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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
˛ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

or

® TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-24539

ECLIPSYS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 65-0632092
(State of incorporation) (I.R.S. Employer
Identification Number)

Three Ravinia Drive


Atlanta, Georgia
30346
(Address of principal executive offices)

(404) 847-5000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each C lass Nam e of Each Exch an ge on W h ich Re giste re d


Common Stock, $0.01 par value The NASDAQ Stock Market LLC
(NASDAQ Global Select)

Securities registered pursuant to Section 12(g) of the Act:


None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ˛ No ®

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ® No ˛

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes ˛ No ®

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ®

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
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Act.

Large accelerated filer ˛ Accelerated filer ® Non-accelerated filer ® Smaller reporting company ®

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ® No ˛

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2008 based upon the closing price of the
Common Stock on the NASDAQ Global Select Market for such date was $988,920,163.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

C lass S h are s O u tstan ding as of Fe bru ary 23, 2009


Common Stock, $0.01 par value 56,154,784
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Part I

This report contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our
company and our industry. These statements are not guarantees of future performance and actual outcomes may differ materially from what is
projected or forecasted. When used in this report, the words “may,” “will,” “should,” “predict,” “continue,” “plans,” “expects,” “anticipates,”
“estimates,” “intends,” “believe,” “could,” and similar expressions are intended to identify forward-looking statements. These statements may
include, but are not limited to, statements concerning our anticipated performance, including revenue, margin, cash flow, balance sheet and
profit expectations; development and implementation of our software; duration, size, scope and revenue expectations associated with client
contracts; business mix; sales and growth in our client base; market opportunities; industry conditions; performance of our acquisitions; and
our accounting, including its effects and potential changes in accounting.

Actual results might differ materially from the results expressed or implied by forward-looking statements due to a number of risks and
uncertainties, including those described in this report under the heading “Risk Factors” and in other filings we make from time to time with the
U.S. Securities and Exchange Commission or SEC. Except as required by law, we assume no obligation to update or revise these forward-
looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-
looking statements, even if new information becomes available in the future.

Throughout this report we refer to Eclipsys Corporation and its consolidated subsidiaries as “Eclipsys,” “the Company,” “we,” “us,” and
“our.”

Item 1. Business
Overview
Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and performance management software, and professional services
that help healthcare organizations improve clinical, financial, and operational outcomes. We develop and license proprietary software and
content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations
require. Among other things, our software:
• enables physicians, nurses and other clinicians to coordinate care through shared electronic medical records, place orders and
access and share information about patients;
• helps our clients optimize the healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory control and
cost accounting;
• supports clinical and financial planning and analysis; and
• provides information for use by physicians, nurses and other clinicians through clinical content, which is integrated with our
software.

We also provide professional services related to our software. These services include software implementation and maintenance, outsourcing,
remote hosting of our software as well as third-party healthcare information technology applications, technical and user training and
consulting.

We believe that one of the key differentiators of our software is its open, flexible and modular architecture. This allows our software to be
installed one application at a time or all at once, and to generally integrate easily with software developed by other vendors or our clients. This
enables our clients to install our software without the disruption and expense of replacing their existing software systems to gain additional
functionality.

We market our software to healthcare providers of many different sizes and specialties, including community hospitals, large multi-entity
healthcare systems, academic medical centers, outpatient clinics and physician practices. Most of the top-ranked U.S. hospitals named in U.S.
News & World Report’s Honor Roll use one or more of our solutions.

Available Information
Our website address is www.eclipsys.com. We make available free of charge, on or through our website, our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those

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reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The information on our
website is not incorporated into this annual report. The public may read and copy any materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, NE, Washington D.C. 20549. The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC. The SEC’s website address is www.sec.gov. The
public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330.

Eclipsys was incorporated in Delaware as “Integrated Healthcare Solutions, Inc.” in 1995 and we changed our name to “Eclipsys Corporation”
in 1997.

Segments
Eclipsys operates in one segment, as further described in Note B, “Summary of Significant Accounting Policies” in the Notes to the
Consolidated Financial Statements.

Recent Developments
In 2008, Eclipsys acquired Enterprise Performance Systems, Inc. (“EPSi”), MediNotes Corporation (“MediNotes”), and Premise Corporation
(“Premise”). Each of these companies added strategic new products that are expected to help improve our competitive position and also drive
additional revenue growth.

EPSi
In February 2008, Eclipsys acquired EPSi, a provider of business performance improvement solutions that help healthcare executives better
manage the business of healthcare by providing actionable financial management and decision support data from functional areas including
budgeting/planning, cost accounting, patient and financial/clinical analysis. EPSi’s solutions offer improved technology and lower cost of
ownership over prior generation products.

MediNotes
Our acquisition of MediNotes in October 2008 strengthens our corporate position in one of the fastest growing markets in healthcare, practice
management and electronic medical records focused on physician practices. In addition, MediNotes expands our community solution portfolio
of Web-based physician practice information solutions that help health systems better connect with physicians, and physicians with their
patients. MediNotes enhances our ability to offer Eclipsys healthcare enterprise clients and new prospects a broad range of solutions,
including tools and data to help them more effectively reach out into their communities to better coordinate care.

Premise
In December 2008, Eclipsys acquired Premise. This expanded our portfolio of solutions that help our clients improve operational performance,
which also includes EPSi software and our growing portfolio of analytics solutions. Premise’s software solutions and services for bed
management, bed turnover, and transport help optimize patient flow, streamline communications, and enhance operational efficiency. In 2008,
Premise’s bed management and patient throughput solutions received the exclusive endorsement of the American Hospital Association
(AHA). With many hospital expansion projects now on hold, Premise’s solutions help hospitals maximize the utilization of current bed
capacity. Premise’s solutions are well-suited for selling into the current economic environment as they help hospitals achieve a quick return on
investment with minimal up-front expense.

Initiatives and Challenges for 2009


To help clients address their needs to operate more efficiently in today’s challenging environment, and to differentiate our capabilities, we plan
to emphasize development and marketing of our performance management suite of solutions, comprising of Sunrise EPSi TM, Sunrise Patient
Flow TM and Sunrise Clinical Analytics TM. These solutions help healthcare organizations streamline and automate manual processes required
to gather, analyze and display enterprise-wide information. They also enable hospital senior and department level management to more easily
identify areas requiring intervention and to improve clinical quality, regulatory compliance, cost-efficiency, resource utilization and patient
satisfaction.

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Some of our software is complex and highly configurable and many clients value our ability to adapt the software to their specific needs.
However, this high degree of configurability can result in significant implementation costs, which can make our offering too expensive for
some clients. Our ability to reach our goals for expansion into smaller clients and in the international market, and to sell to clients with
budgetary constraints, depends upon our ability to develop less costly ways of implementing our most complex software.

We continue to focus on expanding our international business, including our operations in India and sales of our solutions outside of North
America, such as the Asia-Pacific region and the Middle East. We achieved some initial success with our sale of Sunrise Clinical Manager to
SingHealth, the largest healthcare provider in Singapore. Our performance at SingHealth is being closely monitored in the region, and could
prove to be a catalyst to help us drive business in new international markets. These international initiatives are important to our ability to grow
our business and require that we oversee development and client support capabilities in a high quality and cost-effective manner. We expect
to face challenges building brand-name recognition and adapting our software solutions to new international markets.

Recent disruptions in U.S. and international financial markets have adversely affected the availability of capital for our clients and potential
clients, which could negatively impact our sales. In addition, current economic conditions are motivating some clients and potential clients to
prefer software subscription contracting to traditional licensing arrangements. Given that periodic revenue from traditional license
arrangements carries high margins and contributes significantly to overall profitability in the transaction period, this client contracting
preference may affect our profitability in 2009.

Integrating the three companies we acquired in 2008 will present challenges. The anticipated benefits from these acquisitions may not be
achieved, and the diversion of management's attention and any difficulties encountered in the transition process could negatively impact our
business.

Healthcare Industry Factors


Healthcare organizations are under increased pressure to reduce medical errors and increase operational efficiencies. Our software and
services are designed to help clients achieve these objectives. Government regulations and the advancement of industry standards are
requiring changes within the healthcare industry. We believe that these changes and enhanced regulation and standards will increase demand
for healthcare information technology software and services such as ours, but will also require further research and development investments
in our software.
Payor Requirements. The Centers for Medicare and Medicaid Services, or CMS, Inpatient Prospective Payment System rules identify
several “hospital-acquired conditions” the treatment for which is no longer reimbursable by Medicare. This new rule implements a
provision of the Deficit Reduction Act of 2005 that aims to eliminate reimbursement for the treatment of these hospital-acquired
conditions, unless the condition was present on admission. Since October 2008, Medicare claims that do not report secondary diagnoses
that are present on admission will be returned to the hospital for correct submission of present-on-admission information. In order to
avoid significant delays in Medicare reimbursement, hospitals must make significant changes to their admission and claims-submission
procedures. If this hospital-acquired condition rule proves effective, private insurers are likely to implement similar guidelines. Other
pending or potential requirements imposed by federal, state and local governments, as well as private payors, are also likely to affect
hospital reimbursements. Eclipsys has developed and made available eleven Outcomes Toolkits that provide our clients proven methods
of using our solutions effectively to improve outcomes in defined areas, with additional toolkits being developed. We believe many of
these toolkits will help our clients measure and report present-on-admission conditions, reduce their incidence of hospital-acquired
conditions, and address other payor requirements, thereby reducing risk of non-reimbursement. Additionally, these toolkits help enable
our clients to achieve quality measures imposed by payors, including those set forth by CMS, which have grown from 10 quality
measures in 2006 to 127 quality measures defined for 2011.

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CCHIT. The U.S. Department of Health & Human Services initiatives have, among other things, led to the creation of the private-
sector Certification Commission for Health Information Technology, or CCHIT, which consists of a 21-member Board of Commissioners
from across the healthcare industry and is the recognized certification body in the United States for certifying health information
technology products. CCHIT develops a set of private sector determined criteria for electronic health record functionality,
interoperability, reliability and security, and is inspecting electronic health record software to determine its performance against these
criteria. Eclipsys’ Sunrise Ambulatory Care™ 4.5 met CCHIT’s ambulatory electronic health record criteria for 2006. Sunrise Ambulatory
5.0 Service Pack 1 has been awarded pre-market conditional certification on 2007 criteria, and when a client reference site is available with
the required configuration elements, we will be submitting for full CCHIT certification. Full certification requires that a product is verified
to be in production use for a minimum of 45 calendar days at one or more live client sites.
In November 2007, we announced that Eclipsys’ Sunrise Acute Care release 4.5 Service Pack 4 is certified by CCHIT and meets the
inpatient electronic health record criteria for 2007. Inpatient electronic health records are designed for use in acute care hospitals.
Currently we have a large scale product development effort underway to build features into our solutions in preparation for applying in
early 2010 for multiple CCHIT product certifications on 2009 criteria. However, CCHIT requirements may diverge from our software’s
characteristics and our software development direction, and we may choose not to apply for CCHIT certification of certain modules of
our software or to delay applying for certification. The CCHIT application process requires conformity with 100% of all criteria applicable
to each module in order to achieve certification and there is no assurance that we will receive or retain certification for any particular
module notwithstanding application. Certification for a software module lasts for two years and must then be re-secured, and certification
requirements evolve, so even certifications we receive may be lost.
Recognition of certain Interoperability Specifications of the Healthcare Information Technology Standards Panel. In January 2008, the
U.S. Department of Health & Human Services recognized certain interoperability specifications of the Healthcare Information
Technology Standards Panel, or HITSP, including electronic health record laboratory results reporting, biosurveillance and consumer
empowerment. As a result, federal agencies will be required to appropriately consider health information technology systems and
products that comply with these interoperability specifications when purchasing, implementing, or upgrading such items.
The creation of the HITSP interoperability specifications has developed faster than the CCHIT criteria and the 2009 CCHIT criteria
include three of the 13 HITSP interoperability specifications. These 13 total HITSP interoperability specifications now have a total of 25
different versions, all with specified criteria to be built into electronic health records such that vendor products can share information
and also share information with organizations in the Federal Health Architecture, such as the Social Security Administration and the
Centers for Disease Control and Prevention. Beginning in early 2009, the Social Security Administration expects to receive medical
records for some disability applicants electronically through the Nationwide Health Information Network gateway and to start receiving
electronic health records from MedVirginia, Virginia's Regional Health Information Organization.
Economic stimulus legislation is expected to include support to cover additional healthcare software and related devices that apply all
recognized standards by the Secretary of the Department Health and Human Services of the HITSP interoperability specifications and are
CCHIT-certified. The enhancement of our software to include these specifications will require further research and development
investments in our software.
Health Insurance Portability and Accountability Act. The U.S. Health Insurance Portability and Accountability Act of 1996 or HIPAA,
seeks to impose national health data standards on covered entities. The HIPAA standards prescribe, among other things, transaction
formats and code sets for electronic health transactions, in order to protect individual privacy by limiting the uses and disclosure of
individually identifiable health information. HIPAA also requires covered entities to implement administrative, physical and technological
safeguards to ensure the confidentiality, integrity, availability and security of individually identifiable health information in electronic
form.

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We believe that the need for healthcare organizations to become HIPAA compliant and maintain HIPAA compliance will continue to
create demand for software and services such as ours. We follow changes in the HIPAA regulations and adjust the affected software
such that our solutions comply with HIPAA requirements. As we advance into the era of healthcare enterprises exchanging protected
health information, we anticipate having to further enhance our solutions to accommodate new requirements related to privacy and
security, and the exchange of information over secure networks outside of an enterprise.
The Joint Commission. The Joint Commission (formerly known as the Joint Commission on Accreditation of Healthcare Organizations or
JCAHO) is an independent non-profit organization that provides voluntary evaluation and accreditation for more than 15,000 healthcare
organizations in the United States. The Joint Commission periodically introduces new process improvement initiatives, standards and
performance measurements that are used to assess hospitals. The Joint Commission has also established patient safety standards and
each year approves annual National Patient Safety Goals that include specific recommendations for improving patient safety. Most of
our clients seek to comply with The Joint Commission standards, and we believe that our software and services help them in this regard.
In addition, federal tax dollars used to pay for Medicare cannot be used in an organization that is not accredited by The Joint
Commission.
Joint Commission International. The Joint Commission International or JCI, has been working with health care organizations, ministries
of health, and global organizations in over 80 countries since 1994. Over 220 public and private health care organizations in 33 countries
have received JCI accreditation. JCI provides accreditation for hospitals, ambulatory care facilities, clinical laboratories, care continuum
services, medical transport organizations, and primary care services, as well as certification for disease or condition specific care. As
Eclipsys expands in the global healthcare market, we must now monitor for changes needed in the software to meet JCI standards for the
international client base, as well as the Joint Commission Standards for our customer base in the United States.
Canada Health Infoway. Canada Health Infoway collaborates with Canadian federal, provincial, and territorial governments to accelerate
the use of electronic health record systems across Canada. More significant to Eclipsys is Infoway's Standards Collaborative, which
supports and sustains health information standards and fosters collaboration to accelerate the implementation of pan-Canadian
standards based solutions. The role of this Standards Collaborative is similar to the function of HITSP in the United States. Meeting
these Canadian standards for our software will require research and development investments.
The Internet. The Internet enables consumers to be more involved in their healthcare choices, and provides increased availability of
medical information to physicians, clinicians and healthcare workers. As consumers adopt web-centric lifestyles, we believe that
software and services like ours will become more appealing to a wider base of healthcare organizations.

Eclipsys Offerings
We provide the following software and services:
• Enterprise solutions that include clinical, financial and business decision support software for use by healthcare organizations and
clinicians;
• Outpatient (clinic and physician office) software with electronic medical records and independent practice management
functionality;
• Professional services related to implementation and use of our software;
• Consulting services to help our clients improve their operations;
• IT outsourcing; and
• Remote hosting of client IT systems, including our software and third-party software.

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Software
We offer a suite of enterprise solutions that help our clients improve their clinical, financial, and operational outcomes. The underlying
Eclipsys XA architecture and ObjectsPlus/XATM application development technology provide a solid foundation for improved performance
across the enterprise. Among other things, our software is designed to:
• Integrate clinical, financial and access processes throughout the healthcare enterprise for increased quality, cost-efficiency,
revenue, and client satisfaction;
• Reconcile orders related to the patient’s care between departments and units within one healthcare location, as well as between
caregivers across different venues and locations, including ambulatory settings, for improved efficiency and safety during patient
handoffs, admission and discharge;
• Gather patient demographic information and support appropriate resource utilization through integrated scheduling and registration
solutions;
• Improve financial performance through reduced days in accounts receivable, increased cash collections, and inventory control;
• Provide clinicians with access to patient information, evidence-based clinical content and supporting references such as medical
journals, as well as information regarding costs and effects of patient tests and treatments; and
• Permit simultaneous access to real-time patient information by multiple users from access points throughout the clinical
environment and from remote locations.

Our latest-generation clinical and access solutions utilize the same architecture and share the same health data repository, while being adapted
for the workflows of different environments. This enables Eclipsys' clients to tie together their workflows and operations across the entire
continuum of care. Further, we have been committed to building our software on, and re-engineering and migrating existing software to, an
open architecture based on the Microsoft.NET Framework and other industry-standard technologies. We believe this approach allows our
software to be more extensible and easier to integrate with a client’s legacy and ancillary systems, and enables healthcare organizations to
continue to derive value from their existing technology investments, and add other software as functional needs and resources dictate,
including the ability to embed and present evidence-based content.

Our XA-based solutions are designed to prevent the isolation of information and duplication of functionality that can occur with other
information technology systems. We believe that this approach helps to enable a faster, more cost-effective implementation of our software,
simplify software maintenance and provide a lower total cost of ownership.
Sunrise EnterpriseTM comprises the following clinical, access, financial and departmental solutions:
• Sunrise Clinical ManagerTM includes the major integrated modules Sunrise Acute Care™, Sunrise Ambulatory Care™, Sunrise
Critical Care™, Sunrise Emergency Care™ and Sunrise Pharmacy™. Sunrise Clinical Manager enables a physician or other
authorized clinician to view patient data and enter orders quickly from any point in the enterprise, providing evidence-based clinical
decision support at the time of order entry.
• Sunrise Access Manager TM, which also shares the Sunrise Clinical Manager platform and health data repository, includes Sunrise
Enterprise SchedulingTM and Sunrise Enterprise Registration TM. It enables healthcare providers to identify a patient at any time
within a hospital and to collect and maintain patient information on an enterprise-wide basis.
• Sunrise Patient Financials TM provides centralized enterprise-wide business office capabilities that help healthcare organizations
improve financial workflows and more effectively manage their patient billing, accounts receivable, and contract management
functions. This helps them reduce costs for this important function and maximize and accelerate appropriate reimbursements from
patients and other parties.

Eclipsys Performance Management™ solution suite is a newly formed grouping of our recently acquired and existing executive tools that
support direct patient care-related activities, as well as operational performance management. These tools help healthcare organizations
streamline and automate manual processes required to

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gather, analyze and display enterprise-wide information. These solutions also enable hospital’s senior and department level management to
more easily identify areas requiring intervention, leading to improvements in clinical quality, regulatory compliance, cost-efficiency and patient
satisfaction. Core components of the Eclipsys Performance Management solution suite are:
• Sunrise EPSi TM is an integrated performance improvement solution that provides comprehensive enterprise business decision
support to help healthcare organizations take control of their financial, clinical and operational performance. Sunrise EPSi features
an integrated database, enabling hospitals to leverage data across all functional areas — budgeting/planning, cost accounting,
patient financial/clinical analysis and productivity.
• Sunrise Patient Flow TM is a set of integrated and clinically focused software solutions and services that helps hospitals to
optimize patient flow, bed management, bed turnover and patient transport. The solutions support streamlined communications,
enhanced operating efficiency, and empower knowledge based decision making.
• Sunrise Clinical Analytics TM automates surveillance and regulatory reports to help hospitals improve quality and reduce costs
associated with hospital-acquired conditions and substandard utilization by enabling them to act in the moment during a patient
visit – not just review reports retrospectively to track trending. This flexible multi-layered clinical intelligence application allows for
clinical, financial, and performance improvement through near real-time reporting and helps organizations eliminate the labor-
intensive process associated with manually extracting chart data.

Other Clinical/Ancillary solutions include:


• Sunrise Record Manager™ provides comprehensive, enterprise health information management document and image-management
functions. It enables healthcare organizations to effectively manage patient medical records, ranging from Joint Commission-
compliance deficiency and chart completion management functions, and medical records abstracting, utilizing industry-standard
encoders.
• Sunrise Laboratory™ provides a comprehensive set of tools that help manage the data surrounding the testing of samples that are
received in the laboratory. It is designed to streamline workflow and improve productivity, cost effectiveness and quality of the
different processes within inpatient or outpatient laboratories. Sunrise Laboratory results are transmitted to the Sunrise Clinical
Manager Health Data Repository to become part of the patient’s comprehensive electronic medical record. Sunrise Laboratory also
has the related Sunrise Blood Bank™ solution to support the information and workflow needs of blood bank operations.
• Sunrise eLink™ provides tools to enable the integration of clinical and financial data from disparate existing systems within an
integrated health network. Sunrise Radiology™, a comprehensive radiology information system, and Sunrise PACS™ picture
archiving and communications system can be implemented together, separately, or part of an image-enabled clinical information
system to deliver imaging data as an integrated part of the overall patient record that is accessible to clinicians at the point of care
or other points of decision making using any Sunrise Enterprise-enabled device.

Eclipsys’ Electronic Medical Record and Practice Management solutions are a comprehensive set of Web-based physician practice
information solutions that help physicians operate their practices, and help health systems better connect with physicians, and physicians
with their patients. Solutions include:
• Eclipsys PeakPracticeTM is an integrated electronic medical record and practice management solution that enables the automation
of key workflows in a physician’s practice. The electronic medical record element supports electronic orders and results, point-of-
care documentation, e-prescribing and instant access to patient information. The practice management element includes a
comprehensive and workflow-based dashboard, up-to-date information on appointments, patient insurance, current billing and
accounts receivable status, viewed and updated in real time. The solutions can also be implemented independently.

