<PAGE> 1
As filed with the Securities and Exchange Commission on April 21, 1998
Registration No. 333-44985
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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QUADRAMED CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 7371 52-1992861
<S> <C> <C>
(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, ESQ.
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:
SCOTT D. LESTER, ESQ.
BROBECK, PHLEGER & HARRISON LLP
ONE MARKET
SPEAR STREET TOWER
SAN FRANCISCO, CA 94105
(415) 442-0900
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Approximate date of commencement of proposed sale to the public:
From time to time 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. [X]
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. [ ]
----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C>
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE(1)
- ---------------------------- ---------- ----------------- ------------------- --------------------
Common Stock, par value $.01 2,803,515 $19.06 $53,434,996 $15,763
per share..................
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee based on
the average of the high and low prices for the Common Stock as reported on the
Nasdaq National Market on January 23, 1998 in accordance with Rule 457 under the
Securities Act of 1933.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED APRIL 21, 1998
2,803,515 SHARES
QUADRAMED CORPORATION
COMMON STOCK
-----------------
The 2,803,515 shares (the "Resale Shares") of Common Stock, $.01
par value per share (the "Common Stock"), of QuadraMed Corporation ("QuadraMed"
or the "Company") which may be sold from time to time hereby (the "Offering")
are comprised of (i) 1,831,291 shares of Common Stock which may be offered for
resale by certain shareholders of the Company named herein (the "Shareholders")
and (ii) 972,224 shares of Common Stock issuable upon exercise of certain
warrants to purchase Common Stock (the "Warrants") which are being registered
hereunder and may be offered for resale by the holders thereof named herein (the
"Warrantholders" and together with the Shareholders, the "Selling Stockholders")
following exercise of the Warrants and issuance of such shares. See "Selling
Stockholders." The Company will not receive any proceeds from the sale of the
Resale Shares. However, the Company will receive the exercise price payable upon
exercise of any Warrant covering any Resale Shares to be offered and sold
pursuant to this Prospectus.
The Resale Shares may be sold from time to time by the Selling
Stockholders directly, in underwritten offerings or in ordinary brokerage
transactions at prices at or near the market price or in other privately
negotiated transactions on terms to be negotiated at the time of sale. Usual and
customary or specifically negotiated underwriting discounts, brokerage fees or
commissions may be paid by the Selling Stockholders in connection with such
sales. To the extent required, the specific shares to be sold, the terms of the
offering, including price, the names of any broker-dealer or underwriter, and
any applicable commission, discount or other compensation with respect to a
particular sale will be set forth in an accompanying Prospectus Supplement. See
"Plan of Distribution."
The Company has agreed to bear all expenses (other than
commissions or discounts of underwriters, dealers or agents or the fees and
expenses of their counsel) in connection with the registration and sale of the
Resale Shares being registered hereby. The Company has agreed to indemnify the
Selling Stockholders, and the Selling Stockholders have agreed to indemnify the
Company, against certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Plan of Distribution" for possible
indemnification arrangements for broker-dealers and underwriters.
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "QMDC." On , 1998, the reported last sale price of
the Common Stock on the Nasdaq National Market was $ per share.
-------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------------------
THE SELLING STOCKHOLDERS AND ANY BROKER-DEALERS THAT PARTICIPATE
IN THE DISTRIBUTION OF ANY OF THE RESALE SHARES MAY BE DEEMED TO BE
"UNDERWRITERS" WITHIN THE MEANING OF THE SECURITIES ACT, AND ANY COMMISSION
RECEIVED BY THEM AND ANY PROFIT ON THE RESALE SHARES PURCHASED BY THEM MAY BE
DEEMED TO BE UNDERWRITING COMMISSIONS OR DISCOUNTS UNDER THE SECURITIES ACT. SEE
"PLAN OF DISTRIBUTION."
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, 1998.
<PAGE> 3
PROSPECTUS SUMMARY
The following is a summary of certain information contained
elsewhere in this Prospectus and is not intended to be a complete description of
the matters covered in this Prospectus. This summary is subject to and qualified
in its entirety by reference to the more detailed information contained
elsewhere in this Prospectus and in the documents incorporated by reference in
this Prospectus. Stockholders are urged to read carefully the entire Prospectus.
As used in this Prospectus, unless otherwise indicated or the context otherwise
requires, all references to "QuadraMed" or the "Company" refer to QuadraMed
Corporation and, where the context requires, its subsidiaries.
This Prospectus contains forward-looking statements about future
results which are subject to risks and uncertainties. QuadraMed's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors."
THE COMPANY
QuadraMed Corporation develops, markets and sells software
products and services designed to enable health care providers and payors to
increase operational efficiency, improve cash flow, measure the cost of care and
effectively administer managed care contracts. The Company's suite of products
is an integrated offering of electronic data interchange ("EDI"), financial
management and decision support and compliance solutions for both providers and
payors. In addition, the Company provides compliance, consulting and business
office outsourcing services.
Electronic Data Interchange. These products enable the editing and
formatting of all claims submitted to payors to help ensure accuracy and
completeness, which results in more efficient reimbursement of third party
claims. The Company collects and utilizes detailed clinical and financial
information from customers who license its EDI products. This data, which is
supplemented with similar, publicly-available information, forms the basis of
the Company's proprietary databases for its decision support products.
Financial Management Products. These products utilize the enhanced
data stream created by the Company's EDI products to allow providers to track
payor contract terms and review medical billing information to ensure that bills
are properly coded and include all services rendered. These capabilities
facilitate a provider's ability to obtain timely and accurate reimbursement and
to administer and measure the profitability of managed care contracts. Further,
the Company offers a product that is designed to improve the ability of health
care providers to prevent Medicare and Medicaid fraud and abuse by identifying
potentially fraudulent coding in their medical bills. In addition, the Company's
electronic document imaging products allow its customers to improve work flow
and move toward a paperless office environment.
Decision Support Products. These products include database
analysis software and national and regional benchmark data that enable customers
to perform clinical, financial and marketing analyses. These products utilize
the enhanced data stream created by the Company's EDI and financial management
products to build proprietary databases that enable providers to measure more
accurately the resources consumed in the provision of care and to compare
clinical outcomes against the associated costs.
Business Office Outsourcing and Cash Flow Management Services.
These services are offered to health care providers, many of which are
recognizing the value of outsourcing their business office operations to reduce
costs, increase cash flow and improve operating efficiencies. The Company
believes that it possesses a significant advantage in the provision of
outsourcing services due to its ability to use its own QuanTIM(R) suite of
software products and its centralized cash flow management operations.
Compliance and Consulting Products. These services are offered
(i) to improve the ability of healthcare providers to prevent Medicare and
Medicaid fraud and abuse by identifying potentially fraudulent coding in a
medical bill, and (ii) to assist clients in increasing the efficiency of the
business office. QuadraMed offers a comprehensive compliance program, including
compliance assessment, auditing and education expertise through a team of over
100 credentialed healthcare attorneys, medical records professionals, registered
nurses and physicians. These services are augmented by the implementation of
QuadraMed's integrated compliance software products. In addition, QuadraMed
offers consulting and education services in the areas of managed care contract
performance and negotiation, clinically oriented, patient-focused data analysis
and financial management.
