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As filed with the Securities and Exchange Commission on February 29, 2000
Registration No.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INTEGRAL SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
________________
Maryland 52-1267968
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
5000 Philadelphia Way
Lanham, Maryland 20706-4417
(301) 731-4233
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
STEVEN R. CHAMBERLAIN
Chief Executive Officer
Integral Systems, Inc.
5000 Philadelphia Way
Lanham, Maryland 20706-4417
(301) 731-4233
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
____________________
Copies to:
JOHN L. SULLIVAN, III, ESQ.
JAMES P. DVORAK, JR., ESQ.
Venable, Baetjer and Howard, LLP
2010 Corporate Ridge, Suite 400
McLean, Virginia 22102
(703) 760-1600
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
Proposed Proposed
Maximum Maximum
Title Of Shares Amount To Be Aggregate Price Aggregate Offering Amount Of
To Be Registered Registered (1) Per Unit (2) Price (2) Registration Fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value 1,400,000 shares $40.00 $56,000,000 $14,784
$.01 per share
================================================================================================================
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, this registration statement
also covers an indeterminate number of additional shares as may be issued as
a result of adjustments by reason of any stock split, stock dividend or
similar transaction.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933. The above calculation is
based on the average of the high and low sales prices of the common stock on
the Nasdaq National Market on February 22, 2000.
The registrant hereby amends this registration statement on such date
and dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated February 29, 2000
Preliminary Prospectus
Integral Systems, Inc.
1,400,000 shares
Common Stock
___________________________________
The selling stockholders identified in this prospectus may offer and sell
from time to time up to 1,400,000 shares of our common stock. We will not
receive any proceeds from the sale of shares of common stock by the selling
stockholders. The selling stockholders have acquired the shares of common stock
offered by this prospectus in a private placement. Registering these shares of
common stock will allow the selling stockholders to publicly sell or otherwise
distribute their shares of common stock.
The selling stockholders may offer these shares of common stock in one or
more transactions on the Nasdaq National Market at various times and prices, in
negotiated transactions or otherwise. The selling stockholders and brokers
through whom the sale of the shares of common stock are made may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933. In addition, any profits realized by the selling stockholders or brokers
on the sale of the shares of common stock may be deemed to be underwriting
commissions under the Securities Act of 1933. The price at which any of the
shares of common stock may be sold and the commissions paid in connection with
any sale may vary from transaction to transaction. We will pay all costs and
expenses in connection with the registration of the shares, except for any
underwriters' discounts, brokerage fees, and transfer taxes incident to the sale
of the shares and the fees and expenses of the selling stockholder's counsel.
Our common stock currently trades on the Nasdaq National Market under the
symbol "ISYS." On February 25, 2000, the closing price of our common stock was
$45.25 per share.
The purchase of our common stock involves a high degree of risk. You should
carefully consider the risk factors beginning on page 4 of this prospectus
before purchasing any of our common stock from the selling stockholders.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
INFORMATION ABOUT INTEGRAL SYSTEMS, INC................................................ 3
RISK FACTORS........................................................................... 5
FORWARD-LOOKING STATEMENTS............................................................. 13
WHERE YOU CAN FIND MORE INFORMATION.................................................... 14
USE OF PROCEEDS........................................................................ 15
SELLING STOCKHOLDERS................................................................... 16
DESCRIPTION OF CAPITAL STOCK........................................................... 18
PLAN OF DISTRIBUTION................................................................... 19
EXPERTS................................................................................ 20
LEGAL MATTERS.......................................................................... 20
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES............................................................................ 20
</TABLE>
We have informed the selling stockholders that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, may
apply to their sales in the market. We have furnished the selling stockholders
with a copy of these rules. We have also informed the selling stockholders that
they must deliver a copy of this prospectus with any sale of their shares.
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PROSPECTUS SUMMARY
This summary outlines and highlights information contained in this
prospectus and the information incorporated in this prospectus by reference.
You should read the entire prospectus carefully, including the "Risk Factors"
section and the financial statements and related notes which are incorporated by
reference.
INFORMATION ABOUT INTEGRAL SYSTEMS, INC.
We build satellite ground systems-hardware and software to monitor and
control space vehicles. Satellite operators use our ground systems to monitor
and control satellites from Earth to ensure the health and safety of both
satellite and payload, and to process and disseminate satellite payload data.
Satellite manufacturers use our ground systems during the "integration and test"
phase of satellite assembly in order to "talk" to satellite subsystems as they
are installed and tested. Both satellite manufacturers and satellite operators
use our ground systems to simulate satellite missions on the ground in order to
test mission scenarios and to train personnel.
Since our founding in 1982, we have provided ground systems for over one hundred
different satellite missions with applications as diverse as:
. global telecommunications;
. meteorology;
. Earth resource management;
. military surveillance; and
. pure science research.
We have an established domestic and international customer base that includes
government and commercial satellite operators, spacecraft and payload
manufacturers, and aerospace systems integrators.
We have developed innovative software products that reduce the cost
and minimize the development risk associated with traditional, custom-built
ground systems. We believe that we were the first to offer a comprehensive
package of commercial-off-the-shelf software products for satellite command and
control. We leverage our software products to provide ready-to-operate
satellite control facilities that can operate multiple satellites from any
manufacturer by integrating our products with other systems. These multi-
vehicle control systems offer significant cost savings for customers that have
traditionally purchased a separate custom control center for each of their
satellites.
Most of the our sales involve a combination of the following:
. commercial-off-the-shelf software;
. satellite data processing computer and communications hardware;
. engineering services to satisfy mission-specific special
requirements; and
. integration of our products with existing systems.
Our products include:
. EPOCH 2000 Satellite Command and Control System;
. OASYS Orbit Analysis System;
. ABE Archive Browser and Extractor; and
. LEO-T Low Earth Orbiter Terminal System.
EPOCH 2000, our flagship product, is the core of our commercial-off-
the-shelf ground system. EPOCH 2000 receives, formats, displays, and archives
satellite health and safety data transmitted by a satellite, which is a process
sometimes referred to as "telemetry." EPOCH 2000 also formats and transmits
ground instructions to a satellite, which is a process sometimes referred to as
"command and control." OASYS computes:
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. high precision predictions, or an "ephemeris," of a satellite orbit
based on tracking data from EPOCH 2000;
. thruster firings required to adjust satellite orbit and attitude to
fulfill mission payload requirements, or "maneuvers;" and
. tracking station and orbital events necessary for mission scheduling.
ABE software analyzes long-term trends and trouble-shoots satellite health
and safety data from the EPOCH 2000 telemetry data archives. LEO-T is a fully
automated unmanned remote ground station which synthesizes the key components
and functions of EPOCH 2000, ABE, and OASYS. In addition, we provide services to
support requirements for specific missions for both government and commercial
customers. Most of our ground system contracts have a service component.
We have been profitable every year since incorporation and have experienced
recent growth, which reflects increased demand for our products and services.
For over 17 years, we have provided flexible, reliable, and affordable ground
systems. This has allowed us to stay ahead of our competition and perform well
in an industry traditionally dominated by much larger aerospace firms. We
believe that we have a unique combination of competitive advantages, including
the following:
. more experience with different types of satellites and operational
scenarios than any of our competitors;
. internationally recognized and proven commercial-off-the-shelf products
that were first to market and that continue to lead the competition in
the functions performed;
. ready-to-operate systems for customers requiring a comprehensive range
of products and services; and
. ability to deliver systems faster and at a lower cost than our
competition.
We were incorporated in Maryland in 1982. In connection with our initial
public offering, our common stock began trading on the Nasdaq SmallCap Market on
May 22, 1990 under the symbol "ISYS." On September 10, 1998, our common stock
began trading on the Nasdaq National Market under the same symbol. Our principal
executive offices are located at 5000 Philadelphia Way, Lanham, Maryland
20706-4417, and our telephone number is (301) 731-4233.
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RISK FACTORS
Before you invest in shares of our common stock, you should be aware that
there are various risks involved in an investment, including those described
below. We urge you to carefully consider these risk factors together with all of
the other information included in this prospectus and the information
incorporated in this prospectus by reference before you decide to invest in
shares of our common stock.
A significant portion of our revenue is derived from contracts or subcontracts
funded by the U.S. government.
The following table lists the approximate revenues, as a percentage of
Integral's total revenues, derived from contracts funded by the U.S. government
and by one particular agency of the U.S. government, the U.S. National Oceanic
and Atmospheric Administration, for fiscal years 1997, 1998 and 1999, and the
three months ended December 31, 1999.
<TABLE>
<CAPTION>
Percentage of revenues derived
Percentage of revenues derived from contracts and subcontracts
from contracts and subcontracts funded by the U.S. National Oceanic
Time Period funded by the U.S. government and Atmospheric Administration
----------- ------------------------------- -----------------------------------
<S> <C> <C>
Fiscal year 1997 67% 41%
Fiscal year 1998 65% 43%
Fiscal year 1999 65% 47%
Three months ended 59% 46%
December 31, 1999
</TABLE>
We expect that U.S. government contracts are likely to continue to account
for a significant portion of our revenues in the future. Accordingly, our
financial performance may be adversely affected by changing U.S. government
procurement practices and policies as well as declines in U.S. government
civilian and defense agency spending. The factors that could have a material
adverse effect on our ability to win new contracts with the U.S. government, or
retain existing contracts, include the following:
. budgetary constraints;
. changes in government funding levels, programs, policies, or
requirements;
. technological developments;
. the adoption of new laws or regulations; and
. general economic conditions.
In addition, some of our government contracts individually contribute a
significant percentage of our revenues. Two of our largest contracts generated
approximately 23% of our revenues for fiscal year 1999 and 24% of our revenues
for the three-month period ended December 31, 1999. This includes one contract
that generated approximately 16% of our revenues for fiscal year 1999 and 22% of
our revenues for the three-month period ending December 31, 1999. A relatively
small number of large U.S. government contracts are likely to continue to
account for a significant percentage of our revenues in the future. Termination
of any of these contracts or our inability to renew or replace these contracts
when they expire for any of the reasons identified above could have a material
adverse effect on our business, financial condition, or results of operations.
Our contracts and subcontracts that are funded by the U.S. government are
subject to termination without cause by the government.
All of our contracts and subcontracts that are funded by the U.S.
government are subject to termination for "convenience," which means termination
without cause. Should a contract be so terminated without cause, we would be
reimbursed for allowable costs incurred through the date of termination and
would be paid a proportionate amount of the stipulated profits or fees
attributable to work actually performed. Termination of any of our large
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government contracts could have a material adverse effect on our business,
financial condition, or results of operations.
Our contracts and subcontracts that are funded by the U.S. government are
subject to government regulations and audits.
Government contracts require compliance with various contract provisions
and procurement regulations. The adoption of new or modified procurement
regulations could have a material adverse effect on our business, financial
condition, or results of operations or increase the costs of competing for or
performing government contracts. Any violation of these regulations could
result in the termination of the contracts, imposition of fines and/or exclusion
from government contracting and government-approved subcontracting for some
specific time period. In addition, our contract costs and revenues are subject
to adjustment as a result of audits by the Defense Contract Audit Agency and
other government auditors. We reflect any adjustments required by the audits in
our financial statements. Although we have thus far not been required to make
any material audit adjustments, we cannot assure that adjustments will not be
required in the future. The award of government contracts also is subject to
protest by competitors, which can result in the re-opening of the bidding
process, unanticipated legal costs, or the award of a contract to a competitor.
