<PAGE> 1
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1997
REGISTRATION NO. 333-36189
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
QUADRAMED CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 7371 68-0316252
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
80 EAST SIR FRANCIS DRAKE BLVD., STE. 2A
LARKSPUR, CA 94939
(415) 461-7725
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KEITH M. ROBERTS
VICE PRESIDENT AND GENERAL COUNSEL
QUADRAMED CORPORATION
80 EAST SIR FRANCIS DRAKE BLVD., STE. 2A
LARKSPUR, CA 94939
(415) 461-7725
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
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SCOTT D. LESTER KENNETH L. GUERNSEY
DAVID R. GILBERT MICHAEL J. SULLIVAN
BARBARA SKAGGS GALLAGHER ISOBEL A. JONES
BROBECK, PHLEGER & ALEXIS RONDELL RHORER
HARRISON LLP COOLEY GODWARD LLP
ONE MARKET ONE MARITIME PLAZA
SPEAR STREET TOWER SAN FRANCISCO, CA 94111
SAN FRANCISCO, CA 94105 (415) 693-2000
(415) 442-0900
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of Common Stock being registered, other
than underwriting discounts and commissions. All amounts are estimates except
the Securities and Exchange Commission registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.
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<CAPTION>
AMOUNT
TO
BE PAID
--------
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Securities and Exchange Commission registration fee....................... $ 19,014
NASD filing fee........................................................... 6,775
Nasdaq National Market listing fee........................................ 17,500
Printing and engraving expenses........................................... 75,000
Legal fees and expenses................................................... 175,000
Accounting fees and expenses.............................................. 65,000
Blue sky fees and expenses................................................ 10,000
Transfer agent and registrar fees......................................... 10,000
Miscellaneous expenses.................................................... 21,711
--------
Total........................................................... $400,000
========
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ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides in relevant part that "[a] corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or Agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or Agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful." With
respect to derivative actions, Section 145(b) of the DGCL provides in relevant
part that "[a] corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
[by reason of his service in one of the capacities specified in the preceding
sentence] against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deemed proper."
Article 5 of the Company's Amended and Restated Bylaws provides that the
Company shall indemnify each person who is or was a director or executive
officer of the Company to the full extent permitted by the DGCL. Such Article
also provides that the Company may, but is not required to, indemnify its
employees and agents (other than directors and officers) to the extent and in
the manner permitted by the DGCL.
II-1
<PAGE> 3
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
the Underwriters of the Registrant, its directors and executive officers and
other persons for certain liabilities, including liabilities arising under the
Securities Act of 1933.
The Registrant has entered into an indemnification agreement with each of
its directors and officers and intends to maintain insurance for the benefit of
its directors and officers insuring such persons against certain liabilities,
including liabilities under the securities laws.
See also the undertakings set out in response to Item 17 herein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
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EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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1.1 Form of Underwriting Agreement.
2.1 Reserved.
2.2 Assets Purchase Agreement dated December 31, 1995, by and among QuadraMed
Acquisition Corporation, Kaden Arnone, Inc. and its stockholders.(1)
2.3 Exchange Agreement dated June 25, 1996, by and among QuadraMed Holdings, Inc.,
QuadraMed Corporation, and certain stockholders listed on Schedule A thereto.(1)
2.4 Acquisition Agreement and Plan of Merger dated December 2, 1996, between the
Company and InterMed Acquisition Corporation, a wholly owned subsidiary of the
Company and InterMed Healthcare Systems Inc. and its Stockholders.(2)
2.5 Acquisition Agreement and Plan of Merger, dated as of March 1, 1997, by and among
QuadraMed Corporation, Healthcare Recovery Acquisition Corporation, Healthcare
Recovery Incorporated and its Shareholders (the "HRI Acquisition Agreement and
Plan of Merger").(3)
2.6 First Amendment to HRI Acquisition Agreement and Plan of Merger, dated as of
April 22, 1997.(3)
2.7 Second Amendment to HRI Acquisition Agreement and Plan of Merger, dated as of
April 24, 1997.(3)
2.8 Acquisition Agreement and Plan of Merger, dated as of September 24, 1997, by and
among QuadraMed Corporation, HRM Acquisition Corporation, Healthcare Revenue
Management Inc. and its Stockholders (the "Acquisition Agreement and Plan of
Merger").(4)
2.9 First Amendment to Acquisition Agreement and Plan of Merger, dated as of
September 29, 1997.(4)
4.1 Reference is made to Exhibits 3.2 and 3.4 of the Form SB-2 (as defined
herein).(1)
4.2 Form of Common Stock certificate.(1)
4.3 Reserved.
4.4 Reserved.
4.5 Reserved.
4.6 Reserved.
4.7 Reserved.
4.8 Amended and Restated Shareholder Rights Agreement dated June 25, 1996, by and
between the Company and the investors listed on Schedule A thereto.(1)
4.9 Reserved.
4.10 Reserved.
4.11 Reserved.
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II-2
<PAGE> 4
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EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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4.12 Registration Rights Agreement dated December 5, 1996, by and between the Company
and the investors listed on Schedule A thereto.(5)
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.39 Letter dated July 1, 1997 from the Company to Lemuel C. Stewart, Jr. regarding
terms of employment.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.*
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants.*
23.3 Consent of Smith & Company, Certified Public Accountants.*
23.4 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).*
27.1 Financial Data Schedule.(5)
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- ---------------
* Previously filed.
(1) Incorporated herein by reference from the exhibit with the same number to
the Company's Registration Statement on Form SB-2, No. 333-5180-LA, as filed
with the Commission on June 28, 1996, as amended by Amendment No. 1,
Amendment No. 2 and Amendment No. 3 thereto, as filed with the Commission on
July 26, 1996, September 9, 1996, and October 2, 1996, respectively
(collectively "Form SB-2").
(2) Incorporated herein by reference from the exhibit with the same number to
the Company's Current Report on Form 8-K, as filed with the Commission on
January 9, 1997.
(3) Incorporated herein by reference from the exhibit with the same number to
the Company's Current Report on Form 8-K, as filed with the Commission on
May 9, 1997, as amended on July 8, 1997.
(4) Incorporated herein by reference from the exhibit with the same number to
the Company's Current Report on Form 8-K, as filed with the Commission on
October 14, 1997.
(5) Incorporated herein by reference from the exhibit with the same number to
the Company's quarterly report on Form 10-Q for the quarter ended June 30,
1997, as filed with the Commission on August 14, 1997, as amended September
4, 1997.
(b) FINANCIAL STATEMENT SCHEDULES
None
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of Registrant, Indemnification Agreements entered
into between the Registrant and its directors and certain of its officers,
Underwriting Agreement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
II-3
<PAGE> 5
securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Larkspur, State of California on this 15th day of October, 1997.
QUADRAMED CORPORATION
By: /s/ JAMES D. DURHAM*
------------------------------------
James D. Durham
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
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SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -------------------
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/s/ JAMES D. DURHAM* Chairman of the Board, October 15, 1997
- --------------------------------------------- President and Chief
James D. Durham Executive Officer (principal
executive officer)
/s/ JOHN V. CRACCHIOLO* Vice President, Chief October 15, 1997
- --------------------------------------------- Financial Officer and
John V. Cracchiolo Secretary (principal
financial and accounting
officer)
/s/ JOHN M. AUSTIN, M.D.* Director October 15, 1997
- ---------------------------------------------
John M. Austin, M.D.
Director , 1997
- ---------------------------------------------
Albert L. Greene
/s/ KENNETH E. JONES* Director October 15, 1997
- ---------------------------------------------
Kenneth E. Jones
/s/ THOMAS F. MCNULTY* Director October 15, 1997
- ---------------------------------------------
Thomas F. McNulty
/s/ JOAN P. NEUSCHELER* Director October 15, 1997
- ---------------------------------------------
Joan P. Neuscheler
/s/ CORNELIUS T. RYAN* Director October 15, 1997
- ---------------------------------------------
Cornelius T. Ryan
*By: /s/ KEITH M. ROBERTS October 15, 1997
- ---------------------------------------------
Keith M. Roberts
Attorney-in-fact
</TABLE>
II-5
<PAGE> 1
EXHIBIT 1.1
QUADRAMED CORPORATION
3,000,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
_________, 1997
JEFFERIES & COMPANY, INC.
OPPENHEIMER & CO., INC.
PIPER JAFFRAY INC.
PACIFIC GROWTH EQUITIES, INC.
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Suite 1000
Los Angeles, CA 90025
Ladies and Gentlemen:
QuadraMed Corporation, a Delaware corporation (herein called the
"Company"), proposes to issue and sell 2,689,005 shares of its authorized but
unissued Common Stock, $0.01 par value (herein called the "Common Stock") and
the stockholders of the Company named in Schedule II hereto (herein
collectively called the "Selling Securityholders") propose to sell an aggregate
of 310,995 shares of Common Stock of the Company (said 3,000,000 shares of
Common Stock being herein called the "Underwritten Stock"). Of the 310,995
shares of Underwritten Stock to be sold by the Selling Securityholders, 146,133
shares will be sold upon the exercise of certain warrants immediately prior to
the Closing Date (the "Warrant Shares") and 35,000 shares will be sold upon the
exercise of certain options immediately prior to the closing date (the "Option
Shares"). The Company proposes to grant to the Underwriters (as hereinafter
defined) an option to purchase up to 450,000 additional shares of Common Stock
(herein called the "Option Stock" and with the Underwritten Stock herein
collectively called the "Stock"). The Common Stock is more fully described in
the Registration Statement and the Prospectus hereinafter mentioned.
The Company and the Selling Securityholders hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the "Underwriters," which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.
1. REGISTRATION STATEMENT. The Company has filed with the
Securities and Exchange Commission (herein called the "Commission") a
registration statement on Form S-3 (No. 333-36189),
_____________
(1) Plus an option to purchase from the Company up to 450,000 additional
shares to cover over-allotments.
1.
<PAGE> 2
including the related preliminary prospectus, for the registration under the
Securities Act of 1933, as amended (herein called the "Securities Act"), of the
Stock. Copies of such Registration Statement and of each amendment thereto, if
any, including the related preliminary prospectus (meeting the requirements of
Rule 430A of the rules and regulations of the Commission) heretofore filed by
the Company with the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a "Rule
462(b) registration statement"), and, in the event of any amendment thereto
after the effective date of such registration statement (herein called the
"Effective Date"), shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended (including any Rule 462(b)
registration statement). The term Prospectus as used in this Agreement shall
mean the prospectus relating to the Stock first filed with the Commission
pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as
included in the Registration Statement) and, in the event of any supplement or
amendment to such prospectus after the Effective Date, shall also mean (from
and after the filing with the Commission of such supplement or the
effectiveness of such amendment) such prospectus as so supplemented or amended.
