23 July 2008

Drury Lane Capital Plc

("Drury Lane" or the "Company")

Reverse Takeover of Adastra Software Limited, fundraising of £14.6million,

Posting of Admission Document

and

Notice of General Meeting

The Company is pleased to announce today that it has entered into a conditional agreement to acquire Adastra Software Limited ("Adastra"), a data distribution and clinical support software provider to the primary care sectors in the UK, Ireland and the Netherlands, for total consideration of £12.2m. The Company also announces that it proposes to raise up to £14.6 million (before expenses) by way of a placing for 86,088,235 new ordinary shares at 17p per share and to appoint Vinodka Murria as CEO to lead the Enlarged Group together with Michael Jackson as Chairman. Following the proposed Acquisition, the Company will be a holding company of Adastra. The proposed acquisition is a reverse takeover under Rule 14 of the AIM Rules for Companies and is subject to approval by the Company's shareholders. Due to the requirements of the VCT and EIS schemes, the Company will conduct three placings via a split admission process.

Pursuant to the terms of the Acquisition Agreement, the consideration for the Acquisition is £12.2 million, to be satisfied in £6.85 of new equity in Drury Lane, by the issue to the Vendors of 40,294,119 new Ordinary Shares at a price of 17p, credited as fully paid, and the payment to them of £4.8 million in cash (subject to adjustment for specific items including the closing balance sheet as provided for in the Acquisition Agreement). As part of the Acquisition, the Company will also acquire all C Ordinary Shares of 1p each in the share capital of Adastra ("C Ordinary Shares") resulting from the exercise of any options under Adastra's employee management scheme. To the extent any such option is not exercised immediately prior to completion of the acquisition, they shall lapse. Assuming all such options are exercised, the Company will acquire 39,514 C Ordinary Shares for aggregate consideration of £0.6 million.

Background to the acquisition and the fundraising

The Company was admitted to trading on AIM on 30 October 2006 with the purpose of acquiring and managing companies and businesses in sectors where the Directors believe there are opportunities for consolidation, with a particular focus on those sectors undergoing structural, technological and/or regulatory change. The Company was established to focus on businesses based in the UK, Europe and North America. 

Following a review of a number of potential opportunities, the Directors have identified the opportunity to become a leading provider of software and services to the UK primary care market (the provision of first line patient services such as GPs, walk-in-centres, district nursing, and out-of-hours services). The Company's strategy is to consolidate the fragmented healthcare software market, through selective acquisitions, with a focus on primary care. The New Board believes that there are a number of factors which suggest that the Company is well positioned to pursue this strategy and to derive significant value through consolidation of the sector, namely:

The Directors and Proposed Directors view the acquisition of Adastra as the initial step in the implementation of the Company's strategy and have identified a strong pipeline of potential acquisition targets in order to benefit from the above trends.

Details of the Acquisition and Board appointments

Adastra provides a specialist medical event management, data distribution and clinical support software application to urgent and unscheduled "operational hub" healthcare provider services. Adastra's UK customer base comprises approximately 90 service providers commissioned by Primary Care Trusts ("PCTs") to manage out-of-hours ("OoH") primary care following the contractual changes in 2004 which relieved general practitioners ("GPs") of direct responsibility for OoH cover. Adastra provides services to a significant proportion of the operational hubs in the UK and Republic of Ireland. Additionally, Adastra supplies hardware, networking and 24 hour support services to its customer base, together with a secondary software product which automates the flow of information between the NHS Direct/NHS24 national nurse helpline services and operational hubs.

Vinodka Murria, who has extensive experience of working with private equity backed and public listed companies focused on the software sector, will be appointed upon First Admission as the new Chief Executive of the Company to lead the Enlarged Group together with Michael Jackson. Michael Jackson has, for the past 25 years, specialised in raising finance and investing in the software sector and will be appointed Chairman upon First Admission. The Proposed Directors have agreed to subscribe for 16,176,470 Placing Shares to raise £2.75 million representing 8.5 per cent. of the Enlarged Share Capital.

The Board currently comprises David Williams, James Corsellis, Mark Watts and Benjamin Shaw. Upon First Admission, David Williams, James Corsellis and Benjamin Shaw will step down from the Board, and Mark Watts will become a Non-Executive Director. Michael Jackson and Vinodka Murria will join the Board as Chairman and Chief Executive Officer respectively.

Pursuant to the terms of the Acquisition Agreement, the consideration for the Acquisition is £12.2 million, to be satisfied by the issue to the Vendors of the Consideration Shares at the Placing Price, credited as fully paid, and the payment to them of £5.35 million in cash (subject to adjustment for specific items including the closing balance sheet as provided for in the Acquisition Agreement).

The net proceeds of the Placing Shares will be utilised by the Company to part-fund the cash consideration payable under the Acquisition Agreement, to meet the costs and the expenses relating to the Proposals and to meet the working capital requirements of the Enlarged Group.

Commenting on the proposed acquisition and fundraising, Mark Watts, Executive Director, said:

"We believe Adastra is well placed within the fragmented industry for healthcare software services and represents an excellent platform from which to execute a consolidation strategy in the sector. We are excited about working with Vinodka Murria, who brings with her a wealth of experience in the management of IT service providers as well in the acquisition and consolidation of both private and public companies in this arena. In addition, we are delighted that the Placing has been so well received and we welcome our new shareholders, whom I would like to thank on behalf of the Company for their significant support."

Recommendation

The Directors consider the Proposals to be fair and reasonable and in the best interests of the Company and its Shareholders as a whole and therefore recommend the Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting.

The Marwyn Neptune Fund has irrevocably undertaken to vote in favour of the Resolutions in respect of its holding of 40,000,000 Existing Shares, representing approximately 88.9 per cent. of the issued share capital of the Company at 22 July 2008 (the latest practicable date prior to the date of this announcement).

In relation to the Company establishing the EBT, for the benefit of employees of the Company, the Directors, having consulted these matters with the Company's nominated adviser, Collins Stewart, consider that the terms of the transaction are fair and reasonable insofar as Drury Lane's shareholders are concerned. In giving its advice, Collins Stewart has taken into account the Directors' commercial assessments.

