Amendment No. 2 to Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O3yKlw51ss1tr0UoPIa46yphIX6wcwoC1C9fp8rkXx9iH7sMWGMA1phMS58lWXAj kgOsd2XNcsTizowmIxyUWQ== 0001193125-10-228134.txt : 20101012 0001193125-10-228134.hdr.sgml : 20101011 20101012163900 ACCESSION NUMBER: 0001193125-10-228134 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20101012 DATE AS OF CHANGE: 20101012 GROUP MEMBERS: BRIAN R. KAHN GROUP MEMBERS: VINTAGE CAPITAL MANAGEMENT, LLC GROUP MEMBERS: VINTAGE PARTNERS, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRAL SYSTEMS INC /MD/ CENTRAL INDEX KEY: 0000718130 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 521267968 STATE OF INCORPORATION: MD FISCAL YEAR END: 0924 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-55793 FILM NUMBER: 101119586 BUSINESS ADDRESS: STREET 1: 6721 COLUMBIA GATEWAY DRIVE CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4435395008 MAIL ADDRESS: STREET 1: 6721 COLUMBIA GATEWAY DRIVE CITY: COLUMBIA STATE: MD ZIP: 21046 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: VINTAGE PARTNERS GP, LLC CENTRAL INDEX KEY: 0001449935 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 5506 WORSHAM COURT CITY: WINDEMERE STATE: FL ZIP: 34786 BUSINESS PHONE: 407-909-8015 MAIL ADDRESS: STREET 1: 5506 WORSHAM COURT CITY: WINDEMERE STATE: FL ZIP: 34786 FORMER COMPANY: FORMER CONFORMED NAME: VINTAGE PARTNERS LLC DATE OF NAME CHANGE: 20081112 SC 13D/A 1 dsc13da.htm AMENDMENT NO. 2 TO SCHEDULE 13D Amendment No. 2 to Schedule 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 2)*

Integral Systems, Inc.

(Name of Issuer)

Common Stock

(Title of Class of Securities)

45810H107

(CUSIP Number)

Bradley L. Finkelstein

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304

(650) 493-9300

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

October 8, 2010

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

*	The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

SCHEDULE 13D


CUSIP No. 45810H107
1.	Names of Reporting Persons. Vintage Partners, L.P.
2.	Check the Appropriate Box if a Member of a Group (See Instructions). (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ¨
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power None
		8.	Shared Voting Power 1,750,000
		9.	Sole Dispositive Power None
		10.	Shared Dispositive Power 1,750,000
11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,750,000
12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) ¨
13.	Percent of Class Represented by Amount in Row (11) 9.9%
14.	Type of Reporting Person (See Instructions) PN


CUSIP No. 45810H107		Schedule 13D		Page 3 of 10


CUSIP No. 45810H107
1.	Names of Reporting Persons. Vintage Partners GP, LLC
2.	Check the Appropriate Box if a Member of a Group (See Instructions). (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ¨
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power None
		8.	Shared Voting Power 1,750,000
		9.	Sole Dispositive Power None
		10.	Shared Dispositive Power 1,750,000
11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,750,000
12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) ¨
13.	Percent of Class Represented by Amount in Row (11) 9.9%
14.	Type of Reporting Person (See Instructions) OO


CUSIP No. 45810H107		Schedule 13D		Page 4 of 10


CUSIP No. 45810H107
1.	Names of Reporting Persons. Vintage Capital Management, LLC
2.	Check the Appropriate Box if a Member of a Group (See Instructions). (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ¨
6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power None
		8.	Shared Voting Power 1,750,000
		9.	Sole Dispositive Power None
		10.	Shared Dispositive Power 1,750,000
11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,750,000
12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) ¨
13.	Percent of Class Represented by Amount in Row (11) 9.9%
14.	Type of Reporting Person (See Instructions) OO


CUSIP No. 45810H107		Schedule 13D		Page 5 of 10


CUSIP No. 45810H107
1.	Names of Reporting Persons. Brian R. Kahn
2.	Check the Appropriate Box if a Member of a Group (See Instructions). (a) ¨ (b) ¨
3.	SEC Use Only
4.	Source of Funds (See Instructions) OO
5.	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ¨
6.	Citizenship or Place of Organization United States
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power None
		8.	Shared Voting Power 1,750,000
		9.	Sole Dispositive Power None
		10.	Shared Dispositive Power 1,750,000
11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,750,000
12.	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) ¨
13.	Percent of Class Represented by Amount in Row (11) 9.9%
14.	Type of Reporting Person (See Instructions) IN


CUSIP No. 45810H107		Schedule 13D		Page 6 of 10

This Amendment No. 2 amends the Schedule 13D filed with the Securities and Exchange Commission (“SEC”) on July 16, 2010, as amended, on behalf of Vintage Partners, L.P., Vintage Partners GP, LLC, Vintage Capital Management, LLC and Brian R. Kahn (the “Schedule 13D”). Unless set forth below, all disclosure previously included in the 13D is unchanged. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Schedule 13D.

Item 4.

Purpose of Transaction

Item 4 is amended and restated as follows:

The Reporting Persons have acquired the Issuer’s Common Stock for investment purposes, and such purchases have been made in the Reporting Persons’ ordinary course of business.

In pursuing such investment purposes, and subject to the limitations in the Agreement, as defined below, the Reporting Persons may further purchase, hold, vote, trade, dispose or otherwise deal in the Common Stock at times, and in such manner, as they deem advisable, subject to applicable law, to benefit from changes in market prices of such Common Stock, changes in the Issuer’s operations, business strategy or prospects, or from sale or merger of the Issuer. To evaluate such alternatives, the Reporting Persons will routinely monitor the Issuer’s operations, prospects, business development, management, competitive and strategic matters, capital structure, and prevailing market conditions, as well as other investment considerations. Consistent with their investment research methods and evaluation criteria, the Reporting Persons may, subject to the limitations in the Agreement, discuss such matters with management or directors of the Issuer, other shareholders, industry analysts, existing or potential strategic partners or competitors, investment and financing professionals, sources of credit and other investors. Such factors and discussions may materially affect, and result in, subject to the limitations set forth in the Agreement and applicable law, the Reporting Persons’ modifying their ownership of Common Stock, exchanging information with the Issuer pursuant to appropriate confidentiality or similar agreements, proposing changes in the Issuer’s operations, governance or capitalization, pursuing a transaction which would result in Reporting Persons acquisition of a controlling interest in the Issuer, or pursuing one or more of the other actions described in subsections (a) through (j) of Item 4 of Schedule 13D.