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• PeakPractice EMRTM is an electronic medical record solution that interfaces with existing practice management systems.
• PeakPractice PMTM is an independent practice management solution.
• Eclipsys PeakPractice SCTM (supply chain) is a web-based inventory management application that electronically tracks and orders
medical supplies and inventory for physician practices.
• MediNotes eTM is an electronic medical record solution that helps physicians automate practices, including e-prescribing
capabilities.

Services
Professional Services. We offer our clients professional assistance in the implementation of our software, the conversion and integration of
their historical data into our software and systems, and ongoing training and support in the use of our software. We also provide maintenance
releases and software updates, on a when and if available basis.

Consulting Services. We offer consulting services to help clients improve their operations.

Remote Hosting. We offer remote hosting services to our clients. Under this offering, we assume responsibility for processing Eclipsys and/or
non-Eclipsys applications for our clients using equipment and personnel at our facilities. This minimizes the capital investment, operating
expense, and management challenges for our clients of maintaining the environment, equipment and technical staff required to support an
organization’s IT operations.

Information Technology Outsourcing. Eclipsys provides full, partial or transitional IT outsourcing services to our clients. We assume partial
to total responsibility for a healthcare organization’s IT operations using our employees and assets. These services include facilities
management, by which we assume responsibility for all aspects of client internal IT operations, as well as network outsourcing, which relieves
our clients of the need to secure, maintain or transition an expensive IT infrastructure in a rapidly changing technological environment. These
services may also include remote hosting. In one or more combinations, these services help our clients to minimize the capital investment
involved in staffing and maintaining its IT operations while preventing the possible disruption to healthcare delivery.

Sales and Marketing


Our sales and marketing efforts target healthcare providers of a variety of sizes and specialties, including small, stand-alone hospitals, large
multi-entity healthcare systems, academic medical centers, community hospitals, physician practices, and other healthcare organizations. We
sell our software and services primarily in North America and are expanding into international markets. Our sales force includes a core group of
sales people organized by geography and dedicated to either new business or existing client sales. Separate sales teams focusing on certain
specialty solution areas, such as ancillary department software (e.g. Pharmacy, Laboratory and Radiology), as well as our performance
management, electronic medical record and practice management solutions, outsourcing and/or remote hosting, etc., further support the
regionalized sales teams. Peak Practice is also sold through value-added resellers.

Our marketing group develops targeted campaigns designed to increase demand for our software and services, as well as increase corporate
awareness and brand identity for our company, both domestically and internationally. In addition to campaigns, advertising, direct mail, public
relations and Internet-based marketing, our marketing group produces a wide range of collateral and sales support training and materials, and
manages our annual Eclipsys User Network™ client conference, invitation-only Eclipsys Executive Forum and our presence at numerous
industry trade shows and conferences throughout the year.

Sales to North Shore-Long Island Jewish Health System represented 10.7% and 10.3% of our total revenues in 2008 and 2007, respectively. In
2006, no individual customer represented 10.0% or more of our total revenues.

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Seasonality
Our revenues have historically been lower in the first quarter of the year and greater in the fourth quarter of the year; however, this did not
occur in 2008, due primarily to the recent disruptions in the financial markets that adversely affected the availability of capital for our clients
and our potential clients, which adversely affected revenue in the fourth quarter of 2008 as compared to the first quarter of 2008.

International
As of December 2008, our India operations include two offices and approximately 600 employees. We believe that India provides access to
educated professionals to work on software research, development and support, as well as other functions, at an economically effective cost
and also represents a potential new market for our software.

We continue to focus on expanding our international business, including our operations in India and sales of our solutions outside of North
America, such as the Asia-Pacific region and the Middle East.

Research and Development


Our software is based on Microsoft’s .NET Framework and other industry standards. We use Microsoft’s Solutions Framework development
methodology to gauge the quality and performance of our software development efforts.

Our latest-generation clinical and access solutions utilize the same architecture and share the same Health Data Repository and many other
components, while being adapted for the workflows of different environments. This enables Eclipsys clients to tie together their workflows
and operations across the entire continuum of care. Further, our software is built upon an open architecture that supports the secure exchange
of data between systems, as well as the ability to embed and present content.

Our commitment to deliver world-class products means continued investment in software development. Our key development sites are located
in Atlanta, Georgia; Boston, Massachusetts; Malvern, Pennsylvania; Richmond, British Columbia, Canada; Vadodara, India; and Pune, India.
In recent years we have significantly expanded our software development efforts in India, which enables us to respond more efficiently and
cost effectively to changes in our software design and product development strategy.

Our spending on research and development (including capitalized software development costs) was $79.6 million, $77.4 million and $71.9
million in 2008, 2007 and 2006, respectively.

Competition
Eclipsys faces intense competition in the marketplace. We are confronted by rapidly changing technology, evolving user needs and the
frequent introduction by our competitors of new and enhanced software. Our principal competitors in our software business include Cerner
Corporation, Epic Systems Corporation, Medical Information Technology, Inc., GE Healthcare, McKesson Corporation, and Siemens AG.
Other software competitors include providers of practice management, general decision support and database systems, as well as segment-
specific applications and healthcare technology consultants. Our services business competes with large consulting firms, as well as
independent providers of technology implementation and other services. Our outsourcing business competes with large national providers of
technology solutions such as IBM Corporation, Computer Sciences Corp., and Perot Systems Corporation, as well as smaller firms. Several of
our existing and potential competitors are better established, benefit from greater name recognition and have significantly more financial,
technical and marketing resources than we do. In addition, some competitors, particularly those with a more diversified revenue base or that
are privately held, may have greater flexibility than we do to compete aggressively on the basis of price. Vigorous and evolving competition
could lead to a loss of our market share or pressure on our prices and could make it more difficult to grow our business profitably.

The principal factors that affect competition within our market include software functionality, performance, flexibility and features, use of open
industry standards, speed and quality of implementation and client service and support, company reputation, price and total cost of
ownership. We anticipate continued consolidation in both the information technology and healthcare industries and large integrated
technology companies may become more active in our markets, both through acquisition and internal investment. There is a finite number of
hospitals and

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other healthcare providers in our target market. As costs fall, technology improves, and market factors continue to compel investment by
healthcare organizations in software and services like ours, market saturation may change the competitive landscape in favor of larger
competitors with greater economies of scale.

Employees
As of December 31, 2008, we had approximately 2,800 employees — 2,200 in North America and 600 overseas, primarily in India with a small
number in Asia and in the Middle East. Our success depends significantly on our continued ability to attract and retain highly skilled and
qualified personnel. Competition for such personnel is intense in our industry, particularly for software developers, implementation and service
consultants and sales and marketing personnel. We cannot be assured that we will continue to attract and retain qualified personnel. Our
employees are not represented by any labor unions. We consider our relations with our employees to be good.

Financial Information about Geographic Areas


Revenues are attributed to geographical areas based on customer’s geographical location. Our revenues by geographic area are summarized
below (in thousands):

Ye ar e n de d De ce m be r 31,
2008 2007 2006
United States $484,240 $444,474 $394,536
Canada 26,410 31,761 30,592
Other 5,112 1,298 2,414
Total $515,762 $477,533 $427,542

A summary of our long-lived assets by geographic area is summarized below (in thousands):

De ce m be r 31,
2008 2007
United States $437,663 $107,918
Canada 2,542 938
India 6,071 3,454
Total $446,276 $112,310

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ITEM 1A. RISKFACTORS


Many risks affect our business. These risks include, but are not limited to, those described below, each of which may be relevant to decisions
regarding an investment in or ownership of our stock. We have attempted to organize the description of these risks into logical groupings to
enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be
attributed to these groupings or order. The occurrence of any of these risks could have a significant adverse effect on our reputation,
business, financial condition or results of operations.

RISKS RELATING TO DEVELOPMENT AND OPERATION OF OUR SOFTWARE


Our software may not operate properly, which could damage our reputation and impair our sales.
Software development is time consuming, expensive and complex. Unforeseen difficulties can arise. We may encounter technical obstacles and
additional problems that prevent our software from operating properly. Client environments and practice patterns are widely divergent;
consequently, there is significant variability in the configuration of our software from client to client, and we are not able to identify, test for,
and resolve in advance all issues that may be encountered when clients place the system into use at their facilities. If our software contains
errors or does not function consistent with software specifications or client expectations, clients could assert liability claims against us and/or
attempt to cancel their contracts with us. These risks are generally more significant for newer software, until it has been used for enough time
in enough client locations for us to have addressed issues that are discovered through use in disparate circumstances and environments, and
for new installations, until potential issues associated with each new client’s particular environment and configurability are identified and
addressed. Due to our ongoing development efforts, at any point in time, we generally have significant software that could be considered
relatively new and therefore more vulnerable to these risks. It is also possible that future releases of our software, which would typically
include additional features, may be delayed or may require additional work to address issues that may be discovered as the software comes
into use in our client base. If we fail to deliver software with the features and functionality promised to our clients, we could be subject to
significant contractual damages and face serious harm to our reputation, and our results of operations could be negatively impacted.

Our software development efforts may be inefficient or ineffective, which could adversely affect our results of operations.
We face intense competition in the marketplace and are confronted by rapidly changing technology, evolving user needs and the frequent
introduction of new software and enhancements by our competitors to meet the needs of clients. As a result, our future success will depend in
part upon our ability to enhance our existing software and services, and to timely develop and introduce competing new software and services
with features and pricing that meet changing client and market requirements. We schedule and prioritize these development efforts according
to a variety of factors, including our perceptions of market trends, client requirements, and resource availability. Our software is complex and
requires a significant investment of time and resources to develop, test, and introduce into use. This can take longer than we expect. We may
encounter unanticipated difficulties that require us to re-direct or scale-back our efforts and we may need to modify our plans in response to
changes in client requirements, market demands, resource availability, regulatory requirements, or other factors. These factors place significant
demands upon our software development organization, require complex planning and decision making, and can result in acceleration of some
initiatives and delay of others. If we do not manage our development efforts efficiently and effectively, we may fail to produce, or timely
produce, software that responds appropriately to our clients’ needs, or we may fail to meet client expectations regarding new or enhanced
features and functionality.

As we evolve our offering in an attempt to anticipate and meet market demand, clients and potential clients may find our software and services
less appealing. In addition, if software development for the healthcare information technology market becomes significantly more expensive
due to changes in regulatory requirements or healthcare industry practices, or other factors, we may find ourselves at a disadvantage to larger
competitors with more financial resources to devote to development. If we are unable to enhance our existing software or develop new
software to meet changing healthcare information technology market requirements and standards in a timely manner, demand for our software
could suffer.

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Market changes could decrease the demand for our software, which could harm our business and decrease our revenues.
The healthcare information technology market is characterized by rapidly changing technologies, evolving industry standards and new
software introductions and enhancements that may render existing software obsolete or less competitive. Our position in the market could
erode rapidly due to the development of regulatory or industry standards that our software may not fully meet or due to changes in the
features and functions of competing software, as well as the pricing models for such software. Our future success will depend in part upon our
ability to enhance our existing software and services, and to timely develop and introduce competing new software and services with features
and pricing that meet changing client and market requirements. If our products rapidly become obsolete, it makes it more difficult to recover the
cost of product development, which could adversely affect our operating results.

Our software strategy is dependent on the continued development and support by Microsoft of its .NET Framework and other
technologies.
Our software strategy is substantially dependent upon Microsoft’s .NET Framework and other Microsoft technologies. If Microsoft were to
cease actively supporting .NET or other technologies that we use, fail to update and enhance them to keep pace with changing industry
standards, encounter technical difficulties in the continuing development of these technologies or make them unavailable to us, we could be
required to invest significant resources in re-engineering our software. This could lead to lost or delayed sales, loss of functionality, client
costs associated with platform changes, unanticipated development expenses and harm our reputation, and would cause our financial results
and business to suffer.

Any failure by us to protect our intellectual property, or any misappropriation of it, could enable our competitors to market software with
similar features, which could reduce demand for our software.
We are dependent upon our proprietary information and technology. Our means of protecting our proprietary rights may not be adequate to
prevent misappropriation. In addition, the laws of some foreign countries may not enable us to protect our proprietary rights in those
jurisdictions. Also, despite the steps we have taken to protect our proprietary rights, it may be possible for unauthorized third parties to copy
aspects of our software, reverse engineer our software or otherwise obtain and use information that we regard as proprietary. In some limited
instances, clients can access source-code versions of our software, subject to contractual limitations on the permitted use of the source code.
Furthermore, it may be possible for our competitors to copy or gain access to our content. Although our license agreements with clients
attempt to prevent misuse of the source code or trade secrets, the possession of our source code or trade secrets by third parties increases the
ease and likelihood of potential misappropriation of our software. Furthermore, others could independently develop technologies similar or
superior to our technology or design around our proprietary rights.

Failure of security features of our software could expose us to significant liabilities and harm our reputation.
Clients use our systems to store and transmit highly confidential patient health information. Because of the sensitivity of this information,
security features of our software are very important. If, notwithstanding our efforts, our software security features do not function properly, or
client systems using our software are compromised, we could face claims for contract breach, fines, penalties and other liabilities for violation
of applicable laws or regulations, significant costs for remediation and re-engineering to prevent future occurrences, and serious harm to our
reputation.

RISKS RELATED TO SALES AND IMPLEMENTATION OF OUR SOFTWARE


Our sales process can be long and expensive and may not result in revenues. In addition, the length of our sales and implementation cycles
may adversely affect our operating results.
We typically experience long sales and implementation cycles. How and when to implement, replace, expand or substantially modify an
information system, or modify or add business processes, are major decisions for healthcare organizations, our target client market.
Furthermore, our software generally requires significant capital expenditures by our clients. The sales cycle for our software ranges from 6 to
18 months or more from initial contact to contract execution. Our implementation cycle has generally ranged from 6 to 36 months from contract
execution to completion of implementation. During the sales and implementation cycles, we will expend substantial time, effort

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and resources preparing contract proposals, negotiating the contract and implementing the software. Our sales efforts may not result in a sale,
in which case, we will not realize any revenues to offset these expenditures. If we do complete a sale, accounting principles may not allow us to
recognize revenues in the same periods in which corresponding sales and implementation expenses were incurred. Additionally, any decision
by our clients to delay purchasing or implementing our software or reduce the scope of products purchased would likely adversely affect our
results of operations.

We may experience implementation delays that could harm our reputation and violate contractual commitments.
Some of our software is complex and requires a lengthy and expensive implementation process. Implementation also requires our clients to
make a substantial commitment of their own time and resources and to make significant organizational and process changes, and if our clients
are unable to fulfill their implementation responsibilities in a timely fashion, our projects may be delayed or become less profitable. Each
client’s situation is different, and unanticipated difficulties and delays may arise as a result of failures by us or the client to meet our respective
implementation responsibilities or other factors. Because of the complexity of the implementation process, delays are sometimes difficult to
attribute solely to us or the client. Implementation delays could motivate clients to delay payments or attempt to cancel their contracts with us
or seek other remedies from us. Any inability or perceived inability to implement our software consistent with a client’s schedule could harm
our reputation and be a competitive disadvantage for us as we pursue new business. Our ability to improve sales depends upon many factors,
including successful and timely completion of implementation and successful use of our software in live environments by clients who are
willing to become reference sites for us.

Implementation costs may exceed our expectations, which can negatively affect our operating results.
Each client’s circumstances may include unforeseen issues that make it more difficult or costly than anticipated to implement our software. As
a result, we may fail to project, price or manage our implementation services correctly. If we do not have sufficient qualified personnel to fulfill
our implementation commitments in a timely fashion, related revenue may be delayed, and if we must supplement our capabilities with third-
party consultants, which are generally more expensive, our costs will increase. Similarly, our operating results will be negatively affected if our
personnel take longer than budgeted to implement our solutions.

Some of our software is complex and highly configurable and many clients value our ability to adapt the software to their specific
needs. However, this high degree of configurability has resulted in significant implementation costs, which have made our offering too
expensive for some clients. Our ability to reach our goals for expansion into smaller clients and in the international market, and to sell to clients
with budgetary constraints, depends upon our ability to develop less costly ways of implementing our most complex software.

Our earnings can vary significantly depending on periodic software revenues.


In any financial reporting period, the periodic software revenues include traditional license fees associated with sales made in the financial
reporting period, as well as revenues from contract backlog that had not previously been recognized pending contract performance that
occurred or was completed during the period, and certain other activities during the period associated with existing client relationships.
Although these periodic software revenues represent a relatively small portion of our overall revenue in any period, they generally have high
margins, and are therefore an important element of our earnings in any period. These periodic revenues can fluctuate because economic
conditions, market factors, client-specific situations, and other issues can result in significant variations in the type and magnitude of sales
and other contract and client activity in any period. These variations make it difficult to predict the nature and amount of these periodic
revenues. We believe economic conditions, and resulting cash conservation by clients, adversely affected our periodic software revenues in
the second half of 2008, and if these conditions and client reactions continue in 2009, or if for other reasons periodic software revenues in any
period decline from prior periods or fall short of our expectations, our earnings will be adversely affected.

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RISKS RELATED TO OUR INFORMATION TECHNOLOGY (“IT”) OR TECHNOLOGY SERVICES


Various risks could interrupt clients’ access to their data residing in our service center, exposing us to significant costs and other
liabilities.
We provide remote hosting services that involve running our software and third-party vendors’ software for clients in our Technology
Solutions Center. The ability to access the systems and the data that the Technology Solution Center hosts and supports on demand is critical
to our clients. Our operations and facilities are vulnerable to interruption and/or damage from a number of sources, many of which are beyond
our control, including, without limitation: (i) power loss and telecommunications failures; (ii) fire, flood, hurricane and other natural disasters;
(iii) software and hardware errors, failures or crashes; and (iv) computer viruses, hacking and similar disruptive problems. We attempt to
mitigate these risks through various means including redundant infrastructure, disaster recovery plans, separate test systems and change
control and system security measures, but our precautions may not protect against all problems. If clients’ access is interrupted because of
problems in the operation of our facilities, we could be exposed to significant claims by clients or their patients, particularly if the access
interruption is associated with problems in the timely delivery of medical care. We maintain disaster recovery and business continuity plans
that rely upon third-party providers of related services, and if those vendors fail us at a time that our center is not operating correctly, we
could fail to fulfill our contractual service commitments, which could result in a loss of revenue and liability under our client
contracts. Furthermore, any significant instances of system downtime could negatively affect our reputation and ability to sell our remote
hosting services.

Any breach of confidentiality of client or patient data in our possession could expose us to significant expense and harm our reputation.
We must maintain facility and systems security measures to preserve the confidentiality of data belonging to our clients and their patients that
resides on computer equipment in our Technology Solution Center or that is otherwise in our possession. Notwithstanding the efforts we
undertake to protect data, our measures can be vulnerable to infiltration as well as unintentional lapse, and if confidential information is
compromised, we could face claims for contract breach, penalties and other liabilities for violation of applicable laws or regulations, significant
costs for remediation and re-engineering to prevent future occurrences, and serious harm to our reputation.

Recruiting challenges and higher than anticipated costs in outsourcing our clients’ IT operations may adversely affect our profitability.
We provide outsourcing services that involve operating clients’ IT departments using our employees. At the initiation of these relationships,
clients often require us to hire, at substantially the same compensation, the entire IT staff that had been performing the services we take on. In
these circumstances, our costs may be higher than we target unless and until we are able to transition the workforce, methods and systems to
a more scalable model. Various factors can make this transition difficult, including geographic dispersion of client facilities and variation in
client needs, IT environments, and system configurations. Also, under some circumstances, we may incur significant costs as a successor
employer by inheriting obligations of that client for which we may not be indemnified. Further, facilities management contracts require us to
provide the IT services specified by contract, and in some places it can be difficult to recruit qualified IT personnel. Changes in circumstances
or failure to assess the client’s environment and scope our services accurately can mean we must hire more staff than we anticipated in order
to meet our responsibilities. If we have to increase salaries or relocate personnel, or hire more people than we anticipated, our operating results
will be adversely affected.

Inability to obtain consents needed from third party software providers could impair our ability to provide remote IT or technology
services.
We and our clients need consent from some third-party software providers as a condition to running the providers’ software in our service
center, or to allow our employees who work in client locations under facilities management arrangements to have access to their
software. Vendors’ refusal to give such consents, or insistence upon unreasonable conditions to such consents, could reduce our revenue
opportunities and make our IT or technology services less viable for some clients.

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RISKS RELATED TO THE HEALTHCARE IT INDUSTRY AND MARKET


We operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources
than we do.
We face intense competition in the marketplace. We are confronted by rapidly changing technology, evolving user needs and the frequent
introduction by our competitors of new and enhanced software. Our principal competitors in our software business include Cerner
Corporation, Epic Systems Corporation, Medical Information Technology, Inc., GE Healthcare, McKesson Corporation, and Siemens AG.
Other software competitors include providers of practice management, general decision support and database systems, as well as segment-
specific applications and healthcare technology consultants. Our services business competes with large consulting firms, as well as
independent providers of technology implementation and other services. Our outsourcing business competes with large national providers of
technology solutions such as IBM Corporation, Computer Sciences Corp., and Perot Systems Corporation, as well as smaller firms. Several of
our existing and potential competitors are better established, benefit from greater name recognition and have significantly more financial,
technical and marketing resources than we do. In addition, some competitors, particularly those with a more diversified revenue base or that
are privately held, may have greater flexibility than we do to compete aggressively on the basis of price. Vigorous and evolving competition
could lead to a loss of our market share or pressure on our prices and could make it more difficult to grow our business profitably.

The principal factors that affect competition within our market include software functionality, performance, flexibility and features, use of open
industry standards, speed and quality of implementation and client service and support, company reputation, price and total cost of
ownership. We anticipate continued consolidation in both the information technology and healthcare industries and large integrated
technology companies may become more active in our markets, both through acquisition and internal investment. There is a finite number of
hospitals and other healthcare providers in our target market. As costs fall, technology improves, and market factors continue to compel
investment by healthcare organizations in software and services like ours, market saturation may change the competitive landscape in favor of
larger competitors with greater scale.

