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EXHIBIT 2.12
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ACQUISITION AGREEMENT AND PLAN OF MERGER
BY AND AMONG
QUADRAMED CORPORATION AND CMC ACQUISITION CORPORATION,
AND
CABOT XXXXX CORPORATION AND CERTAIN OF ITS STOCKHOLDERS
DATED
FEBRUARY 2, 1998
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ACQUISITION AGREEMENT AND PLAN OF MERGER
This Acquisition Agreement and Plan of Merger (the "Agreement") is
dated February 2, 1998 by and among QuadraMed Corporation, a Delaware
corporation ("QuadraMed"), and CMC Acquisition Corporation, a Delaware
corporation ("Acquisition Co."), on the one hand, and Cabot Xxxxx Corporation,
a Delaware corporation (the "Company"), and Xxxxxxx Xxxxx, Xxxxxx X. Xxxxx
(collectively, the "Principal Stockholders"), Xxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxxx and Xxxxxxxxxxx X. Xxxxxxxx, who, together with the Principal
Stockholders, are the holders of 90.01% of the outstanding shares of common
stock of the Company (collectively, the "Founding Stockholders"), on the other
hand.
WHEREAS, QuadraMed is a duly incorporated Delaware corporation engaged
in the business of developing, marketing and selling software products and
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 Delaware corporation
engaged in the healthcare consulting, coding and software business, with
authorized capital stock consisting of 10,000,000 shares of capital stock,
$0.01 par value, of which 3,410,000 shares are duly and validly issued,
outstanding and entitled to vote as of February 2, 1998.
WHEREAS, the Stockholders 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 of the Company with and into Acquisition
Co. pursuant to the terms of this Agreement (the "Merger").
WHEREAS, it is the intent of the parties hereto that the Merger shall
constitute a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code (as defined below) and a plan of reorganization pursuant to Section 368 of
the Code.
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:
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1.1 "Acquisition Co. Common Stock" shall mean the common stock of
Acquisition Co., $0.001 par value.
1.2 "Affiliate" shall mean any person directly or indirectly
controlled by, controlling or under common control of any party to this
Agreement.
1.3 "Closing" shall mean the closing of the transactions
contemplated in this Agreement.
1.4 "Closing Consideration" shall mean at the Closing, $2,271,068
in cash and newly-issued shares of QuadraMed Common Stock (as defined below)
with an aggregate Fair Market Value (as defined below) of $7,381,644.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6 "Company Common Stock" shall mean all of the issued and
outstanding common stock of the Company, $0.01 par value, all of which shares
are held by the Stockholders as of the date hereof.
1.7 "Company Financial Statements" shall mean the unaudited
balance sheets of the Company as of December 31, 1997 for the twelve (12) month
period then ended and the related statements of operations, stockholders'
equity and cash flows for the periods then ended.
1.8 "Contingent Payment Rights" shall mean the right to receive
contingent payments as set forth in Section 2.16 below, which shall be owned
solely by the Founding Stockholders in proportion to their stockholdings.
1.9 "Contract" shall mean any existing written or oral contract,
lease, policy, commitment, sales order, purchase order, indenture, mortgage,
note, bond, instrument, license or other agreement.
1.10 "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.
1.11 "Delaware Code" shall mean the Delaware General Corporation
Law.
1.12 "Division" shall mean the newly-created division of QuadraMed
of which Xxxxxxx Xxxxx will be the President as of the Closing.
1.13 "Effective Date" shall mean the date and time the Certificate
of Merger (as defined below) is filed with the Delaware Secretary of State.
1.14 "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
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employee of the Company or any beneficiary or dependent thereof that is or was
maintained by the Company.
1.15 "Encumbrances" shall mean any mortgage, chattel mortgage,
conditional sales Contract, pledge, liability, lien, charge, security interest,
encumbrance, option, lease, license, easement or similar interest.
1.16 "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.
1.17 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended and all regulations promulgated thereunder.
1.18 "Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended.
1.19 "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 twenty (20) consecutive trading days
immediately preceding the second business day prior to the Closing, or at any
other time specified in this Agreement.
1.20 "GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.
1.21 "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.
1.22 "Hazardous Substance(s)" shall mean any substance, the
presence of which requires investigation or remediation under any Environmental
Law or under common law, 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
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properties) and radon, ureaformaldehyde, polychlorinated biphenyls, asbestos or
asbestos-containing materials, petroleum and petroleum products.
1.23 "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), other proprietary
rights and copies and tangible embodiments thereof (in whatever form or
medium).
1.24 "IRS" shall mean the United States Internal Revenue Service or
any successor entity.
1.25 "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.
1.26 "Material Adverse Effect" shall mean any material adverse
effect on the business, assets, properties, operations or condition (financial
or otherwise) of the Company.
1.27 "Merger Consideration" shall mean (i) $2,770,000 in cash, (ii)
newly-issued shares of QuadraMed Common Stock with a Fair Market Value of
$8,730,000 and (iii) the Contingent Payment Rights.
1.28 "Non-Founding Stockholders" shall mean all stockholders of the
Company other than the Founding Stockholders.
1.29 "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.
1.30 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.31 "QuadraMed Common Stock" shall mean the shares of common stock
of QuadraMed, $0.01 par value.
1.32 "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,
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the Prospectus dated October 21, 1997, the Form 10-Q for the quarter ended
September 30, 1997, the Annual Report on Form 10-KSB for the year ended
December 31, 1996, the 1996 Annual Report to Stockholders, the Proxy Statement
for the Annual Meeting of Stockholders held May 21, 1997, the Form S-4
Registration Statement dated January 23, 1998 and the Proxy Statement for the
Special Meeting of Stockholders to be held on February 6, 1998.
1.33 "QuadraMed Shares" shall mean the shares of QuadraMed Common
Stock issuable as a portion of the Merger Consideration.
1.34 "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).
1.35 "Real Property Leases" shall mean, collectively, any written
real property leases to which the Company is a party.
1.36 "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.
1.37 "SEC" shall mean the Securities and Exchange Commission.
1.38 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.39 "Software Products" shall mean any stand-alone software
products (i.e., products where the principal component is not computer
hardware) sold by QuadraMed or Acquisition Co. or their Affiliates.
1.40 "Software Product Sales" shall mean (i) any sale of a Software
Product by the Company in 1998 and on or prior to the Closing Date, (ii) any
sale of a Software Product arising directly out of the presentation by
QuadraMed and the Surviving Corporation to Columbia-HCA which is scheduled to
take place on or about February 6, 1998 or any follow-up or continuation of
such negotiations or discussions or (iii) the origination or generation of a
sale of a Software Product after the Closing Date principally by the Division
in which the Division (a) establishes or schedules an initial meeting with a
prospective client or end-user to demonstrate such Software Product, (b)
materially participates in the demonstration of such Software Product to a
prospective client or end-user, (c) endorses such Software Product to a
prospective client or end-user at the request of any other division of
QuadraMed or such prospective client or end-user or (d) obtains the commitment
or agreement of a prospective client or end-user to purchase such Software
Product.
1.41 "Stockholders" shall mean the holders of all of the issued and
outstanding shares of Common Stock of the Company as of the date of this
Agreement.
1.42 "Stockholder Representative" shall mean Xxxxxx X. Xxxxx.
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1.43 "Surviving Corporation" shall mean Acquisition Co. as the
surviving corporation following the Merger.
1.44 "Tax(es)" shall mean all taxes or similar 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 or similar 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.
1.45 "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.
ARTICLE II.
THE MERGER
2.1 Merger. Subject to the terms and conditions hereof, the
Merger shall be consummated in accordance with the Delaware Code as promptly as
practicable following the satisfaction or waiver of the conditions set forth in
Articles VII, VIII and IX. At the Effective Date, subject to the terms and
conditions of this Agreement and in accordance with the laws of Delaware, the
Company shall be merged with and into Acquisition Co., which shall be the
Surviving Corporation.
2.2 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 Stockholders, be
converted into the right to receive a portion of the Merger Consideration as
set forth in Section 2.3 below upon surrender of the certificates representing
such shares and the execution of the documentation required herein. At the
Effective Date, all rights in respect of such Company Common Stock shall cease
to exist, other than the right to receive the Merger 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.