The Company is incorporated under the laws of the State of
Delaware. The Company's executive offices are located at 80 East Sir Francis
Drake Blvd., Suite 2A, Larkspur, California 94939 and its telephone number is
(415) 461-7725.
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RECENT DEVELOPMENTS
Acquisition of Medicus Systems Corporation
On November 9, 1997, the Company agreed to acquire Medicus Systems
Corporation ("Medicus"), a provider of health care information solutions,
pursuant to an Agreement and Plan of Reorganization dated as of November 9, 1997
(the "Medicus Merger Agreement") under which Medicus would be merged with a
wholly owned subsidiary of the Company (the "Medicus Merger"). In the Medicus
Merger, the Company will pay $7.50 in cash, shares of the Company's Common Stock
valued at $7.50 per share, or a combination thereof in exchange for each share
of Medicus Common Stock. The Company anticipates that the Medicus Merger will be
completed during the second quarter of 1998.
In connection with the Medicus Merger Agreement, the Company
purchased shares of Medicus Common Stock from certain stockholders of Medicus
(the "Medicus Selling Stockholders") constituting approximately 56.7% of the
outstanding shares of Medicus Common Stock in exchange for a $7.50 cash payment
per share, together with warrants (the "Warrants") entitling the Medicus Selling
Stockholders to acquire 0.3125 shares of Company Common Stock for each share of
Medicus Common Stock sold at the time of the Medicus Merger. The Company has
agreed to register such shares for resale under the Securities Act. All of such
shares have been registered and are being offered for sale pursuant to this
Prospectus.
Medicus provides information solutions that enable hospitals and
integrated health care delivery networks to manage resources more effectively
and improve outcomes of care by capturing, structuring and analyzing data. The
Medicus customer base includes more than 1,200 client institutions throughout
North America, the majority of which do not currently use QuadraMed's products
and services. Therefore, the Medicus Acquisition substantially expanded
QuadraMed's hospital customer base, afforded the Company exposure to medium and
large-sized hospitals, and broadened QuadraMed's financial management and
decision support software products.
Acquisition of Rothenberg
On December 29, 1997, the Company acquired Rothenberg Health
Systems Inc. ("Rothenberg"), a provider of health care information systems, and
Healthcare Research Affiliates, Inc. ("HRA"), a consulting company that
specializes in HEDIS reporting, from Resource Health Partners, L.P. ("RHP") in
two related merger transactions (referred to as the "RHP Mergers"). In the RHP
Mergers, the Company issued an aggregate of 1,588,701 shares of its Common
Stock, valued at approximately $37.9 million. The transaction will be treated as
a pooling of interests for accounting purposes. Accordingly, the Company's
financial statements for the years ended December 31, 1996 and 1995 will be
restated to include the historical results of Rothenberg, HRA and RHP. The
financial statements of these entities and pro forma financial statements giving
effect to these acquisitions have not been filed with the Securities and
Exchange Commission and are not being included in this Prospectus as their
historical operations are not significant to the consolidated operations of the
Company. The Company has agreed to register such shares for resale under the
Securities Act. All of such shares are being registered and are being offered
for sale pursuant to this Prospectus.
Rothenberg is a provider of health care information systems
designed to enable health care providers to efficiently manage the risks
associated with managed care contracts. Rothenberg has a client base of more
than 300 IPAs, medical groups, hospitals, MSOs, PHOs and integrated delivery
systems that employ or contract with an estimated 40,000 providers of care,
who, in turn, serve over an estimated 8,000,000 enrollees in 35 states. The
primary product acquired from Rothenberg was EZ-CAP, a software product that is
designed to validate enrollee eligibility, adjudicate claims based on specific
benefit structures and ensure the accurate processing and payment of claims.
These acquisitions provided QuadraMed with an entry into the physician market
and with access to the data stream generated by physician practices and
organizations that provide practice management services.
Expansion of Compliance Business
In mid-1997, QuadraMed introduced QuanTIM FACTS fraud and abuse
compliance software in response to increased scrutiny of health care fraud. In
January 1998, the Company entered into an agreement with Ernst & Young LLP
("E&Y") whereby E&Y's healthcare consulting group will use the FACTS product to
provide retrospective reports detailing clients' coding and billing practice and
compliance with government mandated guidelines. Through the relationship with
E&Y, QuadraMed will have the opportunity to gain access to E&Y's 3,500
healthcare clients, including 2,000 hospitals. In addition, in February 1998,
the Company formed a strategic relationship with Superior Consultant Holdings
("Superior") whereby Superior will both incorporate QuanTIM FACTS into its
Medicare and Medicaid compliance programs and will endorse FACTS as a key
component of its clients' ongoing compliance program.
In February 1998, QuadraMed acquired Cabot Marsh Corporation
("Cabot Marsh") for $11.2 million in cash and stock. Cabot Marsh provides
compliance consulting services and software that assess compliance risk to over
60 hospitals and 50 medical groups. The Company believes that the acquisition of
Cabot Marsh positions QuadraMed as a leading provider in the field of health
care compliance, with a comprehensive product and service offering which
includes compliance assessment, auditing and education expertise through a team
of over 100 credentialed healthcare professionals and attorneys utilizing a
suite of compliance software products. The acquisition agreement provides for a
contingent cash payment subject to the achievement of certain future revenue
objectives.
Offering of Convertible Subordinated Debentures
On April 13, 1998, the Company announced that it has proposed to
make a Rule 144A offering of $100 million of Convertible Subordinated Debentures
due 2005. The terms of the offering remain to be established and there can be no
assurances that such offering will be completed.
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THE OFFERING
An aggregate of 2,803,515 shares of Common Stock are being offered
for resale pursuant to this Prospectus, including 1,831,291 shares which are
being offered for resale by certain stockholders of the Company and 972,224
shares which are being offered for resale by certain persons in the event of the
exercise of Warrants. See "Selling Stockholders."
The Company will not receive any proceeds from the sale of the
Resale Shares which may be sold from time to time hereby. However, the Company
will receive the exercise price payable upon exercise of any Warrant covering
any Resale Shares to be offered and sold pursuant to this Prospectus.
3
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RISK FACTORS
In addition to the other information contained in this Prospectus
included herewith, prospective investors should carefully consider the following
factors in evaluating the Company and its business before purchasing the shares
of Common Stock offered hereby.