Our contracts and subcontracts that are funded by the U.S. government are
subject to a competitive bidding process that may affect our ability to win
contract awards or renewals in the future.
Government contracts generally are awarded to us through a formal
competitive process in which we may have many competitors. Upon expiration,
government contracts may be subject, once again, to the competitive process. We
cannot assure that we will be successful in winning contract awards or renewals
in the future. Our failure to renew or replace these contracts when they expire
could have a material adverse effect on our business, financial condition, or
results of operations.
Our contracts and subcontracts with federal government agencies are subject
to competition and awarded on the basis of technical merit, personnel
qualifications, experience, and price. Our business, financial condition, and
results of operations could be materially affected by changes in procurement
policies, a reduction in funds available for the services that we provide, and
other risks generally associated with federal government contracts. New
government contract awards also are subject to protest by competitors at the
time of award that can result in the re-opening of the competition or evaluation
process or the award of a contract to a competitor. We consider bid protests to
be a customary element in the process of procuring government contracts.
Our contracts and subcontracts that are funded by the U.S. government are
subject to the budget and funding process of the U.S. government.
Many of the U.S. government programs in which we participate as a
contractor or subcontractor extend for several years but are funded only on an
annual basis. Accordingly, our contracts and subcontracts are subject to
termination, reduction, or modification in the event of changes in the
government's requirements or budgetary constraints. Additionally, when we
participate in a project as a subcontractor, we are subject to the risk that the
prime contractor may fail or be unable to perform the prime contract.
In addition to the right to terminate, government contracts are conditioned
upon the continuing availability of Congressional funding and are typically
subject to modification or termination in the event of changes in funding.
Congress usually allocates funds on a fiscal-year basis even though contract
performance may take several years. Consequently, at the outset of a major
program, the contract is usually incrementally funded, and additional funds are
normally committed to the contract by the procuring agency as funds are made
available by Congress for future fiscal years. In addition, contractors often
experience revenue uncertainties during the first quarter of the U.S.
government's fiscal year, which begins October 1, until differences between
budget requests and appropriations are resolved. To date, Congress has funded
all years of the multi-year major program contracts for which we have served as
prime contractor or subcontractor, although we cannot assure that this will be
the case in the future.
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Our commercial contracts are subject to competition and strict performance
requirements.
Although a significant portion of our revenues are generated from the sale
of our services and products in commercial markets, we cannot assure that we
will continue to compete successfully in these markets. Many of our commercial
contracts are for a fixed price. This subjects us to substantial risks relating
to unexpected cost increases and other factors outside of our control. We may
fail to anticipate technical problems, estimate costs accurately, or control
costs during performance of a fixed-price contract. Any of these failures may
reduce our profit or cause a loss under our commercial contracts. In addition,
our revenues on fixed-price contracts are recognized on a percentage-of-
completion basis. This means that we calculate a ratio of costs incurred to
costs expected to be incurred for each fixed-price job and then multiply that
same ratio by the fixed-price contract value to determine total revenue for each
fixed-price job. As a result, contract price and cost estimates on fixed-price
contracts are reviewed periodically as the work progresses, and adjustments are
reflected in income in the period when the estimates are revised. To the extent
that these adjustments result in a loss, reduction, or elimination of previously
reported profits, we would recognize a charge against current earnings, which
could be material and have a material adverse effect on our business, financial
condition, or results of operations.
In connection with certain commercial contracts, we have been required to
obtain bonds, letters of credit, and similar guarantees. We cannot assure that
we will be successful in obtaining these types of guarantees or that the
guarantees available will be affordable in the future.
We typically must agree to meet strict performance obligations and project
milestones, which we may not be able to satisfy. Under the terms of our
commercial contracts, our failure to meet these performance obligations and
milestones permits the other party to terminate the contract and, under certain
circumstances, recover liquidated damages or other penalties from us.
We may not be able to effectively manage any continued growth.
Our revenues have increased over the past five fiscal years at an average
annual rate of 35%. Continued growth could place a significant strain on our
limited personnel, management, financial controls, and other resources. Any
future expansion will require us to attract, retain, train, motivate, and manage
new employees successfully. We would also need to integrate new management and
employees into our overall operations, and continue to improve our operational,
financial, and management systems and controls and facilities. Our failure to
manage any expansion effectively could have a material adverse effect on our
business, financial condition, or results of operations.
Intense competition in the satellite ground system industry could harm our
financial performance.
We experience significant competition. We believe that we are one of four
companies in the United States which derive the major portion of their revenue
from the development of satellite ground systems. In addition to these
companies, approximately one dozen large aerospace/defense contractors have
developed satellite control systems either in-house as primary contractors or
through subcontractors. As a result, some of our competitors are also current
or potential customers. Our competitors include the following:
. Lockheed Martin Corporation;
. Hughes Space Company;
. Loral Space & Communications Ltd.;
. Orbital Sciences Corporation;
. AlliedSignal;
. Computer Sciences Corporation;
. Alcatel Espace;
. Matra Marconi Space; and
. Aerospatiale.
Many of our competitors are significantly larger and have greater financial
resources than us. Some of these competitors are divisions or subsidiaries of
large, diversified companies that have access to the financial
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resources of their parent companies. We cannot assure that we will be able to
compete effectively with these companies or maintain them as customers while
competing with them on other projects. In addition, several smaller companies
have specialized capabilities in similar areas. Our products also face
competition from certain off-the-shelf products developed by the government for
satellite command and control. We cannot predict how our competitive position
may be affected by changing economic or competitive conditions, customer
requirements, or technological developments. We principally obtain contracts and
subcontracts through competitive procurements offered by the U.S. government or
commercial enterprises. We cannot assure that we will be able to compete
successfully.
We are dependent on the satellite industry for most of our revenues.
Currently, most of our revenues are generated from products and services
related to satellite applications. Should the satellite industry take a
substantial downturn and the number of satellite deployed be materially reduced,
our new business opportunities would be limited significantly.
We are subject to risks associated with our strategy of acquiring other
companies.
We intend to look for complementary businesses to acquire so that we can
strengthen and expand our core business. However, we may not be able to find
any attractive candidates or we may find that the acquisition terms proposed by
potential acquisition candidates are not favorable to us. In addition, we may
compete with other companies for these acquisition candidates, which may make an
acquisition more expensive for us. Similarly, instability in the U.S.
securities markets and volatility in our stock price may make acquisitions with
our stock more expensive. In February 2000, we completed a private placement in
which we sold an aggregate of 1,400,000 shares of our common stock to the
selling stockholders. See "Selling Stockholders." If we are unable to identify
and acquire any suitable candidates, we may not be able to find alternative uses
for the proceeds of the private placement that improve our business, financial
condition, or results of operations to the extent that an acquisition could.
Accordingly, our acquisition strategy may not improve our overall business,
financial condition, and results of operations, and could weaken them.
If we are able to identify and acquire one or more businesses, the
integration of the acquired business or businesses may be costly and may result
in a decrease in our revenues or a decrease in the value of our common stock for
the following reasons, among others:
. we may not adequately assess the risks inherent in a particular
acquisition candidate or correctly assess the candidate's potential
contribution to our financial performance;
. we may need to divert more management resources to integration than we
planned, which may adversely affect our ability to pursue other more
profitable activities;
. the difficulties of integration may be increased by the necessity of
coordinating geographically separated organizations, integrating
personnel with disparate business backgrounds and combining different
corporate cultures;
. we may not eliminate as many redundant costs as we anticipated in
selecting our acquisition candidates; and
. an acquisition candidate may have liabilities or adverse operating
issues that we failed to discover through our diligence prior to the
acquisition.
Consequently, any acquisition by us may not improve our business, financial
condition, and results of operations in either the short-term or long-term.
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We may be exposed to product liability or related claims with respect to our
products.
Our products are mission-critical parts of sophisticated and extremely
expensive satellite systems. Should a satellite mission fail, or should the
system's service become unavailable, due to a failure or malfunction in the
ground system, we could be sued for product liability or related claims. Any
product liability or related claim could have a material adverse effect on our
business, financial condition, or results of operations. We have found obtaining
insurance to cover product liability claims to be impractical.
Our products may become obsolete due to rapid technological change in the
satellite industry.
Any of our products could become obsolete at any time due to rapid
technological changes in the satellite industry. We may not be able to update
our products quickly enough to remain competitive. The rapid pace of
technological change in our industry exposes us to risk of loss due to the
development of superior technologies by our competitors. We are also dependent
upon technologies developed by third parties for integrating our ground systems
with a variety of satellite systems. As land-based telecommunications services
expand, demand for certain types of satellite-based services may be reduced. New
technology used by our competitors could render satellite-based services less
competitive by satisfying consumer demand in alternative ways or through the use
of telecommunications standards that are incompatible with our products. In
addition, our success depends on our ability to introduce innovative products
and services on a cost-effective and timely basis.
Our business is subject to risks associated with international transactions.
In addition to having contracts with the U.S. Government and other U.S.
commercial organizations, the Company also has contracts with international
organizations. For fiscal year 1999 and the three months ended December 31,
1999, approximately 6% and 15%, respectively, of the Company's revenues were
derived from international organizations. Operations in numerous countries
outside the United States carry substantial managerial, operational, legal, and
political uncertainties. These operations are subject to changes in government
regulations and telecommunications standards, tariffs or taxes, and other trade
barriers. In addition, our agreements relating to foreign operations may be
enforceable only in foreign jurisdictions so that it may be difficult for us to
enforce our rights. We do not currently have any contracts that are subject to
currency fluctuations in foreign markets. However, there can be no assurance
that we will not enter into these types of contracts in the future. As a
result, the limited availability of U.S. currency in certain local markets could
prevent a contracting party from making payments in U.S. dollars or exchange
rate fluctuations could adversely affect our revenues.
Various agencies and departments of the U.S. government regulate our
ability to pursue business opportunities outside the United States. Exports of
space-related products, services, and technical information require licenses
granted by the U.S. government. We do not currently have blanket authorization
for export of our products and services. We cannot assure that we will be able
to obtain blanket export authorization in the future. In addition, we cannot
assure that we will be able to obtain necessary licenses or approvals on a per-
transaction basis, and our inability to do so, or our failure to comply with the
terms of the authorization when granted, could have a material adverse effect on
our business, financial condition, or results of operations.
We depend upon attracting and retaining highly skilled professional staff.
Our success will depend in part upon our ability to attract, retain, train,
and motivate highly skilled employees, particularly in the area of information
technology. We face significant competition for employees with the computer and
technology skills required to perform our services and create our products. In
addition, we must often comply with provisions in government contracts which
require specified levels of education, work experience, and security clearances
for our employees. We cannot assure that we will be successful in attracting a
sufficient number of highly skilled and qualified employees in the future. None
of our employees are subject to non-competition agreements, confidentiality
agreements, or employment agreements. The loss of our key technical personnel,
or our inability in the future to attract key employees or to relocate them as
required by customers, could have a material adverse effect on our business,
financial condition, or results of operations.
