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As filed with the Securities and Exchange Commission on June 14, 1999
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)
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<CAPTION>
DELAWARE 7371
<S> <C>
(State or other jurisdiction (Primary Standard Industrial
of incorporation or organization) Classification Code Number)
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1003 CUTTING BLVD., SUITE 200
RICHMOND, CALIFORNIA 94804
(510) 620-2340
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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E. PAYSON SMITH
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
QUADRAMED CORPORATION
1003 CUTTING BLVD., SUITE 200
RICHMOND, CALIFORNIA 94804
(510) 620-2340
(Name, address, including zip code, and telephone number, including
area code, of agent for service of process)
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Copies to:
SCOTT D. LESTER, ESQ.
BROBECK, PHLEGER & HARRISON LLP
ONE MARKET STREET
SPEAR STREET TOWER
SAN FRANCISCO, CALIFORNIA 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 a 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, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the 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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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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
<S> <C> <C> <C> <C>
Common Stock, par value $.01
(previously included)...................... 507,193 Shares $ 10.00 $ 5,071,930 $ 1,410
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 and based upon the
average of the high and low prices of the Company's Common Stock as
reported on the Nasdaq National Market on June 11, 1999.
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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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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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 JUNE __, 1999
507,193 SHARES
QUADRAMED CORPORATION
COMMON STOCK
This Prospectus relates to the public offering, which is not being
underwritten, of 507,193 shares of our common stock which is held by some of our
current stockholders. All of the 507,193 Shares which may be offered hereby were
received by the stockholders in connection with our acquisition of all of the
outstanding capital stock and options of Premier Healthcare Corporation.
The prices at which such stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares. We have agreed to bear certain expenses in connection with the
registration of the shares being offered and sold by the stockholders hereby.
Our Common Stock is quoted on the Nasdaq National Market under the symbol
"QMDC." On June 11, 1999 the closing price on Nasdaq for the common stock was
$10.125.
____________________
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
____________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
____________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is June __, 1999
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PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in
this Prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in the Common Stock. You
should read the entire Prospectus carefully, especially the risks of investing
in the Common Stock discussed under "Risk Factors."
THE COMPANY
QuadraMed Corporation uses technology to transform disparate healthcare
data into valuable, enterprise-wide information. Providing and distributing
meaningful information through its software, services and Internet solutions,
QuadraMed has enabled its 3,850 customers in the U.S. and Canada to generate
operational efficiencies, improve cash flow and measure the cost and quality of
care. QuadraMed has implemented its product and service solutions in
approximately 60% of the nation's hospitals. The Company has three business
units, which include business office, health information management and
enterprise.
The Business Office group targets a provider's chief financial officer
as the primary buyer. The divisions' solutions address the complex
administrative and financial management demands placed on healthcare
organizations today, providing the technology and expertise to increase cash
flow and reduce administrative costs. The group is comprised of the following
product and service categories: decision support, patient-focused solutions,
electronic business office, managed care and executive information systems. The
group also includes business office outsourcing. The following services are
included: full business office outsourcing, A/R reduction and billing services
and interim management consulting.
QuadraMed's Health Information Management (HIM) business lines
primarily target medical records directors, as well as chief financial officers
throughout the provider system. The division is comprised of the following
products and services: coding and abstracting, document imaging and workflow,
and HIM outsourcing and consulting. The Company also offers a compliance
program, including compliance assessment, auditing and education expertise
through a team of over 100 credentialed healthcare attorneys, medical record
professionals, registered nurses and physicians. These services are designed to
improve the ability of healthcare providers to prevent Medicare and Medicaid
fraud and abuse by identifying potentially fraudulent coding in a medical bill.
In the outsourcing area, QuadraMed offers charge description master (CDM)
review, master patient index clean up, interim HIM management service, general
outsourcing and HIM on-site staff services.
The Company's newest operating group, the Enterprise Division,
established in 1999 provides web-based solutions that are designed to flow
across an extended enterprise of inpatient and outpatient locations and across
business entity lines. The Company's enterprise business lines target a
provider's chief financial officer and chief executive officer. The Company
provides access via LAN, WAN or Web, to patient information from disparate
locations in the enterprise. The Affinity suite of products is the group's most
comprehensive offering. Affinity is an integrated hospital information system
that provides clinical and financial information. The product is packaged in a
suite of hospital applications that are designed to provide compliance with
federal and state regulations while automating decision making and increasing
productivity. Affinity provides a patient-centered database that enables a
provider to track patients throughout the continuum of care, without duplication
of effort. Applications are accessible via a web browser, allowing physicians
and other authorized users to have access to real-time patient information, from
remote locations. Affinity integrates financial information such as patient
accounting and DRG/case mix with clinical data such as medication charting and
plan of care to automate state and federal reporting, billing, and other
administrative activities.
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We are incorporated under the laws of the State of Delaware.
Our executive offices are located at 1003 Cutting Blvd., Suite 200, Richmond,
California 94804 and our telephone number is (510) 620-2340. Unless the context
otherwise requires, "QuadraMed", the "Company", "we", "our" and "us" refer to
QuadraMed Corporation and, where the context requires, its subsidiaries.
THE OFFERING
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Common Stock offered by Selling
Stockholders............................. 507,193
Use of Proceeds.......................... QuadraMed will not receive any
proceeds from the sale of common
stock in the offering
Nasdaq National Market Symbol............ QMDC
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RISK FACTORS
Prior to making an investment in the shares of Common Stock, you
should carefully read this entire prospectus and consider the following risk
and speculative factors in evaluating our Company and our business.
WE HAVE A HISTORY OF OPERATING LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN
We incurred net losses of $37.0 million and $18.5 million for the years
ended December 31, 1997 and 1998, respectively and a net loss of $26.1 million
for the fiscal quarter ended March 31, 1999. As of March 31, 1999, our
accumulated deficit was $217.9 million. These results include write-offs for
acquired in-process research and development of $14.8 million, $21.9 million and
$14.4 million in fiscal years 1995 and 1997 and the nine months ended September
30, 1998, respectively. In connection with our acquisitions, we have and will
incur significant non-recurring charges and we will be required to amortize
significant expenses related to goodwill and other intangible assets in future
periods. It is uncertain whether we will be able to achieve or sustain revenue
growth or profitability on a quarterly or annual basis.
OUR OPERATING RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER
Our quarterly operating results have varied significantly in the past.
Our quarterly revenues and operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside our
control. These factors include:
. integration of acquired businesses with our business;
. variability in demand for our products and services;
. the introduction of product enhancements and new products by us and our
competitors;
. the timing and significance of announcements concerning our present or
prospective strategic alliances;
. the termination of, or a reduction in, the products and services we offer,
. the loss of customers due to consolidation in the health care industry;
. delays in product delivery requested by our customers;
. the length of the sales cycle for our products or the timing of our sales;
. the amount of new potential contracts at the beginning of any particular
quarter;
. budgeting cycles of our customers and changes in our customer's budgets;
. our investment in marketing, sales, research and development, and
administrative personnel necessary to support our anticipated operations;
. costs incurred in connection with our marketing and sale promotional
activities;
. software defects and other quality factors in our products; and
. general economic conditions and resulting effects on the health care
industry.
We cannot accurately forecast the timing of our customer purchases due
to the complex procurement decision process associated with most health care
providers and payors. As a result, we typically experience sales cycles that
extend over several quarters. In addition, certain products we acquired as a
result of our acquisition of Integrated Medical Networks in September
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1998 and The Compucare Company in March 1999 have higher average selling prices
and longer sales cycles than many of our other products. This may increase the
volatility of our quarterly operating results. Moreover, our operating expense
levels, which will increase with the addition of acquired businesses, are
relatively fixed. Accordingly, if future revenues are below our expectations, we
would experience a disproportionate adverse affect on our net income and
financial results. Further, it is likely that, in some future quarter, our
revenues or operating results may fall below the expectations of securities
analysts and investors. In such an event, the trading price of our Common Stock
would likely be materially and adversely affected.
WE FACE RISKS RELATING TO THE INTEGRATION OF ACQUIRED COMPANIES INTO OUR COMPANY
Realizing benefits from acquisitions depends in significant part upon
several factors and is accompanied by a number of risks, including:
. successful integration of the operations, products and personnel of the
acquired company;
. possible costs, delays or other problems we may incur to successfully
complete such integration;
. the potential interruption or disruption of our ongoing business and the
distraction of management from other matters; and
. significant operational and administrative expense relating to such
integration.
Any difficulties encountered in the integration process could have a
material adverse effect on our business, operating results and financial
condition. Even if we are able to successfully integrate these businesses with
our business, the acquired operations may not achieve sales, productivity and
profitability commensurate with our historical or projected operating results.
Failure to achieve such projected results would have a material adverse effect
on our financial performance, and in turn, on the market value of the our
Common Stock. There can be no assurance that we will realize any of the
anticipated benefits of our acquisitions or that such acquisitions will enhance
our business or financial performance.
WE ARE DEPENDENT ON AN ACQUISITION STRATEGY FOR OUR GROWTH
We intend to continue to expand in part through acquisitions of products,
technologies and businesses. Our ability to expand successfully through
acquisition depends on many factors, including:
. the successful identification and acquisition of products, technologies or
businesses;
. management's ability to effectively negotiate and consummate acquisitions and
integrate and operate the new products, technologies or businesses;
. significant competition for acquisition opportunities in our industry, which
may intensify due to increasing consolidation in the health care industry,
thereby increasing the costs of capitalizing on acquisition opportunities; and
. competition for acquisition opportunities with other companies that have
significantly greater financial and management resources than us.
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WE FACE SEVERAL RISKS ASSOCIATED WITH ACQUISITIONS AND MAY NOT BE SUCCESSFUL IN
MANAGING CHANGING OPERATIONS
Acquisitions involve a number of special risks including:
. 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; and
. exposure to the risks of entering markets in which we have no direct prior
experience or to risks associated with the market acceptance of acquired
products and technologies.
Management evaluated and purchased a new management and accounting system
and will implement the system in 1999. Information systems expansion or
replacement can be a complex, costly and time-consuming process, and there can
be no assurance that our system transition and further implementation can be
accomplished without disruption of our business. Any business disruption or
other system transition difficulties could have a material adverse effect on
our business, financial condition and results of operations.
We may not be successful in addressing these risks and our failure to do
so could have a material adverse effect on our business, results of operations
and financial condition.
Additionally, customer dissatisfaction or performance problems at a single
acquired company could have an adverse effect on its sales and marketing
initiatives and on our reputation. With the addition of the acquired
businesses, our anticipated future operations may place a strain on our
management systems and resources. We expect that we will be required to continue
to improve our financial and management controls, reporting systems and
procedures, and will need to expand, train and manage our workforce. There can
be no assurance that we will be able to effectively manage these tasks, and the
failure to do so could have a material adverse effect on our business, financial
condition and results of operations.
Moreover, future acquisitions by us 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. Our inability to successfully deal with these factors could have a
material adverse effect on our business, financial condition and results of
operations.
WE ARE DEPENDENT ON KEY MANAGEMENT PERSONNEL FOR OUR FUTURE SUCCESS
We are substantially dependent upon the continued service of our executive
officers, product managers and other key sales, marketing and development
personnel. If we fail to retain the services of any of our executive officers
or fail to hire, retain and motivate other key employees, our business will be
adversely affected. Furthermore, additions of new, and departures of existing,
personnel could have a disruptive effect on our business and operations.
4.
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WE FACE RISKS RELATED TO HOSPITAL AND MANAGED CARE MARKETS AND UNCERTAINTY IN
THE HEALTHCARE INDUSTRY
A substantial portion of our 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 our products and services, which could adversely affect
our business. In addition, the decision to purchase our products often involves
the approval of several members of management of a hospital or health care
provider. Consequently, it is difficult for us to predict the timing or outcome
of the buying decisions of our 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. We believe that the
commercial value and appeal of our 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 our 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 our
business, financial condition and operating results. 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 of our clients in ways that cannot be
predicted. Health care organizations may react to these proposals by curtailing
or deferring investments, including those for our 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 our products by hospital associations or other customers. Any of these
occurrences could have a material adverse effect on our business. 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
our products. If we fail to maintain adequate price levels, our business,
financial condition and results of operations would be adversely affected. Other
market-driven reforms could also have adverse effects on our business, financial
condition and results of operations.
WE OPERATE IN HIGHLY COMPETITIVE MARKETS
Competition in the market for our 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 our business, financial condition and results of operations. We
compete with other providers of health care information software and services,
as well as health care consulting firms. Our principal competitors include,
among others:
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. CIS Technologies, Inc., a division of National Data Corporation, Inc., and
Sophisticated Software, Inc. in the market for our EDI products;
. MedE AMERICA in the market for our claims processing service;
. Healthcare Cost Consultants, Inc., a division of CIS Technologies, Inc., and
Trego Systems, Inc. in the market for our contract management products;
. McKesson HBOC, Inc., Optika Imaging Systems, Inc. and LanVision Systems, Inc.
in the market for our electronic document management products;
. 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 our decision support
products;
. McKesson HBOC, Inc., Shared Medical Systems, Inc., MediTech Corporation and
Eclipses Corporation in the market for our enterprise products;
. HMS and ARTRAC, a division of Medaphis in the market for our business office
outsourcing services;
. a subsidiary of Minnesota Mining and Manufacturing, in the market for our
medical records products; and
. Transcend Services, Inc. and SMART Corporation in the market for our health
information management services.
In addition, current and prospective customers evaluate our 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 products that
compete with those offered by us, may enter our markets. In addition, many of
our competitors and potential competitors have significantly greater financial,
technical, product development, marketing and other resources and market
recognition than us. Many of our competitors also currently have, or may
develop or acquire, substantial installed customer bases in the health care
industry. As a result of these factors, our 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 and
may devote greater resources to the development, promotion and sale of their
products than us. There can be no assurance that we will be able to compete
successfully against current and future competitors or that such competitive
pressures will not materially adversely affect our business, financial
condition and operating results.
THERE MAY BE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR STOCK AS A RESULT OF
SHARES BEING AVAILABLE FOR FUTURE SALE
Future sales of Common Stock by existing stockholders under Rule 144 of
the Securities Act and through the exercise of registration rights could lower
the market price of our Common Stock. As of April 30, 1999, approximately
1,650,000 shares are available for sale in the public market subject to
compliance with Rule 144. Certain of our existing stockholders holding an
aggregate of 1,994,991 shares of Common Stock as of April 30, 1999 have rights
under certain circumstances to require us to register their shares for future
sale, excluding shares issued in the acquisition of the Compucare Company
("Compucare"), discussed below.
In March 1999, we closed the acquisition of the Compucare Company
("Compucare"). In connection with the acquisition of Compucare, we issued an
aggregate of 2,957,000 shares of Common Stock, all of which have registration
rights. In September 1998, we closed the acquisition of Integrated Medical
Networks. In connection with the acquisition of Integrated Medical Networks, we
issued an aggregate of
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1,550,000 shares of Common Stock and agreed to file a registration statement
under the Securities Act prior to January 1, 1999 to register all such shares.
In June 1998, we closed the acquisition of Pyramid Health Group, Inc.
("Pyramid"). In connection with the acquisition of Pyramid, we issued an
aggregate of 2,784,508 shares of Common Stock and warrants to purchase 62,710
shares of Common Stock. All of the shares of Common Stock issued in connection
with the acquisitions of IMN and Pyramid have been registered under the
Securities Act and are freely tradeable.
Sales of a substantial number of the aforementioned shares in the public
markets or the prospect of such sales could adversely affect or cause
substantial fluctuations in the market price of the Common Stock and impair our
ability to raise additional capital through the sale of our securities.
WE MAY ENCOUNTER RISKS ASSOCIATED WITH NEW PRODUCT DEVELOPMENT
Our performance depends in large part upon our ability to provide the
increasing functionality required by our customers through the timely
development and successful introduction of new products and enhancements to our
existing suite of products. We have historically devoted significant resources
to product enhancements and research and development and believe that
significant continuing development efforts will be required to sustain our
operations and integrate the products and technologies of acquired businesses
with our products. There can be no assurance that we 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 us will meet the requirements of hospitals or other health care
providers and payors and achieve or sustain market acceptance.
WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS AND
MAY FACE A CLAIM OF INFRINGEMENT BY A THIRD PARTY
We rely on a combination of trade secrets, copyright and trademark laws,
nondisclosure and other contractual provisions to protect our proprietary
rights. We have not filed any patent applications covering our technology.
There can be no assurance that measures taken by us to protect our intellectual
property will be adequate or that our competitors will not independently
develop products and services that are substantially equivalent or superior to
the products and services we offer.
There is substantial litigation regarding intellectual property rights in
the software industry. We expect that software products may be increasingly
subject to third-party infringement claims as the number of competitors in our
industry segment grows and the functionality of products overlaps. We believe
that our products do not infringe upon the proprietary rights of third parties.
