<PAGE>
As filed with the Securities and Exchange Commission on December 15, 2000
Registration No. 333-48790
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
AMENDMENT No. 1
TO
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 Maximum Proposed 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 (3)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value 650,000 shares $15.563 $10,115,950 $2,672
$.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 October 20, 2000.
(3) Registrant previously paid $2,188 in connection with the filing of the
registration statement on October 27, 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>
Prospectus
Integral Systems, Inc.
650,000 shares
Common Stock
___________________________________________
The selling stockholder identified in this prospectus may offer and sell
from time to time up to 650,000 shares of our common stock. We will not receive
any proceeds from the sale of shares of common stock by the selling stockholder.
The selling stockholder acquired the shares of common stock offered by this
prospectus in connection with our acquisition of SAT Corporation, a California
corporation. Registering these shares of our common stock will allow the selling
stockholder to publicly sell or otherwise distribute his shares of common stock.
The selling stockholder 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 stockholder and any 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 stockholder or any
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.
Our common stock currently trades on the Nasdaq National Market under the
symbol "ISYS." On December 13, 2000, the closing price of our common stock was
$15.75 per share.
The purchase of our common stock involves a high degree of risk. You should
carefully consider the risk factors beginning on page 5 of this prospectus
before purchasing any of our common stock from the selling stockholder.
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 December 15, 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 STOCKHOLDER................................................ 16
DESCRIPTION OF CAPITAL STOCK....................................... 17
PLAN OF DISTRIBUTION............................................... 18
EXPERTS............................................................ 19
LEGAL MATTERS...................................................... 19
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES.................................................... 19
</TABLE>
We have informed the selling stockholder that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, may
apply to his sales in the market. We have furnished the selling stockholder
with a copy of these rules. We have also informed the selling stockholder that
he must deliver a copy of this prospectus with any sale of his 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 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 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. Our web site
address is www.integ.com.
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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
nine months ended June 30, 2000.
<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%
Nine months ended 63% 49%
June 30, 2000
</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;
. changes in level of government funds available for services that we
provide;
. 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 government
contracts generated approximately 23% of our revenues for fiscal year 1999 and
24% of our revenues for the nine-month period ended June 30, 2000. This includes
one contract that generated approximately 16% of our revenues for fiscal year
1999 and 21% of our revenues for the nine-month period ending June 30, 2000. 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 reason 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 with the U.S. government be 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
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any of our large 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 by us could
result in the termination of the contracts, imposition of fines 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 government
auditors 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.
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 government 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 to the extent that government
agencies believe our competitors offer a more attractive combination of the
foregoing factors. In addition, 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, the award of a contract to a
competitor, or the reopening of the competitive bidding process. 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.
In addition, 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.
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.
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Our commercial contracts are subject to competition and strict performance and
other 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, or 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.
Under the terms of our commercial contracts, we typically must agree to
meet strict performance obligations and project milestones, which we may not be
able to satisfy. 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, any of
which events could have a material adverse effect on our business, financial
condition, or results of operations.
We may not be able to effectively manage any continued growth.
Our revenues increased during fiscal years 1995 through 1999 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;
. Boeing Satellite Systems;
. Loral Space & Communications Ltd.;
. Orbital Sciences Corporation;
. Honeywell International Inc. (formerly AlliedSignal);
. Computer Sciences Corporation;
. Alcatel Espace; and
. Astrium.
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 resources of
their parent companies. We cannot assure that we will be able to compete
effectively with these
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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 satellites deployed be materially
reduced, our new business opportunities would be limited significantly.
We are subject to risks associated with our acquisition of SAT Corporation.
Pursuant to an agreement and plan of reorganization effective as of August
31, 2000, we acquired SAT Corporation, a California corporation and a supplier
of automatic signal monitoring systems and networks for satellite and
terrestrial monitoring applications. The integration of SAT 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 have adequately assessed the risks inherent in SAT or
correctly assessed SAT's potential contribution to our financial
performance;
. we may need to divert more management resources to the integration
of SAT than we planned, which may adversely affect our ability to
pursue other more profitable activities;
. the difficulties of the integration of SAT 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
acquiring SAT; and
. SAT may have liabilities or adverse operating issues that we failed
to discover through our due diligence prior to the acquisition.
