SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Integral Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
INTEGRAL SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 2001
TO THE STOCKHOLDERS OF INTEGRAL SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of Integral Systems, Inc. (the "Company") will be held at
Patuxent Greens Country Club, located at 14415 Greensview Drive, Laurel,
Maryland at 6:00 p.m. on Wednesday, April 25, 2001, for the following purposes:
1. To elect six directors to serve for a term of one year or until their
successors are duly elected and qualified; and
2. To consider and transact such other business as may properly and
lawfully come before the Annual Meeting or any adjournment thereof.
All of the foregoing is more fully set forth in the Proxy Statement
accompanying this Notice.
All stockholders are cordially invited to attend the Annual Meeting in
person. IF YOU CANNOT ATTEND THE ANNUAL MEETING, PLEASE TAKE THE TIME TO
PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE WE HAVE
PROVIDED. If you attend the Annual Meeting and decide that you want to vote in
person, you may revoke your proxy.
By Order of the Board of Directors
/s/ Thomas L. Gough
--------------------
February 26, 2001 Thomas L. Gough
Lanham, Maryland President
INTEGRAL SYSTEMS, INC.
5000 Philadelphia Way
Lanham, Maryland 20706-4417
Annual Meeting of Stockholders
April 25, 2001
_________________________________________
PROXY STATEMENT
_________________________________________
Information Concerning Solicitation and Voting
General
The enclosed proxy is solicited on behalf of Integral Systems, Inc. (the
"Company") for the annual meeting of stockholders of the Company (the "Annual
Meeting") to be held at 6:00 p.m. on Wednesday, April 25, 2001, at Patuxent
Greens Country Club, located at 14415 Greensview Drive, Laurel, Maryland or any
adjournment or adjournments thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting.
These proxy solicitation materials were mailed on or about March 5, 2001 to
all stockholders entitled to vote at the meeting.
Record Date; Outstanding Shares
Only stockholders of record at the close of business on February 20, 2001
(the "Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. The outstanding voting securities of the Company as of the Record Date
consisted of 9,452,718 shares of common stock of the Company, par value $.01 per
share (the "Common Stock"). For information regarding holders of more than 5%
of the outstanding Common Stock, see "Security Ownership of Certain Beneficial
Owners and Management."
Revocability of Proxies
The enclosed proxy is revocable at any time before its use by delivering to
the Company a written notice of revocation or a duly executed proxy bearing a
later date. If a stockholder who has executed and returned a proxy is present
at the Annual Meeting and wishes to vote in person, he or she may elect to do so
and thereby suspend the power of the proxy holders to vote his or her proxy.
Voting and Solicitation
Every stockholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the meeting. All
shares represented at the Annual Meeting by a proxy will be voted in accordance
with the choices specified on the proxy. If no direction is given, proxies will
be voted in accordance with the recommendations of the Board of Directors set
forth in this Proxy Statement. A Board of Directors consisting of six directors
is to be elected at the Annual Meeting (Proposal 1). In the election of
directors, a plurality of the votes cast at the Annual Meeting at which a quorum
is present is sufficient to elect a director. Thus, each stockholder will be
entitled to vote for six nominees and the six nominees with the greatest number
of votes will be elected. Under Maryland law, there are no appraisal or
dissenter's rights with respect to any matter to be voted on at the Annual
Meeting that is described herein.
1
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telecopy or electronic mail.
Quorum; Abstentions; and Broker Non-Votes
The presence, in person or by proxy, of the holders of a majority of the
shares entitled to be voted generally at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. An abstaining vote and a broker
"non-vote" (a broker non-vote occurs if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item) are counted as present and entitled to vote and are, therefore,
included for purposes of determining whether a quorum of shares exists. For
purposes of electing directors (Proposal 1), abstentions and broker non-votes
will not be treated as a vote cast and will not affect the outcome of such
votes.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2002 annual meeting of stockholders must
be received by the Company no later than October 29, 2001 in order that they may
be included in the proxy statement and form of proxy relating to that meeting.
If a stockholder intends to present a stockholder proposal at the 2001 annual
meeting in a manner other than by the inclusion of the proposal in the Company's
proxy statement and proxy relating to that meeting, unless the stockholder
notified the Company of such intention by February 3, 2001, the proxies named by
the Company may exercise their discretionary voting authority on the matter in
accordance with their best judgment. Any such stockholder proposal should be
addressed to the Company's Secretary, Elaine M. Parfitt, and delivered to the
Company's principal executive offices at 5000 Philadelphia Way, Lanham, Maryland
20706-4417.
Annual Report
The Company's Annual Report to Stockholders on Form 10-K for the fiscal
year ended September 30, 2000, is included with these proxy solicitation
materials. A copy of the Company's Annual Report, including the financial
statements and the financial statement schedules included therein, is also
available upon written request to the Company at 5000 Philadelphia Way, Lanham,
Maryland 20706-4417, Attn.: Elaine M. Parfitt, Corporate Secretary.
