
in Article I above and in the form of Exhibit B attached hereto with respect to each of Option #3, Option #4 and Option #5 set forth in Article I above (the “Written Notice”) together with the tender of the Cash Portion, if
any, applicable to such Option.” 
 5. Article V of the Option Agreement is hereby amended by deleting the first paragraph of such article in its
entirety and replacing such paragraph with the following: 
 “With regard to Options #1, #3, #4 and #5 set forth in Article I above, upon the timely
exercise by McGrogan of any such Option in accordance with the terms and conditions set forth herein, including without limitation payment by McGrogan of the Cash Portion, if any, of the Exercise Price for such Option, the Company shall deliver to
McGrogan within five (5) trading days after the Effective Date of Exercise for such Option a number of shares (the “Purchased Shares”) of the Stock determined by dividing the Total Exercise Price for such Option by one hundred
and ten percent (110%) of the average closing price per share of the Stock on the National Association of Stock Dealers Automatic Quotation System (NASDAQ) for the ten (10) trading days immediately prior to the Effective Date of Exercise
(the “Average Closing Price”). The Average Closing Price shall be determined by adding up the closing prices and dividing the sum total by ten (10). With regard to the timely exercise by McGrogan of Option #2 set forth in Article I
above, the number of shares to be delivered by the Company to McGrogan with respect to Option #2 shall be determined by dividing the Total Exercise Price for such Option #2 by one hundred and five percent (105%) of the Average Closing
Price.” 
 6. The Option Agreement is hereby amended by adding the following as Exhibit B to the Option Agreement: 

 “EXHIBIT B 
 FORM OF WRITTEN NOTICE 
  

	Effective	Date of Exercise:
                             

 The undersigned, Susan McGrogan (“McGrogan”), hereby expresses McGrogan’s intent to exercise an option (the
“Option”) to purchase shares of the Common Stock, par value $0.05 per share, of Transcend Services, Inc. (the “Company”) granted to McGrogan by the Company pursuant to that certain Option Agreement to Purchase Stock
dated as of August 15, 2005 and amended pursuant to that certain First Amendment to Option Agreement to Purchase Stock dated as of December 15, 2005 by and between McGrogan and the Company (collectively, the “Option
Agreement”), subject to the terms and conditions contained therein. 
 McGrogan hereby tenders to the Company the sum of One Hundred
Thousand Dollars ($100,000) reduced for fractional shares in immediately available funds. 
 Capitalized terms used in this document not
otherwise defined shall have the meaning ascribed to them in the Option Agreement. 
  

					
	  

	Susan McGrogan
			
	Date:	 	  
	 	”

 7. Remaining Terms Unaffected. Except for the amendments to the Option Agreement set forth herein,
all other provisions of the Option Agreement shall remain in full force and effect and are incorporated herein as if fully set forth herein. 
 8.
Governing Law. This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of Georgia without giving effect to principles of conflicts of laws. 
 9. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall
constitute one and the same instrument. This Amendment shall become binding when one or more counterparts hereof shall bear the signatures of all of the parties indicated as the signatories hereto. 
 [Signatures appear on the following page] 

 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

  

			
	MCGROGAN:
	
	 /s/ Susan McGrogan

	Susan McGrogan
	
	COMPANY:
	
	TRANSCEND SERVICES, INC.
		
	By:	 	 /s/ Larry Gerdes

	Name:	 	Larry Gerdes
	Title:	 	CEO2006 Executive Compensation Plan

 
Exhibit 10.12 
 TRANSCEND SERVICES, INC.

 2006 EXECUTIVE COMPENSATION PLAN 
 On December 21, 2005, the Stock Option and Compensation Committee of the Board of Directors of Transcend Services, Inc. (the “Company”) approved a 2006 compensation plan for management, including the executive officers of the
Company as follows: 
  

									
	 Name
	  	 Title
	  	Potential Annual
Bonus as
Percentage of
Annual Salary *	 	 	 Annual Salary
 (effective 1/1/2006)

	 Gerdes, Larry G.
	  	Chief Executive Officer	  	50	%	 	$	235,000
	 Munoz, Juan Alejandro (“Alex”)
	  	Executive Vice President - Operations	  	50	%**	 	$	200,000
	 Cornell, Lance
	  	Chief Financial Officer, Treasurer and Secretary	  	50	%***	 	$	160,000
	 Bateman, Jeanne N.
	  	Chief Accounting Officer, Controller and Assistant Secretary	  	25	%	 	$	80,000

	*	Based upon the Company exceeding the annual net income in the Company’s 2006 business plan approved by the Board of Directors on December 21, 2005.

	**	$50,000 of this bonus potential is guaranteed for Mr. Munoz. 

	***	In addition Mr. Cornell is eligible for a bonus of up to $10,000 based on the achievement of certain objectives during the first quarter of 2006.Lease Agreement

