Higginbotham Amendment

Higginbotham Release

Baldwin Agreement

Baldwin Amendment

 

 

 

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into on the 9th of July, 2008, to be effective on and as of the 9th of July, 2008 (the “Effective Date”), by and between Integral Systems, Inc., a Maryland corporation (the “Company”), and John B. Higginbotham (the “Executive”).

NOW, THEREFORE, in consideration of the mutual promises made below, the parties agree as follows:

 

1.

Employment, Duties and Acceptance.

 

 

1.1

Employment.

(a) Effective upon the Effective Date, the Company shall employ Executive as its Chief Executive Officer. Executive shall have such powers, perform such duties and fulfill such responsibilities as may be determined by the Board of Directors of the Company (the “Board”) from time to time consistent with his position as Chief Executive Officer of the Company. Executive shall report to the Chairman of the Board. Executive accepts such employment and shall perform his duties faithfully and to the best of his abilities.

(b) Executive shall devote substantially all of his full working time and creative energies to the performance of his duties hereunder and will at all times devote such additional time and efforts as are reasonably sufficient for fulfilling the significant responsibilities entrusted to him. So long as such activities, in the aggregate, do not interfere with the performance by Executive of his duties hereunder: (i) Executive shall be permitted a reasonable amount of time to supervise his personal, passive investments; (ii) Executive shall be permitted a reasonable amount of time to participate (as board member, officer or volunteer) in civic, political and charitable activities; and (iii) Executive shall be permitted to serve on the board of directors of Protostar and the Space Foundation (director emeritus).

(c) During the Term of Executive’s employment, the Company shall cause Executive to be nominated for a position as a member of the Board.

1.2 Place of Employment. Executive’s principal place of employment shall be in Columbia, Maryland (or, prior to early 2009, Lanham, Maryland), subject to such travel as may be reasonably required by his employment pursuant to the terms hereof.

 

2.

Term of Employment.

2.1 Term of Employment. Executive agrees that the initial term of this Agreement shall be for a period of three (3) years commencing on the Effective Date (as may be extended, the “Term”). At the end of the initial Term or at the end of any twelve (12) month renewal period (as described in Section 2.2 below), the Term of this Agreement may automatically extend as provided below in Section 2.2. Notwithstanding anything to the contrary contained herein, the Company may terminate Executive’s employment at any time with or without Cause, subject to the provisions of Section 4 below.


2.2 Renewal Periods. If this Agreement has not been terminated earlier in accordance with the provisions of this Agreement, at the end of the initial Term or any twelve (12) month renewal period, the Term shall be extended automatically for an additional twelve (12) month period unless either party provides written notice of non-renewal to the other party at least one hundred eighty (180) days prior to the last day of the initial Term or any renewal period, as applicable.

 

3.

Compensation.

3.1 Salary. As compensation for all services to be rendered pursuant to this Agreement, the Company shall pay to Executive during the Term a salary of $360,000 per annum (the “Base Salary”), which shall be pro-rated for calendar year 2008, less such deductions as shall be required to be withheld by applicable laws and regulations or as otherwise authorized by Executive. The Base Salary shall accrue from and after the Effective Date, and shall be payable during the Term, in arrears in equal periodic installments and in accordance with the practices of the Company in effect from time to time for the payment of salaries to employees of the Company, but in any event not less frequently than monthly. Executive’s Base Salary shall be reviewed at least annually, at the beginning of each fiscal year, and may be increased (but not decreased) based upon the evaluation of Executive’s performance and the compensation policies of the Company in effect at the time of each such review.

3.2 Additional Compensation. During the Term, Executive shall be entitled to participate, in accordance with the terms thereof and in a manner substantially similar to other similarly situated executive officers, in any present or future bonus, profit sharing, stock option (whether incentive or non qualified) or other employee compensation or incentive plan adopted by the Company. Executive’s annual target bonus opportunity shall be 75% of Base Salary (the “Target Bonus”), with the actual bonus (if any) determined pursuant to the Company’s applicable annual incentive compensation plan as in effect from time-to-time, with a potential actual bonus of up to 150% of Base Salary for performance as determined pursuant to the applicable annual incentive compensation plan. The annual bonus performance goals shall be established in the first ninety (90) days of each fiscal year of the Company by the Board in agreement with Executive. For the 2008 fiscal year (which began on October 1, 2007), the Company and Executive shall agree on reasonable bonus performance goals by no later than sixty (60) days after the Effective Date, and the annual target bonus opportunity for the 2008 fiscal year shall be 75% of the Base Salary earned by Executive during such fiscal year, with a potential actual bonus of up to 150% of Base Salary earned by Executive during such fiscal year for performance as determined pursuant to the applicable arrangement. Any annual bonus shall be paid to Executive no later than two and one-half months following the end of the fiscal year to which it relates.

3.3 Sign-On Bonus. The Company shall pay Executive a one-time sign-on bonus of $75,000, payable with Executive’s first paycheck from the Company.

3.4 Grant of Stock Options. No later than 30 days after the Effective Date, the Company shall grant Executive a nonqualified stock option to acquire two hundred seventy five thousand (275,000) shares of the Company’s common stock, subject to such vesting restrictions and other terms and conditions as set forth by the Company’s 2008

 

2


Stock Incentive Plan and the Company’s standard form of award agreement for options under the Plan, a copy of which has been made available to Executive prior to the Effective Date (the “Award Agreement”). Further, the Company shall in good faith consider Executive for an additional award of stock options under the Company’s equity incentive plan on each anniversary of the Effective Date, consistent with the Company’s overall equity plan, with a target option award covering at least 50,000 shares per year (subject to adjustment based on corporate events occurring after the Effective Date pursuant to the terms of the 2008 Stock Incentive Plan).

The initial stock option award and all future options (“Options”) granted to the Employee shall vest in the following manner:

(a) Vesting shall occur with respect to 25% of the Options on each of the first, second, third and fourth anniversaries of the date of grant (the Effective Date for the 275,000 Options initially granted pursuant to this Section 3.4), subject to Executive’s continued employment with, or provision of services to, the Company through each applicable vesting date; provided, however, that any future Options may vest on a different schedule that results in vesting at least as quickly as under such schedule.

(b) Any unvested portion of the Options or any equity award made to Executive shall immediately vest and become exercisable in full, (i) if a change in control (as defined in the Award Agreement) occurs while Executive is an employee or service provider of the Company, (ii) if Executive’s employment or services with the Company are terminated by the Company without Cause, by Executive for Good Reason, or due to Executive’s death or Total Disability, and, (iii) in the event of non-renewal of the initial Term.

The Company shall use its best efforts to register the shares of stock subject to any stock options or other equity awards made to Executive pursuant to an effective registration statement under the Securities Act of 1933, as amended (“Securities Act”) so that Executive may freely trade such shares on the public markets at such time as the options are exercised or the shares are issued to Executive.

3.5 Change in Control Bonus. If a change in control (as defined in the Award Agreement) occurs before the 18-month anniversary of the Effective Date and while Executive is an employee or other service provider to the Company (or Executive was terminated without Cause or resigned for Good Reason prior to the change in control occurring), the Company shall pay Executive a cash bonus of the following amount upon the occurrence of such change in control:

 

3


 

 

 

Price Per Share of Common Stock

Received by Shareholders in

Connection with the Change in

Control (Adjusted for Post-Effective

Date Corporate Events in the Same

Manner As Awards Granted Under the

2008 Stock Incentive Plan)

  

Change in Control Bonus

$40 or less

  

$630,000

$41

  

$355,000

$42

  

$80,000

$42.30 or above

  

$0

For stock prices between those set forth in the chart above, the change in control bonus shall be determined by interpolation. In addition, the price per share of common stock received by shareholders in connection with the Change in Control shall be determined without regard to any amounts placed in escrow, earn-outs, holdbacks or similar amounts.

3.6 Participation in Executive Officer Benefit Plans. Executive shall be permitted during the Term, if and to the extent eligible, to participate in any group life, hospitalization or disability insurance plan, health program, 401(k) pension or similar benefit plan of the Company which may be available to other executive officers of the Company generally on the same terms as such other executive officers.

3.7 Expenses. The Company shall pay or reimburse Executive for all ordinary, necessary and reasonable expenses (including, without limitation, travel, meetings, dues, subscriptions, fees, educational expenses, computer equipment, mobile telephones, professional insurance, and the like) actually incurred or paid by Executive during the Term in the performance of Executive’s services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as may be required by the policies and procedures of the Company in effect from time to time. The Company shall reimburse Executive for his reasonable fees and expenses incurred in obtaining tax, legal and accounting advice from outside professionals in connection with the negotiation and drafting of this Employment Agreement, up to a maximum amount of $15,000, within fourteen (14) days after Executive provides the Company with a copy of any invoices he has received for such services.

3.8 Withholding. The Company is authorized to withhold from the amount of any Base Salary and any other things of value paid to or for the benefit of Executive, all sums authorized by Executive or required to be withheld by law, court decree, or executive order, including (but not limited to) such things as income taxes, employment taxes, and employee contributions to fringe benefit plans sponsored by the Company.

 

4


4.

Termination.

4.1 General. The employment of Executive hereunder shall terminate as provided in Section 2, unless earlier terminated in accordance with the provisions of this Section 4.

4.2 Termination Upon Mutual Agreement. The Company and Executive may, by mutual written agreement, terminate this Agreement and/or the employment of Executive at any time.

4.3 Death or Disability of Executive.

(a) The employment of Executive hereunder shall terminate upon (i) the death of Executive, and (ii) at the option of the Company upon not less than thirty (30) days’ prior written notice to Executive or his personal representative or guardian, if Executive suffers a “Total Disability” (as defined in Section 4.3(b) below).