Clients that use our legacy software are vulnerable to sales efforts of our competitors.
A significant part of our revenue comes from relatively high-margin legacy software that was installed by our clients many years ago. We
attempt to convert clients using legacy software to our newer generation software, but such conversions may require significant investments
of time and resources by clients. As the marketplace becomes more saturated and technology advances, there will be competition to retain
existing clients, particularly those using older generation products, and loss of this business would adversely affect our results of operations.

The healthcare industry faces financial constraints that could adversely affect the demand for our software and services.
The healthcare industry faces significant financial constraints. For example, managed healthcare puts pressure on healthcare organizations to
reduce costs, and regulatory changes and payor requirements have reduced reimbursements to healthcare organizations. For example, the
Inpatient Prospective Payment System rules, published by the Centers for Medicare & Medicaid in the U.S., identified several “hospital-
acquired conditions” for which treatment will no longer be reimbursed by Medicare. Federal, state and local governments and private payors
are imposing other requirements that may have the effect of reducing payments to healthcare organizations. Our software often involves a
significant financial commitment by our clients. Our ability to grow our business is largely dependent on our clients’ information technology
budgets, which in part depends on the client’s cash generation and access to other sources of liquidity. Recent financial market disruptions
have adversely affected the availability of external financing, and led to tighter lending standards and volatile interest rates. These factors can
reduce access to cash for our clients and potential clients. In addition, many of our clients’ budgets rely in part on investment earnings, which
decrease when portfolio investment values decline. Economic factors are causing many clients to take a conservative approach to
investments, including the purchase of systems like we sell. If healthcare information technology spending declines or increases more slowly
than we anticipate, demand for our software could be adversely affected and our revenue could fall short of our expectations. Challenging
economic conditions also may impair the ability of our clients to pay for our software and services for which they have contacted. As a result,
reserves for doubtful accounts and write-offs of accounts receivable may increase.

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Healthcare industry consolidation could put pressure on our software prices, reduce our potential client base and reduce demand for our
software.
Many healthcare organizations have consolidated to create larger healthcare enterprises with greater market power. If this consolidation trend
continues, it could reduce the size of our target market and give the resulting enterprises greater bargaining power, each of which may lead to
erosion of the prices for our software. In addition, when healthcare organizations combine they often consolidate infrastructure including IT
systems, and acquisitions of our clients could erode our revenue base.

Changes in standards applicable to our software could require us to incur substantial additional development costs.
Integration and interoperability of the software and systems provided by various vendors are important issues in the healthcare
industry. Market forces, regulatory authorities and industry organizations are causing the emergence of standards for software features and
performance that are applicable to our products. Healthcare delivery and ultimately the functionality demands of the electronic health record
are now expanding to support community health, public health, public policy and population health initiatives. In addition, interoperability and
health information exchange features that support emerging and enabling technologies are becoming increasingly important to our clients and
require us to undertake large scale product enhancements and redesign.

For example, the Certification Commission for Healthcare Information Technology, or CCHIT, is developing comprehensive sets of criteria for
the functionality, interoperability, and security of healthcare software in the U.S. Achieving CCHIT certification is evolving as a de facto
competitive requirement, resulting in increased research and development expense to conform to these requirements. Similar dynamics are
evolving in international markets. CCHIT requirements may diverge from our software’s characteristics and our development direction. We
may choose not to apply for CCHIT certification of certain modules of our software or to delay applying for certification. The CCHIT
application process requires conformity with 100% of all criteria applicable to each module in order to achieve certification and there is no
assurance that we will receive or retain certification for any particular module notwithstanding application. Certification for a software module
lasts for two years and must then be re-secured, and certification requirements evolve, so even certifications we receive may be lost.

U.S. government initiatives and related industry trends are resulting in comprehensive and evolving standards related to interoperability,
privacy, and other features that are becoming mandatory for systems purchased by governmental healthcare providers and other providers
receiving governmental payments, including Medicare and Medicaid reimbursement. Various state and foreign governments are also
developing similar standards which may be different and even more demanding.

Our software does not conform to all of these standards, and conforming to these standards is expected to consume a substantial and
increasing portion of our development resources. If our software is not consistent with emerging standards, our market position and sales
could be impaired and we will have to upgrade our software to remain competitive in the market. We expect compliance with these kinds of
standards to become increasingly important to clients and therefore to our ability to sell our software. If we make the wrong decisions about
compliance with these standards, or are late in conforming our software to these standards, or if despite our efforts our software fails
standards compliance testing, our reputation, business, financial condition and results of operations could be adversely affected.

RISKS RELATED TO OUR BUSINESS STRATEGY


Our business strategy includes expansion into markets outside North America, which will require increased expenditures and if our
international operations are not successfully implemented, such expansion may cause our operating results and reputation to suffer.
We are working to further expand operations in markets outside North America. There is no assurance that these efforts will be successful. We
have limited experience in marketing, selling, implementing and supporting our software abroad. Expansion of our international sales and
operations will require a significant amount of attention from our management, establishment of service delivery and support capabilities to
handle that business and commensurate financial resources, and will subject us to risks and challenges that we would not face if we
conducted our business only in the United States. We may not generate sufficient revenues from international business to cover these
expenses.

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The risks and challenges associated with operations outside the United States may include: the need to modify our software to satisfy local
requirements and standards, including associated expenses and time delays; laws and business practices favoring local competitors;
compliance with multiple, conflicting and changing governmental laws and regulations, including healthcare, employment, tax, privacy,
healthcare information technology, and data and intellectual property protection laws and regulations; laws regulating exports of technology
products from the United States and foreign government restrictions on acquisitions of U.S.-origin products; fluctuations in foreign currency
exchange rates; difficulties in setting up foreign operations, including recruiting staff and management; and longer accounts receivable
payment cycles and other collection difficulties. One or more of these requirements and risks may preclude us from operating in some markets
and may cause our operating results and reputation to suffer.

Foreign sales subject us to numerous stringent U.S. and foreign laws, including the Foreign Corrupt Practices Act, or FCPA, and comparable
foreign laws and regulations which prohibit improper payments or offers of payments to foreign governments and their officials and political
parties by U.S. and other business entities for the purpose of obtaining or retaining business. As we expand our international operations, there
is some risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or distributors, which could
constitute a violation by Eclipsys of various laws including the FCPA, even though such parties are not always subject to our control.
Safeguards we implement to discourage these practices may prove to be less than effective and violations of the FCPA and other laws may
result in severe criminal or civil sanctions, or other liabilities or proceedings against us, including class action law suits and enforcement
actions from the SEC, Department of Justice and overseas regulators, which could adversely affect our reputation, business, financial
condition or results of operations.

RISKS RELATED TO OUR OPERATING RESULTS, ACCOUNTING CONTROLS AND FINANCES


Our past stock option practices and related accounting issues have caused costly derivative litigation and may result in additional
litigation, regulatory proceedings and governmental enforcement actions.
As a result of the voluntary review of historical stock option practices we undertook from February to May 2007, we concluded that incorrect
measurement dates were used for accounting for certain prior stock option grants. As a result, we recorded additional non-cash stock-based
compensation expense, and related tax effects, with regard to certain past stock option grants, and we restated certain previously filed financial
statements. In 2008 we settled related stockholder derivative litigation. We believe these restatements reflect appropriate judgments in
determining the correct measurement dates for our stock option grants, and to date those judgments have not been challenged. We believe the
settlement of the derivative suit effectively ends litigation of this matter. However, as with other aspects of our financial statements, the results
of our stock option review are subject to regulatory review and additional claims and there is a risk that we may have to further restate prior
period results or incur additional costs as a result of such a review or proceeding.

We have a history of operating losses and future profitability is not assured.


We experienced operating losses in the years ended December 31, 2003 through 2006. Although we reported operating income for the years
ended December 31, 2007 and 2008, we may incur losses in the future, and it is not certain that we will sustain or increase our recent
profitability.

Our operating results may fluctuate significantly and may cause our stock price to decline.
We have experienced significant variations in revenues and operating results from quarter to quarter. Our operating results may continue to
fluctuate due to a number of factors, including:
• the performance of our software and our ability to promptly and efficiently address software performance shortcomings or warranty
issues;
• the cost, timeliness and outcomes of our software development and implementation efforts, including expansion of our presence in
India;
• the timing, size and complexity of our software sales and implementations;
• healthcare industry conditions and the overall demand for healthcare information technology;
• variations in periodic software license revenues;
• the financial condition of our clients and potential clients;

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• market acceptance of new services, software and software enhancements introduced by us or our competitors;
• client decisions regarding renewal or termination of their contracts;
• software and price competition;
• investment required to support our international expansion efforts;
• personnel changes and other organizational changes and related expenses;
• significant judgments and estimates made by management in the application of generally accepted accounting principles;
• healthcare reform measures and healthcare regulation in general;
• lower investment returns due to recent disruptions in U.S. and international financial markets; and
• fluctuations in general economic and financial market conditions, including interest rates.

It is difficult to predict the timing of revenues that we receive from software sales, because the sales cycle can vary depending upon several
factors. These include the size and terms of the transaction, the changing business plans of the client, the effectiveness of the client’s
management, general economic conditions and the regulatory environment. In addition, the timing of our revenue recognition could vary
considerably depending upon whether our clients license our software under our subscription model or our traditional licensing arrangements,
and current economic conditions are motivating some clients to prefer subscription contracting to traditional licenses, which can result in
commensurate decreases in, or failure to achieve our expectations for, in-period license revenue and associated margin. Because a significant
percentage of our expenses are relatively fixed, a variation in the timing of sales and implementations could cause significant variations in
operating results from quarter to quarter. We believe that period-to-period comparisons of our historical results of operations are not
necessarily meaningful. Investors should not rely on these comparisons as indicators of future performance.

In addition, prices for our common stock may be influenced by investor perception of us and our industry in general, research analyst
recommendations, and our ability to meet or exceed quarterly performance expectations of investors or analysts.

Early termination of client contracts or contract penalties could adversely affect results of operations.
Client contracts can change or terminate early for a variety of reasons. Change of control, financial issues, declining general economic
conditions or other changes in client circumstances may cause us or the client to seek to modify or terminate a contract. Further, either we or
the client may generally terminate a contract for material uncured breach by the other. If we breach a contract or fail to perform in accordance
with contractual service levels, we may be required to refund money previously paid to us by the client, or to pay penalties or other
damages. Even if we have not breached, we may deal with various situations from time to time for the reasons described above which may
result in the amendment or termination of a contract. These steps can result in significant current period charges and/or reductions in current
or future revenue.

Because in many cases we recognize revenues for our software monthly over the term of a client contract, downturns or upturns in sales
will not be fully reflected in our operating results until future periods.
We recognize a significant portion of our revenues from clients monthly over the terms of their agreements, which are typically 5-7 years and
can be up to 10 years. As a result, much of the revenue that we report each quarter is attributable to agreements executed during prior quarters.
Consequently, a decline in sales, client renewals, or market acceptance of our software in one quarter may negatively affect our revenues and
profitability in future quarters. In addition, we may be unable to rapidly adjust our cost structure to compensate for reduced revenues. This
monthly revenue recognition also makes it more difficult for us to rapidly increase our revenues through additional sales in any period, as a
significant portion of revenues from new clients or new sales may be recognized over the applicable agreement term.

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Loss of revenue from large clients could have significant negative impact on our results of operations and overall financial condition.
During the fiscal year ended December 31, 2008, approximately 40% of our revenues were attributable to our 20 largest clients. In addition,
approximately 39% of our accounts receivable as of December 31, 2008 were attributable to 20 clients. One client represented 10.7% of our
revenues. Loss of revenue from significant clients or failure to collect accounts receivable, whether as a result of client payment default,
contract termination, or other factors could have a significant negative impact on our results of operation and overall financial condition.

Impairment of intangible assets could increase our expenses.


A significant portion of our assets consists of intangible assets, including capitalized development costs, goodwill and other intangibles
acquired in connection with acquisitions. Current accounting standards require us to evaluate goodwill on an annual basis and other
intangibles if certain triggering events occur, and adjust the carrying value of these assets to net realizable value when such testing reveals
impairment of the assets. Various factors, including regulatory or competitive changes, could affect the value of our intangible assets. If we are
required to write-down the value of our intangible assets due to impairment, our reported expenses will increase, resulting in a corresponding
decrease in our reported profit.

Failure to maintain effective internal controls could adversely affect our operating results and the market price of our common stock.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we maintain internal control over financial reporting that meets applicable
standards. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could
lose confidence in our reported financial information and operating results, which could result in a negative market reaction.

Funds invested in auction rate securities may not be liquid or accessible for in excess of 12 months, and our auction rate securities may
experience further fair value adjustments or other-than-temporary declines in value, which would adversely affect our financial condition,
cash flow and reported earnings.
Our investment portfolio is primarily invested in auction rate securities, or ARS. Beginning in February 2008, negative conditions in the credit
and capital markets resulted in failed auctions of our ARS. The ratings on some of the ARS in our portfolio have been downgraded, and there
can be no assurances that there will be no further rating downgrades. As of December 31, 2008, we recorded changes in fair value of these
securities of $8.8 million in accumulated other comprehensive income and $3.9 million as a charge to earnings. See Note D – “Investments” in
Notes to the Consolidated Financial Statements for further information. If uncertainties in the credit and capital markets continue, these
markets deteriorate further or we experience further rating downgrades on any investments in our portfolio, funds associated with these
securities may not be liquid or available to fund current operations for in excess of 12 months. This could result in further fair value
adjustments or other-than-temporary impairments in the carrying value of our investments, which could negatively affect our financial
condition, cash flow and reported earnings.

Our commercial credit facility subjects us to operating restrictions and risks of default.
On August 26, 2008, we entered into a credit agreement with certain lenders and Wachovia Bank, as Administrative Agent, providing for a
senior secured revolving credit facility in the aggregate principal amount of $125 million. This credit facility is subject to certain financial ratio
and other covenants that could restrict our ability to conduct business as we might otherwise deem to be in our best interests, and breach of
these covenants could cause the debt to become immediately due. In such an event, our liquid assets might not be sufficient to repay in full
the debt outstanding under the credit facility. Such an acceleration also would expose us to the risk of liquidation of collateral assets at
unfavorable prices.

The conditions of the U.S. and international financial markets may adversely affect our ability to draw on our credit facility.
The U.S. and international credit markets contracted significantly during the second half of 2008. If one or more of the financial institutions
that have extended credit commitments to us under our credit facility are adversely affected by the conditions of the U.S. and international
capital markets, they may become unwilling or unable to fund

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borrowings under their credit commitments to us. In such a case we might not be able to locate replacement lenders or other sources of
financing, which could have a material and adverse impact on our ability to fund working capital, capital expenditures, acquisitions, research
and development and other corporate needs.

Inability to obtain other financing could limit our ability to conduct necessary development activities and make strategic investments.
Although we believe at this time that our available cash and cash equivalents and the cash we anticipate generating from operations will be
adequate to meet our foreseeable needs, we could incur significant expenses or shortfalls in anticipated cash generated as a result of
unanticipated events in our business or competitive, regulatory, or other changes in our market. As a result, we may in the future need to
obtain other financing. The availability of such financing is limited by the tightening of the global credit markets. In addition, the commitment
under our credit facility expires on August 26, 2011. Our ability to renew such credit facility or to enter into a new credit facility to replace the
existing facility could be impaired if current market conditions continue or worsen. In addition, if credit is available, lenders may seek more
restrictive lending provisions and higher interest rates that may reduce our borrowing capacity and increase our costs, which could have a
material adverse effect on our business.

If other financing is not available on acceptable terms, or at all, we may not be able to respond adequately to these changes or maintain our
business, which could adversely affect our operating results and the market price of our common stock. Alternatively, we may be forced to
obtain additional financing by selling equity, and this could be dilutive to our existing stockholders.

RISKS OF LIABILITY TO THIRD PARTIES


Our software and content are used by clinicians in the course of treating patients. If our software fails to provide accurate and timely
information or is associated with faulty clinical decisions or treatment, clients, clinicians or their patients could assert claims against us
that could result in substantial cost to us, harm our reputation in the industry and cause demand for our software to decline.
We provide software and content that provides information and tools for use in clinical decision-making, provides access to patient medical
histories and assists in creating patient treatment plans. If our software fails to provide accurate and timely information, or if our content or
any other element of our software is associated with faulty clinical decisions or treatment, we could have liability to clients, clinicians or their
patients. The assertion of such claims, whether or not valid, and ensuing litigation, regardless of its outcome, could result in substantial cost
to us, divert management’s attention from operations and decrease market acceptance of our software. We attempt to limit by contract our
liability for damages and to require that our clients assume responsibility for medical care and approve all system rules and protocols. Despite
these precautions, the allocations of responsibility and limitations of liability set forth in our contracts may not be enforceable, may not be
binding upon our client’s patients, or may not otherwise protect us from liability for damages. We maintain general liability and errors and
omissions insurance coverage, but this coverage may not continue to be available on acceptable terms or may not be available in sufficient
amounts to cover one or more large claims against us. In addition, the insurer might disclaim coverage as to any future claim. One or more large
claims could exceed our available insurance coverage.

Complex software such as ours may contain errors or failures that are not detected until after the software is introduced or updates and new
versions are released. It is challenging for us to envision and test our software for all potential problems because it is difficult to simulate the
wide variety of computing environments, medical circumstances or treatment methodologies that our clients may deploy or rely upon. Despite
extensive testing by us and clients, from time to time we have discovered defects or errors in our software, and additional defects or errors can
be expected to appear in the future. Defects and errors that are not timely detected and remedied could expose us to risk of liability to clients,
clinicians and their patients and cause delays in software introductions and shipments, result in increased costs and diversion of development
resources, require design modifications or decrease market acceptance or client satisfaction with our software.

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Our software and software provided by third parties that we include in our offering could infringe third-party intellectual property rights,
exposing us to costs that could be significant.
Infringement or invalidity claims or claims for indemnification resulting from infringement claims could be asserted or prosecuted against us
based upon design or use of software we provide to clients, including software we develop as well as software provided to us by third parties.
Regardless of the validity of any claims, defending against these claims could result in significant costs and diversion of our resources, and
vendor indemnity might not be available. The assertion of infringement claims could result in injunctions preventing us from distributing our
software, or require us to obtain a license to the disputed intellectual property rights, which might not be available on reasonable terms or at
all. We might also be required to indemnify our clients at significant expense.

RISKS RELATED TO OUR STRATEGIC RELATIONSHIPS AND INITIATIVES


We depend on licenses from third parties for rights to some of the technology we use, and if we are unable to continue these relationships
and maintain our rights to this technology, our business could suffer.

We depend upon licenses for some of the technology used in our software from a number of third-party vendors. Most of these licenses
expire within one to five years, can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to
cure the breach within a specified period of time. We may not be able to continue using the technology made available to us under these
licenses on commercially reasonable terms or at all. As a result, we may have to discontinue, delay or reduce software sales until we obtain
equivalent technology, which could hurt our business. Most of our third-party licenses are non-exclusive. Our competitors may obtain the
right to use any of the technology covered by these licenses and use the technology to compete directly with us. In addition, if our vendors
choose to discontinue support of the licensed technology in the future or are unsuccessful in their continued research and development
efforts, particularly with regard to Microsoft, we may not be able to modify or adapt our own software.

Our software offering often includes modules provided by third parties, and if these third parties do not meet their commitments, our
relationships with our clients could be impaired.
Some of the software modules we offer to clients are provided by third parties. We often rely upon these third parties to produce software that
meets our clients’ needs and to implement and maintain that software. If these third parties are unable or unwilling to fulfill their
responsibilities, our relationships with affected clients could be impaired, and we could be responsible to clients for the failures. We might not
be able to recover from these third parties for any or all of the costs we incur as a result of their failures.

Any acquisitions we undertake may be disruptive to our business and could have an adverse effect on our future operations and the
market price of our common stock.
An important element of our business strategy has been expansion through acquisitions and while there is no assurance that we will identify
and complete any future acquisitions, any acquisitions would involve a number of risks, including the following:
• The anticipated benefits from the acquisition may not be achieved, including as a result of loss of customers or personnel of the
target.
• The identification, acquisition and integration of acquired businesses require substantial attention from management. The diversion
of management’s attention and any difficulties encountered in the transition process could hurt our business.
• The identification, acquisition and integration of acquired businesses requires significant investment, including to harmonize
product and service offerings, expand management capabilities and market presence, and improve or increase development efforts
and software features and functions.
• In future acquisitions, we could issue additional shares of our common stock, incur additional indebtedness or pay consideration in
excess of book value, which could dilute future earnings.
• Acquisitions also expose us to the risk of assumed known and unknown liabilities.
• New business acquisitions generate significant intangible assets that result in substantial related amortization charges to us and
possible impairments.

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RISKS RELATED TO INDUSTRY REGULATION


Potential regulation by the U.S. Food and Drug Administration of our software and content as medical devices could impose increased
costs, delay the introduction of new software and hurt our business.
The U.S. Food and Drug Administration, or FDA, may become increasingly active in regulating computer software or content intended for use
in the healthcare setting. The FDA has increasingly focused on the regulation of computer software and computer-assisted products as
medical devices under the Food, Drug, and Cosmetic Act, or the FDC Act. If the FDA chooses to regulate any of our software, or third party
software that we resell, as medical devices, it could impose extensive requirements upon us, including requiring us to:
• seek FDA clearance of pre-market notification submission demonstrating substantial equivalence to a device already legally
marketed, or to obtain FDA approval of a pre-market approval application establishing the safety and effectiveness of the software;
• comply with rigorous regulations governing the pre-clinical and clinical testing, manufacture, distribution, labeling and promotion
of medical devices; and/or
• comply with the FDC Act regarding general controls, including establishment registration, device listing, compliance with good
manufacturing practices, reporting of specified device malfunctions and adverse device events.

If we fail to comply with applicable requirements, the FDA could respond by imposing fines, injunctions or civil penalties, requiring recalls or
software corrections, suspending production, refusing to grant pre-market clearance or approval of software, withdrawing clearances and
approvals, and initiating criminal prosecution. Any FDA policy governing computer products or content may increase the cost and time to
market of new or existing software or may prevent us from marketing our software.