 Exhibit 10.13 
 

 
 Lease Agreement Number TR051905 
 LEASE AGREEMENT 
 This Lease Agreement, dated May 19, 2005, by and between FARNAM STREET
FINANCIAL, INC. (the “Lessor”) with an office located at 240 Pondview Plaza, 5850 Opus Parkway, Minnetonka, MN 55343 and TRANSCEND SERVICES, INC. (the “Lessee”) with an office located at 945 East Paces Ferry Road, Suite 1475,
Atlanta, GA 30326. 
 Lessor hereby leases or grants to the Lessee the right to use and Lessee hereby rents and accepts the right to use the equipment
listed by serial number and related services, and software and related services on the Lease Schedule(s) attached hereto or incorporated herein by reference from time to time (collectively, the equipment, software and services are the
“Equipment”), subject to the terms and conditions hereof, as supplemented with respect to each item of Equipment by the terms and conditions set forth in the appropriate Lease Schedule. The term “Lease Agreement” shall include
this Lease Agreement and the various Lease Schedule(s) identifying each item of Equipment or the appropriate Lease Schedule(s) identifying one or more particular items of Equipment. 
 1. TERM: This Lease Agreement is effective from the date it is executed by both parties. The term of this Lease Agreement, as to all Equipment designated on any particular Lease Schedule, shall commence on the
Installation Date for all Equipment on such Lease Schedule and shall continue for an initial period ending that number of months from the Commencement Date as set forth in such Lease Schedule (the “Initial Term”) and shall continue from
year to year thereafter until terminated. The term of this Lease Agreement as to all Equipment designated on any particular Lease Schedule may be terminated without cause at the end of the Initial Term or any year thereafter by either party mailing
written notice of its termination to the other party not less than one-hundred twenty (120) days prior to such termination date. 
 2. COMMENCEMENT
DATE: The Installation Date for each item of Equipment shall be the day said item of Equipment is installed at the Location of Installation, ready for use, and accepted in writing by the Lessee. The Commencement Date for any Lease Schedule is
the first of the month following installation of all the Equipment on the Lease Schedule, unless the latest Installation Date for any Equipment on the Lease Schedule falls on the first day of the month, in which case that is the Commencement Date.
The Lessee agrees to complete, execute and deliver a Certificate(s) of Acceptance to Lessor upon installation of the Equipment. 
 3. LEASE CHARGE:
The lease charges for the Equipment leased pursuant to this Lease Agreement shall be the aggregate “Monthly Lease Charge(s)” as set forth on each and every Lease Schedule executed pursuant hereto (the aggregate “Monthly Lease
Charge(s)” are the “Lease Charges”). Lessee agrees to pay to Lessor the Lease Charges in accordance with the Lease Schedule(s), and the payments shall be made at Lessor’s address indicated thereon. The Lease Charges shall be paid
by Lessee monthly in advance with the first full month’s payment due on the Commencement Date. If the Installation Date does not fall on the first day of a month, the Lease Charge for the period from the Installation Date to the Commencement
Date shall be an amount equal to the “Monthly Lease Charge” divided by thirty (30) and multiplied by the number of days from and including the Installation Date to the Commencement Date and such amount shall be due and payable upon
receipt of an invoice from Lessor. Charges for taxes made in accordance with Section 4 and charges made under any other provision of this Lease Agreement and payable by Lessee shall be paid to Lessor at Lessor’s address specified on the
Lease Schedule(s) on the date specified in invoices delivered to Lessee. If payment, as specified above, is not received by Lessor on the due date, Lessee agrees to and shall, to the extent permitted by law, pay on demand, as a late charge, an
amount equal to one and one-half percent (1 1/2%), or the maximum percentage allowed by law if less, of the
amount past due (“Late Charges”). Late Charges shall be charged and added to any past due amount on the date such payment is due and every thirty (30) days thereafter until all past due amounts are paid in full to Lessor.

 4. TAXES: In addition to the Lease Charges set forth in Section 3, the Lessee shall reimburse Lessor for all license or registration
fees, assessments, sales and use taxes, rental taxes, gross receipts taxes, personal property taxes and other taxes now or hereafter imposed by any government, agency, province or otherwise upon the Equipment, the Lease Charges or upon the
ownership, leasing, renting, purchase, possession or use of the Equipment, whether the same be assessed to Lessor or Lessee (the “Taxes”). Lessor shall file all property tax returns and pay all Taxes when due. Lessee, upon notice to
Lessor, may, in Lessee’s own name, contest or protest any Taxes, and Lessor shall honor any such notice except when in Lessor’s sole opinion such contest is futile or will cause a levy or lien to arise on the Equipment or cloud
Lessor’s title thereto. Lessee shall, in addition, be responsible to Lessor for the payment and discharge of any penalties or interest as a result of Lessee’s actions or inactions. Nothing herein shall be construed to require Lessee to be
responsible for any federal or state taxes or payments in lieu thereof, imposed upon or measured by the net income of Lessor, or state franchise taxes of Lessor, or except as provided hereinabove, any penalties or interest resulting from
Lessor’s failure to timely remit such tax payments. 
 5. DELIVERY AND FREIGHT COSTS: Lessee shall accept delivery of the Equipment and allow the
Equipment to be installed within seven (7) days after delivery. 
 All transportation charges upon the Equipment for delivery to
Lessee’s designated Location of Installation are to be paid by Lessee. All rigging, drayage charges, structural alterations, rental of heavy equipment and/or other expense necessary to place the Equipment at the Location of Installation are to
be promptly paid by Lessee. 
 6. INSTALLATION: Lessee agrees to pay for the actual installation of the Equipment at Lessee’s site. Lessee shall
make available and agrees to pay for all costs associated with providing a suitable place of installation and necessary electrical power, outlets and air conditioning required for operating the Equipment as defined in the Equipment
manufacturer’s installation manual or instructions. All supplies consumed or required by the Equipment shall be furnished and paid for by Lessee. 

