The announcement by Integral Systems, Inc that its board of directors agreed to a takeover of Integral Systems by a subsidiary of Kratos Defense & Security Solutions, Inc has prompted an investigation on behalf of investors of Integral Systems, Inc. (NASDAQ:ISYS) concerning whether the proposed acquisition is unfair to ISYS stockholders and whether certain directors and officers breached their fiduciary duties.

The investigation by a law firm concerns whether certain directors and officers at Integral Systems, Inc. or others breached their fiduciary duties in connection the proposed merger.

On May 16, 2011, Integral Systems, Inc. (NASDAQ-ISYS) announced that it has entered into an agreement under which it will be merged with a subsidiary of Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) in a cash-and-stock transaction for an enterprise value of approximately $266 million.

Pursuant to the agreement, Integral Systems stockholders will receive an amount in cash and stock having an aggregate value of approximately $13.00 per share as of the date of the agreement. Specifically, each Integral Systems share will be converted into $5.00 in cash and 0.588 of a share of Kratos common stock.

Integral Systems, Inc said the transaction represents a 63.5 percent premium over Integral Systems unaffected closing price of $7.95 per share on July 15, 2010, the business day prior to July 16, 2010, the date on which Vintage Capital Management, LLC filed a 13D announcing the acquisition of 9.9 percent ownership of Integral Systems common stock and the transaction represents a premium of 16.6 percent premium over the closing price of Integral Systems common stock of $11.15 per share on January 12, 2011, the day before the Company announced that it had hired Stone Key Partners LLP to assist it in its review of strategic alternatives.

However, following the takeover announcement shares of Integral Systems, Inc. (NASDAQ:ISYS) fell from a close of $12.97 on May 13 to $12.27 per share on Monday, May 16, 2011.

Therefore the investigation concerns whether the Integral Systems Board of Directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of Integral Systems, Inc. (NASDAQ:ISYS) and breached their fiduciary duties to Integral Systems (ISYS) shareholder by failing to adequately shop the Company before entering into the transaction.
Integral Systems, Inc disclosed that certain Integral Systems directors and Vintage Capital Management, LLC, who collectively beneficially own approximately 12.4 percent of the voting power of Integral Systems, and Kratos stockholders who collectively beneficially own approximately 5.2 percent of the voting power of Kratos, have already signed voting agreements and irrevocable proxies to vote in favor of the transaction.

The investigation concerns also whether the subsidiary of Kratos Defense & Security Solutions, Inc. would underpay for NASDAQ:ISYS shares, thus unlawfully harming ISYS stockholders.

ISYS shares traded as recently as May 11, 2011 at $13.66 per share, during April several times above $12.50 and since February almost always above $12 per share, thus leaving ISYS stockholders with only a meager to no premium.
Integral Systems, Inc. has performed well for its stockholders in the past. Integral Systems 12 months Total Revenue increased from $128.65million reported on Sep. 30, 2007 to $177.90million reported on Sept. 24, 2010.

A potential class action lawsuit would seek to maximize the amount of money and information Integral Systems shareholders would receive in a buyout, so the law firm.