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We depend on the services of our key personnel.
Our success depends to a significant degree on our key management
personnel, especially the following:
. Steven R. Chamberlain, Chairman and Chief Executive Officer;
. Thomas L. Gough, President and Chief Operating Officer;
. Steven A. Carchedi, Executive Vice President, Business Development; and
. Elaine M. Parfitt, Vice President and Chief Financial Officer.
The loss of any one of these management personnel could have a material adverse
effect on our business, financial condition, or results of operations. We do
not have employment, non-competition, or confidentiality agreements with any of
these individuals. We intend to purchase a key man life insurance policy with
respect to Steven R. Chamberlain. We do not maintain key man life insurance
policies on any other members of management.
We depend upon intellectual property rights and risk having our rights
infringed.
Much of our business is derived from work product, software programs,
methodologies, and other information that we have privately developed. We have
made a strategic decision after discussion with intellectual property counsel
not to seek patent protection for our software, hardware, and systems. Although
we seek to protect our intellectual property with common law trademarks and
copyrights, and software license and confidentiality agreements with third
parties, we cannot assure that these measures will prevent unauthorized
disclosure or use of our technical knowledge, practices, or procedures, or that
others may not independently develop similar knowledge, practices, or
procedures. To date, we have not registered any of our copyrights or
trademarks. In addition, the laws of some foreign countries do not protect our
intellectual property rights to the same extent as the laws of the United
States. Disclosure or loss of control over our privately developed information
could have a material adverse effect on our business, financial condition, or
results of operations. We may also be subject to litigation to defend against
infringement claims. Any litigation with respect to our intellectual property
rights would be costly and could divert management's attention, either of which
could have a material adverse effect on our business, financial condition, or
results of operations. Adverse determinations in litigation involving our
intellectual property could:
. result in the loss of those intellectual property rights;
. subject us to significant liabilities;
. require us to seek licenses from third parties; or
. prevent us from selling our services.
Any one of the foregoing consequences could have a material adverse effect on
our business, financial condition, or results of operations.
Under some government contracts, we may develop software that in the future
we may decide to commercialize. In order to commercialize that software, we
might need to invest additional research and development funds to re-market the
software as a commercial product. If the product was developed using any
government funding, government regulations and contract provisions may prevent
us from selling the resulting product to any government agencies. If the
primary market for a potential product is government agencies, we may not be
able to recover invested funds through sale of the product. In addition, the
government may acquire certain rights to software programs we develop that are
funded under government contracts or subcontracts and may disclose information
with respect to those programs or products to third parties, including our
competitors.
The estimated backlog under our government contracts is not necessarily
indicative of revenues that will actually be realized under the contracts.
Many of our government contracts are multi-year contracts and contracts
with option years, and portions of these contracts are carried forward from one
year to the next as part of our contract backlog. Backlog means the total value
of all contracts less the revenues earned on those same contracts. The
estimated backlog under a government contract is not necessarily indicative of
revenues that will actually be realized under that contract.
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<PAGE>
Congress normally appropriates funds for a given program on a fiscal-year basis,
even though actual contract performance may take many years. As a result,
contracts ordinarily are only partially funded at the time of award, and
additional monies are normally committed to the contract by the contracting
agency as Congress makes appropriations in subsequent fiscal years. There can be
no assurance that Congress will appropriate funds or that procuring agencies
will commit funds to our government contracts for their anticipated terms. In
addition, most of our government contracts have an initial term of one year plus
a number of option years. We cannot assure that the government will extend a
contract through its option years. Certain of our large contracts provide that
we will not receive payment until the services under those contracts are
requested and performed. We cannot assure that cancellations or adjustments in
the terms of these contracts might not occur. In addition, our services under
these contracts may not be requested at the anticipated levels in the future.
Performance of some of our government contracts may require security clearance.
Some of our contracts with government agencies require that some of our
employees and procedures meet security clearance requirements. If problems
develop meeting security clearance requirements, they could materially limit our
ability to perform these contracts.
Shares held by our current stockholders may adversely effect our stock price.
As of February 18, 2000, we had 8,656,432 shares of common stock
outstanding. After this offering, the following shares of our common stock will
be freely tradable without restriction or limitation under the Securities Act of
1933, except for shares purchased by "affiliates," as that term is defined in
Rule 144 under the Securities Act of 1933:
. the 1,400,000 shares of common stock to be sold in this offering;
. the 600,000 shares of common stock sold in our initial public offering;
. the 1,183,268 shares of common stock registered pursuant to Amendment
No. 1 to the Registration Statement on Form S-3 (File No. 33-82499)
filed by the Company with the SEC on July 28, 1999; and
. the 538,944 shares of common stock issued under our stock option plan.
The remaining shares of our common stock may be sold in the public market,
subject in some cases to the volume and other limitations of Rule 144. We have
reserved 1,261,056 shares of common stock for issuance under our stock option
plan. We have issued options to purchase a total of 1,301,648 shares of common
stock under our stock option plan, of which 762,704 have yet to be exercised and
of which 402,554 are currently exercisable. Sales of substantial amounts of
common stock in the public markets, pursuant to Rule 144 or otherwise, or the
availability of shares of common stock for sale could adversely affect the
prevailing market prices for the common stock and impair our ability to raise
additional capital through the sale of equity securities in the future. In the
past, our common stock has traded at low volumes. The registration of the
shares pursuant to this prospectus will create substantial additional market
overhang. Future sale of the shares into the public market could have an
adverse affect on the prevailing market price of our common stock.
The market price of our common stock may be volatile.
The market price of securities of technology companies has historically
faced significant volatility. In addition, the stock market in recent years has
experienced significant price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of particular
companies. Many factors that have influenced trading prices will vary from
period to period, including:
. actual or anticipated operating results;
. growth rates;
. changes in estimates by analysts;
. market conditions in the industry;
. announcements by competitors;
11
<PAGE>
. regulatory actions; and
. general economic conditions.
Any of these events would likely result in a material adverse effect on the
market price of our common stock. In addition, the public announcement of this
offering, which may be price dilutive with respect to the prevailing market
price, may have an adverse effect on the market price for the common stock.
Our quarterly operating results may vary significantly from quarter to quarter.
Our revenues and earnings may fluctuate from quarter to quarter based on
factors that include the following:
. the number, size, and scope of our projects;
. equipment purchases and other expenditures required for our business;
. bid and proposal efforts undertaken;
. delays;
. employee productivity;
. adequacy of provisions for losses;
. accuracy of estimates of resources required to complete ongoing
projects; and
. general economic conditions.
Demand for our products and services in each of the markets we serve can vary
significantly from quarter to quarter due to revisions in customer budgets or
schedules and other factors beyond our control. Due to all of the foregoing
factors, our results of operations may fall below the expectations of securities
analysts and investors in a particular period. In this event, the market price
of our common stock would likely be materially adversely affected.
Our failure or the failure of our suppliers and customers to be year 2000
compliant could harm our business.
Many currently installed computer systems, software products, and
microprocessor-dependent equipment are coded to accept only two digit entries in
the date code field. To distinguish 21st century dates from 20th century dates,
these date code fields must be able to accept four digit entries.
We may realize exposure and risk if our suppliers or the systems we rely upon to
conduct day-to-day operations are not year 2000 compliant. The potential areas
of exposure include electronic data exchange systems operated by third parties
with whom we transact business, products purchased from third parties and
computers, software, telephone systems and other equipment used internally. To
minimize the potential adverse effects of the year 2000 problem, we established
an internal project team comprised of all functional disciplines. This project
team implemented a three-phase process of:
. identifying our internal information and non-information technology
systems that are not year 2000 compliant;
. determining their significance with respect to the effectiveness of our
operations; and
. developing plans to resolve the issues where necessary.
After review of our internal computer systems, software products and
microprocessor dependent equipment, management determined that we are year 2000
compliant and, as such, does not anticipate any material adverse operational
issues to arise.
In addition to our internal review, we communicated with our suppliers and
others with whom we do business to coordinate year 2000 readiness. The
responses that we have received to date indicate that steps have been taken to
address this concern. However, if those third parties have not been able to
make all systems year 2000 compliant, there could be a material adverse impact
on us.
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<PAGE>
Although the rollover from December 31, 1999 to January 1, 2000 has occurred, we
still face risks to the extent that our suppliers of products, services, and
systems or the suppliers of others with whom we transact business cannot timely
provide us with products, components, services, or systems that meet year 2000
requirements. In the event that any such third parties cannot timely provide us
with products, services, or systems that meet the year 2000 requirements, our
business could be harmed. For example, if one of our major vendors experiences a
material disruption in business due to a failure to have achieved year 2000
compliance, we could experience a material disruption in our business.
We have not yet developed a contingency plan with respect to any potential
failure of third parties to have become year 2000 compliant, nor have we
formulated a timetable to create a contingency plan.
If either the internal systems material to our operations or the internal
systems, products, or services of one or more of our major vendors has failed to
achieve year 2000 compliance, the year 2000 issue could have a material adverse
effect on our business, financial condition and results of operations.
To date, we have not experienced any problems associated with year 2000 computer
issues.
Warning regarding our use of forward-looking statements
Some of the information in this prospectus may contain forward-looking
statements. Such forward-looking statements can be identified by the use of
forward-looking terminology such as "may," "will," "believe," "expect,"
"anticipate," "estimate," "continue" or other similar words, and include
statements as to the intent, belief, or current expectations of Integral Systems
and our directors, officers, and management with respect to future operations,
performance or position of Integral Systems or which contain other "forward-
looking" information. These forward-looking statements are predictions and are
based on current information and expectation, and we assume no obligation to
update these statements. When considering the forward-looking statements in this
prospectus, you should keep in mind the risk factors and other cautionary
statements in this prospectus and in the documents incorporated in this
prospectus by reference. The risk factors noted in this prospectus and the other
factors noted throughout this prospectus and the documents that we incorporate
by reference, including certain known and unknown risks and uncertainties, could
cause our actual results to differ materially from those contained in any
forward-looking statement.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933, covering the shares
offered by this prospectus. This prospectus does not contain all of the
information set forth in the Registration Statement and exhibits.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any materials we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Regional Offices of the SEC at 7 World Trade Center, Suite 1300, New
York, New York 10048, and at 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information on the SEC's public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to our filed SEC documents. The information incorporated by
reference is part of this prospectus. Information we file with the SEC after we
file this document will update and supersede this information.
We incorporate by reference the documents listed below and any future
filings made with the SEC pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until our offering is completed.
(a) Our Annual Report on Form 10-KSB for the year ended September 30,
1999;
(b) Our Quarterly Report on Form 10-QSB for the quarter ended December
31, 1999; and
(c) The description of our common stock which is contained in our Form 8-
A filed May 25, 1990.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded for the
purposes of this prospectus to the extent that a statement contained in this
prospectus, or in any other subsequently filed document which also is, or is
deemed to be, incorporated by reference, modifies or supersedes that statement.
Any statement modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this prospectus.
You, as well as any other person to whom a prospectus is delivered
(including any beneficial owner), may request a copy of any of the filings
incorporated herein by reference, at no cost, by writing or telephoning Elaine
M. Parfitt, Corporate Secretary, at:
Integral Systems, Inc.