 7. RETURN TO LESSOR: On the day following the last day of the lease term associated with a Lease Schedule (the
“Return Date”), Lessee shall cause and pay for the Equipment on that Lease Schedule to be deinstalled, packed using the manufacturer’s standard packing materials and shipped to a location designated in writing by Lessor (the
“Return Location”). If the Equipment on the applicable Lease Schedule is not at the Return Location within ten (10) days of the Return Date, or Lessee fails to deinstall and ship the Equipment on the Return Date, then any written
notice of termination delivered by Lessee shall become void, and the Lease Schedule shall continue in accordance with this Lease Agreement. Irrespective of any other provision hereof, Lessee will bear the risk of damage from fire, the elements or
otherwise until delivery of the Equipment to the Return Location. At such time as the Equipment is delivered to the Lessor at the Return Location, the Equipment will be at the risk of Lessor. 
 8. MAINTENANCE: Lessee, at its sole expense, shall maintain the Equipment in good working order and condition. Lessee shall enter into, pay for and maintain in
force during the entire term of any Lease Schedule, a maintenance agreement with the original manufacturer of the Equipment providing for continuous uninterrupted maintenance of the Equipment (the “Maintenance Agreement”). Lessee will
cause the manufacturer to keep the Equipment in good working order in accordance with the provisions of the Maintenance Agreement and make all necessary adjustments and repairs to the Equipment. The manufacturer is hereby authorized to accept the
directions of Lessee with respect thereto. Lessee agrees to allow the manufacturer full and free access to the Equipment. All maintenance and service charges, whether under the Maintenance Agreement or otherwise, and all expenses, if any, of the
manufacturer’s customer engineers incurred in connection with maintenance and repair services, shall be promptly paid by Lessee. Lessee warrants that all of the Equipment shall be in good working order operating according to manufacturer’s
specification and eligible for the manufacturer’s standard maintenance agreement upon delivery to and inspection and testing by the Lessor. If the Equipment is not operating according to manufacturer’s specification, in good working order
and/or eligible for the manufacturer’s standard maintenance agreement, Lessee agrees to reimburse Lessor for all costs, losses, expenses and fees associated with such equipment and the repair or replacement thereof. 
 9. LOCATION, OWNERSHIP AND USE: The Equipment shall, at all times, be the sole and exclusive property of Lessor. Lessee shall have no right or property interest
therein, except for the right to use the Equipment in the normal operation of its business at the Location of Installation, or as otherwise provided herein. The Equipment is and shall remain personal property even if installed in or attached to real
property. Lessor shall be permitted to display notice of its ownership on the Equipment by means of a suitable stencil, label or plaque affixed thereto. 
 Lessee shall keep the Equipment at all times free and clear from all claims, levies, encumbrances and process. Lessee shall give Lessor immediate notice of any such attachment or other judicial process affecting any
of the Equipment. Without Lessor’s written permission, Lessee shall not attempt to or actually: (i) pledge, lend, create a security interest in, sublet, exchange, trade, assign, swap, use for an allowance or credit or otherwise;
(ii) allow another to use; (iii) part with possession; (iv) dispose of; or (v) remove from the Location of Installation, any item of Equipment. If any item of Equipment is exchanged, assigned, traded, swapped, used for an
allowance or credit or otherwise to acquire new or different equipment (the “New Equipment”) without Lessor’s prior written consent, then all of the New Equipment shall become Equipment owned by Lessor subject to this Lease Agreement
and the applicable Lease Schedule. 
 Any feature(s) installed on the Equipment at the time of delivery that are not specified on the Lease
Schedule(s) are and shall remain the sole property of the Lessor. 
 Lessee shall cause the Equipment to be operated in accordance with the
applicable vendor’s or manufacturer’s manual of instructions by competent and qualified personnel. 
 10. FINANCING STATEMENT: Lessor is
hereby authorized by Lessee to cause this Lease Agreement or other instruments, including Uniform Commercial Code Financing Statements, to be filed or recorded for the purposes of showing Lessor’s interest in the Equipment. Lessee agrees to
execute any such instruments as Lessor may request from time to time. 
 11. ALTERATIONS AND ATTACHMENTS: Upon prior written notice to Lessor, Lessee
may, at its own expense, make minor alterations in or add attachments to the Equipment, provided such alterations and attachments shall not interfere with the normal operation of the Equipment and do not otherwise involve the pledge, assignment,
exchange, trade or substitution of the Equipment or any component or part thereof. All such alterations and attachments to the Equipment shall become part of the Equipment leased to Lessee and owned by Lessor. If, in Lessor’s sole
determination, the alteration or attachment reduces the value of the Equipment or interferes with the normal and satisfactory operation or maintenance of any of the Equipment, or creates a safety hazard, Lessee shall, upon notice from Lessor to that
effect, promptly remove the alteration or attachment at Lessee’s expense and restore the Equipment to the condition the Equipment was in just prior to the alteration or attachment. 
 12. LOSS AND DAMAGE: Lessee shall assume and bear the risk of loss, theft and damage (including any governmental requisition, condemnation or confiscation) to the Equipment and all component parts thereof from
any and every cause whatsoever, whether or not covered by insurance. No loss or damage to the Equipment or any component part thereof shall impair any obligation of Lessee under this Lease Agreement, which shall continue in full force and effect
except as hereinafter expressly provided. Lessee shall repair or cause to be repaired all damage to the Equipment. In the event that all or part of the Equipment shall, as a result of any cause whatsoever, become lost, stolen, destroyed or otherwise
rendered irreparably unusable or damaged (collectively, the “Loss”) then Lessee shall, within ten (10) days after the Loss, fully inform Lessor in writing of such a Loss and shall pay to Lessor the following amounts: (i) the
Monthly Lease Charges (and other amounts) due and owing under this Lease Agreement, plus (ii) one-hundred (100%) percent of the original cost of the Equipment subject to the Loss if the loss occurs in the first nine months of the Initial
Term, and, thereafter, the original cost of the Equipment amortized by the subsequent Monthly Lease Charges received by Lessor during the Initial Term using an amortization rate of eight hundred and ninety (890) basis points over the interest
rate of the three (3) year United States Treasury Note as reported by the Federal Reserve on the Commencement Date (collectively, the sum of (i) plus (ii) shall be the “Casualty Loss Value”). Notwithstanding the proceeding,
if Lessee has provided notice to terminate the applicable Lease Schedule prior to informing Lessor in writing of a Loss and such Loss is not covered by insurance proceeds pursuant to Section 13 hereof, then Lessee shall pay two (2) times
the Casualty Loss Value on the Equipment subject to such Loss. Upon receipt by Lessor of the Casualty Loss Value: (i) the applicable Equipment shall be removed from the Lease Schedule; and (ii) Lessee’s obligation to pay Lease Charges
associated with the applicable Equipment shall cease. Lessor may request, and Lessee shall complete, an affidavit(s) that swears out the facts supporting the Loss of any item of Equipment. 
 13. INSURANCE: Until the Equipment is returned to Lessor or as otherwise herein provided, whether or not this Lease Agreement has terminated as to the Equipment,
Lessee, at its expense, shall maintain: (i) property and casualty insurance insuring the Equipment for its Casualty Loss Value naming Lessor or its assigns as sole loss payee; and (ii) comprehensive public liability and third-party
property insurance naming Lessor and its assigns as additional 

