EXHIBIT B
INTEGRAL SYSTEMS, INC.
1988 STOCK OPTION PLAN
As Amended and Restated
Effective as of May 8, 1998
ARTICLE I
PURPOSE OF PLAN
1.1 PURPOSE OF PLAN. The purpose of the Stock Option Plan is to serve
as a performance incentive and to encourage the ownership of Common
Stock by officers, directors, other employees and non-employee
consultants of the Company so that the person to whom the option is
granted may acquire a proprietary interest in the success of the
Company, and to encourage such person to remain in the employ of the
Company. This Plan shall consist of grants of incentive stock options,
which are intended to qualify under section 422 of the Internal Revenue
Code of 1986, as amended, and of options which are intended not to so
qualify.
ARTICLE II
DEFINITIONS
2.1 AWARD means Options granted hereunder.
2.2 BOARD means the Board of Directors of Integral Systems, Inc.
2.3 CODE means the Internal Revenue Code of 1986, as amended.
Reference in this Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and any
regulations promulgated thereunder.
2.4 COMMITTEE means, as designated by the Board, either the full Board
of Directors or a committee of the Board which shall consist solely of
two or more members of the Board who are "Non-Employee Directors" within
the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended, and "Outside
Directors" within the meaning of Code Section 162(m).
2.5 COMPANY means Integral Systems, Inc. or any successors as described
in Article XI and any subsidiary of the Company of which the Company
owns, directly or indirectly, greater than fifty percent (50%) of its
voting capital stock.
2.6 DATE OF DISABILITY means the date on which a Participant is
classified Disabled.
2.7 DISABILITY or DISABLED means the classification of a Participant as
"Disabled" pursuant to a long-term disability plan of the Company, if
any, or successor to such plan (or, if there is no such plan, as
determined by the Committee), provided that Participant meets the
requirements of section 22(e)(3) of the Code.
2.8 EFFECTIVE DATE means May 8, 1998.
2.9 ELIGIBLE EMPLOYEE means any person employed by the Company who
satisfies all of the requirements of Article VI.
2.10 ELIGIBLE NON-EMPLOYEE means any person performing bona fide
services for the Company in a capacity other than as an employee, such
as a non-employee director or consultant.
2.11 FAIR MARKET VALUE means the fair market value of the Stock, as
determined by the Committee; provided; however, that (i) if the Stock is
admitted to trading on a national securities exchange on the date the
Option is granted, Fair Market Value shall not be less than the last
sale price reported for the Stock on such exchange on such date or, if
no sales are reported on the date the Option is granted, on the date
next preceding such date on which a sale was reported, or (ii) if the
Stock is not admitted to trading on a national securities exchange on
the date the Option is granted but the Stock is admitted to quotation on
the National Association of Securities Dealers Automated Quotation
system on the date the Option is granted, Fair Market Value shall not be
less than the average of the highest bid and lowest asked prices of the
stock on such system on such date.
2.12 INCENTIVE STOCK OPTION means an Option which is an "incentive
stock option" within the meaning of section 422 of the Code and which is
granted under Article VII.
2.13 INSIDER means an "officer" or "director" of the Company within the
meaning of Section 16 of the Securities Exchange Act of 1934, as
amended.
2.14 NON-QUALIFIED STOCK OPTION means an Option which is not an
Incentive Stock Option and which is granted under Article VII.
2.15 OPTION means either a Non-Qualified Stock Option or an Incentive
Stock Option granted under Article VII.
2.16 PARTICIPANT means an Eligible Employee or Eligible Non-Employee
who has been granted an Award under this Plan.
2.17 PLAN means the Integral Systems, Inc. 1988 Stock Option Plan, as
amended and restated as set forth herein.
2.18 RETIREMENT means the normal retirement by an employee from the
Company under a pension or retirement plan maintained by the Company.
2.19 RETIREMENT DATE is the employee's date of Retirement from the
Company.
2.20 STOCK means Common Stock of Integral Systems, Inc., par value $.01
per share.
2.21 STOCK OPTION AGREEMENT means an agreement with respect to Options,
as described in Article VIII.
2.22 TERMINATION means resignation or discharge from employment with
the Company, except in the event of death, Disability or Retirement.
2.23 VESTED OPTION means, at any date, an Option which a Participant is
then entitled to exercise pursuant to the terms of the Plan and an
applicable Stock Option Agreement.
ARTICLE III
EFFECTIVE DATE AND DURATION
3.1 EFFECTIVE DATE. Subject to the approval by a majority of the
holders of Stock voted, in person or by proxy, at the 1998 Annual
Meeting of Stockholders of the Company, this Plan shall be effective as
of the Effective Date.