(b) For purposes of this Agreement, “Total Disability” shall mean (i) if Executive is subject to a legal decree of incompetency (the date of such decree being deemed the date on which such disability occurred), or (ii) the written determination by a physician selected by the Company that, because of a medically determinable disease, injury or other physical or mental disability, Executive is unable substantially to perform each of the material duties of Executive required hereby, and that such disability has lasted for the immediately preceding ninety (90) days and is, as of the date of determination, reasonably expected to last an additional ninety (90) days or longer after the date of determination, in each case based upon medically available reliable information, and the provision of clear and convincing evidence by the Company of Executive’s inability substantially to perform each material duty hereunder in support of such determination by the physician.

(c) Any leave on account of illness or temporary disability which is short of “Total Disability” shall not constitute a breach of this Agreement by Executive and in no event shall any party be entitled to terminate this Agreement for “Cause” (as defined in Section 4.4 below) due to any such leave. All physicians selected hereunder shall be Board certified in the specialty most closely related to the nature of the disability alleged to exist.

4.4 Termination For Cause/Termination by Executive for Good Reason.

(a) The Company may, upon written notice to Executive specifying in reasonable detail the reason therefore (and subject to Executive’s ability to cure as outlined below), terminate the employment of Executive at any time for “Cause” (as defined below). For purposes of this Agreement, “Cause” means (i) the repeated and material failure of Executive to perform his material duties under this Agreement, or to follow the Company’s policies and procedures applicable to executive officers of the Company in effect from time to time, after notice and a reasonable opportunity to cure; (ii) willful malfeasance by Executive in connection with the performance of his duties under this Agreement; (iii) Executive being convicted of, or pleading guilty or nolo contendere to, or being indicted for a felony or other crime involving theft, fraud or moral turpitude; (iv) fraud or embezzlement against the Company; (v) the failure of Executive to comply with in any material respects any proper and lawful written direction of

 

5


the Board of the Company related to the provision of services to the Company that is not inconsistent with this Agreement, after notice to Executive of such failure and a 30-day opportunity to cure; (vi) or the material violation by Executive of any of the provisions of Section 5 of this Agreement.

(b) Executive may, upon written notice to the Company specifying in reasonable detail the reason therefore, terminate his employment at any time for “Good Reason” as provided herein. For purposes of this Agreement, “Good Reason” shall mean Executive’s voluntary termination for one of the following reasons, provided that Executive has provided written notice to the Company of the event that he believes constitutes Good Reason within thirty (30) days after its occurrence, and the Company has not cured such event within thirty (30) days following the receipt of such notice (and provided further that Executive voluntarily terminates employment no later than sixty (60) days after the Company’s time period for curing such violation has lapsed): (i) a material diminution of the authority, responsibilities, or position of Executive from those set forth in this Agreement; (ii) a reduction in Executive’s Base Salary or Target Bonus; (iii) a required relocation of Executive’s principal place of business more than fifty (50) miles from the applicable location specified in Section 1.2; or (iv) a material breach by the Company of a material term of this Agreement.

4.5 Payments Upon Termination.

(a) In the event Executive’s employment is terminated by the Company without Cause during the Term, or if Executive terminates his employment for Good Reason during the Term, then, in addition to the benefits provided under Section 3.4, the Company shall pay to Executive any Base Salary accrued through the date of termination of his employment and any unpaid bonus from a prior fiscal year (and any other benefits due under the Company’s employee benefit plans), and shall also pay Executive:

(1) the Base Salary to which Executive would have been entitled pursuant to Section 3.1 of this Agreement had this Agreement remained in effect and had Executive remained in the employ of the Company for a period commencing upon the date of such termination and ending on the first anniversary of the date of termination (“Termination Coverage Period”), with such payments occurring on the same schedule used to pay Base Salary to Executive during the Term; and

(2) Executive’s COBRA premiums for Executive and his eligible dependents for the Termination Coverage Period, or the portion thereof, that Executive or Executive’s dependents are eligible for such COBRA coverage.

(b) In the event Executive’s employment is terminated (i) by the Company for Cause, or (ii) voluntarily by Executive other than for Good Reason, then the Company shall have no duty to make any payments or provide any benefits to Executive pursuant to this Agreement other than payment of the amount of Executive’s Base Salary, any bonuses or other incentive compensation accrued through the date of termination of his employment and related to a prior fiscal year of the Company and any other benefits Executive is then due pursuant to the employment benefit plans of the Company.

 

6


(c) Upon termination of Executive’s employment for death or due to Total Disability, the Company shall pay to Executive, guardian, personal representative or estate, as the case may be, in addition to any insurance or disability benefits to which Executive may be entitled hereunder and in addition to the benefits provided under Section 3.4, the Base Salary set forth in Section 4.5(a)(1) above, and all compensation or benefits accrued or vested prior to such termination.

(d) Upon termination of Executive’s employment for death, due to Total Disability, without Cause by the Company, or by Executive for Good Reason, Executive, or Executive’s guardian, personal representative or estate, as the case may be, shall be entitled to a bonus (consistent with the provisions of Section 3.2 of this Agreement) for the fiscal year in which the date of termination of employment occurs, in an amount equal to the bonus that Executive would have earned for such year had he remained an employee of the Company, with such bonus determined in the same manner as the annual bonus for such fiscal year is determined for other named executive officers of the Company. Any such bonus shall be payable at the time at which other similarly situated Company executives receive their bonus payments.

(e) In the event that this Agreement is not renewed either after the initial Term or after a renewal period, then the Company shall have no duty to make any payments or provide any benefits to Executive pursuant to this Agreement other than (1) payment of the amount of Executive’s Base Salary, any bonuses accrued through the date of termination of his employment and related to a prior fiscal year, and any other benefits Executive is then due pursuant to the employment benefit plans of the Company, (2) an annual bonus for the fiscal year in which the non-renewal occurs determined in a manner consistent with that described in Section 4.5(d) above and then prorating such amount for the portion of such fiscal year in which Executive is an employee of or other service provider to the Company (with such amount payable at the time described in Section 4.5(d)).

(f) Notwithstanding any other provision of this Agreement to the contrary, severance benefits pursuant to this Section 4.5, to the extent of payments made from the date of termination of Executive’s employment through March 15 of the calendar year following such termination, are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury regulations and thus are payable pursuant to the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations. To the extent such severance payments are made following said March 15, they are intended to constitute separate payments for purposes of Section 1.409A-1(b)(9)(iii) of the Treasury Regulations to the maximum extent permitted by said provision, with any excess amount being regarded as subject to the distribution requirements of Section 409A(a)(2)(A) of the Internal Revenue Code, including, without limitation, the requirement of Section 409A(a)(2)(B)(i) of the Code that payment be delayed until six (6) months after separation from service if Executive is a “specified employee” with the meaning of the aforesaid section of the Code at the time of such separation from service.

4.6 No Disparaging Comments Upon Termination.

Upon termination of this Agreement, the Company will refrain, and will take reasonable efforts to prevent members of the Board, executive officers and managerial personnel to refrain, from making any disparaging remarks about Executive. Similarly, Executive shall refrain from

 

7


making any disparaging remarks about the Company or the businesses, services, products, stockholders, officers, directors or other personnel of the Company or any of its affiliates.

 

5.

Certain Covenants of Executive.

5.1 Restrictive Covenants.

(a) The parties hereto agree that as used herein “Confidential Information” means all information which becomes known to Executive as a consequence of his employment by the Company and includes, but is not limited to, information about the Company’s customers, methods of operation, prospective and executed contracts, trade secrets, business contacts, customer lists, and all technological, business, financial, accounting, statistical and personnel information regarding the Company. The parties hereto further agree and stipulate that this Confidential Information was developed by the Company at considerable expense, that this information is a valuable asset and part of the Company’s goodwill, that this information is vital to the Company’s success and is the sole property of the Company.

(b) Executive recognizes and acknowledges that during his employment by the Company, Executive has, or will, become familiar with the Company’s Confidential Information.

(c) Executive recognizes and acknowledges that the Company is engaged in the business of building satellite ground systems and equipment for command and control, integration and test, data processing and simulation (the “Business”).

The Business is a highly competitive enterprise, so that any unauthorized disclosure or unauthorized use by Executive of the Confidential Information protected under this Agreement, whether during his employment with the Company or after its termination, would cause immediate, substantial and irreparable injury to the Business and the goodwill of the Company.

(d) Executive agrees that upon termination of his employment with the Company for any reason, whether voluntary or involuntary or with or without Cause, he will surrender to the Company every item and every document which is the Company’s property or will completely remove from Executive’s personal property such Confidential Information in whatever form (e.g. cell phones, PDA’s, personal computers, etc.). All such documents and Confidential Information are the sole and absolute property of the Company. At the written request of the Company, Executive shall provide the designated representative of the Company a certificate containing the following statement: “Executive hereby certifies that he has notified the Company’s designated representative of all Confidential Information residing on any personal property of Executive to which Executive is aware of after due review and inspection and has removed and destroyed (unless otherwise directed in writing by the Company) all Confidential Information from all personal property of Executive.” Thereafter, in the event that Executive becomes aware of any further Confidential Information on Executive’s personal property, Executive shall notify the Company in writing and again comply with the immediately preceding sentence.

(e) Executive agrees that during his employment and following the termination of that employment for any reason, whether voluntary or involuntary or with or without Cause, he will not, on his own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, disclose the Company’s Confidential Information to

 

8


any person or entity other than agents of the Company, and he will not use or aid others in obtaining or using any such Confidential Information. Executive’s obligations under this Section 5.1(e) shall not be deemed violated in the event that (i) Executive discloses any Confidential Information pursuant to order of a court of competent jurisdiction, provided Executive has notified the Company of such potential legal order and provided the Company with the opportunity to challenge or limit the scope of the disclosure, or (ii) the information becomes generally available from a source other than the Company, any of its affiliates, or any of their employees when such source is not legally prohibited, to the best of Executive’s knowledge, from making such information available.