Notice of General Meeting

An Admission Document is expected to be posted to shareholders today. The formal notice convening the General Meeting, to be held at 10 a.m. on 26 August 2008, will be enclosed with the Admission Document sent to Shareholders. Subject, inter alia, to the passing of the General Meeting Resolutions, Admission to trading and commencement of dealings of the Enlarged Share Capital on AIM is expected to commence on 27 August 2008 in respect of the Existing Shares and the New VCT/EIS Placing Shares, on 28 August in respect of the Old VCT Shares and on 29 August 2008 in respect of the General Placing Shares, Consideration Shares and EBT Shares.

The Admission Document and the Notice of General Meeting will also shortly be available to view on the Company's website: www.drurylanecapital.com.

The above summary should be read in conjunction with the full text of this announcement.

Enquiries:

ACQUISITION AND PLACING STATISTICS

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the above timetable is subject to change. If any of the details should change, the revised times and dates will be notified to shareholders by means of an announcement through a Regulatory Information Service.

All references are to London times unless otherwise stated.

NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF IRELAND, JAPAN OR THE REPUBLIC OF SOUTH AFRICA.

The contents of this announcement has been prepared by and is the sole responsibility of the Company.

This announcement is exempt from the general restriction in section 21 of the UK's Financial Services and Markets Act 2000 ("FSMA") on communications or invitations or inducements to engage in investment activity pursuant to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the "Financial Promotion Order") on the grounds that it is required to be made in accordance with the rules of a relevant market and is therefore exempt pursuant to section 67 of the Financial Promotion Order.

Collins Stewart Europe Limited, which is regulated by the Financial Services Authority, is acting as Nominated Adviser and Broker exclusively for the Company in connection with the arrangements described in this announcement, is not acting for any other person and will not be responsible to any person other than the Company for providing the protections afforded to customers of Collins Stewart Europe Limited, or for advising any other person in connection with the arrangements described in this announcement. The responsibilities of Collins Stewart Europe Limited, as Nominated Adviser, are owed solely to the London Stock Exchange.

No invitation or offer to acquire shares in the Company is being made by this announcement.

This announcement may contain certain forward-looking information which may be subject to risks and uncertainties that could significantly alter expected results and are based upon  certain key assumptions.  Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof.  The Company and Collins Stewart disclaim any obligation to update any forward-looking statements contained herein, except as required by applicable law.

The new Ordinary Shares to be issued pursuant to the proposed placings have not been and will not be registered under the US Securities Act of 1933 as amended (the "US Securities Act") and may not be offered or sold in the United States or to US persons (as defined  in Regulation S of the US Securities Act).   The new Ordinary Shares are being offered only to non-US persons outside the United States in transactions which are exempt from the registration requirements of the US Securities Act in reliance on Regulation S. Purchasers of the new Ordinary Shares may not offer to sell, sell, pledge or otherwise transfer the new Ordinary Shares in the United States or to US persons (other than distributors) unless such offer, sale, pledge or transfer is registered under the US Securities Act or an exemption from registration is available. Hedging transactions involving the new Ordinary Shares may not be conducted, directly or indirectly, unless in compliance with the US Securities Act. The Company does not currently plan to register the new Ordinary Shares under the US Securities Act or the existing Ordinary Shares under the US Securities Act.

1. Introduction

It was announced today that the Company had entered into a conditional agreement for the acquisition of the whole of the issued share capital of Adastra for total consideration of £12.2 million. The Company will, following the proposed Acquisition, be a holding company of Adastra. 

Adastra provides a specialist medical event management, data distribution and clinical support software application to urgent and unscheduled "operational hub" healthcare provider services. Adastra's UK customer base comprises approximately 90 service providers commissioned by Primary Care Trusts ("PCTs") to manage out-of-hours ("OoH") primary care following the contractual changes in 2004 which relieved general practitioners ("GPs") of direct responsibility for OoH cover. Adastra provides services to a significant proportion of the operational hubs in the UK and Republic of Ireland. Additionally, Adastra supplies hardware, networking and 24 hour support services to its customer base, together with a secondary software product which automates the flow of information between the NHS Direct/NHS24 national nurse helpline services and operational hubs. 

Vinodka Murria, who has extensive experience of working with private equity backed and public listed companies focused on the software sector, will be appointed upon First Admission as the new Chief Executive of the Company to lead the Enlarged Group together with Michael Jackson. Michael Jackson has, for the past 25 years, specialised in raising finance and investing in the software sector and will be appointed Chairman on First Admission. The Board currently comprises David Williams, James Corsellis, Mark Watts and Benjamin Shaw. Upon First Admission, David Williams, James Corsellis and Benjamin Shaw will step down from the Board, and Mark Watts will become a Non-Executive Director. 

Pursuant to the terms of the Acquisition Agreement, the consideration for the Acquisition is £12.2 million, to be satisfied by the issue to the Vendors of the Consideration Shares at the Placing Price, credited as fully paid, and the payment to them of £4.8 million in cash (subject to adjustment for specific items including the closing balance sheet as provided for in the Acquisition Agreement). As part of the Acquisition, the Company will also acquire all C Ordinary Shares of 1p each in the share capital of Adastra ("C Ordinary Shares") resulting from the exercise of any options under Adastra's employee management scheme. To the extent any such option is not exercised immediately prior to completion of the acquisition, they shall lapse. Assuming all such options are exercised, the Company will acquire 39,514 C Ordinary Shares for aggregate consideration of £0.6 million. 

The Company also announced that it proposes to raise up to £14.6 million (before expenses) by issuing up to 86,088,235 Placing Shares at the Placing Price to fund the cash consideration for the Acquisition, transaction costs and to provide on-going working capital for the Company. The Proposed Directors have agreed to subscribe for 16,176,470 Placing Shares to raise £2.75 million representing 8.5 per cent. of the Enlarged Share Capital. 

The Placing is conditional, inter alia, upon the passing of the Resolutions at the General Meeting, the Introduction Agreement becoming unconditional and not having been terminated in accordance with its terms and Admission. 

Owing, inter alia, to the size of the Acquisition, which constitutes a reverse takeover under the AIM Rules for Companies, the Acquisition requires the approval of Shareholders, which is being sought at the General Meeting to be held on 26 August 2008.