The term Preliminary Prospectus as used in this Agreement shall mean the
preliminary prospectus included in such Registration Statement prior to the
time it becomes effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of the Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
a. The Company hereby represents and warrants as
follows:
i. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and authority to
own or lease its properties and conduct its business as described in the
Registration Statement and the Prospectus and as being conducted, and is duly
qualified as a foreign corporation and in good standing in all jurisdictions in
which the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole). Each of [QuadraMed
Acquisition Corporation, QuadNet Corporation and _____________ (the
"Significant Subsidiaries")] has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation. The capital stock of each of the Significant Subsidiaries is
owned solely by the Company.
ii. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there
has not been any material adverse change in the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken
as a whole, whether or not arising from transactions in the ordinary course of
business, other than as set forth in the Registration Statement and the
Prospectus, and since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement and the Prospectus.
2.
<PAGE> 3
iii. The Registration Statement and the Prospectus
comply, and on the Closing Date (as hereinafter defined) and any later date on
which Option Stock is to be purchased, the Prospectus will comply, in all
material respects, with the provisions of the Securities Act and the rules and
regulations of the Commission thereunder; on the Effective Date, the
Registration Statement did not contain any untrue statement of a material fact
and did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and, on the
Effective Date, the Prospectus did not and, on the Closing Date and any later
date on which Option Stock is to be purchased, will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that none of the
representations and warranties in this subparagraph (iii) shall apply to
statements in, or omissions from, the Registration Statement or the Prospectus
made in reliance upon and in conformity with the information referred to in
Section 4(b) below.
iv. The Company has filed all required tax
returns and has paid all taxes shown thereon as due (except such amounts that
are being contested in good faith and as to which any reserves required under
generally accepted accounting principles have been established) and there is no
tax deficiency that has been or might be asserted against the Company that will
or might have a material adverse effect on the Company, and all tax liabilities
are adequately provided for on the books of the Company.
v. The Company's authorized, issued and
outstanding capitalization as of June 30, 1997 is as set forth under the
caption "Capitalization" in the Prospectus. The Stock is duly and validly
authorized, is (or, in the case of shares of the Stock to be sold by the
Company, the Warrant Shares or the Option Shares will be, when issued and sold
to the Underwriters as provided herein) duly and validly issued, fully paid and
nonassessable and conforms to the description thereof in the Prospectus. No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the transfer and sale of the Stock to be sold
by the Selling Securityholders or the issuance and sale of the Stock as
contemplated herein.
vi. The Company does not own, directly or
indirectly, any capital stock or other equity interest of any corporation or
have any direct equity or ownership interest in any other business, whether
organized as a corporation, partnership, joint venture or otherwise, other than
the corporations identified in Exhibit 21.1 to the Registration Statement.
vii. The Stock to be sold by the Selling
Securityholders (other than the Warrant Shares and the Option Shares) is listed
and duly admitted to trading on the Nasdaq National Market, and prior to the
Closing Date, the Stock to be issued and sold by the Company, the Warrant
Shares and the Option Shares will be authorized for listing by the Nasdaq
National Market upon official notice of issuance.
viii. Except as set forth in the Prospectus, there
are no outstanding securities convertible into or exchangeable for, or
warrants, rights or options to purchase from the Company, or obligations of the
Company to issue, shares of the Company's capital stock.
ix. The holders of outstanding shares of capital
stock of the Company are not entitled to preemptive or other similar rights in
connection with the purchase and sale contemplated by this Agreement (other
than such rights that have been validly waived or satisfied), and (except as
disclosed in the Prospectus) there are no restrictions upon the voting or
transfer of any of the Common Stock pursuant to the Company's Certificate of
Incorporation or any agreement or other outstanding instrument to which the
Company is a party (other than restrictions on transfer set forth in stock
issuance or stock option agreements or stock option plans).
3.
<PAGE> 4
x. Assuming due qualification of the Stock for
public offering by the Underwriters under state securities or Blue Sky laws,
none of (a) the issuance of the Stock to be sold by the Company, the Warrant
Shares or the Option Shares, (b) the sale of the Stock to be sold by the
Company, the Warrant Shares or the Option Shares or (c) the consummation by the
Company of any other of the transactions contemplated herein, will conflict
with or result in a breach or violation of or constitute a default under or
result in the creation or imposition of any lien, charge or encumbrance upon
any properties or assets of the Company pursuant to the organization documents
of the Company, the terms of any indenture or other agreement or instrument to
which the Company is a party, or any order or regulation, applicable to the
Company, of any court, regulatory body, administrative agency, governmental
body or arbitration body having jurisdiction over the Company (except where
such breach or other consequence would not have a material adverse effect on
the business, properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole).
xi. The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms except as the enforcement hereof maybe
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally, or by
general equitable principles and except as rights to indemnification and
contribution hereunder may be limited by applicable law. The consummation of
the transactions contemplated herein will not result in a breach or violation
of the terms and provision of or constitute a default under (a) any material
loan agreement or other evidence of indebtedness, (b) the Company's charter
documents or (c) any law or regulation of any governmental agency having
jurisdiction over the Company (except where such breach or other consequence
would not have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken
as a whole).
xii. No consent, approval, authorization or order
of any court or governmental agency, person or body, the Company's
stockholders, or pursuant to applicable law is required for the consummation by
the Company of the transactions contemplated herein, except such as have been
obtained or may be required under the blue sky laws of any jurisdiction or by
the National Association of Securities Dealers, Inc. (herein called "NASD") in
connection with the purchase of Stock and distribution of the Stock by the
Underwriters and such other approvals as have been obtained and which are in
full force and effect.
xiii. Except as disclosed in the Prospectus, no
claim is pending or, to the Company's knowledge, threatened to the effect that
the present or past operations of the Company infringe upon or conflict with
the rights of others with respect to any licenses, patents, patent rights,
patent applications, trademarks, trademark applications, trade names,
copyrights, trade secrets, drawings, schematics, applications, technology,
know-how and other tangible and intangible proprietary information or material
("Intellectual Property") which may materially impair the ability of the
Company to conduct its businesses as now conducted and proposed to be
conducted; no claim is pending or, to the Company's knowledge, threatened
regarding the Company's ownership or other interest in, or rights under, any
Intellectual Property which is material to the Company's ability to conduct its
businesses as now conducted and proposed to be conducted; and, no claim is
pending or, to the Company's knowledge, threatened to the effect that any
Intellectual Property owned by or exclusively licensed to the Company is
invalid or unenforceable. The Company owns, or is licensed or otherwise has
sufficient rights to, all Intellectual Property used or that is material to the
business of the Company as now conducted and proposed to be conducted. No
contract, agreement or understanding between the Company and any other party
exists which would impede or prevent in any respect the continued use by the
Company of the entire right, title and interest of the Company in and to, any
Intellectual Property that is material to the business of the Company as now
conducted and proposed to be conducted.
4.
<PAGE> 5
xiv. The Company is not an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
b. Each of the Selling Securityholders hereby represents and
warrants as follows:
i. Such Selling Securityholder has good and marketable
title to all the shares of Stock to be sold by such Selling Securityholder
hereunder, free and clear of all liens, encumbrances, equities, security
interests and claims whatsoever, with full right and authority to deliver the
same hereunder, subject, in the case of each Selling Securityholder, to the
rights of Boston EquiServe L.P. as Custodian (herein called the Custodian) or,
in the case of the Warrant Shares or Option Shares, such Selling Securityholder
will have immediately prior to the Closing Date good and marketable title to
all the shares of stock to be sold by such Selling Securityholder hereunder,
free and clear of all liens, encumbrances, equities, security interests and
claims whatsoever, with full right and authority to deliver the same hereunder
subject, in the case of each Selling Securityholder, to the rights of the
Custodian and that upon the delivery of and payment for such shares of the
Stock hereunder, the several Underwriters will receive good and marketable
title thereto, free and clear of all liens, encumbrances, equities, security
interests and claims whatsoever.
ii. Certificates in negotiable form for the shares of the
Stock to be sold by such Selling Securityholder have been placed in custody
under a Custody Agreement for delivery under this Agreement with the Custodian
[or, in the case of the Warrant Shares or the Option Shares will be placed in
custody under a Custody Agreement for delivery under this Agreement with the
Custodian immediately prior to the Closing Date]; such Selling Securityholder
specifically agrees that the shares of the Stock represented by the
certificates so held in custody for such Selling Securityholder are subject to
the interests of the several Underwriters and the Company, that the
arrangements made by such Selling Securityholder for such custody, including
the Power of Attorney provided for in such Custody Agreement, are to that
extent irrevocable, and that the obligations of such Selling Securityholder
shall not be terminated by any act of such Selling Securityholder or by
operation of law, whether by the death or incapacity of such Selling
Securityholder (or, in the case of a Selling Securityholder that is not an
individual, the dissolution or liquidation of such Selling Securityholder) or
the occurrence of any other event; if any such death, incapacity, dissolution,
liquidation or other such event should occur before the delivery of such shares
of the Stock hereunder, certificates for such shares of the Stock shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement as if such death, incapacity, dissolution, liquidation or other event
had not occurred, regardless of whether the Custodian shall have received
notice of such death, incapacity, dissolution, liquidation or other event.
iii. Such Selling Securityholder has reviewed the
Registration Statement and Prospectus and nothing has come to the attention of
such Selling Securityholder that would lead such Selling Securityholder to
believe that on the Effective Date, solely with respect to written information
furnished to the Company by such Selling Securityholders expressly for use
therein, the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading;
and, on the Effective Date the Prospectus contained and, on the Closing Date
and any later date on which Option Stock is to be purchased, contains, solely
with respect to written information furnished to the Company by such Selling
Securityholders expressly for use therein, any untrue statement of a material
fact or omitted or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
5.