5000 Philadelphia Way
Lanham, Maryland 20706-4417
Telephone: (301) 731-4233
You should rely only on the information incorporated by reference or
provided in this prospectus and any prospectus supplement. We have authorized
no one to provide you with different information. The selling stockholders are
not authorized to make an offer of these securities in any state where the offer
is not permitted. You should not assume that the information in this prospectus
or any prospectus supplement is accurate as of any date other than the date on
the front of this prospectus or the applicable prospectus supplement.
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<PAGE>
USE OF PROCEEDS
All of the net proceeds from the sale of the common stock covered by this
prospectus will go to the selling stockholders who offer and sell shares of the
common stock. We will not receive any proceeds from the sale of the common
stock offered by the selling stockholders pursuant to this prospectus.
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<PAGE>
SELLING STOCKHOLDERS
In February 2000, we completed a private placement in which we sold an
aggregate of 1,400,000 shares of our common stock to the selling stockholders
identified in the table below. We are registering the shares of common stock
under registration rights granted to the selling stockholders in the private
placement. We have agreed to bear all of the costs and expenses for the
registration of the shares of common stock.
The following table sets forth (1) the name of each selling stockholder,
(2) the number of shares of outstanding common stock beneficially owned by each
selling stockholder as of the date of this prospectus, (3) the aggregate number
of shares of common stock that each selling stockholder may offer and sell for
its account under this prospectus and (4) to our knowledge and assuming that all
of the shares of common stock offered under this prospectus are sold, the
aggregate number of shares of common stock and the percentage of outstanding
shares of common stock to be beneficially owned by each selling stockholder upon
completion of the offering made under this prospectus. To our knowledge and
except as otherwise indicated in the footnotes to the table, none of the selling
stockholders has had within the past three years any position, office or other
material relationship with us or any of our predecessors or affiliates.
<TABLE>
<CAPTION>
Number of Shares Number of Shares Beneficially
Name of Selling Beneficially Owned Number of Shares Owned
Security Holder Prior to Offering Offered Hereby After Offering
- --------------- ----------------- -------------- --------------
Number Percentage
---------- ----------
<S> <C> <C> <C> <C>
Ardsley Partners Fund I, L.P. 80,000 80,000 0 --
Ardsley Partners Fund II, L.P. 100,000 100,000 0 --
HH Managed Account I Limited 60,000 60,000 0 --
Armstrong Capital Ltd. 23,000 8,000 15,000 *
Ashford Capital Partners, L.P. 71,600 25,000 46,600 *
Sabre Institutional Fund, L.P. 14,900 14,900 0 --
Ritchie Capital Investments Ltd. 4,900 4,900 0 --
Garrison Master Fund, L.P. 35,200 35,200 0 --
Chilton International, L.P. 36,336 36,336 0 --
Chilton Investment Partners, L.P. 16,032 16,032 0 --
Chilton QP Investment Partners, L.P. 7,632 7,632 0 --
William C. Radichel 1,500 1,500 0 --
Elizabeth H. Confer 500 500 0 --
Kathleen Jean Radichel 500 500 0 --
Randall W. and Kay C. Lamb 1,000 1,000 0 --
Christopher Faye Conv Roth IRA 1,000 1,000 0 --
Richard P. Confer 5,000 5,000 0 --
Pamela J. Leinberger 500 500 0 --
Elizabeth A. Confer 500 500 0 --
Carol C. Greenwald 1,000 1,000 0 --
Ogden W. Confer 1,500 1,500 0 --
David B. Johnson Family Foundation 2,000 2,000 0 --
FIM Securities Ltd 160,000 160,000 0 --
Crescent International Ltd. 10,000 10,000 0 --
Hamilton College 5,000 5,000 0 --
Lagunitas Partners LP 65,000 65,000 0 --
Thomas O. Lloyd-Butter 1,500 1,500 0 --
Jon D. Gruber 2,500 2,500 0 --
Lockheed Martin Master Retirement 5,000 5,000 0 --
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Number of Shares Beneficially
Name of Selling Beneficially Owned Number of Shares Owned
Security Holder Prior to Offering Offered Hereby After Offering
- --------------- ----------------- -------------- --------------
Number Percentage
--------- ----------
<S> <C> <C> <C> <C>
Gruber-McBaine International 21,000 21,000 0 --
Hauck & Aufthauser Priv. KGAA 8,000 8,000 0 --
High Street Fund I, LLC 15,000 15,000 0 --
KBC Equity Fund New Shares 6,000 6,000 0 --
Kensington Partners L.P. 15,500 15,500 0 --
Kensington Partners II L.P. 920 920 0 --
Bald Eagle Fund, Ltd. 3,580 3,580 0 --
The Family Partnership, LP 39,400 39,400 0 --
The Frontier Partnership, LP 23,600 23,600 0 --
Flagship Partners, Ltd. 5,000 5,000 0 --
MGN Opportunity Group LLC 10,000 10,000 0 --
Nicholas Limited Edition, Inc. 125,000 100,000 25,000 *
Oppenheimer Main Street Small Cap Fund 25,000 25,000 0 --
Plantation Trading & Investments Ltd. 2,000 2,000 0 --
Riverside Growth Partners, L. P. 21,000 10,000 11,000 *
RS Emerging Growth Fund 380,000 200,000 180,000 2.1%
Saudi International Bank 20,000 20,000 0 --
Veritas SG Investment Trust 35,000 35,000 0 --
Endeavor Fund Offshore, Ltd. 5,000 5,000 0 --
Endeavor Fund, L.L.C. 35,000 35,000 0 --
Superius Securities Group Inc. Money 10,000 10,000 0 --
Purchase Plan
Swiss Life PLC 10,000 10,000 0 --
Swiss Life Investment & Fund PLC 30,000 30,000 0 --
Cantrade Invest Capital Gain Fund 10,000 10,000 0 --
Unibank 10,000 10,000 0 --
Prism Partners I, L.P. 56,000 56,000 0 --
Prism Partners II Offshore Fund 16,000 16,000 0 --
Prism Partners Offshore Fund 8,000 8,000 0 --
Antoine J. Tristani 8,000 8,000 0 --
William D. Witter, Inc. Profit Sharing 10,000 10,000 0 --
Trust
</TABLE>
* Less the one percent.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 40,000,000 shares of common
stock, par value $.01 per share. As of February 18, 2000, we had 8,656,432
shares of common stock outstanding.
The holders of common stock are entitled to one vote for each share held
of record on all matters to be voted on by stockholders. The holders of common
stock do not have cumulative voting rights with respect to the election of
directors. In addition, the holders of common stock do not possess any of the
following:
. preemptive rights;
. redemption rights; or
. conversion rights.
The holders of common stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of legally available funds. The
outstanding shares of common stock, and the shares offered by the selling
stockholders in the offering, are fully paid and nonassessable.
We have reserved 1,261,056 shares of common stock for issuance under our
stock option plan. We have issued options to purchase a total of 1,301,648
shares of common stock under our stock option plan, of which 762,704 have yet to
be exercised and of which 402,554 are currently exercisable. See "Risk Factors-
Shares held by our current stockholders may adversely effect our stock price."
Authorized but unissued shares of our common stock may be issued by
direction of our Board of Directors at such times, in such amounts, for such
consideration, and upon such terms as the Board of Directors may determine. The
issuance of additional shares of our common stock will not require the approval
of the stockholders, unless in any specific instances such approval is expressly
required by regulatory agencies or otherwise. The authorized but unissued
shares of common stock could have an anti-takeover effect, because additional
shares of common stock could be issued, within the limits imposed by applicable
law, in one or more transactions that could make a change in control or takeover
of us more difficult. We could issue additional shares to persons who might
side with the Board of Directors in opposing a takeover bid that the Board
determines is not in our best interests and the best interests of our
stockholders. This type of issuance could diminish the voting power of existing
stockholders who favor a change in control, and the ability to issue the shares
could discourage an attempt by another person or entity to acquire control of us
since the issuance of new shares of common stock could be used to dilute the
stock ownership of such person or entity. Upon the liquidation, dissolution or
winding up of our company, the holders of common stock are entitled to share
ratably in all of our assets which are legally available for distribution, after
payment of all debts and other obligations. In addition, the issuance of
additional shares of common stock would dilute the existing stockholders' equity
interest in Integral.
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PLAN OF DISTRIBUTION
The selling stockholders, or their pledgees, donees, distributees,
transferees, or other successors, if any, may sell or distribute some or all of
the shares of common stock offered under this prospectus from time to time
through underwriters, dealers, brokers, or other agents or directly to one or
more purchasers in one or more, or a combination, of the following types of
transactions:
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. transactions involving cross and block trades or otherwise on the
Nasdaq National Market;
. purchases by a broker, dealer, or underwriter as principal and resale
by that person for its own account under this prospectus;
. "at the market" or through market makers or into an existing market
for the common stock;
. sales to purchasers or sales effected through agents or in other ways
not including market makers or established trading markets;
. in privately negotiated transactions; or
. by any other legally available means.
The selling stockholders may sell their shares at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. Brokers,
dealers, agents, or underwriters participating in these transactions as agent
may receive compensation in the form of discounts, concessions, or commissions
from the selling stockholders and, if they act as agent for the purchaser of the
shares, from the purchaser. The discounts, concessions, or commissions received
by a particular broker, dealer, agent or underwriter might be in excess of those
customary in the type of transaction involved. This prospectus also may be
used, with our consent, by donees of the selling stockholders, or by other
persons acquiring the shares of common stock and who wish to offer and sell the
shares under circumstances requiring or making desirable the use of the
prospectus. If required, we will file, during any period in which the offers or
sales are being made, one or more supplements to this prospectus to disclose the
names of donees of the selling stockholders and any other material information
with respect to the plan of distribution not previously disclosed.
The selling stockholders and any underwriters, brokers, dealers, or
agents that participate in the distribution of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions, or concessions received by any of these underwriters, brokers,
dealers, or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. Neither we nor the selling stockholders can presently
estimate the amount of compensation that may be received by the underwriters,
brokers, dealers, or agents. We do not know of any existing arrangements between
the selling stockholders and any underwriter, broker, dealer, or other agent
relating to the sale or distribution of the shares of common stock.
Under applicable rules and regulations under the Securities Exchange Act
of 1934, any person engaged in a distribution of any of the shares of common
stock may not simultaneously engage in market activities with respect to the
common stock for a period of up to five business days prior to the commencement
of the distribution. The selling stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations enacted under the
Exchange Act, including Rule 10b-5 and Regulation M. These provisions may limit
the timing of purchases and sales of any of the shares of common stock by the
selling stockholders. All of the above may affect the marketability of the
common stock.
We will pay all of the costs and expenses for the registration of the
shares of common stock by the selling stockholders under this prospectus, except
for any underwriters' discounts, brokerage fees, and transfer taxes incident to
the sale of the shares and the fees and expenses of the selling stockholder's
counsel. In addition, we have agreed to indemnify the selling stockholders, the
directors and officers of the selling stockholders, each underwriter of the
shares of common stock to be registered under this prospectus, and each person
who controls any selling stockholder or underwriter of the shares of common
stock to be registered under this prospectus against liabilities concerning
untrue statements or omissions that we make, or violations of the securities
laws that we commit, with respect to the registration of the shares of common
stock, including liabilities under the Securities Act. The selling stockholders
have agreed to indemnify us against liabilities concerning untrue statements or
omissions that they
19
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make, or violations of the securities laws that they commit, with respect to the
registration of the shares of common stock, including liabilities under the
Securities Act. See "Disclosure of Commission Position on Indemnification for
Securities Act Liabilities."
