1
EXHIBIT 2.1
ACQUISITION AGREEMENT AND PLAN OF MERGER
BY AND AMONG
QUADRAMED CORPORATION, PRO INTERMED ACQUISITION CORPORATION,
AND
PRO INTERMED, INC., ITS SHAREHOLDERS AND OPTIONEE
DATED
MARCH 29, 1999
2
ACQUISITION AGREEMENT AND PLAN OF MERGER
This Acquisition Agreement and Plan of Merger (the "Agreement") is
dated March 29, 1999 by and among QuadraMed Corporation, a Delaware corporation
("QuadraMed"), and Pro Intermed Acquisition Corporation, a Delaware corporation
("Acquisition Co."), on the one hand, and Pro Intermed, Inc., a California
corporation (the "Company"), Xxxx Xxxxx, Xxxx Xxxxxx, Xxxxxxx X. Xxxxxx and The
Xxxxxx Children's Non-Revocable Trust dated January 1, 1993, who are all of the
shareholders of the Company (the "Shareholders"), and Xxxxx X. Xxxxxxx, who is
the holder of the Options (as defined below) to purchase Common Stock of the
Company (the "Optionee"), on the other hand.
WHEREAS, QuadraMed is a duly incorporated Delaware corporation engaged
in the business of developing, marketing and selling software products and
consulting services to healthcare providers and payors.
WHEREAS, Acquisition Co. is a duly incorporated Delaware corporation
formed by QuadraMed for the purpose of the Merger (as defined below)
contemplated by this Agreement, with authorized capital stock consisting of
1,000 shares of Common Stock, $0.001 par value, of which all 1,000 shares are
duly and validly issued and outstanding and owned by QuadraMed.
WHEREAS, the Company is a duly incorporated California corporation
engaged in the healthcare consulting and receivables management business, with
authorized capital stock consisting of 1,000,000 shares of Common Stock, no par
value, of which 95,000 shares are duly and validly issued, outstanding and
entitled to vote as of the date hereof.
WHEREAS, the Shareholders and the respective Boards of Directors of
QuadraMed, Acquisition Co. and the Company have approved the acquisition of the
Company by Acquisition Co. via merger (the "Merger") of Acquisition Co. with and
into the Company pursuant to the terms of this Agreement and in a transaction
intended to qualify as a tax-free reorganization under Section 368(a) of the
Code (as defined below).
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by each signatory hereto, it is agreed as
follows:
ARTICLE I.
DEFINITIONS
3
As used in this Agreement, the following terms shall have the following
meanings:
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 "California Code" shall mean the California Corporations Code, as
amended.
1.4 "Closing" shall mean the closing of the transactions contemplated
in this Agreement.
1.5 "Closing Consideration" shall mean the consideration to be paid to
the Shareholders and the Optionee (assuming his partial exercise of the Options)
pro rata at the Closing, payable in newly-issued shares of QuadraMed Common
Stock (as defined below), the number of which will equal (i) 660,000 shares if
the Daily Price (as defined below) per share of QuadraMed Common Stock for the
trading day immediately preceding the Closing Date (as defined below) is Ten
Dollars ($10.00) or less, (ii) 550,000 shares if the Daily Price per share of
QuadraMed Common Stock for the trading day immediately preceding the Closing
Date is Twelve Dollars ($12.00) or more or (iii) the pro rata share amount if
the Daily Price per share of QuadraMed Common Stock for the trading day
immediately preceding the Closing Date is between Ten Dollars and One Cent
($10.01) and Eleven Dollars and Ninety-Nine Cents ($11.99).
1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and all regulations promulgated thereunder.
1.7 "Company Common Stock" shall mean all of the issued and outstanding
Common Stock of the Company, no par value, all of which shares are held by the
Shareholders as of the date hereof.
1.8 "Company Financial Statements" shall mean the unaudited balance
sheets of the Company as of December 31, 1998 for the twelve (12) month period
then ended and as of February 28, 1999 for the two (2) month period then ended,
and the related statements of operations, shareholders' equity and cash flows
for the periods then ended.
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.
4
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,
as amended.
1.12 "Effective Date" shall mean the date and time the Agreement of
Merger (as defined below) is filed with the California Secretary of State and
the Certificate of Merger (as defined below) is filed with the Delaware
Secretary of State.
1.13 "Employee Benefit Plan(s)" shall mean any "employee benefit plan"
as defined in Section 3(3) of ERISA (as defined below) and any other plan,
policy, program, practice or arrangement providing compensation or other
benefits to any current or former officer or employee of the Company or any
beneficiary or dependent thereof that is or was maintained by the Company.
1.14 "Encumbrances" shall mean any mortgage, chattel mortgage,
conditional sales Contract, pledge, liability, lien, charge, security interest,
encumbrance, option, lease, license, easement or similar interest.
1.15 "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.
1.16 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all regulations promulgated thereunder.
1.17 "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended.
1.18 "GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.
1.19 "Government Communications" shall mean all written inspection
reports, complaints and other communications received by the Company from
government and
5
regulatory agencies and authorities or oral communications received by officers
of the Company.
1.20 "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
properties) and radon, ureaformaldehyde, polychlorinated biphenyls, asbestos or
asbestos- containing materials, petroleum and petroleum products.
1.21 "Intellectual Property" shall mean all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof,
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, copyrightable works, all
copyrights and all applications, registrations and renewals in connection
therewith, mask works and all applications, registrations and renewals in
connection therewith, trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), proprietary
software, other proprietary rights and copies and tangible embodiments thereof
(in whatever form or medium).
1.22 "IRS" shall mean the United States Internal Revenue Service or any
successor entity.
1.23 "Knowledge" shall mean that an individual will be deemed to have
Knowledge of a particular fact or other matter if such individual is actually
aware of such fact or other matter or a reasonably prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter. The Company will be deemed to have
Knowledge of a particular fact or other matter if any director or executive
officer of the Company has, or at any time had, Knowledge of such fact or other
matter. For purposes of this Agreement, Xxxx Xxxxxx and Xxxxxxx X. Xxxxxx are
the executive officers of the Company.
1.24 "Licenses" shall mean all material governmental licenses, permits,
6
approvals and registrations necessary for the ownership of the Company
properties and the conduct of its business as currently conducted.
1.25 "Material Adverse Effect" shall mean any material adverse effect
on the business, assets, properties, operations or condition (financial or
otherwise) of the Company.
1.26 "Options" shall mean the options to purchase an aggregate of
16,765 shares of Company Common Stock pursuant to the terms of that certain
Stock Option Agreement dated September 1, 1998 by and between the Company and
Xxxxx X. Xxxxxxx (the "Xxxxxxx Option Agreement").
1.27 "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.
1.28 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.29 "QuadraMed Common Stock" shall mean the shares of Common Stock of
QuadraMed, $0.01 par value.
1.30 "QuadraMed SEC Filings" shall mean any and all documents, reports
and other filings made by QuadraMed with the SEC (as defined below), including,
without limitation, 1997 Annual Report to Stockholders, Form 10-K/A-1 for the
fiscal year ended December 31, 1997, Form 10-Q for the period ended March 31,
1998, Form 8-K dated April 13, 1998, Amendment No. 4 to Form S-4 Registration
Statement dated April 24, 1998, Amendment No. 4 to Form S-3 Registration
Statement dated April 24, 1998, Form 8-K dated May 4, 1998, Proxy
Statement/Prospectus for the Special Meeting of Stockholders of Medicus Systems
Corporation held on May 27, 1998, Form 8-K dated May 27, 1998, Notice and Proxy
Statement for the Annual Meeting of Stockholders held on May 28, 1998, Form 8-K
dated June 1, 1998, Form S-3 Registration Statement dated June 1, 1998, Form S-8
Registration Statement dated June 5, 1998, Schedule 13G dated June 5, 1998,
Amendment No. 1 to Form S-3 dated June 17, 1998, Amendment No. 1 to Form 8-K
dated June 17, 1998, Schedule 13D dated June 22, 1998, Amendment to Schedule 13G
dated July 9, 1998, Form 8-K dated August 31, 1998, Form 8-K dated September 30,
1998, Schedule 13D dated October 13, 1998, Form S-3 Registration Statement dated
November 4, 1998, Form 10-Q for the period ended September 30, 1998 and Form 8-K
dated February 3, 1999 and Press Release dated February 18, 1999.