However, there can be no assurance that third parties will not assert
infringement claims against us in the future. The Company may incur substantial
litigation expenses in defending any such claim regardless of the merit of the
claim. In the event of an unfavorable ruling on any such claim, we cannot
guarantee that a license or similar agreement will be available to us on
reasonable terms, if at all. Infringement may result in significant monetary
liabilities which would have a material adverse effect on our business,
7.
<PAGE> 10
financial condition and results of operations. We cannot guarantee that we will
be successful in the defense of these or similar claims.
UNDETECTED SOFTWARE ERRORS, FAILURES FOUND IN NEW PRODUCTS AND FAILURE OF OUR
PRODUCTS TO MEET PERFORMANCE CRITERIA COULD MATERIALLY ADVERSELY AFFECT OUR
OPERATING RESULTS
Products such as our products frequently contain errors or failures,
especially when initially introduced or when new versions are released.
Although we conduct extensive testing on our products, software errors have
been discovered in certain enhancements and products after their introduction.
We cannot guarantee that despite such testing by us, and by our current and
potential customers, products under development, enhancements or shipped
products will be free of errors or performance failures, resulting in, among
other things;
. loss of revenues and customers;
. delay in market acceptance;
. diversion of resources;
. damage to our reputation; or
. increased service and warranty costs.
The occurrence of any of these consequences could have a material adverse
effect upon our business, financial condition and results of operations.
THERE ARE RISKS ASSOCIATED WITH YEAR 2000 COMPLIANCE
As is true for most companies, the Year 2000 computer issue creates a
risk for us. If systems do not correctly recognize date information when the
year changes to 2000, there could be an adverse impact on our operations. We
face risks in four areas: systems used by us to run our business, systems used
by our suppliers, potential warranty or other claims from our customers, and the
potential reduction in spending by other companies on our products and solutions
as a result of significant information systems spending on Year 2000
remediation.
We have conducted a thorough inventory and evaluation of our systems,
equipment and facilities. We have a number of projects underway to replace or
upgrade systems, equipment and facilities that we know to be Year 2000
non-compliant. We have not identified alternative remediation plans if upgrade
or replacement is not feasible. We will consider the need for such remediation
plans as we continue to assess the year 2000 risk. For the Year 2000
non-compliance issues identified to date, the cost of upgrade or remediation is
not expected to be material to our operating results. If implementation of
replacement systems is delayed, or if significant new non-compliance issues are
identified, our results of operations or financial condition could be materially
adversely affected.
We are also in the process of contacting our critical suppliers to
determine that such suppliers' operations and the products and services they
provide are Year 2000 compliant. To date, we are unaware of any current
suppliers that are not Year 2000 ready. In the event that our suppliers are not
Year 2000 compliant, we will seek alternative sources of supplies. However, such
failures remain a possibility and could have an adverse impact on our results of
operations or financial condition.
We believe our current products are Year 2000 compliant. However,
since all customer situations cannot be anticipated, particularly those
involving third party products, we may see an increase in warranty and other
claims as a result of the Year 2000 transition. In addition, litigation
regarding Year 2000 compliance issues is expected to escalate. For these
reasons, the impact of customer claims could have a material adverse impact on
our results of operations or financial condition.
Year 2000 compliance is an issue for virtually all businesses whose
computer systems and applications may require significant hardware and software
upgrades or modifications. Companies owning and operating such systems may plan
to devote a substantial portion of their information systems' spending to fund
such upgrades and modifications and divert spending away from our products and
solutions. Such changes in our customers' spending patterns could have a
material adverse impact on our sales, operating results or financial condition.
8.
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WE MAY SUFFER AN INTERRUPTION IN OUR BUSINESS, INCLUDING, DATA PROCESSING
We currently process substantially all our customer data at our facilities
in Richmond, California and Neptune, New Jersey. Although we back up our data
nightly and have safeguards for emergencies such as power interruption or
breakdown in temperature controls, we have no mirror processing site to which
processing could be transferred in the case of a catastrophic event at either
of these facilities. In the event that a major catastrophic event occurs at
either the Richmond or the Neptune facility, possibly leading to an
interruption of data processing, our business, financial condition and results
of operations could be adversely affected.
WE FACE RISKS RELATED TO OUR OUTSOURCING BUSINESS
We provide compliance, consulting and business office outsourcing and cash
flow management services, including the billing and collection of receivables.
We acquired the infrastructure for our outsourcing business through an
acquisition. In addition, we often use our software products to provide
outsourcing services. As a result, we have not been required to make significant
capital expenditures in order to service existing outsourcing contracts.
However, if we experience a period of substantial expansion in our outsourcing
business, we may be required to make substantial investments in capital assets
and personnel. We cannot guarantee that we will be able to assess accurately the
investment required and negotiate and perform in a profitable manner any of the
outsourcing contracts we may be awarded. Our failure to either estimate
accurately the resources and related expenses required for a project, or to
complete our contractual obligations in a manner consistent with the project
plan upon which a contract was based, could have a material adverse effect on
our business, financial condition and results of operations. In addition, our
failure to meet a client's expectations in the performance of our services could
damage our reputation and adversely affect our ability to attract new business.
Finally, we could incur substantial costs and expend significant resources
correcting errors in our work, and could possibly become liable for damages
caused by these errors.
WE FACE RISKS ASSOCIATED WITH POTENTIAL GOVERNMENTAL 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 our products make them
clinical decision tools subject to FDA regulation. Compliance with these
regulations could be burdensome, time consuming and expensive. We could also
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 us in other
respects not presently foreseeable. We cannot predict the effect of possible
future legislation and regulation.
9.
<PAGE> 12
State governments substantially regulate the confidentiality of patient
records and the circumstances under which such records may be released for
inclusion in our databases. 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 us to incur substantial expenditures. We are not sure
that changes to state or federal laws will not materially restrict the ability
of health care providers to submit information from patient records using our
products.
WE FACE RISK OF PRODUCT-RELATED CLAIMS
Some of our products and services are used in the payment, collection,
coding and billing of health care claims and the administration of managed care
contracts. If our employees or our products fail to accurately assess, process
or collect these claims, our customers may file claims against us. We have been
and currently are involved in claims for money damages related to services
provided by our accounts receivable management business. We maintain insurance
to protect against certain claims associated with the use of our products, but
there can be no assurance that our insurance coverage would adequately cover any
claim brought against us. A successful claim brought against us that is in
excess of, or is not covered by, our insurance coverage could adversely affect
our business, financial condition and results of operations. Even a claim
without merit could result in significant legal defense costs and would consume
management time and resources. We do not know whether we will be subject to
material claims in the future which may result in liability in excess of our
insurance coverage, or which our insurance may not cover. We may not be able to
obtain appropriate insurance in the future at commercially reasonable rates. In
addition, if we are found liable, we would have to significantly alter our
products resulting in additional unanticipated research and development
expenses.
WE FACE RISKS ASSOCIATED WITH CERTAIN INVESTMENTS WE HAVE MADE OR MAY MAKE IN
THE FUTURE
We have made equity investments to acquire minority interests in certain
early stage companies. We do not have the ability to control the operations of
any of these companies. Investing in such early stage companies is subject to
certain significant risks. There can be no assurance that any of these
companies will be successful or achieve profitability or that we will ever
realize a return on our investments. In addition, to the extent any of such
companies fail or become bankrupt or insolvent, we may lose some or all of our
investment. We intend to continue to make additional investments in such
companies in the future. Losses resulting from such investment could have a
material adverse effect on our operating results.
POTENTIAL EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT THE ACQUISITION OF
QUADRAMED
Our Board of Directors has the authority to issue up to 5,000,000 shares
of Preferred Stock and to determine the price, rights preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the stockholders. The rights of the
10.
<PAGE> 13
holders of Common Stock may be subject to, and may be adversely affected by, the
rights of the holders of any Preferred Stock that may be issued in the future.
The issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change of control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of Common Stock. We have no present plans to issue shares of Preferred Stock.
Further, certain provisions of our Certificate of Incorporation and Bylaws
could discourage potential takeover attempts and make attempts by stockholders
to change management more difficult. For example, our Board of Directors is
classified into three classes of directors serving staggered, three-year terms
and has the authority without action by our stockholders to impose various
procedural and other requirements that could make it more difficult for
stockholders to effect certain corporate actions. In addition, our 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, our 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 our Common Stock.
Finally, certain provisions of Delaware law 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.
OUR STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS
The stock market in general, and the Nasdaq National Market, has
historically experienced extreme price and volume fluctuations that have often
been unrelated to the operating performance of companies and which has affected
the market price of securities of many companies. The trading price of our
Common Stock is likely to be highly volatile and could also be subject to
significant fluctuations in price in response to such factors as:
. variations in quarterly results of operations;
. announcements of new products or acquisitions by us or our competitors;
. governmental regulatory action;
. developments or disputes with respect to proprietary rights;
. general trends in our industry and overall market conditions; and
. other event or factors, many of which are beyond our control.
The market price of our Common Stock may also be affected by movements in
prices of equity securities in general.
USE OF PROCEEDS
The Company will not receive any of the net proceeds from the sale of
the Shares by the Selling Stockholders.
11.
<PAGE> 14
SELLING STOCKHOLDERS
The following table sets forth the principal amount of Common Stock
beneficially owned by each of the Selling Stockholders as of April 30, 1999, all
of which are being offered pursuant hereto. Because the Selling Stockholders may
sell all or a portion of the 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 Shares, no
estimate can be given as to the amount of Shares that will be held by the
Selling Stockholders after completion of this Offering. The Shares offered for
sale by this Prospectus may be offered from time to time by the Selling
Stockholders named below.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING
NAME OF SELLING STOCKHOLDER BENEFICIALLY OWNED SHARES
<S> <C> <C>
Peter W. Jarvis 365,179
Michael D. Halberda 121,726 *
John H. Ginn 5,072 *
Jeffrey M. MacDonald 10,144 *
Salim Nice 5,072 *
</TABLE>
- --------------------------
* Less than one percent.
PLAN OF DISTRIBUTION
The Shares offered hereby are being offered directly by the Selling
Stockholders. The Company will receive no proceeds from the Offering. The Shares
offered hereby may be sold 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 Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of
12.
<PAGE> 15
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the 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). The Shares offered
hereby may be sold either pursuant to this Registration Statement or pursuant to
Rule 144 of the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
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 or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
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 Shares may not simultaneously engage in market making
activities with respect to the Common Stock of the Company for a period of one
business day 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.
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 incorporated by reference
in this Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their reports. In that
report, that firm states that with respect to FRA Acquisitions, Inc. and
subsidiary its opinion is based on the report of other independent public
accountants, namely, Deloitte & Touche LLP. The financial statements referred
to above have been incorporated by reference in reliance upon the authority of
those firms as experts in giving said reports.
The consolidated financial statements of FRA Acquisitions, Inc. and
subsidiary, which are not presented separately or incorporated by reference in
this Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which report is incorporated
herein by reference from the QuadraMed Corporation Current Report on Form 8-K
dated March 12, 1999, and has been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
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. Information on the operation
of the Public Reference Room can be obtained by calling the Commission at
1-800-SEC-0330. 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.
Reference is made to such Registration Statement for further information with
respect to the Company and the securities of the Company
13.
<PAGE> 16
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(a) and 15(d) of the Exchange Act are hereby incorporated by reference
in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998
filed March 31, 1999, and amendment thereto filed April 30, 1999.
2. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1999 filed May 17, 1999.
3. Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1998 and amendment thereto filed March 15, 1999;
4. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998 and amendment thereto filed March 15, 1999;
5. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1998 and amendment thereto filed March 15, 1999;
6. Current Report on Form 8-K dated March 12, 1999 and filed March 15,
1999.
7. Current Report on Form 8-K dated February 3, 1999 and filed February
18, 1999;
8. Current Report on Form 8-K dated September 30, 1998 and filed October
15, 1998;
9. Current Report on Form 8-K dated August 31, 1998 and filed September
11, 1998;
10. Current Report on Form 8-K dated June 1, 1998, and filed June 11,
1998, and amendment thereto filed June 17, 1998;
11. Current Report on Form 8-K dated May 1, 1998 and filed May 11, 1998;
12. Current Report on Form 8-K dated April 13, 1998 and filed April 29,
1998;
13. 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;
14. Current Report on Form 8-K dated September 29, 1997 and filed October
14, 1997, and amendment thereto filed March 10, 1998;
15. Current Report on Form 8-K dated February 4, 1998 and filed February
18, 1998;
16. Current Report on Form 8-K dated December 29, 1997 and filed January
13, 1998; and
17. 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, 1003
CUTTING BLVD. SUITE 200, RICHMOND, CALIFORNIA, 94804 (TEL. 510/620-2340).
14.
<PAGE> 17
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 ANY OF THE SECURITIES OFFERED HEREBY TO 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 CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 2
Use of Proceeds............................................................ 11
Selling Stockholders....................................................... 12
Plan of Distribution....................................................... 12
Legal Matters.............................................................. 13
Experts.................................................................... 13
Available Information...................................................... 13
Incorporation of Certain Documents
by Reference.......................................................... 14
</TABLE>
QUADRAMED CORPORATION
4,507,193 Shares of Common Stock
PROSPECTUS
June __, 1999
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of Common Stock to being registered,
other than underwriting discounts and commissions. All amounts are estimates
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 1,410
Nasdaq National Market listing fee........................................ 10,140
Printing and engraving expenses........................................... 1,000
Legal expenses............................................................ 3,000
Accounting fees and expenses.............................................. 1,000
Miscellaneous expenses.................................................... 1,000
-------
Total............................................................. $17,550
=======
</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 the expenses
listed above.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides in relevant part that "[a] corporation shall have power to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful." With respect to derivative actions, Section 145(b) of the DGCL
provides in relevant part that "[a] corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor [by reason of that person's
service in one of the capacities specified in the preceding sentence] against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper."
Section 102(b)(7) of the DGCL provides that a corporation's certificate
of incorporation may eliminate or limit personal liability of its directors to
the corporation or its stockholders for monetary damages for breach of a
director's fiduciary duty. However, no such provision may eliminate or limit the
liability of a director for breaching such director's duty of loyalty, failing
to act in good faith, engaging in intentional misconduct or knowingly violating
a law, paying a dividend or approving a stock repurchase that was illegal, or
obtaining an improper
II-1
<PAGE> 19
personal benefit. A provision of this type has no effect on the availability of
equitable remedies, such as injunction or rescission, for breach of fiduciary
duty.
The Company's Second Amended and Restated Certificate of Incorporation
eliminates the personal liability of its directors to the fullest extent allowed
under the DGCL. In addition, Article 5 of the Company's Amended and Restated
Bylaws provides that the Company shall indemnify each person who is or was a
director or executive officer of the Company to the full extent permitted by the
DGCL. Such Article also provides that the Company may, but is not required to,
indemnify its employees and agents (other than directors and officers) to the
extent and in the manner permitted by the DGCL.
The Registrant has entered into an indemnification agreement with each
of its directors and officers and intends to maintain insurance for the benefit
of its directors and officers insuring such persons against certain liabilities,
including liabilities under the securities laws.
ITEM 16. EXHIBITS.
(a) Exhibits
2.1 Acquisition Agreement and Plan of Merger dated December 23, 1998 by
and among the Company and Premier Healthcare Acquisition
Corporation, and Premier Healthcare Corporation and its
Shareholders.
4.1 Reference is made to Exhibits 3.2 and 3.4 of the Form SB-2 (as
defined herein).(1)
4.2 Form of Common Stock Certificate.(1)
4.3 Registration Rights Agreement dated December 23, 1998 by and
between the Company and the shareholders listed therein.
5.1 Opinion of Brobeck, Phleger and Harrison LLP.(2)
23.1 Consent of Arthur Andersen LLP.(2)
23.2 Consent of Deloitte & Touche LLP.(2)
23.3 Consent of Brobeck, Phleger & Harrison LLP(included in
Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
(1) Incorporated herein by reference from the exhibit with the same number to
the Company's Registration Statement on Form SB-2, No. 333-5180-LA, as filed
with the Commission on June 28, 1996, as amended by Amendment No. 1, Amendment
No. 2 and Amendment No. 3 thereto, as filed with the Commission on July 26,
1996, September 9, 1996 and October 2, 1996, respectively (collectively, "Form
SB-2").
(2) To be filed by amendment.
(b) Financial Data Schedule
Not applicable.
II-2
<PAGE> 20
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 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> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond, State of
California on this 14th day of June, 1999.