HISTORY OF OPERATING LOSSES; UNCERTAIN PROFITABILITY
The Company incurred net losses of $18.8 million, $958,000 and
$25.6 million for the years ended December 31, 1995, 1996 and 1997,
respectively, and as of December 31, 1997 had an accumulated deficit of $52.4
million. These results include write-offs for acquired in-process research and
development in the years ended December 31, 1995 and 1997 of $14.8 million and
$21.9 million, respectively. On a pro forma basis, after giving effect to the
acquisitions of Synergy, HRM, Cabot Marsh, the Medicus Merger, and the RHP
Mergers, the Company's net loss for the year ended December 31, 1997 would have
been $16.1 million. In connection with its acquisitions, the Company has and
will incur significant non-recurring charges and will be required to amortize
significant expenses related to goodwill and other intangible assets in future
periods. There can be no assurance that the Company will be able to achieve or
sustain revenue growth or profitability on a quarterly or annual basis.
POTENTIAL VARIABILITY IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Quarterly revenues and operating results may fluctuate as
a result of a variety of factors, including: integration of acquired businesses,
variability in demand for the Company's products and services; the number,
timing and significance of announcements and releases of product enhancements
and new products by the Company and its competitors; the timing and significance
of announcements concerning the Company's present or prospective strategic
alliances; the termination of, or a reduction in, offerings of the Company's
products and services; the loss of customers due to consolidation in the health
care industry; delays in product delivery requested by customers; the length of
the sales cycle or the timing of sales; the amount of new potential contracts at
the beginning of any particular quarter; customer budgeting cycles and changes
in customer budgets; investments by the Company in marketing, sales, research
and development, and administrative personnel necessary to support the Company's
anticipated operations; marketing and sales promotional activities; software
defects and other quality factors; and general economic conditions.
The timing of customer purchases is difficult to predict given the
complex procurement decision process associated with most health care providers
and payors. As a result, the Company typically experiences sales cycles that
extend over several quarters. Moreover, the Company's operating expense levels,
which will increase with the addition of acquired businesses are relatively
fixed. If revenues are below expectations, net income is likely to be
disproportionately adversely affected. Further, it is likely that in some future
quarter the Company's revenues or operating results will be below the
expectations of securities
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analysts and investors. In such event, the trading price of the Company's Common
Stock would likely be materially adversely affected.
INTEGRATION OF ACQUIRED COMPANIES INTO THE COMPANY
The Company expects to realize significant benefits from its
recent acquisitions, including the acquisition of Medicus and the acquisition
of Rothenberg. Realizing these benefits will depend in significant part upon the
successful integration of the businesses, including their products and
employees, with the Company, and there can be no assurance that such
integration will not entail substantial costs, delays or other problems or that
such integration will be successfully completed. The effort to integrate the
businesses will divert the attention of management from other matters and will
result in significant operational and administrative expense. Any difficulties
encountered in the integration process could have a material adverse effect on
the revenues and operating results of the Company. In addition, the process of
integrating the businesses could cause the interruption of, or a disruption in,
the business of the Company, which could have a material adverse effect on the
operations and financial performance of the Company. Even if these businesses
are successfully integrated into the Company, the acquired operations may not
achieve sales, productivity and profitability commensurate with the Company's
historical or projected operating results. Failure to achieve such projected
results would have a material adverse effect on the Company's financial
performance, and in turn, on the market value of the Company's Common Stock.
There can be no assurance that the Company will realize any of the anticipated
benefits of its recent acquisitions, including the acquisiton of Medicus and the
acquisition of Rothenberg, or that such acquisitions will enhance the Company's
business or financial performance.
DEPENDENCE ON ACQUISITION STRATEGY
The Company intends to continue to expand in substantial part
through acquisitions of products, technologies and businesses. The Company's
ability to expand successfully through acquisitions depends on many factors,
including the successful identification and acquisition of products,
technologies or businesses and management's ability to effectively negotiate and
consummate acquisitions and integrate and operate the new products, technologies
or businesses. There is significant competition for acquisition opportunities in
the Company's industry, which may intensify due to increasing consolidation in
the health care industry, thereby increasing the costs of capitalizing on
acquisition opportunities. The Company competes for acquisition opportunities
with other companies that have significantly greater financial and management
resources than the Company. The inability to successfully identify appropriate
acquisition opportunities, consummate acquisitions or successfully integrate
acquired products, technologies, operations, personnel or businesses could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, acquisitions may divert management's
attention from other business concerns, expose the Company to the risks of
entering markets in which it has no direct prior experience or to risks
associated with the market acceptance of acquired products and technologies, or
result in the loss of key employees of the Company or the acquired company.
Moreover, acquisitions by the Company may result in potentially dilutive
issuances of equity securities, the incurrence of additional debt and the
recognition of amortization expenses related to goodwill and other intangible
assets, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
RISKS ASSOCIATED WITH ACQUISITIONS; NEED TO MANAGE CHANGING OPERATIONS
Acquisitions, including the Medicus Merger and the RHP Mergers,
involve a number of special risks including, without limitation, managing
geographically dispersed operations, failure of the acquired business to achieve
expected results, failure to retain key personnel of the acquired business,
inability to integrate the new business into existing operations and risks
associated with unanticipated events or liabilities, potential increases in
stock compensation expense and increased compensation expense resulting from
newly hired employees, the assumption of unknown liabilities and potential
disputes with the sellers of one or more acquired entities, all of which could
have a material adverse effect on the Company's business, results of operations
and financial condition.
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Additionally, customer dissatisfaction or performance problems at a single
acquired company could have an adverse effect on the Company's reputation and
its sales and marketing initiatives. With the addition of the Medicus and RHP
businesses, the Company's anticipated future operations may place a strain on
its management systems and resources. The Company expects that it will be
required to continue to improve its financial and management controls, reporting
systems and procedures, and will need to expand, train and manage its work
force. There can be no assurance that the Company will be able to effectively
manage these tasks, and the failure to do so could have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's performance depends in significant part upon the
continued service of its executive officers, its product managers and other key
sales, marketing and development personnel. The loss of the services of any of
its executive officers or the failure to hire or retain other key employees
could have a material adverse effect on the Company's business, financial
condition and results of operations. Additions of new, and departures of
existing, personnel can be disruptive and could have a material adverse effect
on the Company's business, financial condition and results of operations.
6
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RISKS RELATED TO HOSPITAL AND MANAGED CARE MARKETS; UNCERTAINTY IN THE HEALTH
CARE INDUSTRY
A substantial portion of the Company's revenues have been and are
expected to be derived from the sale of software products and services to
hospitals. Consolidation in the health care industry, particularly in the
hospital and managed care markets, could cause a decrease in the number of
existing or potential purchasers of the Company's products and services, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the decision to purchase the
Company's products often involves the approval of several members of management
of a hospital or health care provider. Consequently, it is difficult for the
Company to predict the timing or outcome of the buying decisions of customers or
potential customers.
The health care industry in the United States is subject to
changing political, economic and regulatory influences that may affect the
procurement practices and operations of health care organizations. The Company
believes that the commercial value and appeal of its products may be adversely
affected if the current health care financing and reimbursement system were to
reverse its current evolution to a managed care model back to a fee-for-service
model. In addition, many of the Company's customers are providing services under
capitated service agreements, and a reduction in the use of capitation
arrangements as a result of regulatory or market changes could have a material
adverse effect on the Company's business, financial condition and results of
operations. During the past several years, the health care industry has been
subject to increasing levels of governmental regulation of, among other things,
reimbursement rates and certain capital expenditures. Certain proposals to
reform the health care system have been and are being considered by Congress.