3.2 PERIOD FOR GRANTS OF AWARDS. Awards may be made as provided herein
for a period of ten (10) years after the Effective Date.
3.3 TERMINATION. This Plan may be terminated as provided in Article
XII, but shall continue in effect until all matters relating to the
payment of the Awards and the administration of the Plan have been
settled.
ARTICLE IV
ADMINISTRATION
4.1 ADMINISTRATION. Except where this Plan expressly reserves
administrative or other powers to the Company or the Board, this Plan
shall be administered by the Committee. All questions or interpretation
and application of this Plan, or of the terms and conditions pursuant to
which Awards are granted, exercised or forfeited under the provisions
hereof, shall be subject to the determination of the Committee. Such
determination shall be final and binding upon all parties affected
thereby.
It is contemplated that Awards granted hereunder will be recommended by
the management of the Company or the Board to the Committee, and that
the Committee will determine whether to accept such recommendations.
ARTICLE V
GRANT OF AWARDS AND LIMITATION OF
NUMBER OF SHARES OF STOCK AWARDED
5.1 GRANTS OF AWARDS; NUMBER OF SHARES. The Committee may, from time
to time, grant Awards of Options to one or more
Eligible Employees or Eligible Non-Employees in its discretion;
provided, however, that:
(i) subject to any adjustment pursuant to Article X or Article XI, the
aggregate number of shares of Stock subject to Awards under this Plan
may not exceed Nine Hundred Thousand (900,000) shares of Stock;
(ii) to the extent that an Award lapses or the rights of the
Participant to whom it was granted terminate, or to the extent that the
Award is canceled by mutual agreement of the Committee and the
Participant (which cancellation opportunities may be offered by the
Committee to Participants from time to time), any shares of Stock
subject to such Award shall again be available for the grant of an Award
hereunder;
(iii) shares of Stock ceasing to be subject to an Award because of the
exercise of an Option shall no longer be available for the grant of an
Award hereunder; and
(iv) Eligible Non-Employees shall not be entitled to receive Awards of
Incentive Stock Options.
In determining the size of Awards, the Committee may take into account
recommendations by the Board or the Company's management, a
Participant's responsibility level, performance, potential, and cash
compensation level, the Fair Market value of the Stock at the time of
Awards and such other considerations as it deems appropriate.
The maximum number of shares of Stock subject to Options that may be
granted during any one calendar year to any one individual shall be
limited to 50,000. To the extent required by Code Section 162(m), and
so long as Section 162(m) of the Code is applicable to persons eligible
to participate in the Plan, shares of Stock subject to the foregoing
limit with respect to which the related Option is terminated,
surrendered or canceled shall not again be available for grant to the
respective grantee under this limit.
ARTICLE VI
ELIGIBILITY
6.1 ELIGIBLE INDIVIDUALS. All Eligible Employees and Eligible Non-
Employees shall be eligible to receive Awards hereunder. Subject to the
provisions of this Plan, the Committee shall from time to time select
from such Eligible Employees and Eligible Non-Employees those to whom
Awards shall be granted and determined the size of the Awards. A
Participant may hold more than one Option at any one time. No person
shall have any right to be granted an Award under this Plan, as all
Awards granted hereunder are granted in the sole and absolute discretion
of the Committee, as provided herein.
ARTICLE VII
OPTIONS
7.1 GRANTS OF OPTIONS. Awards shall be granted to Participants in the
form of Options to purchase Stock.
7.2 TYPE OF OPTIONS. The Committee may choose to grant a Participant
who is an Eligible Employee either Incentive Stock Options or Non-
Qualified Stock Options or both, subject to the limitations contained
herein. The Committee shall grant to a Participant who is an Eligible
Non-Employee only Non-Qualified Stock Options, subject to the
limitations contained herein.
7.3 INCENTIVE STOCK OPTION DOLLAR LIMITATIONS. If the Committee grants
Incentive Stock Options, the aggregate Fair Market Value (determined as
of the date the Option is granted) of any such Options plus any
incentive stock options granted under any other plans of the Company
which shall be first exercisable by any one Participant during any one
calendar year shall not exceed $100,000, or such other dollar limitation
as may be provided in the Code.