1.31 "QuadraMed Shares" shall mean the shares of QuadraMed Common Stock
issuable as a portion of the Closing Consideration.
1.32 "Real Property" shall mean all of the land, buildings, plants,
facilities, installations, fixtures and other structures and improvements leased
to the Company
7
pursuant to the Real Property Leases (as defined below).
1.33 "Real Property Leases" shall mean, collectively, any written real
property leases to which the Company is a party.
1.34 "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.
1.35 "SEC" shall mean the United States Securities and Exchange
Commission, or any successor entity.
1.36 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.37 "Surviving Corporation" shall mean the Company as the surviving
corporation following the Merger.
1.38 "Tax(es)" shall mean all taxes, charges, fees, levies or other
assessments of any nature whatsoever (including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever) together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority (domestic or foreign) upon the Company to which reference
is being made or any Affiliate thereof or upon any consolidated, combined or
unitary group of which any such entity is or was a member.
1.39 "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 California Code and the Delaware
Code. At the Effective Date, subject to the terms and conditions of this
Agreement and in accordance with the laws of the California and Delaware,
Acquisition Co. shall be merged with and into the Company, 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 Shareholders, be cancelled and
8
converted into the right to receive a ratable portion of the Closing
Consideration upon surrender at the Closing of the certificates representing
such shares. At the Effective Date, all rights in respect of such Company Common
Stock shall cease to exist, other than the right to receive the Closing
Consideration and all such shares shall be cancelled and retired. Until
surrendered, each outstanding certificate which prior to the Effective Date
represented issued and outstanding Company Common Stock shall be deemed for all
corporate purposes to evidence the right to receive such amounts. Each share of
Company Common Stock held in the Company's treasury immediately prior to the
Effective Date shall, by virtue of the Merger, be cancelled and retired and
cease to exist, without any conversion thereof.
2.3 Acquisition Co. Common Stock. Each share of Acquisition Co. Common
Stock issued and outstanding immediately prior to the Effective Date shall, by
virtue of the Merger and without any action on the part of QuadraMed, be
converted into such number of newly-issued shares of the Common Stock of the
Surviving Corporation equal to the number of shares of Acquisition Co. Common
Stock then outstanding.
2.4 Company Stock Options. At the Closing, the Options shall be
converted into and become identical rights with respect to QuadraMed Common
Stock and QuadraMed shall assume each such Option in accordance with the terms
of the Xxxxxxx Option Agreement, except that (i) the number of shares of
QuadraMed Common Stock issuable upon exercise of the Options shall be equal to
that number of shares issuable to the Optionee under the Closing Consideration
as if the Optionee had exercised the Options immediately prior to the Closing
and (ii) the exercise price per share for each Option shall be equal to the
quotient obtained by dividing the exercise price per share for each Option by
the quotient obtained by dividing the aggregate number of QuadraMed Shares
delivered as the Closing Consideration by the number of shares of Company Common
Stock outstanding immediately prior to the Effective Date (assuming partial
exercise of the Options); provided that such exercise price shall be rounded
down to the nearest cent.
2.5 Execution of Agreement of Merger and Certificate of Merger. At the
Closing, the parties shall complete and execute the Agreement of Merger,
substantially in the form attached hereto as Exhibit "A" and incorporated herein
by this reference (the "Agreement of Merger"), and the Company shall complete
and execute the Certificate of Merger, substantially in the form attached hereto
as Exhibit "B" and incorporated herein by this reference (the "Certificate of
Merger"), and counsel for QuadraMed and Acquisition Co. shall cause the
Agreement of Merger to be delivered to the California Secretary of State for
filing as provided in Section 1103 of the California Code and the Certificate of
Merger to be delivered to the Delaware Secretary of State for filing as provided
in Section 252 of the Delaware Code. The parties hereto will also execute and
deliver such other documents or certificates as may be required to effect the
Merger.
2.6 Effect of the Merger. The Merger shall have the effects set forth
in
9
Section 1107 of the California Code and Section 259 of the Delaware Code.
2.7 Articles of Incorporation; Bylaws. As of the Effective Date, the
Articles of Incorporation of the Company, as amended by the Agreement of Merger,
shall be the Articles of Incorporation of the Surviving Corporation, and the
Bylaws of the Company shall be the Bylaws of the Surviving Corporation.
2.8 Directors. The directors of Acquisition Co. as of the Effective
Date shall be the directors of the Surviving Corporation and shall hold office
from the Effective Date until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of Incorporation
and Bylaws of the Surviving Corporation, or as otherwise provided by law.
2.9 Officers. The officers of Acquisition Co. as of the Effective Date
shall be the officers of the Surviving Corporation and shall hold office from
the Effective Date until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of Incorporation
and Bylaws of the Surviving Corporation, or otherwise provided by law.
2.10 Closing. The Closing of the transactions contemplated by this
Agreement shall take place at such time as may mutually be agreed to by the
parties (the "Closing Date") either by facsimile (with original signature pages
to immediately follow by overnight courier) or at the principal executive
offices of QuadraMed, 0000 Xxxx Xxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000.
2.11 Closing Obligations of Company and the Shareholders. At the
Closing, the Company and the Shareholders shall deliver or cause to be delivered
to QuadraMed and Acquisition Co.:
(a) the original certificates representing the shares of
Company Common Stock owned by the Shareholders, duly endorsed in blank (or
accompanied by duly executed stock powers) and an executed exercise notice from
the Optionee exercising part of the Options, accompanied by payment therefor;
(b) the Agreement of Merger executed by the Company, each of
the Shareholders and the Optionee and the Certificate of Merger executed by the
Company;
(c) the legal opinion, dated as of the Closing, of Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP, counsel for the Company and the Shareholders,
substantially in the form attached hereto as Exhibit "C" and incorporated herein
by this reference;
(d) 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
10
the Articles of Incorporation and Bylaws of the Company, each as amended;
(e) written resolutions of the Shareholders and Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement, certified by the Secretary of the Company;
(f) the Employment Agreements, substantially in the form
attached hereto as Exhibit "D" and incorporated herein by this reference (the
"Employment Agreements"), executed by each of Xxxxx X. Xxxxxxx, Xxxx Xxxxxx and
Xxxxxxx X. Xxxxxx;
(g) the Non-Competition and Non-Interference Agreements,
substantially in the form attached hereto as Exhibit "E" and incorporated herein
by this reference (the "Non-Competition Agreements"), executed by each of Xxxxx
X. Xxxxxxx, Xxxx Xxxxxx and Xxxxxxx X. Xxxxxx;
(h) the Escrow Agreement, substantially in the form attached
hereto as Exhibit "F" and incorporated herein by this reference (the "Escrow
Agreement"), executed by each of the Shareholders and the Optionee;
(i) the Release, substantially in the form attached hereto as
Exhibit "G" and incorporated herein by this reference, executed by each of the
Shareholders;
(j) the Registration Rights Agreement (as defined below)
executed by each of the Shareholders and the Optionee;
(k) resignation letters of each of the officers and directors
of the Company dated effective as of the Closing;
(l) written evidence that all necessary third party consents
or approvals identified in Schedule 3.8 shall have been obtained on or prior to
the Closing;
(m) a certificate of good standing for the Company issued by
the California Secretary of State not more than ten (10) days prior to the
Closing Date; and
(n) 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.