<PAGE> 6
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
a. On the basis of the representations and warranties
and subject to the terms and conditions herein set forth, the Company agrees to
issue and sell 2,689,005 shares of the Underwritten Stock to the several
Underwriters, each Selling Securityholder agrees to sell to the several
Underwriters the number of shares of the Underwritten Stock set forth in
Schedule II opposite the name of such Selling Securityholder, and each of the
Underwriters agrees to purchase from the Company and the Selling
Securityholders the respective aggregate number of shares of Underwritten Stock
set forth opposite its name in Schedule I. The price at which such shares of
Underwritten Stock shall be sold by the Company and the Selling Securityholders
and purchased by the several Underwriters shall be $___ per share. The
obligation of each Underwriter to the Company and each of the Selling
Securityholders shall be to purchase from the Company and the Selling
Securityholders that number of shares of the Underwritten Stock which
represents the same proportion of the total number of shares of the
Underwritten Stock to be sold by each of the Company and the Selling
Securityholders pursuant to this Agreement as the number of shares of the
Underwritten Stock set forth opposite the name of such Underwriter in Schedule
I hereto represents of the total number of shares of the Underwritten Stock to
be purchased by all Underwriters pursuant to this Agreement, as adjusted by
Jefferies & Company, Inc. in such manner as Jefferies & Company, Inc. deems
advisable to avoid fractional shares. In making this Agreement, each
Underwriter is contracting severally and not jointly; except as provided in
paragraphs (b) and (c) of this Section 3, the agreement of each Underwriter is
to purchase only the respective number of shares of the Underwritten Stock
specified in Schedule I.
b. If for any reason one or more of the Underwriters
shall fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 8 or 9 hereof) to
purchase and pay for the number of shares of the Stock agreed to be purchased
by such Underwriter or Underwriters, the Company or the Selling Securityholders
shall immediately give notice thereof to you, and the non-defaulting
Underwriters shall have the right within 24 hours after the receipt by you of
such notice to purchase, or procure one or more other Underwriters to purchase,
in such proportions as may be agreed upon between you and such purchasing
Underwriter or Underwriters and upon the terms herein set forth, all or any
part of the shares of the Stock which such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters fail so to
make such arrangements with respect to all such shares and portion, the number
of shares of the Stock which each non-defaulting Underwriter is otherwise
obligated to purchase under this Agreement shall be automatically increased on
a pro rata basis to absorb the remaining shares and portion which the
defaulting Underwriter or Underwriters agreed to purchase; provided, however,
that the non-defaulting Underwriters shall not be obligated to purchase the
shares and portion which the defaulting Underwriter or Underwriters agreed to
purchase if the aggregate number of such shares of the Stock exceeds 10% of the
total number of shares of the Stock which all Underwriters agreed to purchase
hereunder. If the total number of shares of the Stock which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company and the
Selling Securityholders shall have the right, within 24 hours next succeeding
the 24-hour period above referred to, to make arrangements with other
underwriters or purchasers satisfactory to you for purchase of such shares and
portion on the terms herein set forth. In any such case, either you or the
Company and the Selling Securityholders shall have the right to postpone the
Closing Date determined as provided in Section 5 hereof for not more than seven
business days after the date originally fixed as the Closing Date pursuant to
said Section 5 in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made.
If neither the non-defaulting Underwriters nor the Company shall make
arrangements within the 24-hour periods stated above for the purchase of all
the shares of the Stock which the defaulting Underwriter or Underwriters agreed
to purchase hereunder, this Agreement shall be terminated without further act
or deed and without any liability on the part of the Company or the Selling
Securityholders to any non-defaulting Underwriter
6.
<PAGE> 7
and without any liability on the part of any non-defaulting Underwriter to the
Company or the Selling Securityholders. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
c. On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions herein set
forth, the Company grants an option to the several Underwriters to purchase,
severally and not jointly, up to 450,000 shares in the aggregate of the Option
Stock from the Company at the same price per share as the Underwriters shall
pay for the Underwritten Stock. Said option may be exercised only to cover
over-allotments in the sale of the Underwritten Stock by the Underwriters and
may be exercised in whole or in part at any time (but not more than once) on or
before the thirtieth day after the date of this Agreement upon written or
telegraphic notice by you to the Company setting forth the aggregate number of
shares of the Option Stock as to which the several Underwriters are exercising
the option. Delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made as provided in Section 5 hereof. The number of
shares of the Option Stock to be purchased by each Underwriter shall be the
same percentage of the total number of shares of the Option Stock to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Stock, as adjusted by you in such manner as you deem advisable to
avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
a. The terms of the initial public offering by the
Underwriters of the Stock to be purchased by them shall be as set forth in the
Prospectus. The Underwriters may from time to time change the public offering
price after the closing of the initial public offering and increase or decrease
the concessions and discounts to dealers as they may determine.
b. The information set forth in the last paragraph on
the front cover page and under "Underwriting" in the Registration Statement,
any Preliminary Prospectus and the Prospectus (insofar as such information
relates to the Underwriters) constitutes the only information furnished by the
Underwriters to the Company for inclusion in the Registration Statement, any
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company that the statements made
therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
a. Delivery of certificates for the shares of the
Underwritten Stock and the Option Stock (if the option granted by Section 3(c)
hereof shall have been exercised not later than 7:00 A.M., San Francisco time,
on the date two business days preceding the Closing Date), and payment
therefor, shall be made at the office of Brobeck, Phleger & Harrison LLP, One
Market, San Francisco, California 94105 at 7:00 a.m., San Francisco time, on
the third (or if the stock is priced, as contemplated by Rule 15-b(1)(c) of the
Exchange Act after 4:30 p.m. Washington D.C. time, the fourth) business day
after the date of this Agreement, or at such time on such other day, not later
than seven full business days after such third or fourth as the case may be
business day, as shall be agreed upon in writing by the Company, the Selling
Securityholders and you at the time of the execution of this Agreement pursuant
to Rule 15-b(1)(a). The date and hour of such delivery and payment (which may
be postponed as provided in Section 3(b) hereof) are herein called the Closing
Date.
b. If the option granted by Section 3(c) hereof shall be
exercised after 7:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of certificates for the shares of Option
Stock, and payment therefor, shall be made at the office of Brobeck, Phleger &
Harrison
7.
<PAGE> 8
LLP, One Market Plaza, San Francisco, California 94105 at 7:00 a.m., San
Francisco time, on the third business day after the exercise of such option.
c. Payment for the Stock purchased from the Company
shall be made to the Company or its order, payment for the respective aggregate
exercise prices for the Warrant Shares and the Option Shares shall be made to
the Company or its order, and payment for the Stock purchased from the Selling
Securityholders shall be made to the Custodian, for the account of the Selling
Securityholders, in each case by one or more certified or official bank check
or checks or by wire transfer in next day funds (and the Company and the
Selling Securityholders agree not to deposit any such check in the bank on
which drawn until the day following the date of its delivery to the Company or
the Custodian, as the case may be). Such payment shall be made upon delivery
of certificates for the Stock (if physical delivery will be used) to you for
the respective accounts of the several Underwriters against receipt therefor
signed by you. Certificates for the Stock to be delivered to you shall be
registered in such name or names and shall be in such denominations as you may
request at least two business days before the Closing Date, in the case of
Underwritten Stock, and at least two business days prior to the purchase
thereof, in the case of the Option Stock. Such certificates will be made
available to the Underwriters for inspection, checking and packaging at such
location as the Underwriters may specify on the business day prior to the
Closing Date or, in the case of the Option Stock, by 3:00 p.m., New York time,
on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check or wired funds shall not have been received by you on the Closing
Date or any later date on which Option Stock is purchased for the account of
such Underwriter. Any such payment by you shall not relieve such Underwriter
from any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The Company covenants and agrees as follows:
a. The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A and (ii) not file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been
advised and furnished with a copy or to which you shall have reasonably
objected in writing or which is not in compliance with the Securities Act or
the rules and regulations of the Commission.
b. The Company will promptly notify each Underwriter in
the event of (i) the request by the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, (iii) the
institution or notice of intended institution of any action or proceeding for
that purpose, (iv) the receipt by the Company of any notification with respect
to the suspension of the qualification of the Stock for sale in any
jurisdiction, or (v) the receipt by it of notice of the initiation or
threatening of any proceeding for such purpose. The Company will make every
reasonable effort to prevent the issuance of such a stop order and, if such an
order shall at any time be issued, to obtain the withdrawal thereof at the
earliest possible moment.
c. The Company will (i) on or before the Closing Date,
deliver to you a signed copy of the Registration Statement as originally filed
and of each amendment thereto filed prior to the time the Registration
Statement becomes effective and, promptly upon the filing thereof, a signed
copy of each post-effective amendment, if any, to the Registration Statement
(together with, in each case, all exhibits thereto unless previously furnished
to you) and will also deliver to you, for distribution to the Underwriters, a
8.
<PAGE> 9
sufficient number of additional conformed copies of each of the foregoing (but
without exhibits) so that one copy of each may be distributed to each
Underwriter, (ii) as promptly as possible deliver to you and send to the
several Underwriters, at such office or offices as you may designate, as many
copies of the Prospectus as you may reasonably request, and (iii) thereafter
from time to time during the period in which a prospectus is required by law to
be delivered by an Underwriter or dealer, likewise send to the Underwriters as
many additional copies of the Prospectus and as many copies of any supplement
to the Prospectus and of any amended prospectus, filed by the Company with the
Commission, as you may reasonably request for the purposes contemplated by the
Securities Act.
d. If at any time during the period in which a
prospectus is required by law to be delivered by an Underwriter or dealer, any
event relating to or affecting the Company, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is necessary, in
the opinion of counsel for the Company or of counsel for the Underwriters, to
supplement or amend the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser of the Stock, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus so that the Prospectus as so supplemented or amended will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading. If, after the initial public offering of the Stock
by the Underwriters and during such period, the Underwriters shall propose to
vary the terms of offering thereof by reason of changes in general market
conditions or otherwise, you will advise the Company in writing of the proposed
variation, and, if in the opinion either of counsel for the Company or of
counsel for the Underwriters such proposed variation requires that the
Prospectus be supplemented or amended, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the
several Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
e. Prior to the filing thereof with the Commission, the
Company will submit to you, for your information, a copy of any post-effective
amendment to the Registration Statement and any supplement to the Prospectus or
any amended prospectus proposed to be filed.
f. The Company will cooperate, when and as requested by
you, in the qualification of the Stock for offer and sale under the securities
or blue sky laws of such jurisdictions as you may designate and, during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, in keeping such qualifications in good standing under
said securities or blue sky laws; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to qualify as
a foreign corporation in any jurisdiction in which it is not so qualified. The
Company will, from time to time, prepare and file such statements, reports, and
other documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for distribution of
the Stock.
g. During a period of five years commencing with the
date hereof, the Company will furnish to you, and to each Underwriter who may
so request in writing, copies of all periodic and special reports furnished to
stockholders of the Company and of all information, documents and reports filed
with the Commission.
h. Not later than the 45th day following the end of the
fiscal quarter first occurring after the first anniversary of the Effective
Date, the Company will make generally available to its security
9.