2
ELECTION OF DIRECTORS
(Proposal 1)
General
A Board of Directors consisting of six directors is to be elected at the
Annual Meeting. Unless otherwise instructed, the proxy holders will vote all of
the proxies received by them for the Company's six nominees. The six directors
nominated for election at the Annual Meeting are: Steven R. Chamberlain, Thomas
L. Gough, Dominic A. Laiti, R. Doss McComas, Bonnie K. Wachtel and John R.
Murphy (each, a "Nominee," and collectively, the "Nominees"). In the event that
any of the Nominees shall become unavailable, the proxy holders will vote in
their discretion for a substitute nominee. It is not expected that any Nominee
will be unavailable.
The Bylaws of the Company provide that the number of members of the Board
of Directors shall consist of between three and seven directors and that the
exact number may be determined, within the foregoing limits, by the Board of
Directors. Each director is elected for a one-year term at each annual meeting
of the stockholders. Directors serve until the next annual meeting of
stockholders and until successors have been duly elected and qualified.
Officers are elected by the Board of Directors. Each officer holds office until
his or her successor is elected or appointed and qualified or until his or her
earlier resignation or removal.
The terms of each of the elected directors will expire at the next annual
meeting of stockholders or when their successors are elected and qualified.
The Board of Directors Unanimously Recommends That Stockholders Vote "For"
Each of the Nominees.
Set forth below is certain information regarding the directors (including
the Nominees) and executive officers of the Company.
Directors and Executive Officers: Age Position
Steven R. Chamberlain............... 45 Chairman of the Board, Chief Executive Officer, Director
and Nominee
Thomas L. Gough..................... 52 President, Chief Operating Officer, Director and Nominee
Elaine M. Parfitt................... 37 Vice President, Chief Financial Officer, Secretary and
Treasurer
Patrick R. Woods.................... 45 Vice President, Government Programs
Peter J. Gaffney.................... 41 Vice President, Commercial Products
Bonnie K. Wachtel................... 45 Outside Director and Nominee
Dominic A. Laiti.................... 69 Outside Director and Nominee
R. Doss McComas..................... 46 Outside Director and Nominee
John R. Murphy...................... 67 Outside Director and Nominee
3
Steven R. Chamberlain, 45, a Company founder, has been Chairman of the
Board and Chief Executive Officer since June 1992, and a Director since 1982.
He was President from May 1988 until June 1992 and served as Vice President from
1982 until he became President. From 1978 to 1982, OAO Corporation ("OAO")
employed Mr. Chamberlain where he progressed from Systems Analyst to Manager of
the Offutt Air Force Base field support office. Mr. Chamberlain holds a B.S.
degree in Physics from Memphis State University and has done graduate work in
Physics and Mathematics at Memphis State and the University of Maryland.
Thomas L. Gough, 52, became a member of the Company's staff in January
1984. In March 1996, he was elected to the Board of Directors of the Company. He
has served as President and Chief Operating Officer of the Company since June
1992. For three years before being named President, he served as Vice President
and Chief Financial Officer. Prior to joining the Company, he was employed by
Business and Technological Systems, Inc., where he managed the Software Systems
Division. From 1972 to 1977, he was employed by Computer Sciences Corporation,
where he progressed from Programmer Analyst to Section Manager. Mr. Gough earned
a B.S. degree from the University of Maryland with a major in Information
Systems Management in the School of Business and Public Administration.
Elaine M. Parfitt, 37, joined the Company in 1983. She served as Staff
Accountant/Personnel Administrator until January 1995, when she was promoted to
Controller/Director of Accounting. In March 1997, Ms. Parfitt was appointed Vice
President and Chief Financial Officer. In February 2000, she was appointed
Secretary and Treasurer. She holds a B.S. degree in Accounting from the
University of Maryland and is a CPA.
Patrick R. Woods, 45, joined the Company in 1995 and has been Vice
President, Government Programs, since May 1998. From 1996 to April 1998, Mr.
Woods served as Vice President, NOAA Programs. From 1994 to 1995, he worked for
Space Systems/Loral (SS/L), and from 1985 to 1994, he worked for Loral
Aerospace, which is now the Lockheed Martin Corporation. Mr. Woods served as the
Director of Mission Operations for both SS/L and the AeroSys Division of Loral
Aerospace. While at Loral Aerospace, Mr. Woods received the NASA Public Service
Group Achievement Award from NASA Administrator Admiral Richard Truly for his
management of the Hubble Space Telescope control center development and launch
support. Mr. Woods holds a B.S. in Public Administration and a M.P.A. in Public
Management from Indiana University.
Peter J. Gaffney, 41, joined the Company in 1986. In February 2000, Mr.
Gaffney was appointed Vice President, Commercial Products. From May 1999 until
February 2000, Mr. Gaffney served as Vice President, Commercial Division. From
1986 to 1992, he worked on simulators for the Company's DMSP and Tiros programs.