If the Resolutions are approved by Shareholders at the General Meeting, the dealing facility for the Existing Shares will be cancelled. Application will be made to the London Stock Exchange for the Existing Shares to be re-admitted and the Placing Shares, the EBT Shares and the Consideration Shares to be admitted to trading on AIM. 

2. Background information on Drury Lane and its future strategy

The Company was admitted to trading on AIM on 30 October 2006 with the purpose of acquiring and managing companies and businesses in sectors where the Directors believe there are opportunities for consolidation, with particular focus on those sectors undergoing structural, technological and/or regulatory change. The Company was established to focus on businesses based in the UK, Europe and North America. 

Following a review of a number of potential opportunities, the Directors have identified the opportunity to become a leading provider of software and services to the UK primary care market (the provision of first line patient services such as GPs, walk-in-centres, district nursing, and OoH services). The Company's strategy is to consolidate the fragmented healthcare software market, through selective acquisitions, with a focus on primary care. The New Board believes that there are a number of factors which suggest that the Company is well positioned to pursue this strategy and to derive significant value through consolidation of the sector, namely: 

• the fragmented nature of the software and service providers to the primary care market; 

• the opportunity to bring together a management team with significant expertise in the software sector and in particular implementing successful acquisition and consolidation strategies within the UK; 

• the barriers between healthcare delivery points and the service providers are breaking down as the Department of Health ("DoH") continues the push towards integrated primary care; 

• various initiatives, such as patient choice, resulting in recognition that an integrated patient centric healthcare system is key to successful delivery of these services and therefore interoperability of the IT systems has become critical to the efficient delivery of these services across the NHS; 

• the announcement of GP System of Choice ("GPSoC") in May 2008 which pushes power back to the key independent suppliers in the healthcare market; and 

• the removal of two of the original four Local Service Providers, first Accenture and now Fujitsu, from the Connecting For Health project market landscape. 

The Directors and Proposed Directors view the acquisition of Adastra as the initial step in the implementation of the Company's strategy and have identified a strong pipeline of potential acquisition targets in order to benefit from the above trends. 

The Directors and Proposed Directors believe that implementing the Company's strategy following its acquisition of Adastra as a platform will result in the creation of a vehicle with: 

• access to a much wider market, with a broader service offering; 

• the potential for cross-selling and up-selling of product and service offerings, thus further strengthening the customer relationships within each of the targets; 

• high relative market share within the sector allowing R&D synergies and economies of scale that have the potential to create sustainable margin improvement; 

• a greater presence and influence on the NHS and the Connecting for Health program; and 

• upside in value creation through the launch of online services, data mining capability and knowledge management. 

3. Background information on Adastra

Overview

Adastra provides a specialist medical event management, data distribution and clinical support software application to urgent and unscheduled "operational hub" healthcare provider services. The Adastra software product was initially developed in the 1990s to serve GP OoH co-operatives, a network of privately-operated services formed to allow GPs to manage their overnight and weekend duties collectively. 

Adastra's UK customer base currently comprises approximately 90 operational hubs in the UK commissioned by PCTs to manage OoH primary care. Adastra has successfully adapted to the contractual changes initiated in 2004 which relieved GPs of direct responsibility for OoH cover resulting in PCTs taking on this responsibility. Operational hub services cover the entire UK and their coverage ranges from city-wide to county-wide areas. The New Board believe that Adastra has a significant share of the UK market in this segment. 

Adastra also supplies computer related hardware, networking and 24 hour support services to its customer base, together with a secondary software product which automates the flow of information between the NHS Direct/NHS24 national nurse helpline services and operational hubs. Operational hubs are developing into wider aspects of 24 hour urgent health and social care in the community environment, in line with Government policy which is increasingly championing integrated healthcare in an out-of-hospital setting. As such, the New Board believes there is an opportunity for the Company to supply broader services to these operational hubs. Adastra enjoys a close and positive working relationship with policy-makers in the Department of Health and Connecting for Health, and the New Board anticipates that Adastra will be the first system to connect into the National Care Record Service (the national "spine") under its early adopter programme during 2008. 

Adastra has been trading since 1994 and currently has a staff headcount of approximately 150. Adastra generated revenues of approximately £10.6 million and profit before tax of approximately £1.7 million for the financial year ended 29 February 2008. A substantial proportion of Adastra's revenues are based on recurring software and hardware support services. Adastra's business is supported by a broad suite of licences in place with its customer base. 

Products 

Adastra's software application is neither a GP nor a core clinical record system. It is essentially a wide-area operational medical event management and data distribution engine, and its clinical capability is geared to the snapshot nature of an urgent care consultation. Adastra's clients use its application principally in order to record OoH patient information, however its clinical function includes integral prescribing, coding, multiple formulary and dispersed drug stock management features which are compliant with the Department of Health OoH medicines supply policy introduced in 2004. Adastra also embed several specialist decision support software products which provide for the seamless clinical assessment of presenting cases in both face-to-face and, telephone environments. 

Both the Adastra application and its market are therefore discrete from conventional GP systems, and the Adastra application acts as a tributary both to the core clinical record lodged with the GP and, in due course, to national spine services. 

Interoperability has been central to Adastra's approach on the basis that it should be central to the function of any modern healthcare product to be able to support the management of care pathways across service and system boundaries and its application is capable of operating in conjunction with a wide range of other systems. 

Adastra currently supplies its system to approximately 90 operational hubs in the UK, ten operational hubs in the Netherlands and nine operational hubs in Ireland using a total of more than 5,000 application licences. 

Core product 

The Adastra software product for operational hubs is a wide-area case management and data distribution engine with clinical recording and prescribing capability. It is presently approaching conclusion of a five year redevelopment programme to emerge as Adastra v3. As well as its primary function in supporting operational hub services, Adastra provides the Concentrator application (as detailed below) to automate patient information flow in real time between hub level services and NHS Direct (NHS24 in Scotland). In addition to the desktop version, Adastra provides portable versions of the Adastra v3 application, Aremote and Pocket Aremote, for use by care workers whilst on call. The New Board believes that this product will help generate growth in its market. 