2.3 Merger Consideration. The Merger Consideration shall be
distributed as follows and at the following times:
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Cash QuadraMed Contingent Payment Rights
---- --------- ---------- ------- ------
Stock
-----
At Closing:
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Xxxxxxx Xxxxx $1,320,690 $4,292,632 1,785,000
Xxxxxx X. Xxxxx $676,992 $2,200,425 915,000
Xxxxx X. Xxxxxx and Xxxxxxx Xxxxxx $73,988 $240,484 100,000
Xxxxxxx X. Xxxxxxx $73,618 $239,281 99,500
Xxxxxxxxxxx X. Xxxxxxxx $125,780 $408,822 170,000
After Notice of Merger and
----- ------ -- ------ ---
Delivery of Required Documentation:
-------- -- -------- -------------
Xxxxxxx X. Xxxxx, Custodian for
Xxxxxxx Xxxxx Xxxxx $6,782
Xxxxxxx X. Xxxxx, Custodian for
Xxxxxx Xxxxxxx Xxxxxxx $6,782
Xxxxxxx X. Xxxxx, Custodian for
Kelsey Xxxxx Xxxxx $6,782
Xxxxxxx X. Xxxxx, Custodian for
Xxxxxxx Xxxx Xxxxxxx $6,782
Xxxxxx X. Xxxxx, Xx., Custodian for
Xxxxxx X. Xxxxx, Xx. $5,425
Xxxxxx X. Xxxxx, Xx., Custodian for
Xxxxxx X. Xxxxx $5,425
Xxxxxx X. Xxxxx, Xx., Custodian for
Xxxxxxxx X. Xxxxx $5,425
Xxxx Del Sorro and Xxxxxxx Del Sorro,
Custodians for Xxxx Del Sorro $5,425
Xxxx Del Sorro and Xxxxxxx Del Sorro,
Custodians for Ashley Del Sorro $5,425
Xxxxxx Xxxxxxxx $5,425
Xxxxxx Xxxxxxxx $5,425
Xxxxxx Xxxxxxxx and Xxxx Xxxxxxxx $5,425
Xxxxxxx Xxxxxxx $10,850
Xxxxxxxx Xxxxxxxxx $2,713
Xxxx X. Xxxx $6,382 $20,744
Xxxxx X. Xxxx $6,382 $20,744
Xxxxxx X. Xxxxx, Xx. and Xxxxxxx X. Xxxxx $6,382 $20,744
Xxxxxxxx X. Xxxxxxx $6,382 $20,744
Xxxxx X. Xxxxxx, Xx. and Xxxx X. Xxxxxx $12,764 $41,488
Xxxxx X. Xxxxxx, Xx. and Xxxxxx X. Xxxxxx $6,382 $20,744
Doanto X. Xxxxxxxxxx $6,382 $20,744
Xxxxxx X. Kawtowski $6,382 $20,744
Xxxxx X. Xxxxxxxx and Xxxx X. Xxxxxxxx $6,382 $20,744
QuadraMed
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Cash Stock
---- -----
Xxxxxxx X. Bartolaccci, Jr. $6,382 $20,744
Orthopedic Associates of Greater Lehigh
Valley PA Profit Sharing Trust Dtd
9/17/87 FBO Xxxxxx X. Xxxxx, M.D. $25,529 $82,976
C. Xxxxxxx Xxxxxx $6,382 $20,744
Xxxxx Xxxxxxx $6,382 $20,744
Fergo Brothers $25,529 $82,976
Xxxxxxx X. Ghia, M.D. $127,643 $414,879
Xxxxxx X. Xxxxxxxx $6,382 $20,744
J. Xxxxxxxxx Xxxxxx $6,382 $20,744
Greystone Paving & Contracting Co, Inc. $25,529 $82,976
Xxxxx X. Xxxxx $6,382 $20,744
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Xxx Xxxxxx $6,382 $20,744
Xxxx X. Xxxxxx $6,382 $20,744
Xxxxxx X. Xxxxxx $6,382 $20,744
Xxxxx X. Xxxxxx $25,529 $82,976
Xxxxx X. Xxxxx $3,191 $10,372
Xxxxx X. Xxxxx $3,191 $10,372
Xxxx Xxx Xxxxxx and Xxxx Xxxxxx, Xx. $6,382 $20,744
Xxxx Xxxxxx Xxxxx & Hof Employees PST
Plan 003 UAD 1/19/91 FBO Xxxxxx Xxxxx $6,382 $20,744
Zoffinger Family Ltd. Partnership $6,382 $20,744
Orthopedic Associates of Greater Lehigh
Valley FBO Xxxx X. Xxxxxxxxx, M.D. $6,382 $20,744
Mariner Group, Inc. Profit Sharing
Thrift Savings Plan $6,382 $20,744
Xxxxxxxxx X. X'Xxxxx $6,382 $20,744
Xxxxxxx Xxxxx and Xxxx Xxxxx $6,382 $20,744
Xxxx Xxxxx and Xxxx Xxxxx $6,382 $20,744
Xxxxx Xxxxxx $6,382 $20,744
Notwithstanding the foregoing, any Non-Founding Stockholder (other than
stockholders receiving all cash in the Merger) may, in lieu of receiving the
Merger Consideration set forth above elect to receive, by delivery to
Acquisition Co. of the election referred to below, a combination of cash,
QuadraMed Stock and Contingent Payment Rights determined by allocating all the
cash, QuadraMed Stock and Contingent Payment Rights to be paid to the Founding
Stockholders (and the cash and QuadraMed Stock that would have been paid all
such electing Non- Founding Stockholders) among all Founding Stockholders and
all such electing Non-Founding Stockholders in proportion to their respective
ownership of Company Common Stock. At the time such Non-Founding Stockholders
are given notice of the Merger pursuant to Section 2.14, such Non-Founding
Stockholders will be advised of the right to make this election. Such
election, if made, shall be irrevocable, and shall be made, if at all, in
accordance with the procedures set forth in the notice materials. In the
absence of a valid election, such Non-Founding Stockholders shall receive the
Merger Consideration set forth in Section 2.3 above. Each Founding Stockholder
acknowledges and agrees to the election right provided above, and each
Founding Stockholder agrees to any resulting adjustment to each Founding
Stockholder's proportionate share of the Merger Consideration (i.e., an
increase in QuadraMed Shares and cash and a decrease in Contingent Payment
Rights).
2.4 Acquisition Co. Common Stock. Each share of Acquisition Co.
Common Stock issued and outstanding immediately prior to the Effective Date
shall remain outstanding.
2.5 Company Stock Options. At the Closing, each of the employee
stock options set forth on Schedule 2.5 issued by the Company pursuant to the
Cabot Xxxxx Corporation 1997 Incentive Stock Option Plan (the "Plan") shall be
converted into and become identical rights with respect to QuadraMed Common
Stock and QuadraMed shall assume each such Company option, in accordance with
the terms of the Plan, except from and after the Closing (i) the number of
shares issuable upon exercise of each such stock option shall be an amount
equal to $3.3724 divided by the Fair Market Value of the QuadraMed Shares at
Closing (in each case rounding down to the nearest share); (ii) the exercise
price of each such stock option shall be the Fair Market Value of the QuadraMed
Shares at Closing; and (iii) QuadraMed and its Compensation Committee shall be
substituted as the "Committee" administering the Plan pursuant to the terms
thereof.
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2.6 Execution of Certificate of Merger. At the Closing,
Acquisition Co. and the Company shall complete and execute the Certificate of
Merger, substantially in the form attached hereto as Exhibit "A" and
incorporated herein by this reference (the "Certificate of Merger"), and shall
cause the Certificate of Merger to be delivered to the Delaware Secretary of
State for filing as provided in Section 251 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.
2.7 Effect of the Merger. The Merger shall have the effects set
forth in Section 259 of the Delaware Code.
2.8 Certificate of Incorporation; Bylaws. As of the Effective
Date, the Certificate of Incorporation of Acquisition Co. shall be the
Certificate of Incorporation of the Surviving Corporation, and the Bylaws of
Acquisition Co. shall be the Bylaws of the Surviving Corporation; except that
the First Article of the Certificate of Incorporation of Acquisition Co. is
hereby amended in its entirety to read as follows:
"The name of the corporation is Cabot Xxxxx Corporation."
2.9 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 Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
2.10 Officers. The following individuals 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 Certificate of
Incorporation and Bylaws of the Surviving Corporation, or otherwise provided by
law:
Xxxxx X. Xxxxxx Chairman of the Board
Xxxxx X. Xxxxxx President
Xxxxxxx Xxxxx Vice President
Xxxxxx X. Xxxxx Vice President
Xxxxx X. Xxxxxx Chief Executive Officer
Xxxx X. Xxxxxxxxxx Treasurer
Xxxxx X. Xxxxxxx Secretary
2.11 Closing. Unless this Agreement shall have been terminated
pursuant to the provisions of Article XII, the Closing of the transactions
contemplated by this Agreement shall take place at the principal executive
offices of QuadraMed, 00 Xxxx Xxx Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 0X, Xxxxxxxx,
Xxxxxxxxxx 00000 as soon as practicable following the satisfaction or waiver of
the conditions set forth in Articles VII, VIII and IX.
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2.12 Closing Obligations of Company and Founding Stockholders. At
the Closing, the Company and the Founding Stockholders shall deliver or cause
to be delivered to QuadraMed and Acquisition Co.:
(a) the certificates representing the shares of Company
Common Stock owned by the Stockholders, duly endorsed in blank (or accompanied
by duly executed stock powers);
(b) the Certificate of Merger duly executed for filing;
(c) the closing certificate required by Section 8.3
below;
(d) the opinion of counsel required by Section 8.4 below;
(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 Certificate of Incorporation and Bylaws
of the Company, each as amended;
(f) written resolutions of the Stockholders 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 "B" and incorporated herein by this reference,
executed by each of the Principal Stockholders;
(h) the Non-Competition and Non-Interference Agreements,
substantially in the form attached hereto as Exhibit "C" and incorporated
herein by this reference, executed by each of the Principal Stockholders;
(i) the Releases, substantially in the form attached
hereto as Exhibit "D" and incorporated herein by this reference, executed by
each of the Principal Stockholders;
(j) resignation letters of each of the directors of the
Company dated effective as of the Closing;
(k) a certificate of good standing for the Company
certified by the Delaware Secretary of State not more than ten (10) days prior
to the Closing; and
(l) 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.