QUADRAMED CORPORATION
By /s/ E. PAYSON SMITH
----------------------------------
E. Payson Smith
Executive Vice President and
Chief Financial 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 E. Payson Smith, and each one of them, his attorneys-in-fact,
each with the power of substitution and resubstitution, for him in any and all
capacities, to sign any and all amendments to this Registration Statement and
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, as amended, and all
post-effective amendments thereto, and to file the same, with exhibits thereto
and other 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 all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
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. DURNAM Chairman of the Board and Chief Executive Officer June 14, 1999
------------------------ (Principal Executive Officer)
James D. Durham
/s/ E. PAYSON SMITH Executive Vice President and Chief Financial Officer June 14, 1999
------------------------ (Principal Financial and Accounting Officer)
E. Payson Smith
/s/ BERNIE J. MURPHY Vice President, Finance June 14, 1999
------------------------- and Chief Accounting Officer
Bernie J. Murphy (Principal Accounting Officer)
/s/ MICHAEL J. KING Director June 14, 1999
-------------------------
Michael J. King
/s/ ALBERT L. GREENE Director June 14, 1999
-------------------------
Albert L. Greene
Director June __, 1999
-------------------------
Kenneth E. Jones
Director June __, 1999
-------------------------
Joan P. Neuscheler
/s/ E.A. ROSKOVENSKY Director June 14, 1999
-------------------------
E.A. Roskovensky
</TABLE>
II-4
<PAGE> 22
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Acquisition Agreement and Plan of Merger dated December 23, 1998
by and among the Company and Premier Healthcare Acquisition
Corporation, and Premier Healthcare Corporation and its
Shareholders.
4.3 Registration Rights' Agreement dated December 23, 1998 by and
between the Company and the Shareholders listed therein.
II-5
<PAGE> 1
================================================================================
ACQUISITION AGREEMENT AND PLAN OF MERGER
BY AND AMONG
QUADRAMED CORPORATION AND PREMIER HEALTHCARE ACQUISITION CORPORATION,
AND
PREMIER HEALTHCARE CORPORATION AND ITS SHAREHOLDERS
DATED
DECEMBER 23, 1998
================================================================================
<PAGE> 2
EXHIBIT 2.1
ACQUISITION AGREEMENT AND PLAN OF MERGER
This Acquisition Agreement and Plan of Merger (the "Agreement") is dated
December 23, 1998 by and among QuadraMed Corporation, a Delaware corporation
("QuadraMed"), and Premier Healthcare Acquisition Corporation, a Delaware
corporation ("Acquisition Co."), on the one hand, and Premier Healthcare
Corporation, a Washington corporation (the "Company"), Peter W. Jarvis
("Jarvis") and Michael D. Halberda ("Halberda"), who are all of the shareholders
of the Company (the "Shareholders"), on the other hand.
WHEREAS, QuadraMed is a duly incorporated Delaware corporation engaged
in the business of developing, marketing and selling software products and
consulting services to healthcare providers and payors.
WHEREAS, Acquisition Co. is a duly incorporated Delaware corporation
formed by QuadraMed for the purpose of the Merger (as defined below)
contemplated by this Agreement, with authorized capital stock consisting of
1,000 shares of Common Stock, $0.001 par value, of which all 1,000 shares are
duly and validly issued and outstanding and owned by QuadraMed.
WHEREAS, the Company is a duly incorporated Washington corporation
engaged in the business of providing insurance/cost reimbursement consulting
services to healthcare institutions, with authorized capital stock consisting of
2,000 shares of Common Stock, $25.00 par value, of which 400 shares are duly and
validly issued, outstanding and entitled to vote as of the date hereof.
WHEREAS, the Shareholders and the respective Boards of Directors of
QuadraMed, Acquisition Co. and the Company have approved the acquisition of the
Company by Acquisition Co. via merger (the "Merger") of Acquisition Co. with and
into the Company pursuant to the terms of this Agreement and in a transaction
intended to qualify as a tax-free reorganization under Section 368(a) of the
Code (as defined below).
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by each signatory hereto, it is agreed as
follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
<PAGE> 3
I.1 "Acquisition Co. Common Stock" shall mean the Common Stock of
Acquisition Co., $0.001 par value.
I.2 "Affiliate" shall mean any person directly or indirectly
controlled by, controlling or under common control of any party to this
Agreement.
I.3 "Closing" shall mean the closing of the transactions contemplated
in this Agreement.
I.4 "Closing Consideration" shall mean the consideration to be paid
to the Shareholders at the Closing, payable in newly-issued shares of QuadraMed
Common Stock (as defined below) with an aggregate Fair Market Value (as defined
below) of $11,000,000.
I.5 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and all regulations promulgated thereunder.
I.6 "Company Common Stock" shall mean all of the issued and
outstanding Common Stock of the Company, $25.00 par value, all of which shares
are held by the Shareholders as of the date hereof.
I.7 "Company Financial Statements" shall mean the audited balance
sheets of the Company as of December 31, 1997 for the twelve (12) month period
then ended and the related statements of operations, shareholders' equity and
cash flows for the periods then ended, as prepared by Moss Adams LLP independent
certified public accountants to the Company, including notes thereto, and the
unaudited balance sheets of the Company as of November 30, 1998 for the eleven
(11) month period then ended and the related statement of profits and losses for
the period then ended, as prepared internally by the Company, including notes
thereto.
I.8 "Contract" shall mean any existing oral contract in which the
obligation will exceed $1,000 in the next twelve (12) months, written contract,
lease, policy, commitment, sales order, purchase order, indenture, mortgage,
note, bond, instrument, license or other agreement.
I.9 "Daily Price" of the QuadraMed Shares (as defined below) shall
mean the last reported sales price on such day reported by the National
Association of Securities Dealers, Inc. Automated Quotation System.
I.10 "Delaware Code" shall mean the Delaware General Corporation Law.
I.11 "Effective Date" shall mean the date and time the Articles of
Merger (as defined below) are filed with the Washington Secretary of State and
the Certificate of Merger (as defined below) is filed with the Delaware
Secretary of State.
-2-
<PAGE> 4
I.12 "Employee Benefit Plan(s)" shall mean any "employee benefit plan"
as defined in Section 3(3) of ERISA (as defined below) and any other plan,
policy, program, practice or arrangement providing compensation or other
benefits to any current or former officer or employee of the Company or any
beneficiary or dependent thereof that is or was maintained by the Company.
I.13 "Encumbrances" shall mean any mortgage, chattel mortgage,
conditional sales Contract, pledge, liability, lien, charge, security interest,
encumbrance, option, lease, license, easement or similar interest.
I.14 "Environmental Law" shall mean all applicable federal, state and
local laws, statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directives, requests, licenses,
authorizations, permits and agreements issued or signed by any federal, state or
local government authority, relating to environmental, health or safety matters,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Clean Water Act of 1977, the Clean
Air Act, the Resource Conservation and Recovery Act of 1976, the Federal
Insecticide, Fungicide and Rodenticide Act, the Toxic Substances Control Act,
the Emergency Planning and Community Right-to-Know Act of 1986, the Occupational
Safety and Health Act of 1970 and the Safe Drinking Water Act, all as amended,
and any state and local counterparts to such acts as existing at the time of
Closing.
I.15 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all regulations promulgated thereunder.
I.16 "Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended.
I.17 "Fair Market Value" with respect to each of the QuadraMed Shares
shall mean the average of the Daily Price per share of the QuadraMed Shares
(adjusted for any stock splits or other reclassifications during the applicable
time period) for the ten (10) consecutive trading days for the period ending two
(2) business days prior to the Closing.
I.18 "GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.
I.19 "Government Communications" shall mean all written inspection
reports, complaints and other communications received by the Company from
government and regulatory agencies and authorities or oral communications
received by officers of the Company.
I.20 "Hazardous Substance(s)" shall mean any substance, the presence
of which requires investigation or remediation under any Environmental Law or
under common law,
-3-
<PAGE> 5
any toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous substance which is regulated by
any Environmental Law, any substance, the presence of which causes or threatens
to cause a nuisance upon property presently and/or previously owned, leased or
otherwise used by the Company (or poses or threatens to pose a hazard to the
health or safety of persons on or about the property of the Company or adjacent
properties) and radon, ureaformaldehyde, polychlorinated biphenyls, asbestos or
asbestos-containing materials, petroleum and petroleum products.
I.21 "Intellectual Property" shall mean all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof,
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, copyrightable works, all
copyrights and all applications, registrations and renewals in connection
therewith, mask works and all applications, registrations and renewals in
connection therewith, trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), proprietary
software, other proprietary rights and copies and tangible embodiments thereof
(in whatever form or medium).
I.22 "IRS" shall mean the United States Internal Revenue Service or
any successor entity.
I.23 "Knowledge" shall mean that an individual will be deemed to have
Knowledge of a particular fact or other matter if such individual is actually
aware of such fact or other matter or a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter. A Person (as defined below), other than an
individual, will be deemed to have Knowledge of a particular fact or other
matter if any individual who is serving, or who has at any time served, as a
director, officer, partner, executor or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
I.24 "Licenses" shall mean all material governmental licenses,
permits, approvals and registrations necessary for the ownership of the Company
properties and the conduct of its business as currently conducted.
I.25 "Material Adverse Effect" shall mean any material adverse effect
on the business, assets, properties, operations or condition (financial or
otherwise) of the Company.
-4-
<PAGE> 6
I.26 "Person" shall mean an individual, a partnership, a corporation,
a business trust, a joint stock company, a trust, an unincorporated association,
a joint venture or any other entity of whatever nature.
I.27 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
I.28 "QuadraMed Common Stock" shall mean the shares of Common Stock of
QuadraMed, $0.01 par value.
I.29 "QuadraMed SEC Filings" shall mean any and all documents, reports
and other filings made by QuadraMed with the SEC (as defined below), including,
without limitation, 1997 Annual Report to Stockholders, Form 10-K/A-1 for the
fiscal year ended December 31, 1997, Form 10-Q for the period ended March 31,
1998, Form 8-K dated April 13, 1998, Amendment No. 4 to Form S-4 Registration
Statement dated April 24, 1998, Amendment No. 4 to Form S-3 Registration
Statement dated April 24, 1998, Form 8-K dated May 4, 1998, Proxy
Statement/Prospectus for the Special Meeting of Stockholders of Medicus Systems
Corporation held on May 27, 1998, Form 8-K dated May 27, 1998, Notice and Proxy
Statement for the Annual Meeting of Stockholders held on May 28, 1998, Form 8-K
dated June 1, 1998, Form S-3 Registration Statement dated June 1, 1998, Form S-8
Registration Statement dated June 5, 1998, Schedule 13G dated June 5, 1998,
Amendment No. 1 to Form S-3 dated June 17, 1998, Amendment No. 1 to Form 8-K
dated June 17, 1998, Schedule 13D dated June 22, 1998, Amendment to Schedule 13G
dated July 9, 1998, Form 8-K dated August 31, 1998, Form 8-K dated September 30,
1998, Schedule 13D dated October 13, 1998, Form S-3 Registration Statement dated
November 4, 1998 and Form 10-Q for the period ended September 30, 1998.
I.30 "QuadraMed Shares" shall mean the shares of QuadraMed Common
Stock issuable as a portion of the Closing Consideration.
I.31 "Real Property" shall mean all of the land, buildings, plants,
facilities, installations, fixtures and other structures and improvements leased
to the Company pursuant to the Real Property Leases (as defined below).
I.32 "Real Property Leases" shall mean, collectively, any written real
property leases to which the Company is a party.
I.33 "Regulatory Action(s)" shall mean any material claim, demand,
action or proceeding brought or instigated by any governmental authority in
connection with any Environmental Law (including, without limitation, civil,
criminal and/or administrative proceedings), whether or not seeking costs,
damages, penalties or expenses.
I.34 "SEC" shall mean the United States Securities and Exchange
Commission, or any successor entity.
-5-
<PAGE> 7
I.35 "Securities Act" shall mean the Securities Act of 1933, as
amended.
I.36 "Surviving Corporation" shall mean the Company as the surviving
corporation following the Merger.
I.37 "Tax(es)" shall mean all taxes, charges, fees, levies or other
assessments of any nature whatsoever (including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever) together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority (domestic or foreign) upon the Company to which reference
is being made or any Affiliate thereof or upon any consolidated, combined or
unitary group of which any such entity is or was a member.
I.38 "Tax Return(s)" shall mean all federal, state, foreign, local and
other tax returns, reports and statements heretofore required to be filed by the
Company to which reference is being made or by any consolidated, combined or
unitary group of which the Company is or was a member.
I.39 "Washington Code" shall mean the Washington Business Corporation
Act.
ARTICLE II.
THE MERGER
II.1 Merger. Subject to the terms and conditions hereof, the Merger
shall be consummated in accordance with the Washington Code and the Delaware
Code. At the Effective Date, subject to the terms and conditions of this
Agreement and in accordance with the laws of the Washington and Delaware,
Acquisition Co. shall be merged with and into the Company, which shall be the
Surviving Corporation.
II.2 Company Common Stock. Each share of Company Common Stock issued
and outstanding immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the Shareholders, be converted into
the right to receive a ratable portion of the Closing Consideration upon
surrender at the Closing of the certificates representing such shares. At the
Effective Date, all rights in respect of such Company Common Stock shall cease
to exist, other than the right to receive the Closing Consideration and all such
shares shall be cancelled and retired. Until surrendered, each outstanding
certificate which prior to the Effective Date represented issued and outstanding
Company Common Stock shall be deemed for all corporate purposes to evidence the
right to receive such amounts. Each share of Company Common Stock held in the
Company's treasury immediately prior to the Effective Date shall, by virtue of
the Merger, be cancelled and retired and cease to exist, without any conversion
thereof.
-6-
<PAGE> 8
II.3 Acquisition Co. Common Stock. Each share of Acquisition Co.
Common Stock issued and outstanding immediately prior to the Effective Date
shall, by virtue of the Merger and without any action on the part of QuadraMed,
be cancelled and converted into such number of newly issued shares of the Common
Stock of the Surviving Corporation equal to the number of shares of Acquisition
Co. Common Stock then outstanding.
II.4 Execution of Articles of Merger and Certificate of Merger. At the
Closing, the Company shall complete and execute the Articles of Merger,
substantially in the form attached hereto as Exhibit "A" and incorporated herein
by this reference (the "Articles of Merger"), and the Certificate of Merger,
substantially in the form attached hereto as Exhibit "B" and incorporated herein
by this reference (the "Certificate of Merger"), and counsel for QuadraMed and
Acquisition Co. shall cause the Articles of Merger to be delivered to the
Washington Secretary of State for filing as provided in Section 23B.11.050 of
the Washington Code and the Certificate of Merger to be delivered to the
Delaware Secretary of State for filing as provided in Section 252 of the
Delaware Code. The parties hereto will also execute and deliver such other
documents or certificates as may be required to effect the Merger.
II.5 Effect of the Merger. The Merger shall have the effects set forth
in Section 23B.11.060 of the Washington Code and Section 259 of the Delaware
Code.
II.6 Articles of Incorporation; Bylaws. As of the Effective Date, the
Articles of Incorporation of the Company, as amended, shall be the Articles of
Incorporation of the Surviving Corporation, and the Bylaws of the Company shall
be the Bylaws of the Surviving Corporation.
II.7 Directors. The directors of Acquisition Co. as of the Effective
Date shall be the directors of the Surviving Corporation and shall hold office
from the Effective Date until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of Incorporation
and Bylaws of the Surviving Corporation, or as otherwise provided by law.
II.8 Officers. The officers of Acquisition Co. as of the Effective
Date shall be the officers of the Surviving Corporation and shall hold office
from the Effective Date until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of Incorporation
and Bylaws of the Surviving Corporation, or otherwise provided by law.
II.9 Closing. The Closing of the transactions contemplated by this
Agreement shall take place at such time as may mutually be agreed to by the
parties either by facsimile (with original signature pages to immediately follow
by overnight courier) or at the principal executive offices of QuadraMed, 1003
West Cutting Boulevard, 2nd Floor, Richmond, California 94804.