ARTICLE VIII
TERMS AND CONDITIONS OF STOCK OPTION AGREEMENTS
8.1 STOCK OPTION AGREEMENTS. Awards shall be evidenced by Stock Option
Agreements in such form as the Committee shall, from time to time,
approve. Such Stock Option Agreements, which need not be identical,
shall comply with and be subject to the following terms and conditions:
(a) Medium of Payment. Upon exercise of the Option, the Option price
shall be payable either (i) in United States dollars, in cash, or by
certified check, bank draft or money order payable to the order of the
Company, or (ii) in the discretion of the Committee, through the
delivery of shares of Stock (including, for Options granted after the
date of this amendment and restatement, Stock that would otherwise be
issued upon exercise of the Option), with the Fair Market Value equal to
the total Option price, or (iii) by a combination of the methods
described in (i) and (ii).
In addition to the above, with respect to Options granted after the date
of this amendment and restatement, the Committee, subject to such
limitations as it may determine, may authorize payment of the exercise
price, in whole or in part, by delivery of a properly executed exercise
notice, together with irrevocable instructions to: (i) a brokerage firm
designated by the Company to deliver promptly to the Company the
aggregate amount of sale or loan proceeds to pay the exercise price and
any withholding tax obligations that may arise in connection with the
exercise, and (ii) the Company to deliver the certificates for such
purchased shares directly to such brokerage firm.
(b) Number of Shares. The Stock Option Agreement shall state the total
number of shares to which it pertains.
(c) Option Price. With respect to Non-Qualified Stock Options, the
option price shall be an amount determined by the Committee, which
amount may be less than, equal to or greater than the Fair Market Value
of such Shares on the date of the granting of the Option. With respect
to Incentive Stock Options, the option price shall be not less than the
Fair Market Value of such shares on the date of the granting
of the Option (or one hundred ten percent (110%) of such amount if the
Option is granted to an individual owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock
of Integral Systems, Inc. or any subsidiary, within the meaning of Code
Section 424(f), taking into account the attribution rules of Code
Section 424(d)).
(d) Term of Options. Each Non-Qualified Option and Incentive Stock
Option granted under this Plan shall expire not more than ten (10) years
from the date the Option is granted, except that each Incentive Stock
Option granted under the Plan to an individual owning stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of Integral Systems, Inc. or any subsidiary, within the
meaning of Code Section 424(f), taking into account the attribution
rules of Code Section 424(d), shall expire not more than five (5) years
from the date the Option is granted.
(e) Date of Exercise. Subject to subsection (d) of this Section, an
Option which becomes a Vested Option may be exercised in whole or in
part at any time thereafter. Options which are awarded hereunder shall
become exercisable as Vested Options, as follows:
(i) The aggregate number of shares of Stock subject to any Award shall
be divided into three installments (equally or unequally at the
discretion of the Committee), as specified in the Agreement. The first
installment shall become Vested Options one year from the date of such
Award, the second installment shall become Vested Options two years from
the date of such Award and the third installment shall become Vested
Options three years from the date of such Award. Any other vesting
schedule may be substituted for the above, as specified in the
Agreement, at the Committee's discretion.
(ii) Except as otherwise provided hereunder, the Committee may in its
discretion accelerate the time at which an Option granted hereunder may
be exercised.
(f) Forfeiture or Exercise of Option. If a Participant ceases
employment with the Company, all Options held by him
or her which are not Vested Options shall terminate. If a Participant
terminates his or her employment or other service relationship with the
Company prior to the exercise of the Participant's Non-Qualified Stock
Options, such Options shall be forfeited (or exercisable after
termination only as provided in the applicable Stock Option Agreement).
If a Participant terminates employment with the Company prior to
exercise of the Participant's Vested Options which are Incentive Stock
Options, such Vested Options shall be forfeited, or be exercised, as
follows:
(i) Termination and Retirement. In the event of a Participant's
Termination or Retirement, the Participant's Vested Options shall be
forfeited within three (3) months of the Participant's Termination or
Retirement.
(ii) Disability. Upon the Disability of a Participant, the
Participant's Vested Options shall be exercisable within twelve (12)
months (or such shorter period as the Code or the terms of the
particular Stock Option Agreement may require) of the Participant's Date
of Disability.
(iii) Death. If the Participant dies while in the employment of the
Company or within the period of time after Termination or Retirement
during which the Participant would have been entitled to exercise his or
her Vested Option rights, the Participant's estate, personal
representative or beneficiary (as applicable) shall have the right to
exercise such Vested Options, within one (1) year from the date of the
Participant's death (or such shorter period as the Code or the terms of
the particular Stock Option Agreement may require).
(iv) Other Restrictions/Forfeiture Events. The Committee shall have
complete discretion to prescribe any other events of forfeiture and/or
conditions of exercisability of Options, as specified in the applicable
Agreement.
