Document:

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                                                                   EXHIBIT 10.66

                                [QUADRAMED LOGO]

                                  June 12, 2000

Lawrence P. English
18 Highwood Road
Simsbury, Connecticut 06070

Dear Mr. English:

        We are pleased to inform you that the Board of Directors (the "Board")
of QuadraMed Corporation (the "Company") has authorized an employment package
for you which will provide certain assurances concerning the terms and
conditions of your employment with the Company and will allow you to participate
in a program of severance benefit payments should your employment terminate. The
purpose of this letter agreement (the "Agreement") is to document the terms of
your employment package by providing you with a formal employment contract.

        The Company considers it essential to the continuing operation of the
Company and in the best interests of its stockholders to assure the continuous
dedication of key management personnel. It is recognized in the context of
public ownership that a termination of an employee's employment without cause
may be sought and that such circumstances could prove distracting to key
executives and detrimental to the ongoing management and administration of the
Company. Such distraction is not in the best interest of the stockholders of the
Company. Accordingly, the Board has determined to discourage the inevitable
distraction to you in the face of potentially disturbing circumstances inherent
in any uncertainty regarding your employment status. This Agreement is intended
to secure and encourage your ongoing retention by providing severance benefits
in the event that your employment is altered as hereinafter described. In order
to induce you to remain in the employ of the Company, and in consideration of
your agreement set forth in Sections 13, 14, 15 and 16 of Part Two hereof, the
Company agrees to pay the severance payments and benefits set forth in this
Agreement, under the circumstances described herein.

        Part One of this Agreement sets forth certain definitional provisions to
be in effect for purposes of determining your benefit entitlements. Part Two
specifies the terms and conditions which will apply to your continued employment
with the Company, including the severance payments to which you will become
entitled in the event your employment should be terminated in certain
circumstances. Part Three concludes this

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Agreement with a series of general terms and conditions applicable to your
employment benefits.

                             PART ONE -- DEFINITIONS

        DEFINITIONS. For purposes of this Agreement, the following definitions
will be in effect:

        "CHANGE IN CONTROL" means:

        (i) a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
State of the Company's incorporation;

        (ii) a stockholder approved sale, transfer or other disposition of all
or substantially all of the assets of the Company;

        (iii) a transfer of all or substantially all of the Company's assets
pursuant to a partnership or joint venture agreement or similar arrangement
where the Company's resulting interest is less than fifty percent (50%);

        (iv) any reverse merger in which the Company is the surviving entity but
in which fifty percent (50%) or more of the Company's outstanding voting stock
is transferred to holders different from those who held the stock immediately
prior to such merger;

        (v) on or after the date hereof, a change in ownership of the Company
through an action or series of transactions, such that any person is or becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the securities of the combined
voting power of the Company's outstanding securities; or

        (vi) a majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is not endorsed
by a majority of the members of the Board prior to the date of such appointment
or election.

        "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.

        "EFFECTIVE DATE" shall mean June 12, 2000.

        "EMPLOYEE" means Lawrence P. English.

        "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under
Section 3 of ERISA.

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        "EMPLOYMENT PERIOD" means the period of Employee's employment with the
Company governed by the terms and provisions of this Agreement.

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as in effect from time to time.

        "INVOLUNTARY TERMINATION" means the termination of Employee's employment
with the Company:

        (i) involuntarily upon Employee's discharge or dismissal or the
Company's failure to renew this Agreement pursuant to Section 4 of Part Two,
whether or not in connection with a Change in Control;

        (ii) voluntarily, if not in connection with a Change In Control,
provided such termination occurs in connection with (a) a change in Employee's
position with the Company which materially reduces Employee's level of
responsibility or changes Employee's title from Chief Executive Officer of the
Company or, when applicable, Chairman of the Company, (b) failure of Employee to
be elected or appointed as the Company's Chairman on December 31, 2000 (or as
soon thereafter as legal documentation reflecting such election or appointment
reasonably can be perfected), (c) a material reduction in Employee's level of
compensation (including base salary, fringe benefits and any non-discretionary
bonuses) or (d) a relocation of Employee's principal place of employment from
San Rafael, California by more than forty-five (45) miles, and such change,
failure, reduction or relocation is effected without Employee's written
concurrence; or

        (iii) voluntarily, if in connection with or after a Change in Control,
provided that such termination occurs in connection with a (a) change in
Employee's level of responsibilities with respect to the Company's entire
business as it exists immediately prior to such Change in Control such that
Employee ceases to have the operational, managerial and supervisory power and
authority held by Employee immediately prior to such Change in Control (but
without regard to his reporting responsibilities or title), (b) a material
reduction in Employee's level of compensation (including base salary, fringe
benefits and any non-discretionary bonuses) or (c) a relocation of Employee's
principal place of employment from San Rafael, California by more than
forty-five (45) miles, and such change, failure, reduction or relocation is
effected without Employee's written concurrence.

        "OPTION" means any option or share purchase right granted to Employee
under the Stock Option Plan which is outstanding at the time of a Change in
Control or Employee's Involuntary Termination.

        "STOCK OPTION PLAN" means collectively the Company's 1996 Stock
Incentive Plan (including the predecessor 1994 Stock Option Plan), as amended
through the date hereof and the Company's 1999 Stock Incentive Plan, as amended
through the date hereof.

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Lawrence P. English
June 12, 2000
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        "TERM" shall mean the term beginning on the Effective Date and ending on
the second anniversary thereof, subject to the provisions of Sections 3 and 4 of
Part Two.

        "TERMINATION FOR CAUSE" will mean an Involuntary Termination of
Employee's employment for (i) one or more alleged acts of fraud, embezzlement,
misappropriation of proprietary information, misappropriation of the Company's
trade secrets or other confidential information, a verifiable breach of
Employee's fiduciary duties to the Company or any other verifiable misconduct
adversely affecting the business reputation of the Company in a material manner,
(ii) failure to comply with any policy or directive of the Board of Directors of
the Company after written notice to Employee and Employee is given a reasonable
opportunity to comply or (iii) except as permitted by the terms of Section 13 of
Part Two, failure to devote his full working time and effort to the performance
of his duties.

        PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT

        The following terms and conditions will govern Employee's employment
with the Company throughout the Employment Period and will also, to the extent
expressly indicated below, remain in effect following Employee's termination
date.

        1. EMPLOYMENT AND DUTIES. The Company will employ Employee as an
executive officer in the position of Chief Executive Officer. Employee agrees to
continue in such employment for the duration of the Employment Period and to
perform in good faith and to the best of Employee's ability all services which
may be required of Employee in his executive position and to be available to
render such services at all reasonable times and places in accordance with
reasonable directives and assignments issued by the Board. Except as provided in
Section 13, during Employee's Employment Period, Employee will devote his full
time and effort to the business and affairs of the Company within the scope of
his executive office. Employee's principal place of operations will be at the
Company's corporate offices in San Rafael, California.

        2. SERVICE AS DIRECTOR AND CHAIRMAN. As soon as practicable after the
Effective Date, Employee will be elected to serve as a member of the Board. On
or before December 31, 2000, Employee will be elected or appointed the Company's
Chairman. Employee will fulfill his duties as a director and/or Chairman without
additional compensation.

        3. TERM OF AGREEMENT. This Agreement shall be effective as of the date
hereof. The term of this Agreement shall continue in effect until the expiration
of the Term, subject to the provisions of this Part Two, unless sooner
terminated by the parties in accordance with the provisions hereof. No
termination or expiration of this Agreement shall affect any rights, obligations
or liabilities of Employee or the Company that shall have accrued on or prior to
the date of termination or expiration.