  

 Page Number 2 of 5 

 
loss payees. The insurance shall cover the interest of both the Lessor and Lessee in the Equipment, or as the case may be, shall protect both the Lessor and
Lessee in respect to all risks arising out of the condition, delivery, installation, maintenance, use or operation of the Equipment. All such insurance shall provide for thirty (30) days prior written notice to Lessor of cancellation,
restriction, or reduction of coverage. Lessee hereby irrevocably appoints Lessor as Lessee’s attorney-in-fact to make claim for, receive payment of and execute and endorse all documents, checks or drafts for loss or damage or return premium
under any insurance policy issued on the Equipment. Prior to installation of the Equipment, all policies or certificates of insurance shall be delivered to Lessor by Lessee. Lessee agrees to keep the Equipment insured with an insurance company which
is at least “A” rated by A.M. Best. The proceeds of any loss or damage insurance shall be payable to Lessor, but Lessor shall remit all such insurance proceeds to Lessee at such time as Lessee either (i) provides Lessor satisfactory proof
that the damage has been repaired and the Equipment has been restored to good working order and condition or (ii) pays to Lessor the Casualty Loss Value. It is understood and agreed that any payments made by Lessee or its insurance carrier for
loss or damage of any kind whatsoever to the Equipment are not made as accelerated rental payments or adjustments of rental, but are made solely as indemnity to Lessor for loss or damage of its Equipment. 
 14. ENFORCEMENT OF WARRANTIES: Upon receipt of a written request from Lessee, Lessor shall, so long as this Lease Agreement is in force, take all reasonable
action requested by Lessee to enforce the Equipment manufacturer’s warranties, expressed or implied, issued on or applicable to the Equipment, which are enforceable by Lessor in its own name. Lessor shall obtain for Lessee all service furnished
by manufacturer in connection therewith; provided, however, that Lessor shall not be required to commence any suit or action or resort to litigation to enforce any such warranty unless Lessee shall first pay to Lessor in advance all expenses in
connection therewith, including attorney’s’ fees. 
 If any such warranty shall be enforceable by Lessee in its own name, Lessee
shall, upon receipt of written request from Lessor, so long as this Lease Agreement is in force, take all reasonable action requested by Lessor to enforce any such warranty, which is enforceable by Lessee in its own name; provided, however, that
Lessee shall not be obligated to commence any suit or action or resort to litigation to enforce any such warranty unless Lessor shall pay all expenses in connection therewith. 
 15. WARRANTIES, DISCLAIMERS AND INDEMNITY: THE LESSOR DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. LESSEE ACKNOWLEDGES
THAT IT IS NOT RELYING ON LESSOR’S SKILL OR JUDGEMENT TO SELECT OR FURNISH GOODS SUITABLE FOR ANY PARTICULAR PURPOSE AND THAT THERE ARE NO WARRANTIES CONTAINED IN THIS LEASE AGREEMENT. LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR HAS NOT MADE ANY
STATEMENT, REPRESENTATION OR WARRANTY RELATIVE TO THE ACCOUNTING OR TAX ENTRIES, TREATMENT, BENEFIT, USE OR CLASSIFICATION OF THE LEASE AGREEMENT OR ASSOCIATED LEASE SCHEDULES. LESSEE ACKNOWLEDGES THAT IT AND/OR ITS INDEPENDENT ACCOUNTANTS ARE
SOLELY RESPONSIBLE FOR (i) ANY AND ALL OF LESSEE’S ACCOUNTING AND TAX ENTRIES ASSOCIATED WITH THE LEASE AGREEMENT AND/OR THE LEASE SCHEDULES AND (ii) THE ACCOUNTING AND TAX TREATMENT, BENEFITS, USES AND CLASSIFICATION OF THE LEASE
AGREEMENT OR ANY LEASE SCHEDULE. LESSOR SHALL NOT BE LIABLE FOR DAMAGES, INCLUDING SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE PERFORMANCE OF THE EQUIPMENT OR ITS USE BY LESSEE, AND SHALL NOT BE LIABLE FOR
ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH LESSOR’S FAILURE TO PERFORM ITS OBLIGATION HEREUNDER. THIS LEASE AGREEMENT IS A “FINANCE LEASE” AS THAT TERM IS DEFINED AND USED IN ARTICLE 2A OF
THE UNIFORM COMMERCIAL CODE. NO RIGHTS OR REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE CONFERRED ON LESSEE. 
 Lessee agrees that Lessor shall not be liable to Lessee for, and Lessee shall indemnify, defend and hold Lessor harmless with respect to, any claim from a third party for any liability, claim, loss, damage or expense of any kind or nature,
whether based upon a theory of strict liability or otherwise, caused, directly or indirectly, by: (i) the inadequacy of any item of Equipment, including software, for any purpose; (ii) any deficiency or any latent or other defects in any
Equipment, including software, whether or not detectable by Lessee; (iii) the selection, manufacture, rejection, ownership, lease, possession, maintenance, operation, use or performance of any item of Equipment, including software;
(iv) any interruption or loss of service, use or performance of any item of Equipment, including software; (v) patent, trademark or copyright infringement; or (vi) any loss of business or other special, incidental or consequential
damages whether or not resulting from any of the foregoing. Lessee’s duty to defend and indemnify Lessor shall survive the expiration, termination, cancellation or assignment of this Lease Agreement or a Lease Schedule and shall be binding upon
Lessee’s successors and permitted assigns. 
 16. EVENT OF DEFAULT: The occurrence of any of the following events shall constitute an Event of
Default under this Lease Agreement and/or any Lease Schedule: 
  