-7-
<PAGE> 9
II.10 Closing Obligations of Company and the Shareholders. At the
Closing, the Company and the Shareholders shall deliver or cause to be delivered
to QuadraMed and Acquisition Co.:
(a) the original certificates representing the shares of
Company Common Stock owned by the Shareholders, duly endorsed in blank (or
accompanied by duly executed stock powers);
(b) the Articles of Merger and the Certificate of Merger for
filing, executed by the Company;
(c) a closing certificate, executed by the Company and each of
the Shareholders and dated as of the Closing, certifying that (i) all of the
representations and warranties of the Company and the Shareholders in this
Agreement, considered collectively, and each of such representations and
warranties, considered individually, are accurate in all respects as of the date
of the Closing and (ii) all of the covenants and obligations that the Company
and the Shareholders are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing, including, without limitation, those
contained in this Section 2.10, considered collectively, and each of these
covenants and obligations, considered individually, have been performed and
complied with in all respects;
(d) the legal opinion, dated as of the Closing, of Aprahamian
& Aprahamian, P.C., counsel for the Company and the Shareholders, substantially
in the form attached hereto as Exhibit "C" and incorporated herein by this
reference;
(e) a certificate of the Secretary of the Company attesting to
the incumbency of the officers executing the Agreement and the other agreements
and certificates delivered by the Company at the Closing and certifying to the
authenticity of the Articles of Incorporation and Bylaws of the Company, each as
amended;
(f) written resolutions of the Shareholders and Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement, certified by the Secretary of the Company;
(g) the Employment Agreements, substantially in the form
attached hereto as Exhibit "D" and incorporated herein by this reference (the
"Employment Agreements"), executed by each of Jarvis and Halberda;
(h) the Non-Competition and Non-Interference Agreements,
substantially in the form attached hereto as Exhibit "E" and incorporated herein
by this reference (the "Non-Competition Agreements"), executed by each of Jarvis
and Halberda;
-8-
<PAGE> 10
(i) the Escrow Agreement, substantially in the form attached
hereto as Exhibit "F" and incorporated herein by this reference (the "Escrow
Agreement"), executed by each of the Shareholders;
(j) the Release, substantially in the form attached hereto as
Exhibit "G" and incorporated herein by this reference, executed by each of the
Shareholders;
(k) the Registration Rights Agreement, substantially in the
form attached hereto as Exhibit "H" and incorporated herein by this reference
(the "Registration Rights Agreement"), executed by each of the Shareholders;
(l) resignation letters of each of the officers and directors
of the Company dated effective as of the Closing;
(m) written evidence that all necessary third party consents
or approvals identified in Schedule 3.8 shall have been obtained on or prior to
the Closing;
(n) a certificate of good standing for the Company issued by
the Washington Secretary of State not more than ten (10) days prior to the
Closing Date; and
(o) such other documents as may be reasonably requested by
counsel for QuadraMed and Acquisition Co. as necessary to consummate the
transactions contemplated by this Agreement.
II.11 Closing Obligations of QuadraMed and Acquisition Co. At the
Closing, QuadraMed and Acquisition Co. shall deliver or cause to be delivered to
the Company and the Shareholders:
(a) the Closing Consideration;
(b) a closing certificate, executed by each of QuadraMed and
Acquisition Co. dated as of the Closing, certifying that (i) all of the
representations and warranties of QuadraMed and Acquisition Co. in this
Agreement, considered collectively, and each of such representations and
warranties, considered individually, are accurate in all respects as of the date
of the Closing and (ii) all of the covenants and obligations that QuadraMed and
Acquisition Co. are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing, including, without limitation, those
contained in this Section 2.11, considered collectively, and each of these
covenants and obligations, considered individually, have been performed and
complied with in all respects;
(c) the legal opinion, dated as of the Closing, of Zevnik
Horton Guibord McGovern Palmer & Fognani, L.L.P., counsel for QuadraMed and
Acquisition Co.,
-9-
<PAGE> 11
substantially in the form attached hereto as Exhibit "I" and incorporated herein
by this reference;
(d) a certificate of the Secretary of each of QuadraMed and
Acquisition Co. attesting to the incumbency of the officers executing the
Agreement and the other agreements and certificates delivered by each of
QuadraMed and Acquisition Co., respectively, at the Closing;
(e) written resolutions or minutes of the shareholders of
Acquisition Co. and the Board of Directors of each of QuadraMed and Acquisition
Co. authorizing the execution, delivery and performance of this Agreement, each
certified by the Secretary of QuadraMed and Acquisition Co., respectively;
(f) the Employment Agreements, executed by QuadraMed;
(g) the Non-Competition Agreements, executed by each of
QuadraMed and the Surviving Corporation;
(h) the Escrow Agreement, executed by each of QuadraMed and
Acquisition Co.;
(i) the Registration Rights Agreement, executed by QuadraMed;
(j) a certificate of good standing for each of QuadraMed and
Acquisition Co. issued by the Delaware Secretary of State not more than ten (10)
days prior to the Closing Date; and
(k) such other documents as may be reasonably requested by
counsel for the Company and the Shareholders as necessary to consummate the
transactions contemplated by this Agreement.
II.12 Private Placement. The QuadraMed Shares to be issued to the
Shareholders pursuant to this Agreement will be exempt from registration
requirements of the Securities Act pursuant to the private placement exemption
provided by Rule 505 and/or 506 of Regulation D promulgated under the Securities
Act and/or Section 4(2) of the Securities Act, and applicable state securities
laws. Each of the Shareholders hereby agrees to take all actions and execute all
subscription and other documents to qualify issuance of the QuadraMed Shares for
such exemptions.
II.13 Tax Consequences. It is intended that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for purposes of Section
368 of the Code.
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<PAGE> 12
II.14 Pooling of Interests. The parties intend that the Merger be
treated as a "pooling of interests" for accounting purposes. Each party will
take all actions and execute all documents reasonably necessary to effectuate
the same.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders hereby jointly and severally represent
and warrant to QuadraMed and Acquisition Co. as follows:
III.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington, and has full corporate power and authority to own, lease and operate
its assets and properties and to carry on its businesses and to enter into,
deliver and perform its obligations under and to consummate the transactions
contemplated by this Agreement.
III.2 Articles of Incorporation and Bylaws. The Company has delivered
to QuadraMed true, correct and complete copies of its Articles of Incorporation
and Bylaws together with all amendments to each through the date hereof, and
such documents are in full force and effect.
III.3 Corporate Minutes. The Company has delivered to QuadraMed true,
correct and complete copies of its minute books, stock certificate books and
corporate records, and such books and records reflect all issuances of equity
and debt securities of the Company or rights to acquire any such securities, and
contain true and complete records of all meetings and consents in lieu of
meetings of the Board of Directors (and any committees thereof) and shareholders
of the Company.
III.4 Qualifications To Do Business. The Company is qualified to do
business and is in good standing in each jurisdiction (listed on Schedule 3.4 to
this Agreement) where the character or location of property owned and leased,
the employment of personnel or the nature of the business and activities
conducted by the Company, as the case may be, require such qualification,
licensing or domestication, except in such jurisdictions where the failure to be
so qualified, licensed or domesticated and to be in good standing, individually
or in the aggregate, would not have a Material Adverse Effect. Except as set
forth on Schedule 3.4, the Company does not file franchise, income or other tax
returns in any jurisdiction based upon the ownership or use of property therein
or the derivation of income therefrom.
III.5 Capitalization. As of the date of this Agreement, the only
authorized capital stock of the Company consists of 2,000 shares of Company
Common Stock, $25.00 par value, of which 400 shares are issued and outstanding.
All issued and outstanding shares of Company Common Stock have been duly
authorized and are validly issued, fully paid and
-11-
<PAGE> 13
nonassessable and are not subject to, nor were any issued in violation of, any
preemptive rights. There are not and, as of the Closing, there will not be, any
outstanding convertible securities of the Company or options, warrants,
subscriptions, convertible debentures or other rights, commitments or any other
similar agreements for the purchase of any securities of the Company. The
Company and the Shareholders are not party to any voting trust agreements or
other Contracts, agreements or arrangements restricting voting rights or
transferability with respect to the issued and outstanding Company Common Stock.
By execution of this Agreement, each of Jarvis and Halberda acknowledge and
agree to the termination of that certain Stock Cross Purchase Agreement dated
June 6, 1998 by and between Jarvis and Halberda pursuant to Section 11.01(d)
thereto.
III.6 Ownership of Shares; No Change. As of the date of this Agreement
and as of the Closing, the Shareholders do and will own all of the issued and
outstanding Company Common Stock. Each of the shares of Company Common Stock to
be tendered by the Shareholders at the Closing is free and clear of any
Encumbrance, and at the Closing, each of such shares of Company Common Stock
will be free of any Encumbrance. Each of the Shareholders has full power and
authority to convey good marketable title to the shares of Company Common Stock
owned by him, her or it free and clear of any Encumbrances. Except as set forth
on Schedule 3.6, there has been no change in the capital stock or other equity
interests of the Company within the two (2) year period ending on the Effective
Date of this Agreement.
III.7 Subsidiaries and Other Affiliates. The Company does not have any
subsidiaries and does not own, either directly or indirectly, any interest or
investment, whether debt or equity (other than an interest as a creditor holding
a trade account receivable), or any obligation, option or right to acquire any
interest, direct or indirect, in any other corporation or other entity.
III.8 Authority. The Company has the necessary corporate power and
authority to enter into and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby by the Company and each of the Shareholders have been duly
authorized by the Board of Directors and Shareholders of the Company in
accordance with applicable law. No further corporate action will be necessary on
the part of the Company to make this Agreement valid and binding upon the
Company and each of the Shareholders in accordance with its terms. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and each of the Shareholders and this Agreement (assuming due
authorization, execution and delivery by the other parties hereto) constitutes
the legal, valid and binding obligation of the Company and each of the
Shareholders, enforceable in accordance with its terms (except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditors generally or by general
principles of equity). Neither the execution, delivery nor performance of this
Agreement by the Company or any of the Shareholders, nor the
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consummation of the transactions contemplated hereby, nor compliance by the
Company or any of the Shareholders with the terms and provisions of this
Agreement nor the Articles of Merger nor the Certificate of Merger will result
in a violation or breach of any term or provision of the Articles of
Incorporation or Bylaws of the Company, each as amended, or of any statute, rule
or regulation applicable to the Company or its businesses, properties, assets or
personnel, or conflict with or constitute a violation or breach of, or a default
under (or an event which, with the passage of time or the giving of notice, or
both, would constitute a default under), nor give any party a right to
accelerate the due date of any indebtedness or obligation under, any indenture,
mortgage, deed of trust, Contract or agreement to which the Company is a party
or to which its properties or assets are subject (except as would not have a
Material Adverse Effect), or any instrument, judgment, decree, writ or other
restriction to which the Company is a party or by which the Company or its
businesses, properties, assets or personnel are bound. Except for filing the
Articles of Merger with the Washington Secretary of State and the Certificate of
Merger with the Delaware Secretary of State and obtaining any necessary third
party consents set forth on Schedule 3.8, and except as would not have a
Material Adverse Effect, the Company is not required to obtain the consent of
any third party or to submit any notice, report or other filing with any
federal, state or local governmental authority in connection with the execution
or delivery or performance by the Company of this Agreement or the consummation
of the transactions contemplated herein.
III.9 Company Financial Statements. The Company has delivered to
QuadraMed true, complete and correct copies of the Company Financial Statements.
Except as set forth on Schedule 3.9, to the Knowledge of the Company and the
Shareholders, the Company Financial Statements present fairly the financial
condition of the Company and the assets and liabilities of the Company as of the
respective dates of and at said dates and the results of its operations, changes
in shareholders' equity and cash flows for the periods therein specified, and
have been prepared from the books and records of the Company in accordance with
GAAP, consistently applied and maintained throughout the periods indicated
(except, with respect to the November 30, 1998 unaudited financial statements,
as would not have a Material Adverse Effect).
III.10 Undisclosed Liabilities. Except for liabilities disclosed or
provided for on the Company Financial Statements, liabilities incurred in the
ordinary course of business consistent with past practice since November 30,
1998 and liabilities set forth on Schedule 3.10, the Company does not have any
direct or indirect indebtedness, liability, losses or obligation, accrued,
absolute or contingent (whether or not of a kind required by GAAP to be set
forth on a balance sheet).
III.11 Absence of Certain Changes. Except as set forth on Schedule 3.11
or as provided for in this Agreement, since November 30, 1998, the Company has
conducted its business only in the ordinary course and consistent with prior
practice, and the Company has not:
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(a) discharged or satisfied any Encumbrances or paid any
obligation or liability, absolute, accrued, contingent or otherwise, whether due
or to become due, other than current liabilities shown on the Company Financial
Statements and current liabilities incurred since November 30, 1998 in the
ordinary course of business and consistent with prior practice;
(b) declared or made any payment of any dividend, or made any
other distribution upon or in respect of any of its shares of capital stock, or
purchased, retired or redeemed any of the shares of its capital stock or any
other securities, including any warrants or options to purchase any capital
stock, or obligated itself to do any of the foregoing;
(c) subjected (or permitted to be subjected) any of its
property, business or assets, tangible or intangible to any Encumbrances other
than Encumbrances for current Taxes which are not yet due and payable;
(d) sold, transferred, leased to others or otherwise disposed
of any of its assets or cancelled or compromised any debt or claim, or waived or
released any claim or right of substantial value except in the ordinary course
of business consistent with prior practice;
(e) terminated or received any notice of termination of any
Contract, lease or other agreement or suffered any damage, destruction or loss
(whether or not covered by insurance) which, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect;
(f) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts, or
had any material change in its relations with its employees, agents,
distributors, formulators, customers or suppliers;
(g) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, or entered into any
agreement or commitment relating to, any license, patent, copyright, trademark,
trade name, permit, consent, approval, invention, product registration or
similar rights, domestic or foreign, or modified any existing rights with
respect thereto;
(h) adopted, entered into or amended any Employee Benefit Plan
or made any change in the actuarial methods or assumptions used in funding or
determining benefit equivalences thereunder, made any change in the rate of
compensation, commission, bonus, deferred compensation arrangement or other
direct or indirect remuneration payable, or paid or agreed or orally promised to
pay, conditionally or otherwise, any bonus (cash or non-cash), extra
compensation, deferred compensation arrangement or severance or vacation pay, to
any shareholder, director, officer, employee, salesman or distributor of the
Company or hired or entered into any employment agreement or arrangement with
any person;
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<PAGE> 16
(i) issued or sold any shares of its capital stock or other
securities, or issued, granted or sold any options, rights or warrants with
respect thereto, or acquired any capital stock or other securities of any
Person, or any equity interest in any Person or otherwise made any loan or
advance to or investment in any Person, except for short-term investments in
cash and cash equivalents made in the ordinary course of business and consistent
with prior practice;
(j) made any capital expenditures or capital additions or
betterments or commitments therefor in excess of $10,000 individually or $25,000
in the aggregate;
(k) instituted, settled or agreed to settle, or suffered any
adverse determination in, any litigation, action or proceeding before any court
or governmental body (domestic or foreign) relating to the Company or its
businesses, assets or properties;
(l) accepted any Contract for performance of services or
orders in a material amount from any hospital, health care provider or other
customer under conditions relating to price, terms of payment, time of delivery
or performance or like matters differing from the conditions regularly and
usually specified on acceptance of Contracts or orders for similar services or
merchandise from said customer or customers who are similarly situated, or made
any change in its selling, pricing, advertising or personnel practices,
inconsistent with its prior practices and prudent business practices prevailing
in the industry;
(m) revalued any of its assets or written off as uncollectible
any notes or accounts receivable which, individually or in the aggregate, is
material to the Company or its businesses, except writedowns and write-offs in
the ordinary course of business.
(n) entered into any agreement or made any commitment to take
any of the actions described in paragraphs (a) through (m) above; or
(o) experienced any Material Adverse Effect.
III.12 Assets. Except as set forth on Schedule 3.12, the Company has
good and marketable title to, or a valid leasehold interest in or other legal
right to use, all of the properties and assets it owns or uses in its business.
None of such assets or properties are subject to any Encumbrances, except (i)
Encumbrances and leases incurred or made in the ordinary course of business
which are not substantial in character, amount or extent and do not materially
impair the usefulness of such properties and assets in the conduct of the
business of the Company, (ii) liens for Taxes, assessments or other governmental
charges or levies which are either not yet delinquent or are being contested in
good faith and by appropriate proceedings, can be paid without penalty and which
do not materially impair the usefulness of such properties and assets in the
conduct of the business of the Company or (iii) as reflected on the Company
Financial Statements. Except as set forth on Schedule 3.12, all of such
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<PAGE> 17
properties and assets owned, leased or used by the Company have been maintained
in accordance with customary industry practices, are in good operating condition
and repair except for normal wear and tear, are suitable for the purposes used,
are directly related to the business of the Company and are adequate and
sufficient for all current operations of the business of the Company. The
Company has delivered to QuadraMed a complete list, which is true and correct in
all material respects, of all equipment, machinery, tools, equipment, motor
vehicles, rolling stock and other tangible personal property and supplies owned,
leased or used by the Company, except for items having a cost less than $1,000.
III.13 Real Property Matters. The Company does not own any real
property. The Real Property includes all land used for the conduct of the
business and operations of the Company. Except as set forth on Schedule 3.13, to
the actual knowledge of the Company and the Shareholders, no Hazardous
Substances have been used in the construction or repair of, or any alterations
or additions to, or are currently located in or on, any portion of the Real
Property. The Company has delivered to QuadraMed true, correct and complete
copies of the Real Property Leases and copies of all reports of any engineers,
environmental consultants or other consultants in its possession relating to any
of the Real Property. Each of the Real Property Leases is valid and enforceable
in accordance with its terms, the Company has not received any notice of any,
and, to the Knowledge of the Company and the Shareholders, there exists no event
of default or event which constitutes or would constitute (with notice or lapse
of time or both) a default in any material respect under any Real Property Lease
and all lessors under the Real Property Leases have consented or have orally
agreed to consent (where such consent is necessary) to the consummation of the
transactions contemplated by this Agreement without requiring modification in
the rights or obligations thereunder (except where the failure to obtain such
consent would not constitute a Material Adverse Effect). To the actual knowledge
of the Company and the Shareholders, none of the property subject to any Real
Property Lease is subject to any Encumbrance, easement, right-of-way, building
or use restriction, exception, variance, reservation or limitation as might in
any material respect interfere with or impair the present and continued use
thereof in the usual and normal conduct of the business and operations of
Company.