In 1992, he became a project manager for EPOCH 2000 ground systems programs,
which included the Command and Range Generator project for GE Americom, the
Loral Skynet Telstar 3, 4, and 5 ground systems, and the Echostar 1, 2, 3 and 4
ground systems. Prior to joining Integral Systems, Mr. Gaffney was a design
engineer for the General Electric Co., where he worked on the DSCS, Milstar,
Landsat, and Spot satellite programs. Mr. Gaffney graduated from the University
of Maryland in 1981 with a B.S. in Electrical Engineering.
Bonnie K. Wachtel, 45, has served as an outside director since May 1988.
Since 1984, she has been Vice President, General Counsel and a Director of
Wachtel & Co., Inc., an investment-banking firm in Washington, D.C. Ms. Wachtel
serves as a Director of several corporations, including VSE Corporation and
Information Analysis, Inc. She holds a B.A. and an M.B.A. from the University
of Chicago and a J.D. from the University of Virginia, and she is a Certified
Financial Analyst.
Dominic A. Laiti, 69, has served as an outside director of the Company
since July 1995. Mr. Laiti is presently employed as an independent consultant
and was President and Director of
4
Globalink, Inc. from January 1990 to December 1994. He has over 26 years of
experience in starting, building, and managing high-technology private and
public companies with annual revenues from $2 million to over $120 million. Mr.
Laiti was President of Hadron, Inc. from 1979 to 1989; Vice President of Xonics,
Inc. from 1972 to 1979; and Vice President of KMS Industries from 1968 to 1972.
He is a Director of Energy Recovery, Inc. and former Director of United Press
International, Saturn Chemicals Company, Hadron, Inc., Telecommunications
Industries, Inc., MAXXAM Technology, Inc., and Jupiter Technology, Inc.
R. Doss McComas, 46, joined the Board as an outside director in July 1995.
He is President of e-Community Calendar Inc., a supplier of sponsor/advertising
supported community information and a manufacturer and integrator of internet,
cellular and wireless local loop systems. Previously, he was Chairman of Plexsys
International, President of Fortel Technologies, Inc., and held positions with
COMSAT RSI and Radiation Systems, Inc., including Group Vice President, Vice
President of Acquisitions, Strategic Planning and International Marketing, and
General Counsel. He holds a B.A. degree from Virginia Polytechnic Institute, an
M.B.A. from Mt. Saint Mary's, and a J.D. from Gonzaga University.
John R. (Reg) Murphy, 67, was elected to the Board as an outside director
in February 2000. He is Vice Chairman of the National Geographic Society based
in Washington, D.C. He was President and CEO of the Society from 1995 to 1998.
Prior to joining National Geographic, he was the publisher and CEO of the
Baltimore Sun and a member of the Times Mirror Management Committee. Mr. Murphy
has also been the Editor of the Atlanta Constitution, and Editor and Publisher
of the San Francisco Examiner. He is a past President of the United States Golf
Association and Chairman of its Centennial Celebration Committee. Mr. Murphy is
Chairman of the Board of Provant, Inc., and serves on the Board of Directors of
The Omnicom Group, MSD&T Funds, Arbos Inc., Saxotech, and e-Motion, Inc. He is
also President of Caves Valley Golf Club in Baltimore, Maryland and a Trustee of
Mercer and Brenau Universities.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of the Company's Common Stock, to file reports of
ownership and changes in ownership of the Company's Common Stock with the
Securities and Exchange Commission and Nasdaq. Based on a review of the copies
of such reports, the Company believes that during the fiscal year ended
September 30, 2000 its executive officers, directors and greater than ten
percent stockholders filed on a timely basis all reports due under Section 16(a)
of the Exchange Act, with the following exceptions: John R. Murphy, a director
of the Company, inadvertently filed late a Form 3; Steve Chamberlain, an
executive officer and director of the Company, inadvertently filed late a Form 4
for December 1999, reporting one transaction.
Certain Relationships and Related Transactions
In August 2000, the Company entered into an agreement and plan of
reorganization by and among the Company, SAT Corporation, ISI Acquisition
Corporation and Herbert Pardula, the sole shareholder of SAT Corporation. The
reorganization agreement provided for the acquisition of SAT by the Company.
Pursuant to the terms of the reorganization agreement, ISI was merged with and
into SAT, with SAT as the surviving entity. At the time of the merger, SAT
became a wholly owned subsidiary of the Company. Pursuant to the reorganization
agreement, the purchase price paid to the sole shareholder of SAT by the Company
in connection with the acquisition of SAT consisted of 650,000 shares of the
Company's Common Stock. The acquisition was accounted for as a pooling of
interests. In December 2000, the Company registered the 650,000 shares of its
Common Stock paid
5
in connection with the acquisition of SAT on a Form S-3 filed with the
Securities and Exchange Commission.