Third party product 

Adastra also derives additional licence and support revenue from third-party products which can be embedded with Adastra v3. These include national postcode database (Capscan), national drugs database (Multilex from First Databank) and clinical decision support systems. 

Concentrator application 

Since 1999 Adastra has also provided (to Department of Health requirements) a software application (now known as the "Concentrator" or "NHS Direct Concentrator") which links the NHS Direct IT system with applications used by GP co-operative and commercial deputising services. 

The system-to-system links application which connects NHS Direct and NHS24 to operational hub services remains a major revenue-generating component of Adastra's product range and has been re-released as the "NHS Direct Concentrator". 

This linkage capability was central to the DoH's Technical Links Programme ("TLP"), which makes electronic system-to-system links mandatory for patients being onwards-referred by NHS Direct and NHS24. It also encourages the development of the wide area and multi disciplinary OoH services (operational hubs) which now comprise Adastra's core home market. 

Software support 

Adastra supplies 24 hour software support services to its clients and installed base of more than 5,000 application licences. Its technical staff provides training, technical and trouble-shooting services. 

Hardware, support and implementation 

Adastra also provides computer related hardware and networking supply and support services to many of its customers. As Adastra's software products evolve with its customers' operational requirements, so too does the hardware platform to support new software functionality and to take advantage of newly available technology. 

Management 

The Adastra management team is led by Lynn Woods, who co-founded Adastra with James Berry in 1994 and will continue to drive the strategic direction of the business together with the New Board. Prior to commercial roles in this industry, Lynn was a Squadron Leader in the RAF and Sultan of Oman's Air Force. Subsequently he was Manager of the SEADOC GP Co-Operative covering nearly 300 GPs in Kent and East Sussex. Lynn has developed a strong knowledge of the OoH unscheduled care market. 

Lynn is supported by James Berry, Chief Technical Officer, who produced the first version of the Adastra product as a 19-year old whilst working towards his first-class Honours Degree in Computer Sciences at the University of Southampton, and Adrian Gilson, Managing Director, who leads all administrative functions for Adastra. 

The Adastra management team will remain with the business following Completion and will hold 20.9 per cent. of the Enlarged Share Capital through the Consideration Shares which will be subject to a 12 month lock-in as detailed in the Admission Document. 

4. Market background

The proposed strategy is derived, in part, from the changing structure of the healthcare market. An increased requirement for IT interoperability is a direct result of changes in the demand and delivery of healthcare services throughout the NHS. This is driven by various factors including the shifting population profile and the growth of the ageing population, the increasing inability of the working population to access healthcare services during working hours and the associated demand for 24 hour care services provision and the increasing shift in care services away from secondary and towards primary care providers. 

IT in the NHS 

The National Programme for IT ("NPfIT") was launched in 2002. The programme was designed to reform the way the NHS manages and uses information and improve the quality and efficiency of Patient Care in the UK. In April 2005 NHS Connecting for Health ("Connecting for Health") was established as an agency of the DoH with the primary objective of delivering NPfIT. Connecting for Health is now responsible for all nationally coordinated major IT programmes across the NHS. One of the key objectives of Connecting for Health is to establish an NHS Care Records Service, enabling the sharing of patient care records across the NHS. 

There have been much publicised delays to the original targets of the NPfIT, arising from changes in the Local Service Providers ("LSPs") who were originally allocated the key regional contracts for the NPfIT, delays in the provision of certain core systems by certain central software providers and below budget spending by the NPfIT. 

The New Board, however, believes that there are currently good opportunities which can be exploited by smaller healthcare software service providers based on the following: 

• the NHS continues to face a need to update its software systems; 

• a recent National Audit Office ("NAO") report identifies that as a result of delays the NPfIT is due to spend £10.7 billion over the next 7 years, compared with £1.9 billion over the last four; 

• new procurement routes, such as the Additional Supply Capability and Capacity ("ASCC") framework, which allows for local procurement decisions by NHS sites to purchase software and IT services from accredited suppliers as an additional route to the NPfIT. 

Adastra has recently been awarded 6 categories of framework contracts under the ASCC and the New Board believes that this will help position the Enlarged Group to expand its business going forward. 

Primary Care 

The main decision making responsibility in the delivery of primary care lies with the PCTs who manage both in-house and independent providers and are responsible for ensuring that patients receive OoH care. The PCTs: 

• are responsible for local health care service planning; 

• manage and oversee relationships with local GP surgeries and other primary care providers (dentists, opticians, etc); and 

• commission services from NHS Trusts and other Service Providers. 

The PCTs account for the majority of the total NHS budget. In 2007, £63 billion of the total NHS budget amounting to £84 billion was allocated to PCTs. 

Adastra's market 

Adastra operates primarily in the UK primary care OoH market. As outlined above, this market is undergoing significant change and is experiencing the introduction of new funding structures, procurement and service delivery systems. 

The GP OoH commitment was revised in 2004 under the new GP General Medical Services ("GMS') contract. In consequence, most GPs have elected to opt out of OoH care of their patients. That responsibility now falls to PCTs, which either provide an OoH service integral to the PCT or commission an externally managed service. 

As a result of these changes, Adastra's UK market has undergone a fundamental reorganisation from a mass of largely uncoordinated local GP-led OoH schemes into a much more consistent and symmetrical network of operational hubs. 

Operational hubs are now regarded by the Department of Health as being pivotal to the delivery of integrated and cost effective urgent care. They inherit a brief driven by the Department's 2000 Out-of-Hours Review (widely known as the Carson Report) and the subsequent directive entitled Reforming Emergency Care, underlined more recently by the Technical Links Programme ("TLP") and by quality reporting requirements which necessitate continuous information flow from initial contact to final point of care. 

A Government White Paper, "Our Health, Our Care, Our Say", was published on 30 January 2006 and it specifically promotes an "Out of Hospital" care agenda. The Adastra v3 product has been specifically developed to address the needs for integrated urgent care. 