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June 12, 2000
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        4. AUTOMATIC EXTENSION. Commencing on the second anniversary of the
effective date hereof, and on each succeeding anniversary of such date, the term
of this Agreement shall be automatically be extended for one (1) additional year
unless, not later than three (3) months preceding such anniversary date, either
party to this Agreement shall have given written notice to the other party
pursuant to Section 13 of Part Three that such party will not extend the term of
this Agreement.

        5. COMPENSATION.

           A. For service in the 2000 calendar year on or after the Effective
Date, Employee's base salary will be paid at the annual rate of Four Hundred
Thousand Dollars ($400,000). Employee's annual rate of base salary may be
subject to adjustment each calendar year by the Board.

           B. Employee's base salary will be paid at periodic intervals in
accordance with the Company's payroll practices for salaried employees.

           C. Employee shall be entitled to receive a guaranteed bonus of at
least One Hundred Thousand Dollars ($100,000) upon completion of his first six
(6) months of service after the Effective Date. On or before the expiration of
such six (6) month period, Employee and the Board shall meet and consult and in
good faith determine subsequent bonus ranges for Employee to be established by
the Board and payable upon achievement of performance goals. All bonuses payable
to Employee hereunder shall be payable in accordance with the Company's bonus
plan implemented in accordance with its prior practice.

           D. The Company will also pay Employee additional compensation in an
amount equal to the net increase in his state income tax attributable to
becoming a California resident solely as such resident status relates to
Employee's adjusted gross income existing before his employment by the Company
and to the extent continuing thereafter. This calculation shall take into
account the economic benefit of the federal income tax deductibility of
Employee's applicable California state income taxes and shall take into account
the economic detriment of additional federal or state income taxes payable or
withheld in connection with the additional compensation provided for by this
Section 5.D. This additional compensation will be payable solely during such
time as the accounting firm employed by Employee reasonably determines that
Employee is properly classified as a California resident for income tax
purposes. Employee will cooperate in all reasonable respects with the Company's
independent certified public accounting firm in providing work papers and other
materials necessary to calculate the amount of additional compensation payable
pursuant to this Section 5.D. The determination of such accounting firm shall be
final and binding on Employee and the Company. Compensation payable pursuant to
this Section 5.D. shall be paid to

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Lawrence P. English
June 12, 2000
Page 6

Employee either before or reasonably promptly after he has paid applicable
California state income taxes or had such state income taxes withheld from
amounts payable to Employee and otherwise in accordance with the Company's
payroll practices for salaried employees.

           E. The Company will deduct and withhold, from the compensation
payable to Employee hereunder, any and all applicable federal, state and local
income and employment withholding taxes and any other amounts required to be
deducted or withheld by the Company under applicable statute or regulation.

        6. STOCK OPTIONS. The Company will issue Employee non-qualified stock
options to purchase 1,000,000 shares of Common Stock in the Company at an
exercise price equal to the closing price of the Company's Common Stock as of
the Effective Date. These Options will be subject to vesting over a four (4)
year period with 250,000 of such Options vesting upon the expiration of a one
(1) year period following the Effective Date and the remaining 750,000 of such
options vesting ratably on a monthly basis thereafter and shall otherwise be
subject to the standard terms and conditions contained in the Stock Plan and the
form Stock Option Agreements approved by the Board in connection therewith.

        7. EXPENSE REIMBURSEMENT. Employee will be entitled to reimbursement
from the Company for all customary, ordinary and necessary business expenses
incurred by Employee in the performance of his duties hereunder, provided
Employee furnishes the Company with vouchers, receipts and other substantiation
of such expenses in accordance with Company policies. Employee shall also be
entitled to reimbursement of reasonable relocation expenses in accordance with
Company policy. Employee will also be entitled to reimbursement of $750 per
month with respect to the automobile currently leased or owned by him or as
otherwise approved by the Board and with respect to fuel purchased in connection
with travel on Company business. Employee will own his own automobile, and
maintain and insure it at his own expense, for his business use in connection
with his employment under this Agreement. The Company will also pay or reimburse
Employee for the costs of the preparation of his federal, state and local income
tax returns by the Company's independent certified public accounting firm.

        8. FRINGE BENEFITS. During the Employment Period, Employee will be
eligible to participate in any group life insurance plan, group medical and/or
dental insurance plan, accidental death and dismemberment plan, short-term
disability program and other employee benefit plans, including profit sharing
plans, cafeteria benefit programs and stock purchase and option plans, which are
made available to executives and for which Employee qualifies.

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June 12, 2000
Page 7
        9. VACATION. Employee will accrue four (4) weeks of paid vacation
benefits during each calendar year of the Employment Period in accordance with
the Company policy in effect for executive officers.

        10. DEATH OR DISABILITY.

            A. Upon Employee's death or disability during the Employment Period,
the employment relationship created pursuant to this Agreement will immediately
terminate, and no further compensation will become payable to Employee pursuant
to Part Two, Section 5. In connection with such termination by reason of death,
the Company will only be required to pay Employee (or his estate) any unpaid
compensation earned under Part Two, Section 5 for services rendered through the
date of Employee's death. In connection with such termination by reason of
disability, the Company will be required to pay to Employee any unpaid
compensation earned under Part Two, Section 5 for services rendered through the
date of his disability, together with any income continuation payments provided
Employee under any disability income/insurance policies or programs funded by
the Company on Employee's behalf.

            B. Employee will be deemed disabled if he is so characterized
pursuant to the terms of the Company's disability insurance policies or programs
applicable to Employee from time to time.

            C. Upon death or disability of Employee, the relevant terms of the
Stock Option Plan will apply.

        11. SEVERANCE BENEFITS. Employee will be entitled to receive only the
severance benefits specified below in the event there should occur a termination
of Employee's employment:

            A. SEVERANCE BENEFIT. If Employee is terminated by reason of an
Involuntary Termination of Employee's employment (other than a Termination for
Cause), the Company will make a severance payment to Employee, in one lump sum
within thirty (30) days of the date of such an Involuntary Termination, in an
aggregate amount equal to the sum of two (2) times Employee's then-current rate
of base salary. Employee may elect, in his sole discretion, to have the
severance benefit payable pursuant to this Section 11.A. in monthly installments
over a one year period following the date of his Involuntary Termination.

            B. OPTION ACCELERATION UPON INVOLUNTARY TERMINATION. Solely in
connection with the Involuntary Termination of Employee's employment (other than
termination for Cause), and solely in the case where such Involuntary
Termination is not in connection with a Change in Control, Employee's Options
under the Stock Option Plan will (to the extent not then otherwise exercisable
or vested) automatically

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Lawrence P. English
June 12, 2000
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accelerate and vest so that at least 250,000 of such Options will be immediately
exercisable and fully exercisable or vested as of the date of termination. Each
accelerated option, together with all of Employee's other vested Options, will
remain exercisable following such Involuntary Termination and may be exercised
for any or all of the option shares, including the accelerated shares, in
accordance with the exercise provisions of the Option Agreement evidencing the
grant during the full term of such Option Agreement.

            C. LEASE PAYMENTS. If Employee voluntarily resigns or is terminated
by reason of Involuntary Termination of Employee's employment (other than a
Termination for Cause) during the one (1) year period following Effective Date,
the Company shall be financially responsible for lease payments for an apartment
or condominium inhabited by Employee through and including the first anniversary
of the Effective Date if the terms of such lease are reasonably approved by the
Company and, in any event, provide the Company with the ability to sublet such
premises.