Consequently, our acquisition of SAT may not improve our business, financial
condition, and results of operations in either the short-term or long-term.
We are subject to risks associated with our strategy of acquiring other
companies.
We intend to continue 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. If we are unable to identify and
acquire any suitable candidates, we may not be able to find alternative uses for
the cash proceeds of our previous private placements 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:
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. 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 due 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.
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.
Moreover, we have found obtaining insurance to cover product liability claims to
be impractical. Any product liability or related claim could therefore have a
material adverse effect on our business, financial condition, or results of
operations.
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. In addition, 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. To the extent that we cannot obtain
necessary technologies from third parties, our business, financial condition or
results of operations could be materially adversely affected. Furthermore, as
land-based telecommunications services expand, demand for certain types of
satellite-based services, such as the services we provide, 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 nine months ended June 30, 2000,
approximately 6% and 18%, 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. If we do enter into these
types of contracts in the future, the limited availability of U.S. currency in
certain local markets could prevent a contracting party from making payments to
us in U.S. dollars or exchange rate fluctuations could adversely affect our
revenues.
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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 or employment
agreements. In addition, although we are now requiring our new employees to sign
a confidentiality agreement when hired, none of our employees hired before mid-
December 2000, are subject to confidentiality agreements. For all of these
reasons, 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.
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; and
. Elaine M. Parfitt, Vice President and Chief Financial Officer.
We do not have employment, non-competition, or confidentiality agreements with
any of these individuals. 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 have purchased 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. We have
begun the process of registering many of our trademarks. In addition, we have
begun the process of registering the copyrights with respect to new versions of
our software as they are developed. Although we seek to protect our
intellectual property with a combination of common law and registered 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. 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. Moreover, we do not have non-competition agreements with any of our
employees or confidentiality agreements with any of our employees hired before
mid-December 2000. See "Risk Factors - We depend upon attracting and retaining
highly skilled professional staff" and "Risk Factors - We depend on the services
of our key personnel." 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 our intellectual property rights;
. subject us to significant liabilities;
. require us to seek licenses from third parties; or
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<PAGE>
. prevent us from selling our services or products.
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. 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, those problems could materially
limit our ability to perform these contracts.
Shares held by our current stockholders may adversely effect our stock price.
As of November 30, 2000, we had 9,447,518 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 650,000 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. 333-82499)
filed by the Company with the SEC on July 28, 1999;
. the 1,400,000 shares of common stock registered pursuant to Amendment
No. 1 to the Registration Statement on Form S-3 (File No. 333-31306)
filed by the Company with the SEC on March 23, 2000; and
. the 680,326 shares of common stock issued under our stock option plan.
Of the remaining 4,933,924 shares of our common stock, 537,905 shares are
held by affiliates and therefore subject to the volume and other limitations of
Rule 144 and 4,396,019 shares are freely tradable without
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<PAGE>
restriction or limitation under the Securities Act. We have reserved 1,119,674
shares of common stock for issuance under our stock option plan. We have issued
options to purchase a total of 1,485,076 shares of common stock under our stock
option plan, of which 804,750 have yet to be exercised and of which 348,378 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;
. changes in our earnings and revenues or quarterly operating results;
. announcements by competitors;
. 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.
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 were originally 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.
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<PAGE>
We may realize exposure and risk if our suppliers or customers are not "year
2000 compliant." The potential areas of exposure include electronic data
exchange systems operated by third parties with whom we transact business and
products purchased from third parties, such as computers, software, telephone
systems and other equipment used internally.
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 provide
us with products, components, services, or systems that meet year 2000
requirements. In the event that any such third parties cannot provide us with
products, services, or systems that meet the year 2000 requirements, our
business could be harmed.