<PAGE> 10
holders an earnings statement in accordance with Section 11(a) of the
Securities Act and Rule 158 thereunder.
i. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, including
all costs and expenses incident to (i) the preparation, printing and filing
with the Commission and the National Association of Securities Dealers, Inc.
(the "NASD") of the Registration Statement, any Preliminary Prospectus and the
Prospectus, (ii) the furnishing to the Underwriters of copies of any
Preliminary Prospectus and of the several documents required by paragraph (c)
of this Section 6 to be so furnished, (iii) the printing of this Agreement and
related documents delivered to the Underwriters, (iv) the preparation, printing
and filing of all supplements and amendments to the Prospectus referred to in
paragraph (d) of this Section 6, (v) the furnishing to you and the Underwriters
of the reports and information referred to in paragraph (g) of this Section 6
and (vi) the printing and issuance of stock certificates, including the
transfer agent's fees. The Selling Securityholders will pay any transfer taxes
incident to the transfer to the Underwriters of the shares the Stock being sold
by the Selling Securityholders. The provisions of this paragraph (i) are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Company and the Selling Securityholders hereby agree to pay and shall
not affect any agreement which the Company and the Selling Securityholders may
make, or may have made, for the sharing of any such expenses and costs.
j. The Company agrees to reimburse you, for the account
of the several Underwriters, for blue sky fees, the filing fees incident to
securing any requested review by the NASD of the terms of the sale of the Stock
and related disbursements (including counsel fees and disbursements and cost of
printing memoranda for the Underwriters) paid by or for the account of the
Underwriters or their counsel in qualifying the Stock under state securities or
blue sky laws and in the review of the offering by the NASD.
k. The Company agrees that, without the prior written
consent of Jefferies & Company, Inc. on behalf of the Underwriters, the Company
will not, for a period of 90 days following the commencement of the public
offering of the Stock by the Underwriters, directly or indirectly, (i) sell,
offer, contract to sell, make any short sale, pledge, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or exchangeable or
exercisable for or any rights to purchase or acquire Common Stock or (ii) enter
into any swap or other agreement that transfers, in whole or in part, any of
the economic consequences of ownership of Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Stock to be sold to the Underwriters
pursuant to this Agreement, (B) shares of Common Stock issued by the Company
upon the exercise of options granted, or to be granted in the ordinary course,
under the stock option plans of the Company or upon exercise of outstanding
warrants, all as described in footnote (2) to the table under the caption
"Capitalization" in the Preliminary Prospectus, and (C) stock purchased
pursuant to the Company's 1996 Employee Stock Purchase Plan.
l. Each of the Selling Securityholders severally and not
jointly agrees with the several Underwriters and the Company that:
i. without the prior written consent of
Jefferies & Company, Inc. on behalf of the Underwriters, such Selling
Securityholder will not, for a period of 90 days following the commencement of
the public offering of the Stock by the Underwriters, directly or indirectly,
(i) sell, offer, contract to sell, make any short sale, pledge, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or exchangeable or
exercisable for or any rights
10.
<PAGE> 11
to purchase or acquire Common Stock or (ii) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to
the Stock to be sold to the Underwriters pursuant to this Agreement.
ii. in order to document the Underwriters'
compliance with the reporting and withholding provisions of applicable law with
respect to the transactions contemplated hereby, such Selling Securityholder
will deliver to you prior to the Closing Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
7. INDEMNIFICATION AND CONTRIBUTION.
a. The Company agrees to indemnify and hold harmless
each Underwriter and each person (including each partner or officer thereof)
who controls any Underwriter within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act to the fullest extent lawful from and
against any and all losses, claims, damages or liabilities, joint or several,
to which such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act, or the common law or otherwise, and the
Company agrees to reimburse each such Underwriter and controlling person for
any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities (including any amount paid in settlement
of any claim, action, suit, or proceeding) or in connection with any
investigation or inquiry of, or other proceeding which may be brought against,
the respective indemnified parties, in each case arising out of or based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement) or any post-effective
amendment thereto (including any Rule 462(b) registration statement), or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus or the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto) or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
(iii) any untrue statement or alleged untrue statement of a material fact in
any blue sky application or other document executed by the Company and filed in
any state or other jurisdiction in order to qualify any or all of the Stock
under the securities laws thereof or filed with the Commission or any
securities association or exchange; provided, however, that (1) the indemnity
agreements of the Company contained in this paragraph (a) shall not apply to
any such losses, claims, damages, liabilities or expenses if such statement or
omission was made in reliance upon and in conformity with information furnished
as herein stated or otherwise furnished in writing to the Company by or on
behalf of any Underwriter for use in any Preliminary Prospectus or the
Registration Statement or Prospectus or any such amendment thereof or
supplement thereto, and (2) the indemnity agreement contained in this paragraph
(a) with respect to any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Stock which is the subject
thereof (or to the benefit of any person controlling such Underwriter) if at or
prior to the written confirmation of the sale of such Stock a copy of the
Prospectus (or the Prospectus as amended or supplemented) was not sent or
delivered to such person and the untrue statement or omission of a material
fact contained in such Preliminary Prospectus was corrected in the Prospectus
(or the Prospectus as amended or supplemented) unless the failure is the result
of noncompliance by the Company with paragraph (c) of Section 6 hereof. The
indemnity agreements of the Company and the
11.
<PAGE> 12
Selling Securityholders contained in this paragraph (a) and the representations
and warranties of the Company and the Selling Securityholders contained in
Section 2 hereof shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Stock or any termination of this
Agreement. The foregoing indemnity agreement shall be in addition to any
liability that the Company may otherwise have to a person indemnified under
this paragraph (a).
b. Subject to the provisions of paragraph (g) of this
Section 7, the Selling Securityholders severally and not jointly agree to
indemnify and hold harmless each Underwriter and each person (including each
partner or officer thereof) who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the
fullest extent lawful from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act, or the common
law or otherwise, and the Selling Securityholders severally and not jointly
agree to reimburse each such Underwriter and controlling person for any legal
or other expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities (including any amount paid in settlement of any
claim, action, suit, or proceeding) or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading or (iii) any
untrue statement or alleged untrue statement of a material fact in any blue sky
application or other document executed by the Company and filed in any state or
other jurisdiction in order to qualify any or all of the Stock under the
securities laws thereof or filed with the Commission or any securities
association or exchange; provided, however, that (1) the indemnity agreements
of the Selling Securityholders contained in this paragraph (b) shall not apply
to any such losses, claims, damages, liabilities or expenses if such statement
or omission was made in reliance upon and in conformity with information
furnished as herein stated or otherwise furnished in writing to the Company by
or on behalf of any Underwriter for use in any Preliminary Prospectus or the
Registration Statement or Prospectus or any such amendment thereof or
supplement thereto, (2) the indemnity agreement contained in this paragraph (a)
with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Stock which is the subject
thereof (or to the benefit of any person controlling such Underwriter) if at or
prior to the written confirmation of the sale of such Stock a copy of the
Prospectus (or the Prospectus as amended or supplemented) was not sent or
delivered to such person and the untrue statement or omission of a material
fact contained in such Preliminary Prospectus was corrected in the Prospectus
(or the Prospectus as amended or supplemented) unless the failure is the result
of noncompliance by the Company with paragraph (c) of Section 6 hereof, and (3)
each Selling Securityholder shall only be liable under this paragraph with
respect to (A) information pertaining to such Selling Securityholder furnished
by or on behalf of such Selling Securityholder expressly for use in any
Preliminary Prospectus or the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto or (B) facts that would constitute
a breach of any representation or warranty of such Selling Securityholder set
forth in Section 2(b) hereof. The indemnity agreements of the Selling
Securityholders contained in this paragraph (a) and the representations and
warranties of the Selling Securityholders contained in Section 2 hereof shall
remain operative and in full force and effect regardless of any
12.
<PAGE> 13
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock or any termination of this Agreement.
The foregoing indemnity agreement shall be in addition to any liability that
the Selling Securityholders may otherwise have to a person indemnified under
this paragraph (a).
c. Each Underwriter severally agrees to indemnify and
hold harmless the Company, each of its officers who signs the Registration
Statement on his own behalf or pursuant to a power of attorney, each of its
directors, each other Underwriter and each person (including each partner or
officer thereof) who controls the Company or any such other Underwriter within
the meaning of Section 15 of the Securities Act and the Selling
Securityholders, from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act, or the common
law or otherwise and to reimburse each of them for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (as amended or as supplemented
if the Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, if such
statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in writing to the
Company by or on behalf of any Underwriter expressly for use in any Preliminary
Prospectus or the Registration Statement or Prospectus or any such amendment
thereof or supplement thereto. The indemnity agreement of each Underwriter
contained in this paragraph (c) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Stock or any
termination of this Agreement.
d. Each party indemnified under the provisions of
paragraphs (a), (b) and (c) of this Section 7 agrees that, upon the service of
a summons or other initial legal process upon it in any action or suit
instituted against it or upon its receipt of written notification of the
commencement of any investigation or inquiry of, or proceeding against, it in
respect of which indemnity may be sought on account of any indemnity agreement
contained in such paragraphs, it will promptly give written notice (herein
called the "Notice") of such service or notification to the party or parties
from whom indemnification may be sought hereunder. No indemnification provided
for in such paragraphs shall be available to any party who shall fail so to
give the Notice if the party to whom such Notice was not given was unaware of
the action, suit, investigation, inquiry or proceeding to which the Notice
would have related and the failure to give the Notice has resulted in the
forfeiture of substantive rights or defenses, but the omission so to notify
such indemnifying party or parties of any such service or notification shall
not relieve such indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than on
account of such indemnity agreement. Any indemnifying party shall be entitled
at its own expense to participate in the defense of any action, suit or
proceeding against, or investigation or inquiry of, an indemnified party. Any
indemnifying party shall be entitled, if it so elects within a reasonable time
after receipt of the Notice by giving written notice (herein called the "Notice
of Defense") to the indemnified party, to assume (alone or in conjunction with
any other indemnifying party or parties) the entire defense of such action,
suit, investigation, inquiry or proceeding, in which event such defense shall
be conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties
13.
