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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 0-21031
QUADRAMED CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 52-1992861
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22 PELICAN WAY, SAN RAFAEL, CALIFORNIA, 94901
(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code: (415)482-2100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant, as of March 31, 2000 was approximately $156,080,388 (based upon the
closing price for shares of the Registrant's Common Stock as reported by the
Nasdaq National Market for the last trading date prior to that date). Shares of
Common Stock held by each officer, director and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
On March 31, 2000, approximately 25,550,457 shares of the Registrant's Common
Stock, $0.01 par value per share, were outstanding.
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AMENDMENT NO. 1
The undersigned Registrant hereby amends Items 10, 11, 12 and 13 of
its Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and
files such amended Items herewith.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following sets forth certain information concerning the Company's
directors, as of March 31, 1999:
NAME AGE POSITION
---- --- --------
James D. Durham............53 Chairman of the Board and Chief Executive Officer
Albert L. Greene...........50 Director
Joan P. Neuscheler.........39 Director
Michael J. King............61 Director
E.A. Roskovensky...........54 Director
Scott Gross................54 Director
Cornelius T. Ryan..........69 Director
BACKGROUND
James D. Durham serves as QuadraMed's Chairman of the Board and Chief
Executive Officer. Mr. Durham founded the Company in September 1993 when he
became its President and Chief Executive Officer and a director. In May 1996,
Mr. Durham became Chairman of the Board. From November 1992 to December 1993,
Mr. Durham served as the Chief Executive Officer of Trim Healthcare Systems,
Inc., a reimbursement consulting services company. From April 1992 to April
1993, Mr. Durham served as Chief Executive Officer of Care Partners, Inc., an
accounts receivable processing and funding company cofounded by Mr. Durham. From
February 1986 until its acquisition by Ameritech in February 1992, Mr. Durham
served as President and Chief Executive Officer of Knowledge Data Systems, Inc.,
a health care information systems company. Mr. Durham holds a B.S. with honors
in Industrial Engineering from the University of Florida and an M.B.A. with an
emphasis in Finance from the University of California, Los Angeles and is a
Certified Public Accountant.
Albert L. Greene has been a director of the Company since May 1997. Mr.
Greene is currently the President and Chief Executive Officer of
HealthCentral.com, an online consumer health information service. Previously,
Mr. Green was the Chief Executive Officer of Sutter Health East Bay, a health
care delivery system and the parent company of Alta Bates Health System, from
June 1996 until September 1998. From May 1990 until March 1998, Mr. Greene
served as the President and Chief Executive Officer of Alta Bates Medical
Center, a 527-bed acute care hospital located in Berkeley, California. From
January 1996 until March 1998, Mr. Greene also served as the President and Chief
Executive Officer of Alta Bates Health System, the parent company of Alta Bates
Medical Center. Mr. Greene has served as an executive in hospital administration
since 1979, most recently as the President of Sinai Samaritan Medical Center in
Milwaukee, Wisconsin from 1988 to 1990. Mr. Greene received a masters of
hospital administration at the University of Michigan, and is presently a
diplomate of the American College of Healthcare Executives and a member of the
American Hospital Association. Mr. Greene is also chair-elect of the California
Healthcare Association, a member of the board of directors of Acuson
Corporation, a manufacturer and provider of medical diagnostic ultrasound
systems, and a member of the board of directors of several other privately held
hospitals and hospital associations.
Joan P. Neuscheler has been a director of the Company since March 1994. Ms.
Neuscheler has been a general partner of Tullis-Dickerson Partners, a venture
capital firm, since September 1992, and the President and Chief Financial
Officer of Tullis-Dickerson & Co., Inc. since April 1989. Tullis-Dickerson
Partners is the general partner of Tullis-Dickerson Capital Focus, L.P., a
stockholder of the Company. Ms. Neuscheler is also a director of several
privately held companies.
Michael J. King has been a director of the Company since May 1999. Mr. King
has been the Chief Executive Officer of Healthscribe, Inc. since June 1999.
From September 9, 1996 until May 1999, Mr. King served as Chairman of the Board
of Directors and Chief Executive Officer of The Compucare Company, a healthcare
information systems company which was acquired by QuadraMed in March 1989.
Prior to joining The Compucare Company, Mr. King was Chairman of the Board of
Directors, Chief Executive Officer and President of Software AG of the
Americas, a leader in Enterprise Information Systems. Mr. King previously
served as President and Chief Executive Officer of Computer Entry Systems Corp.
and has held various high-level positions at Marietta Data Systems and the
Hoskyns Group in the United Kingdom. Mr. King holds a degree in Mechanical
Engineering from the University of Sheffield and a M.B.A. equivalent in
Management Studies from the University of Hatfield.
E.A. Roskovensky has been a director of the Company since May 1999. Mr.
Roskovensky has been the President and Chief Operating Officer of Robertson-Ceco
Corp., a publicly traded company which manufactures custom engineered metal
buildings, since November 1994. Mr. Roskovensky also has been the President and
Chief Executive Officer of Davis Wire Corporation since 1991. Mr. Roskovensky
previously has held positions at USS-Posco Industries, Double Eagle Steel
Coating Company and U.S. Steel. Mr. Roskovensky holds a B.S. in Chemical
Engineering from Villanova University, an M.B.A. from Duquesne University, and a
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J.D. from the University of Detroit School of Law. He is a member of the State
Bar of Michigan and the Pennsylvania Bar Association.
