Document:

Executive Stock Option Agreement

 Exhibit 10.32 
  
 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 Daou Systems, Inc. 
  
 EXECUTIVE STOCK OPTION AGREEMENT 
 (Non-Statutory) 
  
 This Executive Stock Option Agreement is made and entered as of the 10th day of February, 2003. This option is being issued outside of the 1996 Stock
Option Plan (the “Plan”) of Daou Systems, Inc., a Delaware corporation (the “Corporation”), however, any terms not defined in this Agreement will have the meanings ascribed to such terms in the Plan. The Committee
administering the Plan has selected Daniel J. Malcolm (the “Optionee”) to receive the following grant of a non-statutory stock option (“Stock Option”) to purchase shares of the common stock of the Corporation on the
terms and conditions set forth below to which Optionee accepts and agrees: 
  
 1.
Stock Option Granted: 
  

	 Number of Shares Subject to Option
	  	100,000
	 Date of Grant
	  	February 10, 2003
	 Exercise Price Per Share
	  	$0.28
	 Expiration Date
	  	February 10, 2013

  
 2. The Stock Option is granted to
purchase up to the number of shares of authorized but unissued common stock of the Corporation specified in Section 1 (the “Shares”). The Stock Option will expire, and all rights to exercise it will terminate on the earliest of: (a) the
date provided below in Sections 5 and 6, and (b) the Expiration Date. The number of shares subject to the Stock Option granted pursuant to this Agreement will be adjusted as provided in the Plan. This Stock Option is intended by the Corporation and
the Optionee to be a Non-Statutory Stock Option and does not qualify for any special tax benefits to the Optionee. 
  
 3. Except as otherwise set forth herein, the Stock Option will be exercisable in all respects in accordance with the terms of the Plan as they relate to Non-Statutory
Stock Option which are incorporated herein by this reference. Optionee acknowledges having received and read a copy of the Plan. 
  
 4. Optionee will have the right to exercise the Stock Option in accordance with the following schedule: 
  
 (a) 100,000 Shares 
  
 (i) The Shares subject to the Stock Option will vest in thirty-six equal increments on the monthly anniversary of the date of grant through February 10,
2006. 
  
 (ii) If the Company enters into a binding agreement
during the time that Optionee is employed by the Company that results in a change in control (as defined in the following sentence), then 100% of the Shares will vest. For purposes of this Option Agreement, “change in control” means that:

  

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 (1) any individual, partnership, firm, corporation, association, trust, unincorporated organization or
other entity or person, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is or becomes the “beneficial owner” (as defined in Rule
13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Corporation representing fifty percent (50%) or more of the combined voting power of the Corporation’s then outstanding securities
entitled to vote in the election of directors of the Corporation; or 
  
 (2) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Corporation (“Transaction”), in each case, with respect to which the stockholders of the Corporation immediately prior to such
Transaction do not, immediately after the Transaction, own more than fifty percent (50%) of the combined voting power of the Corporation or other corporation resulting from such Transaction; or 
  
 (3) all or substantially all of the assets of the Corporation are sold,
liquidated or distributed. 
  
 (iii) If at any time prior to July
24, 2004, Optionee’s employment with the corporation is terminated by the corporation without “Cause” or by Optionee for Good Reason as those terms are defined in the Employment Agreement, then Optionee may exercise the Stock Option
as to one hundred percent (100%) of the remaining 100,000 Shares which are not otherwise vested on the date of the termination. 
  
 (iv) In the event Optionee’s employment is terminated for any reason other than as defined in Section 4(a)(iii) of this Agreement, any Stock Option
described in Section 4(a) of this Option Agreement not vested as of the date of the termination will not vest. Any Stock Option described in this Section 4(a) of this Agreement that is vested as of the date of such termination may be exercised in
accordance with Section 6 of this Agreement. 
  
 (b) The right to
exercise the Stock Option will be cumulative. Optionee may buy all, or from time to time any part, of the maximum number of shares which are exercisable under the Stock Option, but in no case may Optionee exercise the Stock Option with regard to a
fraction of a share, or for any share for which the Stock Option is not exercisable. 
  
 5. The Stock Option will lapse and becomes unexercisable in full on the earliest of the following events: 
  
 (a) the first anniversary of the Optionee’s death, as provided below in Section 6; 
  
 (b) the first anniversary of the date the Optionee ceases to be an Employee due to total and permanent disability, as
provided below in Section 6; 
  
 (c) the date otherwise provided
below in Section 6, unless the Committee otherwise extends such period before the applicable expiration date; 
  
 (d) the date provided in Section 9 of the Plan for a transaction described in such Section; or 
  
 (e) the date the Optionee files or has filed against him a petition in
bankruptcy. 
  