On August 18, 2010, the Reporting Persons delivered a letter to the Issuer with respect to recent changes approved by the Board of Directors (the “Board”) to the Issuer’s corporate governance. In the letter, the Reporting Persons express concern with respect to these changes and urge the Board to repeal the governance changes or submit them to a binding stockholder vote. The Reporting Persons also encourage the Issuer to provide the Reporting Persons information concerning the Issuer’s business. A copy of the letter is attached as Exhibit 1 to Amendment No. 1 of this Schedule 13D, filed on August 18, 2010, and incorporated herein by reference.

On October 8, 2010, the Reporting Persons entered into an agreement (the “Agreement”) with the Issuer providing for, among other things, (i) a temporary increase in the size of the Board to eleven (11) directors, (ii) the reassignment of one current Class I director as a Class II director and (iii) the appointment of Mr. Brian R. Kahn and Mr. Melvin L. Keating (the “New Directors”) to the Board as Class I directors, each having an initial term continuing until the Issuer’s 2011 annual meeting of stockholders (the “2011 Annual Meeting”), each effective October 8, 2010.

The Agreement provides that, from the date of the Agreement until immediately prior to the 2012 annual meeting (the “2012 Annual Meeting”) (such time period, the “Term”), if either of the New Directors remains in office, one of the New Directors will have the right, subject to compliance with applicable Securities and Exchange Commission (“SEC”) and NASDAQ corporate governance rules, to serve on each of the committees of the Board. Mr. Keating has been appointed to the Issuer’s audit and compensation committees, and Mr. Kahn has been appointed to the Issuer’s nominating, strategic growth and special litigation committees. The Agreement also provides that, so long as the Reporting Persons beneficially own more than 5% of the Issuer’s then outstanding common stock, (i) through the 2012 Annual Meeting, if a New Director resigns, is unable to serve as


CUSIP No. 45810H107		Schedule 13D		Page 7 of 10

a director or is removed for cause, the Reporting Persons have the right to submit the name of a replacement director for consideration by the Issuer, and (ii) the Issuer will not take any action to remove a New Director (including recommending to its stockholders the removal of either of the New Directors), other than for cause (as used in the Maryland General Corporation Law) until the Issuer’s 2014 annual meeting of stockholders.

The Issuer will compensate the New Directors for their services as described in the discussion of director compensation in the Issuer’s definitive proxy statement for its 2010 annual meeting of stockholders, filed with the SEC on January 11, 2010.

In addition, the Issuer agreed to: (i) nominate the New Directors for election and include the New Directors in the Board’s slate of nominees for election as directors at the 2011 Annual Meeting; (ii) obtain the resignation of two directors, other than the New Directors, effective no later than immediately prior to the 2011 Annual Meeting; (iii) reduce the size of the Board to nine (9) directors effective immediately prior to the 2011 Annual Meeting; (iv) seek to obtain proxies in favor of the election as directors for the New Directors at the 2011 Annual Meeting; (v) call and convene the 2011 Annual Meeting no later than February 28, 2011; (vi) call and convene the 2012 Annual Meeting no later than February 29, 2012; (vii) refrain from calling or convening an annual or special meeting of stockholders for the purpose of electing directors (other than the 2011 Annual Meeting and the 2012 Annual Meeting) prior to February 29, 2012; (viii) keep the size of the Board at no more than eleven (11) directors until the 2011 Annual Meeting; and (ix) keep the size of the Board at no more than nine (9) directors (including the New Directors) from the 2011 Annual Meeting until the 2012 Annual Meeting.

The Issuer also agreed that during the Term, it will not adopt a stockholder rights plan or other defensive device that is inconsistent with, or more restrictive with respect to Reporting Persons than the provisions of the Agreement.

The Reporting Persons have agreed to support the Issuer’s nominees for election as director at the 2011 Annual Meeting (including the New Directors) and to vote at the 2011 Annual Meeting all securities beneficially owned or owned of record by the members of the Reporting Persons in accordance with the Board’s recommendation with respect to the election of directors (provided that the New Directors are two of the Board’s nominees for election as director and the third nominee is an existing member of the Board), ratification of the Issuer’s current auditors, and say-on-pay proposals (provided that the compensation of the Issuer’s executives is consistent with compensation practices at the time of the Agreement).

The Reporting Persons also agreed that during the Term, unless approved by a majority of the entire Board, the members of the Reporting Persons and their associates will refrain from engaging in certain activities, either directly or indirectly, including: (i) acquiring, agreeing to acquire, publicly announcing an intention to acquire, publicly offering, publicly proposing to acquire, or agreeing to acquire, by purchase, gift, tender or exchange offer or otherwise, beneficial or record ownership of any securities of the Issuer (however, the Reporting Persons may increase, or publicly propose to increase, their ownership interest in the Issuer (whether owned beneficially or of record) to up to 25% of the then outstanding common stock of the Issuer in open market purchases, private purchases, block trades, or any other manner other than a tender or exchange offer (any shares of common stock of the Issuer owned beneficially or of record by the Reporting Persons in excess of 20% of the then outstanding shares of common stock of the Issuer during the Term and as of the end of the Term are referred to as the (“Neutral Shares”)); (ii) forming, joining, or participating in a “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to the Issuer’s securities or otherwise act in concert with any person with respect to the Issuer’s securities; (iii) arranging, or in any way participating in, any financing for the purchase by any person of shares of the Issuer’s common stock or other securities or assets or businesses of the Issuer and its affiliates; (iv) publicly proposing or seeking to propose to the Issuer or a third party an extraordinary corporate transaction involving the Issuer or its affiliates, including a merger, reorganization, recapitalization, extraordinary dividend, liquidation, sale or transfer of assets other than in the ordinary course of business; (v) publicly proposing or trying to publicly propose to the Issuer or any third party the acquisition or purchase of all or any portion of the assets of the Issuer by any member of the Reporting Persons; (vi) soliciting proxies for any securities of the Issuer or otherwise becoming a “participant,” directly or