Changes in federal and state regulations relating to patient data could depress the demand for our software and impose significant
software redesign costs on us.
Clients use our systems to store and transmit highly confidential patient health information and data. State and federal laws and regulations
and their foreign equivalents govern the collection, security, use, transmission and other disclosures of health information. These laws and
regulations may change rapidly and may be unclear, or difficult or costly to apply.

Federal regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and related laws and regulations,
impose national health data standards on healthcare providers that conduct electronic health transactions, healthcare clearinghouses that
convert health data between HIPAA-compliant and non-compliant formats, and health plans and entities providing certain services to these
organizations. These standards require, among other things, transaction formats and code sets for electronic health transactions; protect
individual privacy by limiting the uses and disclosures of individually identifiable health information; and require covered entities to implement
administrative, physical and technological safeguards to ensure the confidentiality, integrity, availability and security of individually
identifiable health information in electronic form. Most of our clients are covered by these regulations and require that our software and
services adhere to HIPAA standards, and evolving privacy regulations are expected to apply to us directly. Any failure or perception of failure
of our software or services to meet HIPAA standards and related regulations could adversely affect demand for our software and services and
force us to expend significant capital, research and development and other resources to modify our software or services to address the privacy
and security requirements of our clients.

States and foreign jurisdictions in which we or our clients operate have adopted, or may adopt, privacy standards that are similar to or more
stringent than the federal HIPAA privacy standards. This may lead to different restrictions for handling individually identifiable health
information. As a result, our clients may demand, and we may be required to provide information technology solutions and services that are
adaptable to reflect different and changing regulatory requirements which could increase our development costs. In the future, federal, state or
foreign governmental or regulatory authorities or industry bodies may impose new data security standards or additional restrictions on the
collection, use, transmission and other disclosures of health information. We cannot predict the potential impact that these future rules may
have on our business. However, the demand for our software and services may decrease if we are not able to develop and offer software and
services that can address the regulatory challenges and compliance obligations facing us and our clients.

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RISKS RELATED TO OUR PERSONNEL AND ORGANIZATION


Our growing operations in India expose us to risks that could have an adverse effect on our results of operations.
We now have a significant workforce employed in India engaged in a broad range of development, support and corporate infrastructure
activities that are integral to our business and critical to our profitability. This involves significant challenges that are increased by our lack of
prior experience managing operations in India. Further, while there are certain cost advantages to operating in India, significant growth in the
technology sector in India has increased competition to attract and retain skilled employees with commensurate increases in compensation
costs. In the future, we may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation
and salary structure. Many of the companies with which we compete for hiring experienced employees have greater resources than we have
and may be able to offer more attractive terms of employment. In addition, our operations in India require ongoing capital investments and
expose us to foreign currency fluctuations, which may significantly reduce or negate any cost benefit anticipated from such expansion.

In addition, our reliance on a workforce in India exposes us to disruptions in the business, political and economic environment in that region.
Maintenance of a stable political environment is important to our operations, and terrorist attacks and acts of violence or war may directly
affect our physical facilities and workforce or contribute to general instability. Our operations in India may also be affected by trade
restrictions, such as tariffs or other trade controls, as well as other factors that may adversely affect our business and operating results.

If we fail to attract, motivate and retain highly qualified technical, marketing, sales and management personnel, our ability to execute our
business strategy could be impaired.
Our success depends, in significant part, upon the continued services of our key technical, marketing, sales and management personnel, and
on our ability to continue to attract, motivate and retain highly qualified employees. Competition for these employees is intense and we
maintain at-will employment terms with our employees. In addition, the process of recruiting personnel with the combination of skills and
attributes required to execute our business strategy can be difficult, time-consuming and expensive. We believe that our ability to implement
our strategic goals depends to a considerable degree on our senior management team. The loss of any member of that team could hurt our
business.

RISKS RELATED TO OUR EQUITY STRUCTURE


Provisions of our charter documents and Delaware law may inhibit potential acquisition bids that stockholders may believe are desirable,
and the market price of our common stock may be lower as a result.
Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock. Our board of directors can fix the price, rights,
preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares
of preferred stock may discourage, delay or prevent a merger or acquisition of our company. The issuance of preferred stock may result in the
loss of voting control to other stockholders. We have no current plans to issue any shares of preferred stock and we terminated, effective as
of May 8, 2008, our stockholder rights agreement, which used preferred stock purchase rights designed to enable our board of directors to
better respond to any takeover efforts. However, we could implement a new stockholder rights plan in the future, or make other uses of
preferred stock to inhibit a potential acquisition of the company.

Our charter documents contain additional anti-takeover devices, including:


• only one of the three classes of directors is elected each year;
• the ability of our stockholders to remove directors without cause is limited;
• the right of stockholders to act by written consent has been eliminated;
• the right of stockholders to call a special meeting of stockholders has been eliminated; and
• advance notice must be given to nominate directors or submit proposals for consideration at stockholders meetings.

We are also subject to provisions of Section 203 of the Delaware General Corporation Law which prohibits us from engaging in any business
combination with an interested stockholder for a period of three years from

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the date the person became an interested stockholder, unless certain conditions are met. These provisions make it more difficult for
stockholders or potential acquirers to acquire us without negotiation and may apply even if some of our stockholders consider the proposed
transaction beneficial to them. For example, these provisions might discourage a potential acquisition proposal or tender offer, even if the
acquisition proposal or tender offer is at a premium over the then current market price for our common stock. These provisions could also limit
the price that investors are willing to pay in the future for shares of our common stock.

Item 1B. Unresolved Staff Comments


Not applicable.

Item 2. Properties
Our corporate headquarters are located in Atlanta, Georgia under a lease that expires in September 2017. In addition, we maintain leased office
space in Irvine, California; San Jose, California; Farmington, Connecticut; West Des Moines, Iowa; Rockville, Maryland; Boston,
Massachusetts; St. Louis, Missouri; Mountain Lakes, New Jersey; Malvern, Pennsylvania; Richmond, British Columbia, Canada; Vadodara,
India; Pune, India; Dubai, United Arab Emirates; and certain small offices for remote employees. These leases expire at various times through
September 2013.

Item 3. Legal Proceedings


See Note N, “Commitments and Contingencies” in Notes to the Consolidated Financial Statements.

Item 4. Submission of Matters to a Vote of Security Holders


No matters were submitted to a vote of our stockholders during the fourth quarter of 2008.

Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Price Range of Common Stock
Our common stock has been publicly traded on the NASDAQ Global Select Market under the symbol “ECLP” since our initial public offering
on August 6, 1998. The following table sets forth, for the quarters indicated, the high and low sales prices of our common stock as reported by
the NASDAQ Global Select Market:

High Low
2007
First quarter $21.93 $17.81
Second quarter $21.38 $18.17
Third quarter $25.40 $19.76
Fourth quarter $26.09 $21.80
2008
First quarter $26.16 $19.50
Second quarter $22.14 $18.36
Third quarter $23.31 $17.58
Fourth quarter $21.09 $11.62

Dividends
We have never paid or declared any cash dividends on our common stock or other securities and do not anticipate paying cash dividends in
the foreseeable future. We currently intend to retain all future earnings, if any, for use in the operation of our business.

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Shares Available Under Equity Compensation Plans


Information regarding securities authorized for issuance under equity compensation plans is provided under Item 12 — Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters elsewhere in this document.

Comparative Stock Performance


The following graph compares the cumulative total stockholder return on our common stock from December 31, 2003 to December 31, 2008 with
the cumulative total return of (i) the companies traded on the NASDAQ Global Select Market (the “NASDAQ Composite Index”) and (ii) the
NASDAQ Computer & Data Processing Index. The graph assumes the investment of $100.00 on December 31, 2003 in (i) our Voting Common
Stock, (ii) the NASDAQ Composite Index and (iii) the NASDAQ Computer & Data Processing Index, and assumes that any dividends are
reinvested.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*


Among Eclipsys Corporation, The NASDAQ Composite Index
And The NASDAQ Computer & Data Processing Index

LOGO

* $100 invested on 12/31/03 in stock & index-including reinvestment of dividends.

Fiscal year ending December 31.

C u m u lative Total Re turn


12/03 12/04 12/05 12/06 12/07 12/08
Eclipsys Corporation 100.00 175.52 162.63 176.63 217.44 121.91
NASDAQ Composite 100.00 110.08 112.88 126.51 138.13 80.47
NASDAQ Computer & Data Processing 100.00 115.62 118.29 133.40 158.91 90.83

The Eclipsys Corporation index is based upon the closing prices of Eclipsys common stock on the last trading day of 2003, 2004, 2005, 2006,
2007 and 2008 of $11.64, $20.43, $18.93, $20.56, $25.31, and $14.19 respectively. On February 23, 2009, the closing price of Eclipsys common
stock was $10.00.

Note: The stock price performance shown on the graph above is not necessarily indicative of future price performance. This graph is not
“soliciting material,” is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference in any
of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in
such filing.

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Holders of Record
As of February 23, 2009, we had approximately 350 stockholders of record.

Issuer Purchases of Equity Securities


The following table sets forth information with respect to purchases by Eclipsys of its equity securities registered pursuant to Section 12 of
the Exchange Act during the quarter ended December 31, 2008:

(d)
(c) Maxim u m Nu m be r (or
(a) (b) Total Num be r of Approxim ate Dollar Valu e ) of
Total Num be r Ave rage Price S h are s of C om m on S tock S h are s of C om m on S tock
of S h are s Paid Pe r Purchase d as Part of that
of C om m on S h are of Publicly An n ou n ce d May Ye t Be Purchase d Un de r
Pe riod S tock Purchase d C om m on S tock Plan s or Program s the Plans or Program s
October 1-31, 2008 — — — —
November 1-30, 2008 — — — —
December 1-31, 2008 30,2321 $ 12.18 — —
Total 30,232 $ 12.18 — —
1
These shares were tendered to the Company by employees holding common stock initially issued to them in the form of restricted stock
awards in order to reimburse the Company for income tax deposits paid by the Company on their behalf in respect of taxable income
resulting from scheduled vesting of restricted shares.

Item 6. Selected Financial Data


The Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006, and the Consolidated Balance Sheet data
as of December 31, 2008 and 2007, are derived from our audited Consolidated Financial Statements appearing elsewhere in this Annual Report
on Form 10-K. The Consolidated Statements of Operations for the years ended December 31, 2005 and 2004, and the consolidated balance
sheet data as of December 31, 2006, 2005, and 2004, are derived from audited Consolidated Financial Statements that have not been included in
this filing.

The information set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and
related notes thereto included in Item 8 of this Form 10-K to fully understand factors that may affect the comparability of the information
presented below.

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Consolidated Statements of Operations


(in thousands, except per share data)

Ye ar En de d De ce m be r 31,
2008 2007 2006 2005 2004
Revenues:
Systems and services $495,643 $460,853 $409,450 $370,380 $282,124
Hardware 20,119 16,680 18,092 12,962 26,951
Total revenues 515,762 477,533 427,542 383,342 309,075
Costs and expenses:
Cost of systems and services (excluding depreciation and amortization shown
below) 280,694 263,557 237,617 225,131 168,748
Cost of hardware 16,945 12,230 14,592 11,055 22,949
Sales and marketing 85,911 76,172 63,391 64,080 65,599
Research and development 61,435 56,480 57,768 51,771 58,187
General and administrative 38,457 32,677 24,972 19,479 15,951
Depreciation and amortization 22,098 17,924 15,736 14,659 13,284
In-process research and development charge 850 — — — —
Restructuring charge — 1,175 14,670 — —
Total costs and expenses 506,390 460,215 428,746 386,175 344,718
Income (loss) from operations 9,372 17,318 (1,204) (2,833) (35,643)
Gain on sale of assets 4,370 12,761 — — —
Gain (loss) on investments, net (609) — — — —
Interest expense (2,117) — — — —
Interest income 6,074 7,070 5,335 3,102 1,614
Income (loss) before income taxes 17,090 37,149 4,131 269 (34,029)
(Benefit) provision for income taxes (82,416) (3,992) 38 — —
Net income (loss) $ 99,506 $ 41,141 $ 4,093 $ 269 $(34,029)
Net income (loss) per common share:
Basic net income (loss) per common share $ 1.84 $ 0.78 $ 0.08 $ 0.01 $ (0.73)
Diluted net income (loss) per common share $ 1.81 $ 0.76 $ 0.08 $ 0.01 $ (0.73)
Basic weighted average common shares outstanding 54,089 52,737 51,472 47,947 46,587
Diluted weighted average common shares outstanding 54,953 54,004 52,948 50,638 46,587

Balance Sheet Data

(in thou san ds)


De ce m be r 31,
2008 2007 2006 2005 2004
Cash and cash equivalents $108,304 $ 22,510 $ 41,264 $ 76,693 $122,031
Marketable securities 154 168,925 89,549 37,455 —
Working capital 79,004 163,763 89,597 52,245 46,891
Total assets 708,875 436,721 363,278 328,671 296,004
Long-term obligations 105,000 — — — —
Stockholder's equity 397,997 258,014 190,656 145,529 122,758

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis should be read in conjunction with our consolidated financial statements, including the notes thereto, which
are included elsewhere in this report.

EXECUTIVE OVERVIEW
About the Company
Eclipsys is a leading provider of advanced integrated clinical, revenue cycle and performance management software, and professional services
that help healthcare organizations improve clinical, financial, and operational outcomes. We develop and license proprietary software and
content that is designed for use in connection with many of the key clinical, financial and operational functions that healthcare organizations
require. Among other things, our software:
• enables physicians, nurses and other clinicians to coordinate care through shared electronic medical records, place orders and
access and share information about patients;
• helps our clients optimize the healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory control and
cost accounting;
• supports clinical and financial planning and analysis; and
• provides information for use by physicians, nurses and other clinicians through clinical content, which is integrated with our
software.

We also provide professional services related to our software. These services include software implementation and maintenance, outsourcing,
remote hosting of our software, as well as third-party healthcare information technology applications, technical and user training and
consulting.

With the exception of hardware revenues, we classify our revenues in one caption (systems and services) in our statement of operations since
the amount of license revenue related to traditional software contracts is less than 10% of total revenues and the remaining revenue types
included in this caption relate to bundled subscription arrangements and other services arrangements that have similar attribution patterns for
revenue recognition. Our income statement items of revenue are as follows:
• Systems and services revenues include revenues derived from a variety of sources, including software licenses and contractual
software maintenance, and professional services, which include implementation, training and consulting services. Our systems and
services revenues include both “subscription” software license revenues and software maintenance revenues (which are like
recognized ratably over the contractual term) and license revenues related to “traditional” software contracts (which are generally
recognized upon delivery of the software and represents less than 10% of total revenues). For some clients, we host the software
applications licensed from us remotely on our own servers, which saves such clients the cost of procuring and maintaining
hardware and related facilities. For other clients, we offer an outsourced solution in which we assume partial to total responsibility
for a healthcare organization’s information technology operations using our employees. Margins on the license and maintenance
revenue are generally significantly higher than those on the professional services revenues.
• Hardware revenues result from our sale of computer hardware to our clients in connection with their implementation of our
software. We purchase this hardware from suppliers and resell it to our clients. As clients elect more remote-hosted solutions,
clients’ need for hardware is reduced and future hardware revenues may be negatively impacted. The amount of hardware
revenues, and the proportion of our total revenues that they represent, can vary significantly from period to period. Margins on
hardware revenues are generally significantly lower than those on systems and services revenues.

We market our software to healthcare providers of many different sizes and specialties, including community hospitals, large multi-entity
healthcare systems, academic medical centers, outpatient clinics and physician practices. Most of the top-ranked U.S. hospitals named in U.S.
News & World Report’s Honor Roll use one or more of our solutions.

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We continue to focus on expanding our international business, including our operations in India and sales of our solutions outside of North
America, such as the Asia-Pacific region and the Middle East. As of December 2008, our India operations have expanded to include two
offices and approximately 600 employees. We believe that India provides access to educated professionals to work on software research,
development and support, as well as other functions, at an economically effective cost, and also represents a potential new market for our
software.

In 2008, Eclipsys acquired Enterprise Performance Systems, Inc. (“EPSi”), MediNotes Corporation (“MediNotes”), and Premise Corporation
(“Premise”). Each of these companies added strategic new products that are expected to help improve our competitive position and also drive
additional revenue growth.
• In February 2008, we acquired EPSi, a provider of business performance improvement solutions that help healthcare executives
better manage the business of healthcare by providing actionable financial management and decision support data from all
functional areas, which include budgeting/planning, cost accounting, patient and financial/clinical analysis.
• In October 2008, we acquired MediNotes, an industry leader in physician practice information solutions. This addition helps us
more effectively support healthcare enterprises’ community strategies, to better coordinate care between clinicians and patients,
and puts us in one of the fastest growing markets in healthcare, practice management and electronic medical records.
• In December 2008, we acquired Premise, expanding our portfolio of solutions that help our clients improve operational performance,
which also includes EPSi software and our growing portfolio of analytics solutions. This acquisition expands our range of solutions
to help our clients improve operational performance. Premise’s software solutions and services for bed management, bed turnover,
and transport help optimize patient flow, streamline communications, and enhance operational efficiency.

Business Environment
Our industry, healthcare information technology, is highly competitive and subject to numerous government regulations and industry
standards. Sales of Eclipsys’ solutions can be affected significantly by many competitive factors, including the features and cost of our
solutions as compared to the offerings of our competitors, our marketing effectiveness, and the success of our research and development of
new and enhanced solutions. We anticipate that the healthcare information technology industry will continue to grow and be seen as a way to
curb growing healthcare costs while also improving the quality of healthcare.

New Accounting Pronouncements


See Note B to our consolidated financial statements for a description of new accounting pronouncements.

Critical Accounting Policies


We believe there are several accounting policies that are critical to the understanding of our historical and future performance as these policies
affect the reported amount of revenues and expenses and other significant areas and involve management’s most difficult, subjective or
complex judgments and estimates. On an ongoing basis, management evaluates and adjusts its estimates and judgments, if necessary. The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingencies. Due to the
inherent uncertainty involved in making estimates, actual results reported in future periods may be materially different from those estimates.
These critical accounting policies relate to revenue recognition, allowance for doubtful accounts, capitalized software development costs,
stock based compensation and income taxes. Please refer to Note B of the audited Consolidated Financial Statements for further discussion of
our significant accounting policies.

Revenue Recognition
Revenues are derived from licensing of computer software; software and hardware maintenance; professional services (including
implementation, integration, training and consulting); remote hosting; outsourcing; network services; and the sale of computer hardware.

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We generally contract under multiple element arrangements, which include software license fees, hardware and services, including
implementation, integration, training and software maintenance, for periods of 3 to 7 years. We evaluate revenue recognition on a contract-by-
contract basis as the terms of each arrangement vary. The evaluation of our contractual arrangements often requires judgments and estimates
that affect the timing of revenue recognized in our statements of operations. Specifically, we may be required to make judgments about:
• whether the fees associated with our software and services are fixed or determinable;
• whether collection of our fees is considered probable;
• whether professional services are essential to the functionality of the related software;
• whether we have the ability to make reasonably dependable estimates in the application of the percentage-of-completion method;
and
• whether we have verifiable objective evidence of fair value for our software and services.

We recognize revenues in accordance with the provisions of Statement of Position (“SOP”) 97-2 “Software Revenue Recognition,” as
amended by SOP 98-9, Staff Accounting Bulletin (“SAB”) 104 “Revenue Recognition,” and Emerging Issues Task Force (“EITF”) 00-21
“Revenue Arrangements with Multiple Deliverables.” SOP 97-2 and SAB 104, as amended, require among other matters, that there be a signed
contract evidencing an arrangement exists, delivery has occurred, the fee is fixed or determinable, collectibility is probable, and remaining
obligations under the agreement are insignificant.

Many of our contracts with our clients are multiple element arrangements that provide for multiple software modules including the rights to
unspecified future versions and releases we may offer within the software suites the client purchases or rights to unspecified software
versions that support different hardware or operating platforms, and that do not qualify as exchange rights. We refer to these arrangements as
subscription contracts. Additionally, we sometimes enter into multiple element arrangements that do not include these rights to unspecified
future software or platform protection rights. We refer to these arrangements as traditional software contracts. Finally, we offer much of our
software and services on a stand-alone basis. Revenue under each of these arrangements is recognized as set forth below:

Subscription Contracts
Our subscription contracts typically include the following elements:
• Software license;
• Maintenance;
• Professional services; and
• Third party hardware or remote hosting services.

Software license fees are recognized ratably over the term of the contract, commencing upon the delivery of the software provided that
(1) there is evidence of an arrangement, (2) the fee is fixed or determinable and (3) collection of our fee is considered probable. The value of the
software is determined using the residual method pursuant to SOP 98-9 “Modification of SOP 97-2, With Respect to Certain Transactions.”
These contracts contain the rights to unspecified future software within the suite purchased and/or unspecified platform transfer rights that
do not qualify for exchange accounting. Accordingly, these arrangements are accounted for pursuant to paragraphs 48 and 49 of SOP 97-2
“Software Revenue Recognition.” Under certain arrangements, we capitalize related direct costs consisting of third party software costs and
direct software implementation costs. These costs are amortized over the term of the arrangement.

In the case of maintenance revenues, vendor-specific objective evidence, or VSOE, of fair value is based on substantive renewal prices, and
the revenues are recognized ratably over the maintenance period.

In the case of professional services revenues, VSOE is based on prices from stand-alone sale transactions, and the revenues are recognized as
services are performed pursuant to paragraph 65 of SOP 97-2.

Third party hardware revenues are recognized upon delivery, pursuant to SAB 104.

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For remote hosting services, VSOE is based upon consistent pricing charged to clients based on volumes and performance requirements on a
stand-alone basis and substantive renewal terms, and the revenues are recognized ratably over the contract term as the services are performed.
Our remote hosting arrangements generally require us to perform one-time set-up activities and include a one-time set-up fee. This one-time
set-up fee is generally paid by the client at contract execution. We have determined that these set-up activities do not constitute a separate
unit of accounting, and accordingly the related set-up fees are recognized ratably over the term of the contract.