Scott Gross has been a director of the Company since March 2000. Mr.
Gross is currently the founder, President and Chief Executive Officer of Primus
Management, Inc., a successor organization to Alpha Hospital Management, Inc.
where Mr. Gross was the founder, President and Chief Executive Officer from 1989
to 1992. From 1988 to 1989, Mr. Gross was the Chairman and Chief Executive
Officer of Carondolet Rehabilitation Centers of America, a diversified
rehabilitation medicine services company. From 1984 to 1987, Mr. Gross was the
President and Chief Executive Officer of Hospital Group - National Medical
Enterprises. Mr. Gross holds a Bachelor of Science degree in Biology from Cal
State University, Northridge and a Master degree in Public Administration
(Health Care Management Option ) from the University of Southern California.
Cornelius T. Ryan has been a director of the Company since March 2000, and
was previously a director of the Company from March 1995 to March 1999.
Mr. Ryan has been a general partner of Oxford Partners since 1981 and of OBP
Management L.P., and OBP Management (Bermuda) Limited Partnership since 1992.
OBP Management L.P. and OBP Management (Bermuda) Limited Partnership are the
general partners of Oxford Bioscience Partners L.P. and Oxford Bioscience
Partners (Bermuda) Limited Partnership, respectively. Mr. Ryan is also a
director of several privately held companies. Mr. Ryan holds a Bachelor of
Commerce in Economics from the University of Ottawa, and an M.B.A. from the
University of Pennsylvania.
DIRECTOR REMUNERATION
The non-employee directors receive one thousand dollars ($1,000) for each
board meeting attended and five hundred dollars ($500) for each committee
meeting attended. Non-employee directors are also reimbursed for their
reasonable expenses incurred in connection with attending board meetings.
Non-employee directors receive periodic option grants under the Automatic
Option Grant Program in effect under the Company's 1996 Plan and are eligible
to receive option grants under the Discretionary Option Grant Program of that
plan. Each of these programs is described below.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who is first
elected or appointed as a non-employee Board member will receive at the time of
such initial election or appointment an automatic option grant for 10,000 shares
of Common Stock, provided such individual was not previously in the Company's
employ. At each annual stockholders meeting, each individual who is to continue
in service as a non-employee Board member will automatically be granted at that
meeting an option to purchase 4,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months.
Each option under the Automatic Option Grant Program has an exercise price
per share equal to 100% of the fair market value per share of Common Stock on
the option grant date and a maximum term of ten (10) years measured from the
grant date. The option is immediately exercisable for all the option shares, but
any purchased shares are subject to repurchase by the Company, at the exercise
price paid per share, upon the optionee's cessation of Board service prior to
vesting in those shares. Each initial 10,000-share grant vests, and the
Company's repurchase right lapses, as follows: (i) one-third (1/3) of the
option shares vest upon the optionee's completion of one (1) year of Board
service measured from the option grant date and (ii) the balance of the option
shares vest in a series of twenty-four (24) successive equal monthly
installments upon the optionee's completion of each additional month of Board
service over the twenty-four (24)-month period measured from the first
anniversary of such grant date. Each annual 4,000-share grant vests, and the
Company's repurchase right lapses, in a series of twelve (12) successive equal
monthly installments over the optionee's period of Board service measured from
the grant date.
Mr. Gross received an option for 10,000 shares upon his appointment to the
Board in March 2000, at an exercise price of $5 per share. On the date of the
2000 Annual Meeting, each continuing Board member will receive an option for
4,000 shares at an exercise price per share equal to the fair market value on
that date.
Mr. Ryan received an option for 10,000 shares upon his re-appointment to
the Board in March 2000, at an exercise price of $ 5 per share. On the date of
the 2000 Annual Meeting, each continuing Board member will receive an option for
4,000 shares at an exercise price per share equal to the fair market value on
that date.
DISCRETIONARY OPTION GRANT PROGRAM
Under the Discretionary Option Grant Program, eligible individuals in the
Company's employ or service (including non-employee Board members, officers and
consultants) may, at the discretion of the Compensation Committee of the Board,
as Plan Administrator, be granted options to purchase shares of Common Stock at
an exercise price not less than 100% of their fair market value on the grant
date. The Compensation Committee will have complete discretion to determine the
vesting schedule, maximum term and the status under Federal tax laws of any such
option grant. No non-employee Board member received any option grants under the
Discretionary Option Grant Program during the 1999 fiscal year.
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MANAGEMENT
The following sets forth the names, ages and positions of the Company's
executive officers as of March 31, 2000:
NAME AGE POSITION
---- --- --------
James D. Durham............. 53 Chief Executive Officer
John V. Cracchiolo.......... 43 President, Chief Financial Officer
and Secretary
Keith M. Roberts............ 35 Executive Vice President, General Counsel
and Assistant Secretary
Nancy Nelson................ 47 Executive Vice President and Chief Operating Officer
Patrick Ahearn.............. 45 Executive Vice President, Product Management
Michael Wilstead............ 42 Executive Vice President, Sales and Marketing
Randall MacDonald........... 38 Executive Vice President, Customer Services
Andrew Rushmere............. Executive Vice President, Research and Development
Michelle Philpot............ 34 Vice President, Finance and Chief Accounting Officer
BACKGROUND
John V. Cracchiolo serves as the Company's President, Chief Financial
Officer and Secretary. Mr. Cracchiolo joined the Company in May 1995 as its
Executive Vice President, Chief Financial Officer and Secretary. In May 1998,
he was promoted to President and Chief Operating Officer. Prior to joining the
Company, Mr. Cracchiolo worked for PSICOR, Inc., a health care services
company, serving as its Chief Financial Officer from February 1993 to May 1995,
and its corporate Controller from May 1989 to February 1993. Previously, Mr.