 6. If Optionee ceases to be an Employee for any
reason other than that described in this Section 6, Optionee will have the right, subject to the other provisions of this Agreement, to exercise the Stock Option for the term of the Option but only to the extent that on the date of termination the
Optionee’s right to exercise such Option had vested, and at the end of such period the Stock Option will expire, and all rights to exercise it will terminate. 
  
 (a) For purposes of this Section 6, the employment relationship will be treated as continuing intact while the Optionee is
an active employee of the Corporation or any Affiliate, or is on military leave, sick leave, or other bona fide leave of absence to be determined in the sole discretion of the Committee. 
  

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 (b) If Optionee dies while an Employee, or after ceasing to be an Employee but during the period while he
could have exercised an Option under the preceding sub-Sections, the Option granted to the Optionee may be exercised, to the extent it has vested at the time of death and subject to the Plan, at any time within twelve (12) months after the
Optionee’s death, by the executors or administrators of his estate or by any person or persons who acquire the Option by will or the laws of descent and distribution, but not beyond the otherwise applicable term of the Option. 
  
 (c) If Optionee ceases to be an Employee due to becoming totally and
permanently disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, the Stock Option may be exercised to the extent it has vested at the time of cessation and, subject to the Plan, at any time within twelve (12) months
after the Optionee’s termination of employment, but not beyond the otherwise applicable term of the Stock Option. 
  
 7. The Optionee agrees to comply with all laws, rules, and regulations applicable to the grant and exercise of the Stock Option and the sale or other
disposition of the common stock of the Corporation received pursuant to the exercise of such Stock Option. 
  
 8. The Corporation will not be under any obligation to issue any Shares upon the exercise of this Stock Option unless and until the Corporation has
determined that: 
  
 (a) it and Optionee have taken all actions
required to register such Shares under the Securities Act, or to perfect an exemption from the registration requirements thereof; 
  
 (b) any applicable listing requirement of any stock exchange on which such Shares are listed has been satisfied; and 
  
 (c) all other applicable provisions of state and federal law have been
satisfied. 
  
 9. Optionee acknowledges that the tax effect of the
exercise of this Stock Option and the sale of the underlying Shares is complicated, that Optionee has consulted with his own professional advisor which respect to all tax matters relating to this Stock Option and the exercise and sale of the Shares
and has not relied on any assurances or representations of the Corporation as to such matters. 
  
 10. The Shares have not been registered and, therefore, they may not be sold, pledged, hypothecated, or otherwise transferred unless they are registered under the Securities Act of 1933, as amended, and applicable
state securities laws or an exemption from such registration is available. 
  
 11. A legend will be placed on any certificate evidencing the Shares in substantially the following form: 
  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE STATE SECURITIES LAWS OF ANY
STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED FOR SUCH TRANSFER AND/OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND/OR
APPLICABLE STATE SECURITIES LAWS AND/OR ANY RULE OR REGULATION PROMULGATED THEREUNDER. 
  
 IN WITNESS WHEREOF, each of the parties hereto has executed this Stock Option Agreement, in the case of the Corporation by its duly authorized officer, as of the date and year written above. 
  

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	 OPTIONEE
	 	 	 	 DAOU SYSTEMS, INC.,
 a Delaware corporation

					
	 	 	 /s/    DANIEL J. MALCOLM

	 	 	 	By:	 	 /s/    NEIL R. CASSIDY

	 	 	Daniel J. Malcolm	 	 	 	 	 	Neil R. Cassidy 
	 	 	 	 	 	 	 Its:
	 	Chief Financial Officer and EVP

  
  
  
  
  
  

 4Amendment No. 1 to Separation Agreement & General Release

 Exhibit 10.33 
  
 AMENDMENT NO. 1 TO 
  
 SEPARATION AGREEMENT AND GENERAL RELEASE 
  
 This Amendment No. 1 (this “Amendment”) to the Separation Agreement and General Release documents an agreement by and between Daou Systems,
Inc., a Delaware corporation (the “Company”), and Neil R. Cassidy (“Executive”) that became effective March 31, 2003. 
  