We consider the applicability of EITF 00-3, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use
Software Stored on Another Entity’s Hardware,” to our remote hosting services arrangements on a contract-by-contract basis. If we determine
that the client has the contractual right to take possession of our software at any time during the hosting period without significant penalty,
and can feasibly run the software on its own hardware or enter into another arrangement with a third party to host the software, a software
element covered by SOP 97-2 exists. When a software element exists in a remote hosting services arrangement, we recognize the license,
professional services and remote hosting services revenues pursuant to SOP 97-2, whereby the fair value of the remote hosting service is
recognized as revenue ratably over the term of the remote hosting contract. If we determine that a software element covered by SOP 97-2 is not
present in a remote hosting services arrangement, we recognize revenue for the remote hosting services arrangement, ratably over the term of
the remote hosting contract pursuant to SAB 104.

Traditional Software Contracts


We enter into traditional multiple-element arrangements that can include the following elements:
• Software license;
• Maintenance;
• Professional services; and
• Third party hardware or remote hosting services.

Revenue for each of the elements is recognized as follows:

Software license fees are recognized upon delivery of the software provided that (1) there is evidence of an arrangement, (2) the fee is fixed or
determinable and (3) collection of our fee is considered probable. For those arrangements in which the fee is not considered fixed or
determinable, the software license revenue is recognized as the payments become due. For arrangements where VSOE only exists for the
undelivered elements, we account for the delivered elements (software license revenue) using the residual method in accordance with SOP 98-
9.

In addition to the software license fees, these contracts may also contain maintenance, professional services and hardware or remote hosting
services. VSOE and revenue recognition for these elements is determined using the same methodology as noted above for subscription
contracts.

Software Contracts Requiring Contract Accounting


We enter into certain multiple element arrangements containing milestone provisions in which the professional services are considered
essential to the functionality of the software. Under these arrangements, software license fees and professional service revenues are
recognized using the percentage-of-completion method over the implementation period which generally ranges from 12 to 36 months. Under
the percentage-of-completion method, revenue and profit are recognized throughout the term of the implementation based upon estimates of
total labor hours incurred and revenues to be generated over the term of the implementation. Changes in estimates of total labor hours and the
related effect on the timing of revenues and profits are recognized in the period in which they are determinable. Accordingly, changes in these
estimates could occur and have a material effect on our operating results in the period of change.

Stand-Alone Software and Service


We also market certain software and services on a stand-alone basis, including the following:
• Software license;

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• Maintenance;
• Professional services;
• Hardware;
• Outsourcing; and
• Remote Hosting services.

Revenues related to such software and services are recognized as follows:

Software license fees and maintenance marketed on a stand-alone basis may be licensed either under traditional contracts or under
subscription arrangements. Software license fees under traditional contracts are recognized pursuant to SOP 97-2 upon delivery of the
software, persuasive evidence of an arrangement exists, the fee is fixed or determinable and collectibility is probable. Under subscription
agreements for stand-alone software, license fees are recognized ratably over the term of the contract. With respect to maintenance, VSOE is
determined based on substantive renewal prices contained in the contracts. Maintenance is recognized ratably over the term of the contract.

Professional services represent incremental services marketed to clients including implementation, consulting, and training services.
Professional services revenues, where VSOE is based on prices from stand-alone transactions, are recognized as services are performed.

Hardware is recognized upon delivery pursuant to SAB 104.

Network service arrangements include the assessment, assembly and delivery of a wireless network which may include wireless carts or other
wireless equipment to the client. Our network services arrangements are sold to a client for a fixed fee. All services are performed prior to the
delivery of the equipment. These contracts are typically 60 to 90 days in length and are recognized pursuant to SAB 104, upon the delivery of
the network to the client. We exited the network services business in 2007.

Remote hosting contracts that are sold on a stand-alone basis are recognized ratably over the contract term pursuant to SAB 104. Our remote
hosting arrangements generally require us to perform one-time set-up activities and include a one-time set-up fee. This one-time set-up fee is
generally paid by the client at contract execution. We have determined that these set-up activities do not constitute a separate unit of
accounting, and accordingly, recognize the related set-up fees ratably over the term of the contract.

We provide outsourcing services to our clients. Under these arrangements we assume full, partial or transitional responsibilities for a
healthcare organization’s IT operations using our employees. Our outsourcing services include facilities management, network outsourcing
and transition management. These arrangements typically range from five to ten years in duration. Revenues from these arrangements are
recognized when services are performed.

We record reimbursable out-of-pocket expenses in both systems and services revenues and as a direct cost of systems and services in
accordance with EITF 01-14, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred.” For
2008, 2007, and 2006 reimbursable out-of-pocket expenses were $11.7 million, $11.6 million, and $9.0 million, respectively.

In accordance with EITF 00-10, “Accounting for Shipping and Handling Fees,” we have classified the reimbursement by clients of shipping
and handling costs as revenue and the associated cost as cost of revenue.

If other judgments or assumptions were used in the evaluation of our revenue arrangements, the timing and amounts of revenue recognized
may have been significantly different.

Allowance for Doubtful Accounts


In evaluating the collectability of our accounts receivable, we assess a number of factors, including a specific client’s ability to meet its
financial obligations to us, as well as general factors such as the length of time the receivables are past due and historical collection
experience. Based on these assessments, we record a reserve for specific account balances as well as a reserve based on our historical
experience for bad debt to reduce the related receivables to the amount we ultimately expect to collect from clients. If circumstances related to
specific clients change, or economic conditions deteriorate such that our past collection experience is no longer relevant, our estimate of the
recoverability of our accounts receivable could be further reduced from the levels provided for in the Consolidated Financial Statements.

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Capitalized Software Development Costs


We capitalize a portion of our computer software development costs incurred subsequent to establishing technological feasibility. These
costs include salaries, benefits, consulting and other directly related costs incurred in connection with programming and testing software.
Capitalization ceases when the software is generally released for sale to clients. Management monitors the net realizable value of development
costs to ensure that the investment will be recovered through future revenues. Capitalized software development costs were $18.2 million,
$20.9 million, and $14.1 million for the years ended December 31, 2008, 2007, and 2006, respectively. These costs are amortized over the greater
of (i) the ratio of current revenues to total and anticipated future revenues for the applicable software or (ii) the straight-line method over three
years. During 2008, 2007, 2006 all of our capitalized software costs were amortized over a three year period. Amortization of capitalized software
development costs, which is included in cost of systems and services, was $18.7 million, $15.0 million, and $17.5 million for the years ended
December 31, 2008, 2007, and 2006, respectively. Accumulated amortization of capitalized software development costs was $32.4 million and
$23.8 million as of December 31, 2008 and 2007, respectively.

Stock-Based Compensation
We account for stock-based employee compensation arrangements in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 123(R) “Share-Based Payment,” as adopted effective January 1, 2006. We elected to adopt SFAS 123(R) using the modified
prospective method. Under this method, compensation cost recognized during the year ended December 31, 2008, includes: (a) compensation
cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of SFAS 123 amortized over the awards’ vesting period, and (b) compensation cost for all share-based
payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS
123(R) amortized on a straight-line basis over the awards’ vesting period. The fair value of stock options is estimated at the date of grant using
the Black-Scholes option pricing model with weighted average assumptions for the activity under our stock plans. Option pricing model input
assumptions such as expected term, expected volatility, and risk-free interest rate, impact the fair value estimate. Further, the forfeiture rate
impacts the amount of aggregate compensation. These assumptions are subjective and generally require significant analysis and judgment to
develop. When estimating fair value, some of the assumptions were based on or determined from external data (for example, the risk free
interest rate) and other assumptions were derived from our historical experience (for example volatility). The appropriate weight to place on
historical experience is a matter of judgment, based on relevant facts and circumstances.

We have elected to use the simplified method for estimating our expected term equal to the midpoint between the vesting period and the
contractual term as allowed by SAB 107, “Share-Based Payment.” Staff Accounting Bulletin 110, “Year-End Help for Expensing Employee
Stock Options,” for options granted after December 31, 2007 requires the use of historical data to estimate an expected term unless the
company significantly changes the terms of its share-option grants. The grants the Company issued after December 31, 2007 have a
contractual term of 7 years, which differs from the contractual term of the historical grants (generally 10 years). Therefore, we do not have
sufficient historical data to estimate the expected term for current option issuances. Accordingly, we continue to use the simplified method.
Additionally, this reduction in contractual term has lowered our assumption of our expected term.

We currently estimate volatility by using the weighted average historical volatility of our common stock. The risk-free interest rate is the
implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term input to the Black-
Scholes model. We estimate forfeitures using a weighted average historical forfeiture rate. Our estimate of forfeitures will be adjusted over the
requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from our estimate.

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Income Taxes
Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any
valuation allowance recorded against our net deferred tax assets. A change in these estimates could have a material effect on our operating
results. We estimate our income taxes in each of the jurisdictions in which we operate. This process requires us to estimate our actual current
tax exposure, together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which are included on our Consolidated Balance Sheet.

The Company regularly reviews its deferred tax assets for recoverability taking into consideration such factors as historical losses, projected
future taxable income and the expected timing of the reversals of existing temporary differences. SFAS 109 requires the Company to record a
valuation allowance when it is “more likely than not that some portion or all of the deferred tax assets will not be realized.” It further states that
“forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent
years.” Since inception, the Company has maintained a 100% valuation allowance equal to the deferred U.S. tax assets after considering the
U.S. deferred tax assets that can be realized through offsets to existing taxable temporary differences.

Based upon the Company’s results of operations in recent years, and its expected profitability in this and future years, the Company has
concluded, effective September 30, 2008, that it is more likely than not that substantially all of its net U.S. deferred tax assets will be realized.
As a result, in accordance with SFAS 109, substantially all of the valuation allowance applied to such net deferred tax assets was reversed in
2008. Reversal of the valuation allowance resulted in a non-cash income tax benefit in 2008 totaling $86.9 million.

As of December 31, 2008, a valuation allowance of approximately $0.2 million has been established against the U.S. state and Canada deferred
tax assets that management does not believe are more likely than not to be realized. This determination is based primarily on the Company’s
projected expiration of net operating losses in various state jurisdictions. We will continue to assess the requirement for a valuation allowance
on a quarterly basis.

In the third quarter of 2008, the Company completed its analysis of research and development expenditures for eligibility to qualify for a
research and development (“R&D”) tax credit. Accordingly, the Company recorded a deferred tax asset and related tax benefit of $10.6 million.
As of December 31, 2008, the Company has total R&D tax credit carryforwards of $13.8 million. In 2019, $0.6 million of the R&D credits begin to
expire.

In the fourth quarter of 2007, we concluded that it was more likely than not that the deferred tax assets in Canada would be recovered from
future taxable income. Accordingly, in 2007, we recorded a tax benefit of approximately $5 million for the reversal of the tax valuation allowance
related to our Canadian operation.

As of December 31, 2008, we had U.S. net operating loss carry forwards for federal income tax purposes of approximately $293.8 million. Of this
amount, $10.5 million expires in 2018 and $39.1 million expires in 2019; the balance expires in varying amounts through 2027. Of the total U.S.
net operating loss carry forward, approximately $96.1 million relates to stock-option tax deductions which will be tax-effected and the benefit
credited as additional paid-in-capital when realized. Additionally, the Company has Canadian net operating loss carryovers of approximately
$27.7 million that expire in varying amounts through 2026. Our Indian subsidiary is entitled to a tax holiday which expires in 2009.

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Goodwill
SFAS No. 142, “Goodwill and Other Intangible Assets,” classifies intangible assets into three categories: (1) intangible assets with definite
lives subject to amortization; (2) intangible assets with indefinite lives not subject to amortization; and (3) goodwill. For intangible assets with
definite lives, tests for impairment must be performed if conditions exist that indicate the carrying value may not be recoverable. For intangible
assets with indefinite lives and goodwill, tests for impairment must be performed at least annually or more frequently if events or
circumstances indicate that assets might be impaired. Our acquired technology and other intangible assets determined to have definite lives
are amortized over their useful lives. In accordance with SFAS No. 142, if conditions exist that indicate the carrying value may not be
recoverable, we review such intangible assets with definite lives for impairment. Such conditions may include an economic downturn in a
market or a change in the assessment of future operations. Goodwill is not amortized. We perform tests for impairment of goodwill annually, or
more frequently if events or circumstances indicate it might be impaired. We have only one reporting unit for which all goodwill is assigned.
Impairment tests for goodwill include comparing the fair value of the company compared to the comparable carrying value, including goodwill.

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RESULTS OF OPERATIONS

Statement of Operations Data


(in thousands, except percentages and per share data)

For Th e For Th e
Ye ars En de d Ye ars En de d
De ce m be r 31, De ce m be r 31,
2008 2007 C h an ge ($) C h an ge (%) 2007 2006 C h an ge ($) C h an ge (%)
Revenues:
Systems and services $495,643 $460,853 $ 34,790 7.5% $460,853 $409,450 $ 51,403 12.6%
Hardware 20,119 16,680 3,439 20.6% 16,680 18,092 (1,412) -7.8%
Total revenues 515,762 477,533 38,229 8.0% 477,533 427,542 49,991 11.7%
Costs and expenses:
Cost of systems and services
(excluding depreciation and
amortization shown below) 280,694 263,557 17,137 6.5% 263,557 237,617 25,940 10.9%
Cost of hardware 16,945 12,230 4,715 38.6% 12,230 14,592 (2,362) -16.2%
Sales and marketing 85,911 76,172 9,739 12.8% 76,172 63,391 12,781 20.2%
Research and development 61,435 56,480 4,955 8.8% 56,480 57,768 (1,288) -2.2%
General and administrative 38,457 32,677 5,780 17.7% 32,677 24,972 7,705 30.9%
Depreciation and amortization 22,098 17,924 4,174 23.3% 17,924 15,736 2,188 13.9%
In-process research and
development charge 850 — 850 * — — — *
Restructuring charge — 1,175 (1,175) * 1,175 14,670 (13,495) -92.0%
Total costs and expenses 506,390 460,215 46,175 10.0% 460,215 428,746 31,469 7.3%
Income (loss) from operations 9,372 17,318 (7,946) -45.9% 17,318 (1,204) 18,522 *
Gain on sale of assets 4,370 12,761 (8,391) * 12,761 — 12,761 *
Gain (loss) on investments (609) — (609) * — — — *
Interest expense (2,117) — (2,117) * — — — *
Interest income 6,074 7,070 (996) -14.1% 7,070 5,335 1,735 32.5%
Income before taxes 17,090 37,149 (20,059) -54.0% 37,149 4,131 33,018 799.3%
Provision for income taxes (82,416) (3,992) (78,424) * (3,992) 38 (4,030) *
Net income $ 99,506 $ 41,141 $ 58,365 141.9% $ 41,141 $ 4,093 $ 37,048 905.2%
Basic net income per common share $ 1.84 $ 0.78 $ 1.08 $ 0.78 $ 0.08 $ 0.70
Diluted net income per common share $ 1.81 $ 0.76 $ 1.07 $ 0.76 $ 0.08 $ 0.68
* Not meaningful

2008 compared to 2007


Revenues
Total revenues increased by $38.2 million, or 8.0%, for the year ended December 31, 2008 as compared to the year ended December 31, 2007.
The acquisition of EPSi in February 2008 accounted for $10.9 million of the increase. The acquisition of MediNotes in October 2008 accounted
for $2.2 million of the increase. Although revenues increased 8.0% in 2008, we experienced a decrease in the growth rate in the fourth quarter of
2008, as revenues for the three months ended December 31, 2008 grew only 1.9% compared to the three months ended December 31, 2007.

Systems and Services Revenues


Systems and services revenues increased by $34.8 million, or 7.5%, for the year ended December 31, 2008 as compared to the year ended
December 31, 2007. The overall increase for the year ended December 31, 2008 resulted from increases of $32.8 million in revenues recognized
on a ratable basis and $4.3 million in professional services revenues offset by a decrease of $2.3 million in periodic revenues.

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• Revenues Recognized Ratably - Revenues recognized ratably from software, maintenance, outsourcing and remote hosting were
$334.3 million for the year ended December 31, 2008, an increase of $32.8 million, or 10.9%, as compared to year ended December 31,
2007. The increase was due to new sales bookings in previous periods for our solutions, remote hosting related services, and
outsourcing, resulting in growth in our recurring revenue base. Future growth in these revenues depends upon future bookings in
excess of previous levels. In addition, the acquisition of EPSi in February 2008 added $1.7 million to our revenues recognized
ratably for the year ended December 31, 2008. These increases were offset by a decrease of $2.0 million for the year ended
December 31, 2008 as compared to the year ended December 31, 2007, as a result of the sale of our Clinical Practice Model Resource
Center (CPMRC) business in late 2007.
• Periodic Revenues - Periodic revenues for software related fees, third party software related fees and networking services (only
2007) were $37.1 million for the year ended December 31, 2008, as compared to $39.5 million for the year ended December 31, 2007, a
decrease of $2.3 million. The table below summarizes the components of periodic revenues (in thousands):

For Th e
Ye ars En de d
De ce m be r 31,
2008 2007 C h an ge % C h an ge
Eclipsys software related fees $28,242 $21,505 $ 6,737 31.3%
Third party software related fees 8,879 9,096 (217) -2.4%
Networking services — 8,854 (8,854) -100.0%
Total periodic revenues $37,121 $39,455 $ (2,334) -5.9%

In any period, some software revenues can be considered one time in nature for that period, and we do not recognize these revenues on
a ratable basis. These revenues include traditional license fees associated with new contracts signed in the period, including add-on
licenses to existing clients and new client transactions, as well as revenues from contract backlog that had not previously been
recognized pending contract performance that occurred or was completed during the period, and certain other activities during the period
associated with client relationships. In the aggregate, these periodic revenues can contribute significantly to earnings in the period
because relatively little in-period costs are associated with such revenues (other than those costs associated with networking services,
which is applicable only to 2007). We expect these periodic revenues to continue to fluctuate as a result of significant variations in the
type and magnitude of sales and other contract and client activity in any period, and these variations make it difficult to predict the
nature and amount of these periodic revenues. The acquisition of EPSi in February 2008 contributed periodic software related fees
revenues of $7.5 million for the year ended December 31, 2008. In addition, the acquisition of MediNotes in October 2008 contributed
periodic software related fees revenues of $1.5 million for the year ended December 31, 2008.
Our periodic revenues may vary significantly, and fall below prior-period levels, if challenging economic conditions continue to motivate
clients to defer capital investments, conserve cash and prefer software subscription contracting to traditional licensing
arrangements. Periodic revenue from traditional software license arrangements carries high margins and contributes significantly to
overall profitability in the transaction period, and increasing periodic software license revenue beyond 2008 levels is important to our
ability to improve profitability. We believe economic conditions, and resulting cash conservation by clients, adversely affected our
periodic software related fees revenues in the second half of 2008, and continuation of these conditions and client reactions will
adversely affect our results of operations in 2009.
During 2007, we exited our networking services business and shifted any residual client network hardware needs to third party hardware
providers. The related revenues are included in hardware revenues for the year ended December 31, 2008.
• Professional Services Revenues - Professional services revenues, which include implementation, training and consulting related
services, were $124.3 million for the year ended December 31, 2008, an increase of

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$4.3 million, or 3.6%, as compared to the year ended December 31, 2007. The increase resulted primarily from higher utilization of our
professional services team and increased activity associated with implementation of our software following increases in previous
period software sales. In addition, the acquisition of EPSi in February 2008 and the acquisition of MediNotes in October 2008 added
$1.7 million and $0.3 million respectively to our professional services revenues in 2008. These increases were offset by a decrease of
$5.0 million for the year ended December 31, 2008 as compared to the year ended December 31, 2007, as a result of the sale of our
Clinical Practice Model Resource Center (CPMRC) business in late 2007. Utilization of our professional services organization fell
short of our expectations in the fourth quarter of 2008, and in response we are reducing professional services headcount. Demand
for professional services in 2009 is uncertain.

Hardware Revenues
Hardware revenues increased by $3.4 million, or 20.6%, for the year ended December 31, 2008, as compared to the year ended December 31,
2007. During 2007, we exited our networking services business and shifted any residual client network hardware needs to third party hardware
providers resulting in a shift from periodic revenues to hardware revenues. This shift contributed hardware revenues of $5.9 million for the
year ended December 31, 2008.

Operating Expenses
Stock-based compensation
Stock-based compensation expense is included in cost of systems and services, sales and marketing, general and administrative, and research
and development expenses. Total stock-based compensation was $17.3 million for the year ended December 31, 2008, up $6.1 million compared
to the year ended December 31, 2007. Stock-based compensation expense increased in 2008 as compared to 2007 due to the timing of options
issued (the majority of the 2008 stock-option grants occurred in the first half of 2008 while the majority of the 2007 grants occurred in the
second half of 2007), an increase in restricted-stock grants; and a decrease in the vesting period for stock awards granted in 2008 as compared
to 2007. The increase in stock compensation expense also reflected a change of the forfeiture rate application used in the calculation of stock-
based compensation expense. Beginning with the third quarter of 2008, we elected to change the application of the forfeiture rate used in the
calculation of stock-based compensation expense which resulted in a non-recurring incremental expense of $1.5 million.

Stock-based compensation expense in future periods depends upon equity award activity and changes in variables affecting the valuations of
equity awards, as well as the timing of full vesting of awards and resulting cessation of associated expense.

Cost of Systems and Services

Our cost of systems and services increased $17.1 million, or 6.5%, for the year ended December 31, 2008 as compared to the year ended
December 31, 2007. The increase reflects:
• Labor related costs increased by $8.7 million, which includes higher wages and benefits of $9.3 million, higher stock-based
compensation of $2.7 million, higher severance expenses of $2.2 million, partially offset by lower annual incentive compensation
expense of $5.5 million. The increase in wages reflects higher average headcount supporting growth in the business. Growth
slowed in our services business leading to headcount reductions in early 2009. Higher stock-based compensation was primarily due
to factors discussed in the previous paragraph. Our reorganization of the services organization in the third quarter 2008 drove the
increase in severance expense. The reduction in annual incentive compensation expense resulted from failure to meet minimum
operating results required to fund payment of incentive compensation under our corporate bonus plan.
• Third party software cost of services increased by $7.0 million included growth in our third party business and amounts recognized
in the third quarter 2008 related to nonrecurring adjustments from prior periods and more contract activity requiring third party
services as a result of exiting our network business.
• Amortization of capitalized software increased by $3.6 million as a result of the release of SunriseXA 5.0 in December of 2007.

