Exhibit 99.3
QUADRAMED
CORPORATION
INDUCEMENT STOCK OPTION
AGREEMENT
THIS AGREEMENT, made as of the
26 th day of September 2005, by and
between QuadraMed Corporation (“QuadraMed”) and Keith
B. Hagen (“Optionee”).
RECITALS
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A.
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The Board has
determined to offer employment to Optionee.
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B.
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As an
inducement to accept such employment offer, the Board has
determined to offer Optionee an option (the “Option”)
to purchase 550,000 shares of Common Stock (“Shares”)
under the terms and conditions set forth herein.
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C.
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All capitalized
terms in this Agreement, to the extent not otherwise defined
herein, shall have the meaning assigned to them in the attached
Appendix.
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NOW, THEREFORE,
it is hereby agreed as
follows:
1. Grant of Option .
QuadraMed hereby grants to Optionee, as of the Grant Date, an
Option to purchase up to 550,000 Shares at the Exercise Price. The
Shares shall be purchasable from time to time in accordance with
the Vesting Schedule, subject to acceleration under Sections 4(c)
and 5 below.
2. Option Term . The
Option shall have a maximum term of ten (10) years measured
from the Grant Date and shall accordingly expire at the close of
business on the tenth anniversary of the Grant Date, unless sooner
terminated in accordance with Sections 4 or 5.
3.
Exercisability/Vesting . The right to exercise the
Option shall vest in the Optionee, and the Option shall become
exercisable for any or all of the Shares in accordance with the
Vesting Schedule. The Option shall remain exercisable to the extent
vested until the Expiration Date or the sooner termination of the
Option term under Sections 4 or 5. The right to exercise the Option
shall vest in the Optionee as follows: (i) one-fourth
(25%) of the Shares shall vest on the first anniversary of the
Grant Date and (ii) the remaining three-fourths (75%) of
the Shares shall vest in a series of thirty-six (36) equal
monthly installments upon Optionee’s completion of each month
of Service after the first anniversary of the Grant Date. Vesting
in the Shares may be accelerated pursuant to the provisions of
Section 4(c) or 5. Unless otherwise specifically provided
herein, no additional Shares shall vest following Optionee’s
cessation of Service.
4. Cessation of Service
.
(a) Should Optionee die while the
Option is outstanding, then the personal representative of
Optionee’s estate or the person or persons to whom the Option
is transferred pursuant to Optionee’s will or in accordance
with the laws of inheritance shall have the right to exercise the
Option to the extent the Option is vested as of the date of
Optionee’s death. Such right shall lapse, and the Option
shall cease to be outstanding, upon the earlier of (A) the
expiration of the twelve (12)-month period measured from the date
of Optionee’s death or (B) the Expiration
Date.
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(b) Should Optionee cease to remain
in Service by reason of Permanent Disability while the Option is
outstanding, then the Optionee shall have a period of twelve
(12) months (commencing with the date of such cessation of
Service) during which to exercise the Option to the extent the
Option is vested as of the date of such cessation of Service. In no
event shall the Option be exercisable at any time after the
Expiration Date.
(c) Should the Optionee’s
Service be terminated due to an Involuntary Termination (other than
a Termination for Cause and whether before or after a Change in
Control) while this Option is outstanding, then the right to
exercise this Option shall be fully vested and the Optionee shall
have a period of twelve (12) months (commencing with the date
of such cessation of Service) during which to exercise this Option,
but in no event shall this Option be exercisable at any time after
the Expiration Date.
(d) Should the Optionee terminate
Service voluntarily (other than an Involuntary Termination) while
this Option is outstanding, then the Option shall immediately
terminate and cease to be exercisable with respect to the number of
Option Shares for which the right to exercise this Option has not
then vested under this Agreement, and the Optionee shall have a
period of three (3) months (commencing with the date of such
cessation of Service) during which to exercise this Option for the
remainder of the Option Shares, but in no event shall this Option
be exercisable at any time after the Expiration Date.
(e) During the limited period of
post-Service exercisability, the Option may not be exercised in the
aggregate for more than the number of Shares for which the Option
is exercisable at the time of Optionee’s cessation of Service
according to the Vesting Schedule, except in the event of an
Involuntary Termination as specified in Section 2(c) above.
Upon the expiration of such limited exercise period or (if earlier)
upon the Expiration Date, the Option shall terminate and cease to
be outstanding for any otherwise exercisable Shares for which the
Option has not been exercised. Except as provided for in
Section 2(c) above, to the extent the Option is not
exercisable for one or more Shares at the time of Optionee’s
cessation of Service, the Option shall immediately terminate and
cease to be outstanding with respect to those Shares.
(f) Should Optionee’s Service
be terminated due to a Termination for Cause, the Option shall
terminate immediately and cease to remain outstanding upon the
Optionee’s termination of Service.
5. Change in Control
.
(a) In the event of a Change in
Control, the Option shall, immediately prior to the specified
effective date of the Change in Control, become fully exercisable
with respect to all previously unexercised Shares, and the Optionee
shall have a period of twelve (12) months (commencing with the
date of such cessation of Service) during which to exercise this
Option, but in no event shall this Option be exercisable at any
time after the Expiration Date.
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(b) The Option will be appropriately
adjusted to apply to the number and class of securities which would
have been issued to Optionee in the consummation of the Change in
Control had the Option been exercised immediately prior to such
transaction, and appropriate adjustments will be made to the Option
Exercise Price, provided that the aggregate Exercise Price
will remain the same.
6. Adjustment in
Shares . Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting
the outstanding Common Stock as a class without QuadraMed’s
receipt of consideration, appropriate adjustments shall be made to
(i) the number and/or class of securities subject to the
Option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits
hereunder; provided , however , that the aggregate
Exercise Price shall remain the same.
7. Stockholder Rights
. The holder of the Option shall not have any stockholder rights
with respect to the Shares until such person shall have exercised
the Option, paid the Exercise Price and become a holder of record
of the purchased Shares.
8. Manner of Exercising
Option .
(a) In order to exercise the Option
for all or any part of the Shares for which the Option is at the
time exercisable, Optionee or, in the case of exercise after
Optionee’s death, Optionee’s executor, administrator,
heir or legatee, as the case may be, must take the following
actions:
(i) The Secretary of QuadraMed shall
be provided with written notice of the Option exercise (the
“Exercise Notice”) in substantially the form of
Exhibit I attached hereto, in which there is specified the
number of Shares to be purchased under the exercised
Option.
(ii) The Exercise Price for the
purchased Shares shall be paid in one or more of the following
alternative forms:
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cash or check
made payable to QuadraMed’s order; or
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shares of
Common Stock held by Optionee (or any other person or persons
exercising the Option) for the requisite period necessary to avoid
a charge to QuadraMed’s earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date;
or
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if established
by QuadraMed and permitted under applicable law, through a
“same day sale” commitment from Optionee and a
broker-dealer selected by QuadraMed whereby the Optionee
irrevocably elects to exercise the Option and to sell a portion of
the shares so purchased sufficient to pay for the total exercise
price and whereby the broker-dealer irrevocably commits upon
receipt of such shares to forward the total
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exercise price directly to QuadraMed
plus the applicable Federal, state and local income taxes required
to be withheld by QuadraMed by reason of such exercise.
(iii) Appropriate documentation
evidencing the right to exercise the Option shall be furnished to
QuadraMed if the person or persons exercising the Option is other
than Optionee.
(iv) Appropriate arrangement must be
made with QuadraMed for the satisfaction of all Federal, state and
local income tax withholding requirements applicable to the Option
exercise.
(b) Except to the extent the sale
and remittance procedure specified above is util