III.14 Intellectual Property. Schedule 3.14 sets forth all Intellectual
Property of the Company other than the Company's proprietary software, which is
set forth on Schedule 3.16. The Company owns, or is licensed to, or otherwise
has, the right to use the Intellectual Property that is required for the conduct
of the business of the Company. Except as set forth on Schedule 3.14, to the
Knowledge of the Company and the Shareholders, the Company is not in violation
of, or infringing upon, any patent, trademark, service mark, trade name,
copyright or franchise of any third party, and no claims have been asserted, nor
is there any litigation pending or, to the Knowledge of the Company and the
Shareholders, threatened claiming such infringement. Except as set forth on
Schedule 3.14, the Company has not licensed or encumbered any of its
Intellectual Property to any third party, nor have any other distribution rights
been granted by the Company to a third party. Except as set forth on Schedule
3.14, the Company has not entered into any other agreements whereby the Company
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<PAGE> 18
has been appointed as a distributor or licensee of any products, patents or
trademarks owned by a third party. Except as set forth on Schedule 3.14, the
Company has not entered into any agreement which restricts or affects the use of
any of the Intellectual Property. The Company is not in breach of any agreement
set forth in Schedule 3.14, nor have any claims with respect to any agreement
been asserted nor is there any litigation pending or, to the Knowledge of the
Company and the Shareholders, threatened claiming any such breach, nor have any
claims been asserted that any of the terms and conditions of such agreements
violate the laws of any jurisdiction or treaty. Except as provided in Schedule
3.14, the Company owns or has licensed from third parties, and has the right to
use, all necessary Intellectual Property in order to conduct its business in all
material respects as currently conducted.
III.15 Proprietary Information of Third Parties. To the Knowledge of the
Company and the Shareholders, no third party has claimed or has reason to claim
that any Person employed by, or serving as an independent contractor of, the
Company has (i) violated or may be violating any terms or conditions of his or
her employment, non-competition or non-disclosure agreement with such third
party, (ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information of documentation of such third party or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees. No third party has
requested information from the Company or the Shareholders which suggests that
such a claim might be contemplated. To the Knowledge of the Company and the
Shareholders, no person employed by or serving as an independent contractor of
the Company has employed or proposed to employ any trade secret or any
information or documentation proprietary to any former employer, and to the
Knowledge of the Company and the Shareholders, no person employed by, or serving
as an independent contractor of, the Company has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any proprietary software or other
product or proposed product for the development or sale of any service or
proposed service of the Company, and the Company has no reason to believe that
there will be any such employment or violation.
III.16 Software. Schedule 3.16 contains a complete and accurate list of
all proprietary software that the Company has marketed or licensed to third
parties as owned by or proprietary to the Company (the "Owned Software"). Except
as set forth on Schedule 3.16, the Company has title to the Owned Software, free
and clear of all Encumbrances, including claims or rights of employees, agents,
consultants, investors, customers, licensees or other parties involved in the
development, creation, marketing, maintenance, enhancement or licensing of such
Owned Software. Except as set forth on Schedule 3.16, and except for
commercially available, over-the-counter "shrink-wrap" software, hardware and
host-system operating software utilized by the customers of the Company, the
Owned Software is not dependent on any Licensed Software (as defined below) in
order to operate fully in the manner in which it is intended. No Owned Software
has been published or disclosed to any other parties except pursuant to
Contracts requiring such other parties to keep the Owned Software
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<PAGE> 19
confidential. To the Knowledge of the Company and the Shareholders, no such
other party has breached any such obligation of confidentiality. Schedule 3.16
contains a complete and accurate list of all software (other than commercially
available over-the-counter "shrink-wrap" software) under which the Company is a
licensee, lessee or otherwise has obtained the right to use (the "Licensed
Software"). Except as disclosed on Schedule 3.16, the Company is in compliance
in all material respects with all applicable provisions of such agreements, and
such instances of non-compliance disclosed on Schedule 3.16 would not, in the
aggregate, have a Material Adverse Effect. Except as disclosed on Schedule 3.16,
none of the Licensed Software has been incorporated into or made a part of any
Owned Software or any other Licensed Software by the Company. Schedule 3.16
states with respect to any items disclosed thereon the duration of the
applicable license. The Company has not published or disclosed any Licensed
Software to any other party except in accordance with and as permitted by any
license, lease or other similar agreement relating to the Licensed Software. No
party to whom the Company has disclosed Licensed Software has, to the Knowledge
of the Company and the Shareholders, breached any obligation of confidentiality
imposed on them by the Company relating thereto. The Owned Software and Licensed
Software and commercially available over-the-counter "shrink-wrap" software
constitute all software used in the business of the Company (collectively, the
"Company Software"). The Company Software performs in accordance with the
documentation and other written material used in connection with the Company
Software and is reasonably free of defects in programming and operation, is in
machine-readable form, contains all current revisions of such software and
includes all computer programs, materials, know-how and processes related to the
Company Software. The Company has delivered to QuadraMed and Acquisition Co.
complete and correct copies of all user and technical documentation related to
the Company Software. Except as disclosed on Schedule 3.16, the transactions
contemplated herein will not cause a breach or default under any licenses,
leases or similar agreements relating to the Company Software or impair
QuadraMed's or Acquisition Co.'s ability to use the Company Software in the same
manner as such computer software is currently used by the Company. To the
Knowledge of the Company and the Shareholders, the Company is not infringing in
any material respect any Intellectual Property rights of any other person or
entity with respect to the Company Software, and, to the Knowledge of the
Company and the Shareholders, no other person or entity is infringing any
Intellectual Property rights of the Company with respect to the Company
Software. Except as set forth on Schedule 3.16, the Company does not have any
obligation to compensate any person for the development, use, sale or
exploitation of the Company Software nor has the Company granted to any other
person or entity any license, option or other rights to develop, use, sell or
exploit in any manner the Company Software, whether requiring the payment of
royalties or not. The Company has kept secret and not disclosed the source code
for the Company Software to any person or entity other than certain employees of
the Company. Schedule 3.16 sets forth all patents applied for and copyrights
registered for any part of the Company Software. Schedule 3.16 lists and
separately identifies all agreements pursuant to which the Company has been
granted rights to market software owned by third parties, and Schedule 3.16
lists and separately identifies all agreements pursuant to which the Company has
granted marketing rights in the Company Software to third
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<PAGE> 20
parties. Neither the Company nor any employee or agent thereof has developed or
assisted in the enhancement of the Company Software except for enhancements
included in the Company Software as delivered to QuadraMed and Acquisition Co.
pursuant hereto or the development of any program or product based on the
Company Software or any part thereof. Schedule 3.16 sets forth a list of all
Persons that have provided the Company with Contract programmers (other than
employees of the Company), independent contractors and nonemployee agents who
have performed, within the last three (3) years, computer programming services
for the Company and identifies all Contracts and agreements pursuant to which
such services were performed. Other than as set forth in Schedule 3.16, the
Company Software was developed entirely by the employees of the Company during
the time they were employees only of the Company and, to the Knowledge of the
Company and the Shareholders, such Company Software does not include any
inventions of the employees made prior to the time such employees became
employees of the Company nor any Intellectual Property of any previous employer
of such employee. The Company has not taken or failed to take any actions under
the law of any foreign jurisdiction (other than the United States or any
political subdivision thereof) where the Company has marketed or licensed
Company Software that would materially restrict or limit the ability of the
Company to protect, or prevent it from protecting, its ownership interest in,
confidentiality rights of, and rights to market, license, modify or enhance, the
Company Software.
III.17 Tax Matters. All Tax Returns and reports of the Company required
by law to be filed as of the Closing have been or will be duly filed, and all
Taxes imposed upon the Company or any of its properties, assets or income which
are due and payable as of the Closing or claimed by any taxing authority to be
due and payable as of the Closing have been paid or reserved for as of the
Closing, other than taxes, assessments, fees and charges being contested in good
faith by the Company concerning an amount which in the aggregate, is not
material to the business of the Company. The Company has paid or made provision
for the payment of all unpaid Taxes of the Company accrued for or applicable to
the period ended on the Closing and all years and periods prior thereto and for
which the Company may at that date have been liable in its own right or as
transferee of the assets of, or successor to, any other Person or by reason of
its being a member of any group of corporations filing consolidated tax returns
(including any such amounts payable as a result of an audit of any Tax Return
for any such period). The Company utilizes the cash method of accounting for tax
purposes. Except as set forth on Schedule 3.17, there are no claims for Taxes
pending against the Company and the Company does not know of any threatened
claim for Tax deficiencies or any basis for such claims, and there are not now
in force any waivers or agreements by the Company for the extension of time for
the assessment of any tax, nor has any such waiver or agreement been requested
by the IRS or any other taxing authority. Except as set forth on Schedule 3.17,
neither the federal income Tax Returns of the Company or of its Affiliates have
been examined by the IRS. Except as set forth on Schedule 3.17, no material
issues have been raised in any examination by any taxing authority with respect
to the businesses and operations of the Company or any of its Affiliates which,
by application of similar principles, reasonably could be expected to result in
a proposed adjustment to the liability of the Company for Taxes
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for any other period not so examined. To the Knowledge of the Company and the
Shareholders, and except as would not have a Material Adverse Effect, the
Company has no liability for any federal, state or other Taxes of any other
Person, including, without limitation, by reason of the application of Treas.
Reg. Section 1.1502-6. The Company is not required to file any tax returns or to
pay any Taxes in foreign countries. The Company has paid or is withholding and
will pay when due to the proper taxing authorities all withholding amounts
required to be withheld with respect to all Taxes on income, unemployment,
social security or other similar programs or benefits with respect to salary and
other compensation of directors, officers and employees of the Company. Schedule
3.17 lists those states where the Company or any Affiliate has been, or will be
with respect to the operations or activities on or prior to the Closing,
required to file a Tax Return. The Company and each of its Affiliates has filed
all Tax Returns, including IRS Forms 1099, required to be filed and has reported
accurately all information required to be included on such Tax Returns. Except
as set forth on Schedule 3.17, neither the Company nor any Affiliate has
executed a waiver or consent extending any statute of limitation for the
assessment or collection of any tax, which waiver or consent remains in effect.
Except as set forth on Schedule 3.17, neither the Company nor any Affiliate has
received a tax ruling or entered into any agreement with any taxing authority,
which ruling or agreement has or could have an effect on the Taxes of the
Company or any Affiliate payable on or after the Closing. Except as set forth on
Schedule 3.17, neither the Company nor any Affiliate has any employee pension
benefit plan (as defined in Section 3(2) of ERISA), welfare benefit plan (as
described in Section 3(1) of ERISA), bonus, stock purchase, stock ownership,
stock option, deferred compensation, incentive or other compensation plan or
arrangements. Except as set forth on Schedule 3.17, neither the Company nor any
Affiliate has been included in a federal consolidated income tax return and/or
state consolidated, combined or unitary income tax return. The Company has not
at any time consented to have the provisions of Section 341(f) of the Code apply
to it. None of the Shareholders is a "foreign person" as that term is defined in
Section 1445(f)(3) of the Code. The basis of any depreciable or amortizable
assets, and the methods used in determining allowable depreciation or
amortization (including cost recovery), of the Company, have been computed in
good faith compliance with the Code and the regulations thereunder. Except as
set forth on Schedule 3.17, the Company is not a party to any joint venture,
partnership or other arrangement or Contract which is treated as a partnership
for federal income tax purposes. The Company is not a party to any tax sharing
agreement. The Company is not and will not be required to recognize after the
Closing any taxable income in respect of accounting method adjustments required
to be made under any applicable tax law, other than as set forth on Schedule
3.17 (which describes such adjustment, the reason therefor and the amount or
estimated amount (which estimate has been made in good faith, and is considered
reasonable) of such adjustment. The Company has not made or become obligated to
make, and will not as a result of any event connected with the transactions
contemplated by this Agreement become obligated to make, any "excess parachute
payment" as defined in Section 280G of the Code (without regard to subsection
(b)(4) thereof).
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III.18 Legal and Regulatory Matters. Except as set forth on Schedule
3.18, (i) there is no claim, suit, action, arbitration, governmental
investigation or other proceeding, nor any order, decree or judgment pending or
in effect, or, to the Knowledge of the Company and the Shareholders, threatened
by, against or relating to the Company or any of its properties, or the
transactions contemplated hereby, (ii) there are no judgments, decrees or orders
enjoining the Company in respect of, or the effect of which is to prohibit any
business practice or the acquisition of any property or the conduct of any
aspect of the business of the Company, (iii) to the Knowledge of the Company and
the Shareholders, the Company has complied and is complying with all laws,
ordinances, treaties and governmental rules, orders and regulations applicable
to it or its properties, assets, personnel or business, non-compliance with
which could have a Material Adverse Effect, (iv) the Company has obtained all
material Licenses necessary for the ownership of its properties and the conduct
of its business as currently conducted, and all such Licenses are currently in
full force and effect and (v) the Company has provided QuadraMed and Acquisition
Co. with access to all Government Communications and has delivered to QuadraMed
and Acquisition Co. a true and complete copy of all Government Communications
received by the Company since November 30, 1998, and all Government
Communications as to which any unresolved issue remains.
III.19 Employees. The Company has not been nor is it a party to any
collective bargaining agreements with respect to any of its employees or with
respect to any Contract or agreement with a labor union or any local or
subdivision thereof, nor has it been charged with any unresolved unfair labor
practices, nor, to the Knowledge of the Company and the Shareholders, is there
any present union organizing activity among any of its employees. To the
Knowledge of the Company and the Shareholders, there are no material
controversies, claims, suits, actions or proceedings pending or threatened
between the Company and its employees. To the Knowledge of the Company and the
Shareholders, the Company has complied in all material respects with all laws
and regulations relating to the employment of labor, including, without
limitation, any provisions thereof relating to wages, hours, employment
practices, terms and conditions of employment, collective bargaining, equal
opportunity or similar laws and the payment of social security and similar
taxes, and is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing which will have a Material Adverse
Effect.
III.20 Billings; Customers. Except as set forth on Schedule 3.20, (i)
all billings to customers which are party to oral or written Contracts of the
Company have been accurate in all material respects, (ii) there are no oral
agreements or side deals with such customers or individuals associated
therewith, (iii) to the Knowledge of the Company and the Shareholders, there are
no existing, threatened or suspected disputes, offsets or counterclaims
regarding any services rendered or billings to such customers. Neither the
Company nor the Shareholders has received any notice from, or has any Knowledge
that, any current customer of the Company has taken or will take any steps that
could disrupt the business relationship of the Company with such customer in any
material respect.
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<PAGE> 23
III.21 Insurance. Schedule 3.21 sets forth a list of all policies or
binders of fire, liability, product liability, workman's compensation,
vehicular, directors and officers, and other insurance held by or on behalf of
the Company. Such policies and binders are in full force and effect, are
reasonably believed to be adequate for the businesses engaged in by the Company,
and are in conformity with the requirements of all leases or other agreements to
which the Company is a party and, to the best of the Knowledge of the Company
and the Shareholders, are valid and enforceable in accordance with their terms.
The Company is not in material default with respect to any provision contained
in any such policy or binder nor has the Company failed to give any notice or
present any material claim under any such policy in a due and timely fashion.
There are no outstanding unpaid claims under any such policy or binder. The
Company has not received notice of cancellation or non-renewal of any such
policy or binder.
III.22 Non-Assignable Rights. Except as set forth on Schedule 3.22,
neither the execution, delivery nor performance of this Agreement by the Company
nor the consummation of the transactions contemplated hereby will (i) conflict
with or result in a breach or termination of, or prevent the Company from
realizing the benefits otherwise obtainable by the Company under, any permits or
property interests of the Company or any Contract, agreement, arrangement or
commitment of the Company or (ii) require the affirmative consent or approval of
any third party.
III.23 Personnel. Schedule 3.23 contains (i) the names and addresses of
all directors, officers and employees of the Company, indicating the positions
within the Company held by each such person and the current annual salary rates
for each such person and the amounts due and payable as bonus, accrued vacation
or other compensation for each such person, and (ii) a description of the
Company's policies regarding severance or other benefits that may be payable to
any Company employee if his or her employment were terminated.