2.12 Closing Obligations of QuadraMed and Acquisition Co. At the
Closing, QuadraMed and Acquisition Co. shall deliver or cause to be delivered to
the Company, the Shareholders and the Optionee:
(a) the Closing Consideration;
(b) the Agreement of Merger executed by QuadraMed and
Acquisition
11
Co.;
(c) the legal opinion, dated as of the Closing, of Xxxxxx
Xxxxxx Xxxxxxx XxXxxxxx Xxxxxx & Fognani, L.L.P., counsel for QuadraMed and
Acquisition Co., substantially in the form attached hereto as Exhibit "H" and
incorporated herein by this reference;
(d) a certificate of the Secretary of each of QuadraMed and
Acquisition Co. attesting to the incumbency of the officers executing the
Agreement and the other agreements and certificates delivered by each of
QuadraMed and Acquisition Co., respectively, at the Closing;
(e) written resolutions or minutes of the sole stockholder of
Acquisition Co. and 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;
(f) the Employment Agreements, executed by QuadraMed;
(g) the Non-Competition Agreements, executed by each of
QuadraMed and the Surviving Corporation;
(h) the Escrow Agreement, executed by QuadraMed;
(i) the Registration Rights Agreement executed by QuadraMed;
(j) a certificate of good standing for each of QuadraMed and
Acquisition Co. issued by the Delaware Secretary of State not more than ten (10)
days prior to the Closing Date; and
(k) such other documents as may be reasonably requested by
counsel for the Company and the Shareholders as necessary to consummate the
transactions contemplated by this Agreement.
2.13 Private Placement. The QuadraMed Shares to be issued to the
Shareholders pursuant to this Agreement will be exempt from registration
requirements of the Securities Act pursuant to the private placement exemption
provided by Rule 505 and/or 506 of Regulation D promulgated under the Securities
Act and/or Section 4(2) of the Securities Act, and applicable state securities
laws. Each of the Shareholders and the Optionee hereby agrees to take all
actions and execute all subscription and other documents to qualify issuance of
the QuadraMed Shares for such exemptions.
2.14 Tax Consequences. It is intended that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for purposes of Section
368 of the Code.
12
2.15 Pooling of Interests. The parties intend that the Merger be
treated as a "pooling of interests" for accounting purposes. Each party will
take all actions and execute all documents reasonably necessary to effectuate
the same.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders (except for Xxxx Xxxxx, whose
representations and warranties hereunder are limited to his actual knowledge)
hereby jointly and severally represent and warrant to QuadraMed and Acquisition
Co. as follows, except as stated in the disclosure schedules provided by the
Company to QuadraMed, which describe exceptions to the representations and
warranties:
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
California, 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 Articles of Incorporation and Bylaws. The Company has delivered to
QuadraMed true, correct and complete copies of its Articles of Incorporation and
Bylaws together with all amendments to each through the date hereof, and such
documents are in full force and effect.
3.3 Corporate Minutes. Except as set forth on Schedule 3.3, the Company
has delivered to QuadraMed true, correct and complete copies of its minute
books, stock certificate books and corporate records, and such books and records
reflect all issuances of equity and debt securities of the Company or rights to
acquire any such securities, and contain true and complete records of all
meetings and consents in lieu of meetings of the Board of Directors (and any
committees thereof) and shareholders of the Company.
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.
13
3.5 Capitalization. As of the date of this Agreement, the only
authorized capital stock of the Company consists of 1,000,000 shares of Company
Common Stock, no par value, of which 95,000 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
for the Options, there are not and, as of the Closing, there will not be, any
outstanding convertible securities of the Company or options, warrants,
subscriptions, convertible debentures or other rights, commitments or any other
similar agreements for the purchase of any securities of the Company. The
Company and the Shareholders are not party to any voting trust agreements or
other Contracts, agreements or arrangements restricting voting rights or
transferability with respect to the issued and outstanding Company Common Stock.
By execution of this Agreement, each of the Shareholders acknowledges and agrees
to the termination of that certain Shareholders Agreement dated effective as of
September 1, 1998, and such instrument shall be null and void, and of no further
force and effect, upon execution of this Agreement.
3.6 Ownership of Shares; No Change. As of the date of this Agreement
and as of the Closing, the Shareholders do and will own all of the issued and
outstanding Company Common Stock. Each of the shares of Company Common Stock to
be tendered by the Shareholders at the Closing is free and clear of any
Encumbrance, and at the Closing, each of such shares of Company Common Stock
will be free of any Encumbrance. Each of the Shareholders has full power and
authority to convey good marketable title to the shares of Company Common Stock
owned by him, her or it free and clear of any Encumbrances. Except as set forth
on Schedule 3.6, there has been no change in the capital stock or other equity
interests of the Company within the two (2) year period ending on the Effective
Date of this Agreement.
3.7 Subsidiaries and Other Affiliates. The Company does not have any
subsidiaries and does not own, either directly or indirectly, any interest or
investment, whether debt or equity (other than an interest as a creditor holding
a trade account receivable), or any obligation, option or right to acquire any
interest, direct or indirect, in any other corporation or other entity.
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 and each of the Shareholders have been duly
authorized by the Board of Directors and Shareholders of the Company in
accordance with applicable law. No further corporate action will be necessary on
the part of the Company to make this Agreement valid and binding upon the
Company and each of the Shareholders in accordance with its terms. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and each of the Shareholders and this Agreement (assuming due
authorization, execution and delivery by the other parties
14
hereto) constitutes the legal, valid and binding obligation of the Company and
each of the Shareholders, enforceable in accordance with its terms (except as
such enforcement may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws affecting the rights of creditors generally or by general
principles of equity). Neither the execution, delivery nor performance of this
Agreement by the Company or any of the Shareholders, nor the consummation of the
transactions contemplated hereby, nor compliance by the Company or any of the
Shareholders with the terms and provisions of this Agreement nor the Agreement
of Merger nor the Certificate of Merger will result in a violation or breach of
any term or provision of the Articles of Incorporation or Bylaws of the Company,
each as amended, or of any 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
Agreement of Merger with the California Secretary of State and the Certificate
of Merger with the Delaware Secretary of State and obtaining any necessary third
party consents set forth on Schedule 3.8, 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.
3.9 Company Financial Statements. The Company has delivered to
QuadraMed true, complete and correct copies of the Company Financial Statements.
Except as set forth on Schedule 3.9, the Company Financial Statements present
fairly in all material respects the financial condition of the Company and the
assets and liabilities of the Company as of the respective dates of and at said
dates and the results of its operations, changes in shareholders' equity and
cash flows for the periods therein specified, and have been prepared from the
books and records of the Company in accordance with the cash basis accounting
method.
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,
1998 and liabilities set forth on Schedule 3.10, the Company does not have any
direct or indirect indebtedness, liability, losses or obligation, accrued,
absolute or contingent required by GAAP to be set forth on a balance sheet.
3.11 Absence of Certain Changes. Except as set forth on Schedule 3.11
or as provided for in this Agreement, since December 31, 1998, the Company has
conducted its business only in the ordinary course and consistent with prior
practice, and the
15
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, 1998 in the
ordinary course of business and consistent with prior practice;
(b) declared or made any payment of any dividend, or made any
other distribution upon or in respect of any of its shares of capital stock, or
purchased, retired or redeemed any of the shares of its capital stock or any
other securities, including any warrants or options to purchase any capital
stock, or obligated itself to do any of the foregoing;
(c) subjected (or permitted to be subjected) any of its
property, business or assets, tangible or intangible to any Encumbrances other
than Encumbrances incurred in the ordinary course of business, including current
Taxes which are not yet due and payable;
(d) sold, transferred, leased to others or otherwise disposed
of any of its assets or cancelled or compromised any debt or claim, or waived or
released any claim or right of substantial value except in the ordinary course
of business consistent with prior practice;
(e) terminated or received any notice of termination of any
Contract, lease or other agreement or suffered any damage, destruction or loss
(whether or not covered by insurance) which, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect;
(f) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or lockouts, or
had any material change in its relations with its employees, agents,
distributors, formulators, customers or suppliers;
(g) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, or entered into any
agreement or commitment relating to, any license, patent, copyright, trademark,
trade name, permit, consent, approval, invention, product registration or
similar rights, domestic or foreign, or modified any existing rights with
respect thereto;
(h) adopted, entered into or amended any Employee Benefit Plan
or made any change in the actuarial methods or assumptions used in funding or
determining benefit equivalences thereunder, made any change in the rate of
compensation, commission, bonus, deferred compensation arrangement or other
direct or indirect remuneration payable, or paid or agreed or orally promised to
pay,
16
conditionally or otherwise, any bonus (cash or non-cash), extra compensation,
deferred compensation arrangement or severance or vacation pay, to any
shareholder, director, officer, employee, salesman or distributor of the Company
or hired or entered into any employment agreement or arrangement with any
person;
(i) issued or sold any shares of its capital stock or other
securities, or issued, granted or sold any options, rights or warrants with
respect thereto, or acquired any capital stock or other securities of any
Person, or any equity interest in any Person or otherwise made any loan or
advance to or investment in any Person, except for short-term investments in
cash and cash equivalents made in the ordinary course of business and consistent
with prior practice;
(j) made any capital expenditures or capital additions or
betterments or commitments therefor in excess of $10,000 individually or $25,000
in the aggregate;
(k) instituted, settled or agreed to settle, or suffered any
adverse determination in, any litigation, action or proceeding before any court
or governmental body (domestic or foreign) relating to the Company or its
businesses, assets or properties;
(l) accepted any Contract for performance of services or
orders in a material amount from any hospital, health care provider or other
customer under conditions relating to price, terms of payment, time of delivery
or performance or like matters differing from the conditions regularly and
usually specified on acceptance of Contracts or orders for similar services or
merchandise from said customer or customers who are similarly situated, or made
any material change in its selling, pricing, advertising or personnel practices,
inconsistent with its prior practices and prudent business practices prevailing
in the industry;
(m) revalued in any material respects 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.