These proposals, if enacted, could change the operating environment for the
Company's clients in ways that cannot be predicted. Health care organizations
may react to these proposals by curtailing or deferring investments, including
those for the Company's products and services.
Changes in current health care financing and reimbursement
systems could result in the need for unplanned product enhancements, in delays
or cancellations of product orders or shipments or in the revocation of
endorsement of the Company's products by hospital associations or other
customers. Any of these occurrences could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
many health care providers are consolidating to create integrated health care
delivery systems with greater regional market power. As a result, these emerging
systems could have greater bargaining power, which may lead to price erosion of
the Company's products. The failure of the Company to maintain adequate price
levels would have a material adverse effect on the Company's business, financial
condition and results of operations. Other market-driven reforms could also have
adverse effects on the Company's business, financial condition and results
of operations.
HIGHLY COMPETITIVE MARKET
Competition in the market for the Company's products and services
is intense and is expected to increase. Increased competition could result in
price reductions, reduced gross margins and loss of market share, any of which
could materially adversely affect the Company's business, financial condition
and results of operations. The Company's competitors include other providers of
health care information software and services, as well as health care consulting
firms. The combined company's principal competitors include: (i) CIS
Technologies, Inc., a division of National Data Corporation, Inc., and
Sophisticated Software, Inc. in the market for its EDI products; (ii) Envoy
Corp. and MedE AMERICA in the market for its claims processing service; (iii)
Healthcare Cost Consultants, Inc., a division of CIS Technologies, Inc., and
Trego Systems, Inc. in the market for its contract management products; (iv)
IMNET Systems, Inc., Optika Imaging Systems, Inc. and LanVision Systems, Inc. in
the market for its electronic document management products; (v) Transition
Systems, Inc. and Healthcare Microsystems, Inc., a division of Health Management
Systems Inc., HCIA Inc. and MediQual Systems, Inc., a division of Cardinal
Health, Inc., in the market for its decision support products; (vi) HMS and
ARTRAC, a division of Medaphis in the market for its business office outsourcing
services; and (vii) a subsidiary of Minnesota Mining and Manufacturing and
CodeMaster, in the market for its medical records products. In addition, current
and prospective customers evaluate the Company's capabilities against the merits
of their existing information systems and expertise. Furthermore, major software
information systems companies, including those specializing in the health care
industry, not presently offering
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products that compete with those offered by the Company may enter the Company's
markets. In addition, many of the Company's competitors and potential
competitors have significantly greater financial, technical, product
development, marketing and other resources and market recognition than the
Company. Many of the Company's competitors also currently have, or may develop
or acquire, substantial installed customer bases in the health care industry. As
a result of these factors, the Company's competitors may be able to respond more
quickly to new or emerging technologies, changes in customer requirements and
political, economic or regulatory changes in the health care industry or to
devote greater resources to the development, promotion and sale of their
products than the Company. There can be no assurance that the Company will be
able to compete successfully against current and future competitors or that
competitive pressures faced by the Company will not materially adversely affect
its business, financial condition and results of operations.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock by existing stockholders under Rule
144 and Rule 701 of the Securities Act and through the exercise of registration
rights could have an adverse effect on the price of the Company's Common Stock.
As of March 31, 1998, approximately 1,400,000 shares are available for sale in
the public market subject to compliance with Rule 144 or Rule 701. Certain
existing stockholders holding an aggregate of 497,429 shares of Common Stock as
of March 31, 1998 (which amount does not include shares being registered by the
Company as discussed below) have rights under certain circumstances to require
the Company to register their shares for future sale.
During the second quarter of 1998, the Company expects to close
the acquisition of Medicus. In connection with the acquisition of Medicus, the
Company may issue up to an aggregate of 1,800,000 shares of Common Stock, which
includes up to 972,224 shares of Common Stock issuable upon the exercise of
warrants issued in November 1997 to certain former stockholders of Medicus (the
"Warrants"). Any unexercised portion of the Warrants will expire at the closing
of the acquisition of Medicus. All of the shares of Common Stock to be issued in
connection with the acquisition of Medicus (including shares issuable upon
exercise of the Warrants being registered hereunder) are being registered under
the Securities Act and will be freely tradeable following the closing of such
acquisition. In December 1997, the Company issued 1,588,701 shares of Common
Stock in connection with the RHP Mergers. The shares of Common Stock issued in
connection with the RHP Mergers are being registered hereunder for resale under
the Securities Act and will be freely tradeable following such registration. An
additional 242,590 shares subject to registration rights are being registered
hereunder for resale and will be freely tradeable following such registration.
As a result of issuance of stock in the acquisition of Medicus and RHP Mergers,
substantial sales of the Company's Common Stock could occur immediately after
the registration of such equity securities.
Sales of a substantial number of the aforementioned shares of the
Company's Common Stock could adversely affect or cause substantial fluctuations
in the market price of the Company's Common Stock and impair the Company's
ability to raise additional capital through the sale of its securities. Sales of
substantial amounts of Common Stock in the public market under Rule 144 under
the Securities Act, or otherwise, or the perception that such sales could occur,
may adversely affect prevailing market prices of the Common Stock and could
impair the future ability of the Company to raise capital through an offering
of its equity securities.
NEW PRODUCT DEVELOPMENT AND SYSTEM ENHANCEMENT
The Company's performance will depend in large part upon the
Company's ability to provide the increasing functionality required by its
customers through the timely development and successful introduction of new
products and enhancements to its existing suite of products. The Company has
historically devoted significant resources to product enhancements and research
and development and believes that significant continuing development efforts
will be required to sustain its operations and integrate the products and
technologies of acquired businesses. There can be no assurance that the Company
will successfully or in a timely manner develop, acquire, integrate, introduce
and market new product enhancements or products, or that product enhancements or
new products developed by the Company will meet the requirements of hospitals or
other health care providers and payors and achieve or sustain market acceptance.
LIMITED PROPRIETARY RIGHTS; RISK OF INFRINGEMENT
The Company relies on a combination of trade secrets, copyright
and trademark laws, nondisclosure and other contractual provisions to protect
its proprietary rights. The Company has not filed any patent applications
covering its technology. There can be no assurance that measures taken by the
Company to protect its intellectual property will be adequate or that the
Company's competitors will not independently develop products and services that
are substantially equivalent or superior to those of the Company.