III.24 Employee Benefit Plan(s). Schedule 3.24 lists each Employee
Benefit Plan of the Company. The Company has no Affiliates for the purpose of
ERISA. Each Employee Benefit Plan is in substantial compliance with applicable
law and has been administered and operated in all material respects in
accordance with its terms. Each Employee Benefit Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the IRS and no event has occurred and no
condition exists which could reasonably be expected to result in the revocation
of any such determination. No event which constitutes a "reportable event" (as
defined in Section 4043(b) of ERISA) for which the thirty (30) day notice
requirement has not been waived by the PBGC has occurred with respect to any
Employee Benefit Plan. Other than as contemplated in Section 4.9 below, no
Employee Benefit Plan subject to Title IV of ERISA has been terminated or is or
has been the subject of termination proceedings pursuant to Title IV of ERISA.
Full payment has been made of all amounts which the Company was required under
the terms of the Employee Benefit Plan(s) to have paid as contributions to such
Employee Benefit Plan(s) on or prior to the date hereof (excluding any amounts
not yet due) and no
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<PAGE> 24
Employee Benefit Plan which is subject to Part 3 of Subtitle B of Title 1 of
ERISA has incurred any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived. To the
Knowledge of the Company and the Shareholders, neither the Company nor any other
"disqualified person" or "party in interest" (as defined in Section 4975(e)(2)
of the Code and Section 3(14) of ERISA, respectively) has engaged in any
transactions in connection with any Employee Benefit Plan(s) that could
reasonably be expected to result in the imposition of a material penalty
pursuant to Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or
a tax pursuant to Section 4975(a) of the Code. No material liability, claim,
action or litigation, has been made, commenced or threatened with respect to any
Employee Benefit Plan(s) (other than for benefits payable in the ordinary course
and PBGC insurance premiums). No Employee Benefit Plan or related trust owns any
securities in violation of Section 407 of ERISA. With respect to all Employee
Benefit Plan(s) which are subject to Title IV of ERISA, as of the most recent
actuarial valuation prepared for each such Employee Benefit Plan, the aggregate
present value of the accrued liabilities thereof did not exceed the aggregate
fair market value of the assets allocable thereto. The Company does not
presently nor has not at any time in the past maintained a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA). To the Knowledge of the Company and
the Shareholders, there are no actions, suits or claims (other than routine
claims for benefits) pending or threatened against any Employee Benefit Plan of
the Company or their assets, or arising out of such Employee Benefit Plan(s)
and, to the Knowledge of the Company and the Shareholders, no facts exist which
could rise to any such actions, suits or claims or that might have a Material
Adverse Effect on such Employee Benefit Plan(s). There has been no act or
omission by the Company that has given rise or may give rise to any finds,
penalties, taxes or late charges under Section 502(c), (i) or (l), Section
407(1) of ERISA or Chapter 43 of the Code.
III.25 Accounts Receivable; Inventory. Except as set forth on Schedule
3.25, the Company's accounts receivable represent valid claims, and no
counterclaims or offsetting claims with respect to such receivables are pending
or, to the Knowledge of the Company or the Shareholders, threatened, except for
amounts reserved in the Company Financial Statements against such receivables
for allowances and discounts, and, usually, substantially all such accounts
receivable are collectible in the ordinary course of business within ninety (90)
days of the Closing. The Company has no inventory on its balance sheet.
III.26 Compliance with Environmental Laws. Except as set forth in
Schedule 3.26 (i) the Company and all its operations are and have been in
substantial compliance with all Environmental Laws as currently in effect except
where such noncompliance would not result in a Material Adverse Effect, (ii)
neither the Company nor any of its predecessors used, released or disposed of
any Hazardous Substance in any manner that could reasonably be expected to
result in material liability, (iii) to the Knowledge of the Company and the
Shareholders, and except as would not have a Material Adverse Effect, none of
the property leased or operated by the Company is contaminated by any Hazardous
Substance in a manner which requires investigation or corrective action under
applicable Environmental Laws, (iv) to
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the Knowledge of the Company and the Shareholders, and except as would not have
a Material Adverse Effect, none of the property leased or operated by the
Company is affected by any condition that could reasonably be expected to result
in liability under any Environmental Law as currently in effect and (v) to the
Knowledge of the Company and the Shareholders, and except as would not have a
Material Adverse Effect, there is and has been no condition, activity or event
respecting the Company or any of the properties leased or operated by it that
could reasonably be expected to subject QuadraMed or the Surviving Corporation
to any material liability under any Environmental Law as currently in effect.
III.27 Bank and Brokerage Accounts. Schedule 3.27 lists (i) the names
and addresses of all banks and brokerage firms in which the Company has accounts
or safe deposit boxes, lock boxes, vaults and the account numbers relating
thereto, (ii) the name of each person authorized to draw on any such account or
have access to any such boxes or vaults and (iii) the names of all Persons, if
any, holding tax or other powers of attorney from the Company and a summary of
the terms thereof.
III.28 Contracts. Except as set forth on Schedule 3.28, the Company is
not a party to any:
(a Contracts in effect with any customer of the Company,
including, without limitation, all consulting services, agreements, software
license agreements and other licenses, software development agreements, purchase
commitments or installation agreements and maintenance or service agreements
(collectively, the "Customer Contracts");
(b Contract for the employment or retention of, or collective
bargaining, severance or termination agreement with, any of its directors,
officers, employees, consultants or agents or groups of employees;
(c profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other Employee Benefit Plan, agreement or
arrangement;
(d Contract for the sale of any of its assets, property or
rights outside the ordinary course of business consistent with prior practice
(other than this Agreement);
(e Contract that contains any provisions requiring the
Company to indemnify or act as an indemnitor, guarantor, surety, co-signer,
co-maker or endorser for any other person or entity;
(f Contract restricting the Company from conducting business
anywhere in the world;
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(g agreement, note, debenture, loan, mortgage, indenture or
other obligation for or relating to borrowed money or commitments for obtaining
borrowed money;
(h Contract, lease or commitment which involves the future
payment by or to it of more than $5,000 within the next twelve (12) months,
except (i) Contracts or commitments for the sale of goods or purchase or lease
of equipment, tooling, supplies, services or raw materials in each case entered
into in the ordinary course of business consistent with prior practice for
periods of less than ninety (90) days and (ii) Contracts which may be cancelled
by it upon thirty (30) or fewer days notice without payment of any penalty or
fee in connection therewith;
(i letter of credit or power of attorney;
(j joint venture Contract or similar arrangement or agreement
which is likely to involve future payments by it;
(k personal service, vendor licensing, distributor, supplier,
dealer, franchise, advertising, sales or manufacturer's representative, agency
or other similar Contract; or
(l Contract to which any shareholder, officer or director of
the Company or any "affiliate" or "associate" of such persons (as such terms are
defined in the rules and regulations promulgated under the Securities Act), is
presently a party, including, without limitation, any agreement or other
arrangement providing for the furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to, any such person or
entity.
Except as specified on Schedule 3.28, all Contracts required to be listed on
Schedule 3.28 are valid and binding (assuming due execution and delivery by the
other parties thereto), enforceable in accordance with their respective terms
and in full force and effect (except as may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the rights of creditors
generally or by general principles of equity), and the continuation, validity
and effectiveness of such items will in no way be affected by the consummation
of the transactions contemplated by this Agreement. To the Knowledge of the
Company and the Shareholders, neither the Company nor, any other party thereto,
is in breach of any provision of or in default under any term of any such
agreement, and there exists no condition or event which after lapse of time or
notice (or both) would constitute any such breach or default or result in any
right to accelerate or loss of rights. True and complete copies of all such
Contracts have been delivered to QuadraMed. A substantial majority of the
Customer Contracts entered into within the prior three (3) years conform
substantially to one of the forms attached hereto as Schedule 3.28.
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III.29 Related Party Relationships. Except as set forth on Schedule
3.29, no Shareholder owning greater than a five percent (5%) interest in the
Company, no affiliate or member of the immediate family of any such Shareholder,
and no officer or director or member of the immediate family of such officer or
director of the Company possesses, directly or indirectly, any beneficial
interest in, or is a director, officer or employee of, or member of the
immediate family of a director, officer or employee of, any Person that is a
client, supplier, customer, lessor, lessee, lender, creditor, borrower, debtor
or contracting party with or of the Company (except as a shareholder holding
less than one percent (1%) interest in a corporation whose shares are traded on
a national or regional securities exchange or in the over-the-counter market).
III.30 Intercompany Payables. There are no intercompany payables between
the Company and any of the subsidiary and/or related entities of the Company.
III.31 Pooling of Interests. To the actual knowledge of the Company and
the Shareholders, neither the Company nor any of the Shareholders has taken any
action or has knowledge of facts or circumstances in respect of the Company or
its accounting procedures which would have the effect of precluding accounting
for the transactions contemplated hereby as a "pooling of interests."
Notwithstanding any other provision of this Agreement to the contrary, no
Shareholder will sell, transfer, exchange, pledge or otherwise dispose of, or in
any other way reduce the such Shareholder's risk of ownership or investment in,
or make any offer or agreement relating to any of the foregoing with respect to,
any Company Common Stock or any rights, options or warrants to purchase Company
Common Stock, or any of the QuadraMed Shares (i) during the thirty (30) day
period immediately preceding the Closing Date of the Merger and (ii) until such
time after the Effective Date of the Merger as QuadraMed has publicly released a
report including the combined financial results of QuadraMed and for a period of
at least thirty (30) days of combined operations of QuadraMed and the Company
within the meaning of Accounting Series Release No. 130, as amended, of the SEC.
Nothing in this Section 3.31 will be deemed to prohibit charitable contributions
of such securities without consideration to transferees who agree to all of the
restrictions in this Agreement.
III.32 Year 2000 Compliance. To the Knowledge of the Company and the
Shareholders, the Company is Year 2000 Compliant. For purposes of this
Agreement, "Year 2000 Compliant" means, with respect to the Company Software,
that the Company Software is designed to be used prior to, during and after the
calendar Year 2000 A.D., and the Company Software used during each such time
period will accurately receive, provide and process date/time data (including,
without limitation, calculating, comparing and sequencing) from, into and
between the 20th and 21st centuries, including the years 1999 and 2000 and leap
year calculations, and will not malfunction, cease to function or provide
invalid or incorrect results as a result of date/time data to the extent that
other information technology, used in combination with the Company Software
being acquired, properly exchanges date/time data with it.
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III.33 Investment Representations. Each of the Shareholders is an
"accredited investor" within the meaning of the Securities Act. Each of the
Shareholders is aware that the QuadraMed Shares issued pursuant to this
Agreement have not been registered under the Securities Act or any applicable
state securities laws, and agrees that such QuadraMed Shares will not be offered
or sold in the absence of registration under the Securities Act and any
applicable state securities laws or an exemption from the registration
requirements of the Securities Act and any applicable state securities laws,
which shall be accompanied by an opinion of counsel to such selling Shareholder
satisfactory to QuadraMed and its counsel that registration of such shares is
not required. Each of the Shareholders agrees not to transfer the QuadraMed
Shares in violation of the provisions of any applicable federal or state
securities laws. In this connection, each of the Shareholders represents that
he, she or it is familiar with Rule 144 and Rule 145 promulgated by the SEC
pursuant to the Securities Act, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act. Each of the
Shareholders understands that the offering and sale of the QuadraMed Shares is
intended to be exempt from registration under the Securities Act, by virtue of
the private placement exemption provided by Rule 505 and/or 506 of Regulation D
promulgated under the Securities Act and/or Section 4(2) of the Securities Act,
based, in part, upon the representations, warranties and agreements contained in
this Agreement, and QuadraMed may rely on such representations, warranties and
agreements in connection therewith. Each of the Shareholders is acquiring the
QuadraMed Shares for his, her or its own account and for investment, and not
with a view to the distribution thereof or with any present intention of
distributing or selling any of the QuadraMed Shares except in compliance with
the Securities Act. Each of the Shareholders represents that by reason of his,
her or its business and financial experience, and the business and financial
experience of those persons, if any, retained by such Shareholder to advise him,
her or it with respect to his, her or its investment in the QuadraMed Shares,
such Shareholder together with such advisors have knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risk of the prospective investment. The financial condition and
investments of each of the Shareholders are such that he, she or it is in a
financial position to hold the QuadraMed Shares for an indefinite period of time
and to bear the economic risk of, and withstand a complete loss of, his, her or
its investment in the QuadraMed Shares. Each of the Shareholders has carefully
examined this Agreement and all exhibits and schedules thereto and the QuadraMed
SEC Filings. Each of the Shareholders acknowledges that QuadraMed has made
available to him, her or it all documents and information that he, she or it has
requested relating to QuadraMed and has provided answers to all of his, her or
its questions concerning QuadraMed and/or the QuadraMed Shares. In evaluating
the suitability of the acquisition of the QuadraMed Shares hereunder, each of
the Shareholders has not relied upon any representations or other information
(whether oral or written) other than as set forth in the QuadraMed SEC Filings
or as contained herein.
III.34 Broker's and Finder's Fees. Except as set forth on Schedule 3.33,
there are no broker's or finder's fees or obligations due to any Persons engaged
by either the Company or
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the Shareholders or any of the Company's employees, officers or directors in
connection with the transactions contemplated by this Agreement, except for the
fees and expenses of its counsel and accountants.
III.35 Material Misstatements or Omissions. The statements,
representations and warranties of the Company and the Shareholders contained in
this Agreement (including the exhibits and schedules hereto) and in each
document, statement, certificate or exhibit furnished or to be furnished by or
on behalf of the Company or the Shareholders pursuant hereto, or in connection
with the transactions contemplated hereby, taken together, do not contain and
will not contain any untrue statement of a material fact and do not or will not
omit to state a material fact necessary to make the statements or facts
contained herein or therein, in light of the circumstances made, not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF QUADRAMED AND ACQUISITION CO.
QuadraMed and Acquisition Co. hereby jointly and severally represent and
warrant to the Company and the Shareholders as follows:
IV.1 Organization and Good Standing. Each of QuadraMed and Acquisition
Co. is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and each has full corporate power and
authority to own, lease and operate its assets and properties and to carry on
its businesses and to enter into, deliver and perform its obligations under and
to consummate the transactions contemplated by this Agreement.
IV.2 Authority. Each of QuadraMed and Acquisition Co. has the necessary
corporate power and authority to enter into and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by each of QuadraMed and
Acquisition Co. have been duly authorized by the Board of Directors of each of
QuadraMed and Acquisition Co., respectively, in accordance with applicable law.
No further corporate action will be necessary on the part of either QuadraMed or
Acquisition Co. to make this Agreement valid and binding upon each of QuadraMed
and Acquisition Co., respectively, in accordance with its terms. This Agreement
has been duly and validly authorized, executed and delivered by each of
QuadraMed and Acquisition Co. and this Agreement (assuming due authorization,
execution and delivery by the other parties hereto) constitutes the legal, valid
and binding obligation each of QuadraMed and Acquisition Co., enforceable in
accordance with its terms (except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally or by general principles of equity). Neither the
execution, delivery nor performance of this Agreement by QuadraMed or
Acquisition Co., nor the consummation of the transactions contemplated hereby,
nor compliance by QuadraMed or
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<PAGE> 30
Acquisition Co. with the terms and provisions of this Agreement nor the Articles
of Merger nor the Certificate of Merger will result in a violation or breach of
any term or provision of the Certificate of Incorporation or Bylaws of either
QuadraMed or Acquisition Co., each as amended, or of any statute, rule or
regulation applicable to QuadraMed or Acquisition Co. or their businesses,
properties, assets or personnel, or conflict with or constitute a violation or
breach of, or a default under (or an event which, with the passage of time or
the giving of notice, or both, would constitute a default under), nor give any
party a right to accelerate the due date of any indebtedness or obligation
under, any indenture, mortgage, deed of trust, Contract or agreement to which
either QuadraMed or Acquisition Co. is a party or to which their properties or
assets are subject (except as would not have a Material Adverse Effect), or any
instrument, judgment, decree, writ or other restriction to which either
QuadraMed or Acquisition Co. is a party or by which either QuadraMed or
Acquisition Co. or their businesses, properties, assets or personnel are bound.
Except for filing the Articles of Merger with the Washington Secretary of State
and the Certificate of Merger with the Delaware Secretary of State, and except
as would not have a Material Adverse Effect, neither QuadraMed nor Acquisition
Co. is required to obtain the consent of any third party or to submit any
notice, report or other filing with any federal, state or local governmental
authority in connection with the execution or delivery or performance by each of
QuadraMed and Acquisition Co., respectively, of this Agreement or the
consummation of the transactions contemplated herein.
IV.3 QuadraMed Shares. As of the Closing, the QuadraMed Shares will have
been duly reserved for delivery pursuant to the terms of this Agreement and
will, when so delivered and paid for, be duly authorized, validly issued, fully
paid and nonassessable shares and will be free and clear of all Encumbrances
imposed by or through QuadraMed.