2.13 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 Stockholders:
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(a) the Closing Consideration;
(b) the Certificate of Merger duly executed for filing;
(c) the closing certificate required by Section 9.3
below;
(d) the opinion of counsel required by Section 9.4 below;
(e) 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 QuadraMed and
Acquisition Co. at the Closing;
(f) written resolutions or minutes of 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;
(g) the Employment Agreements, substantially in the form
attached hereto as Exhibit "B" and incorporated herein by this reference,
executed by QuadraMed; and
(h) such other documents as may be reasonably requested
by counsel for the Company and the Stockholders as necessary to consummate the
transactions contemplated by this Agreement.
2.14 Notice to Non-Founding Stockholders. Within twenty (20) days
of the Closing, the Surviving Corporation shall deliver notice of the
transactions approved by the Stockholders hereunder to the Non-Founding
Stockholders, together with a transmittal disclosing all material facts
regarding the transactions contemplated hereby, in form and substance
reasonably acceptable to counsel for QuadraMed, Acquisition Co. and the
Stockholders, such transmittal to also include a Written Consent of the
Stockholders ratifying the Merger and the transactions contemplated by this
Agreement (the "Stockholders Consent"), instructions to the recipients thereof
regarding the requirements for receipt of their proportionate share of the
Merger Consideration and a description of their statutory appraisal rights (as
more fully set forth in Section 2.17 below).
2.15 Obligations of Non-Founding Stockholders. As a condition
precedent to the delivery of the applicable portion of the Merger Consideration
to each Non-Founding Stockholder, he, she or it shall deliver or cause to be
delivered to QuadraMed and Acquisition Co.: (i) the certificates representing
the shares of Company Common Stock owned by such Non-Founding Stockholders,
duly endorsed in blank (or accompanied by duly executed stock powers); (ii)
subscription documents for the QuadraMed Shares in form and substance
reasonably acceptable to counsel for QuadraMed and Acquisition Co. and the
Stockholders; (iii) an executed counterpart signature page to the Stockholders
Consent; and (iv) 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.
2.16 Contingent Payment Rights.
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(a) Each Contingent Payment Right shall represent only a
right to receive a cash payment (the "Earn-Out") from QuadraMed and Acquisition
Co., subject to the terms set forth in this Section 2.16. The amount of any
Earn-Out payment payable with respect to each Contingent Payment Right shall be
equal to the aggregate Earn-Out payment payable, calculated as set forth below,
divided by the total number of Contingent Payment Rights as set forth in
Section 2.3 above. Not later than twenty (20) days following the completion of
the audit of QuadraMed's financial statements for each Earn-Out Year (as
defined below), QuadraMed and Acquisition Co. shall prepare and deliver to the
Founding Stockholders a statement (the "Earn-Out Statement") setting forth the
amount of Software Product Sales and the amount of the Earn-Out, if any,
payable for such Earn-Out Year in accordance with this Section 2.16 and a
reasonably detailed description of the calculations of such Software Product
Sales and Earn-Out amount. Each Founding Stockholder acknowledges and agrees
that the calculation of the amount of Software Product Sales may differ from
the amount of software sales set forth in the profit and loss statement for the
Division. The amount of the Earn-Out payment reflected on the Earn-Out
Statement shall be paid by QuadraMed to the holders of Contingent Payment
Rights not later than the tenth (10th) business day following the date the
Earn-Out Statement is required to be delivered to the Founding Stockholders
entitled to receive payment (the "Earn-Out Payment Date"). Any objections made
to the calculation of the Software Product Sales and/or the amount of the
Earn-Out payment shall be resolved in accordance with Section 2.16(e) below.
Contingent Payment Rights shall not possess any attributes of common stock or
other security and shall not entitle the holders of the Contingent Payment
Rights to any rights of any kind other than as specifically set forth in this
Agreement.
(b) The term "Earn-Out Year" shall refer to each of the
following twelve (12) month periods: (i) the period from January 1, 1998
through December 31, 1998 and (ii) the period from January 1, 1999 through
December 31, 1999.
(c) The Earn-Out payments shall determine by measuring
Software Product Sales for Earn-Out Years 1998 and 1999 against Threshold
Software Product Sales and Maximum Software Product Sales for such Earn-Out
Years. The Threshold Software Product Sales for 1998 shall be $2,500,000 and
the Maximum Software Product Sales for 1998 shall be $3,500,000. The Threshold
Software Product Sales for 1999 shall be $5,000,000 and the Maximum Software
Product Sales for 1999 shall be $7,500,000.
(d) Failure to achieve the Threshold Software Product
Sales amount in any Earn-Out Year will result in no Earn-Out payment being made
for that Earn-Out Year. Achieving the Threshold Software Product Sales shall
result in an Earn-Out payment of $1,000,000 being made for Earn-Out Year 1998
and $3,500,000 for Earn-Out Year 1999. Achieving the Maximum or greater
Software Product Sales in any Earn-Out Year will result in the Maximum Earn-Out
payment to all holders of Contingent Payment Rights, which results in an
Earn-Out payment of $2,000,000 being made for Earn-Out Year 1998 and $5,000,000
being made for Earn-Out Year 1999. Software Product Sales in any Earn-Out Year
which is between the Threshold and Maximum Software Product Sales amount for
such year will result in an Earn-Out payment to all holders of Contingent
Payment Rights, collectively, being made for that Earn-Out Year calculated as
follows:
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00
Xxxxxxxxx Xxxx-Xxx payment = $1,000,000 + [(X-Y)/(Z-Y)] x $1,000,000
for Earn-Out Year 0000
Xxxxxxxxx Earn-Out payment = $3,500,000 + [(X-Y)/(Z-Y)] x $1,500,000
for Earn-Out Year 1999
Where X = the actual Software Product Sales for an Earn-Out Year;
Y = the Threshold Software Product Sales for an Earn-Out Year;
and Z = the Maximum Software Product Sales for an Earn-Out Year.
Note: X will be calculated to four decimals places and rounded to the
nearest four decimals.
(e) If the Stockholder Representative shall have any
objections to the Earn-Out Statement, such Stockholder Representative shall
deliver a reasonably detailed statement describing its objections to
Acquisition Co. within thirty (30) days after receiving the Earn-Out Statement
in question. In the event such statement is not delivered to Acquisition Co.
within such thirty (30) day period, Acquisition Co.'s calculation of Software
Product Sales and the Earn-Out payment, as set forth in the Earn-Out Statement,
shall be conclusive as to all Stockholders. The Stockholder Representative and
Acquisition Co. will use reasonable efforts to resolve any objections to the
calculation of Software Product Sales and/or the Earn-Out Payment which are
timely raised by the Stockholder Representative. If the parties do not obtain
a final resolution within twenty (20) days after Acquisition Co.'s receipt of a
statement of objections, the Stockholder Representative and Acquisition Co.
will select an accounting firm mutually acceptable to them to resolve any
remaining objections. If the Stockholder Representative and Acquisition Co.
are unable to agree on the choice of an accounting firm, such accounting firm
will be selected by lot from a list of nationally recognized accounting firms,
after excluding the regular outside accounting firms of Acquisition Co. and the
Stockholder Representative. The determination of any accounting firm so
selected will be set forth in writing and will be conclusive and binding upon
the parties. If such accounting firm determines that the Stockholders are
entitled under this Section 2.16 to an additional payment from QuadraMed and
Acquisition Co., QuadraMed and Acquisition Co. shall pay such amount with
interest from the Earn-Out Payment Date to the date such amount is actually
paid at the prime rate of interest as announced by Citibank, N.A. from time to
time. In the event that the parties submit any unresolved objections to an
accounting firm for resolution as provided in this Section 2.16(e), the fees
and expenses of the accounting firm shall be borne (i) by the Founding
Stockholders if such accounting firm determines that no additional payment is
due to the Founding Stockholders, (ii) equally by Acquisition Co. and the
Stockholder Representative if the payment which such accounting firm determines
to be due to the Stockholders does not exceed the Earn-Out payment reflected on
the Earn-Out Statement by more than $100,000 or (iii) by Acquisition Co. if
the payment which such accounting firm determines to be due to the Founding
Stockholders exceeds the Earn-Out payment reflected on the Earn- Out Statement
by more than $100,000.
(f) The Contingent Payment Rights are personal to each
initial holder thereof and shall not be transferable for any reason other than
(i) to an affiliate of such holder, (ii) to another holder of Contingent
Payment Rights, (iii) by operation of law or by will or the
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laws of descent and distribution or (iv) for estate planning purposes with
QuadraMed's prior written consent, which consent shall not be unreasonably
withheld, but may be withheld if a proposed transfer would result in an undue
administrative burden. Any attempted transfer of a Contingent Payment Right by
any holder thereof (other than as permitted by the immediately preceding
sentence) shall be null and void.
(g) Payment of the Earn-Out shall be made by cashier's
check or certified check or, if requested by a person entitled to receive
payment, by wire transfer of immediately available funds to an account
specified by such person, after taking such action as is necessary to assure
that all applicable federal or state income withholding and any other taxes are
withheld and deducted from such funds otherwise to be paid to the holders of
Contingent Payment Rights. Each payment of the Earn-Out shall, to the extent
required by law, be deemed to include interest at the applicable federal rate
under the Code (it being understood that such deemed interest will not affect
the amount due and payable, if any, under this Section 2.16).
