2007

Restructuring of contract with CSC and consent to merger with IBA

As announced previously, iSOFT and CSC have been in discussions regarding their involvement in the development function of certain aspects of LORENZO software for the National Health Service in England.  For iSOFT, the objective of these discussions has been to improve the efficiency of the overall delivery process, to maintain ownership of the development expertise and LORENZO intellectual property, and to give increased certainty as to the payments that iSOFT can receive from NPfIT.

The key elements of the changes to the Contract are as follows:

• Legally binding “heads of terms” was signed on 18 June 2007
•  iSOFT and CSC have agreed to integrate their teams involved in the development of software for NPfIT, under CSC’s leadership. iSOFT will contribute certain of the teams of people directly involved in the NPfIT project.
• The responsibility for employment of all such staff  will remain with iSOFT
•  iSOFT will retain the intellectual property rights to LORENZO, including the rights to exploit it outside the CSC clusters.  LORENZO installations (current and planned) outside these clusters will be unaffected and iSOFT does not anticipate that the changes to the Contract will impact its core long term strategy of developing LORENZO as its strategic product to be sold internationally
• In addition to LORENZO, CSC will take responsibility for the code streams of i.Patient Manager (i.PM) and i.Integration Engine (i.IE) for the National Programme, two of iSOFT’s current products. The provision and support of these products by iSOFT for other customers will be unaffected
• Some two thirds of the licence payments to iSOFT under the new agreement will be calendar based, the remainder will be based on mutually agreed milestones in order to ensure the alignment of the two parties interests.  Payments by CSC to iSOFT had previously been linked to the achievement of delivery milestones. However, CSC’s increased direct management responsibility for delivery means that this is no longer appropriate, as CSC is now responsible for programme performance, and the liabilities associated thereto.
• There will be a modest reduction in licence revenue of around 5%, chiefly post 2010. The total potential contract value to iSOFT remains slightly in excess of £300 million since the inception of the National Programme for IT.

IBA has been consulted in detail regarding the changes to the Contract and has provided its approval.

CSC has also indicated in writing to iSOFT that it consents to the change in control of iSOFT that will result from the merger of iSOFT and IBA.  Accordingly, iSOFT has agreed to terminate legal proceedings regarding CSC withholding consent.

Achieving this consent was a condition to IBA’s offer for iSOFT.  The only material condition outstanding remains the approval by iSOFT’s shareholders.  A shareholder meeting is scheduled for 6th July 2007, and the board of iSOFT continues to recommend unanimously that shareholders vote in favour of IBA’s offer. Details of the Offer, the Scheme of Arrangement, and action to be taken by iSOFT Shareholders was posted to shareholders on 13th June 2007.

Commenting, John Weston (Chairman and acting CEO of iSOFT) said, “I firmly believe that these new arrangements with CSC represent an excellent outcome for both the NHS and for iSOFT.  The new management structure will streamline the processes to ensure the delivery to the NHS of a quality product on time.  It aligns both management teams with the highest priority of delivering the NPfIT.

“Our relationship with CSC has clearly been tested in recent weeks, however, this agreement underpins our good working relationship which we look forward to continuing.

“This will enable the iSOFT management team, which recently has had to devote a lot of time to the re-financing of the business, to spend more time on the development of the new products and continuing improvements to our customer service.

“This clears the way for the merger with IBA, which represents an excellent outcome for our business and shareholders, and provides the long term financial stability which we have been seeking.”

Guy Hains, president of CSC's European Group said "We are delighted to have successfully concluded these discussions and acknowledge the significant contribution made by Connecting for Health in bringing all parties together to determine a satisfactory outcome. Together with the NHS and iSOFT, we are excited about Lorenzo and believe that the new agreement will successfully support the final stage of its development and delivery starting next year"