If shares of the common stock are sold in an underwritten offering, those
shares may be acquired by the underwriters for their own account and may be
further resold from time to time in one or more transactions, including
negotiated transactions. These transactions may be made in the following
manner:
. at market prices prevailing at the time of sale;
. at prices related to the prevailing market prices;
. at negotiated prices; or
. at fixed prices.
The names of the underwriters with respect to an offering of the shares
of common stock and the terms of the transactions, including any underwriting
discounts, concessions, or commissions and other items constituting compensation
of the underwriters and broker-dealers, if any, will be set forth in a
supplement to this prospectus relating to the offering. Any public offering
price and any discounts, concessions, or commissions allowed or reallowed or
paid to broker-dealers may be changed from time to time.
EXPERTS
The consolidated financial statements of Integral Systems incorporated by
reference in this prospectus have been audited, except for interim financial
statements, by Rubino & McGeehin, Chartered, independent public accountants, as
indicated in their report with respect thereto, and incorporated herein by
reference in reliance upon the authority of Rubino & McGeehin, Chartered as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
and certain other matters will be passed upon for us by Venable, Baetjer and
Howard, LLP.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The Maryland General Corporation Law permits a corporation to indemnify
any present or former director, officer, employee, or agent of the corporation
against liabilities actually incurred by him or her in connection with any
proceeding to which he or she may be made a party by reason of his or her
service as a director, officer, employee, or agent of the corporation.
Indemnification is not available if:
. the act or omission of the person seeking indemnification was material
to the matter giving rise to the proceeding and was either committed
in bad faith or the result of active and deliberate dishonesty;
. the person seeking indemnification actually received an improper
personal benefit in money, property, or services; or
. the person seeking indemnification, in the case of any criminal
proceeding, reasonably believed that the act or omission was not
lawful.
If a proceeding is by or in the name of the corporation, indemnification is not
available if the director, officer, employee, or agent is adjudged to be liable
to the corporation.
The Maryland General Corporation Law permits a corporation to pay or
reimburse reasonable expenses, including attorney's fees, incurred by a present
or former director, officer, employee, or agent of a corporation made a party to
a proceeding by reason of his or her service as a director, officer, employee,
or agent of the corporation. In addition, the Maryland General Corporation Law
requires a corporation to indemnify a director or officer of the
20
<PAGE>
corporation against reasonable expenses incurred by the director or officer in
connection with a proceeding to which he or she is made a party by reason of his
or her service to the corporation if he or she is successful in the proceeding.
The selling stockholders have agreed to indemnify us against liabilities
concerning untrue statements or omissions that they make, or violations of the
securities laws that they commit, with respect to the registration of the shares
of common stock, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be given to directors, officers, and persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Commission, indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act and
is unenforceable. In the event that a claim for indemnification against
liabilities arising under the Securities Act, other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding, is asserted by that director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether that
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of that issue.
No person has been authorized to give any information or to make any
representation not contained in or incorporated by reference in this prospectus,
and, if given or made, the information or representation not contained in this
prospectus must not be relied on as having been authorized. This prospectus does
not constitute an offer to sell, or the solicitation of an offer to purchase,
any of the securities offered by this prospectus, in any jurisdiction to or from
any person to or from whom it is unlawful to make such offer or solicitation of
an offer, or proxy solicitation in such jurisdiction. Neither the delivery of
this prospectus nor the issuance or sale of any securities hereunder shall under
any circumstances create any implication that there has been no change in the
information disclosed in this prospectus to date or delivered and incorporated
by reference.
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Part II. Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an estimate of the costs and expenses
expected to be incurred in connection with the distribution, all of which will
be paid by Integral:
Registration Fee -- Securities and Exchange Commission..... $ 14,784
Listing Fee -- Nasdaq National Market...................... 17,500
Legal Fees and Expenses.................................... 50,000
Printing and Engraving Expenses............................ 5,000
Miscellaneous.............................................. 5,000
---------
Total...................................................... $ 92,284
=========
The Company will bear all of the above fees and expenses.
Except for the Securities and Exchange Commission registration fee and
the Nasdaq National Market listing fee, all of the foregoing fees and expenses
are estimates.
Item 15. Indemnification of Directors and Officers.
Section 2-418 of the Maryland General Corporation Law permits a
corporation to indemnify each of its present and former directors and officers,
among others, against judgments, penalties, fines, settlements, and reasonable
expenses actually incurred by him or her in connection with any proceeding to
which he or she may be made a party by reason of his or her service in that
capacity or some other capacities, unless it is established that:
. the act or omission of the director or officer was material to the
matter giving rise to such proceeding and (i) was committed in bad
faith or (ii) was the result of active and deliberate dishonesty;
. the director or officer actually received an improper personal
benefit in money, property, or services; or
. in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.
However, if the proceeding was one by or in the right of the corporation,
indemnification may not be made in respect of any proceeding in which the
director or officer shall have been adjudged to be liable to the corporation.
In addition, Section 2-418(f) of the Maryland General Corporation Law
permits a corporation to pay or reimburse, in advance of the final disposition
of a proceeding, reasonable expenses, including attorney's fees, incurred by a
present or former director or officer made a party to the proceeding by reason
of his or her service in that capacity or some other capacities, provided that
the corporation shall have received:
. a written affirmation by the director or officer of his or her good
faith belief that he or she has met the standard of conduct
necessary for indemnification by the corporation; and
. a written undertaking by or on behalf of the director or officer to
repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
The Maryland General Corporation Law also provides that, unless
limited by the corporation's articles of incorporation, a director or officer of
the corporation who has been successful, on the merits or otherwise, shall be
indemnified against reasonable expenses incurred by the director or officer in
connection with any proceeding to which he or she is made a party by reason of
his or her service in that capacity or some other capacities. Maryland law
permits a corporation to indemnify and advance expenses to a present and former
officer, employee, or agent of the corporation to the same extent as a director,
and to provide additional indemnification to such an officer, employee, or agent
who is not also a director.
II-1
<PAGE>
Integral Systems has provided for indemnification of directors, officers,
employees, and agents in Article Ninth of its Articles of Restatement and in
Section 1 of Article VI of the By-Laws. These provisions read as follows:
The Corporation shall indemnify as determined by the Board of
Directors any person who is serving or has served as a director
or officer or employee or agent of this Corporation to the extent
permitted by Maryland law, who has been made, or is threatened to
be made, a party to an action, suit, or proceeding, whether
civil, criminal, administrative, investigative, or otherwise
(including an action, suit or proceeding by or in the right of
the corporation), by reason of the fact that the person is or was
a director or officer or employee or agent of the corporation, or
a fiduciary within the meaning of the Employee Retirement Income
Security Act of 1974 with respect to an employee benefit plan of
the corporation, or serves or served at the request of the
corporation as a director, or as an officer, or as a fiduciary of
an employee benefit plan, of another corporation, partnership,
joint venture, trust or other enterprise, or as an employee, or
as an agent, except in relation to matters as to which such
person is adjudged in such action, suit or proceedings or
otherwise determined to be liable for negligence or misconduct in
the performance of duty.
In addition, the Corporation as determined by the Board of
Directors shall pay for or reimburse any expenses incurred by
such persons who are parties to such proceedings, in advance of
the final disposition of such proceedings, to the extent
permitted by the Maryland law.
Integral's Articles of Restatement do not alter the requirement of the
Maryland General Corporation Law that a corporation indemnify a director or
officer who has been successful, on the merits or otherwise, against reasonable
expenses incurred by the director or officer in any proceeding to which he or
she is made a party by reason of his or her service in that capacity or certain
other capacities.
Under the Maryland General Corporation Law, a corporation is permitted to
expand or limit by provision in its articles of incorporation the liability of
its directors and officers to the corporation or to its stockholder for money
damages except to the extent that (i) it is proved that the director or officer
actually received an improper benefit or profit in money, property or services
for the amount of the benefit or profit in money, property or services actually
received, or (ii) a judgment or other final adjudication adverse to the director
or officer is entered in a proceeding based on a finding in the proceeding that
the director's or officer's action, or failure to act, was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. Integral has not expanded or limited the liability of its
directors and officers for money damages in its Articles of Restatement.
Under the Maryland General Corporation Law, a corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation against any liability asserted against and
incurred by that person in any of these capacities or certain other capacities
or arising out of that person's position, whether or not the corporation would
have the power to indemnify against liability under the Maryland General
Corporation Law. Integral has provided for the purchase of insurance for its
directors, officers, employees, or agents in Section 2 of Article VI of its By-
Laws. This provision reads as follows:
Upon resolution passed by the Board of Directors, the Corporation
may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the
Corporation or who, while a director, officer, employee or agent
of the Corporation is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise or employee benefit plan against any
liability asserted against and incurred by such person in any
such capacity, or arising out of such person's position as such,
whether or not the Corporation would have the power to indemnify
him against such liability under the By-Laws.
The selling stockholders have agreed to indemnify Integral Systems against
liabilities concerning untrue statements or omissions that they make, or
violations of the securities laws that they commit, with respect to the
registration of the shares of common stock, including liabilities under the
Securities Act.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be given to directors, officers and controlling persons of the small
business issuer or others under the above provisions, or otherwise, the small
business issuer has been informed that in the opinion of the Commission,
indemnification for liabilities under the Securities Act is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against liabilities under the
Securities Act, other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding, is asserted by a director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether that indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of the issue.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
4.1 Specimen Common Stock Certificate (Incorporated by reference to
the Registration Statement on Form S-1 (File No. 333-58453)
filed by the Company with the Commission on July 2, 1998).
4.2 Form of Subscription Agreement.
4.3 Articles of Restatement of the Company (Incorporated by
reference to the Registration Statement on Form S-3 (File No.
333-82499) filed by the Company with the Commission on July 8, 1999).
4.4 By-Laws of the Company (Incorporated by reference to the
Company's Annual Report on Form 10-KSB filed with by the Company
with the Commission on December 29, 1998).
5.1 Opinion of Venable, Baetjer and Howard, LLP.*
23.1 Consent of Rubino & McGeehin, Chartered.
23.2 Consent of Venable, Baetjer and Howard, LLP (included in its
opinion filed as Exhibit 5.1).*
24.1 Power of Attorney (included as part of the signature pages of
this registration statement).
___________________
* To be filed by amendment.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
II-4
<PAGE>
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Lanham, Maryland, on the 25th day of February, 2000.
INTEGRAL SYSTEMS, INC.
