Integral hires bank to explore possible sale

Satellite maker bows to demand of dissident major stockholder

April 13, 2006|By HANAH CHO | HANAH CHO,SUN REPORTER

Satellite maker Integral Systems Inc., under pressure to put itself up for sale, told shareholders at its meeting last night that it has hired an investment bank to get the process started.

The news, also disclosed in a regulatory filing yesterday, pleased the company's largest shareholder, which has been agitating for a sale since February.

But Mellon HBV Alternative Strategies LLC and the company's directors were still negotiating a deal last night to place one member on the board who would represent shareholders' interests and advocate a sale, said William F. "Mickey" Harley, Mellon's chief executive officer and top investment officer.

Mellon has a 12 percent stake in the company, or nearly 1.29 million shares.

The annual meeting, held at the Patuxent Greens Country Club in Laurel, is typically routine. But this year's meeting came amid conflict among shareholders and board members, as well as legal troubles facing the company's chief executive officer, Steven R. Chamberlain.

Chamberlain, who lives in Columbia, was indicted in February in Howard County on charges of sexual abuse of a minor and a third-degree sex offense. In past regulatory filings, the company said Chamberlain, whose trial is scheduled for July 24, maintains his innocence and says he will fight the charges.

Last night's 45-minute meeting included one item of official business. Shareholders overwhelmingly approved a new director, Mark Funston, a company nominee.

A short discussion ensued when Harley asked to speak about the company's corporate governance, saying it entrenched the board and disenfranchised shareholders.

In past regulatory filings, Harley proposed replacing Integral's board with one that would put the company up for sale, and he threatened legal action if the satellite maker did not hire an investment firm to pursue a sale.

One longtime shareholder, Bill Nicklin, said he supports the company's sale and management, but he also called for shareholder representation on the board.

"I think shareholders need to be adequately represented, but that doesn't mean you need a majority on the board," Nicklin said.

Harley also expressed frustration that Integral was strengthening ties with its current board members, rather than filling vacancies with Mellon's nominees.

"We've been working on a compromise. ... It's not been the smoothest path," Harley said.

Bonnie K. Wachtel, a longtime shareholder and an Integral director who declined to seek re-election this year, has criticized Chamberlain for not disclosing his legal problems earlier.

Wachtel, who had been calling for the company's sale, resigned Tuesday because of governance concerns.

Chamberlain said last night that he does not oppose having a shareholder advocate on the board, but noted that stockholders have benefited from management's decisions.

"I struggle to see where Mickey is coming from," he said. "We lost money only on two quarters ever, because of bad debt from the U.S. government."

Mellon and Integral's board of directors are close to reaching an agreement, so "there's no further need for hostility," said Harley. But he wouldn't rule out possible legal action.

Thomas L. Gough, Integral's president, said the board will take up the issue of putting a shareholder representative on the board at its quarterly meeting in May.

In a regulatory filing yesterday, the company said it hired BB&T Capital Markets/Windsor Group as an investment banker to "explore strategic alternatives, including a possible sale of the company, in order to maximize shareholder value."

Peter J. Gaffney, Integral's chief operating officer, told shareholders that "many companies" have informally expressed interest in buying the company.

hanah.cho@baltsun.com

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