Cracchiolo worked in various management positions for software, hardware,
defense contractor and personnel and professional services organizations within
the health care and other industries. Mr. Cracchiolo holds a B.S. in Business
Administration from California State University, Long Beach and is a Certified
Public Accountant.
Keith M. Roberts serves as the Company's Executive Vice President, General
Counsel and Assistant Secretary. Mr. Roberts joined the Company in March 1997 as
Vice President and General Counsel and became Executive Vice President, General
Counsel and Assistant Secretary in February 1998. Mr. Roberts served as the
Company's Chief Financial Officer from June 1998 to April 1999. From May 1995 to
March 1997, Mr. Roberts was an associate of Brobeck, Phleger & Harrison LLP, a
private law firm. From September 1992 to May 1995,
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Mr. Roberts was an associate of Hale & Dorr, a private law firm. Mr. Roberts
holds a J.D. from Stanford Law School and a B.A. in Economics and Philosophy
from the University of Rochester.
Nancy Nelson, Executive Vice President and Chief Operating Officer, joined
the Company in March 1999. Before joining the Company, Ms. Nelson was the Senior
Vice President and Chief Operating Officer of The Compucare Company. From
October 1997 until April 1998, Ms. Nelson was Compucare's Senior Vice President
of Product Marketing. Prior to her employment at The Compucare Company, which
was acquired by QuadraMed in March 1999, Ms. Nelson was a principal at First
Consulting Group, a provider of information technology and other consulting
services to payors, providers and healthcare organizations. Ms. Nelson holds a
B.S. in Biological Sciences/Biochemistry from the University of California and
has completed a graduate internship in Medical Technology at California State
University of Long Beach.
Patrick Ahearn, Executive Vice President of Product Management, joined the
Company in October 1998. Before joining the Company, Mr. Ahearn was Chief
Financial and Chief Information Officer at the Medical Center at Princeton, New
Jersey, a non-profit teaching integrated delivery network. In addition to his
financial and information system responsibilities, he was involved in the
development of the Medical Center's Physician Hospital Organization (PHO),
Medical Services Organization (MSO), its real estate company and its for-profit
ventures. Prior to his experience at Princeton, Mr. Ahearn worked in New York
City for a CPA firm, Pannell Kerr Forster. His experience was almost exclusively
in the healthcare arena and included both the audit and consulting aspects of
the practice. Mr. Ahearn received a Bachelors of Business Administration from
Iona College, New York.
Michael Wilstead, Executive Vice President of Sales and Marketing, joined
the Company in July 1998 as Vice President of Sales. Prior to joining QuadraMed,
Mr. Wilstead served as a group president at STERIS Corporation, a world leader
in microbial reduction and surgical support products. Prior to that, he held
positions at AMSCO International and AMSCO Canada, both of which are medical
equipment companies. Mr. Wilstead also founded Rocky Mountain Medical, a durable
medical equipment company, which he sold after six years. Mr. Wilstead holds a
bachelor of science in business administration from the University of Phoenix.
Randall R. Macdonald serves as Executive Vice President of Customer
Services for QuadraMed Corporation. Prior to joining QuadraMed, Mr. Macdonald
held positions as Manager of Information Technology Management for Nissan Motor
Corporation USA and as a senior manager with Andersen Consulting. Mr. Macdonald
holds a Bachelor of Science degree from San Diego State University. He is a
member of the Project Management Institute.
Andrew K. Rushmere, Executive Vice President of Research and Development,
joined company in January 2000 as Executive Vice President of Research and
Development. Most recently, Mr. Rushmere served as vice president at Superior
Consulting, where he was responsible for strategic marketing as well as business
development opportunities and partnerships. Prior to his tenure at Superior, Mr.
Rushmere served as president of Aviant Information, Inc., a division of
Whittaker Corporation. Mr. Rushmere began his work with Whittaker Corporation as
vice president of XYPlex/Hughes LAN Systems. Mr. Rushmere has also held
positions at Persetel Networks as chief technology officer and strategic
marketing vice president, at Grinaker Networks Systems as national sales
manager, at Quality Assured as president and at Hewlett Packard as senior
technical sales manager. Mr. Rushmere earned a T3 in electrical engineering from
SA Navy and a master's degree in marketing management from the University of San
Francisco.
Michelle Philpot, Vice President of Finance and Chief Accounting Officer,
leads the Company's Finance department, reporting to the Chief Financial
Officer. Most recently, Ms. Philpot served as QuadraMed's director of financial
planning. Prior to joining QuadraMed, Ms. Philpot held positions as manager of
worldwide reporting and assistant controller for Digidesign, Inc., a developer
of audio editing software and systems. Ms. Philpot also spent four years in the
audit department at PricewaterhouseCoopers. Ms. Philpot holds a bachelor of
science in business from California State University - Sacramento. She is a
Certified Public Accountant.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities
(collectively, "Insiders"), to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent stockholders are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) reports they
file. Based solely on its review of the copies of such forms received by it, or
written representation from certain reporting persons that no Form 5s were
required for those persons, the Company believes that all reporting requirements
under Section 16(a) for the fiscal year ended December 31, 1999 were met in a
timely manner by its directors, executive officers, and greater than ten percent
beneficial owners.