Board of Directors and Committees
The Board of Directors met five (5) times in the fiscal year ended
September 30, 2000. Each of the Company's incumbent directors attended at least
75% of all meetings of the Board of Directors. The Company has an Audit
Committee, a Stock Option Committee and a Compensation Committee. The Audit
Committee, the Stock Option Committee and the Compensation Committee held their
meetings concurrently with the meetings of the Board of Directors. The Company
does not have a nominating committee.
The Audit Committee, Compensation Committee and Stock Option Committee are
comprised of Dominic A. Laiti, R. Doss McComas and Bonnie Wachtel, each a non-
employee outside director.
The Stock Option Committee administers the Company's 1988 Stock Option
Plan, as amended and restated effective May 8, 1998 (the "Stock Option Plan").
The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plan and results of the audit engagement, reviews the independence of the
Company's public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal accounting controls. For
more information regarding the Audit Committee, see "Executive Compensation -
The Audit Committee Report." The Compensation Committee determines the salary
and bonus for the Chief Executive Officer, and makes recommendations regarding
compensation levels for other officers of the Company.
Director Compensation
Directors who are employees of the Company do not receive any compensation
for their service as directors. The Company pays each director who is not an
employee of the Company an aggregate of $10,000 per year for their services,
which amount is paid in equal quarterly installments. Outside directors are also
annually granted options to purchase 5,000 shares of the Company's common stock
pursuant to the Stock Option Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 2000, by (i) each
person known by the Company to beneficially own more than five percent of the
outstanding shares of Common Stock, (ii) each Nominee, director and executive
officer of the Company and (iii) all executive officers and directors as a
group. Except as indicated, the persons named in the table have sole voting and
investment power with respect to all shares beneficially owned. Except as
indicated, the address of each of the persons named in the table is that of the
Company's principal executive offices.
6
Security Ownership of Certain Beneficial Owners and Management
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Owner of Class
- ------------------------------------ ---------------- -----------
Ashford Capital Management, Inc. 512,800** 5.4%
P.O. Box 4172
Wilmington, DE 19807
Chartwell Capital Investors II LP 555,556 5.9%
One Independent Drive
Suite 3120
Jacksonville, FL 32202
Herbert Pardula 650,000 6.9%
15091 Esther Drive
San Jose, CA 95124
Executive Officers, Directors, and Nominees
Steven R. Chamberlain 419,205 (1) 4.4%
Thomas L. Gough 174,600 (2) 1.8%
Elaine M. Parfitt 16,900 (3) *
Patrick R. Woods 5,400 (4) *
Peter J. Gaffney 36,700 (5) *
Bonnie K. Wachtel 52,400 (6) *
1101 Fourteenth Street, N.W.
Suite 800
Washington, D.C. 20036
Dominic A. Laiti 5,000 (7) *
12525 Knoll Brook Drive
Clifton, Va. 22024
R. Doss McComas 16,000 (8) *
409 Biggs Drive
Front Royal, Va. 22630
John R. Murphy 7,000 (9) *
Cottage 448
West 31st Street
Sea Island, GA. 31561
All Directors, Executive Officers and Nominees
as a group. (9 persons). 733,205 7.6%
*Less than one percent of the Common Stock outstanding.
**As of December 31, 2000 per Form 13-G filed with the Securities and Exchange
Commission on February 13, 2001.
(1) Includes outstanding options to purchase 82,700 shares of Common Stock
which are exercisable within 60 days.
(2) Includes outstanding options to purchase 20,000 shares of Common Stock
which are exercisable within 60 days.
(3) Includes outstanding options to purchase 8,500 shares of Common Stock which
are exercisable within 60 days.
(4) Includes outstanding options to purchase 3,400 shares of Common Stock which
are exercisable within 60 days.
(5) Includes outstanding options to purchase 28,700 shares of Common Stock
which are exercisable within 60 days.
(6) Includes outstanding options to purchase 26,000 shares of Common Stock
which are exercisable within 60 days.
(7) Includes outstanding options to purchase 5,000 shares of Common Stock which
are exercisable within 60 days.
(8) Includes outstanding options to purchase 16,000 shares of Common Stock
which are exercisable within 60 days.
(9) Includes outstanding options to purchase 5,000 shares of Common Stock which
are exercisable within 60 days.