<PAGE> 14
and reasonably satisfactory to the indemnified party or parties; provided,
however, that (i) if the indemnified party or parties reasonably determine that
there may be a conflict between the positions of the indemnifying party or
parties and of the indemnified party or parties in conducting the defense of
such action, suit, investigation, inquiry or proceeding or that there may be
legal defenses available to such indemnified party or parties different from or
in addition to those available to the indemnifying party or parties, then
counsel chosen by the indemnified party or parties (including local counsel)
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties
participate in, but not conduct, the defense, with all fees and expenses to be
paid by the indemnifying party and paid as incurred.
e. If the indemnification provided for in this Section 7
is unavailable or insufficient to hold harmless an indemnified party under
paragraph (a), (b) or (c) of this Section 7, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages or liabilities referred to in paragraph (a), (b) or (c) of this Section
7, (i) in such proportion as is appropriate to reflect the relative benefits
received by each indemnifying party from the offering of the Stock or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each
indemnifying party in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, or actions in respect thereof,
as well as any other relevant equitable considerations, provided, however in
the case of losses, claims, damages, or liabilities suffered by the Company
that the amount payable under this paragraph shall be reduced to the extent of
any contribution received by the Company from persons other than the
Underwriters who may be liable for contribution, including persons who control
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, officers of the Company who signed the Registration Statement,
and directors of the Company. The relative benefits received by the Company,
the Selling Securityholders and the Underwriters shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Stock received by the Company and the Selling Securityholders and the total
underwriting discount received by the Underwriters, as set forth in the table
on the cover page of the Prospectus, bear to the aggregate public offering
price of the Stock. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by each indemnifying party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (e) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this
paragraph (e). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities, or actions in respect thereof, referred
to in the first sentence of this paragraph (e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigation, preparing to defend or defending against any
action or claim which is the subject of this paragraph (e). Notwithstanding the
provisions of this paragraph (e), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Stock purchased by such Underwriter. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this paragraph
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will
14.
<PAGE> 15
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in paragraph (d) of this Section 7).
f. The indemnifying party will not, without the prior
written consent of each Underwriter, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not the individual party is an actual or potential party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such indemnified party from all liability
arising out of such claim, action, suit or proceeding.
g. The liability of each Selling Securityholder under
such Selling Securityholder's representations and warranties contained in
paragraph (b) of Section 2 hereof and under the indemnity and reimbursement
agreements contained in the provisions of this Section 7 and Section 11 hereof
shall be limited to an amount equal to the initial public offering price of the
stock sold by such Selling Securityholder to the Underwriters, net of the
underwriting discount. The Company and the Selling Securityholders may agree,
as among themselves and without limiting the rights of the Underwriters under
this Agreement, as to the respective amounts of such liability for which they
each shall be responsible.
8. TERMINATION. This Agreement may be terminated by you at any
time prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States
on or after the date hereof, (ii) any outbreak of hostilities or other national
or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change in
economic or political conditions in the financial markets of the United States
would, in the Underwriters' reasonable judgment, make the offering or delivery
of the Stock impracticable, (iii) suspension of trading in securities generally
or a material adverse decline in value of securities generally on the New York
Stock Exchange, the American Stock Exchange, or The Nasdaq Stock Market, or
limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of, or commencement of any proceeding or
investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and
adversely affects or will materially or adversely affect the business or
operations of the Company, (v) declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in the Underwriters' reasonable opinion has a material
adverse effect on the securities markets in the United States. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company or the Selling Securityholders to the Underwriters and
no liability of the Underwriters to the Company or the Selling Securityholders;
provided, however, that in the event of any such termination the Company agrees
to indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Stock shall be subject to
the performance by the Company and the Selling Securityholders of their
respective obligations to be performed hereunder at or prior to the Closing
Date or
15.
<PAGE> 16
any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:
a. The Registration Statement shall have become
effective; and no stop order suspending the effectiveness thereof shall have
been issued and no proceedings therefor shall be pending or threatened by the
Commission. No order suspending the qualification or registration of the Stock
under the securities or blue sky laws of any jurisdiction shall be in effect or
proceedings therefor initiated or threatened by the authorities of any such
jurisdiction.
b. The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing the Stock,
all corporate proceedings and other legal matters incident to the foregoing,
and the form of the Registration Statement and of the Prospectus (except as to
the financial statements contained therein), shall have been approved at or
prior to the Closing Date by Cooley Godward LLP, counsel for the Underwriters.
c. You shall have received from Brobeck, Phleger &
Harrison LLP, counsel for the Company and the Selling Securityholders, an
opinion, addressed to the Underwriters and dated the Closing Date, covering the
matters set forth in Annex A hereto, and if Option Stock is purchased at any
date after the Closing Date, an additional opinion from such counsel, addressed
to the Underwriters and dated such later date, confirming that the statements
expressed as of the Closing Date in such opinion remain valid as of such later
date.
d. You shall be satisfied that (i) as of the Effective
Date, the statements made in the Registration Statement and the Prospectus were
true and correct and neither the Registration Statement nor the Prospectus
omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, respectively, not misleading, (ii)
since the Effective Date, no event has occurred which should have been set
forth in a supplement or amendment to the Prospectus which has not been set
forth in such a supplement or amendment, (iii) since the respective dates as of
which information is given in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein, there has
not been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
(iv) the Company does not have any material contingent obligations which are
not disclosed in the Registration Statement and the Prospectus, (v) there are
not any pending or known threatened legal proceedings to which the Company is a
party or of which property of the Company is the subject which are material and
which are not disclosed in the Registration Statement and the Prospectus, (vi)
there are not any franchises, contracts, leases or other documents which are
required to be filed as exhibits to the Registration Statement which have not
been filed as required, (vii) the representations and warranties of the Company
herein are true and correct in all material respects as of the Closing Date or
any later date on which Option Stock is to be purchased, as the case may be,
and (viii) there has not been any material change in the market for securities
in general or in political, financial or economic conditions from those
reasonably foreseeable as to render it impracticable in your reasonable
judgment to make a public offering of the Stock, or a material adverse change
in market levels for securities in general (or those of companies in
particular) or financial or economic conditions which, in your reasonable
opinion, render it inadvisable to proceed.
e. You shall have received on the Closing Date and on
any later date on which Option Stock is purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed
16.
<PAGE> 17
by the Chief Executive Officer and the Chief Financial Officer of the Company,
stating that the respective signers of said certificate have carefully examined
the Registration Statement in the form in which it originally became effective
and the Prospectus contained therein and any supplements or amendments thereto,
and that the statements included in clauses (i) through (vii) of paragraph (d)
of this Section 9 are true and correct.
f. You shall have received on the Closing Date and on
any later date on which Option Stock is purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by an
attorney-in-fact pursuant to the Power of Attorney, stating that the
representations and warranties of the Selling Securityholders herein are true
and correct in all material respects.
g. You shall have received from Arthur Andersen LLP a
letter or letters, addressed to the Underwriters and dated the Closing Date and
any later date on which Option Stock is purchased, confirming that they are
independent public accountants with respect to the Company within the meaning
of the Securities Act and the applicable published rules and regulations
thereunder and based upon the procedures described in their letter delivered to
you concurrently with the execution of this Agreement (herein called the
"Original Letter"), but carried out to a date not more than three business days
prior to the Closing Date or such later date on which Option Stock is purchased
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such later
date, as the case may be, and (ii) setting forth any revisions and additions to
the statements and conclusions set forth in the Original Letter which are
necessary to reflect any changes in the facts described in the Original Letter
since the date of the Original Letter or to reflect the availability of more
recent financial statements, data or information. The letters shall not
disclose any change, or any development involving a prospective change, in or
affecting the business or properties of the Company or any of its subsidiaries
which, in your reasonable judgment, makes it impractical or inadvisable to
proceed with the public offering of the Stock or the purchase of the Option
Stock as contemplated by the Prospectus.
h. You shall have been furnished evidence in usual
written or telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the qualification
referred to in paragraph (f) of Section 6 hereof.
i. Prior to the Closing Date, the Stock to be issued and
sold by the Company shall have been duly authorized for quotation by the Nasdaq
National Market upon official notice of issuance.
j. On or prior to the Closing Date, you shall have
received from all directors, officers, certain beneficial holders of Common
Stock owning an aggregate of not less than 1,190,000 shares of Common Stock,
and all Selling Securityholders, stockholder agreements, in form reasonably
satisfactory to Jefferies & Company, Inc., stating that without the prior
written consent of Jefferies & Company, Inc. on behalf of the Underwriters, and
subject to the terms set forth therein, such person or entity will not, for a
period of 90 days following the commencement of the public offering of the
Stock by the Underwriters, directly or indirectly, (i) sell, offer, contract to
sell, make any short sale, pledge, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any rights to
purchase or acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences or
ownership of Common Stock, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Cooley Godward LLP, counsel for the Underwriters,
shall be satisfied that they comply in form and scope.
17.
<PAGE> 18
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and the Selling Securityholders. Any such termination shall be without
liability of the Company or the Selling Securityholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that (i) in the event of such termination,
the Company agrees to indemnify and hold harmless the Underwriters from all
costs or expenses incident to the performance of the obligations of the Company
and the Selling Securityholders under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof, and (ii) if
this Agreement is terminated by you because of any refusal, inability or
failure on the part of the Company or the Selling Securityholders to perform
any agreement herein, to fulfill any of the conditions herein, or to comply
with any provision hereof, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including reasonable
fees and disbursements of counsel) that shall have been incurred by them in
connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall
not be fulfilled, this Agreement may be terminated by the Company and the
Selling Securityholders by giving notice to you. Any such termination shall be
without liability of the Company and the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that in the event of any such
termination the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of
the Company and the Selling Securityholders under this Agreement, including all
costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to its other
obligations under Section 7 of this Agreement, the Company agrees to reimburse
all reasonable legal and other expenses incurred by the Underwriters (on a
monthly basis) in connection with investigating or defending any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
obligations under this Section 11 and the possibility that such payments might
later be held to be improper; provided, however, that (i) to the extent any
such payment is ultimately held to be improper, the persons receiving such
payments shall promptly refund them and (ii) such persons shall provide to the
Company, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of the Company, the Selling Securityholders and the
several Underwriters and, with respect to the provisions of Section 7 hereof,
the several parties (in addition to the Company, the Selling Securityholders
and the several Underwriters) indemnified under the provisions of said Section
7, and their respective personal representatives, successors and assigns.
Nothing in this Agreement is intended or shall be construed to give to any
other person, firm or corporation any legal or equitable remedy or claim under
or in respect of this Agreement or any provision herein contained. The term
"successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Stock from any of the several Underwriters.
18.