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. 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 our future operations, performance or
position 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 SEC 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 its 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-Q for the quarter ended December 31,
1999;
(c) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
(d) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2000;
(e) Our Report on Form 8-K filed with the Commission on September 15,
2000; and
(f) 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 stockholder is
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 stockholder who offers and sells shares of the
common stock. We will not receive any proceeds from the sale of the common
stock offered by the selling stockholder pursuant to this prospectus.
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<PAGE>
SELLING STOCKHOLDER
Effective as of August 31, 2000, we entered into an agreement and plan of
reorganization pursuant to which we acquired SAT Corporation, a California
corporation. Under the terms of the agreement and plan of reorganization, our
wholly-owned subsidiary ISI Acquisition Corporation was merged with and into
SAT, with SAT as the surviving entity. At the time of the merger, SAT became a
wholly-owned subsidiary of Integral. Pursuant to the agreement and plan of
reorganization, the purchase price paid to Herbert Pardula, the sole shareholder
of SAT, consisted of 650,000 shares of our common stock, all of which shares are
being registered in connection with this prospectus. We are registering the
shares of common stock under registration rights granted to the selling
stockholder in the agreement and plan of reorganization. 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 the selling stockholder,
(2) the number of shares of outstanding common stock beneficially owned by the
selling stockholder as of the date of this prospectus, (3) the aggregate number
of shares of common stock that the selling stockholder may offer and sell for
his 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 the selling stockholder upon
completion of the offering made under this prospectus. During the last three
(3) years, prior to our acquisition of SAT, the selling stockholder was the
President and the sole shareholder of SAT. Since our acquisition of SAT, the
selling stockholder has been retained by SAT, our wholly-owned subsidiary, as a
consultant. To our knowledge, and except as otherwise indicated above, the
selling stockholder has not had within the past three years any other position,
office or other material relationship with us or any of our predecessors or
affiliates.
<TABLE>
<CAPTION>
Number of Shares
Name of Selling Beneficially Owned Number of Shares Number of Shares Beneficially
Security Holder Prior to Offering Offered Hereby Owned After Offering
--------------- ------------------- ----------------- ------------------------------
Number Percentage
------------ --------------
<S> <C> <C> <C> <C>
Herbert Pardula 650,000 650,000 0 --
c/o Frederick D. Lipman, Esq.
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
</TABLE>
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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 November 30, 2000, we had 9,447,518
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
stockholder in this prospectus, are fully paid and nonassessable.
We have reserved 1,119,674 shares of common stock for issuance under our
stock option plan. We have issued options to purchase a total of 1,485,076
shares of common stock under our stock option plan, of which 804,750 have yet to
be exercised and of which 348,378 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 our 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 our 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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<PAGE>
PLAN OF DISTRIBUTION
The selling stockholder, or his 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 stockholder may sell his 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 stockholder 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 stockholder, 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 stockholder and any other material information
with respect to the plan of distribution not previously disclosed.
In connection with our acquisition of SAT Corporation, the selling
stockholder has signed an affiliate agreement in which he has agreed that he
will not sell or transfer his interests in any of his shares of our common stock
until after the date we publish our results of post-acquisition operations for
the period which includes at least thirty (30) days of post-acquisition combined
operations of Integral and SAT. However, with our written approval, he may sell
or transfer his interests in some of his shares of our common stock before we
publish the results of post-acquisition operations in accordance with the
guidelines promulgated by the SEC.
The selling stockholder 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 stockholder can presently
estimate the amount of compensation that may be received by those underwriters,
brokers, dealers, or agents. We do not know of any existing arrangements between
the selling stockholder and any underwriter, broker, dealer, or other agent
relating to the sale or distribution of the shares of common stock identified in
this prospectus.