(f) All inventions, prototypes, discoveries, improvements, and innovations (“Inventions”) and all works of original authorship or images that are fixed in any tangible medium of expression and all copies thereof (“Works”) which are designed, created or developed by Executive, solely or in conjunction with others, in the course of performance of Executive’s duties which relate to the Business, shall be made or conceived for the exclusive benefit of and shall be the exclusive property of the Company. Executive shall immediately notify the Company upon the design, creation or development of all Inventions and Works. At any time thereafter, Executive, at the request and expense of the Company, shall execute and deliver to the Company all documents or instruments which may be necessary to secure or perfect the Company’s title to or interest in the Inventions and Works, including but not limited to applications for letters of patent, and extensions, continuations or reissues thereof, applications for copyrights and documents or instruments of assignment or transfer. All Works are agreed and stipulated to be “works made for hire,” as that term is used and understood within the Copyright Act of 1976, as amended or any successor statute. To the extent any Works are not deemed to be works made for hire as defined above, and to the extent that title to or ownership of any Invention or Work and all other rights therein are not otherwise vested exclusively in the Company, Executive shall, without further consideration but at the expense of the Company, assign and transfer to the Company Executive’s entire right, title and interest (including copyrights and patents) in or to those Inventions and Works.

(g) Executive agrees that during his employment with the Company and for a period commencing on the termination of such employment and ending twelve (12) months thereafter, he will not, on his own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, engage or attempt to engage in a business which competes against the Business of the Company in any geographic area in which the Company engages in the Business. This subsection shall not be construed as precluding Executive from working as an employee or consultant for a separate business unit of a competitor of the Company, if the separate business unit is not in competition with the Business.

(h) Executive agrees that during his employment and for a period of twenty-four (24) months after the termination of such employment, whether voluntary or involuntary or with or without Cause, he will not, on his own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, solicit or induce (or attempt to solicit or induce) any employees of the Company to leave their employment with the Company and/or consider employment with any other person or entity.

 

9


5.2 Rights and Remedies Upon Breach. If Executive breaches, or threatens, either in writing or as evidenced by a demonstrable course of conduct, to commit a breach of, any of the provisions of Section 5.1 (the “Restrictive Covenants”), the Company shall, in addition to its right immediately to terminate this Agreement, have the right and remedy (which right and remedy shall be independent of others and severally enforceable, and which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity) to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach could cause irreparable injury to the Company or its affiliates and that money damages may not provide adequate remedy to the Company.

5.3 Covenants Currently Binding Executive. Executive warrants that his employment by the Company, and his execution, delivery and performance of this Agreement, will not (a) violate any non-disclosure agreements, covenants against competition, or other restrictive covenants made by Executive to or for the benefit of any previous employer or partner, or (b) violate or constitute a breach or default under, any statute, law, judgment, order, decree, writ, injunction, deed, instrument, contract, lease, license or permit to which Executive is a party or by which Executive is bound.

5.4 Litigation. There is no litigation, proceeding or investigation of any nature (either civil or criminal) which is pending or, to the best of Executive’s knowledge, threatened against or affecting Executive or which would adversely affect his ability to substantially perform the duties herein.

5.5 Review. Executive has received or been given the opportunity to review the provisions of this Agreement, and the meaning and effect of each provision, with independent legal counsel of Executive’s choosing.

5.6 Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions.

5.7 Blue-Penciling. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable and shall be enforced. If any such court declines to so revise such covenant, the parties agree to negotiate in good faith a modification that will make such duration or scope enforceable.

 

6.

Dispute Resolution.

6.1 Costs of Arbitration. If either party brings an arbitration proceeding to enforce its rights under this Agreement, each party shall be responsible for the payment of their own fees and expenses incurred by such party in preparing for and in trying the case, including, but not limited to, investigative costs, expert witness fees and reasonable attorneys’ fees. In

 

10


addition, each party shall be responsible for one-half of the administrative costs of the arbitration, including the filing fees to the American Arbitration Association and the fees charged by the arbitrator.

6.2 No Jury Trial. NEITHER PARTY SHALL ELECT A TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONNECTED WITH A BREACH OF THIS AGREEMENT.

6.3 Personal Jurisdiction. Both parties agree to submit to the jurisdiction and venue of the state courts in the State of Maryland as to matters involving enforcement of this Agreement including any award under an arbitration proceeding.

6.4 Arbitration. SUBJECT TO THE COMPANY’S RIGHT TO SEEK INJUNCTIVE RELIEF AS SPECIFIED IN THIS AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE’S TERMINATION OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED BEFORE A SINGLE ARBITRATOR IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION FOR THE RESOLUTION OF EMPLOYMENT DISPUTES. ANY RESULTING HEARING SHALL BE HELD IN COLUMBIA, MARYLAND. THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE BINDING AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION.

 

7.

Other Provisions.

7.1 Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage paid, and shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission or, if mailed, four days after the date of mailing, as follows:

 

 

(i)

if to the Company, to:

Integral Systems, Inc.

5000 Philadelphia Way

Lanham, Maryland

Fax: 301-731-3183

Attention: General Counsel

with copies to:

Gibson, Dunn & Crutcher LLP

1050 Connecticut Avenue, NW

Washington, DC 20036

Fax: (202) 467-0539

Attention: Howard B. Adler, Esq.

 

11


 

(ii)

if to Executive, to:

John B. Higginbotham

102 Jefferson Run Road

Great Falls, VA 22066

Any party may by notice given in accordance with this Section to the other party designate another address or person for receipt of notices hereunder.

7.2 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, written or oral, with respect thereto, including without limitation any severance benefits as described in the Company’s employment manual as in effect from time to time.

7.3 Waivers and Amendments. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by Executive and a duly authorized officer of the Company (each, in such capacity, a party) or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

7.4 “Golden Parachute” Gross-Up. Notwithstanding anything to the contrary in this Agreement, in the event that the payments or other benefits (collectively, the “Payments”) provided for in this Agreement and otherwise to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 7.4, 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 hereinafter collectively referred to as the “Excise Tax”), then the Company shall pay to Executive an additional payment (a “Gross-up Payment”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Taxes imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment (taking into account any similar gross-up payments to Executive under any stock incentive or other benefit plan or program of the Company) equal to the Excise Tax imposed upon the Payments. The Company and Executive shall make an initial determination as to whether a Gross-up Payment is required and the amount of any such Gross-up Payment. Executive shall notify the Company in writing of any claim by the Internal Revenue Service which, if successful, would require the Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by the Company and Executive) within ten (10) business days after the receipt of such claim. The Company shall notify Executive in writing at least ten (10) business days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If the Company decides to contest such claim, Executive shall

 

12


cooperate fully with the Company in such action; provided, however, the Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with such action and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of the Company’s action. If, as a result of the Company’s action with respect to a claim, Executive receives a refund of any amount paid by the Company with respect to such claim, Executive shall promptly pay such refund to the Company. If the Company fails to timely notify Executive whether it will contest such claim or the Company determines not to contest such claim, then the Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. Any Gross-up Payment hereunder shall in all events be paid to Executive by the date on which Executive is required to remit any portion of the Excise Tax to the applicable tax authority.

7.5 Governing Law. This Agreement has been negotiated and is to be performed in the State of Maryland, and shall be governed and construed in accordance with the laws of the State of Maryland applicable to agreements made and to be performed entirely within such State.

7.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7.7 Confidentiality. Neither party shall disclose the contents of this Agreement or of any other agreement they have simultaneously entered into to any person, firm or entity, except the agents or representatives of the parties, or except as required by law.

7.8 Word Forms. Whenever used herein, the singular shall include the plural and the plural shall include the singular. The use of any gender or tense shall include all genders and tenses.

7.9 Headings. The Section headings have been included for convenience only, are not part of this Agreement, and are not to be used to interpret any provision hereof.

7.10 Binding Effect and Benefit. This Agreement shall be binding upon and inure to the benefit of the parties, their successors, heirs, personal representatives and other legal representatives. This Agreement may be assigned by the Company to any entity which buys substantially all of the Company’s assets. However, Executive may not assign this Agreement without the prior written consent of the Company.

7.11 Separability. The covenants contained in this Agreement are separable, and if any court of competent jurisdiction declares any of them to be invalid or unenforceable, that declaration of invalidity or unenforceability shall not affect the validity or enforceability of any of the other covenants, each of which shall remain in full force and effect.

7.12 Insurance and Indemnification. The Company agrees to indemnify and hold the Executive harmless (including the advancement of fees and expenses) to the fullest extent permitted by law and/or under the bylaws and charter of the Company against and in respect of

 

13


any and all actions, suits proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys fees), losses, penalties, and damages resulting from Executive’s performance of his duties and obligations with the Company. In addition, the Company agrees to cause any insurance policy it maintains to provide for the indemnification of officers and directors to cover Executive.

7.13 Survival. Any provision of this Agreement that must survive termination of this Agreement in order to effectuate the intent of the parties, including the provisions regarding post-termination payments under Section 4 and the covenants under Section 5 shall survive the expiration of this Agreement.

IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this Agreement or caused it to be executed and attested by their duly authorized officers as a document under seal on the day and year first above written.

 

 

 

 

INTEGRAL SYSTEMS, INC.

 

 

By:

 

/s/ Paul G. Casner Jr.

 

 

Name: Paul G. Casner Jr.

 

 

Title: Director

 

EXECUTIVE:

 

 

By:

 

/s/ John B. Higginbotham

 

 

John B. Higginbotham

 

14

 

 

 

 

 

Exhibit 10.1

FIRST AMENDMENT

TO

EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into as of the 7th day of August, 2008 (the “Amendment Effective Date”), by and between Integral Systems, Inc., a Maryland corporation (the “Company”), and John B. Higginbotham (the “Executive”).

WHEREAS, the Company and Executive are parties to an Employment Agreement dated as of July 9, 2008 (the “Employment Agreement”);

WHEREAS, the Company and Executive wish to amend the Employment Agreement to reflect a modification to the terms of the change in control bonus provided pursuant to Section 3.5 of the Employment Agreement;

NOW, THEREFORE, the parties agree that the chart in Section 3.5 of the Employment Agreement is hereby amended as follows, effective as of the Amendment Effective Date:

 

 

 

 

Price Per Share of Common Stock Received by Shareholders in Connection with the Change in Control (Adjusted for Post-Effective Date Corporate Events in the Same Manner As Awards Granted Under the 2008 Stock Incentive Plan)

 

Change in Control Bonus

 

 

$46 or less

 

$630,000

 

 

$47

 

$355,000

 

 

$48

 

$80,000

 

 

$48.30 or above

 

$0


IN WITNESS WHEREOF, the parties hereto have entered into this First Amendment as of the Amendment Effective Date.