CUSIP No. 45810H107		Schedule 13D		Page 8 of 10

indirectly, in any “solicitation” of “proxies” to vote, or becoming a “participant” in any “election contest” involving the Issuer or its securities (all terms used having the meanings assigned them in Regulation 14A under the Exchange Act); (vii) calling or seeking to call, directly or indirectly, a special meeting of the Issuer’s stockholders; (viii) seeking, requesting or taking any action to obtain or retain, directly or indirectly, any list of holders of any voting or other securities of the Issuer; (ix) publicly making a recommendation with respect to the voting of Issuer’s securities or recommending to any other stockholder that they vote contrary to the recommendations of the Board on any matter presented for a stockholder vote; (x) publicly seeking any change in the composition of the Board, including a change to the number of directors, the term of directors or to fill any vacancies on the Board; (xi) publicly proposing that the Issuer’s common stock become eligible for termination of registration under Section 12(g)(4) of the Exchange Act; (xii) making a public request that the prohibitions in the Agreement be waived or that the Issuer take action that would permit the Reporting Persons or their associates to take action prohibited by the Agreement, or otherwise making any public statement relating to the Reporting Persons’ willingness to pursue any such prohibited action conditioned upon waiver of the Agreement; (xiii) making, issuing or causing to be issued any public disclosure, public announcement or public statement to a third party about the Board or the management of the Issuer which disparages, criticizes or in any other way reflects adversely or detrimentally upon the Board or the management of the Issuer; (xiv) making, issuing or causing to be issued any disclosure, announcement or statement to a third party concerning the Board or the management of the Issuer, that is materially misleading, or omits to state a material fact necessary to make the statement, in light of the circumstances in which the statement is made, not misleading, or with the intent or purpose of defaming or disparaging the Board or the management of the Issuer; and (xv) initiating, soliciting, assisting, facilitating, financing, or encouraging or otherwise participating in the taking of any of the actions listed above by, or entering into any discussions, negotiations, arrangements, or understandings with, any third party with respect to any of the actions listed above. These standstill provisions will not: (i) prevent the New Directors from discharging their duties as directors; (ii) keep the Reporting Persons from taking actions necessary to comply with the advance notice provisions of the bylaws of the Issuer with respect to the nomination of directors or submission of proposals for the 2012 Annual Meeting; or (iii) prevent the Reporting Persons from soliciting proxies for the 2012 Annual Meeting beginning on the date that is sixty (60) days before the date that the 2012 Annual Meeting is scheduled.

The Agreement provides that the Reporting Persons may increase (or publicly propose to increase) their ownership interest (whether owned beneficially or of record) in the Issuer to up to 25% of the then outstanding common stock of the Issuer, and that subject to the continuing satisfaction of certain conditions set forth in the Agreement (which are described in the following sentence) and assuming that neither the Reporting Persons nor any member thereof is an “interested stockholder” (as defined in the Maryland Business Combination Act) of the Issuer on the date of the Agreement, the Maryland Business Combination Act (and, if it becomes applicable to the Issuer, the Maryland Control Share Acquisition Act) shall not apply to the Reporting Persons up to such amount, if acquired during the Term. The Agreement further provides that for purposes of the Maryland Business Combination Act and the Maryland Control Share Acquisition Act (should it be applicable to the Issuer), the Issuer’s approval of the increase by the Reporting Persons of their ownership interest in the Issuer to up to 25% of the outstanding common stock of the Issuer is conditioned upon and subject to: (i) the Reporting Persons or any member thereof, at no time during the Term, owning beneficially (as defined in the Maryland Business Combination Act) or of record, more than 25% of the outstanding common stock of the Issuer; (ii) the Reporting Persons complying in all material respects with all terms and conditions of the Agreement; and (iii) no material breach, default or violation by the Reporting Persons of any of the terms or conditions of the Agreement having occurred.

The Reporting Persons have agreed that at the 2012 Annual Meeting and for so long as a New Director or designee of the Reporting Persons serves as a director of the Issuer, unless approved by a majority of the entire Board, the Neutral Shares will, at the Reporting Persons’ election, either not be voted or be voted in accordance with the recommendation of the Board with respect to the election of directors, ratification of the Issuer’s auditors, and say-on-pay proposals (provided that the compensation of the Issuer’s executives is consistent with compensation practices at the time of the Agreement).


CUSIP No. 45810H107		Schedule 13D		Page 9 of 10

The Reporting Persons also agreed that for so long as any New Director or any designee of the Reporting Persons serves as a director of the Issuer, the Reporting Persons will not, without the prior written approval of a majority of the Independent Directors (described below) then serving on the Board, seek or offer to (i) acquire, beneficially or of record, securities of the Issuer representing 50% or more of the voting power of the then outstanding securities of the Issuer whether by purchase, tender or exchange offer, merger, consolidation or otherwise or (ii) acquire, directly or indirectly, all or substantially all of the assets of the Issuer.

For purposes of the Agreement, an “Independent Director” is a director who is not a New Director, a designee of the Reporting Persons, or otherwise affiliated with the Reporting Persons, does not have a conflict of interest with respect to the proposed transaction, is not in any way interested in the proposed transaction and meets the qualifications for independence under NASDAQ independence rules.

The full text of the Agreement is attached as Exhibit 1 and is incorporated herein by reference. The foregoing description does not purport to be a complete summary of the terms of the Agreement and is qualified in its entirety by reference to Exhibit 1.