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain information regarding the
compensation earned during the last three fiscal years by (i) the Company's
Chief Executive Officer and (ii) each of the four other most highly compensated
executive officers of the Company serving as such as of the end of the last
fiscal year whose total annual salary and bonus exceeded $100,000, for services
rendered in all capacities to the Company and its subsidiaries. Such individuals
will be hereafter referred to as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- ------------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS AWARDS OPTIONS/WARRANTS COMPENSATION
------------------ ------ -------- -------- ---------- ---------------- ------------
James D. Durham.............. 1999 $374,000 $367,307 -- 100,000 $519,066(5)
Chairman of the Board and 1998 275,000 412,500 $1,862,000(3) 300,000 3,000(5)
Chief Executive Officer 1997 225,000 100,000 -- 305,000 --
John V. Cracchiolo........... 1999 256,000 251,580 -- 75,000 $ 33,244(5)
President 1998 200,000 210,000 997,500(3) 150,000 1,006(5)
1997 159,375(1) 103,000 -- 155,000 --
Keith M. Roberts............. 1999 210,000 84,000 -- 35,000 --
Executive Vice President 1998 159,375(2) 131,250 498,750(3) 35,000 --
Counsel 1997 98,958(4) 50,000 -- 100,000 --
Nancy Nelson................. 1999 206,000 92,700 -- 125,000 --
Executive Vice President
and 1998 190,000 76,220 -- 14,853 --
Chief Operating Officer 1997 158,750 55,500 -- 34,657 --
Patrick Ahearn............... 1999 200,000 -- -- 20,000 --
Executive Vice President 1998 49,134(6) -- -- 100,000 --
Product Management
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(1) Effective August 1997, Mr. Cracchiolo's annual salary was increased from
$150,000 to $175,000 by the Board of Directors.
(2) Effective July 1998, Mr. Robert's annual salary was increased from $150,000
to $175,000 by the Board of Directors.
(3) In October 1998, each of Mr. Durham, Mr. Cracchiolo and Mr. Roberts was
awarded a right to receive 112,000, 60,000 and 30,000 shares of Common
Stock, respectively, under the Company's 1996 Stock Incentive Plan, such
shares to be issued in October, 2003, without payment from the recipient,
provided that each such individual remains in the Company's service through
such date. As of the last day of the 1999 fiscal year, the value of the
bonus share awards held by each such individual, based on the market price
of the underlying shares of Common Stock on that date, was the following:
Mr. Durham - $976,528; Mr. Cracchiolo - $523,140; and Mr. Roberts -
$261,570. No dividends are payable with respect to the bonus share awards
until such time as the underlying shares of Common Stock have been issued.
(4) Represents salary paid from March 1997 through December 1997.
(5) Represents premiums paid for split-dollar life insurance.
(6) Represents salary paid from September 1998 through December 1998.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the stock option
grants made to each of the Named Executive Officers during the 1999 fiscal year.
No stock appreciation rights were granted during the 1999 fiscal year to the
Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL
--------------------------------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
TOTAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OR TERM(3)
OPTIONS IN FISCAL BASE PRICE EXPIRATION --------------------
NAME GRANTED(1) 1999 PER SHARE(2) DATE 5% 10%
---- ---------- ---------- ------------- ---------- --------- -----------
James D. Durham........................... 100,000 3.9% $8.3125 5/18/09 $522,769 $1,324,798
John V. Cracchiolo........................ 75,000 3.0% 8.3125 5/18/09 $392,076 993,599
Keith M. Roberts.......................... 35,000 1.4% 7.3750 12/7/09 $162,333 411,385
Nancy Nelson.............................. 100,000 3.9% 8.7500 3/22/09 $550,283 1,394,525
Nancy Nelson.............................. 25,000 1.0% 7.3750 12/7/09 $115,952 293,846
Patrick Ahearn............................ 20,000 0.8% 8.3125 5/18/09 $104,554 264,960
(1) Each option set forth in the table above has a maximum term of ten (10)
years measured from the grant date, subject to earlier termination upon the
executive officer's termination of service with the Company. Each option
will become exercisable for 25% of the option shares upon the optionee's
completion of one year of service measured from the grant date and will
become exercisable for the remaining shares in equal monthly installments
over the next three years of service thereafter. The option will immediately
become exercisable for all of the option shares upon an acquisition of the
Company by merger or asset sale unless the options are assumed by the
successor corporation.
(2) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a cashless
purchase procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares and the
federal and state income tax liability incurred by the optionee in
connection with such exercise.
(3) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price appreciation
over the 10-year option term will be at the assumed 5% and 10% compounded
annual rates or at any other defined level. Unless the market price of the
Common Stock appreciates over the option term, no value will be realized
from the option grants made to the Named Executive Officers.