3.12 Assets. 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
17
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. 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 does not own any real property.
The Real Property includes all land used for the conduct of the business and
operations of the Company. The Company has delivered to QuadraMed true, correct
and complete copies of the Real Property Leases and copies of all reports of any
engineers, environmental consultants or other consultants in its possession
relating to any of the Real Property. Each of the Real Property Leases is valid
and enforceable in accordance with its terms, the Company has not received any
notice of any, and 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 under the Real Property Leases 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 (except where the failure to obtain such consent would not constitute
a Material Adverse Effect). To the Knowledge of the Company and the
Shareholders, none of the property subject to any Real Property Lease is subject
to any Encumbrance, easement, right-of-way, building or use restriction,
exception, variance, reservation or limitation as might in any material respect
interfere with or impair the present and continued use thereof in the usual and
normal conduct of the business and operations of Company.
3.14 Intellectual Property. Schedule 3.14 sets forth all Intellectual
Property of the Company, other than goodwill, trade secrets and confidential
business information. The Company is not in violation of, or 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 Shareholders, threatened
claiming such infringement. Other than commercially available over-the-counter
"shrink wrap" software, Schedule 3.14 identifies each item of Intellectual
Property that any third party owns and that the Company uses pursuant to
license, sublicense, agreement or permission. The Company has delivered to
QuadraMed correct and complete copies of all such licenses, sublicenses,
agreements and permissions (as amended to date). With respect to each such item:
(i) the license, sublicense, agreement or permission covering the item is legal,
valid, binding, enforceable and in full force and effect against the Company;
(ii) the license, sublicense, agreement or permission will continue to be legal,
valid, binding,
18
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (iii) neither the Company,
nor to the Knowledge of the Company and the Shareholders, the other party to the
license, sublicense, agreement or permission is in breach or default, and to the
Knowledge of the Company and the Shareholders, no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder; (iv) neither the Company,
nor to the Knowledge of the Company and the Shareholders, the other party to the
license, sublicense, agreement or permission has repudiated any provision
thereof; (v) with respect to each sublicense, the representations and warranties
set forth in subsections (i) through (iv) above are true and correct with
respect to the underlying license; (vi) to the Knowledge of the Company and the
Shareholders, the underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling or charge; (vii) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against the Company is pending or, to the Knowledge of the Company and
the Shareholders, is threatened which challenges the legality, validity or
enforceability of the underlying item of Intellectual Property; and (viii) the
Company has not granted any sublicense or similar right with respect to the
license, sublicense, agreement or permission.
3.15 Software. The Company does not own any proprietary Software
marketed or licensed to third parties. There is no 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.
3.16 Tax Matters. All Tax Returns and reports of the Company required
by law to be filed as of the Closing have been or will be duly filed, and all
Taxes imposed upon the Company or any of its properties, assets or income which
are due and payable as of the Closing or claimed by any taxing authority to be
due and payable as of the Closing have been paid or reserved for as of the
Closing, other than taxes, assessments, fees and charges being contested in good
faith by the Company concerning an amount which in the aggregate, is not
material to the business of the Company. The Company has paid or made provision
for the payment of all unpaid Taxes of the Company accrued for or applicable to
the period ended on the Closing and all years and periods prior thereto and for
which the Company may at that date have been liable in its own right or as
transferee of the assets of, or successor to, any other Person or by reason of
its being a member of any group of corporations filing consolidated tax returns
(including any such amounts payable as a result of an audit of any Tax Return
for any such period). The Company utilizes the cash method of accounting for tax
purposes. 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. Neither the federal income Tax Returns of the Company or of its
Affiliates have been
19
examined by the IRS. 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 3.16
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. 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. Neither the Company nor any Affiliate has received
a tax ruling or entered into any agreement with any taxing authority, which
ruling or agreement has or could have an effect on the Taxes of the Company or
any Affiliate payable on or after the Closing. 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. Neither the Company nor any
Affiliate has been included in a federal consolidated income tax return and/or
state consolidated, combined or unitary income tax return. The Company has not
at any time consented to have the provisions of Section 341(f) of the Code apply
to it. None of the Shareholders is a "foreign person" as that term is defined in
Section 1445(f)(3) of the Code. The basis of any depreciable or amortizable
assets, and the methods used in determining allowable depreciation or
amortization (including cost recovery), of the Company, have been computed in
good faith compliance with the Code and the regulations thereunder. 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.
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).
3.17 Legal and Regulatory Matters. Except as set forth on Schedule
3.17, (i) there is no claim, suit, action, arbitration, governmental
investigation or other
20
proceeding, nor any order, decree or judgment pending or in effect, or, to the
Knowledge of the Company and the Shareholders, threatened by, against or
relating to the Company or any of its properties, or the transactions
contemplated hereby, (ii) there are no judgments, decrees or orders enjoining
the Company in respect of, or the effect of which is to prohibit any business
practice or the acquisition of any property or the conduct of any aspect of the
business of the Company, (iii) the Company has complied and is complying with
all laws, ordinances, treaties and governmental rules, orders and regulations
applicable to it or its properties, assets, personnel or business,
non-compliance with which could have a Material Adverse Effect, (iv) the Company
has obtained all material Licenses necessary for the ownership of its properties
and the conduct of its business as currently conducted, and all such Licenses
are currently in full force and effect and (v) the Company has provided
QuadraMed and Acquisition Co. with access to all Government Communications, and
there have been no Government Communications received by the Company since
December 31, 1998.
3.18 Employees. The Company has not been nor is it a party to any
collective bargaining agreements with respect to any of its employees or with
respect to any Contract or agreement with a labor union or any local or
subdivision thereof, nor has it been charged with any unresolved unfair labor
practices, nor, to the Knowledge of the Company and the Shareholders, is there
any present union organizing activity among any of its employees. Except as set
forth on Schedule 3.18, to the Knowledge of the Company and the Shareholders,
there are no material controversies, claims, suits, actions or proceedings
pending or threatened between the Company and its employees. 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.
3.19 Xxxxxxxx; Customers. Except as set forth on Schedule 3.19, (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 material
oral agreements or side deals with such customers or individuals associated
therewith, (iii) to the Knowledge of the Company and the Shareholders, there are
no existing, threatened or suspected disputes, offsets or counterclaims
regarding any services rendered or xxxxxxxx to such customers. Neither the
Company nor the Shareholders has received any notice from, or has any Knowledge
that, any current customer of the Company has taken or will take any steps that
could disrupt the business relationship of the Company with such customer in any
material respect.
3.20 Insurance. Schedule 3.20 sets forth a list of all policies or
binders of fire, liability, product liability, xxxxxxx'x compensation,
vehicular, directors and officers, and other insurance held by or on behalf of
the Company. Such policies and binders are in full force and effect, are
reasonably believed to be adequate for the businesses
21
engaged in by the Company, and are in conformity with the requirements of all
leases or other agreements to which the Company is a party and, to the best of
the Knowledge of the Company and the Shareholders, are valid and enforceable in
accordance with their terms. The Company is not in material default with respect
to any provision contained in any such policy or binder nor has the Company
failed to give any notice or present any material claim under any such policy in
a due and timely fashion. There are no outstanding unpaid claims under any such
policy or binder. The Company has not received notice of cancellation or
non-renewal of any such policy or binder.