7
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation received by the Company's CEO
and four highest paid executive officers who were serving as executive officers
of the Company at the end of fiscal year 2000 and who earned over $100,000
during the fiscal year ended September 30, 2000 and one additional individual
who would have otherwise met the foregoing criteria but for the fact that he was
not an executive officer of the Company at the end of fiscal year 2000:
Summary Compensation Table
Annual Compensation Long-Term Compensation
=================== ======================
Awards Payouts
------ -------
Number of
Shares
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation/(1)/
--------------------------- ---- ------ ----- ------- ------------
Chief Executive Officer
Steven R. Chamberlain 2000 $214,303 $25,000 12,000 $19,061
1999 $187,862 $65,000 20,000 $19,066
1998 $140,120 $30,000 0 $13,847
Chief Operating
Officer/Pres. 2000 $180,648 $20,000 14,000 $18,781
Thomas L. Gough 1999 $167,545 $35,000 0 $16,885
1998 $125,251 $20,000 0 $12,357
Vice Pres., Government
Programs
Patrick R. Woods 2000 $152,510 $10,000 2,000 $16,800
1999 $156,119 $30,000 12,000 $16,799
1998 $117,284 $15,000 0 $12,382
Former Executive Vice
President, Business
Development 2000 $148,693 $ 0 0 $ 9,015
Steven A. Carchedi 1999 $162,476 $35,000 12,000 $16,092
1998 $122,432 $20,000 0 $11,092
Vice Pres., Commercial
Products 2000 $132,423 $15,000 7,000 $12,918
Peter J. Gaffney 1999 $107,520 $12,000 23,000 $ 9,854
1998 $ 91,802 $10,000 0 $ 8,886
Vice Pres/Chief Financial
Officer 2000 $132,169 $15,000 6,000 $13,300
Elaine.M. Parfitt 1999 $106,506 $30,000 10,000 $ 9,575
1998 $ 74,134 $10,000 0 $ 6,830
(1) All Other Compensation represents employer pension contributions. It does
not include the value of insurance premiums paid by or on behalf of the Company
with respect to term life insurance for the benefit of each identified
individual in the approximate amounts of $745, $594 and $584 in fiscal years
2000, 1999 and 1998 respectively.
(2) Mr. Carchedi resigned as an officer and director of the Company on June 30,
2000.
8
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------
Individual Grants
- ---------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options
Underlying Granted to Exercise/Base Grant Date
Options Employees in Price Expiration Present
Name Granted Fiscal Year ($/Share) Date Value/(1)/
- ---------------------------------------------------------------------------------------------------
CEO
Steven R. Chamberlain 12,000 5% $18.00 2006 $64,080
CHIEF OPERATING OFFICER/
President
Thomas L. Gough 14,000 6% $18.00 2006 $74,760
VP GOVERNMENT PROGRAMS
Patrick R. Woods 2,000 1% $18.00 2006 $10,680
VP COMMERCIAL PRODUCTS
Peter J. Gaffney 7,000 3% $18.00 2006 $37,380
VP/CHIEF FINANCIAL OFFICER
Elaine M. Parfitt 6,000 3% $18.00 2006 $32,040
(1) Grant Date Present value is calculated on the date of the grant using
the Black-Scholes options Pricing Model assuming the following: no dividend
yield, risk-free interest rate of 6%, expected volatility of 40%, and an
expected term of the option of four years. The value is then multiplied by
the number of options granted.
Fiscal Year 2000 Stock Option Exercises and Year-End Option Values
The following table provides information with respect to option
exercises in fiscal year 2000 by the named executive officers and the value
of unexercised options held by these officers at September 30, 2000:
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Shares
Acquired
on Value Number of Securities Value of Unexercised "In-the-
Exercise Realized Underlying Unexercised Money" Options at Sept. 30,
Name (#) ($) Options at Sept. 30, 2000 2000 /(1)/
- ---------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
Steven R. Chamberlain 45,000 $1,318,895 78,700 43,300 $959,774 $195,917
- ---------------------------------------------------------------------------------------------------------------------
Thomas L. Gough 6,000 $ 91,230 26,000 26,000 $330,330 $152,460
- ---------------------------------------------------------------------------------------------------------------------
Patrick R. Woods 1,400 $ 32,480 1,000 11,600 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------------------
Steven A. Carchedi (2) 57,378 $1,186,026 0 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------------------
Peter J. Gaffney 9,000 $ 218,280 24,100 29,900 $254,378 $ 58,703
- ---------------------------------------------------------------------------------------------------------------------
Elaine M. Parfitt 0 0 6,500 15,500 $ 58,703 $ 19,568
- ---------------------------------------------------------------------------------------------------------------------
(1) Value for "In the Money" options represents the difference between the
exercise prices of outstanding options and the fair market value of the
Company's Common Stock of $16.625 per share at September 30, 2000.
(2) Mr.Carchedi resigned as an officer and director of the Company on June
30, 2000.
9
PERFORMANCE GRAPH
The following graph shows a comparison of the total return to
stockholders of an investment in Integral Systems, Inc. Common Stock, the NASDAQ
Computer &Data Processing Services Stock Index and the NASDAQ Composite Stock
Market Index (US). The graph assumes $100 was invested in Integral's Common
Stock, the NASDAQ Computer & Data Processing Services Stock Index and the NASDAQ
Composite Stock Market (US) on September 30, 1995 through September 30, 2000.
Total stockholder return in each case is calculated assuming
reinvestment of all dividends. Note that historical stock price performance of
the Company is not necessarily indicative of any future stock price performance.