	 	(1)	the nonpayment by Lessee of any Lease Charges when due, or the nonpayment by Lessee of any other sum required hereunder to be paid by Lessee which non-payment continues for a period
often (10) days from the date when due; 

  

	 	(2)	the failure of Lessee to perform any other term, covenant or condition of this Lease Agreement, any Lease Schedule or any other document, agreement or instrument executed pursuant
hereto or in connection herewith, which is not cured within ten (10) days after written notice thereof from Lessor; 

  

	 	(3)	Lessee attempts to or does remove, transfer, sell, swap, assign, sublease, trade, exchange, encumber, receive an allowance or credit for, or part with possession of, any item of
Equipment; 

  

	 	(4)	Lessee or any guarantor of this Lease Agreement ceases doing business as a going concern, is insolvent, makes an assignment for the benefit of creditors, fails to pay its debts as
they become due, offers a settlement to creditors or calls a meeting of creditors for any such purpose, files a voluntary petition in bankruptcy, is subject to an involuntary petition in bankruptcy, is adjudicated bankrupt or insolvent, files or has
filed against it a petition seeking any reorganization, arrangement or composition, under any present or future statute, law or regulation; 

  

	 	(5)	without Lessor’s consent, (i) Lessee or any guarantor of this Lease Agreement sells, conveys, leases, exchanges or transfers all or substantially all of its assets,
(ii) Lessee or any guarantor of this Lease Agreement merges, consolidates, liquidates, dissolves or combines its assets with any other entity, or (iii) if Lessee or any guarantor of this Lease Agreement is a corporation, partnership,
limited liability company or other entity, more than 35% of the outstanding equity interests of Lessee or such guarantor are owned directly or indirectly at any time during the Term of this Lease Agreement by a person or group of persons other than
the person(s) who held all of the outstanding equity interests on the date of this Lease Agreement; 

  

	 	(6)	 any representations or warranties made at any time by Lessee or any guarantor in this Lease Agreement or in any agreement, statement, certificate, financial or
credit 

  

 Page Number 3 of 5 

	 	 
information provided in connection herewith shall be false or misleading when made; 

  

	 	(7)	Lessee or any guarantor of this Lease Agreement defaults under or otherwise has accelerated any material obligation, credit agreement, loan agreement, conditional sales contract,
lease, indenture or debenture; or Lessee or any guarantor of this Lease Agreement defaults under any other agreement now existing or hereafter made with Lessor, including an Equipment Purchase Agreement; or 

  

	 	(8)	the breach or repudiation by any party thereto of any guaranty, subordination agreement or other agreement running in favor of Lessor obtained in connection with this Lease
Agreement. 

 17. REMEDIES: Should any Event of Default occur and be continuing, Lessor may, in order to protect its interests and
reasonably expected profits, with or without notice or demand upon Lessee, pursue and enforce, alternatively, successively and/or concurrently, any one or more of the following remedies: 
  

	 	(1)	recover from Lessee all accrued and unpaid Lease Charges and other amounts due and owing on the date of the default; 

  

	 	(2)	recover from Lessee from time to time all Lease Charges and other amounts as and when becoming due hereunder; 

  

	 	(3)	accelerate, cause to become immediately due and recover the present value of all Lease Charges and other amounts due and/or likely to become due hereunder from the date of the
default to the end of the lease term using a discount rate of six (6%) percent; 

  

	 	(4)	cause to become immediately due and payable and recover from Lessee the Casualty Loss Value of the Equipment; 

  

	 	(5)	terminate any or all of the Lessee’s rights, but not its obligations, associated with the lease of Equipment under this Lease Agreement; 

  

	 	(6)	retake (by Lessor, independent contractor, or by requiring Lessee to assemble and surrender the Equipment in accordance with the provisions of Section 7 hereinabove) possession
of the Equipment without terminating the Lease Schedule or the Lease Agreement free from claims by Lessee which claims are hereby expressly waived by Lessee; 

  

	 	(7)	require Lessee to deliver the Equipment to a location designated by Lessor; 

  

	 	(8)	proceed by court action to enforce performance by Lessee of its obligations associated with any Lease Schedule and/or this Lease Agreement; and/or 

  

	 	(9)	pursue any other remedy Lessor may otherwise have, at law, equity or under any statute, and recover damages and expenses (including attorneys’ fees) incurred by Lessor by
reason of the Event of Default. 