Market Opportunity 

The UK healthcare market is experiencing a period of change, driven by the introduction of new structures for funding, procurement and service delivery. As a direct result of this there is an increased requirement for IT interoperability as a more integrated healthcare service becomes a reality. The New Board believes that Adastra is well positioned in this regard given its strong relationships with customers and market expertise in the OoH segment. Given that Adastra operates predominantly in the OoH niche of the primary care market, the New Board believe that there is significant scope to expand, either organically or through acquisition, into other segments of the healthcare market. The New Board believes that value can be created for Shareholders in creating a business that operates in the broader market of both in-hours and OoH, and scheduled and unscheduled care, driven by the DoH's desire to integrate urgent care into mainstream Primary Care Relationships within the NHS Secretary of State Department of Health Strategic Health Authorities Primary Care Trusts GPs, Dentists, Opticians, Pharmacists, Walk-in Centres, NHS Direct etc. NHS Hospital Trusts Funding Accountability healthcare and provide single points of contact for patients. 

5. Summary financial information  

The following summary financial information in relation to Adastra has been extracted without material adjustment from the consolidated financial information on Adastra set out in the Admission Document. This summary financial information should be read in conjunction with the full text of the Admission Document.

* Note - before Share based payments. 

In the four month period to 30 June 2008, Adastra has generated revenue and EBITDA in line with management's expectations.

6. Reasons for and details of the Acquisition

Reasons for the Acquisition 

The strategy of the Company is to consolidate the fragmented healthcare software market with a focus on primary care.

The Directors and Proposed Directors believe that Adastra provides a suitable platform for the Enlarged Group to grow, both through development of its existing activities and by further acquisition, in an industry which offers the potential to develop a market leader of niche software and services to the primary care market. The Directors and Proposed Directors believe that the Enlarged Group will have the credibility and operational platform to enable it to pursue further acquisition opportunities. 

The Directors and Proposed Directors believe the particular strengths of Adastra are as follows: 

• brand, reputation and a significant presence in the OoH market, creating barriers to entry and defendable margins; 

• track record of achieving growth by a combination of growing revenue from existing customers and securing new customers; 

• a strong management team, able to grow the business organically and develop a platform for the integration of acquired businesses; and 

• a stable customer base and high levels of customer retention.

The Directors and Proposed Directors believe that Adastra is well positioned to take advantage of the changing UK primary care market given its strong relationships with customers as well as with OoH providers. 

It is the intention of the Directors and Proposed Directors to leverage these perceived strengths and competitive advantages in the execution of its growth strategy going forward.

Details of the Acquisition

On 23 July 2008, the Company entered into the Acquisition Agreement with the Vendors to acquire (together with the proposals to acquire any C Ordinary Shares as described above) the entire issued share capital of Adastra for a total consideration of £12.2 million, subject to adjustment for the specific items including the closing balance sheet as provided for in the Acquisition Agreement. The consideration will on Completion be satisfied by the issue to the Vendors of 40,294,119 new Ordinary Shares at the Placing Price, credited as fully paid, and the payment to the Vendors of £5.35 million in cash, to be funded through the placing of the Placing Shares. The Placing Shares, the EBT Shares and the Consideration Shares will, following Admission, rank pari passu with the Existing Shares and will have the right to receive all dividends and other distributions declared, made or paid in respect of the Ordinary Shares of the Company after Third Admission. 

The Company and the Vendors have agreed a tax covenant pursuant to which the Vendors will indemnify the Company for any tax liabilities of Adastra incurred prior to Completion, subject to customary limitations. Also, under the terms of the Acquisition Agreement, the Vendors have given certain customary warranties in respect of the business and other matters subject to agreed limitations on liability. 

Completion of the Acquisition is conditional, inter alia, on the Resolutions being passed at the General Meeting and will occur on Third Admission. 

Financial effects of the Acquisition 

An unaudited pro forma statement of net assets of the Enlarged Group is set out in the Admission Document to illustrate the effects of the Acquisition and Placing on the net assets of the Enlarged Group, as if it had taken place on 31 December 2007. 

It has been prepared for illustrative purposes only and, because of its nature, cannot give a complete picture of the financial position of the Enlarged Group. On the basis of the assumptions set out in the Admission Document, the Enlarged Group as at 31 December 2007 would have had net assets of approximately £25.0 million. 

7. Future prospects

Following Completion, the New Board believes that the Enlarged Group will be well positioned to take advantage of the perceived consolidation opportunities within the industry. Opportunities to make further complementary acquisitions have already been identified by the New Board and following Completion, the New Board will seek to progress these opportunities. 

8. Directors  

The Board currently comprises David Williams, James Corsellis, Mark Watts and Benjamin Shaw. Upon First Admission, David Williams, James Corsellis and Benjamin Shaw will step down from the Board, and Mark Watts will become a Non-Executive Director. Michael Jackson and Vinodka Murria will join the Board as Chairman and Chief Executive Officer respectively. 

Following First Admission, the New Board will therefore comprise: 

Michael Edward Wilson Jackson, aged 58, Chairman 

Michael founded Elderstreet Investments Limited in 1990 and is its Executive Chairman. For the past 25 years, he has specialised in raising finance and investing in the smaller companies sector. Michael is currently Chairman of PartyGaming plc and until August 2006 was Chairman of The Sage Group plc, a FTSE100 company. Other former directorships include Computer Software Group plc and Planit Holdings. He is also a Director and investor in many other quoted and unquoted companies, including Netstore plc. Michael studied law at Cambridge University, and qualified as a chartered accountant with Coopers and Lybrand before spending five years in marketing for various US multinational technology companies. 

Mark Irvine John Watts, aged 34, Non-Executive Director 

Since 1998, Mark has advised the Boards of quoted UK small and mid-cap companies. At Marwyn, Mark has undertaken 38 transactions raising an amount in excess of £1 billion in acquisition funding for special purpose acquisition vehicles. Previously, Mark worked as a management consultant completing international strategic development and financial analysis projects for a variety of multi-national clients. Mark is a partner of Marwyn Capital and Marwyn Investment Management, as well as a Non-Executive Director of Silverdell plc, Aldgate Capital plc and Melorio plc. Mark was previously a Non-Executive Director of Talarius plc, the high street gaming group, and Inspicio plc, the global testing and inspection business, prior to successful takeover offers and subsequent delisting from AIM. 