[GRAPH APPEARS HERE]
Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00
------ ------ ------ ------ ------ ------
Integral Systems, Inc 100.00 83.04 102.97 315.23 584.71 338.11
NASDAQ Computer & Data 100.00 124.02 167.84 217.53 369.34 464.32
Processing Services Stocks
NASDAQ Market Index-US 100.00 118.68 162.92 165.50 270.38 358.96
10
Employment Agreements
There are no employment agreements in effect with respect to any directors or
executive officers of the Company.
Compensation Pursuant to Plans
Effective October 1, 1987, the Company established a 401(k) pension and profit
sharing plan under Section 401 of the Internal Revenue Code. Under the pension
plan and the profit sharing plan, the Company contributes annually an aggregate
amount equal to 5% of an eligible employee's salary to the plans and may make
additional contributions of up to 7% of an eligible employee's salary. The
employee may contribute up to an additional 10% as salary deferral. In each of
fiscal years 2000 and 1999, the Company contributed a total of 11% of eligible
employees' salaries to both plans.
Compensation Committee Report
The Compensation Committee, which is made up of three outside non-employee
directors, determines the annual salary and bonuses awarded to Chief Executive
Officer and Chairman of the Board of Directors Steven R. Chamberlain. The
Compensation Committee also makes recommendations regarding compensation levels
for other officers of the Company to Steven R. Chamberlain, who determines the
annual salaries and bonuses awarded to such officers on a discretionary basis.
The Compensation Committee's policy on officer compensation is to offer or
recommend (as the case may be) a package that includes a competitive salary, an
annual bonus based on achieving certain Company goals and objectives and
competitive benefits. The goal of the Compensation Committee in determining the
compensation of Steven R. Chamberlain and in making recommendations regarding
compensation levels for other officers is to acquire and retain highly skilled
executives, reward outstanding individual performance and align the compensation
awarded to officers with the success of the Company. The Committee bases its
salary determination or recommendations on the individual officer's
contributions to the Company and the responsibilities and duties that he or she
performs. Bonuses are awarded or recommended by the Compensation Committee on
the basis of achievement of certain Company and division revenue and earnings
goals. Benefit packages offered to officers of the Company are similar to the
benefits offered to all employees and include the Company's health plan and
401(k) and Profit Sharing Plan.
Annually, the Compensation Committee reviews and approves the compensation
awarded to Steven R. Chamberlain. Mr. Chamberlain has provided leadership and
direction as the Company has continued to grow and expand. In fiscal year 2000,
Mr. Chamberlain guided the Company as it completed a private placement of the
Company's Common Stock. The Company received approximately $41 million (net)
from this offering. In addition, Mr. Chamberlain led the effort as the Company
completed the acquisition of SAT Corporation during the year. The Committee
conferred a bonus of $25,000 for Mr. Chamberlain's efforts during the private
placement process. Mr. Chamberlain's salary for fiscal year 2000 was $214,303,
which in light of his experience, contributions and responsibilities with the
Company, the Committee finds reasonable and comparable to executives in similar
size companies.
COMPENSATION COMMITTEE
Dominic A. Laiti
R. Doss McComas
Bonnie K. Wachtel
11
Audit Committee Report
The Audit Committee of the Board of Directors consists of Dominic A. Laiti, R.
Doss McComas and Bonnie K. Wachtel, all of whom are outside non-employee
directors. Each of these members of the Audit Committee is considered
independent as defined under the applicable NASDAQ National Market standards
governing the qualification of Audit Committee members. The duties and
responsibilities of the Audit Committee are laid out in a written charter, which
was adopted by the Board of Directors and is incorporated as Appendix A of this
Proxy Statement.
The Audit Committee has reviewed and discussed the Company's audited financial
statements for the fiscal year ended September 30, 2000 with management and with
Rubino & McGeehin, Chartered, the Company's independent auditors. The Audit
Committee has discussed with Rubino & McGeehin the matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards, AU (S)
380) relating to the conduct of the audit. The Audit Committee has received the
written disclosures and the letter from the independent auditors required by
Independence Standards Board No. 1, (Independence Standards Board Standard No.
1, Independence Discussions with Audit Committee) and has discussed with Rubino
& McGeehin their independence. Based on the review of the audited financial
statements and the discussions and review with the independent accountants
mentioned above, the Audit Committee recommended to the Board of Directors that
the audited financial statements for fiscal year ended September 30, 2000 be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2000, for filing with the Securities and Exchange Commission.
Submitted by the members of the Audit Committee:
Dominic A. Laiti
R. Doss McComas
Bonnie K. Wachtel
Stock Option Plan
Effective May 25, 1988, the Company established the Stock Option Plan, as
amended and restated in 1994 and 1998, to create additional incentives for the
Company's employees, consultants and directors to promote the financial success
of the Company. The Stock Option Committee has the authority to select full-
time employees, directors or consultants to receive awards of options for the
purchase of stock of the Company under this plan. The maximum number of shares
of Common Stock which may be issued pursuant to the Stock Option Plan is
1,800,000. Options to purchase a total of 235,850 shares of Common Stock were
granted and options to purchase 213,756 shares of Common Stock were exercised
during fiscal year 2000. The total number of shares of Common Stock subject to
options issued and outstanding as of February 20, 2001 was 797,650. Pursuant to
the Stock Option Plan, options may be incentive stock options within the meaning
of Section 422 of the Internal Revenue Code or nonstatutory stock options,
although incentive stock options may be granted only to employees.