 Upon repossession of the Equipment, Lessor shall have the right to lease, sell or otherwise
dispose of such Equipment in a commercially reasonable manner, with or without notice, at a public or private sale. Lessor’s pursuit and enforcement of any one or more remedies shall not be deemed an election or waiver by Lessor of any other
remedy. Lessor shall not be obligated to sell or re-lease the Equipment. Any sale or re-lease may be held at such place or places as are selected by Lessor, with or without having the Equipment present. Any such sale or re-lease, may be at wholesale
or retail, in bulk or in parcels. Time and exactitude of each of the terms and conditions of this Lease Agreement are hereby declared to be of the essence. Lessor may accept past due payments in any amount without modifying the terms of this Lease
Agreement and without waiving any rights of Lessor hereunder. 
 18. COSTS AND ATTORNEYS’ FEES: In the event of any default, claim, proceeding,
including a bankruptcy proceeding, arbitration, mediation, counter-claim, action (whether legal or equitable), appeal or otherwise, whether initiated by Lessor or Lessee (or a debtor-in-possession or bankruptcy trustee), which arises out of, under,
or is related in any way to this Lease Agreement, any Lease Schedule, or any other document, agreement or instrument executed pursuant hereto or in connection herewith, or any governmental examination or investigation of Lessee, which requires
Lessor’s participation (individually and collectively, the “Claim”), Lessee, in addition to all other sums which Lessee may be called upon to pay under the provisions of this Lease Agreement, shall pay to Lessor, on demand, all costs,
expenses and fees paid or payable in connection with the Claim, including, but not limited to, attorneys’ fees and out-of-pocket costs, including travel and related expenses incurred by Lessor or its attorneys. 
 19. LESSOR’S PERFORMANCE OPTION: Should Lessee fail to make any payment or to do any act as provided by this Lease Agreement, then Lessor shall have the
right (but not the obligation), without notice to Lessee of its intention to do so and without releasing Lessee from any obligation hereunder to make or to do the same, to make advances to preserve the Equipment or Lessor’s title thereto, and
to pay, purchase, contest or compromise any insurance premium, encumbrance, charge, tax, lien or other sum which in the judgment of Lessor appears to affect the Equipment, and in exercising any such rights, Lessor may incur any liability and expend
whatever amounts in its absolute discretion it may deem necessary therefor. All sums so incurred or expended by Lessor shall be due and payable by Lessee within ten (10) days of notice thereof. 
 20. QUIET POSSESSION AND INSPECTION: Lessor hereby covenants with Lessee that Lessee shall quietly possess the Equipment subject to and in accordance with the
provisions hereof so long as Lessee is not in default hereunder; provided, however, that Lessor or its designated agent may, at any and all reasonable times during business hours, enter Lessee’s premises for the purposes of inspecting the
Equipment and the manner in which it is being used. 
 21. ASSIGNMENTS: This Lease Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Lessee, however, shall not assign this Lease Agreement or sublet any of the Equipment without first obtaining the prior written consent of Lessor and its assigns, if any. Lessee
acknowledges that the terms and conditions of this Lease Agreement have been fixed in anticipation of the possible assignment of Lessor’s rights under this Lease Agreement and in and to the Equipment as collateral security to a third party
(“Assignee” herein) which will rely upon and be entitled to the benefit of the provisions of this Lease Agreement. Lessee agrees to provide Lessor or its potential assigns with Lessee’s most recent audited and its most current
financial statements. Lessee agrees with Lessor and such Assignee to recognize in writing any such assignment within fifteen (15) days after receipt of written notice thereof and to pay thereafter all sums due to Lessor hereunder directly to
such Assignee if directed by Lessor, notwithstanding any defense, set-off or counterclaim whatsoever (whether arising from a breach of this Lease Agreement or not) that Lessee may from time to time have against Lessor. Upon such assignment, the
Lessor shall remain obligated to perform any obligations it may have under this Lease Agreement and the Assignee shall (unless otherwise expressly agreed to in writing by the Assignee) have no obligation to perform such obligations. Any such
assignment shall be subject to Lessee’s rights to use and possess the Equipment so long as Lessee is not in default hereunder. 
 22. SURVIVAL OF
OBLIGATIONS: All covenants, agreements, representations, and warranties contained in this Lease Agreement, any Lease Schedule, or in any document attached thereto, shall be for the benefit of Lessor and Lessee and their successors, any assignee
or secured party. Further, all covenants, agreements, representations, and warranties contained in this Lease Agreement, any Lease Schedule, or in any document attached thereto, shall survive the execution and delivery of this Lease Agreement and
the expiration or other termination of this Lease Agreement. 
 23. CORPORATE AUTHORITY: The parties hereto covenant and warrant that the persons
executing this Lease Agreement and each Lease Schedule on their behalf have been duly authorized to do so, and this Lease Agreement and any Lease Schedule constitute 

  