Subject to the limitations set forth in the Agreement, the Reporting Persons reserve the right to formulate other plans and/or other proposals, and take such actions with respect to their investment in the Issuer, including any other or all of the actions set forth in paragraphs (a) through (j) of Item 4 of Schedule 13D, or acquire additional Common Stock or dispose of all the Common Stock beneficially owned by them, in the public market or privately negotiated transactions. The Reporting Persons may at any time reconsider and change their plans or proposals relating to the foregoing.

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities

Item 6 is hereby amended to add the following:

On October 8, 2010, the Reporting Persons and the Issuer entered into the Agreement defined and described in Item 4 above and attached as Exhibit 1 hereto.

Item 7.

Material to be Filed as Exhibits

Item 7 is hereby amended to add the following exhibits:

Exhibit 1: Agreement, dated as of October 8, 2010, by and among Integral Systems, Inc. and Vintage Partners, L.P., Vintage Partners GP, LLC, Vintage Capital Management, LLC and Brian R. Kahn.

Exhibit 2: Joint Press Release, dated October 8, 2010.


CUSIP No. 45810H107		Schedule 13D		Page 10 of 10

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


Date: October 11, 2010				/s/ Brian R. Kahn
				Brian R. Kahn, for (i) himself; (ii) as Manager of Vintage Partners GP, LLC, for itself and as General Partner of Vintage Partners, L.P.; and (iii) as Managing Member of Vintage Capital Management, LLC, Investment Manager of Vintage Partners, L.P.

EX-1 2 dex1.htm AGREEMENT AMONG INTEGRAL SYSTEMS, INC. AND VINTAGE PARTNERS Agreement among Integral Systems, Inc. and Vintage Partners

Exhibit 1

CONFIDENTIAL

AGREEMENT

THIS AGREEMENT (“Agreement”), dated as of October 8, 2010, is made by and among Integral Systems, Inc., a Maryland corporation (the “Company”), and the entities and natural persons listed on Schedule A hereto and their affiliates (collectively, the “Vintage Group”) (each of the Company and the Vintage Group, a “Party” to this Agreement, and collectively, the “Parties”).

WHEREAS, the Vintage Group may be deemed to beneficially own shares of common stock of the Company (the “Common Stock”) totaling, in the aggregate, 1,750,000 shares, or approximately 9.9%, of the Common Stock issued and outstanding on the date hereof; and

WHEREAS, the Company and the Vintage Group have agreed that it is in their mutual interests to enter into this Agreement.

NOW, THEREFORE, in consideration of and in reliance upon the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1. Representations and Warranties of the Vintage Group. The Vintage Group represents and warrants to the Company that (a) this Agreement has been duly authorized, executed and delivered by each member of the Vintage Group identified on Schedule A hereto, and is a valid and binding obligation of the Vintage Group, enforceable against the Vintage Group in accordance with its terms; (b) neither the execution of this Agreement nor the consummation of any of the transactions contemplated hereby nor the fulfillment of the terms hereof, in each case in accordance with the terms hereof, will conflict with, result in a breach or violation of any of the organizational documents of the Vintage Group as currently in effect, or the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which any member of the Vintage Group is a party or bound or to which its property or assets is subject; and (c) as of the date of this Agreement, the Vintage Group may be deemed to beneficially own in the aggregate 1,750,000 shares of Common Stock.

2. Representations and Warranties of the Company. The Company hereby represents and warrants to the Vintage Group that (a) this Agreement has been duly authorized, executed and delivered by the Company, and is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms; (b) neither the execution of this Agreement nor the consummation of any of the transactions contemplated hereby nor the fulfillment of the terms hereof, in each case in accordance with the terms hereof, will conflict with, result in a breach or violation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any law, any order of any court or other agency of government, the Articles of Restatement of the Company dated May 7, 1999, as supplemented by Articles Supplementary of the Company dated March 13, 2006, as supplemented by Articles Supplementary of the Company dated February 12, 2007, as amended by the Articles of Amendment dated February 26, 2009 and effective April 29, 2009, and as

supplemented by the Articles Supplementary of the Company, dated August 13, 2010 (collectively, the “Charter”), the Company’s Amended and Restated Bylaws, as amended (the “Bylaws”), or the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company is a party or bound or to which its property or assets is subject (collectively, the “Company Contracts”); and (c) attached as Exhibit B is a true, correct and complete copy of the resolutions adopted by the Board to effect the increase in the number of directors and the director appointments contemplated by Section 3, and such resolutions have not been amended, annulled, rescinded or revoked and remain in full force and effect.

3. Directorships.

(a) Effective on October 8, 2010, (i) the number of members of the board of directors of the Company (the “Board”) shall be increased by two (2) directors, (ii) one (1) current Class I Director will be re-assigned to Class II and thereupon, there shall be two (2) vacancies on the Board for Class I Directors and (iii) the New Appointees (as defined below) shall be appointed to fill such two (2) vacancies on the Board as Class I Directors. The Nominating Committee of the Board (the “Nominating Committee”) has, in good faith, reviewed and approved the credentials of Brian Kahn and Mel Keating (the “New Appointees”) in the exercise of their duties as directors of the Company, concluded that each of the New Appointees has business experience in such areas as would reasonably be expected to enhance the Board, and determined, consistent with the Company’s guidelines relating to director qualifications and Board composition, subject to the terms of this Agreement, to recommend the appointment of, and the Board has determined to appoint, the New Appointees to the Board.