            D. RELEASE OF COMPANY. Receipt of severance benefits pursuant to
this Section 11 shall be in lieu of all other amounts payable by the Company to
Employee and in settlement and complete release of all claims Employee may have
against the Company other than those arising out of the severance benefits due
and payable under Sections 11 and 17 of Part Two of this Agreement and
Employee's rights under Part Three of this Agreement. Employee acknowledges and
agrees that execution of a general release of claims by Employee in form
reasonably acceptable to the Company shall be a condition precedent to the
Company's obligation to pay severance benefits hereunder.

        12. OPTION/VESTING ACCELERATION UPON CHANGE IN CONTROL.

            A. To the extent the acquiring company in any Change in Control
transaction does not assume or otherwise continue in full force and effect the
Employee's outstanding Options under the Stock Option Plan, those Options shall
automatically accelerate and vest so that each such Option will, immediately
prior to the Change in Control, become fully exercisable for all the option
shares and shall terminate immediately after the Change in Control transaction.

            B. On or after the closing of a transaction involving a Change in
Control referred to in subsections (i) through (iv) of the definition thereof,
Employee shall have the option, exercisable in his discretion within sixty (60)
days of such Change in Control, to voluntarily terminate his employment under
this Agreement (the "Termination Election"). Effective upon such Termination
Election, one-half of any of Employee's Options which are unvested at the time
of such Termination Election shall accelerate and vest in full sixty (60) days
after such Change in Control (the "Vesting Date"). Each such Option will become
immediately exercisable and fully exercisable

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Lawrence P. English
June 12, 2000
Page 9

and vested as of the Vesting Date. Each such accelerated Option, together with
Employee's other vested Options shall remain exercisable and outstanding for the
full term of the Option Agreement evidencing such Option that may be exercised
for any and all such Option shares, including the accelerated shares, in
accordance with the provisions of the applicable Option Agreement. In the event
that Employee makes the Termination Election, he shall have no right to receive
any severance payments pursuant to Section 11.A. of this Part Two. Acceleration
of Employee's Options pursuant to this Section 12.B. shall be contingent upon
Employee's continued service under this Agreement following such Change in
Control for a minimum period of sixty (60) days after such Change in Control.
Nothing in this Section 12.B. will diminish any rights Employee may have under
this Agreement in the event of an Involuntary Termination.

            C. The following provisions shall govern any Options which are to be
assumed or otherwise continued in effect in the Change in Control, and any
restricted or unvested shares of Common Stock held by the Employee at the time
of the Change in Control.

            Any Option which does not accelerate, and any restricted or unvested
shares of Common Stock which do not vest at the time of the Change in Control
shall immediately accelerate and vest in full and any repurchase rights with
respect thereto will terminate upon any Involuntary Termination of Employee's
employment following the Change in Control (other than a Termination for Cause)
so that each such Option or share of restricted or unvested Common Stock will
become immediately exercisable and fully exercisable or vested as of the date of
such an Involuntary Termination. Each such accelerated Option, together with
each of the Employee's other vested Options shall remain exercisable and
outstanding for the full term of the Option agreement evidencing such Option and
may be exercised for any or all of the Option shares, including the accelerated
shares, in accordance with the provisions of the applicable Option agreement.

            Each Option which is assumed or otherwise continued in effect will
be appropriately adjusted to apply to the number and class of securities which
would have been issued to Employee in the consummation of the Change in Control
transaction had the Option been exercised immediately prior to such transaction,
and appropriate adjustments will be made to the Option exercise price payable
per share, provided the aggregate exercise price will remain the same.

        13. RESTRICTIVE COVENANT. During the Employment Period, Employee will
not directly or indirectly, whether for Employee's own account or as an
employee, director, consultant or advisor, provide services to any business
enterprise other than the Company, unless otherwise authorized by the Company in
writing. Notwithstanding the foregoing, the Company acknowledges that Employee
is currently serving as a member

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June 12, 2000
Page 10

of the Board of Directors of each of Curative Health Services, Paracelsus
Healthcare Corporation and Spacefitters Corporation. Subject to the direction of
the Board, Employee may continue service on these outside corporate boards
during the Employment Period. If the Board determines in good faith that
continued service on one or more such outside corporate boards is not in the
best interest of the Company and its stockholders, Employee agrees to resign
from each such board as to which such a determination is made.

        14. NON-SOLICITATION AND NON-DISPARAGEMENT. During the Employment Period
and one (1) year thereafter, Employee will not directly or indirectly (i)
solicit any Company employee, independent contractor or consultant to leave the
Company's employ or otherwise terminate such person's relationship with the
company for any reason or interfere in any other manner with the employment or
other relationships at the time existing between the Company and its current
employees, independent contractors or consultants, (ii) solicit any of the
Company's customers for products or services substantially similar to those
offered by the Company, or (iii) disparage the Company or any of its
stockholders, directors, officers, employees or agents.

        15. CONFIDENTIALITY.

            A. Employee hereby acknowledges that the Company may, from time to
time during the Employment Period, disclose to Employee confidential or
proprietary information pertaining to the Company's business and affairs and
client base or prospects, including (without limitation) customer lists and
accounts, other similar items indicating the source of the Company's income and
information pertaining to the salaries, duties and performance levels of the
Company's employees. Employee will not, at any time during or after such
Employment Period, disclose to any third party or directly or indirectly make
use of any such confidential information, including (without limitation) the
names, addresses and telephone numbers of the Company's customers, other than in
connection with, and in furtherance of, the Company's business and affairs.
Nothing contained in this section shall be construed to prevent Employee from
disclosing the amount of his salary.

            B. All documents and data (whether written, printed or otherwise
reproduced or recorded) containing or relating to any such confidential or
proprietary information of the Company which come into Employee's possession
during the Employment Period will be returned by Employee to the Company
immediately upon the termination of the Employment Period or upon any earlier
request by the Company, and Employee will not retain any copies, notes or
excerpts thereof. Notwithstanding the foregoing, Employee shall be entitled to
retain his file or Rolodex containing names, addresses and telephone numbers and
personal diaries and calendars; provided, however, that Employee shall continue
to be bound by the terms of Section 15.A. above to the extent such retained
materials constitute confidential information.

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June 12, 2000
Page 11

            C. Employee's obligations under this Section 15 will continue in
effect after the termination of his employment with the Company, whatever the
reason or reasons for such termination, and the Company will have the right to
communicate with any of Employee's future or prospective employers concerning
his continuing obligations under this Section 15.

        16. OWNERSHIP RIGHTS.

            A. All materials, ideas, discoveries and inventions pertaining to
the Company's business or clients, including (without limitation) all patents
and copyrights, patent applications, patent renewals and extensions, trade
secrets, software and the names, addresses and telephone numbers of customers
and prospects, will belong solely to the Company.

            B. All materials, ideas, discoveries and inventions which Employee
may devise, conceive, develop or reduce to practice (whether individually or
jointly with others) during the Employment Period will be the sole property of
the Company and are hereby assigned by Employee to the Company, except for any
idea, discovery or invention (i) for which no Company equipment, supplies,
facility or trade secret information is used, (ii) which is developed entirely
on Employee's own time and (iii) which neither (a) relates at the time of
conception or reduction to practice, to the Company's business or any actual or
demonstrably-anticipated research or development program of the Company nor (b)
results from any work performed by Employee for the Company. The foregoing
exception corresponds to the assignment of inventions precluded by California
Labor Code Section 2870, attached as Exhibit A.