(h) Notwithstanding anything to the contrary contained in
this Section 2.16, QuadraMed shall pay any and all amounts due for any Earn-Out
Year in newly-issued shares of QuadraMed Common Stock valued at their Fair
Market Value at the time of issuance to the extent required to ensure that
fifty percent (50%) of the Merger Consideration is paid in shares of QuadraMed
Common Stock.
2.17 Appraisal Rights. To the extent required under the Delaware
Code, notwithstanding any other provisions of this Agreement to the contrary,
shares of Company Common Stock that are outstanding immediately prior to the
Closing and which are held by Stockholders who shall not have voted in favor of
the Merger or consented thereto in writing and who shall have demanded
properly, in writing, appraisal for such shares in accordance with the
applicable provisions of the Delaware Code (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such Stockholders shall be entitled to receive payment
of the appraised value of such shares of Company Common Stock held by them in
accordance with the applicable provisions of the Delaware Code, except that all
Dissenting Shares held by Stockholders who failed to perfect or who have
effectively withdrawn or lost their rights to appraisal of such shares of
Company Common Stock under the applicable provisions of the Delaware Code shall
thereupon be deemed to have converted into and to become exchangeable, as of
the expiration of the statutory notice period following the Closing, of the
right to receive, without any interest thereon, the Merger Consideration, upon
surrender, in the manner provided in Section 2.15 above, of the certificate or
certificates that formerly evidenced such shares of Company Common Stock. Any
payments required to be made to the holders of any Dissenting Shares shall be
funded by QuadraMed.
2.18 Private Placement. The QuadraMed Shares to be issued to the
Stockholders 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. The Founding Stockholders hereby agree to take all actions
and execute
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all subscription and other documents to qualify issuance of the QuadraMed
Shares for such exemptions.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and each of the Principal Stockholders hereby jointly and
severally represent and warrant to QuadraMed and Acquisition Co. as follows:
3.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, 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.
3.2 Certificate of Incorporation and Bylaws. The Company has
delivered to QuadraMed and Acquisition Co. true, correct and complete copies of
its Certificate of Incorporation and Bylaws together with all amendments to
each through the date hereof, and such documents are in full force and effect.
3.3 Corporate Minutes. The Company has made available to
QuadraMed and Acquisition Co. 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 stockholders of the Company.
3.4 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.
3.5 Capitalization. As of the date of this Agreement, the only
authorized capital stock of the Company consists of 10,000,000 shares of
capital stock, $0.01 par value, of which 3,410,000 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 nonassessable and
are not subject to, nor were any issued in violation of, any preemptive rights.
Except as set forth on Schedule 3.5, 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. Except as set forth in Schedule 3.5, the Company
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and the Stockholders 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.
3.6 Ownership of Shares; No Change. As of the date of this
Agreement and as of the Closing, the Stockholders 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 Stockholders 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. The Stockholders have full power
and authority to convey good marketable title to the shares of Company Common
Stock owned by them free and clear of any Encumbrances.
3.7 Subsidiaries and Other Affiliates. The Company does not have
any subsidiaries and, except as set forth on Schedule 3.7, does not own, either
directly or indirectly, any interest or investment, or any obligation, option
or right to acquire any interest, direct or indirect, in any other corporation
or other entity.
3.8 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 have been duly authorized by
the Board of Directors and Stockholders 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 in
accordance with its terms. This Agreement has been duly and validly
authorized, executed and delivered by the Company and this Agreement (assuming
due authorization, execution and delivery by the other parties hereto)
constitutes the legal, valid and binding obligation of the Company, 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, nor the
consummation of the transactions contemplated hereby, nor compliance by the
Company with the terms and provisions of this Agreement nor the Certificate of
Merger will result in a violation or breach of any term or provision of the
Company's Certificate of Incorporation or Bylaws, or of any material 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, 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 Certificate of Merger with the Delaware Secretary
of State and obtaining any necessary third-party consents set forth on Schedule
3.8, 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.
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3.9 Company Financial Statements. The Company has delivered to
QuadraMed and Acquisition Co. true, complete and correct copies of the Company
Financial Statements. Except as set forth on Schedule 3.9, the Company
Financial Statements present fairly in all material respects the financial
condition of the Company at said dates and the results of its operations,
changes in stockholders' 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.
3.10 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 December 31,
1997, 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 of a kind required by GAAP to be set forth on audited
financial statements, including the notes thereto.
3.11 Absence of Certain Changes. Except as set forth on Schedule
3.11 or as provided for in this Agreement, since December 31, 1997, the Company
has conducted its business only in the ordinary course and consistent with
prior practice, and the Company has not:
(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 December 31, 1997
in the ordinary course of business;
(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 in the ordinary course of business;
(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;
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(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, other than in the ordinary course of business;
(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 stockholder, director, officer, employee, salesman or distributor of the
Company or hired or entered into any employment agreement or arrangement with
any person;
(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 materially from the conditions
regularly and usually specified on acceptance of Contract 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.
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3.12 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 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.
3.13 Real Property Matters. The Company owns no real property.
Schedule 3.13 includes a complete and accurate list of all Real Property
Leases. Except as disclosed on Schedule 3.13, there are no tenants (other than
the Company) occupying space on any 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 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, except as
set forth on Schedule 3.13, all lessors (and, if applicable, all mortgagees
with respect to Real Property Leases covering Real Property which is encumbered
by a mortgage) under the Real Property Leases (or mortgages) have consented
(where such consent is necessary) to the consummation of the transactions
contemplated by this Agreement without requiring modification in the rights or
obligations thereunder. 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.
3.14 Intellectual Property. Schedule 3.14 sets forth all
Intellectual Property of the Company other than goodwill, trade secrets and
confidential business information. Except as set forth on Schedule 3.14, the
Company is not in material violation of, or materially infringing upon, any
patent, trademark, service xxxx, 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 Founding Stockholders
threatened claiming such infringement. Except as set forth on Schedule 3.14,
the Company has not licensed or encumbered any material item of its
Intellectual Property to any third- party, nor have any other material
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 material
agreements whereby the Company 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
materially restricts or affects the use of any of the
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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 Founding Stockholders 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 and has used
reasonable efforts to protect its rights in and to maintain the secrecy of its
trade secrets and other proprietary rights and information. All Intellectual
Property (including Intellectual Property relating to software) owned or
controlled by Cabot Xxxxx Software Corporation ("CMSC") at any time has been
duly, validly and unconditionally assigned, conveyed and transferred to the
Company, and CMSC has no remaining interest therein.
3.15 Proprietary Information of Third Parties. To the knowledge of
the Company and each of the Principal Stockholders, 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
any Stockholder which suggests that such a claim might be contemplated. To the
knowledge of the Company and each of the Principal Stockholders, 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
each of the Principal Stockholders, 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 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. Neither the execution nor delivery of this Agreement or the
carrying on of the business of the Company as officers, employees or agents by
any officer, director or key employee of the Company, or the conduct or
proposed conduct of the business of the Company, will conflict with or result
in the breach of the terms, conditions or provisions of or constitute a default
under any Contract, covenant or instrument under which any such Person is
obligated.
3.16 Software. Schedule 3.16 contains a complete and accurate list
of all proprietary software that the Company has marketed or licensed to
third-parties (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 computer
software. Except as set forth on Schedule 3.16, and except for commercially
available, over-the-counter "shrink-wrap" software and hardware and host system
operating software utilized by the Company's
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customers, 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.
Schedule 3.16 contains a complete and accurate list of all material 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. No party to whom the
Company has disclosed Licensed Software has, to the knowledge of the Company
and each of the Principal Stockholders, breached any obligation of
confidentiality imposed on them by the Company relating thereto. The Owned
Software and Licensed Software constitute all software used in the business of
the Company (collectively, the "Company Software"). The Owned Software
performs in accordance with the user manual and other Company documentation
used in connection with the Owned Software and is free of defects in
programming and operation (except defects caused by third parties or the misuse
of the software or immaterial software bugs), 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 Owned Software. The
Company has made available to QuadraMed and Acquisition Co. complete and
correct copies of all user and technical documentation related to the Owned
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. 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 each of the Principal Stockholders, 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 Owned 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 Owned Software,
whether requiring the payment of royalties or not. The Company has kept secret
and not disclosed the source code for the Owned Software to any person or
entity other than certain employees of the Company. Schedule 3.16 sets forth
all patents applied for and any copyrights registered for any part of the Owned
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 separate identifies all
agreements pursuant to which the Company has granted marketing rights in the
Company Software to third- parties. No employee of the Company is in default
under any term of any employment Contract, agreement or arrangement relating to
the Company Software or noncompetition arrangement, or any other Contract or
any restrictive covenant relating to the Company Software or its development or
exploitation. 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, written source code for the Owned Software for
the Company and
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identifies all Contracts and agreements pursuant to which such services were
performed. Other than as set forth in Schedule 3.16, the Owned Software was
developed entirely by the employees of the Company during the time they were
employees only of the Company and such Owned 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.
3.17 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 is 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 accrual 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 for any other period not so examined. 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 in all material respects. 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 nor has such waiver or consent
been requested by the IRS or any other taxing authority. 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
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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 Stockholders
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).