IV.4 QuadraMed SEC Filings. The QuadraMed SEC Filings, copies of which
have been furnished to each of the Shareholders, have been duly filed, were in
substantial compliance with the requirements of their respective report forms,
were complete and correct in all material respects as of the dates at which the
information therein was furnished, as of such date, contained no untrue
statement of a material fact nor omitted to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements of
QuadraMed and the related notes and schedules included in the QuadraMed SEC
Filings comply in all material respects with the requirements of the Exchange
Act and present fairly the consolidated financial position in accordance with
generally accepted accounting principles of QuadraMed, as of the dates
indicated, and the results of its operations and changes in financial position
for the periods therein specified (subject, in the case of unaudited interim
financial statements, to normal year-end adjustments). Since the date of the
filing with the SEC of QuadraMed's most recent 10-Q, there has been no material
adverse change in the financial condition or results of operations of QuadraMed
that has resulted in a Material Adverse Effect on QuadraMed.
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IV.5 Broker's or Finder's Fees. There are no broker's or finder's fees
or obligations due to any Persons engaged by either QuadraMed or Acquisition Co.
or any of their employees, officers or directors in connection with the
transactions contemplated by this Agreement, except for fees and expenses of its
counsel and accountants.
ARTICLE V.
POST-CLOSING COVENANTS
The parties hereby agree as follows with respect to the period following
the Closing:
V.1 Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, all the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article VI below).
V.2 Company Employees. QuadraMed shall have no obligation to continue
the employment to any of the employees of the Company from and after the Closing
Date. The Company and the Shareholders agree to refrain from making any
statements or communications to its employees regarding subsequent employment by
QuadraMed without QuadraMed's prior written consent. As a condition to such
employment, QuadraMed shall require that any employees of the Company that
QuadraMed shall elect to hire in connection with the transactions contemplated
by this Agreement shall promptly execute and deliver to QuadraMed the QuadraMed
standard form Proprietary Information Agreement, and such employees shall be
included in QuadraMed's standard employee benefit plans.
V.3 Restrictions on Transferability of QuadraMed Shares. The
certificates representing the QuadraMed Shares shall bear the following legend
restricting transfer, and such other legends as may be required by any
applicable state securities law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
The QuadraMed Shares shall not be transferable in the absence of an effective
registration statement under the Securities Act or an exemption therefrom or in
the absence of compliance with any term of this Agreement. In the absence of an
effective registration statement under the Securities Act, neither the QuadraMed
Shares nor any interest therein shall be sold, transferred, assigned or
otherwise disposed of, unless QuadraMed shall have previously
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<PAGE> 32
received an opinion of counsel knowledgeable in federal securities law, in form
and substance reasonably satisfactory to QuadraMed and accompanied by such
supporting documents as QuadraMed may reasonably request, to the effect that
registration under the Securities Act is not required in connection with such
disposition. QuadraMed shall be entitled to give stop transfer instructions to
its transfer agent with respect to the QuadraMed Shares in order to enforce the
foregoing restrictions. Notwithstanding the foregoing, QuadraMed agrees that it
shall not require an opinion of counsel in connection with Rule 144 transactions
except in unusual circumstances.
V.4 Registration Rights. Notwithstanding Section 5.3 above, the
Shareholders shall have registration rights for the QuadraMed Shares as set
forth in the Registration Rights Agreement. At such time as a registration
statement for the QuadraMed Shares has been declared effective in accordance
with the terms and conditions of the Registration Rights Agreement, the
provisions of Section 5.3 above shall cease to apply to the QuadraMed Shares.
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
VI.1 Survival of Representations and Warranties.
(a Representations and Warranties of Company and the
Shareholders. All representations, warranties and covenants of the Company and
the Shareholders contained in this Agreement will survive the Closing and remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the parties to this Agreement until the date of QuadraMed's
first audited financial statements containing combined operations of QuadraMed
and the Company for claims that could reasonably be discovered during such
audit, and, for claims that could not reasonably be discovered during such
audit, until one (1) year from the date of the Closing (the "Survival Period")
and, thereafter, to the extent a claim is made prior to the expiration of the
Survival Period with respect to any breach of such representation, warranty or
covenant, until such claim is finally determined or settled, whereupon such
representation, warranties and covenants will expire.
(b Representations and Warranties of QuadraMed and
Acquisition Co. All representations, warranties and covenants of QuadraMed and
Acquisition Co. contained in this Agreement will survive the Closing and remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the parties to this Agreement until the expiration of the
Survival Period, and, thereafter, to the extent a claim is made prior to the
expiration of the Survival Period with respect to any breach of such
representation, warranty or covenant, until such claim is finally determined or
settled, whereupon such representation, warranties and covenants will expire.
Any judgment or settlement of a claim against either QuadraMed or Acquisition
Co. for a breach of its obligations hereunder brought after the Effective Date
will be settled in QuadraMed Common Stock, valued at the fair market value of
QuadraMed Common Stock for the date immediately preceding the date on which
QuadraMed
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and Acquisition Co. delivers shares of QuadraMed Common Stock in connection with
such a breach.
VI.2 Indemnification by the Shareholders.
(a The Shareholders will indemnify and hold harmless
QuadraMed and Acquisition Co. and their respective officers, directors, agents
and employees, and each Person, if any, who controls or may control QuadraMed or
Acquisition Co. within the meaning of the Securities Act (each, an "Indemnified
Person" and collectively, the "Indemnified Persons"), from and against any and
all claims, demands, actions, causes of actions, losses, costs, damages,
liabilities and expenses including, without limitation, reasonable legal fees
and expenses ("Losses"), arising out of or relating to (i) any misrepresentation
or breach of or default or other action or omission by either the Company or the
Shareholders in connection with any of the representations, warranties and
covenants given or made by the Company or the Shareholders in this Agreement, or
any exhibit or schedule hereto or any certificate, document or instrument
delivered by or on behalf of the Company and the Shareholders pursuant hereto
and (ii) any and all actions, suits, claims or legal, administrative,
arbitration, governmental or other proceedings or investigations against any
Indemnified Person that relate to the Company or the Shareholders in which the
principal event giving rise thereto occurred prior to the Closing or which
result from or arise out of any action or inaction prior to the Closing of the
Shareholders, the Company or any director, officer, employee, agent,
representative or subcontractor of the Company, except for those which QuadraMed
specifically assumes in writing.
(b Notwithstanding the foregoing, the Shareholders shall have
no liability with respect to the matters described in Section 6.2(a) above
unless and until the aggregate amount of Losses equals or exceeds $100,000 (the
"Threshold Amount"). At such time as the aggregate Losses equals or exceeds the
Threshold Amount, QuadraMed and Acquisition Co. shall be indemnified to the full
extent of all such Losses (including Losses counted in determining whether the
aggregate Losses equals or exceeds the Threshold Amount); provided, however,
that this section shall not apply to any intentional or fraudulent breach by
either of the Shareholders of any representation, warranty, covenant or
obligation. The maximum liability for indemnification by the Shareholders under
this Article VI shall in no event exceed the Closing Consideration.
(c As security for their obligation to indemnify QuadraMed
and Acquisition Co. hereunder, concurrently with payment of the Closing
Consideration by QuadraMed, the Shareholders shall place into escrow that number
of QuadraMed Shares from the Closing Consideration having an aggregate Fair
Market Value equal to $1,100,000 (the "Escrow Fund") pursuant to the terms and
conditions of the Escrow Agreement, to be held in escrow until the expiration of
the Survival Period as security for the indemnification obligations of the
Shareholders hereunder. It is hereby acknowledged and agreed that the
Shareholders shall
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have the option of settling any indemnification claim under this Article VI in
cash in lieu of the Escrow Fund.
(d Subject to any limitations under applicable California
law, as additional security for their obligation to indemnify QuadraMed and
Acquisition Co. hereunder, the Shareholders hereby grant to QuadraMed and
Acquisition Co. a right of set-off and agrees that at any time a payment or
amount is owing by the Shareholders pursuant to the terms of this Article VI, or
either QuadraMed or Acquisition Co. has made a claim for indemnification
pursuant to the terms of this Article VI, QuadraMed and Acquisition Co. may
set-off, or direct the other party to set-off, amounts owing by either QuadraMed
or Acquisition Co. to the Shareholders.
VI.3 Indemnification by QuadraMed. QuadraMed will indemnify and hold
harmless the Shareholders and their Indemnified Persons from and against any and
all Losses arising out of or relating to any misrepresentation or breach of or
default or other action or omission in connection with any of the
representations, warranties and covenants given or made by QuadraMed and
Acquisition Co. in this Agreement, or any exhibit or schedule hereto or any
certificate, document or instrument delivered by or on behalf of QuadraMed or
Acquisition Co. pursuant hereto.
VI.4 Notice of Third-Party Claims; Assumption of Defense. Each
indemnified party shall give reasonably prompt notice of a claim ("Claims
Notice") to each indemnifying party, in accordance with the terms of Section 7.3
below, of the assertion of any claim, or the commencement of any suit, action or
proceeding by any third party in respect of which indemnity may be sought
hereunder, and shall give the indemnifying parties such information with respect
thereto as the indemnifying parties may reasonably request. The giving of such
Claims Notice shall not be a condition precedent to indemnification hereunder;
provided, however, that the failure to give reasonably prompt notice shall
reduce the indemnified party's recovery from the indemnifying party only by an
amount equal to the Losses (including attorney's fees) caused by such delay.
Upon receipt of such notice, each indemnifying party may, at its own expense,
participate in and, upon notice to each indemnified party of such indemnifying
party's written agreement that the indemnified party is entitled to
indemnification pursuant to this Article VI for Losses arising out of such third
party claim, suit, action or proceeding, at any time during the course of any
such claim, suit, action or proceeding, assume the defense thereof; provided,
however, that (i) the indemnifying party's counsel is reasonably satisfactory to
the indemnified party, (ii) the indemnifying party shall thereafter consult with
the indemnified party upon the indemnified party's reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding and (iii) the indemnified party shall not be required to permit the
indemnifying party to assume the defense of any third party claim which if not
first paid, discharged or otherwise complied with would result in an imminent,
material interruption or cessation of the conduct of the business of such
indemnified party or any material part thereof. If the indemnifying party
assumes such defense, the indemnified party shall have the right (but not the
duty) to participate in the
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<PAGE> 35
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party. Whether or not the indemnifying
party chooses to defend or prosecute any such claim, suit, action or proceeding,
all of the parties hereto shall cooperate in the defense or prosecution thereof.
VI.5 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the indemnified party or, the indemnifying party, as the
case may be, of any third party such claim, suit, action or proceeding of the
kind referred to in Section 6.4 above shall also be binding upon the
indemnifying party or the indemnified party, as the case may be, in the same
manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise. The indemnified
party will give the indemnifying party at least thirty (30) days notice of any
proposed settlement or compromise of any claim, suit, action or proceeding it is
defending, during which time an indemnifying party may assume the defense of
such claim, suit, action or proceeding and if it does so the proposed settlement
or compromise may not be made.
VI.6 Failure of Indemnified Party to Act. In the event that an
indemnifying party does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the indemnified party to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the indemnifying party of its
obligations hereunder.
VI.7 Procedure for Indemnification. Upon becoming aware of a claim for
indemnification hereunder (whether as a result of any third party claim, suit,
action or proceeding of the kind referred to in Section 6.4 above, or in
connection with any other Losses which the indemnified party deems to be within
the ambit of this Article VI), the indemnified party shall give, in accordance
with the terms of Section 7.3 below, a Claims Notice to the indemnifying party.
If the indemnifying party does not object to such claim within thirty (30) days
of receiving such Claims Notice, the indemnified party shall be conclusively
entitled to recover the amount of such claim.
VI.8 Articles of Incorporation and Bylaws. Notwithstanding anything to
the contrary contained in the Articles of Incorporation or Bylaws of the
Company, each as amended, the indemnification provisions of this Article VI
shall take precedence over such Articles of Incorporation or Bylaws. Neither the
Shareholders nor any other director or officer incumbent at any time prior to
the Closing shall be entitled to indemnification directly or indirectly under
the Articles of Incorporation or Bylaws of the Company or otherwise for any
matter upon which the Company or the Shareholders has or might have an
indemnification obligation hereunder and the Articles of Incorporation and
Bylaws shall be deemed amended accordingly. However, the provisions of this
Section 6.8 are intended only for the regulation of relations between the
Company and the Shareholders and any indemnified party. This Section 6.8 is not
intended for the benefit of creditors or other third parties and does not grant
any rights to creditors or other third parties.
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<PAGE> 36
VI.9 Non-Exclusivity. The parties hereby acknowledge and agree that
the indemnity obligations set forth above shall not be the exclusive remedy of
the indemnified parties with respect to the transactions contemplated hereby and
the amount of the Escrow Fund in no way limits the amount or sources of recovery
of QuadraMed or Acquisition Co. with respect to such indemnity obligations or
otherwise.
ARTICLE VII.
GENERAL
VII.1 Amendments. Subject to applicable law, this Agreement, the
Articles of Merger, the Certificate of Merger and any exhibit attached hereto or
thereto may be amended by the parties hereto at any time prior to the Effective
Date; provided, however, that any such amendment must be in writing and executed
by all parties hereto.
VII.2 Assignment. The rights under this Agreement shall not be
assignable nor the duties delegable by any party without the written consent of
the other parties and nothing contained in this Agreement, express or implied,
is intended to confer upon any person or entity, other than the parties hereto
and their successors in interest and permitted assignees, any rights or remedies
under or by reason of this Agreement unless so stated to the contrary.
VII.3 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered personally, by facsimile transmission, or when mailed, by United
States certified or registered mail, prepaid, to the parties or their assignees
at the following addresses or facsimile numbers (or at such other address as
shall be given in writing by any party):
If to QuadraMed or Acquisition Co.: QuadraMed Corporation
Attention: Keith M. Roberts, Esq.
1003 West Cutting Boulevard, 2nd Floor
Richmond, California 94804
Facsimile: (510) 620-2364
with a required copy to: Zevnik Horton Guibord McGovern
Palmer & Fognani, L.L.P.
Attention: Michael G. Rowles, Esq.
101 West Broadway Street, 17th Floor
San Diego, California 92101
Facsimile: (619) 515-9629
If to the Company or the Shareholders: Premier Healthcare Corporation
Attention: Peter W. Jarvis
7444 East Chapman, Suite D
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<PAGE> 37
Orange, California 92869
Facsimile: (714) 628-0986
with a required copy to: Aprahamian & Aprahamian, P.C.
Attention: Richard J. Aprahamian, Esq.
611 Anton Boulevard, Suite 1110
Costa Mesa, California 92626
Facsimile: (714) 436-6109
VII.4 Further Assurances. QuadraMed and Acquisition Co., on the one
hand, and the Company or the Shareholders, on the other hand, agree that from
time to time after the Closing, at the request of any other party and without
further consideration or consent, they will execute and deliver such additional
instruments as any other party may reasonably request to confirm more
effectively the status of the Merger, and, from and after the date hereof if
there are any rights of the Company vis-a-vis third parties which would not
continue beyond the time of the Merger without the consent of any such third
party, to try with the cooperation and assistance of each other to obtain such
consent promptly.
VII.5 Entire Agreement. This Agreement (including all exhibits and
schedules attached hereto and all documents delivered as provided for herein)
contain the entire agreement among the parties hereto with respect to the
subject matter hereof and the transactions contemplated hereby and supersedes
all prior negotiations, discussions, agreements and undertakings, both written
and oral, among the parties hereto, with respect to the subject matter hereof,
including, without limitation, that certain Letter of Intent dated December 9,
1998.
VII.6 Counterparts; Facsimile. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile (with originals to follow by United States mail), and such
facsimile shall be conclusive evidence of the consent and ratification of the
signatories hereto.
VII.7 Governing Law; Venue. This Agreement shall be construed by and
enforced in accordance with the laws of the State of California without giving
effect to the principles of the conflicts of laws.
VII.8 Payment of Expenses. The Shareholders (on behalf of themselves
and the Company) and QuadraMed will pay all of their respective costs and
expenses (including fees and expenses of legal counsel, accountants and
financial advisors) incurred by such party in connection with the transactions
contemplated by this Agreement, regardless of whether the Merger is consummated.
The costs and expenses incurred by the Company and the Shareholders in
connection with the transactions contemplated hereby may be paid from the
Company's corporate funds up to a maximum of $20,000. Neither QuadraMed,
Acquisition
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<PAGE> 38
Co. nor the Company will be obligated to any person for any finder's or broker's
fee in connection with the proposed Merger.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 39
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
QUADRAMED QUADRAMED CORPORATION
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
ACQUISITION CO. PREMIER HEALTHCARE ACQUISITION CORPORATION
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
COMPANY PREMIER HEALTHCARE CORPORATION
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
SHAREHOLDERS
_____________________________________________
Peter W. Jarvis
_____________________________________________
Michael D. Halberda
[SIGNATURE PAGE TO ACQUISITION AGREEMENT AND PLAN OF MERGER]
<PAGE> 40
EXHIBIT "A"
ARTICLES OF MERGER
<PAGE> 41
EXHIBIT "B"
CERTIFICATE OF MERGER
<PAGE> 42
EXHIBIT "C"
OPINION OF COUNSEL FOR COMPANY AND SHAREHOLDERS
<PAGE> 43
EXHIBIT "D"
EMPLOYMENT AGREEMENT
<PAGE> 44
EXHIBIT "E"
NON-COMPETITION AND NON-INTERFERENCE AGREEMENT
<PAGE> 45
EXHIBIT "F"
ESCROW AGREEMENT
<PAGE> 46
EXHIBIT "G"
RELEASE
<PAGE> 47
EXHIBIT "H"
REGISTRATION RIGHTS AGREEMENT
<PAGE> 48
EXHIBIT "I"
OPINION OF COUNSEL FOR QUADRAMED AND ACQUISITION CO.