3.21 Non-Assignable Rights. Except as set forth on Schedule 3.21,
neither the execution, delivery nor performance of this Agreement by the Company
nor the consummation of the transactions contemplated hereby will (i) conflict
with or result in a breach or termination of, or prevent the Company from
realizing the benefits otherwise obtainable by the Company under, any permits or
property interests of the Company or any Contract, agreement, arrangement or
commitment of the Company or (ii) require the affirmative consent or approval of
any third party.
3.22 Personnel. Schedule 3.22 contains (i) the names and addresses of
all directors, officers and employees of the Company, indicating the positions
within the Company held by each such person and the current annual salary rates
for each such person and the amounts due and payable as bonus, accrued vacation
or other compensation for each such person, and (ii) a description of the
Company's policies regarding severance or other benefits that may be payable to
any Company employee if his or her employment were terminated.
3.23 Employee Benefit Plan(s). Schedule 3.23 lists each Employee
Benefit Plan of the Company. The Company has no Affiliates for the purpose of
ERISA. Each Employee Benefit Plan is in substantial compliance with applicable
law and has been administered and operated in all material respects in
accordance with its terms. Each Employee Benefit Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the IRS and no event has occurred and no
condition exists which could reasonably be expected to result in the revocation
of any such determination. No event which constitutes a "reportable event" (as
defined in Section 4043(b) of ERISA) for which the thirty (30) day notice
requirement has not been waived by the PBGC has occurred with respect to any
Employee Benefit Plan. Other than as contemplated in Section 4.9 below, no
Employee Benefit Plan subject to Title IV of ERISA has been terminated or is or
has been the subject of termination proceedings pursuant to Title IV of ERISA.
Full payment has been made of all amounts which the Company was required under
the terms of the Employee Benefit Plan(s) to have paid as contributions to such
Employee Benefit Plan(s) on or prior to the date hereof (excluding any amounts
not yet due) and no Employee Benefit Plan which is subject to Part 3 of Subtitle
B of Title 1 of ERISA has incurred any "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived. To the Knowledge of the Company and the Shareholders, neither the
Company nor any other "disqualified
22
person" or "party in interest" (as defined in Section 4975(e)(2) of the Code and
Section 3(14) of ERISA, respectively) has engaged in any transactions in
connection with any Employee Benefit Plan(s) that could reasonably be expected
to result in the imposition of a material penalty pursuant to Section 502(i) of
ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section
4975(a) of the Code. No material liability, claim, action or litigation, has
been made, commenced or threatened with respect to any Employee Benefit Plan(s)
(other than for benefits payable in the ordinary course and PBGC insurance
premiums). No Employee Benefit Plan or related trust owns any securities in
violation of Section 407 of ERISA. With respect to all Employee Benefit Plan(s)
which are subject to Title IV of ERISA, as of the most recent actuarial
valuation prepared for each such Employee Benefit Plan, the aggregate present
value of the accrued liabilities thereof did not exceed the aggregate fair
market value of the assets allocable thereto. The Company does not presently nor
has not at any time in the past maintained a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA). To the Knowledge of the Company and the
Shareholders, there are no actions, suits or claims (other than routine claims
for benefits) pending or threatened against any Employee Benefit Plan of the
Company or their assets, or arising out of such Employee Benefit Plan(s) and, to
the Knowledge of the Company and the Shareholders, no facts exist which could
rise to any such actions, suits or claims or that might have a material adverse
effect on such Employee Benefit Plan(s). There has been no act or omission by
the Company that has given rise or may give rise to any finds, penalties, taxes
or late charges under Section 502(c), (i) or (l), Section 407(1) of ERISA or
Chapter 43 of the Code.
3.24 Accounts Receivable; Inventory. Except as set forth on Schedule
3.24, the Company's accounts receivable represent valid claims, and no
counterclaims or offsetting claims with respect to such receivables are pending
or, to the Knowledge of the Company and the Shareholders, threatened, except for
amounts reserved in the Company Financial Statements against such receivables
for allowances and discounts, and, to the Knowledge of the Company and the
Shareholders, 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.
3.25 Compliance with Environmental Laws. (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 Adverse Effect, (ii) neither the Company nor any of its predecessors
used, released or disposed of any Hazardous Substance in any manner that could
reasonably be expected to result in material liability, (iii) to the Knowledge
of the Company and the Shareholders, none of the property leased or operated by
the Company is contaminated by any Hazardous Substance in a manner which
requires investigation or corrective action under applicable Environmental Laws,
(iv) to the Knowledge of the Company and the Shareholders, 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,
23
activity or event respecting the Company or, to the Knowledge of the Company and
the Shareholders, 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.
3.26 Bank and Brokerage Accounts. Schedule 3.26 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.
3.27 Contracts. Except as set forth on Schedule 3.27, the Company is
not a party to any:
(a) Contracts in effect with any customer of the Company,
including, without limitation, all consulting services, agreements, software
license agreements and other licenses, software development agreements, purchase
commitments or installation agreements and maintenance or service agreements
(collectively, the "Customer Contracts");
(b) Contract for the employment or retention of, or collective
bargaining, severance or termination agreement with, any of its directors,
officers, employees, consultants or agents or groups of employees;
(c) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other Employee Benefit Plan, agreement or
arrangement;
(d) Contract for the sale of any of its assets, property or
rights outside the ordinary course of business consistent with prior practice
(other than this Agreement);
(e) Contract that contains any provisions requiring the
Company to indemnify or act as an indemnitor, guarantor, surety, co-signer,
co-maker or endorser for any other person or entity;
(f) Contract restricting the Company from conducting business
anywhere in the world;
(g) agreement, note, debenture, loan, mortgage, indenture or
other obligation for or relating to borrowed money or commitments for obtaining
borrowed money;
(h) Contract, lease or commitment which involves the future
payment
24
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 shareholder, officer or director of
the Company or any "affiliate" or "associate" of such persons (as such terms are
defined in the rules and regulations promulgated under the Securities Act), is
presently a party, including, without limitation, any agreement or other
arrangement providing for the furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to, any such person or
entity.
All Contracts required to be listed on Schedule 3.27 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
Shareholders, any other party thereto, is in breach of any provision of or in
default under any term of any such 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
delivered to QuadraMed. A substantial majority of the Customer Contracts entered
into within the prior two (2) years conform substantially to one of the forms
attached hereto as Schedule 3.27.
3.28 Related Party Relationships. Except as set forth on Schedule 3.28,
no Shareholder owning greater than a five percent (5%) interest in the Company,
no affiliate or member of the immediate family of any such Shareholder, and no
officer or director or member of the immediate family of such officer or
director of the Company possesses, directly or indirectly, any beneficial
interest in, or is a director, officer or employee of, or member of the
immediate family of a director, officer or employee of, any Person that is a
client, supplier, customer, lessor, lessee, lender, creditor, borrower, debtor
or contracting party with or of the Company (except as a shareholder holding
less than one percent (1%) interest in a corporation whose shares are traded on
a
25
national or regional securities exchange or in the over-the-counter market).
3.29 Pooling of Interests. Neither the Company nor any of the
Shareholders has taken any action or has knowledge of facts or circumstances in
respect of the Company or its accounting procedures which would have the effect
of precluding accounting for the transactions contemplated hereby as a "pooling
of interests." Notwithstanding any other provision of this Agreement to the
contrary, no Shareholder will sell, transfer, exchange, pledge or otherwise
dispose of, or in any other way reduce the such Shareholder's risk of ownership
or investment in, or make any offer or agreement relating to any of the
foregoing with respect to, any Company Common Stock or any rights, options or
warrants to purchase Company Common Stock, or any of the QuadraMed Shares (i)
during the thirty (30) day period immediately preceding the Closing Date of the
Merger and (ii) until such time after the Effective Date of the Merger as
QuadraMed has publicly released a report including the combined financial
results of QuadraMed and for a period of at least thirty (30) days of combined
operations of QuadraMed and the Company within the meaning of Accounting Series
Release No. 130, as amended, of the SEC. Nothing in this Section 3.31 will be
deemed to prohibit charitable contributions of such securities without
consideration to transferees who agree to all of the restrictions in this
Agreement.