<PAGE> 19
13. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing or by telegraph and, if to the
Underwriters, shall be mailed, telegraphed or delivered to Jefferies & Company,
Inc., 11100 Santa Monica Boulevard, Suite 1000, Los Angeles, CA 90025;
Attention: Jerry M. Gluck, Esq.; with a copy to Michael J. Sullivan, Esq.,
Cooley Godward LLP, Five Palo Alto Square, Palo Alto, CA 94306-2155; and if to
the Company, shall be mailed, telegraphed or delivered to it at its office, 80
E. Sir Francis Drake Boulevard, Suite 2A, Larkspur, CA 94939; Attention: James
D. Durham; with a copy to Scott D. Lester, Esq., Brobeck, Phleger & Harrison
LLP, One Market, San Francisco, California 94105; and if to the Selling
Securityholders, shall be mailed, telegraphed or delivered to the Selling
Securityholders in care of Scott A. Lester, Esq. Brobeck, Phleger & Harrison
LLP at One Market, San Francisco, California 94105. All notices given by
telegraph shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and
effect regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of any Underwriter or controlling person
thereof, or by or on behalf of the Company or the Selling Securityholders or
their respective directors or officers, and (c) delivery and payment for the
Stock under this Agreement; provided, however, that if this Agreement is
terminated prior to the Closing Date, the provisions of paragraph (k) of
Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
[intentionally left blank]
19.
<PAGE> 20
Please sign and return to the Company and the Selling Securityholders
in care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Securityholders and the several Underwriters in accordance with its terms.
Very truly yours,
QUADRAMED CORPORATION
By___________________________
James D. Durham
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
JEFFERIES & COMPANY, INC. SELLING SECURITYHOLDERS
OPPENHEIMER & CO., INC. LISTED ON SCHEDULE II
PIPER JAFFRAY INC.
PACIFIC GROWTH EQUITIES, INC.
By: Jefferies & Company, Inc.
By___________________________
Attorney-In-Fact
By___________________________
David A. Handler
Senior Vice President
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
20.
<PAGE> 21
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
- ------------ ---------
<S> <C>
Jefferies & Company, Inc. . . . . . . . . . . . . . . . . . . .
Oppenheimer & Co., Inc. . . . . . . . . . . . . . . . . . . . . .
Piper Jaffray Inc. . . . . . . . . . . . . . . . . . . . . . . .
Pacific Growth Equities, Inc. . . . . . . . . . . . . . . . . . .
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000
============
</TABLE>
<PAGE> 22
SCHEDULE II
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
Number of
Shares
Name of Selling Securityholders to be Sold
------------------------------------- -------------
<S> <C>
James D. Durham 150,000
John V. Cracchiolo 25,000
Thomas F. McNulty 10,000
R. Kirby Godsey 40,000
Emily P. Myers 31,000
Kevin H. Arner 25,243
Sirrom Investments, Inc. 14,278
Clinton N. Parker 7,950
Bobby Pope 5,000
Donald Midkiff 2,524
-------
TOTAL 310,995
=======
</TABLE>
<PAGE> 23
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF
BROBECK, PHLEGER & HARRISON LLP
COUNSEL FOR THE COMPANY AND THE SELLING SECURITYHOLDERS
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified as a foreign corporation and in good standing
in each state of the United States of America in which its ownership or leasing
of property requires such qualification (except where the failure to be so
qualified would not have a material adverse effect on the business, properties,
financial condition, or results of operations of the Company) and has full
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement;
(ii) each of [QuadraMed Acquisition Corporation, QuadNet
Corporation and ___________] (the "Significant Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation. The capital stock of each
of the Significant Subsidiaries is owned solely by the Company.
(iii) As of June 30, 1997, the Company's authorized and outstanding
equity capitalization is as set forth under the caption "Capitalization" in the
Prospectus, and there have been no changes thereto since such date other than
as specifically contemplated by the Prospectus or upon the exercise of
outstanding options or warrants disclosed in the Prospectus; the capital stock
of the Company conforms in all material respects to the description thereof
contained in the Prospectus; proper corporate proceedings have been taken
validly to authorize such authorized capital stock; all of the outstanding
shares of such capital stock (including the Underwritten Stock and the shares
of Option Stock issued, if any) have been duly and validly issued and, assuming
payment therefor as provided in the Underwriting Agreement, are fully paid and
nonassessable; any Option Stock purchased after the Closing Date, when issued
and delivered to and paid for by the Underwriters as provided in the
Underwriting Agreement, will have been duly and validly issued and be fully
paid and nonassessable; and, except for rights that have been waived, there are
no preemptive rights of, or rights of refusal in favor of, stockholders with
respect to the Stock, or the issue and sale thereof, pursuant to the
Certificate of Incorporation or Bylaws of the Company, and, to the knowledge of
such counsel, except for rights that have been waived, there are no contractual
preemptive rights or rights of first refusal or co-sale with respect to the
Stock being sold by the Selling Securityholders or the issue and sale of the
Stock;
(iv) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or contemplated by the Commission;
(v) the Registration Statement and the Prospectus (except as to
the financial statements and schedules and other financial and statistical data
derived therefrom, as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the Securities Act
and with the rules and regulations of the Commission thereunder;
(vi) the information required to be set forth in the Registration
Statement in answer to Item 10 (insofar as it relates to such counsel) of Form
S-3 and the information contained in the Prospectus under "Executive
Compensation and Other Information Stock Options" and "Description of Capital
Stock" is accurately and adequately set forth therein in all material respects;
<PAGE> 24
(vii) to the best of such counsel's knowledge, there are no
franchises, contracts, leases, documents or legal proceedings, pending or
threatened, which, in the opinion of such counsel, are of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement, which are not described and filed as
required;
(viii) the Underwriting Agreement has been duly authorized, executed
and delivered by the Company;
(ix) the Underwriting Agreement has been duly executed and
delivered by or on behalf of the Selling Securityholders and the Custody
Agreement between the Selling Securityholders and Boston EquiServe, L.P., as
Custodian, and the Power of Attorney referred to in such Custody Agreement have
been duly executed and delivered by the several Selling Securityholders;
(x) the issue and sale by the Company of the shares of Stock sold
by the Company as contemplated by the Underwriting Agreement will not violate,
or result in a breach of, the Certificate of Incorporation or Bylaws of the
Company or any material agreement or instrument known to such counsel to which
the Company is a party or any applicable law or regulation, or so far as is
known to such counsel, any order, writ, injunction or decree, of any
jurisdiction, court or governmental instrumentality having jurisdiction over
the Company;
(xi) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;
(xii) good and marketable title to the shares of Stock sold by the
Selling Securityholders under the Underwriting Agreement, free and clear of all
liens, encumbrances, equities, security interests and claims, has been
transferred to the Underwriters who have severally purchased such shares of
Stock under the Underwriting Agreement, assuming for the purpose of this
opinion that the Underwriters purchased the same in good faith without notice
of any adverse claims;
(xiii) based insofar as factual matters with respect to the stock to
be sold by the Selling Securityholders are concerned solely upon certificates
of the Selling Securityholders, the accuracy of which such counsel have no
reason to question, no consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated in the Underwriting Agreement, except such as have
been obtained under the Securities Act and such as may be required under state
securities or blue sky laws in connection with the purchase and distribution of
the Stock by the Underwriters; and
(xiv) the Stock issued and sold by the Company will have been duly
authorized for quotation on the Nasdaq National Market upon official notice of
issuance.
____________________________
Counsel rendering the foregoing opinion shall also state therein that
such counsel has no reason to believe that the Registration Statement (except
as to the financial statements and schedules and other financial and
statistical data derived therefrom, as to which such counsel need not express
any opinion or belief) at the Effective Date contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or that the
Prospectus (except as to the financial statements and schedules and other
financial and statistical data derived therefrom, as to which such counsel need
not express any opinion or belief) as of its date or at the Closing Date (or
any later date on which Option Stock is purchased), contained or contains any
untrue statement of
<PAGE> 25
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States, of the State of Delaware or of
the State of California, upon opinions of local counsel reasonably satisfactory
in form and scope to counsel for the Underwriters and, as to questions of fact,
upon representations or certificates of officers of the Company and of
government officials reasonably satisfactory in form and substance to counsel
for the Underwriters. Copies of any opinions or certificates so relied upon
shall be delivered to the Representatives and to counsel for the Underwriters,
and the foregoing opinion shall also state that counsel knows of no reason the
Underwriters are not entitled to rely upon the opinions of such local counsel.
<PAGE> 1
Exhibit 5.1
October 15, 1997
QuadraMed Corporation
80 East Sir Francis Drake Blvd., Ste. 2A
Larkspur, California 94939
Ladies and Gentlemen:
We have acted as counsel to QuadraMed Corporation, a Delaware
corporation (the "Company"), in connection with its registration of an aggregate
of 3,000,000 shares of its common stock, of which 2,689,005 shares are proposed
to be issued by the Company and 310,995 shares are proposed to be sold by
certain stockholders of the Company, plus an over-allotment of 450,000 shares
offered by the Company (the "Shares"), all as described in the Company's
Registration Statement on Form S-3, filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Registration
Statement"). The Shares are to be sold pursuant to an Underwriting Agreement to
be entered into among the Company and Jefferies & Company, Inc., Oppenheimer &
Co., Inc., Piper Jaffray Inc. and Pacific Growth Equities, Inc. as
representatives of the several underwriters (the "Underwriters") named in such
Underwriting Agreement.
In connection with this opinion, we have (i) examined and relied upon
the Registration Statement and related Prospectus, the Company's Second Amended
and Restated Certificate of Incorporation, the Company's Bylaws and the
originals or copies certified to our satisfaction of such records, documents,
certificates, memorandum or other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below and (ii)
assumed that the Shares will be sold by the Underwriters at a price established
by the Pricing Committee of the Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Shares have been duly authorized, and, when issued and sold by
the Company and when sold by certain stockholders of the Company in accordance
with the terms of the Underwriting Agreement, will be validly issued, fully
paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus which is part of the Registration Statement.
<PAGE> 2
QuadraMed Corporation October 15, 1997
Page 2
It is understood that this opinion is to be used only in connection
with the offer and sale of the Shares while the Registration Statement is in
effect.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 10.39
July 1, 1997
Lemuel C. Stewart
Executive Vice President and President - EDI Division
QuadraMed Corporation
4010 Bush Lake Way
Glen Allen, VA 23060
Dear Mr. Stewart:
We are pleased to inform you that the Board of Directors (the "Board")
of QuadraMed Corporation (the "Company") has authorized an employment package
for you which will provide certain assurances concerning the terms and
conditions of your continued employment with the Company and will allow you to
participate in a program of severance benefit payments should your employment
terminate. The purpose of this letter agreement (the "Agreement") is to
document the terms of your employment package by providing you with a formal
employment contract.