OPTION EXERCISES AND YEAR-END VALUES
No stock appreciation rights were granted during the 1999 fiscal year or
outstanding at the end of such fiscal year. The following table sets forth
certain information with respect to the Named Executive Officers concerning
option exercises during the 1999 fiscal year as well as the number of shares of
QuadraMed's common stock subject to exercisable and unexercisable stock options
which the Named Executive Officers held at the end of the 1999 fiscal year.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
(#) SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
ON ($) VALUE ------------------------------ ------------------------------
NAME EXERCISE REALIZED(2) EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
---- ---------- ----------- ----------- --------------- ----------- ---------------
James D. Durham...... 355,600(3) $2,622,550(3) 481,345(4) 358,229 $ 0 $40,650
John V. Cracchiolo... -- -- 214,896 205,104 198,760 30,488
Keith M. Roberts..... -- -- 70,354 70,745 -- 47,040
Nancy Nelson......... -- -- 49,510 125,000 110,061 33,600
Patrick Ahearn....... -- -- 30,251 90,833 5,386 8,130
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(1) Calculated by determining the difference between the fair market value of
Quadramed's common stock as of December 31, 1999 and the exercise price of
the option.
(2) Calculated by multiplying the number of shares acquired on exercise by the
difference between the fair market value of the shares on the date of
exercise and the exercise price.
(3) Represents 355,600 shares of common stock issued upon exercise of a warrant
held by Mr. Durham. See "Security Ownership of Certain Beneficial Owners and
Management."
(4) Includes 134,574 shares of common stock issuable upon exercise of a warrant
held by Trigon Resources Corporation. See "Security Ownership of Certain
Beneficial Owners and Management."
EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL ARRANGEMENTS
In April 1999, the Company entered into a letter agreement with Patrick
Ahearn, Executive Vice President of Product Management. Pursuant to the letter
agreement, Mr. Ahearn is to receive a base salary of $200,000 for the 2000
calendar year and is eligible for such annual cash bonuses as the Board of
Directors in its discretion shall award. The letter agreement also contains the
following severance provisions: (i) if Mr. Ahearn dies, his estate will receive
a special termination payment equal to one months' salary and (ii) if Mr. Ahearn
is terminated by reason of disability or an Involuntary Termination other than a
Termination for Cause (as those terms are defined in the letter agreement), Mr.
Ahearn will receive an aggregate amount equal to his then current annual rate of
base salary and will also continue to receive for a period of 12 months his
life, health and disability and other benefits. In addition, upon a Change in
Control or an Involuntary Termination other than a Termination for Cause, Mr.
Ahearn's outstanding options and all restricted or unvested Common Stock held by
him will vest immediately and remain exercisable for a period of three years
thereafter. The term of the agreement is two years from the effective date and
shall be extended automatically on each succeeding anniversary of the effective
date of the agreement for an additional one (1) year period unless, not later
than three (3) months preceding such anniversary date, the Company shall have
given written notice to Mr. Ahearn that it will not extend the term of the
letter agreement.
In May 1999, the Company entered into a letter agreement with John V.
Cracchiolo, the Company's President. Pursuant to the letter agreement, Mr.
Cracchiolo is to receive a base salary of $256,000 for the 2000 calendar year
and is eligible for such annual cash bonuses as the Board of Directors in its
discretion shall award. The letter agreement also contains the following
severance provisions: (i) if Mr. Cracchiolo dies, his estate will receive a
special termination payment equal to one months' salary and (ii) if Mr.
Cracchiolo is terminated by reason of disability or an Involuntary Termination
other than a Termination for Cause (as those terms are defined in the letter
agreement), Mr. Cracchiolo will receive an aggregate amount equal to the sum of
(a) two times his then current annual rate of base salary and (b) two times his
then current maximum bonus and will also continue to receive for a period of 24
months his life, health and disability and other benefits. In addition, upon a
Change in Control or an Involuntary Termination other than a Termination for
Cause, Mr. Cracchiolo's outstanding options and all restricted or unvested
Common Stock held by him will vest immediately and remain exercisable for the
full term of the option. The term of the agreement is two
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years from the effective date and shall be extended automatically on each
succeeding anniversary of the effective date of the agreement for an additional
one (1) year period, unless not later than three (3) months preceding such
anniversary date, the Company shall have given written notice to Mr. Cracchiolo
that it will not extend the term of the letter agreement.
In January 1999, the Company entered into a letter agreement with James D.
Durham, the Company's Chief Executive Officer. Pursuant to the letter agreement,
Mr. Durham is to receive a base salary of $373,000 for the 2000 calendar year.
In addition, Mr. Durham is eligible for such annual cash bonuses as the Board of
Directors in its discretion shall award, based upon the recommendation of the
Board's Compensation Committee. The letter agreement also contains the following
severance provisions: (i) if Mr. Durham dies, his estate will receive a special
termination payment equal to one months' salary and (ii) if Mr. Durham is
terminated by reason of disability or an Involuntary Termination other than a
Termination for Cause (as those terms are defined in the letter agreement), Mr.
Durham will receive an aggregate amount equal to the sum of (a) three times his
then current annual rate of base salary and (b) three times his then current
maximum bonus and will also continue to receive for a period of 24 months his
life, health and disability and other benefits. In addition, upon a Change in
Control or an Involuntary Termination other than a Termination for Cause, Mr.
Durham's outstanding options and all restricted or unvested Common Stock held by
him will vest immediately and remain exercisable for the full term of the
option. The term of the agreement is two years from the effective date and shall
be extended automatically on each succeeding anniversary of the effective date
of the agreement for an additional one (1) year period, unless not later than
three (3) months preceding such anniversary date, the Company shall have given
written notice to Mr. Durham that it will not extend the term of the letter
agreement.