3.30 Investment Representations. Each of the Shareholders and the
Optionee is an "accredited investor" within the meaning of the Securities Act.
Each of the Shareholders is and the Optionee aware that the QuadraMed Shares
issued pursuant to this Agreement have not been registered under the Securities
Act or any applicable state securities laws, and agrees that such QuadraMed
Shares will not be offered or sold in the absence of registration under the
Securities Act and any applicable state securities laws or an exemption from the
registration requirements of the Securities Act and any applicable state
securities laws, which shall be accompanied by an opinion of counsel to such
selling Shareholder or Optionee satisfactory to QuadraMed and its counsel that
registration of such shares is not required. Each of the Shareholders and the
Optionee agrees not to transfer the QuadraMed Shares in violation of the
provisions of any applicable federal or state securities laws. In this
connection, each of the Shareholders and the Optionee represents that he or it
is familiar with Rule 144 and Rule 145 promulgated by the SEC pursuant to the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
26
Each of the Shareholders and the Optionee understands that the offering and sale
of the QuadraMed Shares is intended to be exempt from registration under the
Securities Act, by virtue of the private placement exemption provided by Rule
505 and/or 506 of Regulation D promulgated under the Securities Act and/or
Section 4(2) of the Securities Act, based, in part, upon the representations,
warranties and agreements contained in this Agreement, and QuadraMed may rely on
such representations, warranties and agreements in connection therewith. Each of
the Shareholders and the Optionee is acquiring the QuadraMed Shares for his or
its own account and for investment, and not with a view to the distribution
thereof or with any present intention of distributing or selling any of the
QuadraMed Shares except in compliance with the Securities Act. Each of the
Shareholders and the Optionee represents that by reason of his or its business
and financial experience, and the business and financial experience of those
persons, if any, retained by such Shareholder or Optionee to advise him or it
with respect to his or its investment in the QuadraMed Shares, such Shareholder
or Optionee together with such advisors have knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risk of the prospective investment. The financial condition and
investments of each of the Shareholders and the Optionee are such that he or it
is in a financial position to hold the QuadraMed Shares for an indefinite period
of time and to bear the economic risk of, and withstand a complete loss of, his
or its investment in the QuadraMed Shares. Each of the Shareholders and the
Optionee has carefully examined this Agreement and all exhibits and schedules
thereto and the QuadraMed SEC Filings. Each of the Shareholders and the Optionee
acknowledges that QuadraMed has made available to him or it all documents and
information that he or it has requested relating to QuadraMed and has provided
answers to all of his or its questions concerning QuadraMed and/or the QuadraMed
Shares. In evaluating the suitability of the acquisition of the QuadraMed Shares
hereunder, each of the Shareholders and the Optionee has not relied upon any
representations or other information (whether oral or written) other than as set
forth in the QuadraMed SEC Filings or as contained herein.
3.31 Broker's and Finder's Fees. There are no broker's or finder's fees
or obligations due to any Persons engaged by either the Company or the
Shareholders or any of the Company's employees, officers or directors in
connection with the transactions contemplated by this Agreement, except for the
fees and expenses of its counsel and accountants.
3.32 Material Misstatements or Omissions. The statements,
representations and warranties of the Company, the Shareholders and the Optionee
contained in this Agreement (including the exhibits and schedules hereto) and in
each document, statement, certificate or exhibit furnished or to be furnished by
or on behalf of the Company, the Shareholders or the Optionee pursuant hereto,
or in connection with the transactions contemplated hereby, taken together, do
not contain and will not contain any untrue statement of a material fact and do
not or will not omit to state a material fact necessary to make the statements
or facts contained herein or therein, in light of the circumstances made, not
misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF QUADRAMED AND ACQUISITION CO.
QuadraMed and Acquisition Co. hereby jointly and severally represent
and warrant to the Company and the Shareholders as follows:
4.1 Organization and Good Standing. Each of QuadraMed and Acquisition
Co. is a corporation duly organized, validly existing and in good standing under
the laws
27
of the State of Delaware.
4.2 Authority. Each of QuadraMed and Acquisition Co. has the necessary
corporate power and authority to enter into and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by each of QuadraMed and
Acquisition Co. have been duly authorized by the Board of Directors of each of
QuadraMed and Acquisition Co., respectively, in accordance with applicable law.
No further corporate action will be necessary on the part of either QuadraMed or
Acquisition Co. to make this Agreement valid and binding upon each of QuadraMed
and Acquisition Co., respectively, in accordance with its terms. This Agreement
has been duly and validly authorized, executed and delivered by each of
QuadraMed and Acquisition Co. and this Agreement (assuming due authorization,
execution and delivery by the other parties hereto) constitutes the legal, valid
and binding obligation each of QuadraMed and Acquisition Co., enforceable in
accordance with its terms (except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally or by general principles of equity). Neither the
execution, delivery nor performance of this Agreement by QuadraMed or
Acquisition Co., nor the consummation of the transactions contemplated hereby,
nor compliance by QuadraMed or Acquisition Co. with the terms and provisions of
this Agreement nor the Agreement of Merger nor the Certificate of Merger will
result in a violation or breach of any term or provision of the Certificate of
Incorporation or Bylaws of QuadraMed, each as amended, or of any material
statute, rule or regulation applicable to QuadraMed 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
QuadraMed is a party or to which its properties or assets are subject, or any
instrument, judgment, decree, writ or other restriction to which QuadraMed is a
party or by which QuadraMed or its businesses, properties, assets or personnel
are bound. Except for filing the Agreement of Merger with the California
Secretary of State and the Certificate of Merger with the Delaware Secretary of
State, neither QuadraMed nor Acquisition Co. is required to obtain the consent
of any third party or to submit any notice, report or other filing with any
federal, state or local governmental authority in connection with the execution
or delivery or performance by each of QuadraMed and Acquisition Co.,
respectively, of this Agreement or the consummation of the transactions
contemplated herein.
4.3 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.
28
4.4 QuadraMed SEC Filings. The QuadraMed SEC Filings, copies of which
have been furnished to each of the Shareholders, have been duly filed, were in
compliance in all material respects 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 GAAP, 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). Except as set forth on Schedule 4.4, 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 change in the businesses,
assets, properties, operations or condition (financial or otherwise) of
QuadraMed. Notwithstanding the foregoing, QuadraMed makes no representations or
warranties regarding its future financial condition, results of operations or
stock price. QuadraMed's future financial condition, results of operations and
stock price are subject to various risk factors and uncertainties that are
reflected in the QuadraMed SEC Filings, copies of which have been provided to
each of the Shareholders and the Optionee.
4.5 Broker's or Finder's Fees. There are no broker's or finder's fees
or obligations due to any Persons engaged by either QuadraMed or Acquisition Co.
or any of their employees, officers or directors in connection with the
transactions contemplated by this Agreement, except for fees and expenses of its
counsel and accountants.
4.6 Material Misstatements or Omissions. The statements,
representations and warranties of QuadraMed and Acquisition Co. contained in
this Agreement (including the exhibits and schedules hereto) and in each
document, statement, certificate or exhibit furnished or to be furnished by or
on behalf of QuadraMed or Acquisition Co. pursuant hereto, or in connection with
the transactions contemplated hereby, taken together, do not contain and will
not contain any untrue statement of a material fact and do not or will not omit
to state a material fact necessary to make the statements or facts contained
herein or therein, in light of the circumstances made, not misleading.
ARTICLE V.
POST-CLOSING COVENANTS
The parties hereby agree as follows with respect to the period
following the Closing:
29
5.1 Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, all the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article VI below).
5.2 Company Employees. QuadraMed shall have no obligation to continue
the employment to any of the employees of the Company from and after the Closing
Date. The Company and the Shareholders agree to refrain from making any
statements or communications to its employees regarding subsequent employment by
QuadraMed without QuadraMed's prior written consent. As a condition to such
employment, QuadraMed shall require that any employees of the Company that
QuadraMed shall elect to hire in connection with the transactions contemplated
by this Agreement shall promptly execute and deliver to QuadraMed the QuadraMed
standard form Proprietary Information Agreement, and such employees shall be
included in QuadraMed's standard employee benefit plans.