<PAGE> 1
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into
December 23, 1998 by and among QuadraMed Corporation, a Delaware corporation
("QuadraMed"), on the one hand, and Peter W. Jarvis and Michael D. Halberda, who
are all of the shareholders of Premier Healthcare Corporation, a Washington
corporation (the "Company"), on the other hand (each, a "Shareholder" and
collectively, the "Shareholders").
WHEREAS, pursuant to that certain Acquisition Agreement and Plan of
Merger of even date herewith by and among QuadraMed and Premier Healthcare
Acquisition Corporation, a Delaware corporation ("Acquisition Co."), on the one
hand, and the Company, Jarvis and Halberda, on the other hand, (the "Merger
Agreement"), (i) Acquisition Co. shall be merged with and into the Company (the
"Merger") and (ii) by virtue of the Merger, the Shareholders shall receive
shares of QuadraMed Common Stock having an aggregate Fair Market Value (as
defined in the Merger Agreement) of $11,000,000 (the "Shares") in exchange for
each issued and outstanding share of Company Common Stock held by the
Shareholders.
WHEREAS, QuadraMed desires to grant certain registration rights for the
Shares, and QuadraMed and the Shareholders desire that this Agreement shall
govern the rights of the Shareholders to cause QuadraMed to register the Shares,
as well as certain other matters as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by each signatory hereto, it is agreed as
follows:
1. Definitions.
(a) The terms "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act (as defined
below), and the declaration or ordering of effectiveness of such registration
statement or document.
(b) The term "Registrable Securities" means (i) the Shares
issued to the Shareholders pursuant to the Merger Agreement and (ii) any Common
Stock issued or issuable with respect to the securities referred to in clause
(i) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registrable Securities, such securities
will cease to be Registrable Securities when they have been distributed to the
public pursuant to an offering registered under the Securities Act or sold to
the public through a broker, dealer or market maker in compliance with any
exemption under the Securities Act, including, without limitation, Rule 144
promulgated by the SEC (as defined below) under the Securities Act (or any
similar rule then in force).
(c) A person will be deemed to be a "Holder" of Registrable
Securities
<PAGE> 2
whenever such person owns or has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitation upon the exercise of such right), whether or not such acquisition has
actually been effected.
(d) The term "Form S-3" means such form under the Securities
Act as in effect on the date hereof or any comparable or successor form under
the Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by QuadraMed with the SEC.
(e) The term "Securities Act" means the Securities Act of
1933, as amended.
(f) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(g) The term "SEC" means the Securities and Exchange
Commission.
2. Registration. As soon as practicable after the restrictions on
transfer set forth in Section 3.31 of the Merger Agreement have lapsed,
QuadraMed shall prepare and file with the SEC a registration statement on Form
S-3 (or, if Form S-3 is not then available, on such form of registration
statement as is then available to effect a registration of the Registrable
Securities, subject to the consent of the Holders, which consent will not be
unreasonably withheld) covering the resale of the Registrable Securities.
QuadraMed shall use its reasonable best efforts to obtain effectiveness of the
registration statement as soon as practicable. QuadraMed represents and warrants
that it meets the registrant eligibility and transaction requirements for the
use of Form S-3 for registration of the sale by the Holders of the Registrable
Securities and QuadraMed shall file all reports required to be filed by
QuadraMed with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3. Obligations of QuadraMed. In connection with the registration of
the Registrable Securities, QuadraMed shall have the following obligations:
(a) QuadraMed shall prepare and file with the SEC a
registration statement with respect to the Registrable Securities and thereafter
shall use its reasonable best efforts to cause such registration statement to
become effective as soon as possible after filing and shall keep such
registration statement effective at all times until two (2) years following the
effective date of such registration statement.
(b) QuadraMed shall prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to keep
the registration statement effective at all times and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
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<PAGE> 3
(c) QuadraMed shall furnish to the Shareholders and their
legal counsel promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by QuadraMed, one (1) copy of the registration
statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto. QuadraMed shall furnish to the Holders
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them. QuadraMed will immediately notify each
Holder by facsimile of the effectiveness of the registration statement or any
post-effective amendment. QuadraMed will promptly respond to any and all
comments received from the SEC, with a view towards causing any registration
statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall promptly file an acceleration request as soon as
practicable following the resolution or clearance of all SEC comments, or, if
applicable, following notification by the SEC that the registration statement or
any amendment thereto will not be subject to review. QuadraMed hereby agrees to
keep the Shareholders apprised of the status of the registration statement.
(d) QuadraMed shall use its reasonable best efforts to (i)
register and qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Holders, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof and (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times, provided that QuadraMed shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) As promptly as practicable, QuadraMed shall notify each
Holder of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing and QuadraMed shall use its reasonable
best efforts promptly to prepare a supplement or amendment to the registration
statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Holder as such Holder may
reasonably request.
(f) In the event Shareholders that hold a majority-in-interest
of the Registrable Securities being offered in the offering select underwriters
for the offering, such determination to be binding on all Holders, QuadraMed
shall enter into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without
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<PAGE> 4
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
(g) QuadraMed shall use its reasonable best efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
registration statement, and, if such an order is issued, to obtain the
withdrawal of such order as soon as practicable and to notify each Holder who
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof.
(h) QuadraMed shall permit counsel designated by the
Shareholders to review the registration statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of the registration statement without prior notice to
such counsel. The sections of the registration statement covering information
with respect to the Holders, the Holders' beneficial ownership of securities of
QuadraMed or the Holders intended method of disposition of Registrable
Securities shall conform to the information provided to QuadraMed by each of the
Holders.
(i) At the request of any Holder, QuadraMed shall (i) furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the registration statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof an
opinion, dated as of such date, from counsel representing QuadraMed for purposes
of such registration statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters, if any,
and the Holders and (ii) use its reasonable best efforts to furnish, on the date
that Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the registration statement or, if such securities are not being
sold by an underwriter, on the date of the effectiveness thereof, a letter,
dated such date, from QuadraMed's independent certified public accountants in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Holders.
(j) QuadraMed shall make available for inspection by (i) any
Holder, (ii) any underwriter participating in any disposition pursuant to the
registration statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Holders and (iv) one firm of attorneys retained
by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
QuadraMed (collectively, the "Records"), as shall be reasonably deemed necessary
by each Inspector to enable each Inspector to exercise its due diligence
responsibility, and cause QuadraMed's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to a Holder) of any Record
or other information which QuadraMed determines in good faith to be
confidential, and of which
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<PAGE> 5
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
registration statement, (b) the release of such Records is ordered pursuant to a
subpoena or other order from a court or government body of competent
jurisdiction or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. QuadraMed shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to QuadraMed) with QuadraMed with respect thereto, substantially in
the form of this Section 3(j). Each Holder agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to
QuadraMed and allow QuadraMed, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the records
deemed confidential. Nothing herein (or in any other confidentiality agreement
between QuadraMed and any Holder) shall be deemed to limit the Holder's ability
to sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
(k) QuadraMed shall hold in confidence and not make any
disclosure of information concerning any Holder provided to QuadraMed unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any registration statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court of governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. QuadraMed agrees that it
shall, upon learning that disclosure of such information concerning a Holder is
sought in or by a court of governmental body of competent jurisdiction or
through other means, give prompt notice to such Holder prior to making such
disclosure, and allow the Holder, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information.
(l) QuadraMed shall (i) cause all the Registrable Securities
covered by the registration statement to be listed on each national securities
exchange on which securities of the same class or series issued by QuadraMed are
then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure the designation and
quotation, of all the Registrable Securities covered by the registration
statement on the Nasdaq National Market and, without limiting the generality of
the foregoing, to arrange for at least two (2) market makers to register with
the National Association of Securities Dealers, Inc. as such with respect to
such Registrable Securities.
(m) QuadraMed shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the registration statement.
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<PAGE> 6
(n) QuadraMed shall cooperate with the Holders who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the registration statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Holders may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Holders may request, and, within three (3) business
days after a registration statement which includes Registrable Securities is
ordered effective by the SEC, QuadraMed shall deliver, and shall cause legal
counsel selected by QuadraMed to deliver, to the transfer agent for the
Registrable Securities (with copies to the Holders whose Registrable Securities
are included in such registration statement) a letter of instruction and an
opinion of such counsel in the usual and customary form and satisfactory to such
transfer agent.
4. Furnish Information. It shall be a condition precedent to the
obligations of QuadraMed to complete the registration pursuant to this Agreement
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to QuadraMed such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
such Holder's Registrable Securities.
5. Expenses of Registration. All expenses incident to QuadraMed's
performance or compliance with the Agreement, including, without limitation, all
registration, filing, listing and qualification fees, printer's fees and fees
and disbursements of counsel, independent certified public accountants and all
other persons retained by QuadraMed and reasonable fees and expenses for one (1)
separate counsel, if any, retained by the holders of the Registrable Securities
in connection with such registration (collectively, the "Registration
Expenses"), will be borne by QuadraMed. Notwithstanding the foregoing, the
Holders of the Registrable Securities shall be obligated to pay, pro rata among
the Holder of the Registrable Securities on the basis of the number of
securities owned by each such Holder the underwriting discounts and commission
relating to the Registrable Securities included in any registration hereunder.
6. Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
7. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, QuadraMed will indemnify,
hold harmless and defend (i) each Holder or Shareholder, (ii) the directors,
officers, partners, employees, agents and each other person who controls any
Holder or Shareholder within the meaning of the Securities Act or the 1934 Act,
(iii) any underwriter (as defined in the Securities Act) for the
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<PAGE> 7
Holders and (iv) the directors, officers, partners, employees and each person
who controls any such underwriter within the meaning of the Securities Act or
the 1934 Act, if any (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities or expenses (joint or several) (collectively,
together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject, insofar as such
Claims arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (a) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (b) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading or (c) any violation or alleged
violation by QuadraMed of the Securities Act, the 1934 Act, any state securities
law or other law or any rule or regulation promulgated under the Securities Act
or the 1934 Act or any state securities law or other law; and QuadraMed will pay
to each such Indemnified Person, as incurred, any legal or other expenses
reasonably incurred such Indemnified Person in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 7(a) shall not apply to amounts paid in settlement of
any such Claim if such settlement is effected without the consent of QuadraMed
(which consent shall not be unreasonably withheld), nor shall QuadraMed be
liable in any such case for any such Claim to the extent that it arises out of
or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder.
(b) In connection with any registration statement in which a
Holder is participating, to the extent permitted by law, each such selling
Holder severally and not jointly will indemnify and hold harmless QuadraMed,
each of its directors, each of its officers who has signed the registration
statement, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder and each person, if any, who controls QuadraMed within the meaning
of the Securities Act, against any Claims to which any of the foregoing persons
may become subject, under the Securities Act or the 1934 Act or other federal or
state law, insofar as such Claims arise out of or are based upon any Violation
by such Holder, in each case to the extent (and only to the extent) that such
Violation occurs by reason of reliance upon and in conformity with written
information furnished to QuadraMed by such Holder expressly for use in
connection with such registration; and each such Holder will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 7(b), in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 7(b) shall not apply to amounts paid in settlement of
any such Claim if such settlement is effected without the consent of the Holder
(which consent shall not be unreasonably withheld); provided, further, that the
Holder shall be liable under this Agreement (including this Section 7(b) and
Section 8 below) only for that amount as does not exceed the net proceeds to
such Holder as a result of the sale of Registrable Securities pursuant to such
registration statement.
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<PAGE> 8
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a Claim in respect thereof
is to be made against any indemnifying party under this Section 7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel (to
be selected by Holders holding a majority of the Registrable Securities included
in the registration statement), with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party to the extent of such prejudice of any liability
to the indemnified party under this Section 7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 7.
(d) No indemnifying party, in the defense of any Claim arising
out of a Violation shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
Claim and, in the event the terms of such judgment or settlement include any
term other than the payment by the indemnifying party of money damages, the
indemnifying party shall not so consent or enter into such a settlement without
the consent of each indemnified party (which will not be unreasonably withheld)
whether or not the terms thereof include such a release.
(e) The obligations of QuadraMed and Holders under this
Section 7 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Agreement, and otherwise.
8. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 7 above to the fullest extent permitted
by law; provided, however, that (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 7 above, (ii) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation and (iii) contribution (together with any
indemnification or other obligations
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under this Agreement) by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
9. Reports Under 1934 Act. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of QuadraMed to the public without registration or pursuant to a
registration on Form S-3, QuadraMed agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of QuadraMed under the Securities Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by
QuadraMed that it has complied with the reporting requirements of SEC Rule 144,
Securities Act and the 1934 Act or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3, (ii) a copy of the most recent
annual or quarterly report of QuadraMed and such other reports and documents so
filed by QuadraMed and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
10. Assignment of Registration Rights. A Holder may assign its rights
under this Agreement (but only with all related obligations) to a transferee or
assignee of such securities, provided that, such transferee holds a minimum of
fifty thousand (50,000) shares of Registrable Securities and within a reasonable
time after such transfer, QuadraMed is furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
11. Amendment of Registration Rights. Any provision of the Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of QuadraMed and the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities and
QuadraMed.
12. Termination of Previous Registration Rights. Each of the
Shareholders acknowledges and agrees that all previous registration rights
granted to the Shareholders by the Company or any predecessor thereto are hereby
terminated in their entirety.
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<PAGE> 10
13. Affiliate Letters. Prior to the effectiveness of any registration
statement required hereunder, each Shareholder agrees, upon request by
QuadraMed, to execute an affiliate letter in form and substance reasonably
satisfactory to counsel for QuadraMed evidencing any applicable restrictions to
the transfer of the transfer of the Registrable Securities under Rule 145 of the
Securities Act, which affiliate letter may include stop transfer restrictions
and a legend condition with respect to the share certificates evidencing the
Registrable Securities.
14. Miscellaneous.
(a) Successors and Assigns. All covenants and agreements in
the Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of the Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(b) Counterparts; Facsimile. This Agreement may be executed in
any number of counterparts and any party hereto may execute any such
counterpart, each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute but one
and the same instrument. This Agreement shall become effective, and binding upon
QuadraMed on the date hereof and upon each Holder when such Holder signs and
returns the counterpart signature page attached hereto.
(c) Descriptive Headings; Interpretation. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a section of this Agreement.
(d) Severability. Whenever possible each provision and term of
this Agreement will be interpreted in a manner to be effective and valid but if
any provision or term of this Agreement is held to be prohibited by law or
invalid, then such provision or term will be ineffective only to the extent of
such prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement. If any of the covenants set forth in this Agreement
are held to be unreasonable, arbitrary or against public policy, such covenants
will be considered divisible with respect to scope, time and geographic area,
and in such lesser scope, time and geographic area, will be effective, binding
and enforceable against the parties hereto.
(e) Governing Law. The Agreement shall be governed by the laws
of the State of California, without regard to the conflicts of law principles.
(f) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior written and oral agreements and
understandings between QuadraMed, on the
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<PAGE> 11
one hand, and the Shareholders, on the other hand, with respect to the subject
matter of this Agreement, including, without limitation, that certain Letter of
Intent dated December 9, 1998. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
(g) Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon receipt by the party to be notified at such address as
such party shall have furnished QuadraMed in writing, or, until any such party
so furnishes an address to QuadraMed, then to and at the address of the last
holder of the Shares covered by this Agreement who has so furnished an address
to QuadraMed.
(h) Delays or Omissions; Remedies Cumulative. It is agreed
that no delay or omission to exercise any right, power or remedy accruing to the
parties, upon any breach or default of QuadraMed under this Agreement, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach of default, or any acquiescence therein, or of any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. It is further agreed that any waiver, permit, consent
or approval of any kind or character by a party of any breach or default under
this Agreement, or any waiver by a party of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a party, shall be cumulative and
not alternative.
(i) Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(j) Actions by Holders. Whenever any action, consent or other
determination is required on the part of the Holders to be made pursuant to this
Agreement, such determination shall be made by the Holders of the majority of
Registrable Securities then outstanding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this Registration
Rights Agreement as of the date first written above.
QUADRAMED QUADRAMED CORPORATION
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
SHAREHOLDERS
___________________________________________
Peter W. Jarvis
___________________________________________
Michael D. Halberda
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