            C. Employee will, at all times whether during or after the
Employment Period, assist the Company, at the Company's sole expense, in
obtaining, maintaining, defending and enforcing all legal rights and remedies of
the Company, including, without limitation, patents, copyrights and other
proprietary rights of the Company. Such assistance will include (without
limitation) the execution of documents and assistance and cooperation in legal
proceedings.

            D. Employee will execute and be bound by all the terms and
provisions of the Company's standard Proprietary Information Agreement, which is
incorporated in whole herein by this reference. Nothing in this document will be
deemed to modify or affect Employee's duties and obligations under those other
agreements, which shall be deemed to be obligations under this Agreement.

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June 12, 2000
Page 12

        17. TERMINATION OF EMPLOYMENT.

            A. The Company (or any successor entity resulting from a Change in
Control) may terminate Employee's employment under this Agreement at any time
for any reason, with or without cause, by providing Employee with at least seven
(7) days prior written notice. However, such notice requirement will not apply
in the event there is a Termination for Cause under subsection D below.

            B. In the event there is a termination of Employee's employment by
reason of an Involuntary Termination of his employment with the Company (other
than Termination for Cause) during the Term, Employee will become entitled to
the benefits specified in Part Two, Section 11 in addition to any unpaid
compensation earned by Employee under Part Two, Section 5 for services rendered
prior to such termination.

            C. Should Employee's employment with the Company terminate by reason
of his death or disability during the Employment Period, no severance benefits
will be payable to Employee under Part Two, Section 11, and only the limited
death or disability benefits provided under Part Two, Section 10 will be
payable.

            D. The Company may at any time, upon written notice, terminate
Employee's employment hereunder for any act qualifying as a Termination for
Cause or at any time following the expiration of the Term. Such termination will
be effective immediately upon such notice.

            E. Upon such Termination for Cause or at any time following the
expiration of the Term, the Company will only be required to pay Employee any
unpaid compensation earned by Employee pursuant to Part Two, Section 5 for
services rendered through the date of such termination, and no termination or
severance benefits will be payable to Employee under Part Two, Section 11.

                     PART THREE -- MISCELLANEOUS PROVISIONS

        1. MITIGATION. Employee shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise and no future income earned by Employee from employment
or otherwise shall in any way reduce or offset any payments due to Employee
hereunder. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish Employee's existing rights which would accrue solely as a result of the
passage of time, under any Company Employee Benefit Plan, "Payroll practice" (as
defined in ERISA), compensation arrangement, incentive plan, stock option or
other stock-related plan.

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June 12, 2000
Page 13

        2. INDEMNIFICATION. The indemnification provisions for officers and
directors under the Company's Bylaws and any applicable indemnification
agreement between Employee and the Company will (to the maximum extent permitted
by law) be extended to Employee, during the period following Employee's
Involuntary Termination, with respect to any and all matters, events or
transactions occurring or effected during Employee's Employment Period.

        3. MISCELLANEOUS. The provisions of this Agreement will be construed and
interpreted under the laws of the State of California. This Agreement
incorporates the entire Agreement between Employee and the Company relating to
the terms of his employment and the subject of severance benefits and supersedes
all prior agreements and understandings with respect to such subject matter.
This Agreement may only be amended by written instrument signed by Employee and
an authorized executive officer of the Company.

        4. INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. Employee acknowledges that
the injury that would be suffered by the Company as a result of a breach of the
provisions of Sections 14, 15 and 16 would be irreparable and that an award of
monetary damages to the Company for such a breach would be an inadequate remedy.
Consequently, the Company will have the right, in addition to any other rights
it may have, to obtain injunctive relief to restrain any breach or threatened
breach or otherwise to specifically enforce any provision of this Agreement, and
the Company will not be obligated to post bond or other security in seeking such
relief.

        5. REPRESENTATIONS AND WARRANTIES BY EMPLOYEE. Employee represents and
warrants to the Company that the execution and delivery by Employee of this
Agreement do not, and the performance by Employee of Employee's obligations
hereunder will not, with or without the giving of notice or the passage of time,
or both: (a) violate any judgment, writ, injunction, or order of any court,
arbitrator, or governmental agency applicable to Employee or (b) conflict with,
result in the breach of any provisions of or the termination of, or constitute a
default under, any agreement to which Employee is a party or by which Employee
is or may be bound.

        6. WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under 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,
(a) no claim or right arising out of 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; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no

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Lawrence P. English
June 12, 2000
Page 14

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.

        7. BINDING EFFECT; DELEGATION OF DUTIES. This Agreement shall be binding
upon and inure to the benefit of the Company and any successor of the Company,
including, without limitation, any corporation or corporations acquiring
directly or indirectly all or substantially all of the stock, business or assets
of the Company, whether by merger, consolidation, division, sale or otherwise
(and such successor shall thereafter be deemed the "Company" for purposes of
this Agreement). The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if such succession had not taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
entitling Employee to the benefits hereunder, as though Employee was subject to
Involuntary Termination. This Agreement shall be binding and inure to the
benefit of Employee, his successors, assigns, executors, administrators or
beneficiaries. The duties and covenants of Employee under this Agreement, being
personal, may not be delegated.

        8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof. This Agreement may not
be amended orally, but only by an agreement in writing signed by the parties
hereto.

        9. ARBITRATION. Any controversy which may arise between Employee and the
Company with respect to the construction, interpretation or application of any
of the terms, provisions, covenants or conditions of this Agreement or any claim
arising from or relating to this Agreement will be submitted to final and
binding arbitration in San Francisco, California in accordance with the rules of
the American Arbitration Association then in effect.

        10. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

        11. COUNTERPARTS; FACSIMILE. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this

<PAGE>   15

Lawrence P. English
June 12, 2000
Page 15

Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. To the maximum extent permitted by applicable law,
this Agreement may be executed via facsimile.

        12. NOTICES. Any notice required to be given under this Agreement shall
be deemed sufficient, if in writing, and sent by certified mail, return receipt
requested, via overnight courier, or hand delivered to the Company at 22 Pelican
Way, San Rafael, California 94901, and to Employee at his most recent address
reflected in the permanent Company records. Copies of each such notice delivered
by either the Company or Employee shall be provided to each current member of
the Board at each such director's current address as listed in the Company's
records.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>   16
Lawrence P. English
June 12, 2000
Page 16

        Please indicate your acceptance of the foregoing provisions of this
Agreement by signing the enclosed copy of this Agreement and returning it to the
Company.

                                             Very truly yours,

                                             QUADRAMED CORPORATION

                                             By: /s/ James D. Durham
                                                 ------------------------------
                                             Title:         CEO
                                                   ----------------------------

ACCEPTED BY AND AGREED TO:

Lawrence P. English

Dated:    /s/  Lawrence P. English
       ------------------------------

<PAGE>   17

                                    EXHIBIT A

        Section 2870. Employment agreements; assignment of rights.

        (a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:

            (1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or

            (2) Result from any work performed by the employee for the employer.

        (b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.<PAGE>   1

                                                                   EXHIBIT 10.67

May 12, 2000

Mark Thomas
1520 Drake Avenue
Burlingame, CA  94010

Dear Mark:

        We are pleased to offer you the position of Chief Financial Officer,
reporting to me. The terms of this offer are discussed below and are packaged as
an employment contract. This will provide certain assurances concerning the
terms and conditions of your employment with QuadraMed Corporation (the
"Company") and will allow you to participate in a program of severance benefit
payments should your employment terminate. The purpose of this letter agreement
(the "Agreement") is to document the terms of your employment package by
providing you with a formal employment contract.