3.18 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 each of the Principal
Stockholders, 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) 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, except where non-compliance would not 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 December 31, 1997, and all Government
Communications as to which any unresolved issue remains.
3.19 Labor Relations. 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 each of the Principal
Stockholders, is there any present union organizing activity among any of its
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employees. To the knowledge of the Company and each of the Principal
Stockholders, there are no material controversies, claims, suits, actions or
proceedings pending or threatened between the Company and its employees. 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.
3.20 Xxxxxxxx; Customers. Except as set forth on Schedule 3.20, to
the knowledge of the Company and the Principal Stockholders (i) all xxxxxxxx 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) there are
no existing, threatened or suspected disputes, offsets or counterclaims
regarding any services rendered or xxxxxxxx to such customers. Neither the
Company nor any of the Principal Stockholders have 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.
3.21 Insurance. The Company maintains valid policies of workers'
compensation insurance, and of other insurance with respect to its properties
and business of the kinds and in the amounts not less than is customarily
obtained by corporations engaged in the same or similar business and similarly
situated, including, without limitation, insurance against loss, damage, fire,
theft, public liability, product liability and other risks. Schedule 3.21
lists all insurance policies of the Company, indicating the risks insured
against, carrier, policy number, amount of coverage (including deductible),
premiums and expiration dates. Except as set forth on Schedule 3.21, such
policies are in full force and effect and all premiums now due and owing with
respect to such policies have been paid in full, and the Company has not made
any borrowings or incurred any indebtedness, the collateral for which was any
of such policies. The Company is not in default in any material respect with
respect to any provision contained in any such policy and the Company has not
received any notice of cancellation or nonrenewal of any such policy. To the
knowledge of the Company and each of the Principal Stockholders, there are no
inaccuracies in any application for such policies or any state of facts that
might form the basis for termination of any such insurance. To the knowledge
of the Company and each of the Principal Stockholders, no event has occurred of
a type normally covered by insurance that is reasonably likely to form the
basis for any material claim against the Company not fully covered by the
policies referred to on Schedule 3.21 (except any applicable deductible).
3.22 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
require the affirmative consent or approval of any third-party.
3.23 Personnel. Schedule 3.23 contains (i) the names and addresses
of all directors, officers and management-level 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
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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.
3.24 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 Employee Benefits Plan is subject to Section 412
of the Code or 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). To the knowledge of the
Company and each of the Principal Stockholders, 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). No Employee Benefit Plan or related trust owns any
securities in violation of Section 407 of ERISA. 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 each of the Principal Stockholders, 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 each of the
Principal Stockholders, 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) of ERISA or Chapter 43 of the Code.
3.25 Accounts Receivable; Inventory. Except as set forth on
Schedule 3.25, the Company's accounts receivable as of the Closing represent
valid claims, and no counterclaims or offsetting claims with respect to such
receivables are pending or threatened, except for any amounts reserved in the
Company Financial Statements against such receivables for allowances and
discounts, and, to the knowledge of the Founding Stockholders, 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.
3.26 Compliance with Environmental Laws. Except as set forth in
Schedule 3.26 (i) the Company and all its operations are and have been in
compliance with all Environmental Laws as currently in effect except where such
noncompliance would not result in a Material
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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) 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) 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)
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.
3.27 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.
3.28 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") except for oral contracts
which involve the future payment of less than $5,000;
(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;
(g) agreement, note, debenture, loan, mortgage, indenture
or other obligation for or relating to borrowed money or commitments for
obtaining borrowed money;
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(h) Contract, lease or commitment which involves the
future payment by or to it of more than $5,000, 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) any material 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 stockholder, 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, enforceable in accordance with their
respective terms and in full force and effect, 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. Neither the Company nor,
to the knowledge of the Company and the Principal Stockholders, any other party
thereto is in breach of any provision of or in default under any term of any
material 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 made available to QuadraMed and Acquisition Co.
3.29 Customer Contracts. 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 3.29 (the "Customer Contract
Forms"). Except as described on Schedule 3.29 under the heading "Known
Contract Defaults" (i) each customer to which Owned Software has been licensed
pursuant to a specified Customer Contract and tendered or certified as
operational by the Company has accepted such software to the extent and on the
terms and conditions provided for in such specified Customer Contract, (ii) in
each case in which the specified Customer Contract pursuant to which Owned
Software is licensed incorporates response(s) by the Company to a request for
proposal by the customer, such software has met all material requirements set
forth in such response(s) and (iii) all performance warranties with respect to
Owned Software made by the Company in any specified Customer Contract,
including warranties with respect to capacity, availability, downtime and
response time, have been satisfied in all material respects upon the terms and
conditions and to the extent provided
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for in such specified Customer Contract. Except as noted on Schedule 3.29,
none of the Customer Contracts licensing Company Software contains any of the
following terms: (a) any term for acceptance of any Owned Software that fails
to specify a period of time or date for acceptance or standards applicable
thereto; (b) any provision granting the customer a right to a whole or partial
refund of fees previously paid upon the non-acceptance or failure of any Owned
Software to perform as warranted; (c) any provision obligating the Company to
indemnify a customer against consequential damages; (d) any commitment by the
Company to provide a hardware upgrade in response to or as a remedy for a
breach of any software-related response-time warranty unless the customer party
to the specified Customer Contract in which the commitment is made is required
to pay the cost of such upgrade and such costs are specified or described in
such Contract; (e) any material deviation from the provisions in the applicable
standard Contract regarding confidentiality of the Owned Software; (f) any
provision granting an ownership interest (other than a license) in any Owned
Software to a customer; (g) any license for use by more than a single entity of
any Owned Software unless the customer that is a party to such Customer
Contract has agreed to pay a fee or fees with respect to each entity's use
thereof; (h) any provision naming a customer as an insured on any policy of
insurance owned by the Company; (i) any joint product development agreement
with any other party; (j) any commitment or warranty made or given by the
Company to design or modify any Owned Software so as to comply with any
governmental regulations; or (k) any restrictions in any specified Customer
Contract on the ability of the Company to increase the fees for maintenance of
any Owned Software.
3.30 Related Party Relationships. Except as set forth on Schedule
3.30, no Stockholder owning greater than a five percent (5%) interest in the
Company, no affiliate or member of the immediate family of any such
Stockholder, 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 stockholder
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).
3.31 Material Misstatements or Omissions. The statements,
representations and warranties of the Company and the Principal Stockholders
contained in this Agreement (including the exhibits and schedules hereto) and
in each certificate or exhibit furnished or to be furnished by or on behalf of
the Company or each of the Founding Stockholders pursuant hereto, 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.
3.32 Investment Representations. Except as set forth on Schedule
3.32, each of the Founding Stockholders is an "accredited investor" within the
meaning of the Securities Act. Each of the Founding Stockholders 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
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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 Founding Stockholder satisfactory to QuadraMed and its counsel that
registration of such shares is not required. The Founding Stockholders will
not transfer the QuadraMed Shares in violation of the provisions of any
applicable federal or state securities laws. In this connection, each of the
Founding Stockholders represents that he or she is familiar with Rule 144
("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 Founding Stockholders
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 Founding Stockholders is
acquiring the QuadraMed Shares for his or her 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 Founding Stockholder represents that by reason
of his or her business and financial experience, and the business and financial
experience of those persons, if any, retained by such Founding Stockholder to
advise him or her with respect to his or her investment in the QuadraMed
Shares, such Founding Stockholder 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 Founding Stockholder are such that
he or she 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 or her investment in the QuadraMed Shares. Each Founding
Stockholder has carefully examined this Agreement and all exhibits and
schedules thereto and the QuadraMed SEC Filings. Each Founding Stockholder
acknowledges that QuadraMed has made available to such Founding Stockholder all
documents and information that he or she has requested relating to QuadraMed
and has provided answers to all of his or her questions concerning QuadraMed
and/or the QuadraMed Shares. In evaluating the suitability of the acquisition
of the QuadraMed Shares hereunder, no Founding Stockholder has 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.
3.33 Broker'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
the Company or the Stockholders 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.
ARTICLE IV.
COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
The Company and each of the Stockholders hereby jointly and severally
covenant and agree as follows:
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4.1 Further Efforts. Each of the Company and the Stockholders
agree to use diligent efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Merger and
the other transactions contemplated hereby in accordance with the terms of this
Agreement. In case at any time any further action is necessary or desirable to
carry out the purposes of this Agreement, each of the Company and the
Stockholders will use diligent efforts to effectuate all such action. As soon
as reasonably practicable after the date hereof, and in any event on or prior
to the Closing, each of the Company and the Stockholders will use reasonable
diligent efforts to obtain the consents of all necessary governmental entities
and other persons to the Merger; provided, however, that the Company will not,
without QuadraMed's prior written consent, pay any fees or other amounts to any
parties from whom such consents are required to be obtained.
4.2 Confidentiality. In the event of the termination of this
Agreement, the Company and its representatives and the Stockholders shall keep
all information with respect to QuadraMed which has been disclosed to the
Company pursuant to this Agreement confidential and shall promptly return to
QuadraMed all written information provided to the Company by QuadraMed.
4.3 Public Announcement. So long as this Agreement is in effect,
neither the Company, the Stockholders nor any of their Affiliates shall issue
or cause the issuance or the publication of any press release or any other
public announcement (including, without limitation, disclosure to employees)
with respect to the Merger or any other transaction contemplated by this
Agreement without the prior review and written consent of QuadraMed.