The Company considers it essential to the continuing operation of the
Company and in the best interests of its stockholders to assure the continuous
dedication of key management personnel. It is recognized in the context of
public ownership that a termination of an employee's employment without cause
may be sought and that such circumstances could prove distracting to key
executives and detrimental to the ongoing management and administration of the
Company. Such distraction is not in the best interest of the stockholders of
the Company. Accordingly, the Board has determined to discourage the
inevitable distraction to you in the face of potentially disturbing
circumstances inherent in any uncertainty regarding your employment status.
This Agreement is intended to secure and encourage your ongoing retention by
providing separation benefits in the event that your employment is altered as
hereinafter described. In order to induce you to remain in the employ of the
Company, and in consideration of your agreement set forth in Sections 10, 11,
12 and 13 of Part Two hereof, the Company agrees to pay the severance payments
and benefits set forth in this Agreement, under the circumstances described
herein.
This Agreement supersedes any written or oral employment agreement
between you and the Company prior to the date hereof.
Part One of this Agreement sets forth certain definitional provisions
to be in effect for purposes of determining your benefit entitlements. Part
Two specifies the terms and conditions which will apply to your continued
employment with the Company, including the severance payments and benefits to
which you will become entitled in the event your employment should be
terminated. Part Two concludes this Agreement with a series of general terms
and conditions applicable to your employment benefits.
<PAGE> 2
PART ONE -- DEFINITIONS
DEFINITIONS. For purposes of this Agreement, including in particular
the severance payments and benefits to which you may become entitled under Part
Two, the following definitions will be in effect:
"CHANGE IN CONTROL" means:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or dissolution of
the Company;
(iii) a transfer of all or substantially all of the Company's assets
pursuant to a partnership or joint venture agreement or similar arrangement
where the Company's resulting interest is less than fifty percent (50%);
(iv) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held the stock
immediately prior to such merger;
(v) on or after the date hereof, a change in ownership of the
Company through an action or series of transactions, such that any person is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the securities of the
combined voting power of the Company's outstanding securities;
(vi) a majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Board prior to the date of such appointment
of election; or
(vii) the occurrence of any other event constituting a "change in
control" under Code Section 280G or the Treasury regulations promulgated
thereunder.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"EMPLOYEE" means Lemuel C. Stewart.
"EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under
Section 3 of ERISA.
"EMPLOYMENT PERIOD" means the period of your employment with the
Company governed by the terms and provisions of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as in effect from time to time.
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<PAGE> 3
"INVOLUNTARY TERMINATION" means the termination of your employment
with the Company:
(i) involuntarily upon your discharge, dismissal or the Company's
failure to renew this Agreement pursuant to Section 3 of Part Two, whether or
not in connection with a Change in Control; or
(ii) voluntarily or involuntarily, provided such termination occurs
in connection with (a) a change in your position with the Company which
materially reduces your level of responsibility or changes your title from
Executive Vice President and President - EDI Division, (b) a reduction in your
level of compensation (including base salary, fringe benefits and any
non-discretionary bonuses or other incentive payments earned pursuant to
objective standards or criteria) or (c) a relocation of your principal place of
employment by more than forty-five (45) miles and such change, reduction or
relocation is effected without your written concurrence.
"OPTION" means any option granted to you under the Stock Option Plan
which is outstanding at the time of your Involuntary Termination.
"STOCK OPTION PLAN" means the Company's 1996 Stock Incentive Plan
(including the predecessor 1994 Stock Option Plan), as amended through the date
hereof.
"TERMINATION FOR CAUSE" will mean an Involuntary Termination of your
employment for (i) one or more alleged acts of fraud, embezzlement,
misappropriation of proprietary information, misappropriation of the Company's
trade secrets or other confidential information, a verifiable breach of your
fiduciary duties to the Company or any other verifiable misconduct adversely
affecting the business reputation of the Company in a material manner or (ii)
your failure to devote your full working time and effort to the performance of
your duties hereunder; provided, however, you will have the right to perform
incidental services as are necessary in connection with (a) your private
passive investments, (b) your charitable or community activities and (c) your
participation in trade or professional organizations, but only to the extent
such incidental services do not materially interfere with the performance of
your services hereunder.
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<PAGE> 4
PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT
The following terms and conditions will govern your employment with
the Company throughout the Employment Period and will also, to the extent
indicated below, remain in effect following your termination date.
1. EMPLOYMENT AND DUTIES. The Company will continue to employ
you as an executive officer in the position of Executive Vice President and
President - EDI Division. You agree to continue in such employment for the
duration of the Employment Period and to perform in good faith and to the best
of your ability all services which may be required of you in your executive
position and to be available to render such services at all reasonable times
and places in accordance with reasonable directives and assignments issued by
the Board. During your Employment Period, you will devote your full time and
effort to the business and affairs of the Company within the scope of your
executive office. Your principal place of operations will be at the Company's
offices in Richmond, Virginia.
2. TERM OF AGREEMENT. This Agreement shall be effective as of
the date hereof. The term of this Agreement shall continue in effect from such
date for a period of two (2) years from such date, subject to the provisions of
this Part Two, unless sooner terminated by the parties in accordance with the
provisions hereof. For and in consideration of his entering into this
Agreement, Employee shall not be an employee-at-will, but shall be hereafter
employed for a definite term. No termination or expiration of this Agreement
shall affect any rights, obligations or liabilities of Employee or the Company
that shall have accrued on or prior to the date of termination or expiration.
3. AUTOMATIC EXTENSION. Commencing on the second anniversary of
the effective date hereof, and on each succeeding anniversary of the date
hereof, the term of this Agreement shall automatically be extended for one (1)
additional year unless, not later than three (3) months preceding such
anniversary date, the Company shall have given written notice pursuant to
Section 7 of Part Three that it will not extend the term of this Agreement.
4. COMPENSATION.
A. For service in the 1997 calendar year, your base
salary will be paid at the annual rate of One Hundred Seventy-Five Thousand
Dollars ($175,000), on a pro rated basis. Your annual rate of base salary may
be subject to adjustment each calendar year by the Board.
B. Your base salary will be paid at periodic intervals
in accordance with the Company's payroll practices for salaried employees.
C. You will be entitled to such bonuses (if any) for
service rendered during the Employment Period as the Board may determine in its
sole discretion and based upon the recommendation of the Company's Compensation
Committee and such additional factors as the Board deems appropriate, including
your individual performance and the Company's financial results.
D. The Company will deduct and withhold, from the
compensation payable to you hereunder, any and all applicable federal, state
and local income and employment withholding
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<PAGE> 5
taxes and any other amounts required to be deducted or withheld by the Company
under applicable statute or regulation.
5. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement
from the Company for all customary, ordinary and necessary business expenses
incurred by you in the performance of your duties hereunder, provided you
furnish the Company with vouchers, receipts and other substantiation of such
expenses in accordance with Company policies.
6. FRINGE BENEFITS. During the Employment Period, you will be
eligible to participate in any group life insurance plan, group medical and/or
dental insurance plan, accidental death and dismemberment plan, short-term
disability program and other employee benefit plans, including profit sharing
plans, cafeteria benefit programs and stock purchase and option plans, which
are made available to executives and for which you qualify.
7. VACATION. You will accrue four (4) weeks of paid vacation
benefits during each calendar year of the Employment Period in accordance with
the Company policy in effect for executive officers.
8. DEATH OR DISABILITY.
A. Upon your death or disability during the Employment
Period, the employment relationship created pursuant to this Agreement will
immediately terminate, and no further compensation will become payable to you
pursuant to Part Two, Section 4. In connection with such termination by reason
of death, the Company will only be required to pay you (or your estate) any
unpaid compensation earned under Part Two, Section 4 for services rendered
through the date of your death, together with a special termination payment
equal to the additional amount of base salary you would have earned hereunder
had your employment continued for an additional thirty (30) days. In
connection with such termination by reason of disability, the Company will be
required to pay to you any unpaid compensation earned under Part Two, Section 4
for services rendered through the date of your disability, together with the
severance benefits set forth in Section 9 below.
B. You will be deemed disabled if you are so
characterized pursuant to the terms of the Company's disability insurance
policies applicable to you from time to time.
C. Upon death or disability the terms of the Stock
Option Plan will apply.
9. SEVERANCE BENEFITS.
A. You will be entitled to receive the severance
benefits specified below in the event there should occur on the termination of
your employment by reason of disability or an Involuntary Termination of your
employment (other than a Termination for Cause) which is not effected in
connection with a Change in Control:
(i) SEVERANCE BENEFIT. The Company will make a
severance payment to you, in one lump sum within thirty (30) days of the date
of your Involuntary Termination, in an aggregate amount equal to the average
annual rate of base salary paid to you by the Company for service rendered in
the two (2) immediately preceding calendar years. You may elect, in your sole
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<PAGE> 6
discretion, to have the severance benefit payable pursuant to this Section 9.A.
(i) in monthly installments over a one year period following the date of your
Involuntary Termination.
(ii) WELFARE BENEFITS. For a period of twelve
(12) months, Employee (and his dependents, as applicable) shall be provided by
the Company with the same life, health and disability plan participation,
benefits and other coverages to which he was entitled as an employee
immediately before the disability or the Involuntary Termination. In the event
that under applicable law or the terms of the relevant Employee Benefit Plans
such participation, benefits and/or coverage cannot be provided to Employee
following his Involuntary Termination, such coverage and/or benefits shall be
provided directly by the Company pursuant to this Agreement on a comparable
basis. In its sole discretion, the Company may obtain such coverage and
benefits for Employee through private insurance acquired at the Company's
expense. Amounts paid or payable to or on behalf of Employee pursuant to any
"employee welfare benefit plan," as defined in ERISA, providing health and/or
disability benefits, that is sponsored by the Company or an affiliate of the
Company, shall be credited against amounts due under this Section 9.A.(ii). To
the maximum extent permitted by applicable law, the benefits provided under
this Section 9.A.(ii) shall be in discharge of any obligations of the Company
or any rights of Employee under the benefit continuation provisions under
Section 4980A of the Code and Part VI of Title I of ERISA ("COBRA") or any
other legislation of similar import.
B. You will be entitled to receive the severance benefits
specified below in the event there should occur an Involuntary Termination of
your employment (other than a Termination for Cause) which is effected in
connection with a Change in Control. Any Involuntary Termination of your
employment within twelve (12) months of the occurrence of a Change in Control
shall be automatically deemed to be "effected in connection with a Change in
Control."
(i) SEVERANCE BENEFIT. The Company will make a
severance payment to you, in one lump sum within thirty (30) days of the date
of your Involuntary Termination, in an aggregate amount equal to the average
annual rate of base salary paid to you by the Company for service rendered in
the two (2) immediately preceding calendar years. You may elect, in your sole
discretion, to have the severance benefit payable pursuant to this Section
9.B.(i) in monthly installments over a one year period following the date of
your Involuntary Termination.