        The Company considers it essential to the continuing operation of the
Company and in the best interests of its stockholders to assure the continuous
dedication of key management personnel. It is recognized in the context of
public ownership that a termination of an employee's employment without cause
may be sought and that such circumstances could prove distracting to key
executives and detrimental to the ongoing management and administration of the
Company. Such distraction is not in the best interest of the stockholders of the
Company. Accordingly, the Board of Directors (the "Board") has determined to
discourage the inevitable distraction to you in the face of potentially
disturbing circumstances inherent in any uncertainty regarding your employment
status. This Agreement is intended to secure and encourage your ongoing
retention by providing separation benefits in the event that your employment is
altered as hereinafter described. In order to induce you to remain in the employ
of the Company, and in consideration of your agreement set forth in Sections 11,
12, 13 and 14 of Part Two hereof, the Company agrees to pay the severance
payments and benefits set forth in this Agreement, under the circumstances
described herein.

<PAGE>   2

Mark Thomas
May 12, 2000
Page 2

        Part One of this Agreement sets forth certain definitional provisions to
be in effect for purposes of determining your benefit entitlements. Part Two
specifies the terms and conditions which will apply to your continued employment
with the Company, including the severance payments and benefits to which you
will become entitled in the event your employment should be terminated. Part
Three concludes this Agreement with a series of general terms and conditions
applicable to your employment benefits.

                             PART ONE -- DEFINITIONS

        DEFINITIONS. For purposes of this Agreement, including in particular the
severance payments and benefits to which Employee may become entitled under Part
Two, the following definitions will be in effect:

        "CHANGE IN CONTROL" means:

        (i) a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
State of the Company's incorporation;

        (ii) a stockholder approved sale, transfer or other disposition of all
or substantially all of the assets of the Company;

        (iii) a transfer of all or substantially all of the Company's assets
pursuant to a partnership or joint venture agreement or similar arrangement
where the Company's resulting interest is less than fifty percent (50%);

        (iv) any reverse merger in which the Company is the surviving entity but
in which fifty percent (50%) or more of the Company's outstanding voting stock
is transferred to holders different from those who held the stock immediately
prior to such merger;

        (v) on or after the date hereof, a change in ownership of the Company
through an action or series of transactions, such that any person is or becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the securities of the combined
voting power of the Company's outstanding securities; or

        (vi) a majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is not

<PAGE>   3

Mark Thomas
May 12, 2000
Page 3

endorsed by a majority of the members of the Board prior to the date of such
appointment of election.

        "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.

        "EMPLOYEE" means Mark Thomas.

        "EMPLOYEE BENEFIT PLAN" shall have the meaning given the term under
Section 3 of ERISA.

        "EMPLOYMENT PERIOD" means the period of Employee's employment with the
Company governed by the terms and provisions of this Agreement. "ERISA" shall
mean the Employee Retirement Income Security Act of 1974, as in effect from time
to time.

        "INVOLUNTARY TERMINATION" means the termination of Employee's employment
with the Company:

        (i) involuntarily upon Employee's discharge, dismissal or the Company's
failure to renew this Agreement pursuant to Section 3 of Part Two, whether or
not in connection with a Change in Control; or

        (ii) voluntarily or involuntarily, provided such termination occurs in
connection with (a) a change in Employee's position with the Company or any
successor which materially reduces Employee's level of responsibility or changes
Employee's title from Executive Vice President and Chief Financial Officer, (b)
a reduction in Employee's level of compensation (including base salary, fringe
benefits and any non-discretionary bonuses or other incentive payments earned
pursuant to objective standards or criteria) or (c) a relocation of Employee's
principal place of employment by more than forty-five (45) miles and such
change, reduction or relocation is effected without Employee's written
concurrence.

        "OPTION" means any option or share purchase right granted to Employee
under the Stock Option Plan which is outstanding at the time of a Change in
Control or Employee's Involuntary Termination.

        "STOCK OPTION PLAN" means the Company's 1996 Stock Incentive Plan
(including the predecessor 1994 Stock Option Plan), as amended through the date
hereof.

<PAGE>   4

Mark Thomas
May 12, 2000
Page 4

        "TERMINATION FOR CAUSE" will mean an Involuntary Termination of
Employee's employment for (i) one or more alleged acts of fraud, embezzlement,
misappropriation of proprietary information, misappropriation of the Company's
trade secrets or other confidential information, a verifiable breach of
Employee's fiduciary duties to the Company or any other verifiable misconduct
adversely affecting the business reputation of the Company in a material manner
or (ii) Employee's repeated and demonstrated failure to perform the material
duties of his position following written notice describing the failure and a
period of not less than 30 days to cure the failure to perform; provided,
however, Employee will have the right to perform incidental services as are
necessary in connection with (a) his private passive investments, (b) his
charitable or community activities and (c) his participation in trade or
professional organizations, but only to the extent such incidental services do
not materially interfere with the performance of Employee's services hereunder.

                 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT

        The following terms and conditions will govern Employee's employment
with the Company throughout the Employment Period and will also, to the extent
indicated below, remain in effect following Employee's termination date.

        1. EMPLOYMENT AND DUTIES. The Company will continue to employ Employee
as an executive officer in the position of Executive Vice President and Chief
Financial Officer. Employee agrees to continue in such employment for the
duration of the Employment Period and to perform in good faith and to the best
of Employee's ability all services which may be required of Employee in his
executive position and to be available to render such services at all reasonable
times and places in accordance with reasonable directives and assignments issued
by the Board. During Employee's Employment Period, Employee will devote his full
time and effort to the business and affairs of the Company within the scope of
his executive office. Employee's principal place of operations will be at the
Company's corporate offices in San Rafael, California.

        2. AT WILL EMPLOYEE. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement. Employee shall be an employee "at will," terminable
at any time by the Company for cause or without cause.

<PAGE>   5

Mark Thomas
May 12, 2000
Page 5

        3. TERM; AUTOMATIC EXTENSION. The initial term of this Agreement shall
be two (2) years from the effective date hereof. Commencing on the anniversary
of the effective date hereof, and on each succeeding anniversary of the date
hereof, the term of this Agreement shall automatically be extended for one (1)
additional year unless, not later than three (3) months preceding such
anniversary date, either party to this Agreement shall have given written notice
to the other party pursuant to Section 6 of Part Three that such party will not
extend the term of this Agreement.

        4. COMPENSATION.

           A. For service in the 2000 calendar year, Employee's base salary will
be paid at the annual rate of Two Hundred and Fifty Thousand Dollars ($250,000).
Employee's annual rate of base salary may be subject to adjustment each calendar
year by the Board.

           B. Employee's base salary will be paid at periodic intervals in
accordance with the Company's payroll practices for salaried employees.

           C. Normally, Employee will be entitled to such bonuses (if any) for
service rendered during the Employment Period as the Board may determine in its
sole discretion and based upon the recommendation of the Company's Compensation
Committee and such additional factors as the Board deems appropriate, including
Employee's individual performance and the Company's financial results. Employee
will be eligible to participate in all bonus plans applicable to the Company's
executives. Inasmuch as we expect your influence to enhance organizational
performance, we realize that initially this will take some time. Therefore,
QuadraMed will guarantee payment of Employee's year 2000 bonus at 40% of base
compensation, specifically the amount of $100,000 payable no later than February
1, 2001. Parties further agree that in the event of Involuntary Termination
prior to Employee's receipt of this payment the payment is guaranteed to
Employee in addition to the severance benefit due pursuant to Section 9.

           D. The Company will deduct and withhold, from the compensation
payable to Employee hereunder, any and all applicable federal, state and local
income and employment withholding taxes and any other amounts required to be
deducted or withheld by the Company under applicable statute or regulation.