 

 

 

 

 

 

 

 

 

 

INTEGRAL SYSTEMS, INC.

 

 

 

JOHN B. HIGGINBOTHAM

 

 

 

 

 

By:

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EX-10.1 2 dex101.htm AGREEMENT AND RELEASE

Exhibit 10.1

AGREEMENT AND RELEASE

IT IS HEREBY AGREED by and between John B. Higginbotham (“Employee”) and Integral Systems, Inc. (“ISI”), for the good and sufficient consideration set forth below, as follows:

1. Employee resigned his employment and all positions with ISI and its affiliates (including, for the avoidance of doubt, as Chief Executive Officer and President of ISI and his officer positions with any ISI affiliates, as well as membership on ISI’s board of directors and the boards of directors of any affiliates) effective August 5, 2009 (the “date of separation”). Subject to Employee’s compliance with these conditions and the remaining provisions of this Agreement and Release, ISI for itself and its affiliates agrees:

(a) promptly following execution of this Agreement and Release, but in any event no longer than seven (7) days after the Effective Date (as defined below), to pay Employee the amount of $100,000, minus applicable withholdings and deductions; and

(b) (i) to provide Employee with continuation of his base salary in effect as of the date of separation (which the parties agree is an annual rate of $390,000), minus applicable withholdings and deductions, for a period of twelve (12) months, with such payments occurring in installments on ISI’s regular payroll schedule, beginning with the first payroll date after the Effective Date and continuing on each payroll date thereafter until full payment of $390,000 (less withholding), (ii) to pay any Consolidated Omnibus Budget Reconciliation Act (“COBRA”) premiums for a period of twelve (12) months (or, if earlier, until COBRA coverage ends) for coverage of Employee and Employee’s dependents if Employee (or, as applicable, Employee’s dependents) elects COBRA coverage, and (iii) promptly following execution of this Agreement (but in no event after the date required by applicable law), to cash out Employee’s accrued vacation, and to cash out any other accrued sick leave or personal time off in accordance with ISI’s policies; and

(c) (i) to fully vest the ISI stock option covering 100,000 shares granted to Employee on May 9, 2009 (the “Option”) and, notwithstanding Section 4 of the “Standard Terms and Conditions” applicable to such Option or any other contrary provision, to permit Employee to continue to exercise such Option until August 5, 2014 (provided that the Option may be treated in the same manner as other ISI stock options in the event of a change in control transaction or similar event to the extent lawful), and the Option shall terminate and be cancelled as of the close of business on August 5, 2014 if not exercised prior to such time (and Employee shall have no further rights with respect thereto in such event); (ii) to use its best efforts to register the shares underlying the Option in accordance with Section 3.4(b) of the Employment Agreement to the extent such shares have not previously been registered; and

(d) to pay to Employee the change in control bonus described in Section 3.5 of Employee’s Employment Agreement dated July 9, 2008, as amended (the “Employment Agreement”) (the “Change in Control Bonus”), minus applicable withholdings and deductions, in the event that the conditions for paying such bonus set forth in such Section 3.5 are satisfied (and, for purposes of clarity, the parties confirm that the time period during which such a change in control must occur shall end on January 9, 2011); provided, however, that (i) in the event the Change in Control Bonus becomes payable, Employee shall elect immediately prior to the applicable change in control whether to receive such Change in Control Bonus or to receive any payment with respect to the Option (and, for the avoidance of doubt, if Employee elects to receive the Change in Control Bonus, the Option shall be cancelled and terminate with no additional consideration, and


if Employee elects to receive any payment with respect to the Option (including, for the avoidance of doubt, continuation of the Option or substitution of new awards for the Option), no Change in Control Bonus shall be payable and Employee’s right to receive any Change in Control Bonus shall terminate), and (ii) notwithstanding subparagraph (i) above, if Employee exercises any portion of the Option prior to the change in control, the Change in Control Bonus shall be reduced dollar for dollar by the positive spread on such exercised portion of the Option, if any (and for this purpose, “positive spread” shall mean the difference between the exercise price for the exercised portion of the Option and the market value of the stock underlying the exercised portion of the Option on the date such stock was sold or transferred by Employee (or if such stock has not been sold or transferred on or before the effective date of the change in control, the market value of the stock at the time of such change in control)); and

(e) to pay to Employee an annual bonus for ISI’s 2009 fiscal year, minus applicable withholdings and deductions, that the Employee would have earned for the 2009 fiscal year had he remained an employee of ISI, with such bonus determined in the same manner as the annual bonus for the 2009 fiscal year is determined for other named executive officers of ISI, with such bonus payable at the same time such bonuses are payable to other named executive officers of ISI. Upon Employee’s request, ISI shall provide information to Employee on a reasonable basis concerning whether or not such bonuses have been approved and any other relevant information concerning the terms and conditions of the 2009 fiscal year bonuses for executives.

Employee’s other benefits will be governed by applicable plan terms. All stock options granted to the Employee other than the Option shall terminate and be cancelled as of the date of separation, and Employee shall have no further rights with respect thereto. For the avoidance of doubt, with the exception of COBRA continuation coverage and other benefits provided for herein, Employee shall not be eligible for benefits, except as otherwise provided by the terms of ISI’s applicable benefit plans and policies. (Employee may elect to continue health insurance coverage following the date of separation at Employee’s own expense, in accordance with the provisions of COBRA, regardless of whether Employee enters into this Agreement and Release.)

2. Employee acknowledges that, as of the date of Employee’s signing of this Agreement and Release, Employee has sustained no injury or illness related in any way to Employee’s employment with ISI for which a workers compensation claim has not already been filed.

3. In return for ISI’s agreement to provide Employee with the consideration referred to in Paragraph 1, Employee, for Employee and Employee’s heirs, beneficiaries, devisees, privies, executors, administrators, attorneys, representatives, and agents, and Employee’s and their assigns, successors and predecessors, hereby releases and forever discharges ISI and its parents, subsidiaries and affiliates, its and their officers, directors, employees, members, agents, attorneys and representatives, and the predecessors, successors and assigns of each of the foregoing (collectively, the “ISI Released Parties”) from any and all actions, causes of action, suits, debts, claims, complaints, charges, contracts, controversies, agreements, promises, damages, counterclaims, cross-claims, claims for contribution and/or indemnity, claims for costs and/or attorneys’ fees, judgments and demands whatsoever, in law or equity, known or unknown, Employee ever had, now has, or may have against the ISI Released Parties as of the date of Employee’s signing of this Agreement and Release. This release includes, but is not limited to, any claims alleging breach of express or implied contract, wrongful discharge, constructive discharge, breach of an implied covenant of good faith and fair dealing, negligent or intentional infliction of emotional distress, negligent supervision or retention, violation of the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Civil Rights Act of 1866, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Maryland Civil Rights Law, claims pursuant to any other federal, state or local law regarding discrimination, harassment or retaliation based on age, race, sex, religion,

 

2


national origin, marital status, disability, sexual orientation or any other unlawful basis or protected status or activity, and claims for alleged violation of any other local, state or federal law, regulation, ordinance, public policy or common-law duty having any bearing whatsoever upon the terms and conditions of, and/or the cessation of Employee’s employment with and by ISI. This release does not include claims that may not be released under applicable law and does not include any claims related to the obligations of ISI under this Agreement and Release or any claims relating to ISI’s fraud or willful gross misconduct.

ISI and its parents, subsidiaries, affiliates, attorneys, representatives, officers and agents, and its and their predecessors, successors and assigns, hereby release and forever discharges Employee and Employee’s heirs, beneficiaries, devisees, privies, executors, administrators, attorneys, representatives, and agents, and Employee’s and their assigns, successors and predecessors (collectively, the “Employee Released Parties”) from any and all actions, causes of action, suits, debts, claims, complaints, charges, contracts, controversies, agreements, promises, damages, counterclaims, cross-claims, claims for contribution and/or indemnity, claims for costs and/or attorneys’ fees, judgments and demands whatsoever, in law or equity, known or unknown, ISI ever had, now has, or may have against the Employee Released Parties as of the date of ISI’s signing of this Agreement and Release. This release does not include claims that may not be released under applicable law and does not include any claims related to the obligations of Employee under this Agreement and Release or any claims relating to Employee’s fraud or willful gross misconduct.

4. Employee agrees not only to release and discharge the ISI Released Parties from any and all claims against the ISI Released Parties that Employee could make on Employee’s own behalf, but also those which may have been or may be made by any other person or organization on Employee’s behalf. Employee specifically waives any right to become, and promises not to become, a member of any class in a case in which any claim or claims are asserted against any of the ISI Released Parties based on any acts or omissions occurring on or before the date of Employee’s signing of this Agreement and Release. If Employee is asserted to be a member of a class in a case against any of the ISI Released Parties based on any acts or omissions occurring on or before the date of Employee’s signing of this Agreement and Release, Employee shall immediately withdraw with prejudice in writing from said class, if permitted by law to do so. Employee agrees that Employee will not encourage or assist any person in filing or pursuing any proceeding, action, charge, complaint, or claim against the ISI Released Parties on matters occurring on or before Employee’s date of separation, except as required by law.

5. This Agreement and Release is not intended to interfere with Employee’s exercise of any protected, nonwaivable right, including Employee’s right to file a charge with the Equal Employment Opportunity Commission or other government agency. By entering into this Agreement and Release, however, Employee acknowledges that the consideration set forth herein is in full satisfaction and is inclusive of any and all amounts, including but not limited to attorneys’ fees, to which Employee might be entitled or which may be claimed by Employee or on Employee’s behalf against the ISI Released Parties and Employee is forever discharging the ISI Released Parties from any liability to Employee for any acts or omissions occurring on or before the date of Employee’s signing of this Agreement and Release.