(ii) WELFARE BENEFITS. For a period of twelve
(12) months, Employee (and his dependents, as applicable) shall be provided by
the Company with the same life, health and disability plan participation,
benefits and coverages to which he was entitled as an employee immediately
before the Involuntary Termination. In the event that under applicable law or
the terms of the relevant Employee Benefit Plans such participation, benefits
and/or coverage cannot be provided to Employee following his Involuntary
Termination, such coverage and/or benefits shall be provided directly by the
Company pursuant to this Agreement on a comparable basis. In its sole
discretion, the Company may obtain such coverage and benefits for Employee
through private insurance acquired at the Company's expense. Amounts paid or
payable to or on behalf of Employee pursuant to any "employee welfare benefit
plan", as defined in ERISA, providing health and/or disability benefits, that
is sponsored by the Company or an affiliate of the Company, shall be credited
against amounts due under this Section 9.B.(ii). To the maximum extent
permitted by applicable law, the benefits provided under this Section 9.B.(ii)
shall be in discharge of any obligations of the Company or any rights of
Employee under the benefit continuation provisions under COBRA or any other
legislation of similar import.
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<PAGE> 7
(iii) OPTION ACCELERATION. Each of your Options
under the Stock Option Plan will (to the extent not then otherwise exercisable)
automatically accelerate so that each such Option will become immediately
exercisable for the total number of shares purchasable thereunder. Each such
accelerated Option, together with all of your other vested Options, will remain
exercisable for a period of three (3) years following your Involuntary
Termination and may be exercised for any or all of the accelerated shares in
accordance with the exercise provisions of the Option agreement evidencing the
grant.
10. RESTRICTIVE COVENANT. During the Employment Period, you will
not directly or indirectly, whether for your own account or as an employee,
consultant or advisor, provide services to any business enterprise other than
the Company, unless otherwise authorized by the Company in writing.
11. NON-SOLICITATION AND NON-DISPARAGEMENT. During any period for
which you are receiving compensation payments pursuant to Part Two, Section 4
and one (1) year thereafter, you will not directly or indirectly (i) solicit
any Company employee, independent contractor or consultant to leave the
Company's employ or otherwise terminate such person's relationship with the
company for any reason or interfere in any other manner with the employment or
other relationships at the time existing between the Company and its current
employees, independent contractors or consultants, (ii) solicit any of the
Company's customers for products or services substantially similar to those
offered by the Company, or (iii) disparage the Company or any of its
shareholders, directors, officers, employees or agents.
12. CONFIDENTIALITY.
A. You hereby acknowledge that the Company may, from
time to time during the Employment Period, disclose to you confidential
information pertaining to the Company's business and affairs and client base,
including (without limitation) customer lists and accounts, other similar items
indicating the source of the Company's income and information pertaining to the
salaries, duties and performance levels of the Company's employees. You will
not, at any time during or after such Employment Period, disclose to any third
party or directly or indirectly make use of any such confidential information,
including (without limitation) the names, addresses and telephone numbers of
the Company's customers, other than in connection with, and in furtherance of,
the Company's business and affairs. Nothing contained in this paragraph shall
be construed to prevent Employee from disclosing the amount of his salary.
B. All documents and data (whether written, printed or
otherwise reproduced or recorded) containing or relating to any such
proprietary information of the Company which come into your possession during
the Employment Period will be returned by you to the Company immediately upon
the termination of the Employment Period or upon any earlier request by the
Company, and you will not retain any copies, notes or excerpts thereof.
Notwithstanding the foregoing, Employee shall be entitled to retain his file or
rolodex containing names, addresses and telephone numbers and personal diaries
and calendars; provided, however, that Employee shall continue to be bound by
the terms of Section 12.A. above to the extent such retained materials
constitute confidential information.
C. Your obligations under this Section 12 will continue
in effect after the termination of your employment with the Company, whatever
the reason or reasons for such
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<PAGE> 8
termination, and the Company will have the right to communicate with any of
your future or prospective employers concerning your continuing obligations
under this Section 12.
13. OWNERSHIP RIGHTS.
A. All materials, ideas, discoveries and inventions
pertaining to the Company's business or clients, including (without limitation)
all patents and copyrights, patent applications, patent renewals and extensions
and the names, addresses and telephone numbers of customers, will belong solely
to the Company.
B. All materials, ideas, discoveries and inventions
which you may devise, conceive, develop or reduce to practice (whether
individually or jointly with others) during the Employment Period will be the
sole property of the Company and are hereby assigned by you to the Company,
except for any idea, discovery or invention (i) for which no Company equipment,
supplies, facility or trade secret information is used, (ii) which is developed
entirely on your own time and (iii) which neither (a) relates at the time of
conception or reduction to practice, to the Company's business or any actual or
demonstrably-anticipated research or development program of the Company nor (b)
results from any work performed by you for the Company. The foregoing
exception corresponds to the assignment of inventions precluded by California
Labor Code Section 2870, attached as Exhibit A.
C. You will, at all times whether during or after the
Employment Period, assist the Company, at the Company's sole expense, in
obtaining, maintaining, defending and enforcing all legal rights and remedies
of the Company, including, without limitation, patents, copyrights and other
proprietary rights of the Company. Such assistance will include (without
limitation) the execution of documents and assistance and cooperation in legal
proceedings.
D. You will continue to be bound by all the terms and
provisions of your Proprietary Information Agreement with the Company, and
nothing in this document will be deemed to modify or affect your duties and
obligations under those other agreements.
14. TERMINATION OF EMPLOYMENT.
A. The Company (or any successor entity resulting from a
Change in Control) may terminate your employment under this Agreement at any
time for any reason, with or without cause, by providing you with at least
seven (7) days prior written notice. However, such notice requirement will not
apply in the event there is a Termination for Cause under subparagraph D below.
B. In the event there is a termination of your
employment by reason of disability or is an Involuntary Termination of your
employment with the Company (other than Termination for Cause) during the
Employment Period, you will become entitled to the benefits specified in Part
Two, Section 9 in addition to any unpaid compensation earned by you under Part
Two, Section 4 for services rendered prior to such termination.
C. Should your employment with the Company terminate by
reason of your death during the Employment Period, no severance benefits will
be payable to you under Part Two, Section 9, and only the limited death
benefits provided under Part Two, Section 8 will be payable.
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<PAGE> 9
D. The Company may at any time, upon written notice,
terminate your employment hereunder for any act qualifying as a Termination for
Cause. Such termination will be effective immediately upon such notice.
E. Upon such Termination for Cause, the Company will
only be required to pay you any unpaid compensation earned by you pursuant to
Part Two, Section 4 for services rendered through the date of such termination,
and no termination or severance benefits will be payable to you under Part Two,
Section 9.
PART THREE -- MISCELLANEOUS PROVISIONS
1. MITIGATION. Employee shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise. The provisions of this Agreement, and
any payment provided for hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish Employee's existing rights which would accrue
solely as a result of the passage of time, under any Company Employee Benefit
Plan, "Payroll practice" (as defined in ERISA), compensation arrangement,
incentive plan, stock option or other stock-related plan.
2. SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of the Company and any successor of the Company, including, without
limitation, any corporation or corporations acquiring directly or indirectly
all or substantially all of the stock, business or assets of the Company
whether by merger, consolidation, division, sale or otherwise (and such
successor shall thereafter be deemed "the Company" for the purposes of this
Agreement). The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
entitling Employee to the benefits hereunder, as though Employee was subject to
Involuntary Termination in connection with a Change in Control. This Agreement
shall be binding upon and inure to the benefit of Employee, his successors,
assigns, executors, administrators or beneficiaries.
3. DEATH. Should you die before receipt of all the separation
payments to which you may become entitled under Part Two, Section 8, then such
payment or payments will be made, on the due date or dates hereunder had you
survived, to the executors or administrators of your estate. Should you die
before you exercise your outstanding vested options, then each such option may
be exercised, within twelve (12) months after your death, by the executors or
administrators of your estate or by person to whom the option is transferred
pursuant to your will or in accordance with the laws of inheritance. In no
event, however, may any such vested option be exercised after the specified
expiration date of the option term.
4. INDEMNIFICATION. The indemnification provisions for officers
and directors under the Company's Bylaws will (to the maximum extent permitted
by law) be extended to you, during the period following your Involuntary
Termination, with respect to any and all matters, events or transactions
occurring or effected during your Employment Period.
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<PAGE> 10
5. MISCELLANEOUS. The provisions of this Agreement will be
construed and interpreted under the laws of the State of California. This
Agreement incorporates the entire Agreement between you and the Company
relating to the terms of your employment and the subject of severance benefits
and supersedes all prior agreements and understandings with respect to such
subject matter. This Agreement may only be amended by written instrument
signed by you and an authorized officer of the Company.
6. ARBITRATION. Any controversy which may arise between you and
the Company with respect to the construction, interpretation or application of
any of the terms, provisions, covenants or conditions of this Agreement or any
claim arising from or relating to this Agreement will be submitted to final and
binding arbitration in San Francisco, California in accordance with the rules
of the American Arbitration Association then in effect.
7. NOTICES. Any notice required to be given under this Agreement
shall be deemed sufficient, if in writing, and sent by certified mail, return
receipt requested, via overnight courier, or hand delivered to the Company at
80 East Sir Francis Drake Boulevard, Suite 2A, Larkspur, California 94939, and
to Employee at his most recent address reflected in the permanent Company
records. Copies of each such notice delivered by either the Company or
Employee shall be provided to each current member of the Board at each such
director's current address as listed in the Company's records.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Please indicate your acceptance of the foregoing provisions of this
Agreement by signing the enclosed copy of this Agreement and returning it to
the Company.
Very truly yours,
QUADRAMED CORPORATION
By: /S/ KEITH M. ROBERTS
--------------------------------------
Title: Vice President and General Counsel
-----------------------------------
ACCEPTED BY AND AGREED TO:
/s/ LEMUEL C. STEWART, JR.
- --------------------------------------
Lemuel C. Stewart, Jr.
Dated: July 1, 1997
---------------------------------
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EXHIBIT A
Section 2870. APPLICATION OF PROVISION PROVIDING THAT EMPLOYEE WILL
ASSIGN OR OFFER TO ASSIGN RIGHTS IN INVENTION TO EMPLOYER.
(a) Any provision in an employment agreement which provides that
an employee will assign, or offer to assign, any of his or her rights in an
invention to his or her employer will not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the employee for
his employer.
(b) To the extent a provision in an employment agreement purports
to require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
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