In April 1999, the Company entered into a letter agreement with Nancy
Nelson, Executive Vice President and Chief Operating Officer. Pursuant to the
letter agreement, Ms. Nelson is to receive a base salary of $365,479 for the
2000 calendar year and is eligible for such annual cash bonuses as the Board of
Directors in its discretion shall award. The letter agreement also contains the
following severance provisions: (i) if Ms. Nelson dies, her estate will receive
a special termination payment equal to one months' salary and (ii) if Ms. Nelson
is terminated by reason of disability or an Involuntary Termination other than a
Termination for Cause (as those terms are defined in the letter agreement), Ms.
Nelson will receive an aggregate amount equal to her then current annual rate of
base salary and will also continue to receive for a period of 12 months her
life, health and disability and other benefits. In addition, upon a Change in
Control or an Involuntary Termination other than a Termination for Cause, Ms.
Nelson's outstanding options and all restricted or unvested Common Stock held by
her will vest immediately and remain exercisable for a period of three years
thereafter. The term of the agreement is two years from the effective date and
shall be extended automatically on each succeeding anniversary of the effective
date of the agreement for an additional one (1) year period unless, not later
than three (3) months preceding such anniversary date, the Company shall have
given written notice to Ms. Nelson that it will not extend the term of the
letter agreement.
In April 1999, the Company entered into a letter agreement with Keith M.
Roberts, the Company's Executive Vice President and General Counsel. Pursuant to
the letter agreement, Mr. Roberts is to receive a base salary of $210,000 for
the 2000 calendar year and is eligible for such annual cash bonuses as the Board
of Directors in its discretion shall award. The letter agreement also contains
the following severance provisions: (i) if Mr. Roberts dies, his estate will
receive a special termination payment equal to one months' salary and (ii) if
Mr. Roberts is terminated by reason of disability or an Involuntary Termination
other than a Termination for Cause (as those terms are defined in the letter
agreement), Mr. Roberts will receive an aggregate amount equal to his then
current annual rate of base salary and will also continue to receive for a
period of 12 months his life, health and disability and other benefits. In
addition, upon a Change in Control or an Involuntary Termination other than a
Termination for Cause, Mr. Robert's outstanding options and all restricted or
unvested Common Stock held by him will vest immediately and remain exercisable
for a period of three years thereafter. The term of the agreement is two years
from the effective date and shall be extended automatically on each succeeding
anniversary of the effective date of the agreement for an additional one (1)
year period unless, not later than three (3) months preceding such anniversary
date, the Company shall have given written notice to Mr. Roberts that it will
not extend the term of the letter agreement.
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In connection with an acquisition of the Company by merger or asset sale,
each outstanding option held by the Chief Executive Officer and the other
executive officers under the Company's 1994 Stock Plan (the predecessor equity
incentive program to the 1996 Plan) or the 1996 Plan will automatically
accelerate in full, except to the extent such options are to be assumed by the
successor corporation. In addition, the Compensation Committee as Plan
Administrator of the 1996 Plan will have the authority to provide for the
accelerated vesting of the shares of Common Stock subject to outstanding options
held by the Chief Executive Officer or any other executive officer or any
unvested shares of Common Stock subject to direct issuances held by such
individual, in connection with the termination of the officer's employment
following: (i) a merger or asset sale in which these options are assumed or are
assigned or (ii) certain hostile changes in control of the Company.
DEFERRED COMPENSATION PLAN
Effective January 1, 2000 QuadraMed adopted a deferred compensation plan
(the"DCP") the purpose of which is to provide specified benefits to a select
group of management and highly compensated employees and directors who
contribute materially to the continued growth, development and future business
success of QuadraMed. The DCP is unfunded for tax purposes and for purposes of
Title I of ERISA. A committee of the board of directors is responsible, in its
sole discretion, to select the employees and directors to participate in the
DCP.
Under the DCP, a participant may elect to defer for each plan year a
minimum amount of $2,000 of his or her base annual salary and a minimum amount
of $2,000 of his or her annual bonus, and a maximum amount of 90% (less
applicable withholding) of his or her base annual salary, a maximum amount of
90% (less applicable withholding) of his or her annual bonus, and 100% of his
or her director's fees. QuadraMed may, in its sole discretion, credit any
amount it desires to any participant's company contribution account. QuadraMed
is required to contribute a matching amount equal to 50% of a participant's
annual deferral amount, up to 2% of such participant's total annual
compensation for each plan year, to the participant's company contribution
account. The amount contributed by a participant is 100% vested at all times.
The amount contributed by QuadraMed is vested in relation to each participant's
years of service on the date of termination of employment, as follows: (a) 0%
if less than 1 year; (b) 25% for 1 year; (c) 50% for 2 years; (d) 75% for 3
years; and (e) 100% for 4 years or more. In the event of a change in control or
involuntary termination of employment, other than a termination of employment
for cause, a participant's company contribution account immediately becomes
100% vested.
STOCK EXCHANGE DEFERRED COMPENSATION PLAN
Effective January 3, 2000, QuadraMed adopted a Stock Exchange Deferred
Compensation Plan (the "SEDCP") the purpose of which is to provide specified
benefits to a select group of management and highly compensated employees who
contribute materially to the continued growth, development and future business
success of QuadraMed. The SEDCP is unfunded for tax purposes and for purposes of
Title I of ERISA. A committee of the board of directors is responsible, in its
sole discretion, to select the employees and directors to participate in the
SEDCP.