5.3 Restrictions on Transferability of QuadraMed Shares. The
certificates representing the QuadraMed Shares shall bear the following legend
restricting transfer, and such other legends as may be required by any
applicable state securities law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
The QuadraMed Shares shall not be transferable in the absence of an effective
registration statement under the Securities Act or an exemption therefrom or in
the absence of compliance with any term of this Agreement. In the absence of an
effective registration statement under the Securities Act, neither the QuadraMed
Shares nor any interest therein shall be sold, transferred, assigned or
otherwise disposed of, unless QuadraMed shall have previously received an
opinion of counsel knowledgeable in federal securities law, in form and
substance reasonably satisfactory to QuadraMed and accompanied by such
supporting documents as QuadraMed may reasonably request, to the effect that
registration under the Securities Act is not required in connection with such
disposition. QuadraMed shall be entitled to give stop transfer instructions to
its transfer agent with respect to the QuadraMed Shares in order to enforce the
foregoing restrictions. Notwithstanding the foregoing, QuadraMed agrees that it
shall not require an opinion of counsel in connection with Rule 144 transactions
except in unusual circumstances. QuadraMed shall be obligated to reissue
promptly unlegended
30
certificates at the request of any Shareholder or the Optionee thereof if such
stockholder shall have obtained an opinion of counsel reasonably acceptable to
QuadraMed to the effect that the securities proposed to be disposed of may
lawfully be disposed of without registration, qualification or legend.
5.4 Lock-Up; Registration Rights. Each Shareholder and the Optionee
hereby agrees that he or it shall not sell, transfer, exchange, pledge or
otherwise dispose of, or in any other way reduce the such Shareholder's or
Optionee's risk of ownership or investment in, or make any offer or agreement
relating to any of the foregoing with respect to, any of the QuadraMed Shares
until such time after the Effective Date of the Merger as QuadraMed has publicly
released a report including the combined financial results of QuadraMed and for
a period of at least thirty (30) days of combined operations of QuadraMed and
the Company within the meaning of Accounting Series Release No. 130, as amended,
of the SEC. As soon as practicable thereafter, QuadraMed will provide the
Shareholders and the Optionee with registration rights in accordance with the
terms and conditions of that certain Registration Rights Agreement,
substantially in the form attached hereto as Exhibit "H" and incorporated
herein by this reference (the "Registration Rights Agreement"). At such time as
a registration statement for the QuadraMed Shares has been declared effective in
accordance with the terms and conditions of the Registration Rights Agreement,
the provisions of Section 5.3 above shall cease to apply to the QuadraMed
Shares.
5.5 Preparation of Company Tax Returns. Xxxx Xxxxxx and Xxxxxxx X.
Xxxxxx shall have the right to participate in the preparation of the Company's
Tax Returns for the year ended 1998; provided, however, QuadraMed shall have
final authority to control, prepare and file such Tax Returns; and, provided,
further, that QuadraMed agrees to take a $500,000 deduction for a severance
contribution on such Tax Returns.
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
6.1 Survival of Representations and Warranties.
(a) Representations and Warranties of Company and the
Shareholders. All representations, warranties and covenants of the Company and
the Shareholders contained in this Agreement will survive the Closing and remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the parties to this Agreement until the date of QuadraMed's
first audited financial statements containing combined operations of QuadraMed
and the Company for claims that could reasonably be discovered during such
audit, and, for claims that could not reasonably be discovered during such
audit, until one (1) year from the date of the Closing (the "Survival Period")
and, thereafter, to the extent a claim is made prior to the expiration of the
Survival Period with respect to any breach of such representation, warranty or
covenant, until such claim is finally determined or settled, whereupon such
31
representation, warranties and covenants will expire.
(b) Representations and Warranties of QuadraMed and
Acquisition Co. All representations, warranties and covenants of QuadraMed and
Acquisition Co. contained in this Agreement will survive the Closing and remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the parties to this Agreement until the expiration of the
Survival Period, and, thereafter, to the extent a claim is made prior to the
expiration of the Survival Period with respect to any breach of such
representation, warranty or covenant, until such claim is finally determined or
settled, whereupon such representation, warranties and covenants will expire.
Any judgment or settlement of a claim against either QuadraMed or Acquisition
Co. for a breach of its obligations hereunder brought after the Effective Date
will be settled in QuadraMed Common Stock, valued at the fair market value of
QuadraMed Common Stock for the date immediately preceding the date on which
QuadraMed and Acquisition Co. delivers shares of QuadraMed Common Stock in
connection with such a breach.
6.2 Indemnification.
(a) The Shareholders and the Optionee, on a pro rata basis
based on their respective portion of the Closing Consideration, will indemnify
and hold harmless QuadraMed and Acquisition Co. and their respective officers,
directors, agents and employees, and each Person, if any, who controls or may
control QuadraMed or Acquisition Co. within the meaning of the Securities Act
(each, an "Indemnified Person" and collectively, the "Indemnified Persons"),
from and against any and all claims, demands, actions, causes of actions,
losses, costs, damages, liabilities and expenses including, without limitation,
reasonable legal fees and expenses ("Losses"), arising out of or relating to (i)
any misrepresentation or breach of or default or other action or omission by
either the Company or the Shareholders in connection with any of the
representations, warranties and covenants given or made by the Company or the
Shareholders in this Agreement, or any exhibit or schedule hereto or any
certificate, document or instrument delivered by or on behalf of the Company and
the Shareholders pursuant hereto, (ii) any and all actions, suits, claims or
legal, administrative, arbitration, governmental or other proceedings or
investigations against any Indemnified Person that relate to the Company or the
Shareholders in which the principal event giving rise thereto occurred prior to
the Closing or which result from or arise out of any action or inaction prior to
the Closing of the Shareholders, the Company or any director, officer, employee,
agent, representative or subcontractor of the Company, except for those which
QuadraMed specifically assumes in writing, (iii) that certain matter entitled
Xxxxxxxx Xxxxx and Xxxxx Xxxxx v. Pro Intermed, Inc. and Xxxxxxx Xxxxxx, Case
No. 726882 pending in the Superior Court of California, County of San Diego, to
the extent that the Losses to QuadraMed or the Surviving Corporation arising out
of such litigation exceed $200,000 and (iv) any Taxes due and owing by the
Company for the year ended 1998 arising out of or related to the $500,000
deduction to be claimed by the Company as a severance contribution for the year
ended 1998.
32
(b) QuadraMed will indemnify and hold harmless the
Shareholders, the Optionee and their Indemnified Persons from and against any
and all Losses arising out of or relating to any misrepresentation or breach of
or default or other action or omission in connection with any of the
representations, warranties and covenants given or made by QuadraMed and
Acquisition Co. in this Agreement, or any exhibit or schedule hereto or any
certificate, document or instrument delivered by or on behalf of QuadraMed or
Acquisition Co. pursuant hereto.
(c) Notwithstanding the foregoing, the parties shall have no
liability with respect to the matters described in Section 6.2(a) and Section
6.2(b) above unless and until the aggregate amount of Losses equals or exceeds
$250,000, in which event QuadraMed and Acquisition Co. shall be indemnified
solely to the extent such Losses exceed $250,000. The maximum liability for
indemnification by the parties under this Article VI shall in no event exceed
the Closing Consideration, and the maximum liability for indemnification by and
Shareholder or the Optionee shall in no event exceed such Shareholder's or
Optionee's pro rata portion of the Closing Consideration. This section shall not
apply to (i) any indemnification by the Shareholders and the Optionee under
Section 6.2(a)(iv) above or (ii) any intentional or fraudulent breach by any
party of any representation, warranty, covenant or obligation.
(d) As security for their obligation to indemnify QuadraMed
and Acquisition Co. hereunder, concurrently with payment of the Closing
Consideration by QuadraMed, the Shareholders and the Optionee, on a pro rata
basis based on their respective portion of the Closing Consideration, shall
place into escrow 66,000 of QuadraMed Shares from the Closing Consideration (the
"Escrow Fund") pursuant to the terms and conditions of the Escrow Agreement, to
be held in escrow until the expiration of the Survival Period as security for
the indemnification obligations of the Shareholders and the Optionee hereunder.