These increases were slightly offset by lower consulting and insurance fees in 2008.

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Cost of Hardware
Cost of hardware increased $4.7 million or 38.6% for the year ended December 31, 2008 as compared to the year ended December 31, 2007
impacted by higher hardware sales and an incremental adjustment in the third quarter of 2008 of $1.7 million to correctly record certain third-
party embedded software costs which were previously deferred. Increases in costs of hardware were also impacted by our networking services
business during 2007, which shifted any residual network hardware activity to third party hardware providers. This shift created additional
hardware costs related to increased third party hardware activity. The first nine months of 2008 were also impacted by higher software costs
for reasons previously discussed for the third quarter of 2008.

Sales and Marketing


Our sales and marketing expenses increased $9.7 million, or 12.8%, for the year ended December 31, 2008 as compared to the year ended
December 31 2007. The increase in sales and marketing expenses included higher labor related compensation and higher travel, sales trade
shows, and other miscellaneous expenses in efforts to continue to grow the business. Higher labor related costs included higher stock-based
compensation of $3.1 million, higher basic wages and related benefits of $6.7 million, partially offset by lower annual incentive compensation
expense of $1.8 million resulting from failure to meet minimum operating results required to fund payment of incentive compensation under our
corporate bonus plan and lower sales commissions of $2.9 million.

Research and Development


Our research and development expenses increased $5.0 million, or 8.8%, in the year ended December 31, 2008 as compared to the year ended
December 31, 2007. For the year ended December 31, 2008, labor related costs increased $2.7 million impacted by higher wages and related
benefits due to higher headcount in India, partially offset by a decrease in annual incentive compensation expense resulting from failure to
meet minimum operating results required to fund payment of incentive compensation under our corporate bonus plan. The increase in 2008
research and development expenses also reflect a $2.8 million year-over-year decrease in internal labor cost capitalization due to completion of
development work related to SunriseXA 5.0, which we released in December of 2007.

Our gross research and development spending, which consists of research and development expenses and capitalized software development
costs of $79.6 million in 2008, increased $2.2 million compared to $77.4 million in 2007. This increase was due primarily to continued expansion
of our research and development activities in supporting current and future growth in our business.

In summary, research and development expense for the years ended December 31, 2008 and 2007 were as follows (in thousands):

For Th e
Ye ar En de d
De ce m be r 31,
2008 2007 C h an ge ($) C h an ge (%)
Research and development expenses $61,435 $56,480 $ 4,955 8.8%
Capitalized software and development costs 18,177 20,943 (2,766) -13.2%
Gross research and development expenditures $79,612 $77,423 $ 2,189 2.8%
Amortization of capitalized software development costs $18,668 $15,039 $ 3,629 24.1%

General and Administrative


Our general and administrative expenses increased $5.8 million, or 17.7%, in the year ended December 31, 2008 as compared to the year ended
December 31, 2007. Increases in general and administrative costs include higher bad debt expense of $3.5 million due to write offs and reserves
for specific receivables in 2008. Labor costs for the year ended December 31, 2008 compared to the year ended December 31, 2007 increased
$1.7 million due to higher stock-based compensation expense of $1.0 million and higher labor and benefit costs of $2.6 million, partially offset
by lower annual incentive compensation expense of $1.9 million resulting from failure to meet minimum operating results required to fund
payment of incentive compensation under our corporate bonus plan. Other increases in

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general and administrative costs include higher rents and facilities costs due to office transition and build outs in India and Atlanta. These
increases were partially offset by lower legal costs of $1.0 million in 2008 due to completion of the voluntary stock-option review in 2007 and to
a lesser extent insurance recoveries associated with our derivative lawsuit recorded as a reduction in legal expense in 2008.

Depreciation and Amortization


Depreciation and amortization expense increased $4.2 million, or 23.3%, in the year ended December 31, 2008 as compared to the year ended
December 31, 2007. The increase in depreciation and amortization is attributable primarily to $4.8 million of increased amortization related to
intangible assets acquired in the 2008 acquisitions of EPSi and MediNotes. Due to the timing of these acquisitions and our acquisition of
Premise on December 30, 2008, we expect amortization to increase approximately $7.0 million in 2009.

In-Process Research and Development Charge


Approximately $0.9 million of the purchase price of our acquisition of EPSi was allocated to in-process research and development and was
charged to our income statement in the first quarter of 2008. The $0.9 million acquired in-process research and development was valued using
the Multi-Period Excess Earnings Method by an independent appraisal firm. The material assumptions, underlying the purchase price
allocation, were as follows: projected revenue assumptions, decay rate, cost assumptions, operating expense assumptions, charge
assumptions for the use of contributory assets, and discount rate assumptions. At the date of acquisition, the technology was still in the
research and development phase and had not yet been completed to a point of an existing or current product offering. At the time of
acquisition, the projected cost to complete the project was $0.2 million. The in-process technology was incorporated within an EPSi product
module that was released in January 2009.

Restructuring Charges
Restructuring charges were $1.2 million in 2007. The 2007 restructuring expenses related to the relocation of our corporate headquarters from
Boca Raton, Florida to Atlanta, Georgia.

Gain on Sale of Assets


During 2008 we recorded additional gain on sale of assets of $4.4 million, resulting from the completion of post-closing milestones associated
with the fourth quarter 2007 sale of our CPMRC business. In December of 2007 we recorded a $12.8 million gain on the original sale of the
CPMRC business. See 2007 compared to 2006 results for additional disclosure on the sale of this business.

Loss on Auction Rate Security (ARS)


We recorded a net loss of $0.6 million during 2008. This net loss included a gain of $3.3 million associated with recording the fair value of a
settlement agreement entered into with UBS in November 2008, which was more than offset by a $3.9 million loss reflecting the reduction of the
fair value of our ARS purchased through UBS.

Interest Expense
We incurred interest expense of $2.1 million on borrowings under the $45.0 million short-term financing arrangement we entered into in
February 2008 and repaid in May 2008, the $50.0 million short-term financing arrangement we entered into in May 2008 and repaid in August
2008, and the $105.0 million borrowed under the $125.0 million long-term financing arrangement we entered into in August 2008. The interest
rate applicable to the borrowed amount is based, at our option, on the prime rate, one-month LIBOR rate, three-month LIBOR rate, six-month
LIBOR rate or 12-month LIBOR rate at the initial debt draw date and interest rate contract end date plus an applicable margin. The applicable
margin is based on our leverage ratio, as defined in the credit agreement and as of December 31, 2008 was 1.75%. Our leverage ratio increases
to 2.0% in 2009 due to the increase in our outstanding debt. The effective interest rates at December 31, 2008 are as follows:

O u tstan ding De bt Inte re st Rate


$ 51,000 3.95%
16,000 3.97%
38,000 4.00%
$105,000 3.97%

Borrowings increased from $0 to $105.0 million in stages during 2008, including borrowings of approximately $16 million in October and
approximately $38 million in December. Borrowings are not expected to decrease in 2009.

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Interest Income
Interest income decreased $1.0 million, or 14.4%, for the year ended December 31, 2008 as compared to year ended December 31, 2007. The
decrease was attributable to lower interest rates in 2008 as compared to 2007 on our ARS due to failed Dutch auctions beginning in February
2008. Although the auctions failed, we continued to earn interest on the ARS, but only at the contractual rate.

Provision for Income Taxes


For the year ended December 31, 2008, we recorded an income tax benefit of $82.4 million as compared to an income tax benefit of $4.0 million
for the year ended December 31, 2007. The change in income taxes was primarily related to the benefit of the release of our U.S. deferred tax
asset valuation allowance and recognizing the benefit of research and development credits.

Beginning with the first quarter of 2009, we expect to begin providing for an income tax provision at a rate on income before taxes equal to our
combined worldwide effective tax rate. However, our tax rate could be unfavorably impacted by share-based compensation shortfalls. A
shortfall exists for a stock compensation award to the extent that the cumulative recognized book stock compensation expense for that award
exceeds the associated tax deduction. Substantial amounts of stock compensation shortfalls could occur in 2009 because of the recent
volatility of the Company’s common stock price. However, we are not able to predict the amount of the shortfalls. The Company must reflect a
tax provision for stock compensation shortfalls because it has no pool of windfall tax benefits from stock compensation. The Company has no
pool of windfall tax benefit because the Company has used the “with-and-without” or “incremental” approach for ordering tax benefits derived
from the share-based payment of awards.

2007 compared to 2006


Revenues
Total revenues increased by $50.0 million, or 11.7% to $477.5 million, for the year ended December 31, 2007 as compared to the year ended
December 31, 2006.

Systems and Services Revenues


Systems and services revenues increased by $51.4 million, or 12.6%, for the year ended December 31, 2007 as compared to the year ended
December 31, 2006. Of this increase, $24.5 million was attributable to revenue recognized on a ratable basis, $20.9 million was attributable to
revenue from professional services and $6.0 million was attributable to periodic revenues related to software licenses and other in-period
related activities.
• Revenues Recognized Ratably - Revenues recognized ratably from software, maintenance, outsourcing and remote hosting were
$301.5 million, for the year ended December 31, 2007, an increase of $24.5 million, or 8.8%, as compared to year ended December 31,
2006. The increase was due to new sales bookings in previous periods for our solutions, remote hosting related services, and
outsourcing, in previous periods, resulting in growth in our recurring revenue base. Future growth in these revenues depends upon
future bookings in excess of previous levels.

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• Periodic Revenues - Periodic revenues for software related fees, third party software related fees and networking services were
$39.5 million for the year ended December 31, 2007, as compared to $33.5 million for the year ended December 31, 2006, a decrease of
$6.0 million or 17.9% over the prior year. The table below summarizes the components of periodic revenues (in thousands):

For Th e
Ye ars En de d
De ce m be r 31,
2007 2006 C h an ge $ C h an ge %
Eclipsys software related fees $21,505 $12,975 $ 8,530 65.7%
Third party software related fees 9,096 7,952 1,144 14.4%
Networking services 8,854 12,550 (3,696) -29.5%
Total periodic revenues $39,455 $33,477 $ 5,978 17.9%

In any period, some software revenues can be considered one time in nature for that period, and we do not recognize these
revenues on a ratable basis. These revenues include traditional license fees associated with new contracts signed in the period,
including add-on licenses to existing clients and new client transactions, as well as revenues from contract backlog that had not
previously been recognized pending contract performance that occurred or was completed during the period, and certain other
activities during the period associated with client relationships. In the aggregate, these periodic revenues can contribute
significantly to earnings in the period because relatively little in-period costs are associated with such revenues (other than those
costs associated with networking services). We expect these periodic revenues to continue to fluctuate on an annual basis as a
result of significant variations in the type and magnitude of sales and other contract and client activity in any period, and these
variations make it difficult to predict the nature and amount of these periodic revenues. The increase in software related fees in
2007 was partially offset by lower revenues from networking services due to management’s decision in the third quarter of 2007 to
stop selling networking products.
• Professional Services Revenues - Professional services revenues, which include implementation, training and consulting related
services, were $120.0 million for the year ended December 31, 2007, an increase of $20.9 million, or 21.1%, as compared to the year
ended December 31, 2006. The increase in both periods resulted primarily from higher utilization of our professional services team
and increased activity associated with implementation of our software following increases in previous period software sales.

Hardware Revenues
Hardware revenues decreased by $1.4 million, or 7.8%, for the year ended December 31, 2007, as compared to the year ended December 31,
2006. The decrease in revenues resulted from more clients choosing other hardware sources and/or reducing their hardware needs by opting
for remote hosted solutions. As remote hosting reduces clients’ need for hardware, future hardware revenues may be negatively impacted. We
expect hardware revenues to continue to fluctuate on an annual basis.

Operating Expenses
Cost of Systems and Services
Cost of systems and services increased by $25.9 million, or 10.9%, to $263.2 million, for the year ended December 31, 2007. The increase in cost
of systems and services in 2007 was primarily attributable to the following:
• Higher labor related costs of $20.3 million, mainly associated with an increase in headcount and higher incentive compensation on
improved financial performance;
• Higher travel costs of $3.3 million associated with increased level of sales activity; and
• Higher consulting, software maintenance and software license costs associated with incremental implementation and software-
related revenues.

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The increases above were slightly offset by lower amortization of capitalized software development costs of $2.6 million, as costs capitalized
for Sunrise Clinical Manager 3.5XA were fully amortized as of the second quarter of 2007.

Cost of Hardware
Cost of hardware decreased $2.4 million, or 16.2%, in 2007. The decrease in these costs was directly related to the lower hardware volumes
discussed above, slightly offset by more favorable product margins. The gross margin percentage on hardware revenue increased to 26.0% in
2007 compared to 19.3% in 2006 impacted by changes in product mix.

Sales and Marketing


Sales and marketing expenses increased $12.8 million, or 20.2%, in 2007. The increase in sales and marketing expenses was primarily due to
increased labor-related costs of $9.5 million on higher headcount, higher commissions on increased sales volumes and increased incentive
compensation on improved financial performance. The increase was also related to additional expenses for tradeshows and marketing events
designed to enhance market awareness of the Company’s solutions.

Research and Development


Research and development expenses were $56.5 million in 2007 compared to $57.8 million in 2006, a decrease of $1.0 million over the prior year.
Research and development expense decreased due to the higher level of internal labor cost capitalization of $6.8 million associated with
development work related to SunriseXA 5.0. SunriseXA 5.0 was released in December of 2007. The impact of higher cost capitalization was
partially offset by higher labor-related costs of $6.2 million on increased headcount and higher incentive compensation on improved financial
performance. Our gross research and development spending, which consists of research and development expenses and capitalized software
development costs, increased $5.8 million to $77.7 million in 2007 compared to $71.9 million in 2006.

In summary, research and development expense was as follows:

For Th e
Ye ar En de d
De ce m be r 31,
2007 2006 C h an ge ($) C h an ge (%)
Research and development expenses $56,480 $57,768 $ (1,288) -2.2%
Capitalized software and development costs $20,943 $14,106 $ 6,837 48.5%
Gross research and development expenditures $77,423 $71,874 $ 5,549 7.7%
Amortization of capitalized software development costs $15,039 $17,494 $ (2,455) -14.0%

General and Administrative


General and administrative expenses increased approximately $8.0 million, or 32.0%, in 2007. The increase was primarily related to $4.6 million of
higher professional service fees, including $3.1 million of incremental legal and accounting fees associated with our voluntary stock option
review and related derivative lawsuit. Additional increases in general and administrative expenses include higher labor-related costs reflecting
increased headcount and higher incentive compensation due to improved financial performance.

Depreciation and Amortization


Depreciation and amortization increased $2.0 million, or 12.9%, in 2007 compared to 2006. The increase was primarily the result of higher
depreciation associated with the increased asset base related to the continued growth of our operations.

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Restructuring Charges
Restructuring charges were $1.2 million in 2007 compared to $14.7 million in 2006. The 2007 restructuring expenses related to the relocation of
our corporate headquarters from Boca Raton, Florida to Atlanta, Georgia, which commenced in October 2007 to consolidate more of the
Company’s operations in one location and provide a more accessible location for existing and potential clients as well as employees. The
charges related to this plan primarily consisted of severance-related expenses associated with the termination of impacted employees and
included one-time termination benefits and retention-bonus expenses. The plan is expected to be substantially complete in the first quarter of
2008, with total restructuring expenses expected to approximate $2.3 million, which includes the $1.2 million incurred in 2007.

The 2006 restructuring charges related to the reduction of headcount and the consolidation of office space. In January 2006, we effected a
restructuring of our operations which included a reduction in headcount of approximately 100 individuals, as part of the reorganization of our
company. This was undertaken to better align our organization, reduce costs, and re-invest some of the cost savings into client-related
activities including client support and professional services. In December 2006, we realigned certain management resources and consolidated
certain facilities to eliminate excess office space. The 2006 activities resulted in restructuring charges of $14.7 million in the year ended
December 31, 2006. See Note L, “Restructuring” in the Notes to the Consolidated Financial Statements for further information.

Gain on Sale of Assets


In December 2007, the Company entered into an Asset Purchase Agreement with Elsevier Inc. (“Elsevier”) pursuant to which Elsevier acquired
certain assets of our Clinical Practice Model Resource Center (“CPMRC”) business (including CPMRC’s proprietary clinical practice
guidelines and related intellectual property), assumed certain CPMRC content customer contracts and retained related CPMRC employees for
$23.1 million in cash. The transaction resulted in a net gain in 2007 of $12.8 million comprised of the following:

(in thousands):

Cash received $23,134


CPMRC earnout settlement payment (5,100)
Net assets sold (4,755)
Other costs (518)
Gain on sale $12,761

In connection with this transaction the Company, for $5.1 million, settled the remaining earnout obligation under the 2004 CPMRC acquisition
agreement and reflected this as a reduction of the gain on sale.

In addition to the aforementioned proceeds from sale, the Company can earn up to an additional $11.0 million over the next 3 years in the event
Elsevier meets certain sales targets, we are successful in obtaining permission from a customer to transfer its contract to Elsevier, and we
complete certain minor data base application development for Elsevier. If these milestones are met, we would reflect any contingent
consideration received as additional gain on the sale of CPMRC.

In connection with the sale, the Company and Elsevier entered into reseller and license agreements to allow Eclipsys to continue to acquire
CPMRC content and services from Elsevier in order to support existing and possible new customers who use Eclipsys’ Knowledge-Based
Charting software application, which contains the CPMRC content.

Interest Income
Interest income increased $1.7 million, or 32.5%, for the year ended December 31, 2007 as compared to the year ended December 31, 2006. The
increase was due to increased marketable securities balances in 2007 as compared to 2006 and an improvement in yields on marketable
securities in 2007.

(Benefit) Provision for Income Taxes


The income tax benefit was $4.0 million for the year ended December 31, 2007 as compared to a provision of $38,000 for the year ended
December 31, 2006. The 2007 benefit resulted from the reversal of the valuation

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allowance related to our Canadian operations, offset by alternative minimum tax, as well as non-cash expense related to the utilization of pre-
acquisition net operating losses pursuant to SFAS 109 “Accounting for Income Taxes.” The utilization of the pre-acquisition loss resulted in a
corresponding reduction to goodwill. The 2007 benefit was also offset by accruals of probable foreign taxes and penalties relating to transfer
pricing, pursuant to FIN 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of SFAS 109.”

Liquidity and Capital Resources


Overview
Cash and marketable securities at December 31, 2008 were $108.5 million representing an $83.0 million decrease from December 31, 2007. This
decrease primarily reflects the reclassification of $103.9 million of our ARS from marketable securities to non-current assets. In addition, the
company used $43.3 million in 2008 for purchases of property and equipment and capitalized software development costs. These uses of cash
were offset by $73.4 million of cash inflow from operating activities. Our 2008 acquisitions were primarily debt funded.

Economic events in 2008, including the substantial decline in the global capital markets, as well as the lack of liquidity in the credit markets,
could impact our clients’ ability to obtain financing. In addition, many of our clients’ budgets rely in part on investment earnings, which have
suffered given recent declines in portfolio investment values. These recent events, to date, have not materially impacted the quality of our
accounts receivable balances or our ability to access our credit facility as evidenced by our December 2008 borrowing of $38.0 million to fund
the Premise Corporation acquisition price and related transaction fees. However, if challenging economic conditions persist, our clients’ future
ability to pay for our software and services, for which they have contracted, may be impaired. As a result, reserves for doubtful accounts and
write-offs of accounts receivable may increase, with corresponding decreases in cash collections.

2008
During the year ended December 31, 2008, operating activities provided $73.4 million of cash. Cash flow from operating activities reflected
income generated from operations of $76.9 million, after adjusting for non cash items of $22.6 million, which included depreciation and
amortization, in-process research and development charge, stock compensation, provision for bad debt, non cash deferred tax provision, gain
on sale of assets and gain on sale of investments. Cash flow from operating activities after noncash items, described above, in 2008 as
compared to 2007 increased by $4.8 million due to higher revenues and related cash collections in 2008.

Net changes in operating assets and liabilities contributed an adjustment of $5.3 million to reconcile net income to cash provided by operating
activities. This adjustment comprises the following changes year over year:
• an increase in accounts receivable of $20.9 million related to increased revenue in 2008 and higher 2009 maintenance activity billed
in December 2008;
• a decrease in prepaid expenses and other current assets of $2.1 million related to timing of cash payments;
• an increase in accounts payable and other current liabilities of $9.0 million related to timing of our contractual obligations and
payments;
• a decrease in accrued compensation of $10.6 million due to payment of 2007 annual incentive compensation in 2008 and no accrual
of expense for 2008 annual incentive compensation resulting from failure to meet minimum operating results required to fund
payment under our corporate bonus plan;
• an increase in other long term liabilities of $12.5 million due to recording of a FIN 48 liability and an increase in deferred rent
primarily related to our Atlanta location; and
• an increase in deferred revenue of $13.5 million due to higher 2009 maintenance activity billed in December 2008.

Investing activities used $96.8 million of cash which included $111.5 million, net of cash acquired, for our EPSi, MediNotes, and Premise
acquisitions, $25.1 million of capital expenditures and $18.2 million for investment in software, partially offset by net sales of marketable
securities of $51.6 million and $3.6 million received on the 2007 sale of our CPMRC business. We do not expect our 2008 acquisitions to
materially impact our future liquidity. Capital expenditures included leasehold improvements for our new corporate headquarters facility in
Atlanta, Georgia and our facility in British Columbia, Canada and investment in our facilities in Pune, India.

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Financing activities provided cash inflow of $110.6 million, primarily consisting of net proceeds of $105.0 million from our secured financing
described below. We also received $6.3 million from stock option exercises. Stock-option exercises subsided during the fourth quarter of 2008
due to the downturn in the economy and related drop in our stock price. The amount of cash that will be provided by future stock option
exercises is uncertain.