4.4 Conduct of Business. From and after the date of this
Agreement to and including the Effective Date, the Company shall and the
Stockholders shall cause the Company to: (i) carry on its businesses in all
material respects in the usual and ordinary course and will not change the
character of such businesses; (ii) use all reasonable efforts to preserve and
maintain each of its respective business organizations intact, to preserve each
of their respective goodwill, to retain its present employees and to maintain
its relationships with suppliers and customers so that all of them will be
preserved for the Surviving Corporation on and after the Effective Date; (iii)
not enter into any agreement or make any commitment without QuadraMed's prior
written consent to take any of the actions set forth in Section 3.11(a) through
(o), inclusive, of this Agreement; (iv) not become a party to or commit to
enter into any of the types of Contracts set forth in Section 3.28 of this
Agreement or required to be set forth on Schedule 3.28 without QuadraMed's
prior written consent; (v) not amend, terminate or change in any material
respect any Contract set forth on Schedule 3.28 without QuadraMed's prior
written consent and will not knowingly do any act or omit to do any act, or
permit an act or omission to act, that will cause it to breach any such
Contract; and (vi) not amend its Certificate of Incorporation or Bylaws. The
prohibitions provided for in this Section 4.4 shall not apply to actions in
connection with obtaining consent to assignment of Contracts to the Surviving
Corporation and/or QuadraMed effective as of the Closing.
4.5 Access and Information. The Company will grant access to
QuadraMed and its counsel, accountants and other representatives, during
reasonable working hours throughout the period from the date hereof to the
Closing and upon reasonable prior notice, to all of the
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Company and the Company's properties, books, Contracts, commitments and
records, and will furnish QuadraMed during such period with access to key
Company employees and to all such information concerning the affairs of the
Company as QuadraMed reasonably requests, including copies and/or extracts of
pertinent records, documents and Contracts. The Company will cause its
accountants to furnish to QuadraMed during such period any and all of its
statements, working papers and other records and data as QuadraMed reasonably
may request. No investigation by QuadraMed or its counsel, accountants and
other representatives as contemplated by this Section 4.5 shall affect any
representation or warranty given by the Company or the Stockholders under this
Agreement.
4.6 Financial Information. From and after the date hereof and
until the Closing, the Company will deliver to QuadraMed as soon as practicable
and in any event within fourteen (14) days after the end of each month, an
unaudited balance sheet of the Company as at the end of such month and
unaudited statements of operations and of cash flows of the Company for such
month and for the current fiscal year to the end of such month.
4.7 Subsequent Events. The Company shall promptly, and in any
event prior to the Closing, advise QuadraMed in writing of the occurrence of
any event or the existence of any state of facts which would render any
representation or warranty of the Company hereunder inaccurate or which would
preclude satisfaction of any condition contained in Article VII or Article VIII
of this Agreement; provided, however, that no such notification shall affect
any such representation, warranty or condition.
4.8 Updating Schedules. The Company and the Stockholders shall
supplement and update the schedules to the Agreement prior to the Closing Date
to the extent necessary to make them true, complete and accurate in all
material respects as of the Closing Date.
4.9 Exclusive Dealing. From the execution of this Agreement until
the Effective Date or the earlier termination of this Agreement, subject solely
to the exercise of their respective fiduciary duties, the Company and each of
the Stockholders will not directly or indirectly, through any representative or
otherwise, solicit or entertain offers from, negotiate with or in any manner
encourage, discuss, accept or consider any proposal of any other person
relating to the acquisition of the Company's capital stock, its assets or
business, in whole or in part, whether directly or indirectly, through
purchase, merger, consolidation or otherwise (other than sales of inventory in
the ordinary course), and will immediately notify QuadraMed in writing
regarding any contact between the Company, the Stockholders and any other
Person or their respective representatives regarding any such offer or proposal
or any related inquiry.
4.10 Termination of 401(k) Plan. Prior to or within sixty (60)
days of the Closing, the Company and the Founding Stockholders shall have
terminated the existing 401(k) Plan in a fashion which results in no continuing
liability with respect to the Surviving Corporation and QuadraMed and is
otherwise reasonably acceptable to counsel for QuadraMed and Acquisition Co.
Such termination activity shall include, without limitation, making provision
to satisfy all benefit liabilities, providing notices of such termination in
compliance with the Code and other applicable law to all covered employees, and
obtaining all necessary governmental or regulatory approvals for such
termination. In this regard, any benefit obligation that cannot be satisfied
from the assets of the 401(k) Plan shall be paid from the Company's assets on
or prior
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to the Closing or, if such assets are insufficient, after the Closing, shall be
paid by the Founding Stockholders (in proportion to their ownership of the
Company Common Stock); provided, however, that after the Closing, the Company
may, so long as the 401(k) Plan remains in existence, continue to make Company
matching contributions to the 401(k) Plan out of its assets in accordance with
past practice and the terms of such Plan. In no event shall those benefit
obligations constitute a liability of the Surviving Corporation or QuadraMed.
The Founding Stockholders shall severally (in proportion to their ownership of
the Company Common Stock) indemnify the Surviving Corporation and QuadraMed and
shall defend and hold the Surviving Corporation and QuadraMed (and any
Affiliate thereof) completely harmless on an after-tax basis, in the event the
IRS or the PBGC for any reason whatsoever seeks to claim, assess or collect
from the Surviving Corporation or QuadraMed (or any Affiliate) any deficiency
or assessment in federal income taxes (and any related penalties, additions to
tax and interests), or any other amounts attributable to the 401(k) Plan of the
Company. In the event that the IRS or the PBGC takes any action with respect
to the 401(k) Plan, the Founding Stockholders shall be entitled to conduct,
manage or control any audit, examination or adversarial proceeding by or
against the IRS or PBGC, employing counsel selected by them in their reasonable
discretion (provided that the Surviving Corporation and QuadraMed and their
counsel may, at their own expense, attend any and all meetings and proceedings
relating to any such action). The Founding Stockholders shall also cause to be
removed or abated any lien, levy or attachment upon the Surviving Corporation
or QuadraMed or their respective property and take any and all other steps
necessary to defend and hold the Surviving Corporation and QuadraMed (and any
Affiliate thereof) completely harmless on an after-tax basis, from any action
by the IRS or PBGC with respect to the 401(k) Plan.
4.11 Termination of Stockholders Agreement. That certain
Stockholders Agreement dated July 26, 1996 by and among the Company and the
Founding Stockholders (other than Xxxxx X. Xxxxxx) signing effective
immediately prior to the Closing this Agreement is hereby terminated in its
entirety and shall be of no further force or effect.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF QUADRAMED AND ACQUISITION CO.
QuadraMed and Acquisition Co. hereby jointly and severally represent
and warrant to the Company and the Stockholders as follows:
5.1 Organization and Good Standing. QuadraMed and Acquisition Co.
are both corporations duly organized, validly existing and in good standing
under the laws of the State of Delaware.
5.2 Authority. QuadraMed and Acquisition Co. have the necessary
corporate power and authority to enter into and deliver this Agreement, to
perform their 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 QuadraMed and
Acquisition Co. have been duly authorized by the Board of Directors of each of
QuadraMed and Acquisition Co. in accordance with applicable law. No further
corporate action will be necessary on the part of QuadraMed or Acquisition Co.
to make this Agreement
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valid and binding upon QuadraMed and Acquisition Co. in accordance with its
terms. This Agreement has been duly and validly authorized, executed and
delivered by 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 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). Except for filing the Certificate of Merger with the Delaware
Secretary of State, QuadraMed and Acquisition Co. are 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 QuadraMed and Acquisition Co. of this
Agreement or the consummation of the transactions contemplated herein.
5.3 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.
5.4 QuadraMed SEC Filings. The QuadraMed SEC Filings, copies of
which have been furnished to each of the Stockholders, 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.
5.5 Broker's Fees. There are no broker's or finder's fees or
obligations due to any Persons engaged by 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 VI.
COVENANTS OF QUADRAMED AND ACQUISITION CO.
QuadraMed and Acquisition Co. hereby jointly and severally covenant
and agree as follows:
6.1 Further Efforts. QuadraMed agrees to use diligent efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable
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under applicable laws and regulations to consummate and make effective the
Merger and the other transactions contemplated hereby in accordance with the
terms of this Agreement. In case at any time any further action is necessary
or desirable to carry out the purposes of this Agreement, QuadraMed and
Acquisition Co. will use diligent efforts to effectuate all such action. As
soon as reasonably practicable after the date hereof, and in any event on or
prior to the Closing, QuadraMed and Acquisition Co. will use reasonable
diligent efforts to obtain the consents of all necessary governmental entities
and other persons to the Merger.
6.2 Confidentiality. In the event of the termination of this
Agreement, QuadraMed and its representatives shall keep all information with
respect to the Company which has been disclosed to QuadraMed pursuant to this
Agreement confidential and shall promptly return to the Company all written
information provided to QuadraMed by the Company.