6. Neither this Agreement and Release, nor anything contained herein, shall be construed as an admission by the ISI Released Parties or the Employee Released Parties of any liability or unlawful conduct whatsoever. The parties hereto agree and understand that the consideration set forth in Paragraph 1 is in excess of that which ISI is obligated to provide to Employee, and that it is provided solely in consideration of Employee’s execution of this Agreement and Release. ISI and Employee agree that the consideration set forth in Paragraph 1 is sufficient consideration for the release being given by Employee in Paragraphs 3, 4 and 5, and for Employee’s other promises herein.

 

3


7. Employee will direct all requests for references to ISI’s Human Resources Department, which will confirm Employee’s job title, dates of employment and Employee’s salary. ISI will refrain, and will take reasonable efforts to prevent members of its board of directors, executive officers and managerial personnel to refrain, from making any disparaging remarks about Employee. Similarly, Employee shall refrain from making any disparaging remarks about ISI or the businesses, services, products, stockholders, officers, directors or other personnel of ISI or any of its affiliates.

8. With respect to acts occurring through the date of separation, ISI agrees to indemnify and hold Employee harmless (including the advancement of fees and expenses) to the fullest extent permitted by law and/or under the bylaws and charter of ISI against and in respect of any and all actions, suits proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys fees), losses, penalties, and damages resulting from Employee’s performance of his duties and obligations with the Company through the date of separation. In addition, ISI agrees to cause any insurance policy it maintains to provide for the indemnification of officers and directors to continue to cover Employee.

9. Employee’s covenants in Section 5.1 of the Employment Agreement, and ISI’s rights and remedies pursuant to Section 5.2 of the Employment Agreement, shall continue to apply pursuant to their terms. In addition, Employee shall continue to comply with the provisions of the Confidentiality Agreement dated as of July 11, 2008 (the “Confidentiality Agreement”).

10. Following the date of separation, Employee agrees to reasonably cooperate with the Company in connection with the transition of Employee’s positions.

11. Each party shall bear its own costs and attorneys’ fees, if any, incurred in connection with this Agreement and Release.

12. This Agreement and Release contains the full agreement of the parties and may not be modified, altered, changed or terminated except upon the express prior written consent of ISI and Employee or their authorized agents. It expressly supersedes all prior agreements and understandings between the parties with respect to its subject matter, including but not limited to the Employment Agreement (other than the covenants applicable to Employee in Section 5.1 thereunder and ISI’s rights and remedies under Section 5.2 thereunder, the provisions of Section 3.5, and the procedures in Section 6 of the Employment Agreement as described in paragraph 15 hereof), but excluding the Confidentiality Agreement. Additionally, the terms and conditions of the Option shall continue to be governed by the 2008 Stock Incentive Plan and the applicable Term sheet and standard Terms and Conditions, except to the extent specifically modified above. The parties confirm that they agree that the payments and benefits provided for herein do not constitute deferred compensation subject to Section 409A of the Internal Revenue Code, and ISI shall not take a contrary position with any taxing authority.

13. Employee acknowledges and agrees that: (a) no promise or inducement for this Agreement and Release has been made except as set forth in this Agreement and Release; (b) this Agreement and Release is executed by Employee without reliance upon any statement or representation by ISI except as set forth herein; (c) Employee is legally competent to execute this Agreement and Release and to accept full responsibility therefore; (d) Employee has used all or as much of a twenty-one (21) day period as Employee deemed necessary to consider fully this Agreement and Release and, if Employee has not used the entire twenty-one (21) day period, Employee waives that period not used; (e) Employee has read and fully understands the meaning of each provision of this Agreement and Release; (f) ISI has advised Employee to consult with an attorney concerning this Agreement and Release; (g) Employee freely and voluntarily enters into this Agreement and Release; and (h) no fact, evidence, event, or transaction currently unknown to Employee but which may hereafter become known to Employee shall affect in any manner the final and unconditional nature of the release stated above.

 

4


14. This Agreement and Release shall become effective and enforceable on the eighth (8th) day following execution hereof by Employee (the “Effective Date”) unless Employee revokes it by so advising ISI in writing received by R. Miller Adams, General Counsel, at ISI’s offices at 6721 Columbia Gateway Drive, Columbia, Maryland 21046 before the end of the seventh (7th) day after its execution by Employee.

15. ISI and Employee agree that any dispute arising under or relating in any way to this Agreement and Release will be resolved pursuant to arbitration under the procedures in Section 6 of the Employment Agreement (except to the extent Section 5.2 of the Employment Agreement applies).

16. This Agreement and Release shall be governed by and construed in accordance with the laws of the State of Maryland applicable to agreements made and to be performed entirely within such State.

17. The waiver by any party of a breach of any provision herein shall not operate or be construed as a waiver of any subsequent breach by any party.

18. The provisions of this agreement are severable. Should any provision herein be declared invalid by a court or arbitrator of competent jurisdiction, the remainder of the agreement will continue in force, and the parties agree to renegotiate the invalidated provision in good faith to accomplish its objective to the extent permitted by law.

19. This Agreement and Release may be signed in counterparts, and each counterpart shall be considered an original agreement for all purposes.

20. This Agreement and Release shall be binding upon and inure to the parties’ respective successors, assigns, heirs and personal representatives.

IN WITNESS WHEREOF, the parties have hereunto set their hands.

 

/s/ John B. Higginbotham

 

 

/s/ R. Miller Adams

John B. Higginbotham

 

 

For Integral Systems, Inc.

August 10, 2009

 

 

August 10, 2009

Date

 

 

Date

 

5

 

 

 

 

 

 

 

 

 

EX-10.1 2 dex101.htm EXHIBIT 10.1

Exhibit 10.1

EXECUTION COPY

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT is entered into on the 30th day of July, 2007 to be effective on and as of the 30th day of May, 2007 (the “Effective Date”), by and between Integral Systems, Inc., a Maryland corporation (the “Company”), and Alan W. Baldwin (the “Executive”).

NOW, THEREFORE, in consideration of the mutual promises made below, the parties agree as follows:

 

 

1.

Employment, Duties and Acceptance.

 

 

1.1

Employment.

(a) Effective upon the Effective Date, the Company shall employ the Executive as its interim Chief Executive Officer. The Executive shall have such powers, perform such duties and fulfill such responsibilities as may be determined by the Board of Directors of the Company from time to time. The Executive accepts such employment and shall perform his duties faithfully and to the best of his abilities.

(b) The Executive shall devote his full working time and creative energies, in the amount of forty to sixty hours per week, to the performance of his duties hereunder and will at all times devote such additional time and efforts as are reasonably sufficient for fulfilling the significant responsibilities entrusted to him. So long as such activities, in the aggregate, do not interfere with the performance by the Executive of his duties hereunder: (i) the Executive shall be permitted a reasonable amount of time to supervise his personal, passive investments; and (ii) the Executive shall be permitted a reasonable amount of time to participate (as board member, officer or volunteer) in civic, political and charitable activities. Executive agrees to serve on the Board of Directors of the Company and, at the Board’s request, on the board of directors of any majority owned subsidiary of the Company without additional compensation. The Executive shall be issued an employee badge and authorized to carry a business card stating his position with the Company.

1.2 Place of Employment. The Executive will perform his duties as interim Chief Executive Officer at least three days a week from an office to be established by the Company in Lanham, Maryland and at the Company’s subsidiaries, subject to such travel as may be reasonably required by his employment pursuant to the terms hereof.

2. Term of Employment. Unless terminated earlier in accordance with the provisions of this Agreement, the Executive’s employment hereunder shall continue for a three (3) month period after the date: (a) the Company hires a permanent Chief Executive Officer, (b) the Company notifies the Executive that his employment as interim Chief Executive Officer is being terminated by the Company without cause before a permanent Chief Executive Officer is hired by the Company, or (c) the Company notifies the Executive that his employment as interim Chief Executive Officer is being terminated upon or following a “Change of Control” (as defined below), and shall thereupon terminate (the “Term”).


 

3.

Compensation.

3.1 Salary. As compensation for all services to be rendered pursuant to this Agreement, the Company shall pay to the Executive during the Term a salary of Three Hundred Thousand Dollars ($300,000.00) per annum (the “Base Salary”), which shall be pro-rated for calendar year 2007, less such deductions as shall be required to be withheld by applicable laws and regulations or as otherwise authorized by the Executive. The Base Salary shall accrue from and after the Effective Date, and shall be payable during the Term, in arrears in equal periodic installments and in accordance with the practices of the Company in effect from time to time for the payment of salaries to employees of the Company, but in any event not less frequently than monthly. The Executive’s Base Salary shall be reviewed at least annually and may be increased (but not decreased) based upon the evaluation of the Executive’s performance and the compensation policies of the Company in effect at the time of each such review.

3.2 Stock Options. On the Effective Date, the Company shall grant the Executive options to acquire Fifty Thousand (50,000) shares of the Company’s common stock, subject to such vesting restrictions and other terms and conditions as set forth by the Company’s 2002 Stock Option Plan, as it may be amended by the Company from time to time, and the Stock Option Grant Agreement attached hereto as Exhibit A. Vesting shall occur at the rate of 10,000 shares on each of the following dates: July 30, 2007; August 1, 2007; September 1, 2007; October 1, 2007; and November 1, 2007, with the added provision that upon termination of the Executive for other than cause as defined in Section 4.4 of this Agreement all non-vested shares shall be accelerated effective on the date of termination.

3.3 Bonus. The Executive shall be eligible to participate in the Company’s bonus program, if any, as established and administered by the Company’s Compensation Committee and in effect from time to time.

3.4 Participation in Senior Executive Officer Benefit Plans; Vacation. The Executive shall be permitted during the Term, if and to the extent eligible, to participate in any group life, hospitalization or disability insurance plan, health program (as modified to reflect the Illinois state residency of Executive), 401(k) pension and profit sharing plan or similar benefit plan of the Company which may be available to other senior executive officers of the Company generally on the same terms as such other senior executive officers. The Executive shall receive vacation in accordance with the usual vacation policy of the Company.