Under the SEDCP, QuadraMed is required to credit an amount to a
participant's account under the SEDCP as of the date specified in the
participant's Exchange Agreement. One-half of the amount so credited must be
credited to the participant's company stock account and the other half must be
credited to the participant's other investments account. A participant is
vested in his or her SEDCP account in relation to each participant's years of
service on the date of termination of employment, as follows: (a) 0% if less
than 3 years; (b) 100% for 3 years or more. In the event of a change in
control, a participant's death, disability, retirement or involuntary
termination of employment, other than a termination of employment for cause, a
participant's SEDCP immediately becomes 100% vested.
On January 3, 2000, James Durham entered into an Exchange Agreement with
QuadraMed pursuant to which Mr. Durham agreed that the stock options previously
granted to him in 1998 to acquire 300,000 shares of stock in QuadraMed would be
cancelled and in consideration for such cancellation, Mr. Durham would receive
an amount equal to $2,416,000 which would be credited to his SEDCP account in
accordance with the SEDCP.
On January 3, 2000, John Cracchiolo entered into an Exchange Agreement with
QuadraMed pursuant to which Mr. Cracchiolo agreed that the stock options
previously granted to him in 1998 to acquire 150,000 shares of stock in
QuadraMed would be cancelled and in consideration for such cancellation, Mr.
Cracchiolo would receive an amount equal to $1,208,000 which would be credited
to his SEDCP account in accordance with the SEDCP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective January 3, 2000, QuadraMed adopted a Supplemental Executive
Retirement Plan (the "SERP") the purpose of which is to provide specified
benefits to a select group of management and highly compensated employees who
contribute materially to the continued growth, development and future business
success of QuadraMed. The SERP is unfunded for tax purposes and for purposes of
Title I of ERISA. A committee of the board of directors is responsible, in its
sole discretion, to select the employees and directors to participate in the
SERP.
Under the SERP, the participant would receive a 20-year installment
benefit, payable monthly and commencing at age sixty (60), equal to the product
of 0.05 multiplied by such participant's highest annual compensation multiplied
by his or her years of service (not to exceed 13) multiplied by 1/12. A
participant is vested in his or her SERP benefit in relation to each
participant's years of service on the date of termination of employment, as
follows: (a) 0% if less than 7 years; (b) 100% for 7 years or more. James
Durham and John Cracciolo are each participants in the SERP.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 2000 by (i) each person
(or group of affiliated persons) known by the Company to be the beneficial owner
of more than five percent of the outstanding shares of the Company's Common
Stock, (ii) each director of the Company, (iii) each Named Executive Officer of
the Company and (iv) all executive officers and directors of the Company as a
group.
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT
------------------------- ---------- --------
Pilgrim Baxter & Associates, Ltd(2)...................... 1,860,700 7.3%
825 Duportail Road
Wayne, PA 19087
AXA Financial, Inc.(3)................................... 1,408,488 5.5%
1290 Avenue of the Americas
New York, NY 10104
Nitin T. Mehta(4)........................................ 1,326,362 5.2%
58 Greenoaks Drive
Atherton, CA 94027
Joe D. Whisenhunt, Sr.(5)................................ 1,255,190 4.9%
Harmony Meadows Ranch
Route 2, Box 150
Bee Branch, AR 72013
James D. Durham(6)....................................... 1,330,469 5.2%
John V. Cracchiolo(7).................................... 480,000 1.9%
Keith M. Roberts(8)...................................... 183,980 *
Nancy Nelson(9).......................................... 174,510 *
Patrick Ahearn(10)....................................... 121,084 *
Albert L. Greene(11)..................................... 18,000 *
Scott Gross(12).......................................... 12,000 *
Michael J. King(13)...................................... 159,322 *
Joan P. Neuscheler(14)................................... 145,493 *
E.A. Roskovensky(15)..................................... 12,900 *
Cornelius T. Ryan(16).................................... 28,000 *
All executive officers and directors as a group (15
persons)(17)........................................... 3,053,727 12%
- ---------------
* Less than one percent.
(1) Percentage ownership is based on approximately25,550,457 shares of Common
Stock outstanding on March 31, 2000. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of Common Stock subject to options, warrants and convertible notes
currently exercisable or convertible, or exercisable or convertible within
60 days, are deemed outstanding for computing the percentage of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them.
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(2) Represents shares beneficially owned by Pilgrim Baxter & Associates, Ltd.
("Pilgrim Baxter") based on the information contained in Amendment No 2 to
Schedule 13G filed on January 19, 1999. Pilgrim Baxter is an investment
adviser registered under the Investment Advisers Act of 1940.
(3) Represents shares beneficially owned by AXA Financial, Inc., formerly The
Equitable Companies Incorporated ("AXA") based on information in a Schedule
13G filed on February 14, 2000. All shares of the Common Stock reported as
beneficially owned by AXA were directly beneficially owned by subsidiaries
of AXA.
(4) Represents shares beneficially owned by Nitin T. Mehta based on information
contained in a Schedule 13G filed on June 15, 1998.
(5) Represents shares beneficially owned by Joe D. Whisenhunt, Sr. based on
information contained in a Schedule 13D filed on October 15, 1998.
(6) Includes 23,295 shares of Common Stock owned by Trigon Resources
Corporation ("Trigon"), a corporation owned by Mr. Durham and his two
children and 134,574 shares of Common Stock issuable upon exercise of a
warrant held by Trigon. Also includes 705,000 shares issuable upon exercise
of options, 434,791 of which are exercisable within 60 days of March 31,
2000 and 112,000 shares subject to a stock bonus award, which shares will
be issued in October 2003, or earlier, in the event certain performance
milestones are attained. Mr. Durham's address is 22 Pelican Way, San
Rafael, California 94901.
(7) Includes 420,000 shares issuable upon exercise of options, 265,416 of which
are exercisable within 60 days of March 31, 2000 and 60,000 shares subject
to a stock bonus award, which shares will be issued in October 2003, or
earlier, in the event certain performance milestones are attained.
(8) Includes 153,980 shares issuable upon exercise of options, 83,235 of which
are exercisable within 60 days of March 31, 2000 and 30,000 shares subject
to a stock bonus award, which shares will be issued in October 2003, or
earlier, in the event certain performance milestones are attained.
(9) Includes 174,510 shares of Common Stock issuable upon exercise of options,
78,677 of which are exercisable within 60 days of March 31, 2000.
(10) Includes 121,084 Shares of Common Stock issuable upon exercise of options,
40,667 of which are exercisable within 60 days of March 31, 2000.
(11) Includes 18,000 shares issuable upon exercise of options, 17,000 of which
are exercisable within 60 days of March 31, 2000.
(12) Includes 12,000 shares of Common Stock issuable upon exercise of options,
2,000 of which are exercisable within 60 days of March 31, 2000.
(13) Includes 159,322 shares issuable upon exercise of options, 159,322 of which
are exercisable within 60 days of March 31, 2000.
(14) Includes 122,005 shares of Common Stock issuable upon exercise of certain
warrants issued to Tullis-Dickerson Capital Focus, L.P. Also includes
22,000 shares issuable upon exercise of options held by Ms. Neuscheler,
21,000 of which are exercisable within 60 days of March 31, 2000. Ms.
Neuscheler, a director of the Company, is a general partner of
Tullis-Dickerson Partners, which is the general partner of Tullis-Dickerson
Capital Focus, L.P. Ms. Neuscheler disclaims beneficial ownership in the
shares held by Tullis-Dickerson Capital Focus, L.P., except to the extent
of her pecuniary interest arising from her general partnership interest in
Tullis-Dickerson Partners. Also includes 744 shares held in trust for the
benefit of Susannah Dickerson and 744 shares held in trust for the benefit
of Caroline Dickerson. Ms. Neuscheler disclaims beneficial ownership in
such shares.
(15) Includes 10,000 shares of Common Stock issuable upon exercise of options,
none of which are exercisable within 60 days of March 31, 2000.
(16) Includes 28,000 shares of Common Stock issuable upon exercise of options,
18,000 of which are exercisable within 60 days of March 31, 2000.
(17) Includes 23,295 shares of Common Stock owned by Trigon Resources
Corporation ("Trigon"), a corporation owned by Mr. Durham and his two
children and 134,574 shares of Common Stock issuable upon exercise of a
warrant held by Trigon. Includes 2,211,865 shares issuable upon exercise
of options, 1,154,067 of which shares are exercisable within 60 days of
March 31, 2000 and 202,000 shares subject to a stock bonus award, which
shares will be issued in October 2003, or earlier, in the event certain
performance milestones are attained.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In addition to the indemnification provisions contained in the Company's
Restated Certificate of Incorporation and Bylaws, the Company has entered into
separate indemnification agreements with each of its directors and officers.
These agreements require the Company, among other things to indemnify such
director or officer against expenses (including attorneys' fees), judgments,
fines and settlements (collectively, "Liabilities") paid by such individual in
connection with any action, suite or proceeding arising out of such individual's
status or service as a director or officer of the Company (other than
Liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest) and to advance expenses incurred by such
individual in connection with any proceeding against such individual with
respect to which such individual may be entitled to indemnification by the
Company.
Michael King, a director of the Company, is the Chief Executive Officer
of Healthscribe, Inc., a provider of transcription services. During 1999,
QuadraMed paid a total of $717,278 to Healthscribe, Inc. for transcription
services.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
QUADRAMED CORPORATION
Date: April 30, 2000
By: /s/ KEITH M. ROBERTS
------------------------------------
Keith M. Roberts
Executive Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this report has been signed by the following persons in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES D. DURHAM Chairman of the Board April 30, 2000
- ---------------------------------- and Chief Executive Officer
James D Durham (Principal Executive Officer)
/s/ JOHN V. CRACCHIOLO President, April 30, 2000
- ---------------------------------- Chief Financial Officer and Secretary
John V. Cracchiolo (Principal Financial Officer)
/s/ ALBERT L. GREENE Director April 30, 2000
- -----------------------------------
Albert L. Greene
/s/ SCOTT GROSS Director April 30, 2000
- -----------------------------------
Scott Gross
/s/ MICHAEL J. KING Director April 30, 2000
- -----------------------------------
Michael J. King
/s/ E. A. ROSKOVENSKY Director April 30, 2000
- -----------------------------------
E. A. Roskovensky
/s/ CORNELIUS T. RYAN Director April 30, 2000
- -----------------------------------
Cornelius T. Ryan
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QUADRAMED CORPORATION
1999 FORM 10-K/A ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART III.................................................................... 2
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............... 2
ITEM 11. EXECUTIVE COMPENSATION........................................... 7
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 17
SIGNATURES.................................................................. 18