(b) The Company further agrees to:

(i) take all actions necessary and appropriate to reduce the size of the Board to nine (9), effective immediately prior to the annual meeting of the Company’s stockholders in 2011 (the “2011 Meeting”), and obtain the resignation of two (2) directors of the Company other than the New Appointees, effective no later than immediately prior to the 2011 Meeting;

(ii) take all actions necessary and appropriate to nominate the New Appointees (or any replacement therefore nominated in accordance with Section 3(c)) for election as directors of the Company at the 2011 Meeting;

(iii) take all actions necessary and appropriate to recommend, and reflect such recommendation in the Company’s definitive proxy statement in connection with the 2011 Meeting, that the stockholders of the Company vote to elect the New Appointees (or any replacement nominated or appointed in accordance with Section 3(c)) as directors of the Company at the 2011 Meeting;

(iv) take all actions necessary and appropriate to call and convene the 2011 Meeting no later than February 28, 2011;

(v) use all efforts consistent with the efforts used by the Company to obtain proxies for the other candidates nominated by the Board to obtain proxies in favor of the election of the New Appointees (or any replacement nominated or appointed in accordance with Section 3(c)) at the 2011 Meeting;

-2-

(vi) take all actions necessary and appropriate to call and convene the 2012 annual meeting of the Company’s stockholders (the “2012 Meeting”) no later than February 29, 2012;

(vii) take all actions necessary and appropriate to not call and convene any other annual or special meeting of stockholders for the election of directors, other than the 2011 Meeting and the 2012 Meeting, prior to February 29, 2012;

(viii) use all reasonable efforts to ensure that, at all times from the execution of this Agreement until immediately prior to the 2012 Meeting (the “Term”) that either of the New Appointees (or any replacement nominated or appointed pursuant to Section 3(c)), remains in office, at least one such nominee shall have the right, subject to compliance with applicable Securities and Exchange Commission (the “SEC”) and NASDAQ corporate governance rules, to serve on each of the committees and sub-committees of the Board (or any substitutes therefor), including any committees and sub-committees of the Board (or any substitutes therefor) created after the date hereof;

(ix) use all reasonable efforts to ensure that, at all times during the Term prior to the 2011 Meeting, the Board shall consist of no greater than eleven (11) members; and

(x) use all reasonable efforts to ensure that, at all times following the 2011 Meeting and through the 2012 Meeting, the Board shall consist of no greater than nine (9) members (two (2) of whom shall be the New Appointees (or any replacement nominated or appointed pursuant to Section 3(c)).

(c) The Company agrees that, through the 2012 Meeting, so long as the Vintage Group’s beneficial ownership of the outstanding Common Stock is greater than 5% of the Common Stock outstanding at such time, if a New Appointee resigns or is otherwise unable to serve as a director or is removed for cause as a director, the Vintage Group shall have the right to submit the name of a replacement (the “Replacement”) to the Company for its reasonable approval to serve as director. If the proposed Replacement is not approved by the Nominating Committee and recommended by the Board, the Vintage Group shall have the right to submit another proposed Replacement to the Nominating Committee for its reasonable approval. The Vintage Group shall have the right to continue submitting the name of a proposed Replacement to the Nominating Committee for its reasonable approval until the Nominating Committee approves and the Board recommends that such Replacement may serve as director, whereupon such person shall be appointed as the Replacement, as the case may be. In addition, so long as the Vintage Group’s beneficial ownership of the outstanding Common Stock is greater than 5% of the Common Stock outstanding at such time, the Company agrees that it will take no action to remove either of the New Appointees (including without limitation recommending to the Company’s stockholders removal of either of the New Appointees), other than for cause (as such term is used in the Maryland General Corporation Law), until the Company’s 2014 annual meeting of stockholders.

(d) Each of the New Appointees, upon election to the Board, will be governed by the same protections and obligations regarding confidentiality, conflicts of interests, directors’ duties, trading and disclosure policies and other governance guidelines, and shall have the same rights and benefits, including without limitation with respect to insurance, indemnification, compensation and fees, as are generally applicable to any non-employee directors of the Company.

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(e) The Vintage Group agrees to support the nominees for director presented by the Board for election at the 2011 Meeting (which shall include the New Appointees). At the 2011 Meeting, the Vintage Group shall cause all voting securities of the Company beneficially owned or owned of record by each member of the Vintage Group to be present at such meeting for purposes of establishing a quorum and to be voted (either in person or by directing that any proxy granted with respect to such meeting be voted) in accordance with the recommendation of the Board with respect to (i) the election of directors (provided that the New Appointees constitute two (2) of the three (3) directors nominated and the other nominee is an existing member of the Board), (ii) ratification of the Company’s current auditors and (iii) say-on-pay proposals (provided that compensation for the Company’s executives included therein is consistent with practices in effect as of the date hereof). No later than five (5) business days prior to such meeting of stockholders, the Vintage Group shall vote in accordance with this Section 3(e) and shall not revoke or change any such vote.

(f) Nothing in this Section 3 shall prevent the members of the Board from discharging their duties as directors of the Company.

4. Certain Activities During the Term. The Vintage Group agrees that, during the Term, unless approved by a majority of the entire Board, neither any member of the Vintage Group nor any of its associates (as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) will (and the Vintage Group and their associates will not assist, encourage or participate with others to), directly or indirectly:

(a) acquire, agree to acquire, publicly announce an intention to acquire, publicly offer, publicly seek or publicly propose to acquire, or agree to acquire, by purchase, gift, tender or exchange offer, or otherwise, beneficial or record ownership of any shares of Common Stock or any other securities or Derivative Securities (as hereinafter defined) of the Company, including any rights, warrants, options or other securities convertible into or exchangeable for shares of Common Stock or any other securities of the Company from the Company or third parties, except as a result of a stock split, stock dividend or other pro rata distribution made by the Company to its stockholders and in which any member of the Vintage Group participates solely in its capacity as a stockholder; provided, however, that the Vintage Group may increase (or publicly propose to increase) its ownership interest (whether owned beneficially or of record) in the Company to up to 25% of the then-outstanding Common Stock (including the amounts that may be deemed to be owned, whether beneficially or of record, by the Vintage Group as of the date hereof) in open market purchases, private purchases, block trades or any other manner other than a tender or exchange offer (and, subject to the continuing satisfaction of the conditions set forth in the last paragraph of this Section 4 and assuming that neither the Vintage Group nor any member thereof is an interested stockholder (as defined in the Maryland Business Combination Act) of the Company on the date hereof, the Maryland Business Combination Act (and, if it becomes applicable to the Company, the Maryland Control Share Acquisition Act) shall not apply to the Vintage Group up to such amount, if acquired during the Term); any shares of Common Stock owned beneficially or of record by the Vintage Group in excess of 20% of the then-outstanding Common Stock of the Company during the Term and as of the end of the Term are referred to in this Agreement as the “Neutral Shares”;

