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As filed with the Securities and Exchange Commission on January 27, 1998
Registration No. 333-[_____]
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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)
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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)
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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. [ ]
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<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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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 JANUARY 27, 1998
2,803,515 SHARES
QUADRAMED CORPORATION
COMMON STOCK
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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 and issuance. 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 January 26, 1998, the reported last sale price of
the Common Stock on the Nasdaq National Market was $19.75 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.
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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.
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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 ("QuadraMed" or the "Company"), 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 solutions for
both providers and payors. In addition, the Company provides business office
outsourcing and cash flow management 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.
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
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. 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. Rothenberg's
primary product is EZ-CAP(R), 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.
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 first quarter of 1998.
In connection with the Medicus Merger Agreement, the Company
purchased shares of Medicus Common Stock from certain stockholders of Medicus
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 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.
Medicus provides information systems and related services to more than 1,200
client institutions throughout North America.
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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.
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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 $4.9 million and $9.4 million
for the years ended December 31, 1994 and 1995, respectively, and as of
September 30, 1997 had an accumulated deficit of $12.3 million. Medicus incurred
net losses of $3.7 million and $4.2 million for the years ended May 31, 1996 and
1997, respectively, and for the six months ended November 30, 1997, had a net
loss of $1.4 million and an accumulated deficit of $9.3 million. Although the
Company recorded net income of $153,000 and $2.8 million for the year ended
December 31, 1996 and the nine months ended September 30, 1997, respectively,
these results do not include the effect of the Medicus Merger and RHP Mergers.
In connection with the Medicus Merger and other 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 revenues and 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 the following: 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.
In May 1997, the Company acquired, in exchange for $2.5 million, a
10.2% equity stake in EDI USA, Inc. ("EDI USA"), an organization owned and
established by thirteen independent Blue Cross and Blue Shield Plans to build
and operate an EDI transaction network to facilitate submission of claims,
receipt of remittances, eligibility verification and other health care
transactions. In addition, the Company entered into an agreement with EDI USA
for EDI USA to provide EDI processing services. The Company recorded
non-recurring charges of $334,000, $360,000 and $346,000 for each of the first
three quarters of 1997, respectively, related to start-up costs incurred in
connection with its arrangement to provide EDI processing and management
services for EDI USA's transactions. The Company and EDI USA have terminated
their business relationship, and EDI USA has repurchased the Company's equity
stake in EDI USA for $2.5 million during the fourth quarter of 1997. As a result
of the termination of the relationship, the Company expects to record a
non-recurring charge in the fourth quarter of 1997 that substantially exceeds
the charges reported in the first three quarters.
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, and Medicus and RHP
have experienced, sales cycles that extend over several quarters for new
customers. The Company expects that these factors will result in variations in
quarterly revenues and operating results. Moreover, the Company's operating
expense levels, which will increase with the addition of the businesses of
Medicus, Rothenberg and HRA, are relatively fixed. If revenues are below
expectations, net income is likely to be disproportionately 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 has entered into the Medicus Merger Agreement with
Medicus and completed the RHP Mergers with the expectation that the Medicus
Merger and the RHP Mergers will result in certain benefits to the Company as the
combined company. Realizing the benefits of the Medicus Merger and the RHP
Mergers will depend in part upon the successful integration of the businesses,
products and employees of the Company, Rothenberg, HRA and Medicus in an
efficient manner, 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. Combining the companies will divert the
attention of management from other matters and will result in significant
operational and administrative expense. QuadraMed will incur a significant
amortization expense in future periods as a result of the Medicus acquisition.
Any difficulties encountered in the integration process could have a material
adverse effect on the revenues and operating results of the combined company.
In addition, the process of combining the companies could cause the interruption
of, or a disruption in, the business activities of the constituent companies,
which could have a material adverse effect on the operations and financial
performance of the combined company. Even if these companies are successfully
integrated into the Company, the acquired operations may not achieve sales,
productivity and profitability commensurate with the Company's historical
operating results or with projected results of the Company and financial
analysts and investors. 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 Common Stock. There can be no assurance that the
combined company will realize any of the anticipated benefits of the Medicus
Merger and the RHP Mergers or that such acquisitions will enhance the Company's
business or financial performance.