<PAGE>   6

Mark Thomas
May 12, 2000
Page 6

           E. The Board of Directors will grant you options to purchase 200,000
shares of common stock exercisable at a purchase price equal to fair market
value on the date that this agreement is accepted and subject to vesting
according to the terms of the Company's Stock Option Plan.

           F. The Company will reimburse you, within the first 30 days of your
employment, for unvested 401(k) funds with your current employer, agreed to be
$22,987. The exact amount will be substantiated by the most recent report of
your 401(k) account balance.

        5. EXPENSE REIMBURSEMENT. Employee will be entitled to reimbursement
from the Company for all customary, ordinary and necessary business expenses
incurred by him in the performance of his duties hereunder, provided Employee
furnishes the Company with vouchers, receipts and other substantiation of such
expenses in accordance with Company policies.

        6. FRINGE BENEFITS. During the Employment Period, Employee will be
eligible to participate in any group life insurance plan, group medical and/or
dental insurance plan, accidental death and dismemberment plan, short-term
disability program and other employee benefit plans, including profit sharing
plans, cafeteria benefit programs and stock purchase and option plans, which are
made available to executives and for which Employee qualifies.

        7. VACATION. Employee will accrue four (4) weeks of paid vacation
benefits during each calendar year of the Employment Period in accordance with
the Company policy in effect for executive officers.

        8. DEATH OR DISABILITY.

           A. Upon Employee's death or disability during the Employment Period,
the employment relationship created pursuant to this Agreement will immediately
terminate, and no further compensation will become payable to Employee pursuant
to Part Two, Section 4. In connection with such termination by reason of death,
the Company will only be required to pay Employee (or his estate) any unpaid
compensation earned under Part Two, Section 4 for services rendered through the
date of Employee's death, together with a special termination payment equal to
the additional amount of base salary Employee would have earned hereunder had
his employment continued for an additional thirty (30) days. In connection with
such termination by reason of disability, the Company will be required to pay to
Employee any unpaid compensation earned under Part Two, Section 4 for services
rendered

<PAGE>   7

Mark Thomas
May 12, 2000
Page 7

through the date of Employee's disability, together with the severance benefits
set forth in Section 9 below. However, the Company's obligation to provide such
severance benefits shall be reduced and offset, dollar-for-dollar, by any income
continuation payments provided Employee under any disability income/insurance
programs funded by the Company on Employee's behalf.

           B. Employee will be deemed disabled if his is so characterized
pursuant to the terms of the Company's disability insurance policies applicable
to Employee from time to time or, if no such policy is applicable, if Employee
is unable to perform the essential functions of his duties for physical or
mental reasons for one hundred twenty (120) consecutive days, or one hundred
eighty (180) days during any twelve (12) month period.

           C. Upon death or disability the terms of the Stock Option Plan will
apply.

        9. SEVERANCE BENEFITS. Employee will be entitled to receive the
severance benefits specified below in the event there should occur a termination
of Employee's employment by reason of disability or an Involuntary Termination
of his employment (other than a Termination for Cause).

           A. SEVERANCE BENEFIT. The Company will make a severance payment to
Employee, in one lump sum within thirty (30) days of the date of Employee's
Involuntary Termination, in an aggregate amount equal to one (1) times
Employee's then-current annual rate of base salary. Employee may elect, in his
sole discretion, to have the severance benefit payable pursuant to this Section
9.A in monthly installments over a one (1) year period following the date of his
Involuntary Termination. In addition, Employee will receive a lump sum payment
equal to Employee's annual bonus of 40% of base compensation.

           B. WELFARE BENEFITS. For a period of twelve (12) months, Employee
(and his dependents, as applicable) shall be provided by the Company with the
same life, health and disability plan participation, benefits and other
coverages to which he was entitled as an employee immediately before the
disability or the Involuntary Termination. In the event that under applicable
law or the terms of the relevant Employee Benefit Plans such participation,
benefits and/or coverage cannot be provided to Employee following his
Involuntary Termination, such coverage and/or benefits shall be provided
directly by the Company pursuant to this Agreement on a comparable basis. In its
sole discretion, the Company may obtain such coverage and

<PAGE>   8

Mark Thomas
May 12, 2000
Page 8

benefits for Employee through private insurance acquired at the Company's
expense. Amounts paid or payable to or on behalf of Employee pursuant to any
"employee welfare benefit plan," as defined in ERISA, providing health and/or
disability benefits, that is sponsored by the Company or an affiliate of the
Company, shall be credited against amounts due under this Section 9.B. To the
maximum extent permitted by applicable law, the benefits provided under this
Section 9.B shall be in discharge of any obligations of the Company or any
rights of Employee under the benefit continuation provisions under Section 4980A
of the Code and Part VI of Title I of ERISA ("COBRA") or any other legislation
of similar import.

           C. OPTION ACCELERATION. In connection with the Involuntary
Termination of Employee's employment (other than Termination for Cause), whether
before or after a Change in Control transaction, each of Employee's Options
under the Stock Option Plan and all restricted or unvested Common Stock granted
by the Company will (to the extent not then otherwise exercisable or vested)
automatically accelerate and vest and any repurchase rights with respect thereto
will terminate so that each such Option or share of restricted or unvested
Common Stock will become immediately and fully exercisable or vested as of the
date of termination. Not withstanding the provisions of Section 5 of the Stock
Option Plan, each such accelerated Option, together with all of Employee's other
vested Options, will remain exercisable for a period of three (3) years
following Employee's Involuntary Termination and may be exercised for any or all
of the option shares, including the accelerated shares, in accordance with the
exercise provisions of the Option agreement evidencing the grant.

           D. RELEASE OF COMPANY. Receipt of severance benefits pursuant to this
Section 9 shall be in lieu of all other amounts payable by the Company to
Employee and in settlement and release of all claims Employee may have against
the Company other than those arising out of the severance benefits due and
payable under Sections 9 and 16 of Part Two of this Agreement and Employee's
rights under Part Three of this Agreement. Employee acknowledges and agrees that
execution of a mutual general release of claims setting forth the terms of this
Section 9.D. and otherwise reasonably acceptable to the Company and Employee
shall be a condition precedent to the Company's obligation to pay severance
benefits hereunder.

<PAGE>   9
Mark Thomas
May 12, 2000
Page 9

        10. OPTION/VESTING ACCELERATION UPON CHANGE IN CONTROL.

            A. To the extent the acquiring company in any Change in Control
transaction does not assume or otherwise continue in full force and effect the
Employee's outstanding Options under the Stock Option Plan, those Options shall
automatically accelerate and vest so that each such Option will, immediately
prior to the Change in Control, become fully exercisable for all the option
shares and shall terminate immediately after the Change in Control transaction.

            B. The following provisions shall govern any Options which are to be
assumed or otherwise continued in effect in the Change in Control and any
restricted or unvested shares of Common Stock held by the Employee at the time
of the Change in Control.

            The Options shall accelerate and vest at the time of the Change in
Control so that each Option will become exercisable for all of the Option shares
immediately prior to the Change in Control transaction, except to the extent the
Option parachute payment attributable to such accelerated vesting would
otherwise result in an excess parachute payment under Code Section 280G. Any
Option which does not accelerate and vest at the time of the Change in Control
by reason of the foregoing limitation shall continue to become exercisable and
vest in accordance with the vesting schedule applicable to that Option
immediately prior to the Change in Control.