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(b) form, join or in any way participate in a “group” within the meaning of Section 13(d)(3) of the Exchange Act with respect to the Common Stock or any other securities or Derivative Securities of the Company or otherwise act in concert with any person in respect of any such securities;

(c) arrange, or in any way participate in, any financing for the purchase by any person of shares of Common Stock or any other securities or assets or businesses of the Company or any of its affiliates;

(d) publicly propose or seek to propose to the Company or any third party any extraordinary corporate transaction involving the Company or any of its affiliates, including a merger, reorganization, recapitalization, extraordinary dividend, liquidation, sale or transfer of assets other than in the ordinary course of the Company’s business (it being understood that this clause (d) shall not address acquisitions of securities that are the subject of clause (a) above);

(e) publicly propose or seek to publicly propose to the Company or any third party the acquisition or purchase by any member of the Vintage Group of all or any portion of the assets of the Company (it being understood that this clause (e) shall not address acquisitions of securities that are the subject of clause (a) above);

(f) (i) solicit proxies for the voting of any voting or other securities of the Company or otherwise become a “participant,” directly or indirectly, in any “solicitation” of “proxies” to vote, or become a “participant” in any “election contest” involving the Company or its securities (all terms used herein having the meanings assigned them in Regulation 14A under the Exchange Act), (ii) call or seek to call, directly or indirectly, any special meeting of stockholders of the Company for any reason whatsoever, (iii) seek, request, or take any action to obtain or retain, directly or indirectly, any list of holders of any voting or other securities of the Company, (iv) publicly make any recommendation with respect to the voting of any securities of the Company or (v) make any recommendation to any other stockholder of the Company to vote contrary to the recommendation of the Board on any matter presented to the Company’s stockholders for their vote.

(g) publicly seek any change in the composition of the Board of the Company, including any plans or proposals to change the number or term of directors or to fill any vacancies on the board of directors;

(h) publicly propose that the Common Stock become eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act;

(i) make a public request that the prohibitions set forth in this Agreement be waived or that the Company take any action that would permit the Vintage Group or its associates to take any of the actions prohibited by this Agreement, or otherwise make any public statement relating to the Vintage Group’s willingness to pursue any such prohibited action conditioned upon waiver of this Agreement;

(j) make or issue or cause to be made or issued any public disclosure, public announcement or public statement to any third party (including without limitation the filing of any document or report with the Securities and Exchange Commission or any public filing with any other governmental agency or any disclosure to any journalist or member of the media) concerning the Board or the management of the Company, which disparages, criticizes or in any other way reflects adversely or detrimentally upon the Board or the management of the Company;

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(k) make or issue or cause to be made or issued any disclosure, announcement or statement, whether publicly or privately, to any third party (including without limitation any securities analyst) concerning the Board or the management of the Company, (i) that is materially misleading, or omits to states a material fact necessary in order to make the statement, in light of the circumstances in which such statement is made, not misleading, or (ii) with the intent or purpose of defaming or disparaging the Board or the management of the Company; or

(l) initiate, solicit, assist, facilitate, finance, or encourage or otherwise participate in the taking of any of the foregoing actions by any third party or enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing actions.

Notwithstanding the foregoing, nothing in this Section 4 shall prevent: (i) the New Appointees from discharging their duties as directors of the Company; (ii) the Vintage Group from taking any actions necessary to comply with the advance notice provisions of the bylaws of the Company with respect to nomination of directors or submission of proposals for the 2012 Meeting; or (iii) the Vintage Group from soliciting proxies for the 2012 Meeting beginning on the date that is sixty (60) days before the date on which the 2012 Meeting is scheduled to be held.

For the purposes of this Agreement, “Derivative Securities” means any rights, options or other securities convertible into or exercisable or exchangeable for securities or indebtedness or any obligations measured by the price or value of any securities, bank debt or other obligations of the Company, including without limitation any swaps or other derivative arrangements.

For purposes of the Maryland Business Combination Act and the Maryland Control Share Acquisition Act (should it be applicable to the Company), the approval of the increase by the Vintage Group of its ownership interest in the Company of up to 25% of the outstanding Common Stock of the Company (including the amounts that may be deemed to be beneficially owned by the Vintage Group as of the date hereof) is conditioned upon and subject to: (i) the Vintage Group or any member thereof, at no time during the Term, owning, beneficially (as defined in the Maryland Business Combination Act) or of record, more than 25% of the outstanding Common Stock of the Company; (ii) the Vintage Group complying in all material respects with all terms and conditions of this Agreement; and (iii) no material breach, default or violation by Vintage Group of any of the terms or conditions of this Agreement having occurred. It is the intention of the Company that as permitted by Section 3-601(j)(4) of the Maryland General Corporation Law, the approval by the Board of the increase by Vintage Group of its ownership interest in the Company to up to 25% of the outstanding Common Stock shall be subject to compliance by the Vintage Group with the conditions set forth in the immediately preceding sentence.

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5. Certain Other Activities. The Vintage Group agrees that:

(a) at the 2012 Meeting, and thereafter for so long as any New Appointee or any other designee of the Vintage Group serves as a director of the Company (unless otherwise approved by a majority of the entire Board), the Neutral Shares shall, at the Vintage Group’s election, solely with respect to the election of directors, ratification of auditors and say-on-pay proposals (provided that compensation for the Company’s executives included therein is consistent with practices in effect as of the date hereof), either (i) not be voted or (ii) be voted in accordance with the recommendation of the Board; and

(b) for so long as any New Appointee or any designee of the Vintage Group serves as a director of the Company, the Vintage Group shall not, without the prior written approval of a majority of the Independent Directors (as hereinafter defined) then serving on the Board, seek or offer to (i) acquire, beneficially or of record, securities of the Company representing 50% or more of the voting power of the then-outstanding securities of the Company, whether by purchase, tender or exchange offer, merger, consolidation or otherwise or (ii) acquire, directly or indirectly, all or substantially all of the assets of the Company.