DEPENDENCE ON ACQUISITIONS FOR GROWTH
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, 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 (including the Medicus Merger and the RHP Mergers) 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 its 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, 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 its business, financial condition and results of operations.
NEED TO EXPAND SALES AND TECHNICAL SUPPORT CAPABILITIES
A substantial percentage of the Company's sales force is currently
inexperienced in selling the Company's products and will remain so for some
time. With the addition of the Medicus, Rothenberg and HRA businesses, the
Company will need to commit significant resources to further recruit, train,
motivate, manage and retain sales personnel to support its expanded product and
service offerings. While the Company intends to commit funds to expand its sales
organization, there can be no assurance that the Company will be able to
recruit, train, motivate, manage and retain additional sales personnel or that
their activities will result in additional revenues to the Company. In addition,
the Company recognizes that as its level of sales increases, it will need to
expand its technical support capabilities to service its expanding customer
base. Competition for qualified sales and technical support personnel in the
software industry is intense. Failure by the Company to effectively expand its
sales and technical support capabilities could have a material adverse effect on
the Company's business, financial condition and results of operations.
In addition, the Company intends to develop a national sales force
that will be responsible for particular customers rather than particular
products. This approach will require additional training so that sales personnel
may become more familiar with the Company's broader range of product and service
offerings. There can be no assurance that the Company will be successful in its
efforts to restructure its sales and marketing approach, and any failure to
successfully implement such strategy could have a material adverse effect on its
business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's performance also depends in significant part upon
the continued service of its executive officers, its product managers and other
key sales, marketing, and development personnel, including such key personnel
associated with Medicus, Rothenberg and HRA who must be successfully integrated
into the Company's management team. 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.
EXPANDED PRODUCT AND SERVICE OFFERINGS; RELIANCE ON CROSS-SELLING PRODUCTS AND
SERVICES TO CUSTOMERS
With the additions of the Medicus, Rothenberg and HRA businesses,
the Company will further expand the complexity of its product and service
offerings and broaden its customer base to include physicians and other
non-hospital health care providers. Prior to the RHP Mergers, the Company's
customers were typically hospitals and other health care providers, and
substantially all of the Company's revenues were derived from the sale of
software products and services to hospitals. With the addition of the Medicus,
Rothenberg and HRA businesses, the Company intends to direct its sales and
marketing efforts to a broader customer base than it has previously addressed,
including cross-selling its expanded product and service offerings to existing
customers of the Company, Medicus, Rothenberg and HRA. Additionally, the Company
intends to continue to expand its product and service offerings in the future.
The addition by the Company to its product and service offerings presents
certain risks and uncertainties involving the Company's relative unfamiliarity
with these new products and services and the market for such new products and
services. There can be no assurance that the Company will be successful in its
cross-selling efforts or in developing or integrating new products and services,
or that its existing customers will accept such new products and services.
Additionally, there can be no assurance that the Company will retain its
existing customers or the existing customers of Medicus, Rothenberg and HRA. In
particular, Medicus and Rothenberg have each released Windows(TM)-based versions
of their products and may
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choose not to continue to provide technical support for old versions of their
product. If the combined company chooses not to provide this technical support,
existing Medicus and Rothenberg customers may be lost. Any failure by the
Company to successfully cross-sell its products, to develop or integrate new
products and services or to retain existing customers of the combined company
could have a material adverse effect on its business, financial condition and
results of operations.
RISKS RELATED TO HOSPITAL AND MANAGED CARE MARKETS
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. The Company's financial performance is dependent on continued demand
for its products. Consolidation in the health care industry, particularly in the
hospital and managed care markets, could cause a decrease in the number of
potential purchasers of the Company's products and services or the loss of one
or more of the Company's significant customers, including existing customers of
Medicus, Rothenberg and HRA, insofar as customers may be acquired by another
company that uses products or services provided by a competitor of the Company,
Medicus, Rothenberg or HRA. Any of these occurrences 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.