Vinodka ("Vin") Murria, aged 45, Chief Executive Officer 

Vin has over 20 years' experience of working for private equity backed and publicly listed companies focused on the software sector. During this time, Vin has held a number of senior positions, including Chief Executive Officer of Computer Software Group plc, which she took private in May 2007. The company merged with IRIS in July 2007 and was subsequently sold to Hellman Friedman for $1 billion. Vin is a Partner at Elderstreet Capital, and prior to this was European Chief Operating Officer for Kewill Systems Plc and Chairman of Leeds Group Plc. She remains a Chair or Non-Executive Director to a number of companies, including Concateno Plc, BSG plc and Innovise Plc.

9. Details of the Placing and Admission

The Company intends to raise £13.8 million, net of expenses, through the issue of 86,088,235 Placing Shares at the Placing Price pursuant to the Placing. 

The Placing Shares will in total represent 45.1 per cent. of the Enlarged Share Capital and are being placed to raise £14.6 before expenses. The Directors and Proposed Directors have agreed to subscribe for 16,176,470 Placing Shares to raise £2.8 million, representing 8.5 per cent. of the Enlarged Share Capital. 

Due to the requirements of the VCT and EIS schemes, the Company will conduct three placings. The New VCT/EIS Placing Shares will be offered to VCTs investing funds raised after 6 April 2006 and to EIS investors. The Old VCT Placing Shares will be offered to VCTs investing funds raised prior to 6 April 2006 and the General Placing Shares will be offered to other investors who will not be seeking relief under the EIS or VCT legislation. 

The Placing Shares have been conditionally placed by the Company with institutional and other investors. The Placing is conditional, inter alia, upon, the passing of the Resolutions at the General Meeting, the Introduction Agreement becoming unconditional and not having been terminated in accordance with its terms and Admission in each case no later than 8.00 a.m. on 27 August 2008 in relation to the First Admission, no later than 8.00 a.m. on 28 August 2008 in relation to Second Admission and no later than 8.00 a.m. on 29 August 2008 in relation to Third Admission.

Shareholders should be aware of the possibility that First Admission and Second Admission might occur but that the Acquisition might not be completed and/or Third Admission may not occur. Investors in the New VCT/EIS Placing and Old VCT Placing should be aware that, whilst advance assurance has been sought from HMRC, the Directors and Proposed Directors cannot guarantee that New VCT/EIS Placing Shares and Old VCT Placing Shares will be able to be treated as qualifying holdings within the meaning of Part 6 of the Income Tax Act 2007. 

The net proceeds of the Placing Shares will be utilised by the Company to part-fund the cash consideration payable under the Acquisition Agreement, to meet the costs and the expenses relating to the Proposals and to meet the working capital requirements of the Enlarged Group. 

The Placing Shares will, following Admission, rank pari passu in all respects with the Existing Ordinary Shares and will have the right to receive all dividends and other distributions declared, made or paid in respect of the issued Ordinary Shares of the Company after Admission. 

Application will be made to the London Stock Exchange for the Placing Shares (together with the Consideration Shares and the EBT Shares) to be admitted to trading on AIM. It is expected that, subject to, inter alia, the passing of the Resolutions, First Admission will become effective and the dealings in the New VCT/EIS Placing Shares and the Existing Shares will commence at 8.00 a.m. on 27 August 2008. It is expected that, subject to First Admission having so occurred, the Second Admission will become effective and the dealings in the Old VCT Placing Shares will commence at 8.00 a.m. on 28 August 2008. It is expected that, subject to First Admission and Second Admission having so occurred, the Third Admission will become effective and that dealings in the General Placing Shares, the EBT Shares and the Consideration Shares will commence (as applicable) at 8.00 a.m. on 29 August 2008. 

Subscribers to the New VCT/EIS Placing Shares and the Old VCT Shares should note that there can be no guarantee that Third Admission will take place when expected, or at all, and it is possible that the New VCT/EIS Placing and the Old VCT Placing Shares will proceed in circumstances where the General Placing and Acquisition do not subsequently complete. No temporary documents of title will be issued. All documents sent by or to a Shareholder, or at his direction, will be sent through the post at the Shareholder's risk. Pending the despatch of definitive share certificates (as applicable), instruments of transfer will be certified against the register of members of the Company. 

If the Resolutions are not passed at the General Meeting, the Placing will not be completed and the Existing Shares will continue to trade on AIM.  

10. Lock-ins and orderly market restrictions

Immediately following Admission, the Vendors will be interested in, in aggregate, 40,294,119 Ordinary Shares, representing approximately 21.1 per cent. of the Enlarged Share Capital. 

The Vendors have each undertaken to the Company and Collins Stewart, subject to certain exceptions (including the ability to accept a take-over offer for the Company and to give an irrevocable undertaking to accept a take-over offer for the Company), not to dispose of or transfer any shares in the Company in which he is interested at Admission or becomes interested in during the lock in period for a period of 12 months from Admission. They have also undertaken to the Company and to Collins Stewart only to dispose of any such shares in the Company through Collins Stewart (following the 12 month lock-in period) for a further period of 12 months so as to maintain an orderly market in the Ordinary Shares. 

In accordance with Rule 7 of the AIM Rules for Companies, each of the Existing Directors and the Marwyn Neptune Fund has undertaken to the Company and Collins Stewart, subject to certain exceptions (including the ability to accept a take-over offer for the Company and to give an irrevocable undertaking to accept a take-over offer for the Company), not to dispose of or transfer any shares in the Company in which they are interested at Admission or become interested in during the lock in period for a period of 12 months from Admission. They have also undertaken to the Company and to Collins Stewart only to dispose of any such shares in the Company through Collins Stewart (following the 12 month lock-in period) for a further period of 12 months so as to maintain an orderly market in the Ordinary Shares. 

Further details of such lock-in arrangements are contained in the Admission Document. 

In compliance with Rule 7 of the AIM Rules for Companies, each of the Proposed Directors have undertaken to the Company and Collins Stewart, subject to certain exceptions (including the ability to accept a take-over offer for the Company and to give an irrevocable undertaking to accept a take-over offer for the Company), not to dispose of or transfer any shares in the Company in which they are interested at Admission or become interested in during the lock in period for a period of 18 months from Admission. They have also undertaken to the Company and to Collins Stewart only to dispose of any such shares in the Company through Collins Stewart (following the 18 month lock-in period) for a further period of 12 months so as to maintain an orderly market in the Ordinary Shares. 