 Page Number 4 of 5 

 
a valid and binding obligation of the parties hereto. The Lessee will, if requested by Lessor, provide to Lessor, Certificates of Authority naming the
officers of the Lessee who have the authority to execute this Lease Agreement and any Lease Schedules attached thereto. 
 24. LANDLORDS’ AND
MORTGAGEES’ WAIVER: If requested, Lessee shall furnish waivers, in form and substance satisfactory to Lessor, from all landlords and mortgagees of any premises upon which any Equipment is located. 
 25. MISCELLANEOUS: This Lease Agreement, the Lease Schedule(s), attached riders and any documents or instruments issued or executed pursuant hereto will have been
made, executed and delivered in, and shall be governed by the internal laws (as opposed to conflicts of law provisions) and decisions of, the State of Minnesota. Lessee and Lessor consent to jurisdiction of any local, state or federal court located
within Minnesota. Venue shall be in Minnesota and Lessee hereby waives local venue and any objection relating to Minnesota being an improper venue to conduct any proceeding relating to this Lease Agreement. At Lessor’s sole election and
determination, Lessor may select an alternative forum, including arbitration or mediation, to adjudicate any dispute arising out of this Lease Agreement. 
 This Lease Agreement was jointly drafted by the parties, and the parties hereby agree that neither should be favored in the construction, interpretation or application of any provision or any ambiguity. There are no
unwritten or oral agreements between the parties. This Lease Agreement and associated Lease Schedule(s) constitute the entire understanding and agreement between Lessor and Lessee with respect to the lease of the Equipment superseding all prior
agreements, understandings, negotiations, discussions, proposals, representations, promises, commitments and offers between the parties, whether oral or written. No provision of this Lease Agreement or any Lease Schedule shall be deemed waived,
amended, discharged or modified orally or by custom, usage or course of conduct unless such waiver, amendment or modification is in writing and signed by an officer of each of the parties hereto. If any one or more of the provisions of this Lease
Agreement or any Lease Schedule is for any reason held invalid, illegal or unenforceable, the remaining provisions of this Lease Agreement and any such Lease Schedule will be unimpaired, and the invalid, illegal or unenforceable provisions shall be
replaced by a mutually acceptable valid, legal and enforceable provision that is closest to the original intention of the parties. Lessee agrees that neither the manufacturer, nor the supplier, nor any of their salespersons, employees or agents are
agents of Lessor. 
 Any notice provided for herein shall be in writing and sent by certified or registered mail to the parties at the
addresses stated on page 1 of this Lease Agreement. 
 This Lease Agreement shall not become effective until delivered to Lessor at its offices at
Minnetonka, Minnesota and executed by Lessor. If this Lease Agreement shall be executed by Lessor prior to being executed by Lessee, it shall become void at Lessor’s option five (5) days after the date of Lessor’s execution hereof,
unless Lessor shall have received by such date a copy hereof executed by a duly authorized representative of Lessee. 
 This Lease Agreement
is made subject to the terms and conditions included herein and Lessee’s acceptance is effective only to the extent that such terms and conditions are consistent with the terms and conditions herein. Any acceptance which contains terms and
conditions which are in addition to or inconsistent with the terms and conditions herein will be a counter-offer and will not be binding unless agreed to in writing by Lessor. 
 The terms used in this Lease Agreement, unless otherwise defined, shall have the meanings ascribed to them in the Lease Schedule(s). 
 26. REPOSSESSION: LESSEE ACKNOWLEDGES THAT, PURSUANT TO SECTION 17 HEREOF, LESSOR HAS BEEN GIVEN THE RIGHT TO REPOSSESS THE EQUIPMENT SHOULD LESSEE BECOME IN
DEFAULT OF ITS OBLIGATIONS HEREUNDER. LESSEE HEREBY WAIVES THE RIGHT, IF ANY, TO REQUIRE LESSOR TO GIVE LESSEE NOTICE AND A JUDICIAL HEARING PRIOR TO EXERCISING SUCH RIGHT OF REPOSSESSION. 
 27. NET LEASE: This Lease Agreement is a net lease and Lessee’s obligations to pay all Lease Charges and other amounts payable hereunder shall be absolute
and unconditional and, except as expressly provided herein, shall not be subject to any: (i) delay, abatement, reduction, defense, counterclaim, set-off, or recoupment; (ii) discontinuance or termination of any license;
(iii) Equipment failure, defect or deficiency; (iv) damage to or destruction of the Equipment; or (v) dissatisfaction with the Equipment or otherwise, including any present or future claim against Lessor or the manufacturer, supplier,
reseller or vendor of the Equipment. To the extent that the Equipment includes intangible (or intellectual) property, Lessee understands and agrees that: (i) Lessor is not a party to and does not have any responsibility under any software
license and/or other agreement with respect to any software; and (ii) Lessee will be responsible to pay all of the Lease Charges and perform all its other obligations under this Lease Agreement despite any defect, deficiency, failure,
termination, dissatisfaction, damage or destruction of any software or software license. Except as expressly provided herein, this Lease Agreement shall not terminate for any reason, including any defect in the Equipment or Lessor’s title
thereto or any destruction or loss of use of any item of Equipment. 
 28. HEADINGS: Section headings herein are used for convenience only and shall
not otherwise affect the provisions of this Lease Agreement. 
 IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to be signed by their
respective duly authorized representative. 
  

									
	Every Term is Agreed to and Accepted:	 		 	Every Term is Agreed to and Accepted:
			
	FARNAM STREET FINANCIAL, INC.	 		 	TRANSCEND SERVICES, INC.
					
	By:	 	 /s/ Steven C. Morgan
	 		 	By:	 	 /s/ Mark D. Meersman

					
	Print Name:	 	 Steven C. Morgan
	 		 	Print Name:	 	 Mark D. Meersman

					
	Title:	 	 President
	 		 	Title:	 	 CFO

					
	Date:	 	 June 15, 2005
	 		 	Date:	 	 6/10/05

  

 Page Number 5 of 5 

			
	 Rider Number:
	 	001
		
	 Lease Agreement Number:
	 	TR051905
		
	 Lease Schedule Number:
	 	ALL
		
	 Lessee Name:
	 	TRANSCEND SERVICES, INC.
		
	 Lease Dated:
	 	MAY 19, 2005

 INTEREST RATE FLUCTUATION 
 This Lease Schedule is intended to be a fixed rate lease during the installation period and from the Commencement Date to the end of the term. The three-year treasury rate is an integral part of the underlying rate of
this lease. The Lessor and Lessee agree that the rate shall be fixed upon execution of this Lease and that should the three year treasury note increase between the execution of this Lease Schedule and the Commencement Date, the rate will be adjusted
on the Commencement Date to reflect such increase and will then be fixed for the term of this Lease Schedule. 
  