            Any restricted or unvested shares of Common Stock held by the
Employee at the time of the Change in Control shall immediately vest at that
time and the Company's repurchase rights with respect to those shares shall
terminate, except to the extent the parachute payment attributable to such
accelerated vesting, when added to the parachute payment attributable to the
acceleration of the Employee's outstanding Options, would result in an excess
parachute payment under Code Section 280G. The Company's repurchase rights with
respect to any restricted or unvested shares which do not vest at the time of
the Change in Control by reason of the foregoing limitation shall continue in
effect and shall be assigned to any successor entity in the Change in Control
transaction, and Employee shall continue to vest in those shares in accordance
with the vesting schedule in effect for the shares immediately prior to the
Change in Control.

            Any Option which does not accelerate, and any restricted or unvested
shares of Common Stock which do not vest at the time of the Change in Control by
reason of the foregoing limitations shall immediately vest in full

<PAGE>   10
Mark Thomas
May 12, 2000
Page 10

pursuant to the provisions of Section 9.C. upon any Involuntary Termination of
Employee's employment following the Change in Control (other than a Termination
for Cause). Each such accelerated Option, together with each of the Employee's
other vested Options shall remain exercisable and outstanding for a period of
three (3) years and may be exercised for any or all of the Option shares,
including the accelerated shares, in accordance with the provisions of the
Option agreement evidencing such Option.

           All determinations concerning the application of the parachute
payment provisions of Code Section 280G to the accelerated vesting of Options
and shares pursuant to this Section 10 shall be made in accordance with the
procedures set forth in Section 16.B.

           Each Option which is assumed or otherwise continued in effect will be
appropriately adjusted to apply to the number and class of securities which
would have been issued to Employee in the consummation of the Change in Control
transaction had the Option been exercised immediately prior to such transaction,
and appropriate adjustments will be made to the Option exercise price payable
per share, provided the aggregate exercise price will remain the same.

        11. RESTRICTIVE COVENANT. During the Employment Period, Employee will
not directly or indirectly, whether for Employee's own account or as an
employee, consultant or advisor, provide services to any business enterprise
other than the Company, unless otherwise authorized by the Company in writing.

        12. NON-SOLICITATION AND NON-DISPARAGEMENT. During any period for which
Employee is receiving compensation payments pursuant to Part Two, Section 4 and
one (1) year thereafter, Employee will not directly or indirectly (i) solicit
any Company employee, independent contractor or consultant to leave the
Company's employ or otherwise terminate such person's relationship with the
company for any reason or interfere in any other manner with the employment or
other relationships at the time existing between the Company and its current
employees, independent contractors or consultants, (ii) solicit any of the
Company's customers for products or services substantially similar to those
offered by the Company, or (iii) disparage the Company or any of its
stockholders, directors, officers, employees or agents.

<PAGE>   11

Mark Thomas
May 12, 2000
Page 11

        13. CONFIDENTIALITY.

            A. Employee hereby acknowledges that the Company may, from time to
time during the Employment Period, disclose to Employee confidential information
pertaining to the Company's business and affairs and client base, including
(without limitation) customer lists and accounts, other similar items indicating
the source of the Company's income and information pertaining to the salaries,
duties and performance levels of the Company's employees. Employee will not, at
any time during or after such Employment Period, disclose to any third party or
directly or indirectly make use of any such confidential information, including
(without limitation) the names, addresses and telephone numbers of the Company's
customers, other than in connection with, and in furtherance of, the Company's
business and affairs. Nothing contained in this section shall be construed to
prevent Employee from disclosing the amount of his salary.

            B. All documents and data (whether written, printed or otherwise
reproduced or recorded) containing or relating to any such proprietary
information of the Company which come into Employee's possession during the
Employment Period will be returned by Employee to the Company immediately upon
the termination of the Employment Period or upon any earlier request by the
Company, and Employee will not retain any copies, notes or excerpts thereof.
Notwithstanding the foregoing, Employee shall be entitled to retain his file or
Rolodex containing names, addresses and telephone numbers and personal diaries
and calendars; provided, however, that Employee shall continue to be bound by
the terms of Section 13.A. above to the extent such retained materials
constitute confidential information.

            C. Employee's obligations under this Section 13 will continue in
effect after the termination of Employee's employment with the Company, whatever
the reason or reasons for such termination, and the Company will have the right
to communicate with any of Employee's future or prospective employers concerning
his continuing obligations under this Section 13.

        14. OWNERSHIP RIGHTS.

            A. All materials, ideas, discoveries and inventions pertaining to
the Company's business or clients, including (without limitation) all patents
and copyrights, patent applications, patent renewals and extensions and the
names, addresses and telephone numbers of customers, will belong solely to the
Company.

<PAGE>   12
Mark Thomas
May 12, 2000
Page 12

            B. All materials, ideas, discoveries and inventions which Employee
may devise, conceive, develop or reduce to practice (whether individually or
jointly with others) during the Employment Period will be the sole property of
the Company and are hereby assigned by Employee to the Company, except for any
idea, discovery or invention (i) for which no Company equipment, supplies,
facility or trade secret information is used, (ii) which is developed entirely
on Employee's own time and (iii) which neither (a) relates at the time of
conception or reduction to practice, to the Company's business or any actual or
demonstrably-anticipated research or development program of the Company nor (b)
results from any work performed by Employee for the Company. The foregoing
exception corresponds to the assignment of inventions precluded by California
Labor Code Section 2870, attached as Exhibit A.

            C. Employee will, at all times whether during or after the
Employment Period, assist the Company, at the Company's sole expense, in
obtaining, maintaining, defending and enforcing all legal rights and remedies of
the Company, including, without limitation, patents, copyrights and other
proprietary rights of the Company. Such assistance will include (without
limitation) the execution of documents and assistance and cooperation in legal
proceedings.

            D. Employee will continue to be bound by all the terms and
provisions of Employee's existing Proprietary Information Agreement with the
Company, and nothing in this document will be deemed to modify or affect
Employee's duties and obligations under those other agreements.

        15. TERMINATION OF EMPLOYMENT.

            A. The Company (or any successor entity resulting from a Change in
Control) may terminate Employee's employment under this Agreement at any time
for any reason, with or without cause, by providing Employee with at least seven
(7) days prior written notice. However, such notice requirement will not apply
in the event there is a Termination for Cause under subsection D below.

            B. In the event there is a termination of Employee's employment by
reason of disability or an Involuntary Termination of Employee's employment with
the Company (other than Termination for Cause) during the Employment Period,
Employee will become entitled to the benefits

<PAGE>   13
Mark Thomas
May 12, 2000
Page 13

specified in Part Two, Section 9 in addition to any unpaid compensation earned
by Employee under Part Two, Section 4 for services rendered prior to such
termination. However, in the event of such disability, the Company's obligation
to provide benefits under Part Two, Section 9 shall be reduced and offset,
dollar-for-dollar, by any income continuation payments provided Employee under
any disability income/insurance program funded by the Company on Employee's
behalf.

            C. Should Employee's employment with the Company terminate by reason
of his death during the Employment Period, no severance benefits will be payable
to Employee under Part Two, Section 9, and only the limited death benefits
provided under Part Two, Section 8 will be payable.

            D. The Company may at any time, upon written notice, terminate
Employee's employment hereunder for any act qualifying as a Termination for
Cause. Such termination will be effective immediately upon such notice.

            E. Upon such Termination for Cause, the Company will only be
required to pay Employee any unpaid compensation earned by him pursuant to Part
Two, Section 4 for services rendered through the date of such termination, and
no termination or severance benefits will be payable to Employee under Part Two,
Section 9.