2007
During the year ended December 31, 2007, operating activities provided $70.2 million of cash. Cash flow from operating activities reflected
income generated from operations of $72.1 million, after adjusting for non cash items of $30.9 million, which included depreciation and
amortization, stock compensation, provision for bad debt, non cash deferred tax provision, gain on sale of assets and gain on sale of
investments. Cash flow from operating activities after noncash items, described above, in 2007 as compared to 2006 increased by $15.8 million
due to higher revenues and related cash collections in 2007.

Net changes in operating assets and liabilities contributed an adjustment of $1.8 million to reconcile net income to cash provided by operating
activities. This adjustment comprises the following changes year over year:
• an increase in accounts receivable of $5.7 million related to increased revenue in 2007;
• an increase in prepaid expenses and other current assets of $4.6 million due to timing of cash payments;
• a decrease in accounts payable and other current liabilities of $9.1 million related to timing of our contractual obligations and
payments, as well as payments of $4.7 million in connection with our restructuring activities;
• an increase in accrued compensation of $11.1 million due primarily to an increase in sales commissions and bonuses;
• a decrease in inventory of $1.0 million due to our exit of the networking services business;
• an increase in other long term liabilities of $2.5 million; and
• an increase in deferred revenue of $1.4 million and a decrease in other assets of $1.4 million each due to timing of our customer
billing cycles.

Investing activities used $102.7 million of cash, and consisted of net purchases of marketable securities of $79.4 million to invest excess cash
not needed in daily operations, property and equipment expenditures of $16.6 million related to activities at our Technology Solutions Center,
or TSC, for the continued expansion of our remote hosting function, capitalized software development costs of $20.9 million for new product
development, $2.0 million used to collateralize a letter of credit on a new building lease, and $6.4 million related to earnout payments on our
prior acquisitions, offset by $22.6 million received from sale of CPMRC assets.

Financing activities provided cash inflow of $12.9 million, primarily consisting of proceeds from stock option exercises. The timing and amount
of cash provided by future stock option exercises are uncertain.

2006
During the year ended December 31, 2006, operating activities provided $26.6 million of cash. Cash flow from operating activities reflected
income generated from operations of $56.4 million, after adjusting for non cash items of $52.3 million, which included depreciation and
amortization, stock compensation, provision for bad debt, non cash deferred tax provision, gain on sale of assets and gain on sale of
investments.

Net changes in operating assets and liabilities contributed an adjustment of $29.8 million to reconcile net income to cash provided by
operating activities. This adjustment comprises the following changes year over year:
• an increase in accounts receivable of $14.5 million related to increased revenue in 2006;

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• an increase in prepaid expenses and other current assets of $3.8 million due to timing of cash payments;
• an decrease in accrued compensation of $4.9 million due timing of payroll transactions;
• a decrease in inventory of $1.2 million due to phasing out our networking services business;
• a decrease in deferred revenue of $10.6 million due to timing of our customer billing cycles and a decline in up-front billing
contracts; and
• a decrease in other assets of $2.6 million primarily representing deferred expenses, due to timing of our customer billing cycles.

Investing activities used $89.7 million of cash, and consisted of net purchases of marketable securities of $52.1 million to invest excess cash
not needed in daily operations, purchases of property and equipment of $17.5 million, capitalized software development costs of $14.1 million
for new product development, and $6.0 million related to acquisitions. The property and equipment expenditures were related to activities at
our Technology Solutions Center, or TSC, for the continued expansion of our remote hosting function, as well as investments in our enterprise
resource planning solution.

Financing activities provided cash inflow of $27.7 million and mainly consisted of exercises of stock options. Stock option exercises were
above their typical levels during the year ended December 31, 2006 as a result of exercises of options from option holders whose employment
was terminated in connection with the restructuring.

Future Capital Requirements


As of December 31, 2008, our principal source of liquidity is our cash and cash equivalents balances and marketable securities of $108.5
million. We believe that our current cash and cash equivalents and marketable securities combined with our anticipated cash flows from
operations will be sufficient to fund our current operations for the next twelve months.

As of December 31, 2008, $58.3 million of our money market funds held at Evergreen Investments have been guaranteed by the U.S. Treasury
Money Market Guarantee Program. The plan ensures that if a participating fund’s share value declines under $1.00 and a decision is made to
liquidate by the fund’s Board of Trustees, the U.S. Treasury would cover any shortfall between the share price at the time of liquidation and
$1.00 for investors as of September 19, 2008. This guarantee is effective until April 30, 2009.

As of December 31, 2008, the Company held approximately $116.6 million par value of investments in auction-rate securities (“ARS”) of which
$36.3 million was purchased through UBS Financial Services (“UBS”) and $80.3 million was purchased through Goldman Sachs. As of
December 31, 2008, our ARS purchased through UBS are entirely comprised of “AAA” rated pools of student loans, and our ARS purchased
through Goldman Sachs are comprised of $64.8 million of “AAA” rated pools of student loans and $15.5 million of “Baa3” rated pools of
student loans. These investments have long-term nominal maturities for which the interest rates are supposed to be reset through a Dutch
auction each month. Prior to February 2008, the monthly auctions historically provided a liquid market for these securities. However, in
February 2008, the broker-dealers managing the Company’s ARS portfolio experienced failed auctions of certain of these securities where the
amount of securities submitted for sale exceeded the amount of purchase orders. Our ARS continued to fail to settle at auctions through the
end of 2008.

The Company continues to earn interest on these investments at the contractual rate. In April 2008, a partial call transaction was closed related
to one of our ARS, as a result of which we received proceeds of $4.6 million. In May 2008, a call transaction was closed related to another one
of our ARS securities, as a result of which we received proceeds of $14.3 million. Each of these two transactions resulted in a recovery of the
full par value of the securities. On November 12, 2008, we entered into a settlement agreement with UBS pursuant to which the Company
(1) received the right (the “put option”) to sell its ARS, originally purchased through UBS, at par value, to UBS between June 30, 2010 and
July 2, 2012 and (2) gave UBS the right to purchase the ARS, originally purchased through UBS, from the Company any time after the
acceptance date of the settlement agreement as long as the Company receives the par value of the securities.

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As of December 31, 2008, the Company has recorded these investments, including the put option, at their estimated fair value of $107.2 million.
Due to events in the credit markets, quoted prices in active markets are not readily available at this time. A third-party appraisal firm provided
an estimate of the fair value of the ARS and the put option held as of December 31, 2008. In order to validate the fair value estimate of these
securities and the put option for reporting, the Company considered the appraiser’s pricing model which included factors such as credit
quality, duration, insurance wraps, assumptions about future cash flows and likelihood of redemption. The Company concluded that the
pricing model, given the lack of market available pricing, provided a reasonable basis for determining fair value of the ARS and the put option
as of December 31, 2008. All of our ARS were at an unrealized loss position as of December 31, 2008.

The Company has accounted for the put option as a freestanding financial instrument and elected to record the value under the fair value
option of SFAS No. 159. This resulted in the recording of a $3.3 million asset with a corresponding credit to income for the value of the put
option for the year ended December 31, 2008. Simultaneously, the Company made an election pursuant to SFAS No. 115, “Accounting for
Certain Investments in Debt and Equity Securities” (“SFAS 115”), to transfer the related auction rate securities from available-for-sale to
trading securities. The transfer resulted in the reversal of prior unrealized losses, net of taxes, on the UBS purchased ARS from accumulated
other comprehensive income and the recognition of the unrealized losses as a charge to income of $3.9 million for the year ended December 31,
2008. The Company expects that the future changes in the fair value of the put option will be offset by the fair value movements in the related
ARS. We have recorded a temporary loss on the ARS purchased through Goldman Sachs of $8.8 million, as of December 31, 2008, in
accumulated other comprehensive income, reflecting the decline in the fair value of these securities, as these securities remain classified as
available for sale. The Company has concluded that no other-than-temporary impairment losses occurred for the year ended December 31, 2008
related to these securities because the Company believes that the declines in fair value that have occurred during 2008 are due to recent market
liquidity conditions.

We believe these investments continue to be of high credit quality, and we currently plan to hold the ARS until such time as successful
auctions occur, secondary markets allow for a sufficient price to recover substantially all of our par value, or our put option becomes
exercisable. Accordingly, we have classified these securities as long-term investments in our consolidated balance sheet. The Company will
continue to analyze its ARS each reporting period for impairment and it may be required to record an impairment charge in the consolidated
statement of operations if the decline in fair value of the Goldman Sachs purchased ARS are determined to be other-than-temporary.

In February 2008 we entered into a secured financing agreement with an investment bank, pursuant to which we received $45.0 million in
exchange for a transfer to the bank (as a form of collateral) of ARS with a nominal value of $90.0 million in the aggregate. The Company entered
into this arrangement to provide funds to close our February 2008 acquisition of EPSi. On May 9, 2008, we entered into a credit agreement,
pursuant to which the Company received a senior secured revolving credit facility in the aggregate principal amount of $50.0 million. We
entered into this arrangement to obtain funds to repay the $45.0 million short-term financing agreement. On August 26, 2008, Eclipsys entered
into a credit agreement pursuant to which Eclipsys received a senior secured revolving credit facility in the aggregate principal amount of
$125.0 million. The credit facility includes a letter of credit subfacility of up to $10.0 million and a swingline loan subfacility of up to $5.0 million.
We have collateralized a letter of credit with $1.9 million of available principal and are incurring interest expense on the outstanding letter of
credit amount based on the applicable rate of 1.75% plus a 0.25% facing fee. We also incur interest on the unused principal balance based on
an applicable rate of 0.30%. Borrowings under the credit facility may be used to pay transaction expenses, to refinance debt, for potential
acquisitions and capital investments, and for working capital and other general corporate purposes. At the closing, Eclipsys borrowed $51.0
million under the credit facility of which $50.3 million was used to repay all borrowings plus interest under Eclipsys’ prior $50.0 million credit
facility and $0.7 million was used to pay transaction costs.

On October 2, 2008, the Company acquired MediNotes for approximately $45.0 million consisting of cash and Eclipsys common stock. The
cash portion of the acquisition price and related transaction fees were financed with $16.0 million borrowed from our $125.0 million credit
facility. On December 31, 2008, we acquired Premise Corporation for approximately $39.4 million. The acquisition price was financed with $38.0
million borrowed from our $125.0 million credit facility. As of December 31, 2008, Eclipsys has $18.1 million available for borrowings under the
$125.0 million credit facility.

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Our future cash requirements will depend on a number of factors including, among other things, the timing and level of our new sales volumes,
the cost of our development efforts, the success and market acceptance of our future product releases, and other related items. The Company
also periodically evaluates business expansion opportunities that fit its strategic plans, such as our February 2008 acquisition of EPSi, our
October 2008 acquisition of MediNotes, and our December 2008 acquisition of Premise. If an opportunity requiring significant capital
investment were to arise, the Company may seek to finance the opportunity through available cash on hand, existing financings, issuance of
additional shares of its stock or additional sources of financing, as circumstances warrant. However, there can be no assurance that adequate
liquidity would be available to finance extraordinary business opportunities. In addition, we may not be able to draw on the full available
balance of our $125.0 million credit facility if one or more of the financial institutions that have extended credit commitments to us become
unwilling or unable to fund such borrowings. In the current economic environment, the chance of a syndicate bank failing to meet a funding
commitment is less unlikely than under more normal circumstances, and our ability to replace a non-funding bank in the syndicate is uncertain.
There can also be no assurance that our credit facility will be renewed or replaced upon its expiration on August 26, 2011. Our ability to renew
such credit facility or to enter into a new financing arrangement to replace the existing facility could be impaired if the current disruptions in
U.S. and international financial markets continue or worsen.

The recent disruptions in the financial markets can also reduce access to cash by our clients and potential clients. In addition, many of our
clients’ budgets rely in part on investment earnings, which have suffered given recent declines in portfolio investment values. If healthcare
information technology spending declines or increases more slowly than we anticipate, demand for our software could be adversely affected
and our revenue could decline. Challenging economic conditions also may impair the ability of our clients to pay for our software and services
for which they have contacted. As a result, reserves for doubtful accounts and write-offs of accounts receivable may increase, with
corresponding decreases in cash collections.

SFAS 157 “Fair Value Measurements”


Due to events in credit markets quoted prices in active markets are not readily available at this time for our ARS and put option. A third-party
appraisal firm provided an estimate of the fair value of the ARS and the put option held as of December 31, 2008. In order to validate the fair
value estimate of these securities and the put option for reporting, the Company considered the appraiser’s pricing model which included
factors such as credit quality, duration, insurance wraps, assumptions about future cash flows and likelihood of redemption. The Company
concluded that the pricing model, given the lack of market available pricing, provided a reasonable basis for determining fair value of the ARS
and the put option as of December 31, 2008. The assumptions that were used in the model were highly subjective and therefore considered
level 3 unobservable inputs in the fair value hierarchy. The fair value of these assets represents $107.2 million or 54.1% of total assets
measured at fair value in accordance with SFAS 157. The estimate of the fair value of the ARS we hold could change significantly based on
future market conditions. For additional information on our investments, see Note D - Investments.

Contingencies
On May 22, 2008, The McKenna System (“TMS”) filed in the 274th Judicial District Court, Comal County, Texas, a complaint against the
Company stemming from an agreement between the Company and McKenna Health System (“McKenna”) pursuant to which McKenna agreed
to acquire software and services from the Company. McKenna terminated that agreement on April 18, 2007. The complaint alleges various
causes of action essentially amounting to breach of contract for failing to meet contractual obligations related to the software sold and the
timeliness of implementation, and intentionally or negligently misleading McKenna. TMS has asserted damages of approximately $7.5 million,
and seeks multiple damages under various theories. The outcome of this case and its impact on the Company’s results of operations depend
upon questions of fact and law that are disputed or not clear and cannot be predicted with confidence at this time. The Company intends to
contest this matter vigorously, including defending the allegations and pursuing McKenna’s unfulfilled obligations to Eclipsys.

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In addition to the foregoing, the Company and its subsidiaries are from time to time parties to other legal proceedings, lawsuits and other
claims incident to their business activities. Such matters may include, among other things, assertions of contract breach or intellectual
property infringement, claims for indemnity arising in the course of our business and claims by persons whose employment with us has been
terminated. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, management is
unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third
parties, or the financial impact with respect to these other matters as of December 31, 2008. However, based on our knowledge as of
December 31, 2008, management believes that the final resolution of such other matters pending at the time of this report, individually and in
the aggregate, will not have a material adverse effect upon our consolidated financial position, results of operations or cash flows.

Off-Balance Sheet Arrangements


As of December 31, 2008, we did not have any off-balance sheet arrangements.

Contracts and Commitments


The following table provides information related to our contractual obligations under various financial and commercial agreements as of
December 31, 2008:

Paym e n ts Due by Pe riod


(in thou san ds)
Le ss th an More than
Total 1 ye ar 1-3 ye ars 4-5 ye ars 5 ye ars
Contractual Obligations
Operating Leases $ 40,359 $ 9,128 $ 12,542 $ 8,567 $ 10,122
Long-Term Debt Obligations $105,000 $ — $105,000 $ — $ —
Unconditional Purchase Obligations $121,401 47,796 50,740 22,865 —
Total $266,760 $ 56,924 $168,282 $ 31,432 $ 10,122

The unconditional purchase obligations consist of minimum purchase commitments for telecommunication services, computer equipment,
maintenance, consulting and other commitments.

These amounts are expected to be funded from current cash and cash equivalent balances and the income generated from operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk


We do not currently use derivative financial instruments or enter into foreign currency hedge transactions. Foreign currency fluctuations
through December 31, 2008 have not had a material impact on our financial position or results of operations. We continually monitor our
exposure to foreign currency fluctuations and may use derivative financial instruments and hedging transactions in the future if, in our
judgment, the circumstances warrant their use. Generally, our expenses are denominated in the same currency as our revenue and the exposure
to rate changes is minimal. We believe most of our international operations are naturally hedged for foreign currency risk as our foreign
subsidiaries invoice their customers and satisfy their obligations primarily in their local currencies with the exception of our development
center in India. Our development center in India is not naturally hedged for foreign currency risk since their obligations are paid in their local
currency but are funded in U.S. dollars. There can be no guarantee that foreign currency fluctuations in the future will not be significant.

We hold investments in auction-rate securities (“ARS”). These ARS are debt instruments with long-term nominal maturities that previously
could be sold via Dutch auctions every 7, 14, 21, 28, or 35 days creating a short-term instrument. In February 2008, broker-dealers holding the
Company’s ARS portfolio experienced failed auctions of certain ARS where the amount of securities submitted for sale exceeded the amount
of related purchase orders. Our ARS continued to fail to settle at auctions through the fourth quarter of 2008. The Company continues to earn
interest on these investments at the contractual rate, and the ARS that the Company

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holds have not been placed on credit watch by credit rating agencies. The average interest rate earned on the majority of these investments in
the second half of 2008 was between zero and two percent. During the second half of 2008, $15.5 million (comprising pools of student loans) of
our approximately $116.6 million par value of investments in ARS was downgraded from “AAA” rated to “Baa3” rated. During the year ended
December 31, 2008, we adjusted the carrying amount of our ARS to estimated fair market value. If uncertainties in the credit and capital markets
continue and these markets deteriorate further or the Company experiences any additional rating downgrades on any investments in its
portfolio, the Company may incur further temporary impairments or other-than-temporary impairments, which could negatively affect the
Company’s financial condition, cash flow and reported earnings.

As discussed further in Liquidity and Capital Resources, in November 2008 we entered into a put option to sell our ARS to UBS between
June 30, 2010 and July 2, 2012. Associated with this put, we classified $32.4 million of our ARS as trading as of December 31, 2008. This
classification results in fair value changes recorded to income. The Company expects that the future changes in the fair value of the put option
will be offset by the fair value movements in the related ARS.

Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if
interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or
we may suffer losses in principal if forced to sell securities that have seen a decline in market value due to changes in interest rates.

The following table illustrates potential fluctuation in annualized interest income based upon hypothetical values for blended interest rates for
hypothetical ARS balances (we currently earn interest on $116.6 million par value of ARS):

Hypothe tical
Inte re st Rate Hypothe tical ARS balan ce s (in thou san ds)
$95,000 $105,000 $115,000
0.0% — — —
0.5% 475 525 575
1.0% 950 1,050 1,150
1.5% 1,425 1,575 1,725
2.0% 1,900 2,100 2,300
2.5% 2,375 2,625 2,875

We estimate that a one-percentage point decrease in interest rates for our investment securities portfolio as of December 31, 2008 would have
resulted in a decrease in interest income of $0.3 million for a three month period or $1.2 million for a 12 month period. This sensitivity analysis
contains certain simplifying assumptions, including a constant level and rate of debt securities and an immediate across-the-board increase or
decrease in the level of interest rates with no other subsequent changes for the remainder of the period, and it does not consider the impact of
changes in the portfolio as a result of our business needs or as a response to changes in the market. Therefore, although it gives an indication
of our exposure to changes in interest rates, it is not intended to predict future results, and our actual results will likely vary. Hypothetical
interest rates used in the table above are significantly lower than the analysis in the prior year due to changes in market conditions in 2008.

On August 26, 2008, we entered into a credit agreement pursuant to which we received a senior secured revolving credit facility in the
aggregate principal amount of $125.0 million. As of December 31, 2008, borrowings under the credit facility totaled $105.0 million. The interest
rate applicable to the borrowed amount is based, at our option, on the prime rate, one-month LIBOR rate, three-month LIBOR rate, six-month
LIBOR rate or 12-month LIBOR rate at the initial debt draw date and interest rate contract end date plus an applicable margin. The applicable
margin is based on our leverage ratio, as defined in the credit agreement and as of December 31, 2008 was 1.75%. Our leverage ratio increases
to 2.0% in 2009 due to the increase in our outstanding debt. As of December 31, 2008, our weighted average interest rate was calculated at
3.97%. Based on borrowings of $105.0 million, as of December 31, 2008, for each percentage point increase in the interest rate, annual interest
expense would increase $1.0 million.

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Item 8. Financial Statements and Supplementary Data


Index to Consolidated Financial Statements:
Financial Statements:

Page
Report of Independent Registered Public Accounting Firm 54
Consolidated Balance Sheets as of December 31, 2008 and 2007 55
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006 56
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006 57
Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2008, 2007
and 2006 58
Notes to the Consolidated Financial Statements 59
Financial Statement Schedule:
Schedule II — Valuation of Qualifying Accounts for the years ended December 31, 2008, 2007 and 2006 90
All other schedules are omitted as they are not applicable or the required information is shown in the financial statements or notes
thereto.
Signatures 96

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Eclipsys Corporation:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial
position of Eclipsys Corporation and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on
these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers
Atlanta, Georgia
February 24, 2009

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ECLIPSYS CORPORATION AND SUBSIDIARIES


Consolidated Balance Sheets
(in thousands, except share data)

As of De ce m be r 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $ 108,304 $ 22,510
Marketable securities 154 168,925
Accounts receivable, net of allowance for doubtful accounts of $4,912 and $4,240, respectively 121,811 99,260
Prepaid expenses 23,975 27,289
Deferred tax asset 2,643 4,668
Other current assets 5,712 1,759
Total current assets 262,599 324,411
Long-term investments 107,215 —
Property and equipment, net 53,996 45,657
Capitalized software development costs, net 37,718 38,206
Acquired technology, net 39,710 594
Intangible assets, net 10,258 1,376
Goodwill 96,973 7,772
Deferred tax asset 89,063 5,331
Other assets 11,343 13,374
Total assets $ 708,875 $ 436,721
Liabilities and Stockholders’ Equity
Current liabilities:
Deferred revenue $ 123,733 $ 105,115
Accounts payable 20,924 11,679
Accrued compensation costs 16,457 24,473
Other current liabilities 22,481 19,381
Total current liabilities 183,595 160,648
Deferred revenue 5,743 9,860
Deferred tax liability — 4,300
Long-term debt 105,000 —
Other long-term liabilities 16,540 3,899
Total liabilities 310,878 178,707
Commitments and contingencies
Stockholders’ Equity:
Common stock, $0.01 par value, issued and outstanding 56,126,674 and 53,806,742, respectively. Non-voting
common stock, $0.01 par value, 0 shares outstanding. 561 538
Additional paid-in capital 569,717 519,112
Accumulated deficit (164,712) (264,218)
Accumulated other comprehensive income (7,569) 2,582
Total stockholders’ equity 397,997 258,014
Total liabilities and stockholders’ equity $ 708,875 $ 436,721

The accompanying notes are an integral part of these Consolidated Financial Statements.