By: /s/
--------------------------------
steven R. Chamberlain
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Steven R. Chamberlain and Thomas L. Gough, either of whom may act, as their true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Chief Executive February 25, 2000
- --------------------------- Officer and Chairman (Principal
Steven R. Chamberlain Executive Officer)
/s/ Vice President, Chief Financial February 25, 2000
- --------------------------- Officer, Treasurer and Secretary
Elaine M. Parfitt (Principal Financial and
Accounting Officer)
/s/ Director, President February 25, 2000
- --------------------------- and Chief Operating Officer
Thomas L. Gough
/s/ Director and Executive Vice February 25, 2000
- --------------------------- President, Business Development
Steven A. Carahedi
/s/ Director February 25, 2000
- ---------------------------
Bonnie K. Wachtel
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Director February 25, 2000
- ---------------------------
Dominic A. Laiti
/s/ Director February 25, 2000
- ---------------------------
John R. Murphy
/s/ Director February 25, 2000
- ---------------------------
R. Doss McComas
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
Exhibit Description
4.1 Specimen Common Stock Certificate (Incorporated by reference to
the Registration Statement on Form S-1 (File No. 333-58453) filed
by the Company with the Commission on July 2, 1998).
4.2 Form of Subscription Agreement.
4.3 Articles of Restatement of the Company (Incorporated by reference
to the Registration Statement on Form S-3 (File No. 333-82499)
filed by the Company with the Commission on July 8, 1999).
4.4 By-Laws of the Company (Incorporated by reference to the Company's
Annual Report on Form 10-KSB filed with by the Company with the
Commission on December 29, 1998).
5.1 Opinion of Venable, Baetjer and Howard, LLP.*
23.1 Consent of Rubino & McGeehin, Chartered.
23.2 Consent of Venable, Baetjer and Howard, LLP (included in its
opinion filed as Exhibit 5.1).*
24.1 Power of Attorney (included as part of the signature pages of this
registration statement).
___________________
* To be filed by amendment.
II-8
<PAGE>
EXHIBIT 4.2
FORM OF SUBSCRIPTION AGREEMENT
February 11, 2000
Integral Systems, Inc.
5000 Philadelphia Way, Suite A
Lanham, Maryland 20706
Ladies/Gentlemen:
1. Subscription; Purchase and Closing; Purchase Price Adjustment.
-------------------------------------------------------------
1.1 The undersigned ("Subscriber"), intending to be legally bound
hereby, subscribes for and agrees to purchase the number of shares (the
"Shares") of the Common Stock, par value $.01 per share (the "Common Stock"), of
Integral Systems, Inc., a Maryland corporation (the "Company"), indicated on the
signature page hereto, at a price of $31.00 per share (the "Purchase Price") and
upon the terms and conditions set forth in this subscription agreement (this
"Agreement").
1.2 The Shares subscribed for hereby shall not be deemed owned by
Subscriber, nor shall Subscriber be deemed a holder of securities of the
Company, until this subscription has been accepted by the Company and the
Purchase Price for the Shares subscribed for has been paid. Subscriber
understands and agrees that the Company reserves the right to reject this
subscription for the Shares in whole or in part, in its sole discretion, at any
time through the Closing Date (as that term is defined in Section 1.5). This
subscription is subject to allotment. If subscription for the Shares is
oversubscribed, the Company will determine which subscriptions shall be
accepted, in whole or in part.
1.3 In the event of rejection of this subscription, or in the event the
sale of the Shares is not consummated for any reason (in which event this
Agreement shall be deemed to be rejected), this Agreement shall have no force or
effect.
1.4 Subscriber hereby agrees to deliver the Purchase Price required to
purchase the number of Shares subscribed for hereunder, as that amount may be
reduced pursuant to Section 1.2 hereof, on the Closing Date set by the Company
pursuant to Section 1.5 hereof.
1.5 The closing of the transactions contemplated herein (the "Closing")
shall take place at such time as the Company and ING Barings LLC, Allen &
Company Incorporated and Miller, Johnson & Kuehn, Inc., as co-placement agents
(together, the "Placement Agents"), shall determine. The Placement Agents shall
establish and inform Subscriber of the closing date for such subscription (the
"Closing Date") and the date upon which the Purchase Price shall be delivered to
the Company.
<PAGE>
1.6 Payment of the full Purchase Price for the Shares to be purchased
shall be made on the Closing Date by wire transfer of immediately available
funds or at such other time and by such other means as the Company shall
approve. The Company or the Placement Agents will notify Subscriber as to
payment instructions. Upon the Closing Date, certificates representing the
Shares purchased by Subscriber will be delivered by the Company to Subscriber.
2. Representations, Warranties and Agreements of Subscriber. Subscriber
--------------------------------------------------------
hereby represents and warrants to the Company and hereby covenants and agrees
with the Company as follows:
(a) Subscriber has full power and authority to enter into this
Agreement and to perform its obligations hereunder. All requisite action on the
part of Subscriber necessary for the authorization, execution, delivery and
performance of Subscriber's obligations under this Agreement and for the
purchase of the Shares has been taken, and this Agreement, when executed by a
duly authorized officer of Subscriber, will be a valid and binding agreement of
Subscriber, enforceable in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization or
other similar laws and legal and equitable principles limiting or affecting the
rights of creditors generally and/or (ii) general principles of equity,
regardless of whether considered in a proceeding in equity or at law, and except
as rights to indemnification hereunder may be limited by federal or state
securities laws.
(b) Subscriber has carefully read this Agreement and, to the extent
Subscriber believes necessary, has discussed with Subscriber's counsel and other
professional advisor(s) the representations, warranties, covenants and
agreements which Subscriber makes by signing it, and any applicable limitations
upon Subscriber's transfer of the Shares issuable thereunder. Subscriber
acknowledges that Subscriber has not relied upon the legal counsel or
accountants for the Company regarding the transactions contemplated by this
Agreement, and Subscriber has been advised to engage separate legal counsel and
accountants to represent Subscriber's individual interest and advise Subscriber
regarding the structure of, and risks associated with, such transactions.
(c) Subscriber understands that, as a publicly traded company, the
Company files with the Securities and Exchange Commission (the "SEC") various
reports, including quarterly and annual financial statements, annual reports to
stockholders, and proxy statements and that all of such reports statements and
information are available to the public, including Subscriber, from the SEC and
directly from the Company. Subscriber acknowledges that the Company has
delivered to Subscriber within a reasonable time prior to the execution of this
Subscription Agreement a copy of the following: (i) an Executive Summary dated
January 24, 2000; (ii) the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1999; (iii) the Company's Quarterly Report on Form 10-
QSB for the fiscal quarter ended June 30, 1999; (iv) Amendment No. 1 to the
Company's Registration Statement on Form S-3 (Registration No. 333-82499) filed
with the SEC on July 28, 1999; (v) the Company's definitive proxy statement
filed with the SEC on March 23, 1999 and an amendment thereto filed with the SEC
on April 12, 1999 relating to its 1999 Annual Meeting of Stockholders; (vi) the
Company's press releases since September 30, 1999; and (vii) such other
documents as
2
<PAGE>
Subscriber (and Subscriber's attorney, accountant and/or other advisors) deemed
pertinent in order for Subscriber to make an informed investment decision (the
documents identified in clauses (i) through (vii) herein are collectively
referred to herein as the "Documents"). The Documents contain "forward-looking
statements" about business strategies, market potential, future financial
performance and other matters. These forward-looking statements are predictions.
No assurances can be given that the future results indicated, whether expressed
or implied, will be achieved. Subscriber acknowledges and agrees that the
inclusion of forward-looking statements in the Documents should not be regarded
as a representation by the Company or any other person that these estimates will
be realized, and actual results may vary materially.
Subscriber further acknowledges that Subscriber is entering into this
Agreement solely on the basis of information contained in the Documents and not
on the basis of any information, representations or agreements made by any other
person, and that no representations or warranties of any nature have been made
to Subscriber with respect to the ultimate economic consequences or tax
consequences of Subscriber's investment in the Company. Subscriber acknowledges
that any forecasted financial data, if any, which may have been given to
Subscriber is for illustration purposes only and no assurance is given that
actual results will correspond with the results contemplated in any such data.
(d) Subscriber acknowledges that Subscriber has had the opportunity to
ask questions of, and receive answers from, or obtain additional information
from, the executive officers of the Company concerning the financial and other
affairs of the Company and the terms and conditions of its investment hereunder,
and, to the extent deemed necessary, Subscriber has asked such questions and
received satisfactory answers and desires to invest in the Company. In
evaluating the suitability of an investment in the Company, the Subscriber has
not relied upon any representations or other information (whether oral or
written) other than as set forth in this Agreement or as contained in any
documents delivered or answers given in writing by the Company to questions
furnished to the Company. Subscriber has been advised and acknowledges that no
federal or state agency has made any finding or determination as to the fairness
or merits of an investment in the Company and that no such agency has made any
recommendation or endorsement whatsoever with respect to such an investment.
(e) Subscriber is an "accredited investor" as that term is defined in
Rule 501 of Regulation D promulgated by the SEC under the Securities Act of
1933, as amended (the "Securities Act"). For this purpose, Subscriber
understands that an "accredited investor" includes:
(i) any individual who: (A) has a net worth (with spouse) in
excess of $1 million; or (B) has had an individual income in excess of
$200,000 (or joint income with spouse in excess of $300,000) in each of the
two most recent years and who reasonably expects the same income level for
the current year; or (C) who is an executive officer or director of the
Company;
(ii) any entity in which all of the equity owners or partners are
"accredited investors;" or
3
<PAGE>
(iii) any corporation or partnership with total assets in excess
of $5,000,000 that was not formed for the specific purpose of purchasing
the securities subscribed hereunder; or
(iv) any investment company registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), or a
business development company as defined in Section 2(a)(48) of the
Investment Company Act.
(f) Subscriber considers himself/herself/itself to be a sophisticated
investor in companies similarly situated to the Company, and Subscriber has
substantial knowledge and experience in financial and business matters
(including, without limitation, knowledge of finance, securities and
investments, generally, and experience and skill in investments based on actual
participation) such that Subscriber is capable of evaluating the merits and
risks of the prospective investment in the Company.
(g) Subscriber's current address and, if Subscriber is an entity, the
address of the office or offices of Subscriber where the investment decision
with respect to this Agreement was made, are as set forth on the signature page
hereto. If Subscriber is an entity which does not meet the classification set
forth under Section 2(e)(iii) or Section 2(e)(iv) above, each of Subscriber's
equity owners and/or partners has the same state of residence as the state in
which the office or offices of Subscriber are located where the investment
decision with respect to this Agreement was made, and none of Subscriber's
equity owners and/or partners has any present intention of moving from such
state of residency.
(h) Subscriber has been advised and acknowledges that the issuance of
the Shares will not be registered under the Securities Act, in reliance upon the
exemption(s) from registration promulgated thereunder, and, therefore, are
"restricted securities." Subscriber also acknowledges that the issuance of the
Shares will not be registered under the securities laws of any state.
Consequently, Subscriber agrees that the Shares cannot be resold unless they are
registered under the Securities Act and applicable state securities laws, or
unless an exemption from such registration requirements is available.
Subscriber has been advised and acknowledges that the Company is under no
obligation to take any action necessary in order to make available any exemption
for the transfer of the Shares without registration.
(i) Subscriber is purchasing the Shares solely for Subscriber's own
account and not as nominee for, representative of, or otherwise on behalf of,
any other person. Subscriber is purchasing the Shares with the intention of
holding the Shares for investment, with no present intention of participating
directly or indirectly in a subsequent public distribution of the Shares unless
registered under the Securities Act and applicable state securities laws, or
unless an exemption from such registration requirements is available. Subscriber
shall not make any sale, transfer or other disposition of the Shares in
violation of state or federal law.