Under applicable rules and regulations under the Securities Exchange Act
of 1934, any person engaged in a distribution of any of the shares of our 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 stockholder 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 stockholder. 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 stockholder under this prospectus. In
addition, we have agreed to indemnify the selling stockholder against any
liability he suffers by reason of the registration of
18
<PAGE>
the shares of common stock arising from any untrue statement or omission of a
material fact, or violations of the securities laws that we commit, in
connection with the registration of the shares of common stock. We will
generally not be required to indemnify the selling stockholder for any liability
he suffers in connection with the registration of the shares of common stock to
the extent that the liability is caused by written information that the selling
stockholder provides to us.
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
will be passed upon for us by Venable, Baetjer and Howard, LLP.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our articles of incorporation and bylaws provide for the indemnification of
our directors, officers, employees and agents. We are required to indemnify, as
determined by the Board of Directors and to the extent permitted by Maryland
law, any director, officer, employee, or agent who is made, or threatened to be
made, a party to an action by reason of the fact that he or she served Integral
as a director, officer, employee, or agent. However, we are not required to
indemnify any director, officer, employee or agent under our articles of
incorporation or bylaws in connection with any matter with respect to which he
or she is adjudged to be liable for negligence or misconduct in the performance
of his or her duty. 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.
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<PAGE>
In addition, our articles of incorporation and bylaws require us to pay for
or reimburse any expenses incurred by any director, officer, employee, or agent
who is a party to an action by reason of the fact that he or she served Integral
as a director, officer, employee, or agent, to the extent permitted by Maryland
law. 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 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.
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.............. $ 2,672
Listing Fee -- Nasdaq National Market............................... 6,500
Legal Fees and Expenses............................................. 70,000
Printing and Engraving Expenses..................................... 5,000
Miscellaneous....................................................... 5,000
-------
Total............................................................... $89,172
=======
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.
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<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.
Insofar as indemnification for liabilities arising under the Securities Act
may be given to directors, officers and controlling persons of the issuer or
others under the above provisions, or otherwise, the 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
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<PAGE>
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.
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<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 Agreement and Plan of Reorganization dated August 31, 2000 among the
Company, SAT Corporation, ISI Acquisition Corporation and Herbert
Pardula (Incorporated by reference to the Company's Report on Form 8-K
filed by the Company with the Commission on September 15, 2000).
4.3 Shareholder Affiliate Agreement dated August 31, 2000 among the
Company, SAT Corporation and Herbert Pardula.*
4.4 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).
4.5 Bylaws 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.*
___________________
* Previously filed
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 of 1933;
(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 of 1933, 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.
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<PAGE>
(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 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.
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<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 15th day of December, 2000.
INTEGRAL SYSTEMS, INC.
By: /s/ Thomas L. Gough
---------------------------
Thomas L. Gough
President and Chief Operating Officer
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>
* Chief Executive December 15, 2000
---------------------------------
Steven R. Chamberlain Officer and Chairman (Principal
Executive Officer)
/s/ Thomas L. Gough Director, President December 15, 2000
---------------------------------
Thomas L. Gough and Chief Operating Officer
* Vice President, Chief Financial December 15, 2000
---------------------------------
Elaine M. Parfitt Officer, Treasurer and Secretary
(Principal Financial and
Accounting Officer)
* Director December 15, 2000
---------------------------------
Bonnie K. Wachtel
* Director December 15, 2000
---------------------------------
R. Doss McComas
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
* Director December 15, 2000
---------------------------------
Dominic A. Laiti
* Director December 15, 2000
---------------------------------
John R. Murphy
* By: /s/ Thomas L. Gough
---------------------------
Thomas L. Gough
Attorney-in-Fact
</TABLE>
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<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 Agreement and Plan of Reorganization dated August 31, 2000 among the
Company, SAT Corporation, ISI Acquisition Corporation and Herbert
Pardula (Incorporated by reference to the Company's Report on Form 8-K
filed by the Company with the Commission on September 15, 2000).
4.3 Shareholder Affiliate Agreement dated August 31, 2000 among the
Company, SAT Corporation and Herbert Pardula. *
4.4 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).
4.5 Bylaws 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. *
___________________
* Previously Filed
II-8