For purposes of this Agreement, an “Independent Director” shall be a director who (i) is not a New Appointee, a designee of the Vintage Group or otherwise affiliated with the Vintage Group, (ii) does not have a conflict of interest with respect to the proposed transaction and is not in any way interested in the proposed transaction and (iii) meets the qualifications for independence under NASDAQ Rule 5605 or any successor rule.

6. Rights Plan. The Company agrees that, during the Term, it will not implement a shareholder rights plan (also know as a “poison pill”) or other similar defensive device that is inconsistent with, or more restrictive with respect to the Vintage Group than, the provisions of Section 4, including, without limitation, the ability of the Vintage Group to acquire up to 25% of the then-outstanding Common Stock.

7. Expenses. Each Party shall bear all fees and expenses incurred by such Party in connection with this Agreement and the circumstances giving rise hereto, and neither Party shall seek or be entitled to reimbursement of any such fees and expenses from the other Party.

8. Public Announcement. The Company and the Vintage Group shall promptly disclose the existence of this Agreement after its execution pursuant to a joint press release that is mutually acceptable to the parties, including a description of the material terms of this Agreement. Subject to applicable law, none of the Parties shall disclose the existence of this Agreement until the joint press release is issued.

9. Nonpublic Information.

In connection with discussions between the Vintage Group and their representatives and the Company and its representatives, or otherwise during the Term, the Vintage Group or their representatives have obtained, and may in the future obtain, information about the Company or its securities that is confidential. Each member of the Vintage Group agrees to treat confidentially any such information pursuant to the terms of the Confidentiality Agreement, dated as of September 23, 2010, between the Company and Vintage Capital Management, LLC.

10. Remedies.

(a) Each of the Parties acknowledges and agrees that a breach or threatened breach by any Party may give rise to irreparable injury inadequately compensable in damages, and accordingly each Party shall be entitled to injunctive relief to prevent a breach of the provisions hereof and to enforce specifically the terms and provisions hereof in any state or federal court having jurisdiction, in addition to any other remedy to which such aggrieved Party may be entitled to at law or in equity.

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(b) In the event that a Party institutes any legal action to enforce such Party’s rights under, or recover damages for breach of, this Agreement, the prevailing Party or Parties in such action shall be entitled to recover from the other Party or Parties all costs and expenses, including but not limited to reasonable attorneys’ fees, court costs, witness’ fees, disbursements and any other expenses of litigation or negotiation incurred by such prevailing Party or Parties.

(c) In the event that the Company (on the one hand) or any member of the Vintage Group (on the other hand) materially breaches its obligations hereunder, and such breach, to the extent curable, is not cured within ten (10) days of receiving written notice thereof from the non-breaching Party, then the obligations, and restrictions imposed, under this Agreement on the non-breaching Party shall terminate.

11. Notices. Any notice or other communication required or permitted to be given under this Agreement will be sufficient if it is in writing, sent to the applicable address set forth below (or as otherwise specified by a Party by notice to the other Parties in accordance with this Section 11) and delivered personally, mailed by certified or registered first-class mail or sent by recognized overnight courier, postage prepaid, and will be deemed given (a) when so delivered personally, (b) if mailed by certified or registered first-class mail, three (3) business days after the date of mailing, or (c) if sent by recognized overnight courier, one (1) day after the date of sending.

If to the Company:

Integral Systems, Inc.

6721 Columbia Gateway Drive

Columbia, Maryland 21046

Attention: R. Miller Adams

Telephone: (443) 539-5016

Facsimile: (410) 312-2980

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP

1050 Connecticut Ave., NW

Washington, DC 20036

Attention: Howard B. Adler

Telephone: (202) 955-8589

Facsimile: (202) 530-9526

If to the Vintage Group:

Vintage Partners, L.P.

5506 Worsham Court

Windermere, Florida 34786

Attention: Brian Kahn

Telephone: (407) 909-8015

Facsimile: (208) 728-8007

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with a copy (which shall not constitute notice) to each of:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304

Attention: Bradley L. Finkelstein

Telephone: (650) 493-9300

Facsimile: (650) 493-6811

DLA Piper LLP

6225 Smith Avenue

Baltimore, Maryland 21209

Attention: Robert “Jay” Smith, Jr.

Telephone: (410) 580-4266

Facsimile: (410) 580-3266

12. Entire Agreement. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions of the Parties in connection with the subject matter hereof.

13. Counterparts; Facsimile. This Agreement may be executed in any number of counterparts and by the Parties in separate counterparts, and signature pages may be delivered by facsimile, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

14. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

15. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland, without regard to choice of law principles that would compel the application of the laws of any other jurisdiction.

16. Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

17. Successors and Assigns. This Agreement shall not be assignable by any of the Parties. This Agreement, however, shall be binding on successors of the Parties.

18. Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by all of the Parties.

19. Further Action. Each Party agrees to execute such additional reasonable documents, and to do and perform such reasonable acts and things necessary or proper to effectuate or further evidence the terms and provisions of this Agreement.

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[Signatures are on the following page.]

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CONFIDENTIAL

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written.


INTEGRAL SYSTEMS, INC.

By:	/s/ Paul G. Casner, Jr.
	Name:	Paul G. Casner, Jr.
	Title:	Chief Executive Officer and President

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written.


BRIAN R. KAHN

By:	/s/ Brian R. Kahn

VINTAGE PARTNERS GP, LLC

By:	/s/ Brian R. Kahn
	Name:	Brian R. Kahn
	Title:	Manager

VINTAGE PARTNERS, L.P.