Termination of Employment and Change of Control Termination
The Company has no compensatory plan or arrangement with respect to any
individual named in the Summary Compensation Table which results or will result
from the resignation, retirement or any other termination of that individual's
employment with the Company or its subsidiaries or from a change in control of
the Company or a change in the individual's responsibilities following a change
in control.
12
INDEPENDENT ACCOUNTANTS
Management has not yet selected independent public accountants to audit the
books, records and accounts of the Company for the current fiscal year ending
September 30, 2001. In accordance with its policy of evaluating its choice of
independent accountants periodically, the Company is in the process of selecting
an independent public accountant for the current fiscal year. However, at this
time, the Company has not made its selection. The independent public
accountants for the Company for the fiscal year ended September 30, 2000 were
Rubino & McGeehin, Chartered. A representative of Rubino & McGeehin, Chartered
is expected to be present at the Annual Meeting and will be available to answer
questions from stockholders.
Audit Fees. The aggregate fees billed by Rubino & McGeehin for professional
services rendered for the audit of the Company's annual financial statements for
fiscal year 2000 and the reviews of the financial statements included in the
Company's Forms 10-Q for fiscal year 2000 was $52,431.
All Other Fees. The aggregate fees billed for professional services rendered
during fiscal year 2000 relating to the acquisition of SAT, review of the
Company's tax returns, audit of the Company's pension plans, consultations on
accounting standards and other miscellaneous services was $66,302.
The Audit Committee has considered whether provision of the services described
above under the caption "All Other Fees" is compatible with maintaining the
independent accountants' independence and has determined that such services have
not adversely affected Rubino & McGeehin's independence.
13
OTHER MATTERS
There is no reason to believe that any other business will be presented at the
Annual Meeting; however, if any other business should properly and lawfully come
before the Annual Meeting, the proxies will vote in accordance with their best
judgment in such matters pursuant to discretionary authority granted in the
proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas L. Gough
------------------------------
February 26, 2001 Thomas L. Gough
Lanham, Maryland President and Chief Operating Officer
14
APPENDIX A
INTEGRAL SYSTEMS, INC.
AUDIT COMMITTEE CHARTER
Adopted June 14, 2000
I. PURPOSE
The primary functions of the Audit Committee (the "Audit Committee") of
Integral Systems, Inc. (the "Company") are to assist the Board of Directors of
the Company (the "Board of Directors") in (i) fulfilling its oversight duties
with respect to corporate financial reporting and (ii) monitoring the
independence and performance of the Company's independent auditors. The Audit
Committee shall also assist in fostering open communication between the Board of
Directors, senior management of the Company and the independent auditors.
II. ORGANIZATION/COMPOSITION
The Board of Directors shall appoint the members of the Audit Committee,
which shall consist of at least three directors (with the exact number to be
determined from time to time by resolution of the Board of Directors), each of
whom shall meet the independence and experience requirements of the Nasdaq Stock
Market and shall be free from any relationship that would interfere with the
exercise of independence in the performance of his or her duties as an Audit
Committee member. The Board of Directors shall elect one of the members of the
Audit Committee to act as Chairman of the Audit Committee. Each of the members
of the Audit Committee shall be able to read and understand fundamental
financial statements, including a company's balance sheet, income statement, and
cash flow statement or will become able to do so within a reasonable period of
time after his or her appointment to the Audit Committee. In addition, at least
one member of the Audit Committee shall have past employment experience in
finance or accounting, requisite professional certification in accounting, or
any other comparable experience or background which results in his or her
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
III. MEETINGS
The Audit Committee shall meet from time to time upon the call of any of
the members of the Audit Committee, or the Chairman of the Board of Directors of
the Company, on 24 hours notice to each member of the Audit Committee, either
personally or by telephone or by mail, telegraph, telex, cable, wireless or
other form of recorded communication. Notice of any such meeting need not be
given to any member of the Audit Committee, however, if waived by him or her in
writing (or by telegraph, telex, cable, wireless or other form of recorded
communication), or if he or she shall be present at such meeting. At all
meetings of the Audit Committee, 50% or more of the members of the Audit
Committee then in office immediately before the meeting begins shall constitute
a quorum for the transaction of business. The meeting may be convened at a
location selected by the Audit Committee members, or by way of conference call
or either immediately before or immediately after the quarterly meeting of the
Board of Directors. The Chairman of the Audit Committee shall be responsible
for conducting the meetings and the Audit Committee members shall have sole
discretion to formulate the agenda and select attendees for the meetings. The
Audit Committee shall report to the full Board of Directors in a timely fashion
on its activities and findings and put forward any recommendations or comments.