3.5 Expenses. The Company shall pay or reimburse the Executive for all ordinary, necessary and reasonable expenses (including, without limitation, travel, meetings, dues, subscriptions, fees, educational expenses, computer equipment, mobile telephones, professional insurance, and the like) actually incurred or paid by the Executive during the Term in the performance of the Executive’s services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as may be required by the policies and procedures of the Company in effect from time to time.

3.6 Withholding. The Company is authorized to withhold from the amount of any Base Salary and any other things of value paid to or for the benefit of the Executive, all sums authorized by the Executive or required to be withheld by law, court decree, or executive order, including (but not limited to) such things as income taxes, employment taxes, and employee contributions to fringe benefit plans sponsored by the Company.

 

2


 

4.

Termination.

4.1 General. The employment of the Executive hereunder shall terminate as provided in Section 2, unless earlier terminated in accordance with the provisions of this Section 4.

4.2 Termination Upon Mutual Agreement. The Company and the Executive may, by mutual written agreement, terminate this Agreement and/or the employment of the Executive at any time.

4.3 Death or Disability of Executive.

(a) The employment of the Executive hereunder shall terminate upon (i) the death of the Executive, and (ii) at the option of the Company upon not less than thirty (30) days’ prior written notice to the Executive or his personal representative or guardian, if the Executive suffers a “Total Disability” (as defined in Section 4.3(b) below).

(b) For purposes of this Agreement, “Total Disability” shall mean (i) if the Executive is subject to a legal decree of incompetency (the date of such decree being deemed the date on which such disability occurred), or (ii) the written determination by a physician selected by the Company that, because of a medically determinable disease, injury or other physical or mental disability, the Executive is unable substantially to perform each of the material duties of the Executive required hereby, and that such disability has lasted for the immediately preceding ninety (90) days and is, as of the date of determination, reasonably expected to last an additional ninety (90) days or longer after the date of determination, in each case based upon medically available reliable information, and the provision of clear and convincing evidence by the Company of the Executive’s inability substantially to perform each material duty hereunder in support of such determination by the physician.

(c) Any leave on account of illness or temporary disability which is short of “Total Disability” shall not constitute a breach of this Agreement by the Executive and in no event shall any party be entitled to terminate this Agreement for “Cause” (as defined in Section 4.4 below) due to any such leave. All physicians selected hereunder shall be Board certified in the specialty most closely related to the nature of the disability alleged to exist.

4.4 Termination For Cause. The Company may, upon action of the Board, and upon written notice to the Executive specifying in reasonable detail the reason therefor, terminate the employment of the Executive at any time for “Cause” (as defined below). For purposes of this Agreement, “Cause” means (i) the material failure of the Executive to perform his duties under this Agreement, or to follow the Company’s policies and procedures applicable to senior executive officers of the Company in effect from time to time, after notice and a reasonable opportunity to cure; (ii) willful malfeasance by the Executive in connection with the performance of his duties under this Agreement; (iii) the Executive being convicted of, or pleading guilty or nolo contendere to, or being indicted for a felony or other crime involving theft, fraud or moral turpitude; (iv) fraud or embezzlement against the Company; (v) the failure of the Executive to obey in any material respects any proper written direction of the Board that is not inconsistent with this Agreement; or (vi) the violation by the Executive of any of the provisions of Section 5 of this Agreement.

 

3


4.5 Payments Upon Termination.

(a) In the event the Executive’s employment as interim Chief Executive Officer is terminated in accordance with Section 2, the Company shall pay or reimburse the Executive and the Executive’s covered dependents for COBRA premiums up to and including the date that is eighteen (18) months following the date on which the Term ends (provided, and to the extent, that the Executive and the Executive’s covered dependents are eligible for and elect COBRA coverage).

(b) In the event the Executive’s employment is terminated (i) by the Company for Cause, (ii) by death or Total Disability, or (iii) by the Executive, then the Company shall have no duty to make any payments or provide any benefits to the Executive pursuant to this Agreement other than payment of the amount of the Executive’s Base Salary accrued through the date of termination of his employment and any other benefits the Executive is due pursuant to the employment benefit plans of the Company.

(c) Upon termination of Executive’s employment for death or Total Disability, the Company shall pay to the Executive, guardian or personal representative, as the case may be, in addition to any insurance or disability benefits to which he may be entitled hereunder, all amounts accrued or vested prior to such termination.

(d) For purposes of this Agreement, a “Change in Control” shall mean the first occurrence of any of the following events:

(i) Any person or group (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Company or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the beneficial owner (within the meaning of Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities representing 50% or more of the combined voting power of the Company’s then-outstanding securities entitled generally to vote for the election of directors;

(ii) The Company’s stockholders approve an agreement to merge or consolidate with another corporation (other than a majority-controlled subsidiary of the Company) unless the Company’s stockholders immediately before the merger or consolidation are to own more than 50% of the combined voting power of the resulting entity’s voting securities entitled generally to vote for the election of directors;

(iii) The Company’s stockholders approve an agreement (including, without limitation, an agreement of liquidation) to sell or otherwise dispose of all or substantially all of the business or assets of the Company; or

(iv) Individuals who, as of the Effective Date, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided that any person becoming a director subsequent to the Effective Date whose election or nomination for election by the Company’s stockholders is approved by a vote of at least a majority of directors then constituting the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such

 

4


person is named as a nominee for direction, without objection to such nomination) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board (excluding, however, for this purpose any Board member whose initial assumption as a member of the Board of Directors of the Company occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of any person or persons other than the Incumbent Board).

Notwithstanding anything herein to the contrary, no Change in Control shall be deemed to have occurred by a reason of (i) any event involving a transaction in which the Executive or a group of persons or entities with whom or with which the Executive acts in concert, acquire(s), directly or indirectly, 50% or more of the combined voting power of the Company’s then-outstanding voting securities or the business or assets of the Company; or (ii) any event involving or arising out of a proceeding under Title 11 of the United States Code or the provisions of any future United States bankruptcy law, an assignment for the benefit of creditors or an insolvency proceeding under state or local law.

A Change in Control shall be deemed to occur, (i) with respect to a Change in Control pursuant to Section 4.5(d)(i) above, on the date any person or group first becomes the beneficial owner, directly or indirectly, of securities representing 50% or more of the combined voting power of the Company’s then-outstanding securities entitled generally to vote for the election of directors, (ii) with respect to a Change in Control pursuant to Sections 4.5(d)(ii) or (iii) above, on the date of stockholder approval, or (iii) with respect to a Change in Control pursuant to Section 4.5(d)(iv) above, on the date members of the Incumbent Board first cease to constitute at least a majority of the Board of Directors of the Company.

4.7 No Disparaging Comments Upon Termination.

Upon termination of this Agreement, the Company will refrain from making any disparaging remarks about the Executive. Similarly, the Executive shall refrain from making any disparaging remarks about the Company or the businesses, services, products, stockholders, officers, directors or other personnel of the Company or any of its affiliates.

 

 

5.

Certain Covenants of the Executive.

5.1 Restrictive Covenants.

(a) The parties hereto agree that as used herein “Confidential Information” means all information which becomes known to the Executive as a consequence of his employment by the Company and includes, but is not limited to, information about the Company’s customers, methods of operation, prospective and executed contracts, trade secrets, business contacts, customer lists, and all technological, business, financial, accounting, statistical and personnel information regarding the Company. The parties hereto further agree and stipulate that this Confidential Information was developed by the Company at considerable expense, that this information is a valuable asset and part of the Company’s goodwill, that this information is vital to the Company’s success and that it is the sole property of the Company.

(b) The Executive recognizes and acknowledges that during his employment by the Company, the Executive has, or will, become familiar with the Company’s Confidential Information.

 

5


(c) The Executive recognizes and acknowledges that the Company is engaged in the business of, among other things, building satellite ground systems and equipment for command and control, integration and test, data processing and simulation (the “Business”). The Business is a highly competitive enterprise, so that any unauthorized disclosure or unauthorized use by the Executive of the Confidential Information protected under this Agreement, whether during his employment with the Company or after its termination, would cause immediate, substantial and irreparable injury to the Business and the goodwill of the Company.

(d) The Executive agrees that upon termination of his employment with the Company for any reason, whether voluntary or involuntary or with or without Cause, he will surrender to the Company every item and every document which is the Company’s property or will completely remove from the Executive’s personal property such Confidential Information in whatever form (e.g. cell phones, PDA’s, personal computers, etc.). All such documents and Confidential Information are the sole and absolute property of the Company. At the written request of the Company, the Executive shall provide the designated representative of the Company a certificate containing the following statement: “The Executive hereby certifies that he has notified the Company’s designated representative of all Confidential Information residing on any personal property of the Executive to which the Executive is aware of after due review and inspection and has removed and destroyed (unless otherwise directed in writing by the Company) all Confidential Information from all personal property of the Executive.” Thereafter, in the event that the Executive becomes aware of any further Confidential Information on the Executive’s personal property, the Executive shall notify the Company in writing and again comply with the immediately preceding sentence.

(e) The Executive agrees that during his employment and following the termination of that employment for any reason, whether voluntary or involuntary or with or without Cause, he will not, on his own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, disclose the Company’s Confidential Information to any person or entity other than agents of the Company, and he will not use or aid others in obtaining or using any such Confidential Information. The Executive’s obligations under this Section 5.1(e) shall not be deemed violated in the event that (i) the Executive discloses any Confidential Information pursuant to order of a court of competent jurisdiction, provided the Executive has notified the Company of such potential legal order and provided the Company with the opportunity to challenge or limit the scope of the disclosure, or (ii) the information becomes generally available from a source other than the Company, any of its affiliates, or any of their employees when such source is not legally prohibited, to the best of the Executive’s knowledge, from making such information available.