HIGHLY COMPETITIVE MARKET
Competition in the market for the Company's products and services
(including products and services acquired from Medicus and RHP by the Company)
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. While no one firm competes directly in all niches in
which Medicus and Rothenberg offers products, Medicus and Rothenberg each
compete with several firms of varying size and geographic coverage in each of
their market niches. 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
7
<PAGE> 10
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 and changes in customer requirements 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.
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 recently 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 each company conducts extensive testing, software errors
have been discovered in certain enhancements and products after their
introduction. The Company and Medicus are currently developing various new
applications and each has recently introduced versions of certain of its
existing applications designed to function with the Microsoft Windows(TM) NT
operating system. 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 these 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.
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 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 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
UNCERTAINTY IN THE HEALTH CARE INDUSTRY
The health care industry is subject to changing political,
economic and regulatory influences that may affect the procurement practices and
operation of health care organizations. 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 unpredictable effects on the Company's business,
financial condition and results of operations.
RISK OF PRODUCT-RELATED CLAIMS
Certain of the combined 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 or administrates such
contracts 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 its 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. To the extent any of these
companies are unprofitable, the Company may be required to recognize a loss on
its investment during a reporting period. Any loss in connection with these
investments could have a material adverse effect on the Company's business,
financial condition or results of operations during a particular reporting
period. In addition, to the extent any of such companies fail or become bankrupt
or insolvent, the Company may be required to record a total loss on 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
corporation 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.
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE VOLATILITY OF STOCK PRICE; LOW TRADING
VOLUME
After the Medicus Merger and assuming the issuance of 1,800,000
shares of the Company Common Stock pursuant to the Medicus Merger Agreement and
the Warrants, approximately [__________] shares of the Company Common Stock
issued to holders of Medicus Common Stock and the Warrants will be freely
tradeable, and an additional [_______] shares of the Company Common Stock will
be tradeable under Rule 145 under the Securities Act. Additionally, the Company
has issued 1,588,701 shares of the Company Common Stock in connection with the
RHP Mergers, all of which are being registered under the Securities Act pursuant
to this Prospectus. As a result, substantial sales of the Company Common Stock
could occur immediately after the Medicus Merger. Sales of a substantial number
of the aforementioned shares of the Company Common Stock could adversely affect
or cause substantial fluctuations in the market price of the Company Common
Stock and impair the Company's ability to raise additional capital through the
sale of its equity securities.
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. In addition, the average
daily trading volume of the Company's Common Stock since public trading of the
Common Stock commenced has been low. To the extent this trading pattern
continues, the price of the Common Stock may fluctuate significantly as a result
of relatively minor changes in demand for such shares and sales of stock by
stockholders.
RISKS RELATED TO MEDICUS LITIGATION
On July 11, 1997, St. Joseph Hospital filed a lawsuit, St. Joseph
Hospital v. Medicus Systems Corporation, File No. 97-36574, in the District
Court of Harris County, Texas. The complaint alleges primarily breach of a
contract to provide case management software, and seeks unspecified damages,
including attorney's fees. Medicus vigorously denies any liability, and has
filed its answer denying the plaintiff's claims. In addition, Medicus has filed
counterclaims asserting breach of contract and fraudulent inducement. Medicus
believes that it has meritorious defenses to the plaintiff's claims, and it
intends to defend the litigation vigorously. However, due to the nature of the
litigation, the combined company cannot determine the total expense or possible
loss, if any, that may ultimately be incurred either in the context of a trial,
or as a result of a negotiated settlement. Regardless of the ultimate outcome of
the litigation, it could result in significant diversion of time by the combined
company's personnel. While management believes that the resolution of these
matters will not have a material adverse effect on the combined company's
business, financial condition and results of operation, the results of these
proceedings, including any potential settlement are uncertain and there can be
no assurance to that effect.
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<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 January 15,
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:
Resource Health Partners, L.P. (2) 1,588,701 13.3
Eugene M. Arnone 167,688 1.4
Richard C. Jelinek 30,196 *
Richard C. Jelinek Charitable Trust 24,706 *
Richard Pendleton 20,000 *
---------
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 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. See "Plan of Distribution."