6.3 Public Announcement. So long as this Agreement is in effect,
QuadraMed shall not, and shall cause its Affiliates not to, issue or cause the
issuance or the publication of any press release or any other public
announcement (including, without limitation, disclosure to employees) with
respect to the Merger or any other transaction contemplated by this Agreement
without the prior review, and consultation with, the Company with respect to
such press release or other public announcement. Notwithstanding the
foregoing, the Company and the Stockholders acknowledge and agree that
QuadraMed may issue a press release regarding the execution of this Agreement
and may make any filings required pursuant to the Exchange Act, which document
shall be presented to the Company for review and comment prior to issuance or
filing.
ARTICLE VII.
GENERAL CONDITIONS PRECEDENT
The obligation of the parties to effect the transactions contemplated
by this Agreement and to take the other actions required to be taken by them at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions:
7.1 No Injunctions. No injunction or restraining or other order
issued by a court of competent jurisdiction which prohibits the consummation of
the transactions contemplated shall be in effect (each party agreeing to use
reasonably diligent efforts to have any such injunction or order lifted), and
no governmental action or proceeding shall have been commenced or threatened in
writing seeking any injunction or restraining or other order that seeks to
prohibit, restrain, invalidate or set aside consummation of the transactions
contemplated by this Agreement.
7.2 No Governmental Proceedings. No action will have been taken,
and no statute, rule or regulation will have been enacted, by any state or
federal government agency that would render the consummation of the Merger
illegal.
7.3 Governmental Approvals. All governmental filings or approvals
required in connection with the consummation of the transactions contemplated
by this Agreement, including, without limitation, compliance with all
applicable federal and state securities laws, shall have been made or received.
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ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATION
OF QUADRAMED AND ACQUISITION CO. TO CLOSE
The obligation of QuadraMed and Acquisition Co. to effect the
transactions contemplated by this Agreement and to take the other actions
required to be taken by QuadraMed and Acquisition Co. at the Closing is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by QuadraMed or Acquisition Co., in
whole or in part):
8.1 Accuracy of Representations and Warranties. All of the
representations and warranties of the Company and the Founding Stockholders in
this Agreement, considered collectively, and each of such representations and
warranties, considered individually, must be accurate in all material respects
when made, and as of the Closing as if made on the Closing.
8.2 Performance. All of the covenants and obligations that the
Company and the Stockholders are required to perform or to comply with pursuant
to this Agreement at or prior to the Closing, including, without limitation,
those contained in Section 2.12 above, considered collectively, and each of
these covenants and obligations, considered individually, must have been
performed and complied with in all material respects.
8.3 Closing Certificate. QuadraMed and Acquisition Co. shall have
received from the Company a certificate, dated as of the Closing, certifying
that the conditions specified in Sections 8.1 and 8.2 above have been
fulfilled.
8.4 Opinion of Counsel. QuadraMed and Acquisition Co. shall have
received an opinion, dated as of the Closing, of Dechert Price & Xxxxxx,
counsel for the Company and the Stockholders, in form and substance reasonably
acceptable to counsel for QuadraMed and Acquisition Co.
8.5 Approval of Final Schedules. QuadraMed and Acquisition Co.
shall have approved in their sole and absolute discretion any material changes
or updates to the schedules to this Agreement made by the Company and the
Stockholders between the date of this Agreement and the Closing Date.
8.6 No Claims. There must not have been made or threatened by any
Person (other than a Stockholder) any claim asserting that such Person is the
holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any capital stock of, or any other voting, equity or
ownership interest in the Company or is entitled to all or any portion of the
Closing Consideration.
8.7 No Proceedings. No action, suit or proceeding shall be
pending or threatened against the Company or any of the Stockholders before any
court or quasi-judicial or administrative agency of any federal, state, local
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would prevent
consummation of any of the transactions contemplated by this Agreement or cause
any
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of the transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect).
8.8 No Material Adverse Effect. The Company shall not have
experienced any Material Adverse Effect, including, without limitation, a
Material Adverse Effect resulting from unfavorable general economic conditions
affecting the healthcare consulting and software industry as a whole.
8.9 Proceedings Satisfactory to Counsel. All proceedings taken by
the Company and the Stockholders and all instruments executed and delivered by
the Company and the Stockholders on or prior to the Closing in connection with
the transactions contemplated herein shall be reasonably satisfactory in form
and substance to the counsel for QuadraMed and Acquisition Co.
ARTICLE IX.
CONDITIONS PRECEDENT TO OBLIGATION OF
THE COMPANY AND THE STOCKHOLDERS TO CLOSE
The obligation of the Company and the Stockholders to effect the
transactions contemplated by this Agreement and to take the other actions
required to be taken by the Company and the Stockholders at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Company and the
Stockholders, in whole or in part):
9.1 Accuracy of Representations and Warranties. 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, must be accurate in all material respects
when made, and as of the Closing as if made on the Closing.
9.2 Performance. 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 Section 2.13 above, considered collectively, and
each of these covenants and obligations, considered individually, must have
been performed and complied with in all material respects.
9.3 Closing Certificate. The Company and the Stockholders shall
have received from QuadraMed and Acquisition Co. a certificate, dated as of the
Closing, certifying that the conditions specified in Sections 9.1 and 9.2 above
have been fulfilled.
9.4 Opinion of Counsel. The Company and the Stockholders shall
have received an opinion, dated as of the Closing, of Xxxxxx Xxxxxx Xxxxxxx
XxXxxxxx Xxxxxx & Fognani, L.L.P., counsel for QuadraMed and Acquisition Co.,
in form and substance reasonably acceptable to counsel for the Company and the
Stockholders.
9.5 No Material Adverse Effect. QuadraMed and Acquisition Co.
shall not have experienced any Material Adverse Effect, including, without
limitation, a Material Adverse
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Effect resulting from unfavorable general economic conditions affecting the
healthcare consulting and software industry as a whole.
9.6 Proceedings Satisfactory to Counsel. All proceedings taken by
QuadraMed and Acquisition Co. and all instruments executed and delivered by the
QuadraMed and Acquisition Co. on or prior to the Closing in connection with the
transactions contemplated herein shall be reasonably satisfactory in form and
substance to the counsel for Company and the Stockholders.
ARTICLE X.
POST-CLOSING COVENANTS
The parties hereby agree as follows with respect to the period
following the Closing:
10.1 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 and the
seeking of any necessary third party consents or approvals) 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 XI below).
10.2 Company Employees. QuadraMed and Acquisition Co. shall have
no obligation to continue employment of any of the employees of the Company
from and after the Closing Date. The Company and the Stockholders agree to
refrain from making any statements or communications to its employees regarding
subsequent employment by QuadraMed and Acquisition Co. without their prior
written consent. Any employees of the Company that QuadraMed and Acquisition
Co. shall elect to hire in connection with the transactions contemplated by
this Agreement shall promptly execute and deliver to QuadraMed and Acquisition
Co. the QuadraMed standard form Proprietary Information Agreement, and such
employees shall be included in QuadraMed's standard employee benefit plans.
10.3 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 Section 10.3. 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 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
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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.
10.4 Further Actions. No party shall take any action that would
cause the Merger to fail to be treated as a reorganization under Section
368(a)(1)(A) of the Code.
10.5 Directors' and Officers' Indemnification. QuadraMed and
Acquisition Co. shall cause the Company to indemnify and hold the past and
existing directors and officers of the Company harmless from and against, to
the maximum extent provided for by the Certificate of Incorporation and the
Bylaws of the Surviving Corporation, any and all losses, claims, damages,
liabilities (or actions or proceedings with respect to any thereof) or expenses
to which, jointly or severally, any such officer or director may be subject,
which arise out of or are based upon such officer's or director's service or
status as an officer or director of the Company prior to the Closing Date, for
a period of three (3) years after the Closing Date; provided, that such period
of indemnification shall be extended for the duration of any and all actions or
proceedings with respect to any claim for indemnification made prior to the
expiration of such three (3) year period.
ARTICLE XI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties.
(a) Representations and Warranties of Company and
Stockholders. All representations, warranties and covenants of either the
Company or the Stockholders 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 one
(1) year from the date of 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 terminate as of the earlier of
the termination of this Agreement in accordance with its terms or the Closing.
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 and Acquisition Co. delivers shares of QuadraMed Common Stock in
connection with such a breach.
11.2 Indemnification by Founding Stockholders.
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(a) Each of the Founding Stockholders will severally (in
proportion to their ownership of shares of the Company's Common Stock)
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 any misrepresentation or breach of or default with respect to
(i) any of the representations, warranties and covenants given or made by the
Company or the Stockholders in this Agreement, or any exhibit or schedule
hereto or any certificate delivered by or on behalf of the Company and the
Stockholders pursuant hereto, or (ii) the obligations of the Founding
Stockholders to terminate the 401(k) Plan as set forth in Section 4.10 above.
(b) Notwithstanding the foregoing, the Stockholders shall
have no liability with respect to the matters described in paragraph (a) above
unless and until the aggregate amount of Losses equals or exceeds $150,000 (the
"Threshold Amount"). Any individual Loss of $2,500 or less shall not be taken
into account in determining whether the Threshold Amount has been equaled or
exceeded. At such time as the aggregate Losses equal or exceed 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 equal or exceed the Threshold Amount); provided, however, that
this paragraph shall not apply to any intentional or fraudulent breach by
either the Company or any Stockholder of any representation, warranty, covenant
or obligation. The maximum liability of each Founding Stockholder pursuant to
this Article XI shall not exceed his or her entire portion of the Merger
Consideration.