(f) All inventions, prototypes, discoveries, improvements, innovations and the like (“Inventions”) and all works of original authorship or images that are fixed in any tangible medium of expression and all copies thereof (“Works”) which are designed, created or developed by the Executive, solely or in conjunction with others, in the course of performance of the Executive’s duties which relate to the Business, shall be made or conceived for the exclusive benefit of and shall be the exclusive property of the Company. The Executive shall immediately notify the Company upon the design, creation or development of all Inventions and Works. At any time thereafter, the Executive, at the request and expense of the Company, shall execute and deliver to the Company all documents or instruments which may be necessary to secure or perfect the Company’s title to or interest in the Inventions and Works, including but not limited to applications for letters of patent,

 

6


and extensions, continuations or reissues thereof, applications for copyrights and documents or instruments of assignment or transfer. All Works are agreed and stipulated to be “works made for hire,” as that term is used and understood within the Copyright Act of 1976, as amended or any successor statute. To the extent any Works are not deemed to be works made for hire as defined above, and to the extent that title to or ownership of any Invention or Work and all other rights therein are not otherwise vested exclusively in the Company, the Executive shall, without further consideration but at the expense of the Company, assign and transfer to the Company the Executive’s entire right, title and interest (including copyrights and patents) in or to those Inventions and Works.

5.2 Rights and Remedies Upon Breach. If the Executive breaches, or threatens to commit a breach of, any of the provisions of Section 5.1 (the “Restrictive Covenants”), the Company shall, in addition to its right immediately to terminate this Agreement, have the right and remedy (which right and remedy shall be independent of others and severally enforceable, and which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity) to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach could cause irreparable injury to the Company or its affiliates and that money damages may not provide adequate remedy to the Company.

5.3 Covenants Currently Binding the Executive. The Executive warrants that his employment by the Company, and his execution, delivery and performance of this Agreement, will not (a) violate any non-disclosure agreements, covenants against competition, or other restrictive covenants made by the Executive to or for the benefit of any previous employer or partner, or (b) violate or constitute a breach or default under, any statute, law, judgment, order, decree, writ, injunction, deed, instrument, contract, lease, license or permit to which the Executive is a party or by which the Executive is bound.

5.4 Litigation. There is no litigation, proceeding or investigation of any nature (either civil or criminal) which is pending or, to the best of the Executive’s knowledge, threatened against or affecting the Executive or which would adversely affect his ability to substantially perform the duties herein.

5.5 Review. The Executive has received or been given the opportunity to review the provisions of this Agreement, and the meaning and effect of each provision, with independent legal counsel of the Executive’s choosing.

5.6 Severability of Covenants. The Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in geographical and temporal scope and in all respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions.

5.7 Blue-Penciling. If any court determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable and shall be enforced. If any such court declines to so revise such covenant, the parties agree to negotiate in good faith a modification that will make such duration or scope enforceable.

 

7


6. Dispute Resolution.

6.1 Costs of Arbitration. If either party brings an arbitration proceeding to enforce its rights under this Agreement, the prevailing party shall be entitled to recover from the other party all expenses incurred by it in preparing for and in trying the case, including, but not limited to, investigative costs, court costs and reasonable attorneys’ fees.

6.2 No Jury Trial. NEITHER PARTY SHALL ELECT A TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.

6.3 Personal Jurisdiction. Both parties agree to submit to the jurisdiction and venue of the state courts in the State of Maryland as to matters involving enforcement of this Agreement including any award under an arbitration proceeding.

6.4 Arbitration. SUBJECT TO THE COMPANY’S RIGHT TO SEEK INJUNCTIVE RELIEF AS SPECIFIED IN THIS AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE’S TERMINATION OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION. ANY RESULTING HEARING SHALL BE HELD IN LANHAM, MARYLAND. THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE BINDING AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION.

7. Other Provisions.

7.1 Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage paid, and shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission or, if mailed, four days after the date of mailing, as follows:

 

 

(i)

if to the Company, to:

Integral Systems, Inc.

5000 Philadelphia Way

Lanham, Maryland

Fax: (301) 731-9606

Attention: Corporate Secretary

with copies to:

Venable LLP

575 7th Street, NW

Washington, DC 20004

Fax: (202) 344-8300

Attention: Wallace E. Christner, Esq.

 

8


 

(ii)

if to the Executive, to:

Alan W. Baldwin

c/o Integral Systems, Inc.

5000 Philadelphia Way

Lanham, Maryland

Fax: (301) 731-9606

Attention: Corporate Secretary

Any party may by notice given in accordance with this Section to the other party designate another address or person for receipt of notices hereunder.

7.2 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, written or oral, with respect thereto.

7.3 Waivers and Amendments. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the Executive and a duly authorized officer of the Company (each, in such capacity, a party) or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

7.4 Governing Law. This Agreement has been negotiated and is to be performed in the State of Maryland, and shall be governed and construed in accordance with the laws of the State of Maryland applicable to agreements made and to be performed entirely within such State.

7.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7.6 Confidentiality. Neither party shall disclose the contents of this Agreement or of any other agreement they have simultaneously entered into to any person, firm or entity, except the agents or representatives of the parties, or except as required by law.

7.7 Word Forms. Whenever used herein, the singular shall include the plural and the plural shall include the singular. The use of any gender or tense shall include all genders and tenses.

7.8 Headings. The Section headings have been included for convenience only, are not part of this Agreement, and are not to be used to interpret any provision hereof.

7.9 Binding Effect and Benefit. This Agreement shall be binding upon and inure to the benefit of the parties, their successors, heirs, personal representatives and other legal

 

9


representatives. This Agreement may be assigned by the Company to any entity which buys substantially all of the Company’s assets. However, the Executive may not assign this Agreement without the prior written consent of the Company.

7.10 Separability. The covenants contained in this Agreement are separable, and if any court of competent jurisdiction declares any of them to be invalid or unenforceable, that declaration of invalidity or unenforceability shall not affect the validity or enforceability of any of the other covenants, each of which shall remain in full force and effect.

 

10


IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this Agreement or caused it to be executed and attested by their duly authorized officers as a document under seal on the day and year first above written.

 

 

 

 

INTEGRAL SYSTEMS, INC.

 

 

By:

 

/s/ Paul Casner                                         (SEAL)

 

 

Paul Casner:

 

 

Director

 

EXECUTIVE:

 

 

 

 

/s/ Alan W. Baldwin                                (SEAL)

 

 

Alan W. Baldwin

 

11


EXHIBIT A


S06-17

 

 

 

 

TO:

  

Alan W. Baldwin

FROM:

  

Integral Systems’ Stock Option Committee

SUBJECT:

  

NONQUALIFIED STOCK OPTION

DATE:

  

July 30, 2007

Integral Systems, Inc. (“Integral Systems”) has adopted a 2002 Stock Option Plan (“the Plan”) to permit options to purchase shares of its common stock with par value $0.01 per share (“Common Stock”) to be granted to certain employees, directors, and consultants of Integral Systems and any subsidiary of which it owns, directly or indirectly, greater than 50% of the voting capital stock (the “Company”). Since you are considered an employee of the Company, and since the Company desires you to remain in its employ by providing you with a means to acquire a proprietary interest in the Company’s success, the Stock Option Committee of Integral Systems’ Board of Directors has agreed, subject to the following terms and conditions, to grant you the right to acquire shares of Common Stock. The terms and conditions surrounding this grant to you are set forth below.

 

1.

Subject to the terms and conditions of the Plan, a copy of which is attached hereto and made a part hereof, and this agreement, you are hereby granted, as a matter of separate inducement and not in lieu of salary or any other compensation for services, the option to purchase from Integral Systems all or any part of an aggregate number of fifty thousand (50,000) shares of Common Stock. Such shares of Common Stock are hereinafter referred to as the “Optioned Shares” and the option to purchase the Optioned Shares is referred to as the “Option”.

 

2.

The price to be paid for the Optioned Shares shall be $23.50 per share, which, in the opinion of the Stock Option Committee, is not less than 100 percent of the fair market value of the Optioned Shares on the grant date, which is July 30, 2007. If the Common Stock is admitted for quotation on NASDAQ or some other public market as of the grant date, such fair market value shall not be less than the closing price of the Common Stock on NASDAQ (or such other market) on the grant date set forth above.


Alan W. Baldwin

July 30, 2007

 

3.

The Option granted under this Plan shall terminate and be of no force and effect with respect to any shares not previously exercised by you upon the expiration of 6 years from the date of granting this Option. The Option is exercisable as follows:

 

 

 

 

 

 

NUMBER

OF SHARES

  

VESTING SCHEDULE

  

VESTING

DATE

10,000 shares

  

shall become vested and exercisable     

  

07/30/07

10,000 shares

  

shall become vested and exercisable on

  

08/01/07

10,000 shares

  

shall become vested and exercisable on

  

09/01/07

10,000 shares

  

shall become vested and exercisable on

  

10/01/07

10,000 shares

  

shall become vested and exercisable on

  

11/01/07

Notwithstanding the above, the Option shall become fully exercisable on the date the Company hires a permanent Chief Executive Officer or on the termination of your employment by the Company without Cause, as defined in Section 4.4 of your employment agreement with the Company as in effect on the date of this Agreement. Except as otherwise provided herein, you may exercise your rights under this Option as described above at any time. Reference in this agreement to exercise of the Option shall refer to the exercise of the Option with respect to all or any portion of the Optioned Shares.

 

4.

The Option may be exercised only by written notice, delivered or mailed by registered or certified mail addressed to the Stock Option Committee of Integral Systems at its principal business office. Such notice shall state your election to exercise the Option and the number of shares in respect to which it is being exercised and shall be accompanied by payment of the entire option price of the Optioned Shares being purchased (i) in cash or its equivalent, and/or (ii) in the discretion of the Stock Option Committee by tendering shares of Common Stock held for at least six (6) months having a fair market value not less than the option price. Upon receipt of the payment of the entire price of the Optioned Shares so purchased, certificates for such Optioned Shares shall be issued to you. The Optioned Shares so purchased shall be fully paid and nonassessable except insofar as statutory liability may be imposed under any applicable law.