 WHEREAS, the Company and Executive have entered into that certain Separation Agreement and General Release (the “Separation Agreement and General
Release”) by and between the Company and Executive dated December 31, 2002; and 
  
 WHEREAS, the Company determined that it is in the best interest of the Company, and the Executive has agreed, to extend the date that Executive will resign his position as the Chief Financial Officer of the Company;
and 
  
 WHEREAS, on March 31, 2003, the Company and the Executive
agreed to amend the Separation Agreement and Release in the manner set forth in this Amendment; and 
  
 WHEREAS, the members of the Company’s Board of Directors, and the Compensation Committee of the Company’s Board of Directors, have heretofore
approved the execution and delivery of this Amendment; 
  
 NOW
THEREFORE, the parties hereto, in consideration of the promises and mutual covenants and agreements contained herein, and other good and valuable consideration, voluntarily and knowingly, and intending to be legally bound hereby, covenant and agree
as follows: 
  
 1. Date of Resignation. Recital A of the
Separation Agreement and General Release shall be amended and restated in its entirety to read as follows: 
  
 “Cassidy will resign his position as Chief Financial Officer of the Company effective June 30. 2003 (the “Separation Date”). As of
the Separation Date, Cassidy’s rights and obligations as an employee will cease, except as set forth in this Agreement.” 
  
 2. Bonus Payment. Section 1.2 of the Separation Agreement and General Release is hereby amended by deleting the language “After execution of
this Agreement,” and by inserting in place of that language “After the Separation Date,”. In addition to the Severance Payment specified in Section 1.2 of the Separation Agreement and General Release, Cassidy shall receive a bonus
payment in the amount of $25,000 to be paid on June 15, 2003. 
  
 3. Section 1.5 of the Separation Agreement and General Release shall be amended and restated in its entirety to read as follows: 
  
 “Stock Options and Restricted Share. On the Separation Date, all unexercised stock options previously granted to Cassidy which have not vested
as of the Separation Date and which are set forth on Exhibit A, will not expire but shall continue in effect and shall expire on the date set forth in the related stock option agreement; and any unvested stock options among the Options granted to
Cassidy on May 17, 2002 immediately will vest and become exercisable on the Separation Date. Executive purchased 150,000 restricted shares of Executive’s common stock, par value $.001 per share (the “Shares”) in accordance with
the terms of the Restricted Stock Agreement (the “Purchase Agreement”). Upon execution of this Agreement, Cassidy shall acquire a vested interest in and the Company’s Right of Repurchase shall lapse with respect to all of the
Shares. In all other respects, the Purchase Agreement remains in full force and effect.” 
  

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 4. Successors and Assigns. Executive and the Company understand and agree that this Agreement
shall bind and benefit their heirs, employees, parent corporation, subsidiaries, affiliates, controlled corporations, sister corporations, agents, representatives, predecessors, successors, and assigns. The Company’s successors shall include
(without limitation) any person, corporation or other entity who or which enters into a Corporate Transaction with the Company (hereinafter “Company Successor”). For purposes of this Agreement, a “Corporate Transaction” is
defined to mean a transaction in which any person, corporation or other entity acquires, directly or indirectly, all or substantially all of the stock, business or assets of the Company, whether by way of merger, consolidation, sale, transfer or
otherwise. 
  
 5. Entire Agreement. This Amendment and the
Separation Agreement and General Release set forth the entire understanding among the parties hereto, and shall supercede all prior employment, severance and change of control agreements and any related agreements that Executive has with the Company
or any subsidiary, or any predecessor company. 
  
 6. No Other
Changes. Upon signing, this Amendment is incorporated into the Separation Agreement and General Release by reference herein, and, except as expressly modified hereby, all other terms of the Separation Agreement and General Release remain the
same unless agreed to in writing. 
  
 7. Severability. In
the event that any provision or portion of this Amendment or the Separation Agreement and General Release shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Amendment and the
Separation Agreement and General Release shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 
  
 8. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Amendment or the Separation
Agreement and General Release to the extent necessary to the intended preservation of such rights and obligations. 
  
 IN WITNESS WHEREOF, the Company and Executive have executed this Amendment on and as of the date set forth below. 
  

	 DAOU SYSTEMS, INC. 
	 	 	 	 	 	 
				
	 /s/    DANIEL J.
MALCOLM        

	 	 	 	Date	 	 June 25, 2003

	 Daniel J. Malcolm,
 Chief Executive Officer
	 	 	 	 	 	 

  

	 EXECUTIVE
	 	 	 	 	 	 
				
	 /s/    NEIL R.
CASSIDY        

	 	 	 	Date	 	 June 25, 2003

	Neil R. Cassidy	 	 	 	 	 	 

  

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