(g) Agreement as to Sale of Securities. If, at the time of the
exercise of any Option, in the opinion of counsel for the Company, it
is necessary or desirable, in order to comply with any applicable laws
or regulations relating to
the sale of securities, that the Participant exercising the Option shall
agree to purchase the shares that are subject to the Option for
investment only and not with any present intention to resell the same
and that the Participant will dispose of such shares only in compliance
with such laws and regulations, the Participant will, upon the request
of the Company, execute and deliver to the Company an agreement to such
effect.
(h) Required Amendments. Each Award shall be subject to any provision
necessary to assure compliance with federal and state securities laws.
(i) Limitation of Participant Rights. A Participant shall not be
deemed to be the holder of, or to have any of the rights of a holder
with respect to, any shares of Stock subject to an Option unless and
until the Option shall have been exercised pursuant to the terms
thereof, the Company shall have issued and delivered the shares to the
Participant, and the Participant's name shall have been entered as a
stockholder of record on the books of Integral Systems, Inc.
Thereafter, the Participant shall have full voting, dividend and other
ownership rights with respect to such shares of stock.
ARTICLE IX
GRANTS IN SUBSTITUTION FOR OPTIONS
GRANTED BY OTHER CORPORATION
9.1 SUBSTITUTE AWARDS. Awards may be granted under this Plan from
time to time in substitution for similar awards held by employees of
corporations who become or are about to become employees of the Company
as the result of a merger or consolidation of the employing corporation
with the Company, or the acquisition by the Company of the assets of the
employing corporation, or the acquisition by the Company of fifty
percent (50%) or more of the stock of the employing corporation causing
it to become a subsidiary of the Company. Subject to the procurement of
the approval of the stockholders of the Company as may be required for
the Plan to satisfy the requirements of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, the terms and conditions of the
substitute Awards so granted may vary from
the terms and conditions set forth in this Plan to such extent as the
Committee at the time of the grant may deem appropriate to confirm, in
whole or in part, to the provisions of the options in substitution for
which they are granted.
ARTICLE X
CHANGES IN CAPITAL STRUCTURE
10.1 CAPITAL STRUCTURE CHANGES:
(a) In the event of any change in the number of issued shares of Stock
resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend or other increase or
decrease of such shares, then appropriate adjustments shall be made by
the Committee with respect to outstanding Awards and the aggregate
number of shares of Stock which may be awarded pursuant to this Plan.
Additions to Awards issued as a result of any such change shall bear the
same restrictions and carry the same terms as the Awards to which they
relate.
(b) In the event of a change in the Stock which is limited to a change
in the designation thereof to "capital stock" or other similar
designation, or in par value to no par value, without increase or
decrease in the number of issued shares, the shares resulting from any
such change shall be deemed to be Stock within the meaning of this Plan.
ARTICLE XI
COMPANY SUCCESSORS
11.1 IN GENERAL
(a) If the Company shall be the surviving or resulting corporation in
any merger, sale of assets or sale of stock, consolidation or corporate
reorganization (including a reorganization in which the holders of Stock
receive securities of another corporation), any Award granted hereunder
shall pertain to and apply to the securities to which a holder of Stock
would have been entitled. The Committee shall make such appropriate
determinations and
adjustments as it deems necessary so as to substantially preserve the
rights and benefits, both as to number of shares and otherwise, of
Participants under this Plan.
(b) If the Company shall not be the surviving corporation in any
merger, sale of assets or sale of stock consolidation or corporate
reorganization (including a reorganization in which the holders of Stock
receive securities of another corporation) involving the Company, the
successor corporation shall issue substitute options so as to preserve
substantially the rights and benefits of the Participants under this
Plan.
ARTICLE XII
AMENDMENT OR TERMINATION OF PLAN
12.1 AMENDMENTS AND TERMINATION. The Plan shall terminate on the tenth
(10) anniversary of the Effective Date of the Plan. The Board may at
any time and from time to time otherwise alter, amend, suspend or
terminate this Plan in whole or in part; provided, however, that (i) no
such action may be taken without stockholder approval which materially
increases the benefits accruing to Participants hereunder, materially
increases the number of securities which may be issued pursuant to this
Plan (except as provided in Sections 10.1 and 11.1), materially extends
the period for granting Awards hereunder, or materially modifies the
requirements as to eligibility for participation hereunder; and (ii) no
such action may be taken, without the consent of the Participant to whom
any Award shall have been granted, which adversely affects the rights of
such Participant concerning such Award, except as such termination or
amendment of this Plan is required by statute, or rules and regulations
promulgated thereunder, or as otherwise permitted hereunder.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 NON-TRANSFERABILITY. Except by the laws of descent and
distribution, no benefit provided hereunder shall be subject to
alienation, assignment or transfer by a Participant (or by any person
entitled to such benefit pursuant to the terms of
this Plan), nor shall it be subject to attachment or other legal process
of whatever nature, and any attempted alienation, assignment, attachment
or transfer shall be void and of no effect whatsoever and, upon any such
attempt, the benefit shall terminate and be of no force or effect.