									
	Every Term is Agreed to and Accepted:	 		 	Every Term is Agreed to and Accepted:
			
	FARNAM STREET FINANCIAL, INC.	 		 	TRANSCEND SERVICES, INC.
	 “LESSOR”
	 		 	 “LESSEE”

					
	By:	 	 /s/ Steven C. Morgan
	 		 	By:	 	 /s/ Mark D. Meersman

					
	Print Name:	 	 Steven C. Morgan
	 		 	Print Name:	 	 Mark D. Meersman

					
	Title:	 	 President
	 		 	Title:	 	 CFO

					
	Date:	 	 June 15, 2005
	 		 	Date:	 	 6/10/05

			
	 Rider Number:
	 	002
		
	 Lease Agreement Number:
	 	TR051905
		
	 Lease Schedule Number:
	 	001
		
	 Lessee Name:
	 	TRANSCEND SERVICES, INC.
		
	 Lease Dated:
	 	MAY 19, 2005

 FAIR MARKET PURCHASE 
 Lessee shall have the option to purchase the Equipment in its physical possession and on this Lease Schedule at the end of the initial term, in whole and not in part, on an as-is, where-is basis, for the then
determined mutually-agreed, in-place fair market value (plus applicable taxes) provided that (i) an Event of Default has not occurred, (ii) Lessor has received all of the Lease Charges due under the Lease Schedule prior to Lessee
exercising this option to purchase, (iii) Lessor has received written notice of Lessee’s election to exercise said purchase option not less than one hundred twenty (120) days prior to the last date of the initial term of this Lease
Schedule. 
  

									
	Every Term is Agreed to and Accepted:	 		 	Every Term is Agreed to and Accepted:
			
	FARNAM STREET FINANCIAL, INC.	 		 	TRANSCEND SERVICES, INC.
	 “LESSOR”
	 		 	 “LESSEE”

					
	By:	 	 /s/ Steven C. Morgan
	 		 	By:	 	 /s/ Mark D. Meersman

					
	Print Name:	 	 Steven C. Morgan
	 		 	Print Name:	 	 Mark D. Meersman

					
	Title:	 	 President
	 		 	Title:	 	 CFO

					
	Date:	 	 June 15, 2005
	 		 	Date:	 	 6/10/05

 INCUMBENCY CERTIFICATE 
 I, Jeanne N. Bateman, Assistant Secretary of Transcend Services, Inc., a Delaware corporation (the “Company”) do hereby certify that: 
  

	1.	The persons whose names, titles and signatures that appear below (“Authorized Person”) are duly elected or appointed, qualified and authorized, on behalf of the Company,
to execute and deliver any lease agreement and related documents, including, but not limited to, lease schedules, documents, riders, certificates of acceptance by and between Farnam Street Financial, Inc. and the Company (collectively, the
“Lease Documents”); 

  

	2.	The Company shall be bound by any Lease Document that is executed and delivered by an Authorized Person; 

  

	3.	The execution and delivery of any Lease Document is not prohibited by or in any manner restricted by the terms of the Company’s certificate of incorporation, its by-laws, or by
any loan agreement, indenture or contract to which the Company is a party or under which it is bound; and 

  

	4.	The signatures below are the true, correct and genuine signatures of the below-named persons: 

  

									
					
	Authorized Signature:	 	 /s/ Mark D. Meersman
	 		 	Authorized Signature:	 	  
					
	Print Name:	 	 Mark D. Meersman
	 		 	Print Name:	 	  
					
	 Title:
	 	 CFO
	 		 	 Title:
	 	  

									
					
	Authorized Signature:	 	  	 		 	Authorized Signature:	 	  
					
	Print Name:	 	  	 		 	Print Name:	 	  
					
	 Title:
	 	  	 		 	 Title:
	 	  

 IN WITNESS WHEREOF, the undersigned does hereby execute this Certificate this 19th day of May, 2005. 
  

	
	
	 /s/ Jeanne N. Bateman

	 Assistant Secretary

 ADDENDUM NO. 1 
 This transaction is a true lease and is not intended by the parties as a secured transaction. Filing is only intended to make the true lease a matter of public record. Farnam Street Financial, Inc. is the owner of all
the equipment contained on this filing and any and all other equipment now or hereafter the subject of any lease agreement or lease schedule by and between the parties and all accessories, attachments, additions, and any substitutions and/or
replacement of the equipment contained on this filing or any lease agreement or lease schedule between the parties. The lessee has no rights, express or implied, to sell, exchange, encumber, or otherwise dispose of any equipment contained on this
filing or any lease agreement or lease schedule by and between the parties. The parties agree that this financing statement covers any and all equipment now or hereafter the subject of any lease agreement or lease schedule by and between the
parties, including, but not limited to, the following equipment contained on or subject to: 
  

			
	 Lease Agreement Number
	  	TR051905 or
	 Lease Schedule Number
	  	001 or
	 Schedule A attached hereto
	  	

 Together with all substitutions, replacements, accessions, process, rent, revenue, insurance, and proceeds related
to the equipment contained on this filing or any lease agreement or lease schedule by and between the parties. 
  

									
	Every Term is Agreed to and Accepted:	 		 	Every Term is Agreed to and Accepted:
			
	FARNAM STREET FINANCIAL, INC.	 		 	TRANSCEND SERVICES, INC.
	 “LESSOR”
	 		 	 “LESSEE”

					
	By:	 	 /s/ Steven C. Morgan
	 		 	By:	 	 /s/ Mark D. Meersman

					
	Print Name:	 	 Steven C. Morgan
	 		 	Print Name:	 	 Mark D. Meersman

					
	Title:	 	 President
	 		 	Title:	 	 CFO

					
	Date:	 	 June 15, 2005
	 		 	Date:	 	 6/10/05

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