Substantial litigation regarding intellectual property rights
exists in the software industry, and the Company expects that software products
may be increasingly subject to third-party infringement claims as the number of
competitors in the Company's industry segment grows and the functionality of
products overlaps. Although the Company believes that its products do not
infringe upon the proprietary rights of third parties, there can be no assurance
that third parties will not assert infringement claims against the Company in
the future or that a license or similar agreement will be available on
reasonable terms in the event of an unfavorable ruling on any such claim. In
addition, any claim may require the Company to incur substantial litigation
expenses or subject the Company to significant liabilities and could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has received notice of a claim filed with the
United States Trademark Appeal Board for the cancellation of its registered
QuanTIM(R) trademark, and also has recently received a letter from a separate
third party challenging this trademark. There can be no assurance that the
Company will be successful in its defense of these or similar claims.
RISK OF PRODUCT DEFECTS; FAILURE TO MEET PERFORMANCE CRITERIA
Products such as those offered by the Company frequently contain
errors or failures, especially when initially introduced or when new versions
are released. Although QuadraMed conducts extensive testing, software errors
have been discovered in certain enhancements and products after their
introduction. There can be no assurance that, despite testing by the Company and
by current and potential customers, errors or performance failures will not
occur in products under development or in other enhancements or products after
commencement of commercial shipments, resulting in loss of revenues and
customers, delay in market acceptance, diversion of development
8
<PAGE> 11
resources, damage to the Company's reputation or increased service and warranty
costs, any of which could have a material adverse effect upon its business,
financial condition and results of operations.
YEAR 2000
Many computer systems have experienced or will experience
problems processing dates beyond the year 1999. Therefore, some computer
hardware and software will need to be modified prior to the year 2000 in order
to remain functional. The Company is assessing both the internal readiness of
its computer systems and the compliance of its computer products and software
sold to customers for addressing the year 2000 issues. The Company expects to
implement successfully the systems and programming changes necessary to address
the year 2000 issues and does not believe that the cost of such actions will
have a material adverse effect on the Company's business, results of operations
or financial condition. There can be no assurance, however, that there will not
be a delay in, or increased costs associated with, the implementation of such
changes, and the Company's inability to implement such changes could have an
adverse effect on its business, financial condition and results of operations.
The Company has designed and tested the most current versions of
its products to be year 2000 compliant. A significant number of the Company's
customers are running product versions that are not year 2000 compliant. While
the Company has been encouraging such customers to migrate to current product
versions, it is possible that the Company may experience increased expenses in
addressing migration issues and may lose customers. In addition, there can be
no assurances that the Company's current products do not contain undetected
errors or defects associated with year 2000 date functions that may result in
the material costs to the Company. Some commentators have stated that
significant amounts of litigation will arise out of year 2000 compliance issues.
Because of the unprecedented nature of such litigation it is uncertain whether
or to what extent the Company may be affected by it.
RISK OF INTERRUPTION OF DATA PROCESSING
The Company currently processes substantially all its customer
data at its facilities in Larkspur, California and Neptune, New Jersey. While
the Company backs up its data nightly and has safeguards for emergencies such as
power interruption or breakdown in temperature controls, it has no mirror
processing site to which processing could be transferred in the case of a
catastrophic event at either of these facilities. The occurrence of a major
catastrophic event at either the Larkspur or the Neptune facility could lead to
an interruption of data processing and could have a material adverse effect on
the Company's business, financial condition and results of operations.
RISKS RELATED TO OUTSOURCING BUSINESS
The Company provides compliance, consulting and business office
outsourcing and cash flow management services, including the billing and
collection of receivables. The infrastructure for the Company's outsourcing
business was acquired by the Company. In addition, the Company often uses its
software products to provide outsourcing services. As a result, the Company has
not been required to make significant capital expenditures in order to service
existing outsourcing contracts. However, if the Company experiences a period of
substantial expansion in its outsourcing business, it may be required to make
substantial investments in capital assets and personnel, and there can be no
assurance that it will be able to assess accurately the investment required and
negotiate and perform in a profitable manner any of the outsourcing contracts it
may be awarded. The Company's failure to estimate accurately the resources and
related expenses required for a project or its failure to complete its
contractual obligations in a manner consistent with the project plan upon which
a contract was based could have a material adverse effect on its business,
financial condition and results of operations. In addition, the Company's
failure to meet a client's expectations in the performance of its services could
damage the Company's reputation and adversely affect its ability to attract new
business. Finally, the Company could incur substantial costs and expend
significant resources correcting errors in its work, and could possibly become
liable for damages caused by these errors.
GOVERNMENT REGULATION
The United States Food and Drug Administration (the "FDA") is
responsible for assuring the safety and effectiveness of medical devices under
the Federal Food, Drug and Cosmetic Act. Computer products are subject to
regulation when they are used or are intended to be used in the diagnosis of
disease or other conditions, or in the cure, mitigation, treatment or prevention
of disease, or are intended to affect the structure or function of the body. The
FDA could determine in the future that any predictive aspects of the Company's
products make them clinical decision tools subject to FDA regulation. Compliance
with these regulations could be burdensome, time consuming and expensive. The
Company also could become subject to future legislation and regulations
concerning the development and marketing of health care software systems. Such
legislation could increase the cost and time necessary to market new products
and could affect the Company in other respects not presently foreseeable. The
Company cannot predict the effect of possible future legislation and regulation.
The confidentiality of patient records and the circumstances under
which such records may be released for inclusion in the Company's databases are
subject to substantial regulation by state governments. These state laws and
regulations govern both the disclosure and the use of confidential patient
medical record information. Although compliance with these laws and regulations
is at present principally the responsibility of the hospital, physician or other
health care provider, regulations governing patient confidentiality rights are
evolving rapidly. Additional legislation governing the dissemination of medical
record information has been proposed at both the state and federal levels. This
legislation may require holders of such information to implement security
measures that may require substantial expenditures by the Company. There can be
no assurance that changes to state or federal laws will not materially restrict
the ability of health care providers to submit information from patient records
using the Company's products.
9
<PAGE> 12
RISK OF PRODUCT-RELATED CLAIMS
Certain of the Company's products and services relate to the
payment, collection, coding and billing of health care claims and the
administration of managed care contracts. Any failure by employees of the
Company or by the Company's products to accurately assess, process or collect
such claims could result in claims against the Company by its customers. The
Company has been and currently is involved in claims for money damages related
to services provided by its accounts receivable management business. The Company
maintains insurance to protect against certain claims associated with the use of
its products, but there can be no assurance that its insurance coverage would
adequately cover any claim asserted against the Company. A successful claim
brought against the Company that is in excess of, or excluded from, its
insurance coverage could have a material adverse effect on its business,
financial condition and results of operations. Even unsuccessful claims could
result in the Company's expenditure of funds in litigation and management time
and resources. There can be no assurance that the Company will not be subject to
material claims in the future, that such claims will not result in liability in
excess of the Company's insurance coverage, that the Company's insurance will
cover such claims or that appropriate insurance will continue to be available to
the Company in the future at commercially reasonable rates. In addition, if
liability of the Company were to be established, substantial revisions to its
products could be required that may cause it to incur additional unanticipated
research and development expenses.
