QUADRAMED CORPORATION

                       AMENDMENT OF SEPARATION AGREEMENT

         THIS AGREEMENT entered into effective as of July 31, 2001 (the
"Effective Date"), by and between James D. Durham, an individual currently
residing at 31 West Shore Road, Belvedere, California ("Mr. Durham"), and
QuadraMed Corporation, a Delaware corporation (the "Company"):

                                WITNESSETH THAT

         WHEREAS, prior to June 12, 2000, Mr. Durham served as Chairman of the
Company's Board of Directors (the "Board") and its Chief Executive Officer;

         WHEREAS, the Company and Mr. Durham entered into an separation
agreement as of the 12th day of June, 2000 (the "Separation Agreement"),
pursuant to which Mr. Durham relinquished his role as Chief Executive Officer
of the Company while agreeing to remain a part-time employee of the Company
through December 31, 2002, Chairman of the Board through December 31, 2000,
and thereafter a member of the Board, in exchange for the consideration
therein described;

         WHEREAS, the Company and Mr. Durham believe it would be mutually
advantageous for Mr. Durham to resign as a member of the Board; and

         WHEREAS, the Company and the Mr. Durham desire to clarify certain
provisions of the Separation Agreement that would be affected by Mr. Durham's
resignation as a member of the Board in general without, however, increasing
the compensation and benefits otherwise due him under the Separation Agreement
or reducing the obligations of the Company had that Agreement continued in
effect unamended;

         NOW, THEREFORE, the Company and the Mr. Durham hereby agree as
follows, in each case effective as of the Effective Date:

         1. Resignation. Mr. Durham hereby voluntarily resigns as a member of
the Board. This resignation shall not alter Mr. Durham's continued employment
as a part-time employee pursuant to the Separation Agreement, which shall
continue as provided therein. Neither Mr. Durham's resignation from the Board
nor any other modification of his employment arrangement with the Company, now
or in the future, shall be treated as an Involuntary Termination as defined in
the QuadraMed Corporation Supplemental Executive Retirement Plan, effective
January 1, 2000 (the "SERP").

         2. Contemporaneous with the execution of this Agreement, the Company
has delivered to Mr. Durham and Mr. Durham acknowledges receipt (i) the
Company's check in the amount EIGHT HUNDRED NINETY-FIVE THOUSAND NINE HUNDRED
THIRTY-NINE DOLLARS AND SIXTY-EIGHT CENTS ($895,939.68) and (ii) one or more
certificates of the Company's common stock representing in aggregate ONE
HUNDRED TWENTY-FOUR THOUSAND SIX HUNDRED NINETY-SIX (124,696) shares. Mr.
Durham hereby agrees to and does accept such check and stock certificates in
full satisfaction of his interest and rights under the QuadraMed Corporation
Stock Exchange Deferred Compensation Plan (the "Stock Plan"), disavows any
right or claim he has or might have to continued participation in the Stock
Plan after the Board's termination thereof, whether pursuant to the Separation
Agreement or otherwise, and disclaims any interest he has or might have in any
life insurance policy or other arrangement the Company holds or now maintains
for the purpose of preparing for the date or dates on which it otherwise would
be obligated to satisfy its liability to Mr. Durham under the Stock Plan. Mr.
Durham further acknowledges any income taxes due in respect of this payment
(including the share certificates) are his sole responsibility and hereby
agrees to hold the Company harmless from and indemnify the Company for any
liability for income taxes (including interests or penalties thereon and
additions thereto) required to be withheld from or due and payable by Mr.
Durham in respect of, this payment (including the share certificates). Mr.
Durham authorizes the Company, in addition to any other remedies it may have
under applicable law to enforce the foregoing indemnity, to set off any such
liability against any amounts it may owe Mr. Durham under the SERP (as defined
in Section 3 below), with interest from the date or dates incurred to the date
the eliminated or reduced SERP payment would otherwise have been made at rates
reflective of the Company's borrowing costs over such period or periods.

         3. Mr. Durham's interest in the QuadraMed Corporation Supplemental
Executive Retirement Plan (the "SERP"), otherwise vesting on the basis of his
continued service as a member of the Board or on the failure of the
stockholders to elect him as a member of the Board, shall hereby become fully
vested. No acceleration of the date on which any benefits under the SERP shall
become payable shall result therefrom, however. For the purpose of preparing
for the date or dates on which it would be obligated to satisfy its liability
to Mr. Durham under the SERP, the Company shall make the payments described on
Exhibit A attached hereto (the "Payments"), on the respective dates specified
in Exhibit A, to the trust fund (the "SERP Trust") established pursuant to the
QuadraMed Corporation Grantor Trust Agreement (the "Trust Agreement") made the
first day of January 2000 by and between the Company and Wachovia Bank, N.A.,
which Agreement, together with all amendments through the date hereof, is
attached hereto as Exhibit B (as so attached, and as it may be amended from
time to time hereafter consistent with both its terms and the terms of this
Agreement, the "Trust Agreement"). The Company shall designate each Payment to
the trustee of the SERP Trust as for Mr. Durham's Account (as that term is
defined in the Trust Agreement) under the SERP. To the extent that the
requirement of making the Payments conflicts with the provisions of Section
1(g) of the Trust Agreement or Sections 10.1 or 11.2 of the SERP, the
provisions of this Agreement shall be controlling. The Company shall pay all
trustees fees and other trust charges arising under the Trust Agreement from
any of the transactions referred to in this Agreement.

         4. The Company shall provide Mr. Durham with written confirmation of
payment within ten business days of making any Payment.

         5. The Company shall execute no amendment to the Trust Agreement or
the SERP which will in any manner adversely affect his rights under either
instrument. Accelerating the payment date of Mr. Durham's benefit, by
termination of the SERP or as otherwise allowed consistent with the SERP and
this Agreement, shall not be considered to adversely affect Mr. Durham's
rights.

         6. In the event that either party to this Agreement files an action
to enforce any of the provisions hereof or of the SERP or the Trust Agreement,
the prevailing party in such action shall be entitled to the payment of
reasonable attorneys fees from the other party.

         7. Except as provided in the preceding paragraphs of this Agreement,
the provisions of the Separation Agreement remain in full force and effect in
accordance with their respective terms.

         8. Mr. Durham acknowledges he has read this Agreement. His execution
of this Agreement shall indicate that this Agreement conforms to his
understandings and is acceptable to him as a final agreement. Mr. Durham
further acknowledges that he has had the opportunity to consult with counsel
of his choice, that he has in fact consulted with his own counsel with respect
to this Agreement, and that he had been given a reasonable and sufficient
period of time in which to consider and return this Agreement.

         IN WITNESS WHEREOF, the parties have duly executed this Agreement
under seal as of the date and year first above written.

                                          QUADRAMED CORPORATION




                                          By:_______________________________
                                          Michael H. Lanza
                                          Its Executive Vice President


                                          James D. Durham



                                                                   EXHIBIT A

                           SCHEDULE OF SERP FUNDING

   Date                                                       Amount

Within five (5) business days
 of the Effective Date                                        $483, 846

Within thirty (30) business days
of                                                           the Effective
                                                             Date The then
                                                             cash surrender
                                                             value under the
                                                             73 Travelers'
                                                             Life Insurance
                                                             Policies
                                                             purchased by the
                                                             Company in
                                                             connection with
                                                             its deferred
                                                             compensation
                                                             plans (whether by
                                                             transfer of
                                                             ownership of the
                                                             policies or
                                                             otherwise)

June 30, 2002                                                $483, 846

June 30, 2003                                                $483, 846

June 30, 2004                                                $483, 846

June 30, 2005                                                $483, 846