EXHIBIT 99.3
QUADRAMED
CORPORATION
INDUCEMENT STOCK OPTION
AGREEMENT
THIS AGREEMENT, made as of the
1 st day of August 2005, by and between
QuadraMed Corporation (“QuadraMed”) and James R. Klein
(“Optionee”).
RECITALS
|
A.
|
The Board has
determined to offer employment to Optionee.
|
|
B.
|
As an
inducement to accept such employment offer, the Board has
determined to offer Optionee an option (the “Option”)
to purchase 200,000 shares of Common Stock (“Shares”)
under the terms and conditions set forth herein.
|
|
C.
|
All capitalized
terms in this Agreement, to the extent not otherwise defined
herein, shall have the meaning assigned to them in the attached
Appendix.
|
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 200,000 Shares at the Exercise Price. The
Shares shall be purchasable from time to time in accordance with
the Vesting Schedule.
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 Paragraph 4 or 5.
3.
Exercisability/Vesting . The right to exercise the
Option shall vest in the Optionee, and the Option shall become
exercisable 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 Paragraph 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 Paragraph 4 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. Such right shall lapse, and the Option shall cease to be
outstanding, upon the earlier of (A) the expiration of the six
(6)-month period measured from the date of Optionee’s death
or (B) the Expiration Date.
(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 six (6)
months (commencing with the date of such cessation of Service)
during which to exercise the Option. 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 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 Paragraph 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 Paragraph
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 for Cause, then 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 following provisions shall govern:
(i) 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, except to the extent the Option parachute payment
attributable to such accelerated vesting would result in an excess
parachute payment under Section 280G of the Code. To the extent the
Option does not accelerate and vest immediately prior to the
specified effective date of the Change in Control by reason of the
foregoing limitation, the Option shall continue to become
exercisable and vest with respect to the remaining unvested Shares
in accordance with the Vesting Schedule set forth in Paragraph
3.
(ii) To the extent the Option does
not accelerate by reason of the foregoing limitation, it shall
immediately vest in full pursuant to the provisions of this
Paragraph 5 upon any Involuntary Termination of Optionee’s
employment following the Change in Control (other than a
termination for Cause). The Option shall then remain exercisable
and may be exercised for any or all of the Shares, including the
accelerated Shares, in accordance with the provisions of this
Agreement until the earlier of (A) the first anniversary of the
date of the Involuntary Termination or (B) the Expiration
Date.
(iii) All determinations concerning
the application of the parachute payment provisions of Section 280G
of the Code to the accelerated vesting of the Option pursuant to
this Paragraph 5(b) shall be made by QuadraMed’s independent
certified public accountant, whose determination shall be
binding.
(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:
|
|
•
|
|
cash or check
made payable to QuadraMed’s order; or
|
|
|
•
|
|
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
|
|
|
•
|
|
if established
by QuadraMed and permitted under applicable law
|