6.3 Notice of Third-Party Claims; Assumption of Defense. Each
indemnified party shall give reasonably prompt notice of a claim ("Claims
Notice") to each indemnifying party, in accordance with the terms of Section 7.3
below, of the assertion of any claim, or the commencement of any suit, action or
proceeding by any third party in respect of which indemnity may be sought
hereunder, and shall give the indemnifying parties such information with respect
thereto as the indemnifying parties may reasonably request. The giving of such
Claims Notice shall not be a condition precedent to indemnification hereunder;
provided, however, that the failure to give reasonably prompt notice shall
reduce the indemnified party's recovery from the indemnifying party only by an
amount equal to the Losses (including attorney's fees) caused by such delay.
Upon receipt of such notice, each indemnifying party may, at its own expense,
participate in and, upon notice to each indemnified party of such indemnifying
party's written agreement that the indemnified party is entitled to
indemnification pursuant to this Article VI for Losses arising out of such third
party claim, suit,
33
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.
6.4 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the indemnified party or, the indemnifying party, as the
case may be, of any third party such claim, suit, action or proceeding of the
kind referred to in Section 6.4 above shall also be binding upon the
indemnifying party or the indemnified party, as the case may be, in the same
manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise. The indemnified
party will give the indemnifying party at least thirty (30) days notice of any
proposed settlement or compromise of any claim, suit, action or proceeding it is
defending, during which time an indemnifying party may assume the defense of
such claim, suit, action or proceeding and if it does so the proposed settlement
or compromise may not be made.
6.5 Failure of Indemnified Party to Act. In the event that an
indemnifying party does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the indemnified party to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the indemnifying party of its
obligations hereunder.
6.6 Procedure for Indemnification. Upon becoming aware of a claim for
indemnification hereunder (whether as a result of any third party claim, suit,
action or proceeding of the kind referred to in Section 6.4 above, or in
connection with any other Losses which the indemnified party deems to be within
the ambit of this Article VI), the indemnified party shall give, in accordance
with the terms of Section 7.3 below, a Claims Notice to the indemnifying party.
If the indemnifying party does not object to such claim within thirty (30) days
of receiving such Claims Notice, the indemnified party shall be conclusively
entitled to recover the amount of such claim.
6.7 Articles of Incorporation and Bylaws. Notwithstanding anything to
the contrary contained in the Articles of Incorporation or Bylaws of the
Company, each as amended, the indemnification provisions of this Article VI
shall take precedence over
34
such Articles of Incorporation or Bylaws. Neither the Shareholders nor any other
director or officer incumbent at any time prior to the Closing shall be entitled
to indemnification directly or indirectly under the Articles of Incorporation or
Bylaws of the Company or otherwise for any matter upon which the Company or the
Shareholders has or might have an indemnification obligation hereunder and the
Articles of Incorporation and Bylaws shall be deemed amended accordingly.
However, the provisions of this Section 6.8 are intended only for the regulation
of relations between the Company and the Shareholders and any indemnified party.
This Section 6.8 is not intended for the benefit of creditors or other third
parties and does not grant any rights to creditors or other third parties.
6.8 Non-Exclusivity. The parties hereby acknowledge and agree that the
indemnity obligations set forth above shall not be the exclusive remedy of the
indemnified parties with respect to the transactions contemplated hereby and the
amount of the Escrow Fund in no way limits the amount or sources of recovery of
QuadraMed or Acquisition Co. with respect to such indemnity obligations or
otherwise.
ARTICLE VII.
GENERAL
7.1 Amendments. Subject to applicable law, this Agreement, the
Agreement of Merger, the Certificate of Merger and any exhibit attached hereto
or thereto may be amended by the parties hereto at any time prior to the
Effective Date; provided, however, that any such amendment must be in writing
and executed by all parties hereto.
7.2 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.
7.3 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered personally, by facsimile transmission, or when mailed, by United
States certified or registered mail, prepaid, to the parties or their assignees
at the following addresses or facsimile numbers (or at such other address as
shall be given in writing by any party):
If to QuadraMed or Acquisition Co.: QuadraMed Corporation
Attention: Xxxxx X. Xxxxxxx, Esq.
0000 Xxxx Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
35
with a required copy to: Xxxxxx Xxxxxx Xxxxxxx XxXxxxxx
Xxxxxx & Fognani, L.L.P.
Attention: Xxxxxxx X. Xxxxxx, Esq.
000 Xxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
If to the Company or the Shareholders: Pro Intermed, Inc.
(other than Xxxx Xxxxx) Attention: Xxxxxxx X. Xxxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
with a required copy to: Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Attention: Xxxxxx X. Xxxxxxx, Esq.
000 Xxxx X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
If to Xxxx Xxxxx: Xxxx Xxxxx
c/o Xxxx X. Xxxxx, Esq.
Law Offices of Xxxx X. Xxxxx
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
7.4 Further Assurances. QuadraMed and Acquisition Co., on the one hand,
and the Company or the Shareholders, on the other hand, agree that from time to
time after the Closing, at the request of any other party and without further
consideration or consent, they will execute and deliver such additional
instruments as any other party may reasonably request to confirm more
effectively the status of the Merger, and, from and after the date hereof if
there are any rights of the Company vis-a-vis third parties which would not
continue beyond the time of the Merger without the consent of any such third
party, to try with the cooperation and assistance of each other to obtain such
consent promptly.
7.5 Entire Agreement. This Agreement (including all exhibits and
schedules attached hereto and all documents delivered as provided for herein)
contain the entire agreement among the parties hereto with respect to the
subject matter hereof and the transactions contemplated hereby and supersedes
all prior negotiations, discussions, agreements and undertakings, both written
and oral, among the parties hereto, with respect to the subject matter hereof,
including, without limitation, that certain Letter of Intent dated March 5,
1999.
36
7.6 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.
7.7 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.
7.8 Payment of Expenses. The Shareholders, the Company and QuadraMed
will pay all of their respective costs and expenses (including fees and expenses
of legal counsel, accountants and financial advisors) incurred by such party in
connection with the transactions contemplated by this Agreement, regardless of
whether the Merger is consummated. The costs and expenses incurred by the
Company in connection with the transactions contemplated hereby may be paid from
the corporate funds of the Company, provided that such expenses shall not exceed
$25,000 without the prior written consent of QuadraMed, in its sole and absolute
discretion. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
37
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
QUADRAMED QUADRAMED CORPORATION
By:
----------------------------
Name:
Title:
ACQUISITION CO. PRO INTERMED ACQUISITION CORPORATION
By:
----------------------------
Name
Title:
[SIGNATURE PAGE NO. 1 TO ACQUISITION AGREEMENT AND PLAN OF MERGER]
38
COMPANY PRO INTERMED, INC.
By:
----------------------------
Name:
Title:
SHAREHOLDERS
--------------------------------
Xxxx Xxxxx
--------------------------------
Xxxx Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
THE XXXXXX CHILDREN'S NON-REVOCABLE TRUST
DATED JANUARY 1, 1993
By:
----------------------------
Xxxx Xxxxxx, Trustee
By:
----------------------------
Xxxxxxx X. Xxxxxx, Trustee
OPTIONEE
--------------------------------
Xxxxx X. Xxxxxxx
[SIGNATURE PAGE NO. 2 TO ACQUISITION AGREEMENT AND PLAN OF MERGER]
39
EXHIBIT "A"
AGREEMENT OF MERGER
40
EXHIBIT "B"
CERTIFICATE OF MERGER
41
EXHIBIT "C"
OPINION OF COUNSEL FOR COMPANY AND SHAREHOLDERS
42
EXHIBIT "D"
EMPLOYMENT AGREEMENT
43
EXHIBIT "E"
NON-COMPETITION AND NON-INTERFERENCE AGREEMENT
44
EXHIBIT "F"
ESCROW AGREEMENT
45
EXHIBIT "G"
RELEASE
46
EXHIBIT "H"
OPINION OF COUNSEL FOR QUADRAMED AND ACQUISITION CO.
47
EXHIBIT "I"
REGISTRATION RIGHTS AGREEMENT