Prior to each Audit Committee meeting and no less than on a quarterly
basis, at least one member of the Audit Committee shall be responsible for
meeting with at least one member from senior management and the independent
auditors either in person or by telephone to discuss the Company's financial
statements to be filed with Securities and Exchange Commission for the most
recent calendar quarter and fiscal year to date period. This meeting will be
for the primary purpose of reviewing any significant accounting issue that may
have arisen in the preparation of the financial statements, including but not
limited to accounting estimates, financial disclosure, accounting principles and
disagreements (if any) with the independent auditors.
The Audit Committee will rotate the member responsible for conducting such
meetings on a quarterly basis so that each member has the opportunity to
directly participate in these meetings. The Audit Committee member attending
this meeting shall be responsible for reporting his/her findings to the full
Audit Committee at the ensuing Audit Committee meeting. Nothing contained
herein shall limit the number of Audit Committee members who may attend review
meetings with senior management and the independent auditors.
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee shall:
1. Review and periodically reassess this Charter at least annually, and
recommend any proposed changes to the Board of Directors for approval.
2. Recommend to the Board of Directors the independent auditors to be
selected to audit the books and records of the Company. The
independent auditors' ultimate accountability is to the Board of
Directors and the Audit Committee.
3. Obtain a formal written statement delineating all relationships
between the independent auditors and the Company, consistent with
Independence Standards Board Standard No. 1, discuss with the
independent auditors any disclosed relationships or services that may
impact the objectivity and independence of the independent auditors,
and, if so determined by the Audit Committee, recommend that the Board
of Directors take appropriate action to oversee the independence of
the independent auditors.
4. Review information received from the independent auditors regarding
the scope of the audit and the audit procedures to be used in the
course of the current year's audit. At the conclusion of the audit,
discuss with the independent auditors the Company's annual financial
statements and the independent auditors' report on the financial
statements. Inquire of the independent auditors about the
appropriateness of the significant accounting estimates, financial
disclosures and accounting principles of the Company.
5. Discuss with the independent auditors and management disagreements, if
any, that arose during the course of the audit and preparation of the
financial statements. Review and discuss with management and the
independent auditors any significant findings or recommendations made
by the independent auditors during the course of the audit and
management response to these findings. Inquire of the independent
auditors if any changes were made to the initial scope and plan of the
audit and reasons for these changes.
6. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
7. Evaluate together with the Board of Directors the performance of the
independent auditors and, if so determined by the Audit Committee,
recommend that the Board of Directors replace the independent
auditors.
8. Perform any other activities, on an as needed basis, to allow the
Audit Committee to perform its duties under this charter and fulfill
its obligation to the Board of Directors.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditors. Nor is
it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditors or to
assure compliance with laws and regulations.
PROXY CARD
INTEGRAL SYSTEMS, INC.
5000 Philadelphia Way
Lanham, Maryland 20706-4417
The undersigned hereby appoints Elaine Parfitt and Albert Alderete, or
either of them, as proxies with full powers of substitution, to vote all shares
of the Common Stock of Integral Systems, Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on April 25, 2001 (the "Annual Meeting") and at any
adjournment thereof, upon the items described in the Proxy Statement. The
undersigned acknowledges receipt of notice of the meeting and the Proxy
Statement.
A. PROPOSAL BY THE COMPANY FOR THE ELECTION OF DIRECTORS (PROPOSAL NO. 1)
[_] FOR all nominees listed below (except as [_] WITHHOLD AUTHORITY for
marked to the contrary below) all nominees listed below
Nominees: Steven R. Chamberlain, Thomas L. Gough, Dominic A. Laiti, R. Doss
McComas, Bonnie K. Wachtel and John R. Murphy.
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
PRINT THE NAME(S) OF SUCH NOMINEE(S):___________________________________________
B. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
FOR AGAINST ABSTAIN
[_] [_] [_]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE. YOU MAY ALSO RETURN A COPY OF THIS PROXY CARD TO THE COMPANY BY
FACSIMILE, BUT YOU MUST ALSO RETURN THE EXECUTED PROXY CARD IN THE ENCLOSED
ENVELOPE. THE COMPANY'S FACSIMILE NUMBER IS 301-731-9606.
This Proxy, when properly executed, will be voted as directed herein. If no
instructions are given, the shares represented by this proxy will be voted "FOR"
all of the nominees and proposal No. 1 and in the discretion of the proxy
holders as to other Business.
Please date and sign this proxy exactly as your name appears hereon.
______________________________ _____________________________________________
Number of Shares Print Name
______________________________ _____________________________________________
Date Signature of Owner
_____________________________________________
Additional Signature of Joint Owner (if any)
If stock is jointly held, each joint
owner should sign. When signing as
attorney-in-fact, executor,
administrator, trustee, guardian,
corporate officer or partner, please
give full title.