During a Participant's lifetime, Options granted to the Participant
shall be exercisable only by the Participant. Shares of Stock shall be
delivered only into the hands of the Participant entitled to receive the
same or into the hands of the Participants authorized legal
representative.
13.2 NO EMPLOYMENT RIGHT. Neither this Plan nor any action taken
hereunder shall be construed as giving any right to any individual to be
retained as an officer, employee, director or independent contractor of
the Company.
13.3 TAX WITHHOLDING. The Company shall have the right to deduct from
all Awards paid any federal, state, local or employment taxes which it
deems are required by law to be withheld with respect to such payments.
The Participant receiving Stock pursuant to the exercise of an Option
may be required to pay to the Company an amount required to be withheld
with respect to such Stock. At the request of a Participant, or as
required by law, such sums as may be required for the payment of any
estimated or accrued income tax liability may be withheld and paid over
the governmental entity entitled to receive the same.
13.4 FRACTIONAL SHARES. Any fractional shares concerning Awards shall
be eliminated at the time of payment or payout by rounding down for
fractions of less than one-half (1/2) and rounding up for fractions of
equal to or greater than one-half (1/2). No cash settlements shall be
made with respect to fractional shares eliminated by rounding.
13.5 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of Awards in Stock or otherwise shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
government agencies as may be deemed necessary or appropriate by the
Committee. If Stock awarded hereunder may in certain circumstances be
exempt from registration under the Securities Act of 1933, the Company
may restrict its transfer in such manner as it deems advisable to ensure
such exempt status. The Plan is intended
to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. Any provision inconsistent with such Rule shall be inoperative
and shall not affect the validity of the Plan. The Plan shall be
subject to any provision necessary to assure compliance with federal and
state securities laws.
13.6 INDEMNIFICATION. Each person who is or at any time serves as a
member of the Board or the Committee shall be indemnified and held
harmless by Integral Systems, Inc. against and from (i) any loss, cost,
liability or expense that may be imposed upon or reasonably incurred by
such person in connection with or resulting from any claim, action, suit
or proceeding to which such person may be a party or in which such
person may be involved by reason of any action or failure to act under
this Plan; and (ii) any and all amounts paid by such person in
satisfaction of judgment in any such action, suit or proceeding relating
to this Plan. Each person covered by this indemnification shall give
Integral Systems, Inc. an opportunity, at its own expense, to handle and
defend the same before such person undertakes to handle and defend the
same on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the charter
or by-laws of Integral Systems, Inc. as a matter of law, or otherwise,
or any power that Integral Systems, Inc. may have to indemnify such
person or hold such person harmless.
13.7 RELIANCE ON REPORTS. Each member of the Board or the Committee
shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountants of the Company, and
upon any other information furnished in connection with this Plan. In
no event shall any person who is or shall have been a member of the
Board or the Committee be liable for any determination made or other
action taken or any omission to act in reliance upon any such report or
information, or for any action taken, including the furnishing of
information, or failure to act, if in good faith.
13.8 GOVERNING LAW. All matters relating to this Plan or to Awards
granted hereunder shall be governed by the laws of the State of
Maryland, without regard to the principles of
conflict of laws thereof, except to the extent preempted by the laws of
the United States.
13.9 RELATIONSHIP TO OTHER BENEFITS. No payment under this Plan shall
be taken into account in determining any benefits under any pension,
retirement, profit sharing or group insurance plan of the Company.
13.10 EXPENSES. The expenses of implementing and administering this
Plan shall be borne by the Company.
13.11 TITLES AND HEADINGS. The titles and headings of the Articles and
Sections in this Plan are for convenience of reference only, and in the
event of any conflict, the text of this Plan, rather than such titles or
headings, shall control.
13.12 USE OF PROCEEDS. Proceeds from the sale of Stock pursuant to
Options granted under the plan shall constitute general funds of the
Company.
13.13 NON-EXCLUSIVITY OF PLAN. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company
for approval shall be construed as creating any limitations on the power
of the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.