In addition to the above, the Stock Option Committee, subject to such limitations as it may determine and unless otherwise prohibited by section 402 of the Sarbanes-Oxley Act of 2002 or any regulations promulgated by the Securities and Exchange Commission in connection therewith, may authorize payment of the exercise price, in

 

INTEGRAL SYSTEMS, INC. 2002 STOCK OPTION PLAN


Alan W. Baldwin

July 30, 2007

 

whole or in part, by delivery of a properly executed exercise notice, together with irrevocable instructions to: (i) a brokerage firm designated by Integral Systems to deliver promptly to Integral Systems the aggregate amount of sale or loan proceeds to pay the exercise price and the amount necessary to satisfy the minimum statutory tax withholding that may arise in connection with the exercise, and (ii) Integral Systems to deliver the certificates for such purchased shares directly to such brokerage firm. For this purpose, subject to change by notice from the Stock Option Committee, at your discretion you may contact Banc of America Investment Services, Inc., 7316 Wisconsin Avenue, Suite 200, Bethesda, MD 20814; Attention: Stuart Barth, phone 301-493-2895.

 

5.

(a) If you cease to be an employee of the Company, any unvested portion of the Option shall terminate. Any portion of the Option which is vested as of the date your employment with the Company ceases shall remain exercisable for a period of 3 years, subject to the other provisions of this Agreement.

(b) Upon termination of your employment with the Company by the Company your right to the Option shall be subjected to the following conditions: that until such Option is fully exercised, in the event that you breach any restrictive covenant to which you are subject in connection with your employment by the Company with respect to confidential or proprietary information, competition with Integral Systems and/or any of its subsidiaries, the solicitation of any employee or customer thereof, or any similar matter, you will forfeit all rights under the Option as of the date of the breach of the condition. Upon any breach of such condition, Integral Systems shall have the further right, at its option, to repurchase at the Option price per share set forth in paragraph 2 hereof, any Optioned Shares previously purchased by you.

 

6.

Integral Systems shall have the right to place an appropriate legend on any certificate representing shares of Common Stock which are acquired upon exercise of the Option to the effect that the shares represented by such certificate are subject to the terms and conditions of this agreement as well as to any restrictions imposed by federal or state securities laws.

 

7.

You shall not be deemed for any purpose to be a stockholder of Integral Systems with respect to any shares which may be acquired hereunder except to the extent that the Option shall have been exercised with respect thereto and the stock certificate issued therefor.

 

INTEGRAL SYSTEMS, INC. 2002 STOCK OPTION PLAN


Alan W. Baldwin

July 30, 2007

 

8.

The Option herein granted shall not be transferable by you otherwise than by will or by the laws of descent and distribution, and except as otherwise provided in the Plan, may be exercised only during your life and only by you.

 

9.

You agree for yourself and your heirs, legatees and other legal representatives, with respect to all shares of Common Stock acquired pursuant to the terms and conditions of the Plan and this agreement (or any other shares of Common Stock issued pursuant to a stock dividend or stock split thereon or any securities issued in lieu thereof or in substitution or exchange therefore), that you and your heirs, legatees and other legal representatives will not sell or otherwise dispose of these shares except (i) pursuant to an effective registration statement under the Securities Act of 1933, as amended (“the Act”), or except in a transaction which, in the opinion of counsel for Integral Systems, is exempt from registration under the Act and (ii) in compliance with state securities laws.

 

10.

The existence of the Option herein granted shall not affect in any way the right or power of the Company or its directors or stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. In the event the Company enters into a merger, sale or other corporate reorganization in which it is not the surviving entity and the Option is not otherwise assumed or continued by the surviving entity, the Option (to the extent then outstanding) shall become fully exercisable immediately before closing of the respective transaction and shall terminate as of the date of such closing.

 

11.

If upon exercise of the Option, Integral Systems determines upon advice of counsel that the Optioned Shares are not then issuable as a result of any limitation which is imposed by state or federal laws, then Integral Systems will not be obligated to issue such Optioned Shares to you until such time as in the opinion of counsel such issuance can occur without violating any such limitation of law.

 

12.

If you make a disposition (as that term is defined in section 424(c) of the Code) of any shares of Common Stock acquired pursuant to the exercise of an Incentive Stock

 

INTEGRAL SYSTEMS, INC. 2002 STOCK OPTION PLAN


Alan W. Baldwin

July 30, 2007

 

 

Option within two (2) years of the grant date or within one (1) year after the shares of Common Stock are transferred to you pursuant to your exercise of the Option, you agree to notify the Stock Option Committee of such disposition in writing within one week of the transfer. Notification must include the disposition date, the number of shares disposed of and the aggregate and price per share received.

 

13.

This agreement shall be governed by the laws of the State of Maryland.

 

14.

The Option and Optioned Shares shall be subject to all terms, restrictions, and limitations set forth in the Plan. To the extent there is some ambiguity, conflict or inconsistencies between the terms of the Plan document and the terms of this Agreement, the terms of the Plan document shall control.

If you accept the foregoing terms and conditions, please sign this agreement on the line provided below for your signature. In the absence of your written acceptance of the terms hereof, no Optioned Shares will be purchasable by you.

 

 

 

 

Integral Systems, Inc.

 

 

By:

 

/s/ Paul Casner

 

 

AGREED TO AND ACCEPTED:

 

/s/ Alan W. Baldwin

 

PRINT NAME: Alan W. Baldwin

DATE: 07/31/2007

 

INTEGRAL SYSTEMS, INC. 2002 STOCK OPTION PLAN

 

 

 

 

 

EX-10.2 3 dex102.htm EXHIBIT 10.2

Exhibit 10.2

FIRST AMENDMENT

TO

EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into as of the 9th day of July, 2008 (the “Amendment Effective Date”), by and between Integral Systems, Inc., a Maryland corporation (the “Company”), and Alan W. Baldwin (the “Executive”).

WHEREAS, the Company and Executive are parties to an Employment Agreement dated as of May 30, 2007 (the “Employment Agreement”);

WHEREAS, the Company and Executive wish to amend the Employment Agreement to reflect the terms of Executive’s continued service with the Company in light of the interim nature of Executive’s position as the Company’s Chief Executive Officer;

NOW, THEREFORE, the parties agree that the Employment Agreement is hereby amended as follows, effective as of the Amendment Effective Date:

 

 

1.

Section 2 of the Employment Agreement is amended to read as follows:

Term of Employment. Unless terminated earlier in accordance with the provisions of this Agreement, the Executive’s employment hereunder shall continue until June 30, 2009 (the “Term”); provided, however, that Executive shall continue to provide services to the Company as an executive until the earlier of (a) December 31, 2008, or (b) the date specified in a written notice from the Company to Executive that his employment as interim Chief Executive Officer is being terminated by the Company.

 

 

2.

Section 3.2 of the Employment Agreement is amended by adding the following new sentence to the ends thereof:

Notwithstanding any other provision of the 2002 Stock Option Plan or any agreement thereunder (including, without limitation, Exhibit A), the options described in this Section 3.2 and the 5,000 stock options granted to Executive on December 31, 2006 shall expire on the fifth anniversary of the applicable grant date of such options (provided, that, in the event the Company enters into a merger, sale or other corporate reorganization in which it is not the surviving entity and the options are not otherwise assumed or continued by the surviving entity, the options (to the extent then outstanding) shall become fully exercisable immediately before closing of the respective transaction and shall terminate as of the date of such closing).

 

 

3.

Section 3.3 of the Employment Agreement is amended to read as follows:


Bonus. Executive shall be entitled to a bonus (the “Bonus”) of up to sixty percent (60%) of the Base Salary, determined pursuant to criteria established by the Compensation Committee of the Board. The earned portion of the Bonus shall be paid to Executive when bonuses are normally paid by the Company to employees for fiscal year 2008, which is expected to be in November 2008; provided, however, that if the Compensation Committee determines that any portion of the Bonus is contingent upon a successful GOES-R bid on or before December 31 2008 or a business transaction occurring before December 31, 2008 and such portion is not payable when the Bonus otherwise is scheduled to be paid (i.e., because the conditions to receive such portion of the Bonus have not been satisfied at the time the rest of the Bonus is payable), but such applicable portion of the Bonus does subsequently become payable, it shall be paid to Executive no later than January 4, 2009.

 

 

4.

A new Section 3.7 is added to read as follows:

Additional Stock Option Grants. No later than thirty (30) days after the execution of this Amendment, the Company shall grant the Executive nonqualified stock options to acquire Sixty Thousand (60,000) shares of the Company’s common stock, subject to such terms and conditions as set forth by the Company’s 2008 Stock Incentive Plan, as it may be amended by the Company from time to time, and the Term Sheet and Standard Terms and Conditions for Nonqualified Stock Options entered into by Executive and the Company. Such Term Sheet and Standard Terms and Conditions for Nonqualified Stock Options shall reflect the terms set forth in this Section 3.7 but otherwise shall be the Company’s standard form of Term Sheet and Standard Terms and Conditions for Nonqualified Stock Options. Notwithstanding any other provision of the 2008 Stock Incentive Plan to the contrary, the exercise price for the options shall be the fair market value of the Company’s common stock as of the grant date, the options shall be fully vested when granted, and the options shall expire on the fifth anniversary of the grant date (provided, that, in the event the Company enters into a merger, sale or other corporate reorganization in which it is not the surviving entity and the option is not otherwise assumed or continued by the surviving entity, the option (to the extent then outstanding) shall become fully exercisable immediately before closing of the respective transaction and shall terminate as of the date of such closing).

 

 

5.

Section 4.5(a) is amended to add the following sentence at the end thereof:

For the avoidance of doubt, the COBRA continuation period shall commence on July 1, 2009 and the Company shall pay eighteen (18) months of COBRA premiums commencing with the premiums for July 2009.


IN WITNESS WHEREOF, the parties hereto have entered into this First Amendment as of the Amendment Effective Date.

 

 

 

 

 

 

 

 

 

 

INTEGRAL SYSTEMS, INC.

 

 

 

ALAN W. BALDWIN

 

 

 

 

 

By:

 

/s/ Paul G. Casner Jr.

 

 

 

By:

 

/s/ Alan W. Baldwin