By:	Vintage Partners GP, LLC, its General Partner

By:	/s/ Brian R. Kahn
	Name:	Brian R. Kahn
	Title:	Manager

VINTAGE CAPITAL MANAGEMENT, LLC

By:	/s/ Brian R. Kahn
	Name:	Brian R. Kahn
	Title:	Managing Member

Schedule A

The Vintage Group

Vintage Partners, L.P.

Vintage Partners GP, LLC

Vintage Capital Management, LLC

Brian R. Kahn

EX-2 3 dex2.htm JOINT PRESS RELEASE Joint Press Release

Exhibit 2

LOGO

6721 Columbia Gateway Drive • Columbia • Maryland • 21046 • U.S.A.

Telephone: 443.539.5008 • Fax: 410.312.2705 • Internet: sales@integ.com • Web: http://www.integ.com

Integral Systems Reaches Agreement with the Vintage Group

COLUMBIA, Md, October 8, 2010 – Integral Systems, Inc. (NASDAQ: ISYS) and Vintage Partners, L.P., Vintage Partners GP, LLC, Vintage Capital Management, LLC and Brian R. Kahn (the “Vintage Group”) announced today that they have reached an agreement resulting in the appointment of two new directors to the Integral Systems’ Board of Directors.

Pursuant to the terms of the agreement, Integral Systems has temporarily increased the size of the Board of Directors to 11 directors and appointed Mr. Brian R. Kahn and Mr. Melvin L. Keating as new Class I directors to the Board of Directors, each having an initial term continuing until the Company’s 2011 annual meeting of stockholders. The agreement provides that the Company will call and convene the 2011 annual meeting of stockholders no later than February 28, 2011. In addition, immediately prior to the 2011 annual meeting of stockholders, the number of directors will be reduced to nine. Mr. Kahn and Mr. Keating will also be included in the Company’s proxy statement as candidates for election at the Company’s 2011 annual meeting of stockholders. In connection with the agreement, Ms. Bonnie K. Wachtel has moved from a Class I director to a Class II director, having a term continuing until the Company’s 2012 annual meeting of stockholders. Mr. Keating will join the Company’s audit and compensation committees, and Mr. Kahn will join the Company’s nominating, strategic growth and special litigation committees.

As part of the agreement, the Company and the Vintage Group have agreed to certain standstill provisions that will remain in effect until immediately prior to the Company’s 2012 annual meeting of stockholders. The standstill provisions generally permit the Vintage Group to increase its ownership to 25% of the Company’s then outstanding common stock (subject to certain limitations with respect to voting shares in excess of 20%) and do not restrict the Vintage Group from making nominations of directors and soliciting proxies for the 2012 annual meeting of stockholders.

“On behalf of the Board, we are pleased to welcome Brian Kahn and Mel Keating to the Integral Systems Board,” said Dr. John (Jack) M. Albertine, Chairman of Integral Systems’ Board of Directors. “Brian and Mel have a proven track record of delivering shareholder value and we look forward to their constructive participation in strengthening Integral Systems.”

“The Board is committed to serving the best interests of all Integral Systems shareholders. The agreement announced today, and the addition of Brian and Mel to the Board, will continue to support our unwavering focus on efficient operations, business growth and delivering shareholder value.”

“Brian and Mel bring a broad set of industry experience and business expertise to the Board,” commented Paul G. Casner, Chief Executive Officer of Integral Systems. “Their expertise and engagement will be valuable as we continue to focus on establishing an efficient operating structure to support dynamic business growth. We look forward to the contributions and value they will provide.”

Brian Kahn, Managing Partner and founder of Vintage Capital Management commented, “We are looking forward to working closely with Integral Systems’ Board to drive improved profitability by reducing its cost structure while continuing to grow Integral Systems’ business by delivering superior products, systems, and services to its customers. Integral Systems has a history of delivering innovative technology for the infrastructure of our most critical communications systems. We believe this agreement demonstrates Integral Systems’ commitment to enhancing shareholder value and we look forward to working together toward that goal.”

For additional information about the agreement, please see the Current Report on Form 8-K, filed by Integral Systems with the Securities and Exchange Commission on October 8, 2010.

ABOUT INTEGRAL SYSTEMS

Integral Systems, Inc., of Columbia, Md, applies more than 25 years experience to provide integrated technology solutions for satellite communications-interfaced systems. Customers have relied on the Integral Systems family of companies (Integral Systems, Inc., Integral Systems Europe, Lumistar, Inc., Newpoint Technologies, Inc., RT Logic and SAT Corporation) to deliver on time and on budget for more than 250 satellite missions. Our dedication to customer service has solidified long-term relationships with the U.S. Air Force, NASA, NOAA, and nearly every satellite operator in the world. For more information, visit www.integ.com.

ABOUT VINTAGE

Vintage Capital Management is a value-oriented private equity investment firm specializing in the defense, manufacturing and consumer sectors. Vintage partners with proven management teams to target situations where there is a verifiable opportunity to significantly enhance a company’s value through the Vintage operational and strategic approach. Since its establishment as Kahn Capital Management in 1998, VCM and its principals have had a successful history of identifying, analyzing, and investing in high quality, lower-middle market companies in its target sectors. For more information, please see www.vintcap.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act. Such forward-looking statements include, but are not necessarily limited to, the Company’s operations, growth and shareholder value and similar statements concerning future events and expectations that are not historical facts. These forward-looking statements are based on current information and expectations. Integral Systems cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the Company’s reliance on contracts and subcontracts funded by the U.S. government, intense competition in the ground systems industry, the competitive bidding process to which the Company’s government and commercial contracts are subject, the Company’s dependence on the satellite industry for most of its revenues, rapid technological changes in the satellite industry, the Company’s acquisition strategy and other risks and uncertainties noted in the Company’s Securities and Exchange Commission filings, including the Annual Report on Form 10-K for the year ended September 25, 2009, and subsequent filings. Integral Systems undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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Company Contact:

Andrew Miller

Vice President, External Communications

Integral Systems, Inc.

Phone: 443.539.5124

amiller@integ.com

Vintage Group Contact:

Brian Randall Kahn

Phone: 407.907.8015

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