(j) Subscriber has been advised that there is no assurance than an
active market for the Shares will continue in the future. Subscriber is aware
that Subscriber's investment in the Company is speculative and involves a high
degree of risk of loss arising from,
4
<PAGE>
among other things, substantial market, operational, competitive and other
risks, and, having made Subscriber's own evaluation of the risks associated with
this investment, Subscriber is aware and Subscriber has been advised that
Subscriber must bear the economic risks of a purchase of the Shares
indefinitely.
(k) Subscriber acknowledges that the Shares were not offered to
Subscriber by means of any form of general or public solicitation or general
advertising, or publicly disseminated advertisements or sales literature,
including, without limitation, (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which
Subscriber was invited by any of the foregoing means of communication.
(l) Subscriber understands and agrees that the Company, and all
current and future stockholders of the Company, are relying on the agreements
and representations contained herein.
(m) In connection with the purchase of the Shares by Subscriber,
Subscriber has not paid and will not pay, and has no knowledge of the payment
of, any commission or other direct or indirect remuneration to any person or
entity for soliciting or otherwise coordinating the purchase of the Shares,
except for fees paid to the Placement Agents.
(n) Subscriber has been advised and agrees that there will be placed
on any certificates representing the Shares, or any substitution(s) thereof, a
legend stating in substance the following (and including any restrictions or
conditions that may be required by any applicable state law), and Subscriber has
been advised and further agrees that the Company will refuse to permit the
transfer of the Shares out of Subscriber's name in the absence of compliance
with the terms of such legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
any state securities laws and may not be sold, pledged,
transferred, assigned or otherwise disposed of except in
accordance with such Act and the rules and regulations thereunder
and in accordance with applicable state securities laws. The
Company will transfer such shares only upon receipt of evidence
satisfactory to the Company, which may include an opinion of
counsel, that the registration provisions of such Act have been
compiled with or that such registration is not required and that
such transfer will not violate any applicable state securities
laws."
(o) Subscriber is aware that the Company may offer and sell additional
shares of Common Stock in the future, thereby diluting Subscriber's percentage
equity ownership of the Company.
(p) Subscriber is familiar with Regulation M promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), a copy of
which is attached
5
<PAGE>
hereto as Exhibit A, and is in full compliance with the provisions thereof with
---------
respect to the transactions contemplated hereby.
Subscriber represents that the foregoing representations and
warranties are true and correct as of the date hereof and, unless Subscriber
otherwise notifies the Company prior to the Closing Date, shall be true and
correct as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
3. Representations of the Company. As used in this Section 3, the following
------------------------------
capitalized terms shall have the meanings set forth below:
"Contract" means any agreement, indenture, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, insurance policy,
annuity, mortgage, restriction, commitment, obligation or other contract,
agreement or instrument (whether written or oral).
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Material Adverse Change" or "Material Adverse Effect" means, with
respect to any Person, any change or effect that is materially adverse to the
financial condition, business, prospects or results of operations of such
Person.
"Person(s)" means any individual, sole proprietorship, partnership, joint
venture, trust, limited liability company, incorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
Subscriber is subscribing for the Shares based upon the following
representations and warranties of the Company, which the Company hereby confirms
by accepting this subscription:
(a) Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Maryland
and has the corporate power to own and/or lease its properties and to conduct
its business in the places where such properties are now owned, leased or
operated or such business is presently conducted. The Company is duly qualified
and licensed as a foreign corporation in additional jurisdictions in which it
owns or leases real property or in which its operations or activities would
otherwise require such qualification, except where such failure to qualify would
not have a Material Adverse Effect on the Company.
(b) Authorization. The execution, delivery and performance of this
-------------
Agreement by the Company has been duly and validly authorized and approved by
its Board of Directors, and this Agreement, when executed by a duly authorized
officer of this Company, will be a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization or
6
<PAGE>
other similar laws and legal and equitable principles limiting or affecting the
rights of creditors generally and/or (ii) general principles of equity,
regardless of whether considered in a proceeding in equity or at law, and except
as rights to indemnification hereunder may be limited by federal or state
securities laws.
(c) Capitalization. The authorized capital stock of the Company
--------------
consists of 40,000,000 shares of Common Stock, $.01 par value per share. All
issued and outstanding shares of capital stock of the Company have been, and as
of the Closing Date will be, duly authorized and validly issued and are fully
paid and non-assessable. As of the date hereof, 7,250,326 shares of Common
Stock are issued and outstanding. The Company has a Stock Option Plan, pursuant
to which the Company has issued options to acquire up to an aggregate of 767,810
shares of Common Stock to its officers, directors, other employees and non-
employee consultants. As of the date hereof, 408,660 of such options are
exercisable under this plan.
(d) No Violations; Defaults. The execution and delivery of this
-----------------------
Agreement and the consummation of the transactions contemplated by this
Agreement will not (i) violate, result (with the lapse of time or giving of
notice, or both) in a violation of, conflict with, or constitute a default
under, or permit the termination or acceleration of the maturity of any material
indebtedness or material obligation of the Company; (ii) violate, result (with
the lapse of time or giving of notice, or both) in a violation of, conflict with
or constitute a default under, any material term of, or permit the termination
of, any material note, mortgage, indenture, license, agreement, contract,
arrangement, understanding or other instrument to which the Company is a party,
or by which it is bound, or the Articles of Incorporation or By Laws of the
Company; or (iii) violate any statute, law, rule, regulation or ordinance known
to the Company, or any judgment, decree, order regulation or rule of any court,
tribunal, administrative or governmental agency, body or entity to which the
Company or its properties are subject.
(e) Validity of Securities. The Shares, when issued, sold and
----------------------
delivered in accordance with the terms and conditions hereof, will be duly
authorized, validly issued, fully paid and non-assessable, and the delivery to
Subscriber of the Shares delivered pursuant to this Agreement shall vest in it
good title thereto, free of any and all liens, options, encumbrances, charges,
third-party rights or claims of any nature whatsoever except for restrictions on
transfers set forth herein or imposed by law.
(f) Disclosure. The Company is aware of no facts which lead it to
----------
believe that the Documents, as of their respective dates, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(g) Material Changes. Except as set forth in the Documents, or as
----------------
otherwise contemplated herein, since September 30, 1999, there has been no
Material Adverse Change in the Company, and there has not been (i) any direct or
indirect redemption, purchase or other acquisition by the Company of any shares
of the Common Stock, or (ii) declaration, setting aside or payment of any
dividend or other distribution by the Company with respect of the Common Stock.
7
<PAGE>
(h) No Commissions. In connection with the purchase of the Shares
--------------
hereunder, the Company has agreed to pay the Placement Agents a placement fee
and certain expenses relating to the transactions contemplated hereunder.
Except for such placement fee and expenses, the Company has not incurred any
other obligation for any finder's or broker's or agent's fees or commissions in
connection with the sale of the Shares.
(i) Consents/Approvals. No consent, approval, waiver or other action
------------------
by any Person under any Contract to which the Company is a party, or by which
any of its properties or assets are bound, is required or necessary for the
execution, delivery or performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby, except for such consents,
approvals or waivers that have been obtained or except where the failure to
obtain such consents, filings, authorizations, approvals or waivers or make such
filings would not have a Material Adverse Effect on the Company.
(j) SEC Reports and NASDAQ Compliance. Since September 30, 1998, the
---------------------------------
Company has made, in a timely fashion, all filings (as amended, the "SEC
Reports") required to be made by it under the Exchange Act. The SEC Reports,
when filed, complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act and the securities laws, rules and
regulations of any state and pursuant to the requirements of applicable law.
The Company will use its best efforts to ensure its continued inclusion in, and
the continued eligibility of the Common Stock for trading on, the NASDAQ
National Market under all currently effective and currently proposed inclusion
requirements prior to and after the Closing.
(k) Financial Statements. Each of the balance sheets included in the
--------------------
Documents (including any related notes and schedules) fairly presents in all
material respects the financial position of the Company as of its date, and each
of the other financial statements included in the Documents (including any
related notes and schedules) fairly presents in all material respects the
results of operations or other information therein of the Company for the
periods or as of the dates therein set forth in accordance with GAAP
consistently applied during the periods involved (except that the interim
reports are subject to normal recording adjustments which might be required as a
result of year-end audit and except as otherwise stated therein).
The Company represents that the foregoing representations and
warranties are true and correct as of the date hereof and, unless the Company
otherwise notifies Subscriber prior to the Closing Date, shall be true and
correct as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
4. Registration Rights.
-------------------
4.1 Registration of Shares. As soon as practicable, but in any event no
----------------------
later than 30 days after the Closing Date, the Company will file a registration
statement (the "Registration Statement") under the Securities Act with respect
to all of the Shares (collectively, the "Subject Stock"), and the Company shall
use its best efforts to cause such Registration Statement to become effective as
soon as practicable after filing; provided, however, that in the event that the
-------- -------
Company shall determine in good faith that complying with the foregoing 30-day
period would
8
<PAGE>
cause undue burden or expense to the Company, the Company shall, in its sole
discretion, have the option of extending such 30-day period for up to an
additional 30 days by giving notice to Subscriber 5 days prior to the expiration
of such 30-day period. In connection therewith, each holder of Shares (each, a
"Holder") will provide in a timely manner all such information and materials
pertaining to it as may be required in order to permit the Company to comply
with all applicable requirements of the SEC and to obtain the acceleration of
the effective date of the Registration Statement. In connection with such
registration, the Company shall:
(a) keep the Registration Statement effective until the earliest of
(i) when each Holder has sold its Subject Stock, (ii) two years following the
effective date of the Registration Statement, or (iii) the date all of the
Shares may be sold without volume limitations under Rule 144 under the
Securities Act of 1933);
(b) as expeditiously as possible furnish to each Holder such
reasonable numbers of copies of the prospectus as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Subject Stock;
(c) as expeditiously as possible use its best efforts to register or
qualify the Subject Stock under the securities or blue sky laws of such states
as Subscriber shall reasonably request, provided, however, that the Company
-------- -------
shall not be required in connection with this paragraph (c) to qualify as a
foreign corporation or execute a general consent to service of process in any
jurisdiction;
(d) pay all costs and expenses incident to registration hereunder,
except as set forth in Section 4.2.
4.2 Holder's Fees. Each Holder shall pay any and all underwriters'
-------------
discounts, brokerage fees and transfer taxes incident to the sale of the Subject
Stock sold by such Holder pursuant to this Section and the fees and expenses of
its counsel.
5. Indemnification.
---------------
5.1 Indemnification Generally. The Company shall indemnify Subscriber
-------------------------
from and against any and all losses, damages, liabilities, claims, charges,
actions, proceedings, demands, judgments, settlement costs and expenses of any
nature whatsoever (including, without limitation, attorneys' fees and expenses)
or deficiencies resulting from any material breach of a representation, warranty
or covenant by the Company and all claims, charges, actions or proceedings
incident to or arising out of the foregoing.