RISKS ASSOCIATED WITH CERTAIN INVESTMENTS
The Company has made, and may continue to make in the future,
certain investments in which it obtains a minority equity interest in certain
early stage companies. The Company does not have the ability to control the
operations of any of these companies. Investing in early stage companies is
subject to certain significant risks, and there can be no assurance that any of
these companies will be successful or achieve profitability or that the Company
will ever realize a return on its investments. In addition, to the extent any of
such companies fail or become bankrupt or insolvent, the Company may be required
to report a loss on some or all of its investment, which could have a material
adverse effect on its results of operations during a particular reporting
period.
POTENTIAL EFFECT OF ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law applicable to the Company could
have the effect of delaying, deterring or preventing a change in control of the
Company, including Section 203 of the Delaware General Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years from the date the person
became an interested stockholder unless certain conditions are met. In addition,
the Company's Certificate of Incorporation and Bylaws contain certain provisions
that could discourage potential takeover attempts and make attempts by
stockholders to change management more difficult. The Company's Board of
Directors is classified into three classes of directors serving staggered,
three-year terms and has
10
<PAGE> 13
the authority without action by the Company's stockholders to fix the rights and
preferences and issue shares of preferred stock, and to impose various
procedural and other requirements that could make it more difficult for
stockholders to effect certain corporate actions. The Company's Certificate of
Incorporation provides that directors may be removed only by the affirmative
vote of the holders of two-thirds of the shares of capital stock of the
Company entitled to vote. Any vacancy on the Board of Directors may be
filled only by vote of the majority of directors then in office. Further, the
Company's Certificate of Incorporation provides that any "Business Combination"
(as therein defined) requires the affirmative vote of two-thirds of the shares
entitled to vote, voting together as a single class. These provisions, and
certain other provisions of the Certificate of Incorporation which may have the
effect of delaying proposed stockholder actions until the next annual meeting of
stockholders, could have the effect of delaying or preventing a tender offer for
the Company's Common Stock or other changes of control or management of the
Company, which could adversely affect the market price of the Company Common
Stock.
VOLATILITY OF STOCK PRICE
The stock market historically has experienced volatility which
has affected the market price of securities of many companies and which has
sometimes been unrelated to the operating performance of such companies. The
trading price of the Company's Common Stock could also be subject to
significant fluctuations in response to variations in quarterly results of
operations, announcements of new products or acquisitions by the Company or its
competitors, governmental regulatory action, other developments or disputes
with respect to proprietary rights, general trends in the industry and overall
market conditions, and other factors. The market price may also be affected by
movements in prices of equity securities in general.
11
<PAGE> 14
USE OF PROCEEDS
The Company will not receive any of the net proceeds from the sale
of the shares by the Selling Stockholders. However, the Company will receive the
exercise price payable upon exercise of any Warrant covering any Resale Shares
to be offered and sold pursuant to this Prospectus.
SELLING STOCKHOLDERS
The following table sets forth the principal amount of Common
Stock beneficially owned by each of the Selling Stockholders as of March 31,
1998, all of which are Resale Shares. Because the Selling Stockholders may
offer all or some of the Resale Shares which they own pursuant to the offering
contemplated by this Prospectus, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the Resale
Shares, no estimate can be given as to the amount of Resale Shares that will be
held by the Selling Stockholders after completion of this offering. The Resale
Shares offered by this Prospectus may be offered from time to time by the
Selling Stockholders named below.
<TABLE>
<CAPTION>
Number of Percent
Shares of Out-
Beneficially standing
Name of Selling Stockholder Owned Shares
- --------------------------- ------------- ----------
<S> <C> <C> <C>
WARRANTHOLDERS (1)
Richard C. Jelinek 260,219 2.2
Holly Bank Investments, L.P. 172,118 1.4
William Gardner Brown Trust 67,503 *
Trigran Investments 56,223 *
P.A.W. Offshore Fund, Ltd. 46,719 *
Neal Goldman 45,000 *
Dorsey Gardner 37,258 *
P.A.W. Partners, L.P. 35,938 *
Walter McNerney 34,587 *
Debbie Jelinek 31,250 *
Jackson Stephens 31,250 *
Stephens Group, Inc. 29,688 *
Gail Warden 28,750 *
Peak Investment, L.P. 18,938 *
Pleaides Investment Partners 17,188 *
First NY Securities 14,375 *
Jacoby Enterprises, Inc. 14,063 *
Jacobs Family Co., LLC 8,719 *
Peter H. Kamin 8,594 *
Coral Two Corporation 6,250 *
Petrus Fund, L.P. 3,844 *
Peter H. Kamin Childrens Trust 3,750 *
---------
972,224
SHAREHOLDERS:
Eugene M. Arnone 167,688 1.3
Richard C. Jelinek 30,196 *
Richard C. Jelinek Charitable Trust 24,706 *
Richard Pendleton 20,000 *
J.P. Morgan Investment Corporation(2) 660,200 5.2
Coventry Corporation(2) 165,051 1.3
Mutual Group, Ltd.(2) 165,051 1.3
Rothenberg Living Trust(2) 143,185 1.1
Rothenberg Properties, Ltd.(2) 80,542 *
Nancy Rothenberg(2) 10,609 *
Craig C. Camp(2) 6,491 *
Eugene Hoeckendorf(2) 16,975 *
Joseph Riley(2) 25,462 *
Joel M. Weinberg(2) 30,555 *
Ted J. Ackroyd(2) 67,835 *
Peter Ackroyd(2) 553 *
Paul Ackroyd(2) 800 *
David R. Vaughn(2) 20,882 *
Barbara M. Vaughn(2) 8,503 *
Louis M. Phillips(2) 7,537 *
John Rassweiler(2) 460 *
Marie Nell(2) 246 *
John Henn(2) 6,134 *
William Park(2) 616 *
David H. Alexander, Jr.(2) 540 *
Thomas Brown(2) 800 *
Patricia Schano(2) 800 *
Roslyn White(2) 102 *
Bruce Boyle(2) 1,858 *
RJK Medical Associates
Profit Sharing Account(2) 1,531 *
John H. Rorke, III(2) 3,071 *
Joseph Nally, Jr.(2) 768 *
Michael Weinper(2) 10,609 *
Marc Vest(2) 6,366 *
Melanie Corbin(2) 6,366 *
David Orenstein(2) 6,366 *
Elise Latawiec(2) 4,244 *
Mark Wallis(2) 6,366 *
Judy Gerber(2) 2,122 *
Catalyst Partners, L.L.C.(2) 3,318 *
Patricia Shaw(2) 1,961 *
Addie Scott(2) 1,961 *
IPN, Inc.(2) 38,563 *
RHP Health, Inc.(2) 929 *
Max I. Gibert(2) 924 *
Max I. Gilbert-Rollover IRA(2) 766 *
Timothy C. Shamroy, as
Trustee of the Timothy Shamroy
Living Trust dated May 24, 1996(2) 70,683 *
---------
1,831,291
=========
Total 2,803,515
</TABLE>
- ----------
* Less than 1%
(1) All shares listed as beneficially owned by the Warrantholders are issuable
under Warrants held by each Warrantholder.