11. Dividend policy

The New Board intends, subject to the availability of distributable reserves, that dividends will be paid to the Shareholders. However, the initial focus for the Company will be on delivering capital growth for Shareholders and therefore the Board will only commence the payment of dividends as and when it considers such payments to be appropriate and practicable.  

12. Relationship with Marwyn

David Williams is a director of Marwyn and each of David Williams, Mark Watts, James Corsellis and Benjamin Shaw are partners in Marwyn Capital, Marwyn Investment Management and Marwyn Management Partners and shareholders in Marwyn. The Company has entered into a corporate finance agreement with Marwyn Capital, further details of which are set out in the Admission Document. 

Marwyn Neptune Fund, a substantial shareholder in the Company, is managed on an arm's length basis by Marwyn Investment Management. Marwyn Neptune Fund currently holds 40,000,000 Existing Ordinary Shares via its nominee, Vidacos Nominees Limited, representing 88.9 per cent. of the issued equity of the Company prior to First Admission and 21.0 per cent. of the Enlarged Share Capital. Marwyn Neptune Fund has entered into an irrevocable undertaking in relation to its holding of Existing Ordinary Shares to vote in favour of the Resolutions as further described in the Admission Document. 

The Company intends to grant Marwyn Management Partners the Marwyn Participation Option on 24 July 2008. Further details of the Marwyn Participation Option are set out below.  

In relation to the Company entering into the corporate finance agreement with Marwyn Capital and the placing arrangement with Co-Investment Capital LLP, the Company's nominated adviser, Collins Stewart, consider that the terms of the transaction are fair and reasonable insofar as Drury Lane's shareholders are concerned. In addition, the Proposed Directors have also reviewed the above arrangements and consider them to be fair and reasonable insofar as Drury Lane's shareholders are concerned.

13. Management Participations Shares

The New Board believe that the success of the Company will depend to a high degree on the future performance of the management team. The Company has established incentive arrangements which will only reward the participants if Shareholder value is created, thereby aligning the interests of management directly with those of the Shareholders. 

The Key Executives have subscribed for Management Participation Shares in Drury Lane (Jersey). Subject to a number of provisions described below, the Management Participation Shares can be sold to the Company for an aggregate value equivalent to 15 per cent. of the increase in "Shareholder value". Shareholder value, for this purpose, is broadly defined as the difference between the market capitalisation of the Company at the relevant date of sale and the sum of (i) the market capitalisation of the Company on Third Admission, calculated using the Placing Price and (ii) the aggregate subscription price of all Ordinary Shares issued up to the date of sale, adjusted for dividends and capital returns to shareholders. Subject to the passing of the resolution numbered 6 at the General Meeting, the Company will be authorised to purchase the Management Participation Shares either for cash or for the issue of new Ordinary Shares at its discretion. 

The Management Participation Shares may only be sold on this basis if both the Growth and Vesting Conditions (as described below) have been satisfied. If these conditions have not been satisfied the Management Participation Shares must be sold to the Company for a nominal amount. 

Growth Condition 

The growth condition is that the compound annual growth of the Company's share price must be at least 11 per cent. per annum (the "Growth Condition"). The Growth Condition takes into account the price at which the Consideration Shares and the Placing Shares have been issued, being the Placing Price, and the issue price of any subsequent issue of Ordinary Shares, the date on which they are issued, any dividends paid on the Ordinary Shares and any capital returned to Shareholders. The Growth Condition will be measured between three and five years after Third Admission and, if earlier, on a sale or change of control of the Company. 

Vesting Condition 

The Management Participation Shares are subject to a vesting period. The vesting period ends on the third anniversary following Third Admission. However, if the Growth Condition is not met on the third anniversary, the vesting period will be extended until the fifth anniversary following Third Admission or, if earlier, when the Growth Condition is met. The vesting period will also end on a sale or change of control of the Company. If the Growth Condition has not been met by the end of the vesting period, the Management Participation Shares must be sold to the Company for a nominal amount. During the vesting period the participant may not sell any Management Participation Shares unless he leaves employment. In this case, the participant must sell all the Management Participation Shares to the Company for a nominal amount unless he is a "good leaver". 

A good leaver is any leaver, other than one who leaves as a result of fraud, dishonesty or gross negligence. Good leavers will be able to retain their Management Participation Shares until the third anniversary of Third Admission. If the Growth Condition has been met on the third anniversary of Third Admission they will be able to sell a time-apportioned percentage of the Management Participation Shares to the Company for an amount that reflects the growth in Shareholder value of the Company, with the remainder being sold to the Company for a nominal value. If the Growth Condition is not satisfied on the third anniversary of Third Admission, all of their Management Participation Shares must be sold to the Company for a nominal value. 

After the end of the vesting period, and if the Growth Condition has been met, a participant may sell their Management Participation Shares to the Company for an amount that reflects the growth in Shareholder value of the Company as described above. The Management Participation Shares must be sold to the Company on the fifth anniversary of Third Admission. The Management Participation Shares may not be sold or transferred to any other party without the permission of the Company.

14. Marwyn Participation Option

The Company intends to enter into a performance participation agreement with Marwyn Management Partners on 24 July 2008 under which Marwyn will assist the Company in meeting its business strategy, so aligning the interests of Marwyn with those of the Shareholders. Marwyn Management Partners will be granted an option to subscribe for Ordinary Shares. Subject to a number of provisions described below, the Marwyn Participation Option may be exercised to subscribe for a number of the Ordinary Shares at an exercise price equal to the 10p nominal value per Ordinary Shares. 

The number of Ordinary Shares that may be subscribed for is such a number that will give Marwyn Management Partners a gain (calculated after deducting the exercise price) equivalent to 5 per cent. of the increase in "Shareholder value". Shareholder value, for this purpose, is broadly defined as the difference between the market capitalisation of the Company at the relevant date of sale and the sum of (i) the market capitalisation of the Company on Third Admission, calculated using the Placing Price and (ii) the aggregate subscription price of all Ordinary Shares issued up to the relevant date, adjusted for dividends and capital returns to shareholders. 