12
<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 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 number of
shares to be owned by each such person has not yet been determined. 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, Max I. Gilbert, Max I. Gilbert - Rollover IRA, John H.
Rorke III, Joseph Nally, Jr., Rothenberg Trust, Rothenberg Family Partnership,
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.
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.
The information in this Prospectus concerning the Company has been furnished by
the Company.
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. Proxy Statement on Schedule 14A filed April 28, 1997;
3. Annual Report on Form 10-KSB, and amendment thereto,
for the fiscal year ended December 31, 1996;
4. Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
5. Quarterly Report on Form 10-Q, and amendment thereto,
for the quarter ended June 30, 1997;
6. Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997;
7. Current Report on Form 8-K filed January 9, 1997;
8. Current Report on Form 8-K filed May 9, 1997 and
amendment thereto filed July 8, 1997;
9. Current Report on Form 8-K filed October 14, 1997;
10. Current Report on Form 8-K filed November 21, 1997
and amendment thereto filed December 24, 1997;
11. Current Report on Form 8-K filed January 13, 1998;
15
<PAGE> 18
12. The description of Company Common Stock set forth in
the Company's Registration Statement on Form S-3
(File No. 333-36189) 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 A, 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* ............................ _______
Legal expenses*.............................................. _______
Accounting fees and expenses* ............................... _______
Miscellaneous*............................................... _______
Total* ............................................. $
=======
</TABLE>
- ----------
* To be filed by amendment.
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 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. (2)
3.2 Second Amended and Restated Certificate of Incorporation of the
Company. (3)
3.4 Amended and Restated Bylaws of the Company. (3)
5.1 Opinion of Brobeck, Phleger & Harrison. *
23.1 Consent of Arthur Andersen LLP
II-1
<PAGE> 21
24.2 Consent of Brobeck, Phleger & Harrison (included in the Opinion of
Counsel filed as Exhibit 5.1 hereto). *
25.1 Power of Attorney (included on page II-3 of this Registration
Statement).
- ----------
* To be filed by amendment.
(1) Incorporated by reference from the exhibit with the same number to the
Company's Current Report on Form 8-K, filed with the Commission on
November 21, 1997.
(2) Incorporated 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 13, 1998.
(3) 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 meet
all requirements for filing on Form S-3 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 22nd DAY OF
January, 1998.
QuadraMed Corporation
By /s/ James D. Durham
---------------------------------------
James D. Durham
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, John V. Cracchiolo
and Keith M. Roberts, and each one of them, his attorneys-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement and to sign any registration statement
for the same offering covered by this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) promulgated under the Securities
Act of 1933, and all post-effective amendments thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that each of said attorneys-in-fact and
agents or any of them, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James D. Durham Chairman of the Board, President and January 22, 1998
- --------------------------- Chief Executive Officer (principal
James D. Durham executive officer)
/s/ John V. Cracchiolo
- --------------------------- Vice President, Chief Financial Officer January 22, 1998
John V. Cracchiolo and Secretary (principal financial and
accounting officer)
/s/ John H. Austin, M.D.
- --------------------------- Director January 22, 1998
John H. Austin, M.D.
/s/ Albert L. Greene
- --------------------------- Director January 22, 1998
Albert L. Greene
</TABLE>
II-4
<PAGE> 24
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Kenneth E. Jones
- --------------------------- Director January 22, 1998
Kenneth E. Jones
/s/ Thomas F. McNulty
- --------------------------- Director January 22, 1998
Thomas F. McNulty
/s/ Joan P. Neuscheler
- --------------------------- Director January 22, 1998
Joan P. Neuscheler
/s/ Cornelius T. Ryan
- --------------------------- Director January 22, 1998
Cornelius T. Ryan
</TABLE>
II-5
<PAGE> 25
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
23.1 Consent of Arthur Andersen, 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 reports dated March 5, 1997
included in QuadraMed Corporation's Form 10-K for the year ended December 31,
1996 and to all references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
January 22, 1998
San Jose, California
