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Thursday, October 26, 2006

Integral Systems (ISYS) Lower After Sales Process Proves Fruitless, Large Holder Wants Buyback

From 13D Tracker

Shares of Integral Systems, Inc., (Nasdaq: ISYS) are under pressure today after providing an update on its review of strategic alternatives.
The company said its efforts, which have been focused principally on a possible sale, have not resulted in any proposal. Therefore, the company said it has decided to explore other strategic alternatives to maximize stockholder value while still exploring a sale.
In a 13D filing after the close on Integral Systems, 12.1% shareholder Mellon HBV Alternative Strategies LLC disclosed a letter to the company dated October 22nd asking the company to consider a "broad range of alternatives". The firm suggested a Dutch auction to buyback a significant amount of its common stock.
Shares of Integral Systems are 11.6% lower to $27.94 in mid-day action Wednesday.
A Copy of the Letter:

To the Board of Directors:

As an alternative to the efforts of Integral Systems, Inc. to pursue anoutright sale, Mellon HBV Alternative Strategies LLC ("MHBV") asks that youconsider a broad range of alternatives to enhance shareholder value. As theCompany has a substantial amount of cash and unutilized debt capacity, webelieve a Dutch auction whereby the Company would buy back a significant amountof its common shares at or above current market prices would serve the goal ofenhancing shareholder value. Based on our understanding of current marketconditions, we are confident that the Company would find lenders willing tofinance such a buyback.

We believe a significant buyback would reflect the Company's belief in theinvestment value of its shares, while also providing a liquidity opportunity forthose of the Company's shareholders that may be interested in selling someportion of their position.

As you know, MHBV on behalf of affiliated investment funds and separatelymanaged accounts over which it exercises discretionary authority may be deemedthe beneficial owner of in excess of 1.3 million shares of Company common stock.As the Company's largest shareholder, we confirm that we would support effortsto explore alternative means of enhancing shareholder value, including thepossible pursuit of a Dutch auction style self tender or other significant stockbuyback program.

William F, Harley, III
Chief Executive Officer
Mellon HBV Alternative Strategies LLC

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