(2) RHP and RHP GP, L.P., the general partner of RHP, have approved the
liquidating distributions to their partners of the approximate number of
shares above. Nonetheless, RHP may hold back from such distribution, up to
31,422 shares for sale to cover its expenses and up to 155,014 shares to
cover certain of its obligations to the Company pursuant to the terms of the
RHP Mergers. See "Plan of Distribution."
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<PAGE> 15
The Resale Shares which may be offered by the Warrantholders were
acquired by them pursuant to certain Stock Purchase Agreements entered into in
connection with the Medicus Merger. To the extent the Resale Shares issuable
upon exercise of the Warrants are sold by the Warrantholders pursuant hereto,
the Warrants will be exercised and the exercise price thereof will be paid to
the Company prior to the sale of the Resale Shares underlying such Warrants.
The Resale Shares which may be offered by RHP (or its distributees)
were acquired by RHP from the Company in connection with the RHP Mergers.
The Resale Shares which may be offered by Eugene Arnone were acquired
by Mr. Arnone in connection with the Company's acquisition of Healthcare
Recovery, Inc. in April 1997. Mr. Arnone was the President and co-founder of
Healthcare Recovery, Inc., and became the Company's Executive Vice President and
President of the Business Office Outsourcing Services Division after the
completion of the acquisition. Mr. Arnone resigned from his position with the
Company effective December 15, 1997.
Certain of the Resale Shares which may be offered by Richard C.
Jelinek, as a Shareholder (and not as a Warrantholder), and by the Richard C.
Jelinek Charitable Trust (the "Trust") were acquired by Mr. Jelinek and the
Trust pursuant to certain Warrant Purchase Agreements entered into in connection
with the Medicus Merger pursuant to which the Company purchased certain warrants
held by Mr. Jelinek and the Trust.
Mr. Pendleton received an option to purchase 20,000 shares of Company
Common Stock in connection with the settlement of a lawsuit to which the Company
was a party. Mr. Pendleton has exercised this option and acquired the shares
which may be offered hereby for resale.
CERTAIN TRANSACTIONS
Thomas F. McNulty, a director of the Company, holds options to purchase
50,000 shares of Medicus Common Stock which will be assumed by the Company in
the Merger. These options will be converted into options to purchase shares of
Company Common Stock on the same terms as other outstanding Medicus options. In
connection with the approval of the Medicus Merger by the Board of Directors of
the Company, Mr. McNulty disclosed this interest and abstained from voting.
John H. Austin, M.D., a director of the Company, is the chief
executive officer of a limited partner of RHP. In connection with the approval
of the RHP Mergers by the Board of Directors of the Company, Dr. Austin
disclosed this interest and abstained from voting.
PLAN OF DISTRIBUTION
The Resale Shares offered hereby are being offered directly by the
Selling Stockholders. The Company will receive no proceeds from the sale of any
of the Resale Shares. However, the Company will receive the exercise price
payable upon exercise of any Warrant covering any Resale Shares to be offered
and sold pursuant to this Prospectus. The sale of the Resale Shares may be
effected by the Selling Stockholders from time to time in transactions in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at negotiated prices. The Selling Stockholders may effect such transactions by
selling the Resale Shares to or through broker-dealers, and such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the Selling Stockholders and/or the purchasers of the Resale Shares for
whom such broker-dealers may act as agents or to whom they sell as principals,
or both (which compensation as to a particular broker-dealer might be in excess
of customary commissions).
At the time a particular offer of Resale Shares is made, to the extent
required, a supplemental Prospectus will be distributed which will set forth the
number of Resale Shares being offered and the terms of the offering including
the name or names or any underwriters, dealers or agents, the purchase price
paid by any underwriter for the Resale Shares purchased from Selling
Stockholders, any discounts, commissions and other items constituting
compensation from the Selling Stockholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the Resale Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Resale Shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Resale
Shares may be deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act, and any commissions received by them and any profit on the
resale of the Resale Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities
13
<PAGE> 16
Act. The Company has agreed to indemnify certain of the Selling Stockholders
against certain liabilities, including liabilities under the Securities Act, as
underwriters or otherwise.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any person engaged in the
distribution of the Resale Shares may not simultaneously engage in market making
activities with respect to the Common Stock of the Company for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, each Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales of
shares of the Company's Common Stock by the Selling Stockholders.
RHP has authorized a liquidating distribution of the Resale Shares
received by it to its partners. RHP GP, L.P., the general partner of RHP, has
authorized a liquidating distribution of the Resale Shares to be received by it
to its partners. The Company is registering the Resale Shares owned by RHP on
behalf of the partners of RHP, the partners of RHP GP, L.P., and the transferees
of the partners of RHP and RHP GP, L.P. The partners of RHP and/or RHP GP, L.P.
are: Mutual Group, Ltd., Coventry Corporation, J.P. Morgan Investment
Corporation, David R. Vaughn, Ted J. Ackroyd, Craig C. Camp, Louis M. Phillips,
Barbara M. Vaughn, John Rassweiler, Marie Nell, John Henn, William Park, David
H. Alexander, Jr., Thomas Brown, Peter Ackroyd, Paul Ackroyd, Patricia Schano,
Roslyn White, Bruce Boyle, RJK Medical Associates Profit Sharing Account, Max I.
Gilbert, Max I. Gilbert - Rollover IRA, John H. Rorke, III, Joseph Nally, Jr.,
Rothenberg Living Trust, Rothenberg Properties, Ltd., Timothy C. Shamroy, as
trustee of the Timothy Shamroy Living Trust dated May 24, 1996, Joel M.
Weinberg, Joseph Riley, Eugene Hoeckendorf, Nancy Rothenberg, Michael Weinper,
Marc Vest, Melanie Corbin, David Orenstein, Elise Latawiec, Mark Wallis, Judy
Gerber, Catalyst Partners, L.L.C., IPN, Inc., Patricia Shaw, Addie Scott, RHP
GP, L.P. and RHP Health, Inc.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Brobeck, Phleger & Harrison LLP, San Francisco, California.