(c) The amount of any Losses incurred by a party pursuant
to this Article XI shall be reduced by (i) the actual tax benefit realized with
respect to payment of all or any portion of such Losses by the indemnified
party and (ii) the amount of any insurance proceeds actually paid to such
indemnified party as reimbursement for such Losses.
(d) As additional security for their obligation to
indemnify QuadraMed and Acquisition Co. hereunder, the Company and the
Stockholders hereby grant to QuadraMed and Acquisition Co. a right of set-off
and agree that at any time a payment or amount is owing by either the
Stockholders or the Company pursuant to the terms of this Article XI, or either
QuadraMed or Acquisition Co. has made a claim for indemnification pursuant to
the terms of this Article XI, QuadraMed and Acquisition Co. may set-off, or
direct the other party to set-off, amounts owing by either QuadraMed or
Acquisition Co. to any of the Stockholders. QuadraMed and Acquisition Co.
shall first recover any Losses pursuant to this Article XI by means of set-off
against any amounts of Earn-Out payments actually earned hereunder, and,
thereafter, or in the absence thereof, QuadraMed and Acquisition Co. shall be
entitled to recover further Losses in any fashion permitted by applicable law.
11.3 Indemnification by QuadraMed and Acquisition Co. QuadraMed
and Acquisition Co. will indemnify and hold harmless the Company and each of
the Stockholders and their respective Indemnified Persons from and against any
and all Losses arising out of or
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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.
11.4 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
13.3 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 XI 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 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.
11.5 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 11.4 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.
11.6 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
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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.
11.7 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 11.4 above, or in
connection with any other Losses which the indemnified party deems to be within
the ambit of this Article XI), the indemnified party shall give, in accordance
with the terms of Section 13.3 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.
11.8 Certificate of Incorporation and Bylaws. Notwithstanding
anything to the contrary contained in the Certificate of Incorporation or
Bylaws of the Company or the Surviving Corporation, the indemnification
provisions of this Article XI shall negate any protection provided by such
Certificate of Incorporation or Bylaws. Accordingly, no Stockholder nor any
other director or officer incumbent at any time prior to the Closing shall be
entitled to indemnification directly or indirectly under the Certificate of
Incorporation or Bylaws of the Company or the Surviving Corporation or
otherwise for any matter upon which the Company or any Stockholder has or might
have an indemnification obligation hereunder and such Certificate of
Incorporation and Bylaws shall be deemed amended accordingly. However, the
provisions of this Section 11.8 are intended only for the regulation of
relations between the Company and the Stockholders and any indemnified party.
This Section 11.8 is not intended for the benefit of creditors or other
third-parties and does not grant any rights to creditors or other
third-parties.
11.9 Exclusivity. Each party hereby acknowledges and agrees that
the indemnity obligations set forth above shall be the exclusive remedy of each
party with respect to the transactions contemplated hereby other than with
respect to fraud or willful misconduct of any other party.
ARTICLE XII.
TERMINATION
12.1 Termination. This Agreement and the Merger contemplated
hereby may be terminated at any time prior to the Closing, whether before or
after approval of this Agreement and the Merger by the Stockholders, as
follows, and in no other manner:
(a) by mutual written consent of QuadraMed and the
Company;
(b) by QuadraMed or the Company if any of the conditions
set forth in Article VII shall not have been satisfied as of the date of the
Closing;
(c) by QuadraMed if any of the conditions set forth in
Article VIII shall not have been satisfied as of the date of the Closing;
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(d) by the Company if any of the conditions set forth in
Article IX shall not have been satisfied as of the date of the Closing; or
(e) by either QuadraMed or the Company if the Closing
shall have not been consummated on or before February 4, 1998; provided,
however, that with respect to paragraphs (b) through (d) above, that the
terminating party has complied with or performed or tendered performance of all
covenants and agreements, and satisfied all conditions contained herein which
are to be complied with, performed or satisfied by such party immediately prior
to or at the Closing; provided, further, that a party shall promptly notify the
other parties hereto in writing if it becomes aware of circumstances which
would cause such other party to breach or be unable to comply with or perform
the conditions set forth in Article VII, VIII or IX as is appropriate.
12.2 Effect of Termination. In the event that this Agreement is
terminated pursuant to Section 12.1 above, all further obligations of the
parties hereto under this Agreement shall terminate without further liability
of any party to another, and each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance of and compliance with all agreements and conditions contained
herein or therein on its part to be performed or complied with, including the
fees, expenses and disbursements of its counsel; provided, however, that the
obligations of the Company contained in Section 4.2 above and the obligations
of QuadraMed and Acquisition Co. contained in Section 6.2 above shall survive
any such termination; and provided, further, that nothing herein shall relieve
any party of any liability with respect to or arising out of any willful breach
of its obligations, covenants or agreements hereunder and such termination
shall not constitute an election of remedies nor limit the non-breaching
parties from pursuing whatever rights and remedies they may have at law, in
equity or otherwise.
12.3 Waiver of Conditions. If any of the conditions specified in
Article VII above have not been satisfied, QuadraMed and the Company may
nevertheless mutually agree to proceed with the transactions contemplated
hereby. If any of the conditions specified in Article VIII above have not been
satisfied, QuadraMed and Acquisition Co. may nevertheless at the election of
QuadraMed and Acquisition Co. proceed with the transactions contemplated
hereby. If any of the conditions specified in Article IX above have not been
satisfied, the Company and the Stockholders may nevertheless at the election of
the Company and the Stockholders proceed with the transactions contemplated
hereby.
12.4 Payment of Expenses. The Founding Stockholders (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. Notwithstanding the foregoing, the Company may pay all the
fees and expenses of its accountants incurred in connection with the
transactions
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contemplated hereby. In addition, the costs and expenses incurred by the
Company and the Stockholders in connection with the transactions contemplated
hereby may be paid from the Company's corporate funds up to a maximum of
$25,000. The Founding Stockholders agree to share, pro rata in accordance with
their ownership of Company Common Stock, the costs and expenses (such as legal
and advisory fees and expenses) incurred in connection with the transactions
contemplated hereby that are not borne by the Company. Neither QuadraMed,
Acquisition Co. nor the Company will be obligated to any person for any
finder's or broker's fee in connection with the proposed Merger.
ARTICLE XIII.
GENERAL
13.1 Amendments. Subject to applicable law, this Agreement, 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.
13.2 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.
13.3 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/Acquisition Co.: QuadraMed Corporation
Attention: Xxxxx X. Xxxxxxx, Esq.
00 Xxxx Xxx Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 0X
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With a required copy to: Xxxxxx Xxxxxx Xxxxxxx XxXxxxxx
Xxxxxx & Fognani, L.L.P.
Attention: Xxxxxx X. Xxxxxx, Esq.
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
If to the Company/Stockholders: Cabot Xxxxx Corporation
Attention: Xxxxxx X. Xxxxx, Esq.
The Atrium, 00 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
With a required copy to: Dechert Price & Xxxxxx
Attention: Xxxxxx X. Xxxxxx, Esq.
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
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13.4 Further Assurances. QuadraMed and Acquisition Co., on the one
hand, and the Company or the Stockholders, 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.
13.5 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.
There are no representations or warranties by or on behalf of any party hereto
or any of its respective Affiliates or representatives other than those
expressly set forth in this Agreement.
13.6 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.
13.7 Governing Law. This Agreement shall be construed by and
enforced in accordance with the laws of the State of Delaware without giving
effect to the principles of the conflicts of laws. The parties hereby agree
that the jurisdiction and venue for any controversy arising out of the terms of
this Agreement or breach thereof shall be in the appropriate federal or state
court of the states of California, Pennsylvania or Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
QUADRAMED QUADRAMED CORPORATION
By: /s/ XXXXX X. XXXXXX
------------------------------------------
Name: Xxxxx X. Xxxxxx
----------------------------------------
Title: Chairman of the Board, Chief Executive
Officer and President
---------------------------------------
ACQUISITION CO. CMC ACQUISITION CORPORATION
By: /s/ XXXXX X. XXXXXX
------------------------------------------
Name: Xxxxx X. Xxxxxx
----------------------------------------
Title: President
---------------------------------------
COMPANY CABOT XXXXX CORPORATION
By: /s/ XXXXXXX XXXXX
------------------------------------------
Name: Xxxxxxx Xxxxx
----------------------------------------
Title: Chief Executive Officer
---------------------------------------
STOCKHOLDERS
/s/ XXXXXXX XXXXX
---------------------------------------------
Xxxxxxx Xxxxx
/s/ XXXXXX X. XXXXX
---------------------------------------------
Xxxxxx X. Xxxxx
/s/ XXXXX X. XXXXXX
---------------------------------------------
Xxxxx X. Xxxxxx
/s/ XXXXXXX X. XXXXXXX
---------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ XXXXXXXXXXX X. XXXXXXXX
---------------------------------------------
Xxxxxxxxxxx X. Xxxxxxxx
[SIGNATURE PAGE TO ACQUISITION AGREEMENT AND PLAN OF MERGER]
47
EXHIBIT "A"
CERTIFICATE OF MERGER
48
EXHIBIT "B"
EMPLOYMENT AGREEMENT
49
EXHIBIT "C"
NON-COMPETITION AND NON-INTERFERENCE AGREEMENT
50
EXHIBIT "D"
RELEASE