5.2 Indemnification Relating to Registration Rights.
-----------------------------------------------
(a) With respect to any registration, qualification or compliance
effected or to be effected pursuant to Section 4 of this Agreement, the Company
shall indemnify each Holder of the Shares which are included or are to be
included therein, each of such Holder's directors and officers, each underwriter
(as defined in the Securities Act) of the Shares sold by such
9
<PAGE>
Holder (if any), and each Person who controls (within the meaning of the
Securities Act) any such Holder or underwriter (a "Controlling Person") from and
against all losses, damages, liabilities, claims, charges, actions, proceedings,
demands, judgments, settlement costs and expenses of any nature whatsoever
(including, without limitation, attorneys' fees and expenses) or deficiencies of
any such Holder or any such underwriter or Controlling Person concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make a statement
therein, in the light of the circumstances under which it was made, not
misleading; or
(iii) any violation by the Company of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Company, or of any
blue sky or other state securities laws or any rule or regulation promulgated
thereunder applicable to the Company,
in each case, relating to any action or inaction required of the Company in
connection with any such registration, qualification or compliance, and subject
to Section 5.3 below will reimburse each such Person entitled to indemnity under
this Section for all legal and other expenses reasonably incurred in connection
with investigating or defending any such loss, damage, liability, claim, charge,
action, proceeding, demand, judgment, settlement or deficiency; provided,
--------
however, that the foregoing indemnity and reimbursement obligation shall not be
- -------
applicable to the extent that any such matter arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of such Holder or by or on behalf of such an
underwriter specifically for use in such prospectus, offering circular or other
document.
(b) With respect to any registration, qualification or compliance
effected or to be effected pursuant to this Agreement, each Holder of the Shares
which are included or are to be included therein, shall indemnify the Company
from and against all losses, damages, liabilities, claims, charges, actions,
proceedings, demands, judgments, settlement costs and expenses of any nature
whatsoever (including, without limitation, attorneys' fees and expenses) or
deficiencies of the Company concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance;
10
<PAGE>
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which it was made, not
misleading; or
(iii) any violation by such Holder of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Company or such
Holder or of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Company or such Holder,
in each case, relating to any action or inaction required of such Holder in
connection with any such registration, qualification or compliance, and subject
to Section 5.3 below will reimburse the Company for all legal and other expenses
reasonably incurred in connection with investigating or defending any such loss,
damage, liability, claim, charge, action, proceeding, demand, judgement,
settlement or deficiency; provided, however, that, the obligation of the Holder
-------- -------
hereunder shall be limited to an amount equal to the proceeds to the Holder of
the Shares sold as contemplated hereunder.
5.3 Indemnification Procedures. Each Person entitled to indemnification under
--------------------------
this Section (an "Indemnified Party") shall give written notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an "Indemnifying Party") of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, (i) the Indemnifying Party shall
assume the defense of such action if it is a claim brought by a third party,
(ii) the Indemnified Party shall, at the Indemnifying Party's expense and
reasonable request, cooperate with the Indemnifying Party in any such defense
and shall make available to the Indemnifying Party at the Indemnifying Party's
expense all those persons and documents (excluding attorney/client work product
materials) reasonably requested by the Indemnifying Party in defense of any such
action and (iii) after such assumption the Indemnified Party shall not be
entitled to reimbursement of any expenses incurred by it in connection with such
action except as described below. In any such action, any Indemnified Party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (x) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
contrary or (y) the named parties in any such action (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing or conflicting interests between them. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent (which shall not be unreasonably withheld
or delayed by such Indemnifying Party), but if settled with such consent or if
there be final judgment for the plaintiff, the Indemnifying Party shall
indemnify the Indemnified Party from and against any loss, damage or liability
by reason of such settlement or judgment.
11
<PAGE>
6. Use of Proceeds. Subscriber acknowledges that the Company intends to use
---------------
the proceeds of the private placement contemplated hereunder for general
corporate purposes, including, without limitation, potential acquisitions.
Subscriber acknowledges that some or all of the proceeds of the private
placement contemplated hereunder may be used for acquisitions by the Company,
and Subscriber is aware that the Company is in the process of actively looking
for potential acquisition candidates. Subscriber acknowledges that the Company
may not be able to find any attractive or suitable candidates for acquisition
and that the Company may not be able to negotiate suitable terms for the
acquisition of any potential candidates. Subscriber acknowledges that any
acquisition by the Company and subsequent integration of the acquired business
into the Company involves the risks described herein and in the Documents.
7. Miscellaneous.
-------------
7.1 Neither this Agreement nor any provisions hereof shall be modified,
discharged or terminated except by an instrument in writing signed by the party
against whom any such waiver, change, discharge or termination is sought to be
enforced.
7.2 Any notice, demand or other communication which any party hereby may
be required or may elect to give to anyone interested hereunder shall be deemed
effectively given (a) three business days after deposit, postage prepaid, in a
United States mail letter box, registered or certified mail, return receipt
requested, addressed to such address as may be given herein, (b) one business
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt, at such address, or (c)
upon personal delivery to the party to be notified at such address. The
Company's address for notices is set forth on the first page hereof, and the
Subscriber's address for notices is set forth on the signature page.
7.3 This Agreement may be executed through the use of separate signature
pages or in any number of counterparts, and each of such counterparts shall, for
all purposes, constitute one agreement binding on all the parties,
notwithstanding that all parties are not signatories to the same counterpart.
7.4 Except as otherwise provided herein, the agreement shall be binding
upon and inure to the benefit of the parties and their successors, legal
representatives and assigns.
7.5 This Agreement (including the Exhibits attached hereto) contains the
entire agreement of the parties, and there are no representations, covenants or
other agreements except as stated or referred to herein.
7.6 This Agreement is not transferable or assignable by Subscriber except
as may be provided herein.
7.7 This Agreement shall be governed by and construed in accordance with
the law of the State of New York applicable to agreements made and to be
performed in that State.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Subscription
Agreement to be duly executed and delivered as of the date set forth below.
NAME OF SUBSCRIBER: ADDRESS FOR NOTICES (Please Print):
_______________________ ____________________________________
____________________________________
SIGNATURE: ____________________________________
Attention:__________________________
By:____________________ Telecopy:___________________________
Name:__________________
Title:_________________ Tax Identification #:_______________
Exact Name to appear on Stock Certificate: ____________________________________
Number of Shares Subscribed For: ____________________________________
Price = $_____ (must be a whole
number of shares)
Aggregate Purchase Price (see Section 1.1):____________________________________
The Investor hereby provides the following additional information:
(a) Excluding the shares of Common Stock subscribed for above, set forth
below is the number of shares of Common Stock and options rights or warrants of
Integral Systems, Inc. ("Options" and together with the Common Stock,
"Securities") which Subscriber beneficially owns or of which Subscriber is the
------------ ----
record owner on the date hereof. Please refer to the definition of beneficial
----------
ownership on Exhibit B attached hereto. If none, please so state.
- --------- ---------
Number of Shares: ___________ (excluding the Shares subscribed for above)
Number of Options: ___________
Please indicate by an asterisk (*) above if Subscriber disclaims "beneficial
----------
ownership" of any of the above listed Securities, and indicate in response to
- ---------
question (b) below who has beneficial ownership.
(b) If Subscriber disclaims "beneficial ownership" in question (a), please
--------------------
furnish the following information with respect to the person(s) other than
Subscriber who is the beneficial owner(s) of the Securities in question. If not
applicable, please check box: [_]
Name of Beneficial Owner:_____________________________________
Relationship to Subscriber: __________________________________
Number of Securities Beneficially Owned:______________________
13
<PAGE>
NAME OF SUBSCRIBER:________________________
(c) Are any of the Securities listed in response to question (a) the
subject of a voting agreement, contract or other arrangement whereby others have
voting control over, or any other interest in, any of Subscriber's Securities?
Yes No
If the answer is "Yes," please give details:
(d) Please describe each position, office or other material relationship
which the Subscriber has had with the Company or any of its affiliates,
including any subsidiary of the Company, within the past three years. Please
include a description of any loans or other indebtedness, and any contracts or
other arrangements or transactions involving a material amount, payable by
Subscriber to the Company or any of its affiliates, including its subsidiaries,
or by the Company or any of its affiliates, including its subsidiaries, to
Subscriber. "Affiliates" of the Company include its directors and executive
officers, and any other person controlling or controlled by the Company. If
none, please so state.
Answer:
(e) Please provide the name and address of other person(s), if any, to
whom any proxy statements, registration statements (including notice of
effectiveness thereof), prospectuses or similar documents and information should
be delivered by the Company on behalf of Subscriber in the future, with respect
to Subscriber's shares:
______________________ ________________________
______________________ ________________________
______________________ ________________________
(f) Please advise of special stock certificate delivery requirements for
closing, if any:
(g) Please advise if a NASD member has placed with you the Shares being
purchased hereunder: (Name of Member:)_______________________________________
==============================================================================
ACCEPTED: INTEGRAL SYSTEMS, INC.
By:__________________________________________
Name: Steven R. Chamberlain
Title: Chief Executive Officer
14
<PAGE>
EXHIBIT A
Copy of Regulation M
<PAGE>
EXHIBIT B
Explanation of "BENEFICIAL OWNERSHIP"
Securities that are subject to a power to vote or dispose are deemed
beneficially owned by the person who holds such power, directly or indirectly.
This means that the same securities may be deemed beneficially owned by more
than one person, if such power is shared. In addition, the beneficial ownership
rules provide that shares which may be acquired upon exercise of an option or
warrant, or which may be acquired upon the termination of a trust, discretionary
account or similar arrangement, which can be effected within a period of 60 days
from the date of determination, are deemed to be "beneficially" owned.
Furthermore, shares that are subject to rights or powers even though such rights
or powers to acquire are not exercisable within the 60-day period may also be
deemed to be beneficially owned if the rights or powers were acquired "with the
purpose or effect of changing or influencing the control of the issuer or in
connection with or as a participant in any transaction having such purpose or
effect."
In determining whether securities are "beneficially owned," benefits which
are substantially equivalent to those of ownership by virtue of any contract,
understanding, relationship, agreement or other arrangement should cause the
securities to be listed as "beneficially owned."
Thus, for example, securities held for a person's benefit in the name of
others or in the name of any estate or trust in which such person may be
interested should also be listed. Securities held by a person's spouse,
children or other members of such person's family who are such person's
dependents or who live in such person's household should be listed as
"beneficially owned" unless such person does not enjoy benefits equivalent to
those of ownership with respect to such securities.
If a person has a proprietary or beneficial interest in a controlled
corporation, partnership, personal holding company, trust or estate which owns
of record or beneficially any securities, such person should state the amount of
such securities owned by such controlled corporation, partnership, personal
holding company, trust or estate in lieu of allocating such person's proprietary
interest, and by note or otherwise, please indicate that. In any case, the name
of the controlled corporation, partnership, personal holding company, or estate
must be stated.
In all cases the nature of the beneficial ownership should be stated.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated November 20, 1999
included in Integral Systems, Inc.'s Form 10-KSB for the year ended September
30, 1999 and to all references to our Firm included in this Registration
Statement.
/s/: Rubino & McGeehin, Chartered
RUBINO & MCGEEHIN, CHARTERED
Bethesda, Maryland
February 24, 2000
