1
Exhibit 99.3
QUADRAMED CORPORATION
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This 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 Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may, in connection
with the Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of the Optionee's immediate family or
to a trust established for the exclusive benefit of one or more such family
members. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
2
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a period of three (3)
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.
(ii) If Optionee dies while this 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 descent and distribution shall have
the right to exercise this option. Such right shall lapse, and this
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.
(iii) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a
period of twelve (12) months (commencing with the date of such
cessation of Service) during which to exercise this option. In no event
shall this option be exercisable at any time after the Expiration Date.
(iv) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the
number of vested Option Shares for which the option is exercisable at
the time of Optionee's cessation of Service. Upon the expiration of
such limited exercise period or (if earlier) upon the Expiration Date,
this option shall terminate and cease to be outstanding for any vested
Option Shares for which the option has not been exercised. However,
this option shall, immediately upon Optionee's cessation of Service for
any reason, terminate and cease to be outstanding with respect to any
Option Shares in which Optionee is not otherwise at that time vested or
for which this option is not otherwise at that time exercisable.
2.
3
(v) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain
outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully-vested shares of Common Stock. No such acceleration of
this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent pay-out in accordance with the same
option exercise/vesting schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION 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
3.
4
a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the total number and/or class of securities
subject to this option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares
in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) 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 the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or
(D) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
written instructions (I) to a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available
on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise
4.
5
and (II) to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order
to complete the sale transaction.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Notice of
Exercise delivered to the Corporation in connection with the
option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be
5.
6
binding upon, the Corporation and its successors and assigns and Optionee,
Optionee's assigns and the legal representatives, heirs and legatees of
Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.(1)
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
--------
(1) Authorization of payment of the Exercise Price by a promissory note may,
under currently proposed Treasury Regulations, result in the loss of incentive
stock option treatment under the Federal tax laws.
6.
7
- This option shall cease to qualify for favorable
tax treatment as an Incentive Option if (and to the extent) this option
is exercised for one or more Option Shares: (A) more than three (3)
months after the date Optionee ceases to be an Employee for any reason
other than death or Permanent Disability or (B) more than twelve (12)
months after the date Optionee ceases to be an Employee by reason of
Permanent Disability.
- No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent)
the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable
hereunder would, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other
securities for which this option or any other Incentive Options granted
to Optionee prior to the Grant Date (whether under the Plan or any
other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One Hundred
Thousand Dollar ($100,000) limitation be exceeded in any calendar year,
this option shall nevertheless become exercisable for the excess shares
in such calendar year as a Non-Statutory Option.
- Should the exercisability of this option be
accelerated upon a Corporate Transaction, then this option shall
qualify for favorable tax treatment as an Incentive Option only to the
extent the aggregate Fair Market Value (determined at the Grant Date)
of the Common Stock for which this option first becomes exercisable in
the calendar year in which the Corporate Transaction occurs does not,
when added to the aggregate value (determined as of the respective date
or dates of grant) of the Common Stock or other securities for which
this option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should the applicable One Hundred
Thousand Dollar ($100,000) limitation be exceeded in the calendar year
of such Corporate Transaction, the option may nevertheless be exercised
for the excess shares in such calendar year as a Non-Statutory Option.
- Should Optionee hold, in addition to this option,
one or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the order
in which such options are granted.
7.
8
18. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant Notice shall be
frozen as of the first day of the authorized leave, and this option
shall not become exercisable for any additional installments of the
Option Shares during the period Optionee remains on such leave.
(b) Should Optionee resume active Employee status within sixty (60)
days after the start date of the authorized leave, Optionee shall, for
purposes of the exercise schedule set forth in the Grant Notice,
receive Service credit for the entire period of such leave. If Optionee
does not resume active Employee status within such sixty (60)-day
period, then no Service credit shall be given for the entire period of
such leave.
(c) If the option is designated as an Incentive Option in the Grant
Notice, then the following additional provision shall apply:
- If the leave of absence continues for more than three (3)
months, then this option shall automatically convert to a
Non-Statutory Option under the Federal tax laws upon the expiration
of such three (3)-month period, unless the Optionee's reemployment
rights are guaranteed by statute or by written agreement. Following
any such conversion of the option, all subsequent exercises of such
option, whether effected before or after Optionee's return to active
Employee status, shall result in an immediate taxable event, and the
Corporation shall be required to collect from Optionee the Federal,
state and local income and employment withholding taxes applicable
to such exercise.
(d) In no event shall this option become exercisable for any
additional Option Shares or otherwise remain outstanding if Optionee
does not resume Employee status prior to the Expiration Date of the
option term.
8.
9
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify QuadraMed Corporation (the "Corporation") that I elect
to purchase ___________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $_______________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1996 Stock Incentive Plan on ___________________, 199__.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
_______________________, 199
Date
____________________________________
Optionee
Address:____________________________
____________________________________
Print name in exact manner
it is to appear on the
stock certificate: ____________________________________
Address to which certificate
is to be sent, if different
from address above: ____________________________________
____________________________________
Social Security Number: ____________________________________
Employee Number: ____________________________________
10
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean QuadraMed Corporation, a Delaware
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified
in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
A-1.
11
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
X. XXXXX DATE shall mean the date of grant of the option as specified
in the Grant Notice.
X. XXXXX NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
A-2.
12
R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. PLAN shall mean the Corporation's 1996 Stock Incentive Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