        16. TAX EFFECT OF PAYMENTS.

            A. GROSS-UP PAYMENT. In the event that it is determined that any
payment or distribution of any type to or for Employee's benefit made by the
Company, by any of its affiliates, by any person who acquires ownership or
effective control of the Company or ownership of a substantial portion of the
Company's assets (within the meaning of Section 280G of the Code and the
regulations thereunder) or by any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Total Payments"), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest or penalties, are
collectively referred to as the "Excise Tax"), then Employee shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Employee of all taxes imposed upon the Gross-Up Payment,

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Mark Thomas
May 12, 2000
Page 14

including any Excise Tax, Employee retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed on the Total Payments.

            B. DETERMINATION BY ACCOUNTANT. All mathematical determinations and
all determinations of whether any of the Total Payments are "parachute payments"
(within the meaning of Section 280G of the Code) that are required to be made
under this Section 16, including all determinations of whether a Gross-Up
Payment is required, of the amount of such Gross-Up Payment and of amounts
relevant to the last sentence of this Section 16, shall be made by an
independent accounting firm selected by Employee and reasonably acceptable to
the Company from among the largest five (5) accounting firms in the United
States (the "Accounting Firm"), which shall provide its determination, together
with detailed supporting calculations regarding the amount of any Gross-Up
Payment and any other relevant matters (the "Determination"), both to the
Company and to Employee within five (5) business days of Employee's termination
date, if applicable, or such earlier time as is requested by the Company or by
Employee (if Employee reasonably believes that any of the Total Payments may be
subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax
is payable by Employee, it shall furnish Employee with a written statement that
such Accounting Firm has concluded that no Excise Tax is payable (including the
reasons therefor) and that Employee has substantial authority not to report any
Excise Tax on Employee's federal income tax return. If a Gross-Up Payment is
determined to be payable, it shall be paid to Employee within five (5) business
days after the Determination is delivered to the Company or to Employee. Any
Determination by the Accounting Firm shall be binding upon the Company and
Employee, absent manifest error. All of the costs and expenses of the Accounting
Firm shall be borne by the Company.

            C. UNDERPAYMENTS AND OVERPAYMENTS. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made
by the Company should have been made ("Underpayments") or that Gross-Up Payments
will have been made by the Company which should not have been made
("Overpayments"). In either event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the amount of such Underpayment shall promptly be paid by the
Company to or for Employee's benefit. In the case of an Overpayment, Employee
shall, at the direction and expense of the Company, take such steps as are
reasonably

<PAGE>   15

Mark Thomas
May 12, 2000
Page 15

necessary (including the filing of returns and claims for refund), follow
reasonable instructions from, and procedures established by, the Company and
otherwise reasonably cooperate with the Company to correct such Overpayment;
provided, however, that (i) Employee shall in no event be obligated to return to
the Company an amount greater than the net after-tax portion of the Overpayment
that Employee has retained or has received as a refund from the applicable
taxing authorities and (ii) this provision shall be interpreted in a manner
consistent with the intent of this Section 16, which is to make Employee whole,
on an after-tax basis, for the application of the Excise Tax, it being
understood that the correction of an Overpayment may result in Employee's
repaying to the Company an amount which is less than the Overpayment.

                     PART THREE -- MISCELLANEOUS PROVISIONS

        1. MITIGATION. Employee shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise and no future income earned by Employee from employment
or otherwise shall in any way reduce or offset any payments due to Employee
hereunder. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish Employee's existing rights which would accrue solely as a result of the
passage of time, under any Company Employee Benefit Plan, "Payroll practice" (as
defined in ERISA), compensation arrangement, incentive plan, stock option or
other stock-related plan.

        2. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Company and any successor of the Company, including, without
limitation, any corporation or corporations acquiring directly or indirectly all
or substantially all of the stock, business or assets of the Company whether by
merger, consolidation, division, sale or otherwise (and such successor shall
thereafter be deemed "the Company" for the purposes of this Agreement). The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance satisfactory to
Employee, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement

<PAGE>   16
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May 12, 2000
Page 16

entitling Employee to the benefits hereunder, as though Employee was subject to
Involuntary Termination. This Agreement shall be binding upon and inure to the
benefit of Employee, his successors, assigns, executors, administrators or
beneficiaries.

        3. INDEMNIFICATION. The indemnification provisions for officers and
directors under the Company's Bylaws and any applicable indemnification
agreement between Employee and the Company will (to the maximum extent permitted
by law) be extended to Employee, during the period following his Voluntary or
Involuntary Termination, with respect to any and all matters, events or
transactions occurring or effected during Employee's Employment Period.

        4. MISCELLANEOUS. The provisions of this Agreement will be construed and
interpreted under the laws of the State of California. This Agreement
incorporates the entire Agreement between Employee and the Company relating to
the terms of Employee's employment and the subject of severance benefits and
supersedes all prior agreements and understandings with respect to such subject
matter. This Agreement may only be amended by written instrument signed by
Employee and an authorized officer of the Company.

        5. ARBITRATION. Any controversy which may arise between Employee and the
Company with respect to the construction, interpretation or application of any
of the terms, provisions, covenants or conditions of this Agreement or any claim
arising from or relating to this Agreement will be submitted to final and
binding arbitration in San Francisco, California in accordance with the rules of
the American Arbitration Association then in effect.

        6. NOTICES. Any notice required to be given under this Agreement shall
be deemed sufficient, if in writing, and sent by certified mail, return receipt
requested, via overnight courier, or hand delivered to the Company at 1003 West
Cutting Boulevard, 2nd Floor, Richmond, California 94804, and to Employee at his
most recent address reflected in the permanent Company records. Copies of each
such notice delivered by either the Company or Employee shall be provided to
each current member of the Board at each such director's current address as
listed in the Company's records.

        7. LEGAL COSTS. If any legal action or other proceeding is brought by
Employee for the enforcement of this Agreement, or because of an alleged

<PAGE>   17
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May 12, 2000
Page 17

dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, Employee shall be entitled to recover reasonable
attorneys fees and other costs incurred in that action or proceeding, in
addition to any other relief to which Employee may be entitled, in the event and
to the extent that Employee prevails in such action or other proceeding.
Notwithstanding anything herein above to the contrary, as between Employee and
the Company, the Company shall bear all legal costs and expenses of defending
the validity of this Agreement against any third party. The Company shall bear
all legal costs and expenses incurred in the event the Company should contest or
dispute the characterization of any amounts paid pursuant to this Agreement as
being nondeductible under Section 280G of the Code or subject to imposition of
an excise tax under Section 4999 of the Code.

              THE REST OF THIS PAGE WAS INTENTIONALLY LEFT BLANK.

<PAGE>   18

Mark Thomas
May 12, 2000
Page 18

        Please indicate your acceptance of the foregoing provisions of this
Agreement by signing the enclosed copy of this Agreement and returning it to the
Company.

                                         Very truly yours,

                                         QUADRAMED CORPORATION

                                         By:
                                             ---------------------------------
                                             James D. Durham
                                             Chairman and CEO

ACCEPTED BY AND AGREED TO:

---------------------------------
Mark Thomas

Dated:
      ---------------------------

<PAGE>   19

                                    EXHIBIT A

        Section 2870. APPLICATION OF PROVISION PROVIDING THAT EMPLOYEE WILL
ASSIGN OR OFFER TO ASSIGN RIGHTS IN INVENTION TO EMPLOYER.

        (a) Any provision in an employment agreement which provides that an
employee will assign, or offer to assign, any of his or her rights in an
invention to his or her employer will not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:

           (1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.

           (2) Result from any work performed by the employee for his employer.

        (b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.

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