EXPERTS
The audited consolidated financial statements including schedules of
the Company incorporated by reference herein and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The consolidated financial statements of FRA Acquisitions, Inc. and its
subsidiary which are not presented separately or incorporated by reference
in this Proxy Statement/Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which report is incorporated
herein by reference from the QuadraMed Annual Report on Form 10-K/A for the year
ended December 31, 1997, and has been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
14
<PAGE> 17
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith file reports, proxy statements and
other information with the Securities and Exchange Commission
(the "Commission"). These materials can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, New York, New York 10048. Copies of these
materials can also be obtained from the Commission at prescribed rates by
writing to the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other materials that are filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR"). This Web site can be accessed at http:\\www.sec.gov. In
addition, material filed by the Company can be inspected at the offices of the
National Association of Securities Dealers, Inc., Market Listing Section,
1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 and exhibits relating thereto, including any
amendments (the "Registration Statement"), of which this Prospectus is a part,
and which the Company has filed with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). Reference is made to such Registration
Statement for further information with respect to the Company and the securities
of the Company offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission or attached as an annex hereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
Section 13(d) and 15(d) of the Exchange Act are hereby incorporated by reference
in this Prospectus:
1. Proxy Statement on Schedule 14A filed January 16,
1998;
2. Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1997;
3. Current Report on Form 8-K dated April 24, 1997 and
filed May 9, 1997, and amendments thereto filed July
8, 1997 and March 10, 1998, respectively;
4. Current Report on Form 8-K dated September 29, 1997
and filed October 14, 1997, and amendment thereto
filed March 10, 1998;
5. Current Report on Form 8-K dated December 29, 1997
and filed January 13, 1998;
15
<PAGE> 18
6. Current Report on Form 8-K dated February 4, 1998
and filed February 18, 1998; and
7. The description of Company Common Stock set forth in
the Company's Registration Statement on Form 8-A
filed pursuant to Section 12 of the Exchange Act and
any amendment or report filed for the purpose of
updating such description.
All reports and definitive proxy or information statements filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus shall be deemed to be incorporated by
reference into this Prospectus from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THERE WILL BE PROVIDED WITHOUT CHARGE TO
EACH PERSON, INCLUDING ANY BENEFICIAL OWNER OF COMPANY COMMON STOCK, TO WHOM A
PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST OF ANY SUCH PERSON, A COPY
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE HEREIN (EXCLUDING EXHIBITS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE HEREIN).
REQUESTS SHOULD BE DIRECTED TO KEITH M. ROBERTS, QUADRAMED CORPORATION, 80 E.
SIR FRANCIS DRAKE BLVD., SUITE 2A, LARKSPUR, CALIFORNIA, 94939 (TEL.
415/461-7725).
16
<PAGE> 19
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
----------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary........................................................1
Risk Factors..............................................................4
Use of Proceeds..........................................................12
Selling Stockholders.....................................................12
Plan of Distribution.....................................................13
Legal Matters............................................................14
Experts..................................................................14
Available Information....................................................15
Incorporation of Certain Documents by Reference..........................15
----------------------
2,803,515 SHARES
[LOGO]
COMMON STOCK
PROSPECTUS
__, 1998
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized statement of all
estimated expenses in connection with the issuance and distribution of the
securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Registration fee............................................. $15,763
Printing and engraving expenses ............................. 1,000
Legal expenses .............................................. 25,000
Accounting fees and expenses ................................ 25,000
Miscellaneous ............................................... 0
Total .............................................. $66,763
=======
</TABLE>
- ----------
The Selling Stockholders will bear their own sales commissions and
related sales expenses in connection with this offering, but will not bear any
of expenses listed above.
Item 15. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation Law permits a
corporation to grant indemnification to directors, officers and other agents in
terms sufficiently broad to permit indemnification under certain circumstances
for liabilities, including expenses, arising in connection with the Securities
Act of 1933, as amended. Pursuant to the Certificate of Incorporation and the
Bylaws of the Company, directors and officers of the Company are indemnified to
the full extent permitted by law. In addition, the Company has entered into
indemnification agreements with its officers and directors that indemnify such
officers and directors to the full extent permitted by law against all expenses
(including attorneys' fees), judgments, fines or settlement amounts incurred or
paid by them in any action or proceeding, including any action by or on behalf
of the Company, on account of their service as an officer or director of the
Company.
Item 16. Exhibits.
2.10 Agreement and Plan of Reorganization, dated as of November 9, 1997, by
and among the Company and Medicus Systems Corporation. (1)
2.11 Amendment No. 1 to Agreement and Plan of Reorganization, dated as of
February 26, 1998. (2)
2.12 Amendment No. 2 to Agreement and Plan of Reorganization, dated as of
March 24, 1998. (2)
2.13 Acquisition Agreement and Plan of Merger, dated as of December 29,
1997, by and among the Company, Resource Health Partners, L.P. and
other parties thereto. (3)
3.2 Second Amended and Restated Certificate of Incorporation of the
Company. (4)
3.4 Amended and Restated Bylaws of the Company. (4)
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Deloitte & Touche LLP
II-1
<PAGE> 21
23.3 Consent of Brobeck, Phleger & Harrison (included in the Opinion of
Counsel filed as Exhibit 5.1 hereto).
24.1 Power of Attorney (previously filed).
- ----------
(1) Incorporated by reference from the Company's Current Report on Form
8-K, filed with the Commission on November 21, 1997.
(2) Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
(3) Incorporated by reference from the Company's Current Report on Form
8-K, as filed with the Commission on January 13, 1998.
(4) Incorporated 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.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to include
any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (i) and (ii)
do not apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i) and
(ii) is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15 of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, 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 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 securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to
II-2
<PAGE> 22
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement 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.
For purposes of determining any liability under the Securities Act of
1933, 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.
II-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF LARKSPUR, STATE OF CALIFORNIA ON THIS 21st DAY OF
April, 1998.
QuadraMed Corporation
By /s/ Keith M. Roberts
---------------------------------------
Keith M. Roberts
Vice President and General Counsel
II-4
<PAGE> 24
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of Arthur Andersen, LLP
23.2 Consent of Deloitte & Touche LLP
- -------
<PAGE> 1
EXHIBIT 5.1
April 21, 1998
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
2,803,515 shares of its common stock (the "Shares"), comprised of (i) 1,831,291
shares which may be offered for resale by certain stockholders of the Company
(the "Stockholders") and (ii) 972,224 shares issuable upon exercise of certain
warrants to purchase common stock (the "Warrant Shares"). The Warrant Shares are
being registered and may be offered for resale by the holders of such warrants
(the "Warrantholders" and together with the Stockholders, the "Selling
Stockholders") following exercise and issuance, 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").
In connection with this opinion, we have 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, memoranda or other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below.
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 by the
Company and sold by the Selling Stockholders 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.
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,
/s/ BROBECK, PHLEGER & HARRISON
-------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated April 16, 1998
with respect to the consolidated financial statements and schedule, as restated,
included in QuadraMed Corporation's Form 10-K/A for the year ended December 31,
1997 and to all references to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN, LLP
- ------------------------
Arthur Andersen, LLP
April 21, 1998
San Jose, California
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 3 to
Registration Statement No. 333-44985 of QuadraMed Corporation on Form S-3 of our
report dated April 25, 1997 (relating to the consolidated balance sheet of FRA
Acquisitions, Inc. as of December 31, 1996, and the related statements of
operations, shareholder's equity and cash flows for the year ended December 31,
1996 and the 55 day period ended December 31, 1995 not presented or incorporated
by reference separately herein) appearing in the Annual Report on Form 10-K/A of
QuadraMed Corporation for the year ended December 31, 1997, and to the reference
to us under the heading "Experts" in the Prospectus, which is part of such
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Los Angeles, California
April 21, 1998
2