The Marwyn Participation Option may only be exercised on this basis if both the Growth and vesting conditions (as described below) have been satisfied. 

Growth Condition 

The growth condition is that the compound annual growth of the Company's share price must be at least 11 per cent. per annum (the "Option Growth Condition"). The Option Growth Condition takes into account the price at which the Consideration Shares and Placing Shares have been issued, being the Placing Price, and the issue price of any subsequent issue of Ordinary Shares, the date on which they are issued, any dividends paid on the Ordinary Shares and any capital returned to Shareholders. The Option Growth Condition will be measured between three and five years after Third Admission and, if earlier, on a sale or change of control of the Company. 

Vesting Condition 

The exercise of the Marwyn Participation Option is subject to a vesting period. The vesting period ends on the third anniversary following Third Admission. However, if the Option Growth Condition is not met on the third anniversary, the vesting period will be extended until the fifth anniversary following Third Admission or, if earlier, when the Option Growth Condition is met. The vesting period will also end on a sale or change of control of the Company. If the Option Growth Condition has not been met by the end of the vesting period, the Marwyn Participation Option will lapse for no consideration. After the end of the vesting period, and if the Option Growth Condition has been met, the Marwyn Participation Option may be exercised. The Marwyn Participation Option will lapse on the fifth anniversary of Third Admission.  

15. Employee Incentive Schemes 

The New Board believe that the success of the Enlarged Group will depend to a significant extent on the future performance of key employees. The New Board believes that equity incentives are, and will continue to be, an important means of retaining, attracting and motivating key employees. Accordingly, the New Board has adopted an EMI Scheme which will allow the grant of share options to employees of the Enlarged Group. Option grants will be at the discretion of the remuneration committee. Shareholders' approval to ratify the New Board's adoption of the EMI Scheme will be sought at the General Meeting to be held on 26 August 2008.  

16. Employee Benefit Trust 

The Company has established the EBT for the benefit of directors and employees of the Enlarged Group. The Company cannot benefit from any funds held in the EBT. The Trustee has discretion over how any funds held by the EBT are used; although consideration is given by the Trustee to the Company's recommendation as to allocation of the EBT funds. 

On Completion, the Company will issue to the Trustee 19,537,816 new Ordinary Shares which will represent 10.2 per cent. of the Enlarged Share Capital of the Company. The Trustee will waive any dividends paid on any unallocated Ordinary Shares that it holds. 

The Company intends to recommend to the Trustee that it makes free share awards for the benefit of the selected directors. The terms of the share awards have not yet been agreed with the Trustee. It is currently expected than any share awards made would vest 18 months after the award or, if earlier, a change of control of the Company.  

17. General Meeting

Enclosed with the Admission Document is a notice convening the General Meeting of the Company to be held at the offices of CMS Cameron McKenna LLP at 10.00 a.m. on 26 August 2008 at which the following resolutions will be proposed: 

• Resolution 1 is an ordinary resolution to approve the Acquisition; 

• Resolution 2 is an ordinary resolution to increase the authorised share capital of the Company from £10,000,000 to £50,000,000; 

• Resolution 3 is an ordinary resolution to authorise the Directors under section 80 of the Act to allot new Ordinary Shares up to the whole of the authorised but unissued share capital of the Company for the purpose of the Placing, the Acquisition and other general purposes; 

• Resolution 4 is an ordinary resolution to authorise the Directors of the Company to allot relevant securities (as defined in section 80 of the Companies Act 1985) up to an aggregate nominal amount equal to £5,000,000 for the purposes of the Management Participation Shares, Marwyn Participation Option and EMI Scheme; 

• Resolution 5 is a special resolution to authorise the Board under section 95 of the Act to allot new Ordinary Shares for certain specified purposes and otherwise up to a limit representing approximately 25 per cent. of the Enlarged Share Capital for cash on a non pre-emptive basis; 

• Resolution 6 is a special resolution to empower the Directors of the Company pursuant to section 95 of the Companies Act 1985, to allot equity securities for cash on a non pre-emptive basis in respect of the Management Participation Shares, Marwyn Participation Option and EMI Scheme; 

• Resolution 7 is a special resolution to ratify the adoption of the EMI Scheme; 

• Resolution 8 is a special resolution to approve the purchase of any Management Participation Shares by the Company for the purposes of section 190 of the Companies Act 2006; 

• Resolution 9 is a special resolution ratifying the appointment of KPMG Audit Plc as the Company's auditors; 

• Resolution 10 is a special resolution approving the appointment of Michael Jackson and Vinodka Murria to the Board; 

• Resolution 11 is a special resolution changing the name of the Company to Advanced Computer Software Plc. 

The attention of Shareholders is also drawn to the voting intentions of Marwyn Neptune Fund set out below.  

18. Action to be taken

Shareholders will find enclosed with the Admission Document a Form of Proxy for use at the General Meeting. Whether or not Shareholders intend to be present at the General Meeting, Shareholders are requested to complete, sign and return the Form of Proxy to the Company's registrars, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, BR3 4TU as soon as possible but, in any event, so as to arrive no later than 10:00 a.m. on 24 August 2008. The completion and return of a Form of Proxy will not preclude Shareholders from attending the meeting and voting in person should they wish to do so. 

19. Recommendation 

The Directors, consider the Proposals to be fair and reasonable and in the best interests of the Company and its Shareholders as a whole and therefore recommend the Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting. 

The Marwyn Neptune Fund has irrevocably undertaken to vote in favour of the Resolutions in respect of its holding of 40,000,000 Existing Shares, representing approximately 88.9 per cent. of the issued share capital of the Company at 22 July 2008 (the latest practicable date prior to the date of this announcement).

In relation to the Company establishing the EBT, for the benefit of employees of the Company, the Directors, having consulted these matters with the Company's nominated adviser, Collins Stewart, consider that the terms of the transaction are fair and reasonable insofar as Drury Lane's shareholders are concerned. In giving its advice, Collins Stewart has taken into account the Directors' commercial assessments.   

DEFINITIONS

The following definitions apply throughout this announcement, unless the context otherwise requires: