Exhibit III
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") dated as of December 29, 1997 by
and among QuadraMed Corporation, a Delaware corporation ("QuadraMed"), RH
Acquisition Co., a Delaware corporation ("Sub A") and FA Acquisition Co., a
Delaware corporation ("Sub B"), Resource Health Partners, L.P., a Delaware
limited partnership ("RHP"), Resource Holdings, Ltd., a Pennsylvania
corporation ("Resource Holdings") and FRA Acquisition Inc., a Delaware
corporation ("FRA") and State Street Bank and Trust Company (the "Escrow
Agent").
RECITALS
A. This Agreement is being entered into by the parties pursuant to
Section 2.9(b) of that certain Acquisition Agreement and Plan of Merger dated
as of December 29, 1997 (the "Merger Agreement") by and among QuadraMed, Sub A
and Sub B and RHP, Resource Holdings and FRA, pursuant to which Sub A will be
merged with and into Resource Holdings (the "Sub A Merger") and Sub B will be
merged with and into FRA (the "Sub B Merger" and, together with the Sub A
Merger, the "Mergers") and QuadraMed will issue to RHP shares of Common Stock
of QuadraMed ("QuadraMed Shares") in exchange for all outstanding capital
stock of Resource Holdings and FRA, all on the terms and conditions set forth
in the Merger Agreement.
B. Pursuant to the Merger Agreement, RHP has agreed to deposit in
escrow a portion of the QuadraMed Shares received by RHP in the Mergers as
security for its obligation to indemnify QuadraMed, Sub A and Sub B pursuant
to the Merger Agreement, all on the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Establishment of Escrow.
(a) After the issuance and delivery of the QuadraMed Shares to
RHP pursuant to the Merger Agreement, RHP shall cause to be deposited with the
Escrow Agent, to be held in an escrow account established by the Escrow Agent
for the purposes hereof (the "Escrow Account") and designated QuadraMed Escrow
Account, or any account having a similar designation, certificates for an
aggregate of 155,014 QuadraMed Shares, duly endorsed in blank or with
appropriate executed stock powers, to be held in accordance with the terms and
conditions of this Agreement. For the purposes of this Agreement, in the
event QuadraMed is acquired by merger or otherwise, the term "Escrow Shares"
shall include all amounts received in exchange for or in respect of the Escrow
Shares.
(b) The Escrow Agent hereby agrees to act as escrow agent, to
accept delivery of the Escrow Shares, and to hold, safeguard and disburse the
Escrow Shares pursuant to the terms and conditions hereof.
2. Release of Escrow Shares. The Escrow Shares shall be held by the
Escrow Agent until the Escrow Agent is required to release the Escrow Shares
pursuant to the terms hereof. Promptly following December 29, 1998 (the
"Initial Escrow Release Date"), the Escrow Agent shall cause all Escrow Shares
to be released and transferred to RHP; provided, however, that in the event
that the Escrow Agent has received a Claim Notice (as defined below) of any
Claim or Claims (as defined below) prior to the Initial Escrow Release Date
and either (i) the Escrow Agent receives joint written instructions from or on
behalf of QuadraMed and RHP ("Joint Instructions") instructing the Escrow
Agent to release all or a portion of the Escrow Shares as specified in the
Joint Instructions or (ii) the Escrow Agent receives notice from either
QuadraMed or RHP of the entry of a final non-appealable order of a court of
competent jurisdiction (together with a legal opinion by counsel for the
presenting party, providing an unqualified opinion that the court order is
final and non-appealable, which the Escrow Agent shall act on without further
question) (a "Final Order") with respect to such Claim or Claims and the
disposition of such portion of the Escrow Shares, and instructing the Escrow
Agent to release all or a portion of the Escrow Shares in accordance with such
Final Order, then, in such event, the Escrow Agent shall release all or a
portion of the Escrow Shares specified in such Joint Instructions or Final
Order, as the case may be.
3. Claims.
(a) Notice. From time to time on or before December 29, 1998,
QuadraMed may provide written notice to RHP and the Escrow Agent (a "Claim
Notice") specifying in reasonable detail the nature and dollar amount of one
or more claims (a "Claim" or "Claims") being made under Article X of the
Merger Agreement, certifying that such Claim is being made in accordance with
the requirements of Section 10.2 of the Merger Agreement, and setting forth
(with reasonably detailed calculations) the portion of the Threshold Amount
under the Merger Agreement that has not yet been utilized as an offset to
prior Claims ("Remaining Threshold Amount"). Thereafter, if RHP gives notice
to QuadraMed and the Escrow Agent disputing any Claim or other information
contained in the Claim Notice (a "Counter Notice") within thirty (30) days
following receipt by the Escrow Agent and by RHP of a Claim Notice regarding
such Claim, such Claim shall be resolved as provided in Section 3(b). If no
Counter Notice is received by the Escrow Agent within such thirty (30) day
period, then the amount of damages claimed by QuadraMed as set forth in the
related Claim Notice shall be deemed established for purposes of this
Agreement, and, at the end of such thirty (30) day period, the Escrow Agent
shall release and transfer promptly, and in any event within five (5) days,
the number of Escrow Shares equal to the dollar amount of the Claim (after
giving effect to the application of the Remaining Threshold Amount), divided
by $23.8688, which released Escrow Shares shall be in full satisfaction of
such Claim. The Escrow Agent shall have no duty to inquire into or consider
whether a Claim complies with the requirements of the Merger Agreement.
(b) If a Counter Notice is given with respect to a Claim, the
Escrow Agent shall release and transfer all or a portion of the Escrow Shares
from the Escrow Account only (i) in accordance with the Claim Notice to the
extent a Claim is not disputed by a Counter Notice, (ii) in accordance with
Joint Instructions or (iii) in accordance with a Final Order. The number of
QuadraMed Shares to be released from the Escrow Account pursuant to clauses
(i) and (iii) of the immediately preceding sentence shall (after giving effect
to the application of the Remaining Threshold Amount), be equal to the dollar
amount of the Claim divided by $23.8688.
(c) QuadraMed and RHP agree to deliver promptly appropriate
Joint Instructions to the Escrow Agent upon reaching a mutually agreed
resolution of any Claim or upon issuance of a Final Order.
4. Provisions Regarding the Escrow Agent.
(a) Liability of the Escrow Agent.
(i) This Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Agreement against the
Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto, including the Merger Agreement,
except for those contained in this Agreement.
(ii) The Escrow Agent shall not be liable for any losses,
costs or expenses, except for its own gross negligence or willful misconduct.
In no event shall the Escrow Agent and its officers, directors and employees
be liable to any party for indirect, special, punitive or consequential
damages (including, without limitation, lost profits). The Escrow Agent shall
not incur any liability for (i) any act or failure to act made or omitted in
good faith, or (ii) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Agreement, that the Escrow Agent shall in good faith believe to be genuine,
nor will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel, including in-house
counsel, in connection with the Escrow Agent's duties under this Agreement and
shall be fully protected in any act taken, suffered, or permitted by it in
good faith in accordance with the advice of counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any person acting
or purporting to act on behalf of any party to this Agreement.
(b) Duties of Escrow Agent.
(i) The Escrow Agent shall not be under any duty to give
the Escrow Shares held by it hereunder any greater degree of care than it
gives its own similar property and shall not be required to invest any funds
held hereunder.
(ii) The Escrow Agent does not have any interest in the
Escrow Shares deposited hereunder but is serving as escrow holder only and
having only possession thereof. Any payments of income from this Escrow Shares
shall be subject to withholding regulations then in force with respect to
United States taxes. The parties hereto will, if necessary, provide the
Escrow Agent with appropriate Internal Revenue Service Forms W-8 or W-9 for
tax identification number certification, or non-resident alien certifications.
The parties hereto understand that if their tax identification numbers are not
certified to the Escrow Agent, the Internal Revenue Code, as amended from time
to time, may require withholding of a portion of any interest or other income
earned on the Escrow Account.
(iii) The Escrow Agent makes no representation as to the
validity, value, genuineness or collectability of any security or other
document held by or delivered to it.
(iv) The Escrow Agent shall not be called upon to advise
any party as to the wisdom in selling or retaining or taking or refraining
from any action with respect to any securities or other assets or property
deposited in the Escrow Shares established hereunder.
(c) Resignation of The Escrow Agent. The Escrow Agent may
resign at any time upon giving at least thirty (30) days' written notice to
the parties; provided, however, that no such resignation shall become
effective until the appointment of a successor escrow agent which shall be
accomplished in accordance with this section. The parties shall use their
best efforts to mutually agree on a successor escrow agent within thirty (30)
days after receiving such notice. If the parties fail to agree on a successor
escrow agent within such time, the Escrow Agent shall have the right to
appoint a successor escrow agent authorized to do business in the State of
California. The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. Upon the
effective appointment of a successor escrow agent, the Escrow Agent shall be
discharged from any further duties and liability under this Agreement.
(d) Controversies. In the event of any disagreement among the
parties hereto other than the Escrow Agent resulting in adverse Claims or
demands being made in connection with the Escrow Shares, or in the event that
the Escrow Agent is in doubt as to what action it should take hereunder, the
Escrow Agent will not be required to determine the controversy or to take any
action regarding it. The Escrow Agent shall be entitled to retain all or any
portion of the Escrow Shares subject to such dispute, without liability to any
party, until the Escrow Agent shall have received (i) Joint Instructions or
(ii) a Final Order, in which event the Escrow Agent shall disburse the Escrow
Shares in accordance with such Joint Instructions or Final Order. The Escrow
Agent may, but shall be under no duty whatsoever to, institute or defend any
legal proceedings.
(e) Fees and Expenses. QuadraMed shall pay the Escrow Agent
compensation (as payment in full) for the services to be rendered by the
Escrow Agent hereunder in the amount of Two Thousand Five Hundred Dollars
($2,500) at the time of execution of this Agreement and agree to reimburse the
Escrow Agent for all reasonable expenses, disbursements and advances incurred
or made by the Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses and disbursements of its counsel). Any such
compensation and reimbursement to which the Escrow Agent is entitled shall be
borne by QuadraMed. The Escrow Agent shall be entitled to reimbursement on
demand to QuadraMed for all reasonable legal fees and expenses incurred in
connection with the preparation and administration of this Agreement or the
escrow created hereby which are in excess of its compensation for normal
services hereunder, including without limitation, payment of any reasonable
legal fees and expenses incurred by the Escrow Agent in connection with the
resolution of any Claim by any party hereunder.
(f) Indemnification of the Escrow Agent.
(i) QuadraMed agrees to indemnify and hold the Escrow
Agent and its officers, directors and employees harmless against any and all
losses, claims, damages, liabilities, and expenses, including reasonable costs
of investigation, counsel fees, including allocated costs of in-house counsel,
and disbursements that may be imposed on the Escrow Agent or incurred by the
Escrow Agent in connection with the performance of its duties under this
Agreement, including but not limited to any litigation arising from this
Agreement or involving its subject matter.
(ii) QuadraMed and RHP, jointly and severally, agree to
assume any and all obligations imposed now or hereafter by any applicable tax
law with respect to the payment under the Escrow Account under this Agreement,
and to indemnify and hold the Escrow Agent harmless from and against any
taxes, additions for late payment, interest, penalties and other expenses,
that may be assessed against the Escrow Agent in any such payment or other
activities under this Agreement. QuadraMed and RHP undertake to instruct the
Escrow Agent in writing with respect to the Escrow Agent's responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting in connection with its acting as
Escrow Agent under this Agreement. QuadraMed and RHP, jointly and severally,
agree to indemnify and hold the Escrow Agent harmless from any liability on
account of taxes, assessments or other governmental charges, including without
limitation the withholding or deduction or the failure to withhold or deduct
the same, and any liability for failure to obtain proper certifications or to
properly report to governmental authorities, to which the Escrow Agent may be
or become subject in connection with or which arises out of this Agreement,
including costs and expenses (including reasonable legal fees and expenses),
interest and penalties. This Section 4(f) shall survive notwithstanding any
termination of this Agreement.
(iii) The Escrow Agent shall have no more or less
responsibility or liability on account of any action or omission of any
book-entry depository or subescrow agent employed by the Escrow Agent than any
such book-entry depository or subescrow agent has to the Escrow Agent, except
to the extent that such action or omission of any book-entry depository or
subescrow agent was caused by the Escrow Agent's own gross negligence, bad
faith or willful misconduct.
5. Ownership. QuadraMed acknowledges and agrees that RHP is, and
shall be treated as, the owner, and shall retain all rights of ownership, of
any and all portions of the Escrow Shares not distributed to QuadraMed
hereunder, and, accordingly, RHP shall retain all voting rights and rights to
dividends with respect to any Escrow Shares so held. RHP agrees that, for
purposes of federal and other taxes based on income, RHP will be treated as
the owner of the Escrow Shares for so long as such Escrow Shares are held in
the Escrow Account, and that RHP will report all income, if any, that is
earned on, or derived from, the Escrow Shares as its income in the taxable
year or years in which such income is properly included and pay any taxes
attributable thereto. The Escrow Agent shall not be entitled to any offset
against the Escrow Shares.
6. Partner Representative. The parties acknowledge that, following
the date hereof, RHP may transfer the QuadraMed Shares to the partners of RHP,
and the general partner of RHP may further transfer QuadraMed Shares to its
partners in accordance with the Merger Agreement, RHP or such Partners may
designate a representative ("Partner Representative") to receive notices and
make all determinations with regard to any Claim Notices or other actions
required of RHP under this Agreement. In such event, RHP shall notify
QuadraMed and the Escrow Agent of such election, including the identity and
address of the Partner Representative, and the Partner Representative shall
thereafter have all of the rights of RHP under this Agreement, but will have
no liability hereunder. Such appointment shall not relieve RHP of its
obligations hereunder. The Escrow Agent shall be entitled to rely on all
instructions, notices and actions of the Partner Representative as if the
Escrow Agent had received such instructions or notices or such actions had
been taken by RHP.
7. Notices. All notices, consents, waivers and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (i) delivered by hand (with written confirmation of receipt), (ii)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (iii) when received
by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
To QuadraMed: QuadraMed Corporation
00 Xxxx Xxx Xxxxxxx Xxxxx Xxxx., Xxxxx 0X
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Xxx Xxxxxx, Xxxxx Xxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To RHP: Resource Health Partners, L.P.
c/o X.X. Xxxxxx Investment
Corporation
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxx Xxx Xxxxxx
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the Escrow Agent: State Street Bank & Trust Company
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Corporate Trust Department
Fifth Floor, QuadraMed Escrow Account
Facsimile: (000) 000-0000
8. Counterparts; Facsimile. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original and all of
which, when taken together, will be deemed to constitute one and the same
Agreement. This Agreement may be executed by facsimile, with such facsimile
copy to serve as conclusive evidence of the consent and ratification of the
matters contained herein by the parties hereto.
9. Section Headings. The headings of sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation.
10. Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power or privilege under the documents referred
to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party, (ii) no waiver
that may be given by a party will be applicable except in the specific
instance for which it is given and (iii) no notice to or demand on one party
will be deemed to be a waiver of any obligation of such party or of the right
of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
11. Exclusive Agreement; Modification. This Agreement and the Merger
Agreement supersedes all prior agreements among the parties with respect to
its subject matter and constitute a complete and exclusive statement of the
terms of the agreement among the parties with respect to the subject matter
hereof. This Agreement may not be amended except by a written agreement
executed by or on behalf of QuadraMed, RHP and the Escrow Agent.
12. Governing Law. This Agreement shall be governed by the laws of the
State of New York, without regard to conflicts of law principles.
13. Consent to Jurisdiction and Service. Each of the parties hereto,
other than the Escrow Agent, hereby absolutely and irrevocably consent and
submit to the jurisdiction of the courts in the Commonwealth of Massachusetts
and of any Federal court located in said Commonwealth in connection with any
actions or proceedings brought against QuadraMed and RHP by the Escrow Agent
arising out of or relating to this Escrow Agreement. In any such action or
proceeding, QuadraMed and RHP hereby absolutely and irrevocably waive personal
service of any summons, complaint, declaration or other process and hereby
absolutely and irrevocably agree that the service thereof may be made by
certified or registered first-class mail directed to QuadraMed and RHP, as the
case may be, at their respective addresses in accordance with Section 7
hereof.
14. Force Majeure. The Escrow Agent shall not be responsible for
delays or failures in performance resulting from acts beyond its control.
Such acts shall include but not be limited to acts of God, strikes, lockouts,
riots, acts of war, epidemics, governmental regulations superimposed after the
fact, fire communication line failures, computer viruses, power failures,
earthquakes or other disasters.
15. Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties have delivered this Escrow Agreement as
of the date first written above.
QUADRAMED CORPORATION RESOURCE HEALTH PARTNERS, L.P.
By: RHP GP, L.P., its general partner
By: RHP Health, Inc., its general partner
By: /s/Xxxx X. Xxxxxxxxxx By: /s/ Xxx X. Xxxxxxx
Name: Name: Xxx X. Xxxxxxx
Title: Title: President
RH ACQUISITION CO. RESOURCE HOLDINGS, LTD.
By: /s/ Xxxx X. Xxxxxxxxxx By: /s/ Xxx X. Xxxxxxx
Name: Name: Xxx X. Xxxxxxx
Title: Title: President
FR ACQUISITION CO. FRA ACQUISITION INC.
By: /s/ Xxxx X. Xxxxxxxxxx By: /s/ Xxx X. Xxxxxxx
Name: Name: Xxx. X. Xxxxxxx
Title: Title: President
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Assistant Vice President
[SIGNATURE PAGE TO THE ESCROW AGREEMENT]