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ECLIPSYS CORPORATION AND SUBSIDIARIES


Consolidated Statements of Operations
(in thousands, except per share data)

For Th e Ye ar En de d
De ce m be r 31,
2008 2007 2006
Revenues:
Systems and services $495,643 $460,853 $409,450
Hardware 20,119 16,680 18,092
Total revenues 515,762 477,533 427,542
Cost and expenses:
Cost of systems and services (excluding depreciation and amortization shown below) 280,694 263,557 237,617
Cost of hardware 16,945 12,230 14,592
Sales and marketing 85,911 76,172 63,391
Research and development 61,435 56,480 57,768
General and administrative 38,457 32,677 24,972
Depreciation and amortization 22,098 17,924 15,736
In-process research and development 850 — —
Restructuring charge — 1,175 14,670
Total costs and expenses 506,390 460,215 428,746
Income (loss) from operations 9,372 17,318 (1,204)
Gain on sale of assets 4,370 12,761 —
Gain (loss) on investments, net (609) — —
Interest expense (2,117) — —
Interest income 6,074 7,070 5,335
Income before income taxes 17,090 37,149 4,131
(Benefit) provision for income taxes (82,416) (3,992) 38
Net income $ 99,506 $ 41,141 $ 4,093
Net income per common share:
Basic net income per common share $ 1.84 $ 0.78 $ 0.08
Diluted net income per common share $ 1.81 $ 0.76 $ 0.08
Basic weighted average common shares outstanding 54,089 52,737 51,472
Diluted weighted average common shares outstanding 54,953 54,004 52,948

The accompanying notes are an integral part of these Consolidated Financial Statements.

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ECLIPSYS CORPORATION AND SUBSIDIARIES


Consolidated Statements of Cash Flows
(in thousands)

For Th e Ye ar En de d De ce m be r 31,
2008 2007 2006
Operating activities:
Net income $ 99,506 $ 41,141 $ 4,093
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 41,376 35,603 36,681
Provision for bad debts 5,995 2,078 1,457
Research and development charge 850 — —
Stock compensation expense 17,282 11,267 14,103
Deferred (benefit) provision for income taxes (93,031) (5,285) 38
Gain on sale of assets (4,370) (12,761) —
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable (20,881) (5,695) (14,489)
Prepaid expenses and other current assets 2,054 (4,559) (3,781)
Inventory — 1,031 1,213
Other assets (329) 1,421 2,625
Deferred revenue 13,528 1,441 (10,571)
Accrued compensation (10,562) 11,115 (4,897)
Accounts payable and other current liabilities 8,955 (9,071) 103
Other long-term liabilities 12,480 2,470 (4)
Other 548 28 —
Total adjustments (26,105) 29,083 22,478
Net cash provided by operating activities 73,401 70,224 26,571
Investing activities:
Purchases of property and equipment (25,092) (16,596) (17,465)
Purchases of marketable securities (102,000) (241,054) (85,201)
Proceeds from sale of marketable securities 153,641 161,673 33,107
Proceeds from sale of assets, net of transaction costs 835 22,616 —
Capitalized software development costs (18,176) (20,943) (14,106)
Restricted cash 1,964 (1,950) —
Earnout on disposition 3,578
Cash paid for acquisitions and related earnouts (111,522) (6,372) (6,039)
Net cash used in investing activities (96,772) (102,626) (89,704)
Financing activities:
Proceeds from stock options exercised 6,254 12,549 26,712
Proceeds from employee stock purchase plan 822 310 990
Cash paid for debt issuance costs (1,440) — —
Repayment of secured financing (95,000) — —
Proceeds from secured financing 200,000 — —
Net cash provided by financing activities 110,636 12,859 27,702
Effect of exchange rates on cash and cash equivalents (1,471) 789 2
Net decrease in cash and cash equivalents 85,794 (18,754) (35,429)
Cash and cash equivalents — beginning of year 22,510 41,264 76,693
Cash and cash equivalents — end of year $ 108,304 $ 22,510 $ 41,264
Cash paid for income taxes $ 1,425 $ 110 $ —
Cash paid for interest $ 1,842 $ — $ —
Non-cash investing activities:
Purchases of property and equipment $ — $ — $ 2,352
Common stock issued pursuant to earn-out agreements $ 1,252 $ 1,673

The accompanying notes are an integral part of these Consolidated Financial Statements.

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ECLIPSYS CORPORATION AND SUBSIDIARIES


Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income
(in thousands, except share data)

Accum u late d
Addition al O the r
C om m on S tock
Paid-in Accum u late d C om pre h e n sive C om pre h e n sive
S h are s Am ou n t C apital De ficit Incom e (Loss) Incom e (Loss) Total
Balance at December 31, 2005 49,903,325 499 454,322 (309,452) 160 145,529
Exercise of stock options 2,583,484 26 26,686 26,712
Employee stock purchase plan 39,638 732 732
Issuance of restricted stock 100,000 1 1
Stock compensation expense 14,103 14,103
Stock issued for acquisitions 76,458 1 727 728
Restricted stock retained for tax
withholdings (166,023) (2) (1,386) (1,388)
Deferred stock unit grants 56 56
Comprehensive income:
Net income 4,093 $ 4,093 4,093
Foreign currency translation adjustment 90 90 90
Other comprehensive income 90
Comprehensive income $ 4,183
Balance at December 31, 2006 52,536,882 $ 525 $ 495,240 $ (305,359) $ 250 $190,656
Exercise of stock options 999,942 10 12,725 12,735
Shares cancelled (15,924) (2) (2)
Employee stock purchase plan 19,568 399 399
Issuance of restricted stock 150,000 1 1
Stock compensation expense 11,267 11,267
Stock issued for acquisitions 62,063 1 222 223
Restricted stock retained for tax
withholdings (39,133) (853) (853)
Deferred stock unit grants 114 114
Other 93,344 1 1
Comprehensive income:
Net income 41,141 $ 41,141 41,141
Unrealized gain on marketable securities 24 24 24
Foreign currency translation adjustment 2,308 2,308 2,308
Other comprehensive income 2,332
Comprehensive income $ 43,473
Balance at December 31, 2007 53,806,742 $ 538 $ 519,112 $ (264,218) $ 2,582 $258,014
Exercise of stock options 505,494 5 6,277 6,282
Shares exchanged (8,156) —
Employee stock purchase plan 42,240 1 822 823
Issuance of restricted stock 647,321 6 (6) —
Stock compensation expense 17,282 17,282
Stock issued for acquisitions 1,257,100 13 27,279 27,292
Restricted stock retained for tax
withholdings (64,029) (1) (1,040) (1,041)
Deferred stock unit grants —
Other (60,038) (1) (9) (10)
Comprehensive income:
Net income 99,506 $ 99,506 99,506
Unrealized loss on marketable securities,
net of tax (5,309) (5,309) (5,309)
Foreign currency translation adjustment,
net of tax (4,842) (4,842) (4,842)
Other comprehensive income (10,151)
Comprehensive income $ 89,355
Balance at December 31, 2008 56,126,674 $ 561 $ 569,717 $ (164,712) $ (7,569) $397,997

The accompanying notes are an integral part of these Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS


Eclipsys Corporation (“Eclipsys” or the “Company,” “We,” “Us” or “Our”) is a healthcare information technology company and a leading
provider of advanced integrated clinical, revenue cycle and performance management software, and professional services that help healthcare
organizations improve their clinical, financial, and operational outcomes. We provide our products and services principally in the U.S. and
Canada and have recently expanded our operations to markets in Southeast Asia and the Middle East. The Company develops and licenses
proprietary software and content that is designed for use in connection with many of the key clinical, financial and operational functions that
healthcare organizations require. Among other things, the software enables physicians, nurses and other clinicians to coordinate care through
shared electronic medical records, place orders and access and share information about patients. The software also helps clients optimize their
healthcare revenue cycle, including patient admissions, scheduling, invoicing, inventory control and cost accounting, in addition to providing
records maintenance and assessment of the profitability of specific medical procedures and personnel. Clinical content, which is integrated
with our software, provides information for use by physicians, nurses and other clinicians.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation
The Consolidated Financial Statements include the accounts of Eclipsys and our wholly owned subsidiaries. All material inter-company
transactions and balances between the Company and its subsidiaries have been eliminated in consolidation. Eclipsys manages its business as
one reportable segment. Certain amounts in the prior period consolidated financial statements have been reclassified to conform with current
year presentation. In addition, the Company has revised the presentation of certain prior year deferred tax asset and liabilities to offset $28.7
million of those arising in the same tax jurisdiction. These reclassifications and revisions did not affect total revenue, or operating income.

Segment Information
The Company follows SFAS 131, “Disclosures about Segments of an Enterprise and Related Information.” SFAS 131 requires that a company
report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise for
which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The Company’s chief operating decision maker currently evaluates the Company’s operations from a
number of different operational perspectives including but not limited to a client by client basis. The Company derives all significant revenues
from a single reportable operating segment of business, healthcare information technology. Accordingly, the Company does not report more
than one segment; nevertheless, management evaluates, at least annually, whether the Company continues to have one single reportable
segment.

Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and
expenses, and disclosures of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated
financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial
statements. Actual results could differ from those estimates. The most significant estimates relate to the allowance for doubtful accounts,
revenues recognized, the amounts recorded for capitalized software development costs and related useful lives, stock-based compensation,
the valuation of ARS and the related put option, the valuation allowance for deferred tax assets, and acquired intangible assets and the related
impact on goodwill.

Cash and Cash Equivalents


For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

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Restricted Cash
The restricted cash balance was $2.0 million as of December 31, 2007 and represented collateral to secure a letter of credit for our Atlanta
facility. The restricted cash balance was zero as of December 31, 2008 given that the letter of credit, as of December 31, 2008, is secured by our
credit facility.

Marketable Securities
The Company accounts for marketable securities in accordance with SFAS 115, “Accounting for Certain Investments in Debt and Equity
Securities.” The Company determines the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading
at the time of purchase, and re-evaluates such classification as of each balance sheet date. Unrealized gains and losses on securities classified
as available-for-sale are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity, and unrealized
gains and losses on securities classified as trading are reported in earnings. The Company uses the specific identification method to determine
the cost basis in computing realized gains and losses on the sale of its available-for-sale securities. As of December 31, 2007, $168.9 million of
our marketable securities investments were investments in ARS and were classified as current. As of December 31, 2008 our total investments
in ARS of $103.9 million were recorded as long-term investments. See Note D – Investments.

Accounts Receivable and Unbilled Receivables


The timing of revenue recognition and contractual billing terms under certain multiple element arrangements may not precisely coincide,
resulting in the recording of unbilled accounts receivable or deferred revenue. Client payments are due under these arrangements in varying
amounts primarily upon the achievement of certain contractual milestones throughout the implementation periods, which generally range from
12 to 36 months. The current portion of unbilled accounts receivable is included in accounts receivable.

Allowance for Doubtful Accounts


In evaluating the collectability of our accounts receivable, we assess a number of factors, including a specific client’s ability to meet its
financial obligations to us, as well as general factors, such as the length of time the receivables are past due and historical collection
experience. Based on these assessments, we record a reserve for specific account balances as well as a reserve based on our historical
experience for bad debt to reduce the related receivables to the amount we ultimately expect to collect from clients. If circumstances related to
specific clients change, or economic conditions deteriorate such that our past collection experience is no longer relevant, our estimate of the
recoverability of our accounts receivable could be further reduced from the levels provided for in the consolidated financial statements.

Property and Equipment


Property and equipment are stated at cost. Depreciation and amortization are provided for using the straight-line method over the estimated
useful lives, which generally range from 3 to 7 years. Computer equipment is depreciated over 5 years. Office equipment is depreciated over 7
years. Purchased software for internal use is amortized over 3 years. Expenditures for our resource planning system are depreciated over 8
years. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the remaining term of the lease. When assets
are retired or otherwise disposed of, the related costs and accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in income. Expenditures for repairs and maintenance not considered to substantially lengthen the property and equipment
lives are charged to expense as incurred.

Capitalized Software Development Costs and Acquired Technology


We capitalize a portion of our computer software development costs incurred subsequent to establishing technological feasibility. These
costs include salaries, benefits, consulting and other directly related costs incurred in connection with programming and testing software.
Capitalization ceases when the software is generally released for sale to clients. Capitalized software development costs were $18.2 million,
$20.9 million, and $14.1 million for the years ended December 31, 2008, 2007, and 2006, respectively. These costs are amortized over the greater
of (i) the ratio of current revenues to total and anticipated future revenues for the applicable software or (ii) the straight-line method over three
years. During 2008, 2007, 2006 all our capitalized software costs were amortized over a three year period. Amortization of capitalized software
development costs, which is included in costs of systems and services revenues, was $18.7 million, $15.0 million, and $17.5 million for the years
ended December 31, 2008,

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2007, and 2006, respectively. Accumulated amortization of capitalized software development costs was $32.4 million and $23.8 million as of
December 31, 2008 and 2007, respectively. Acquired technology is amortized over its estimated useful lives on a straight-line basis.
Amortization of acquired technology is included in the cost of systems and services. Management monitors the net realizable value of
development costs and acquired technology to ensure that the investment will be recovered through future revenues.

Intangible Assets, including Goodwill


SFAS No. 142, “Goodwill and Other Intangible Assets,” classifies intangible assets into three categories: (1) intangible assets with definite
lives subject to amortization; (2) intangible assets with indefinite lives not subject to amortization; and (3) goodwill. For intangible assets with
definite lives, tests for impairment must be performed if conditions exist that indicate the carrying value may not be recoverable. For intangible
assets with indefinite lives and goodwill, tests for impairment must be performed at least annually or more frequently if events or
circumstances indicate that assets might be impaired. Our acquired technology and other intangible assets determined to have definite lives
are amortized over their useful lives. In accordance with SFAS No. 142, if conditions exist that indicate the carrying value may not be
recoverable, we review such intangible assets with definite lives for impairment. Such conditions may include an economic downturn in a
market or a change in the assessment of future operations. Goodwill is not amortized. We perform tests for impairment of goodwill annually, or
more frequently if events or circumstances indicate it might be impaired. We have only one reporting unit for which all goodwill is assigned.
Impairment tests for goodwill include comparing the fair value of the company compared to the comparable carrying value, including goodwill.

No impairment has been identified or recorded in 2008, 2007 or 2006.

Long-Lived Assets
Long-lived assets, including separate and identifiable intangible assets, are reviewed for potential impairment at such time that events or
changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Any impairment loss would be recognized
when the sum of the expected, undiscounted net cash flows is less than the carrying amount of the asset. If an asset is impaired, the asset is
written down to its estimated fair value. We did not record any impairment of long-lived assets in 2008, 2007 or 2006.

Fair Value of Financial Instruments


The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, and other current liabilities,
approximate fair value due to the short-term nature of these assets and liabilities.

Revenue Recognition
Revenues are derived from licensing of computer software; software and hardware maintenance; professional services (including
implementation, integration, training and consulting); remote hosting; outsourcing; network services; and the sale of computer hardware. With
the exception of hardware revenues, we classify our revenues in one caption (systems and services) in our statement of operations since the
amount of license revenue related to traditional software contracts is less than 10% of total revenues and the remaining revenue types
included in this caption relate to software maintenance, services and bundled subscription arrangements that have similar attribution patterns
for revenue recognition.

We generally contract under multiple element arrangements, which include software license fees, hardware and services including
implementation, integration, training and software maintenance, for periods of 3 to 7 years. We evaluate revenue recognition on a contract-by-
contract basis as the terms of each arrangement vary. The evaluation of our contractual arrangements often requires judgments and estimates
that affect the timing of revenue recognized in our statements of operations. Specifically, we may be required to make judgments about:
• whether the fees associated with our software and services are fixed or determinable;
• whether collection of our fees is considered probable;
• whether professional services are essential to the functionality of the related software;

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• whether we have the ability to make reasonably dependable estimates in the application of the percentage-of-completion method;
and
• whether we have verifiable objective evidence of fair value for our software and services.

We recognize revenues in accordance with the provisions of SOP 97-2 “Software Revenue Recognition,” as amended by SOP 98-9, SAB 104
“Revenue Recognition,” and EITF 00-21 “Revenue Arrangements with Multiple Deliverables.” SOP 97-2 and SAB 104 require among other
matters, that there be a signed contract evidencing that an arrangement exists, delivery has occurred, the fee is fixed or determinable,
collectibility is probable, and remaining obligations under the agreement are insignificant.

Contracts with our clients can include multiple element arrangements that provide for multiple software modules including the rights to
unspecified future versions and releases we may offer within the software suites the client purchases or rights to unspecified software
versions that support different hardware or operating platforms, and that do not qualify as exchange rights. We refer to these arrangements as
subscription contracts. Additionally, we sometimes enter into multiple element arrangements that do not include these rights to unspecified
future software or platform protection rights. We refer to these arrangements as traditional software contracts. Finally, we offer much of our
software and services on a stand-alone basis. Revenue under each of these arrangements is recognized as set forth below:

Subscription Contracts
Our subscription contracts typically include the following elements:
• Software license;
• Maintenance;
• Professional services; and
• Third party hardware or remote hosting services.

Software license fees are recognized ratably over the term of the contract, commencing upon the delivery of the software provided that
(1) there is evidence of an arrangement, (2) the fee is fixed or determinable and (3) collection of our fee is considered probable. The value of the
software is determined using the residual method pursuant to SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions.” These contracts contain the rights to unspecified future software within the suite purchased and/or
unspecified platform transfer rights that do not qualify for exchange accounting. Accordingly, these arrangements are accounted for pursuant
to paragraphs 48 and 49 of SOP 97-2. Under certain arrangements, we capitalize related direct costs consisting of third party software costs and
direct software implementation costs. These costs are amortized over the term of the arrangement.

In the case of maintenance revenues, vendor-specific objective evidence (VSOE) of fair value is based on substantive renewal prices, and the
revenues are recognized ratably over the maintenance period.

In the case of professional services revenues, VSOE is based on prices from stand-alone sale transactions, and the revenues are recognized as
services are performed pursuant to paragraph 65 and 66 of SOP 97-2.

Third party hardware revenues are recognized upon delivery, pursuant to SAB 104.

For remote hosting services, where VSOE is based upon consistent pricing charged to clients based on volumes and performance
requirements on a stand-alone basis and substantive renewal terms, revenues are recognized ratably over the contract term as the services are
performed. Our remote hosting arrangements generally require us to perform one-time set-up activities and include a one-time set-up fee. This
one-time set-up fee is generally paid by the client at contract execution. We have determined that these set-up activities do not constitute a
separate unit of accounting, and accordingly the related set-up fees are recognized ratably over the term of the contract.

We consider the applicability of EITF 00-3, “Application of AICPA Statement of Position 97-2, Software Revenue Recognition, to
Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” to our remote hosting services arrangements on
a contract-by-contract basis. If we determine that the client has the contractual right to take possession of our software at any time during the
hosting period without significant penalty,

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and can feasibly run the software on its own hardware or enter into another arrangement with a third party to host the software, a software
element covered by SOP 97-2 exists. When a software element exists in a remote hosting services arrangement, we recognize the license,
professional services and remote hosting services revenues pursuant to SOP 97-2, whereby the fair value of the remote hosting service is
recognized as revenue ratably over the term of the remote hosting contract. If we determine that a software element covered by SOP 97-2 is not
present in a remote hosting services arrangement, we recognize revenue for the remote hosting services arrangement ratably over the term of
the remote hosting contract pursuant to SAB 104.

Traditional Software Contracts


We enter into traditional multiple-element arrangements that can include the following elements:
• Software license;
• Maintenance;
• Professional services; and
• Third party hardware or remote hosting services.

Revenue for each of the elements is recognized as follows:


Software license fees are recognized upon delivery of the software provided that (1) there is evidence of an arrangement, (2) the fee is fixed or
determinable and (3) collection of our fee is considered probable. For those arrangements in which the fee is not considered fixed or
determinable, the software license revenue is recognized as the payments become due. For arrangements where VSOE only exists for the
undelivered elements, we account for the delivered elements (software license revenue) using the residual method in accordance with SOP 98-
9.

In addition to the software license fees, these contracts may also contain maintenance, professional services and hardware or remote hosting
services. VSOE and revenue recognition for these elements is determined using the same methodology as noted above for subscription
contracts.

Software Contracts Requiring Contract Accounting


We enter into certain multiple element arrangements containing milestone provisions in which the professional services are considered
essential to the functionality of the software. Under these arrangements, software license fees and professional service revenues are
recognized using the percentage-of-completion method over the implementation period which generally ranges from 12 to 36 months. Under
the percentage-of-completion method, revenue and profit are recognized throughout the term of the implementation based upon estimates of
total labor hours incurred and revenues to be generated over the term of the implementation. Changes in estimates of total labor hours and the
related effect on the timing of revenues and profits are recognized in the period in which they are determinable. Accordingly, changes in these
estimates could occur and have a material effect on our operating results in the period of change.

Stand-Alone Software and Services


We also market certain software and services on a stand-alone basis, including the following:
• Software license;
• Maintenance;
• Professional services;
• Hardware;
• Outsourcing; and
• Remote Hosting services.

Revenues related to such software and services are recognized as follows:

Software license fees and maintenance marketed on a stand-alone basis may be licensed either under traditional contracts or under
subscription arrangements. Software license fees under traditional contracts are recognized pursuant to SOP 97-2 when the following criteria
are met, delivery of the software has occurred, persuasive

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evidence of an arrangement exists, the fee is fixed or determinable and collectibility is probable. Under subscription agreements for stand-alone
software, license fees are recognized ratably over the term of the contract. With respect to maintenance, VSOE is determined based on
substantive renewal prices contained in the contracts. Maintenance is recognized ratably over the term of the contract.

Professional services represent incremental services marketed to clients including implementation, consulting, and training services.
Professional services revenues, where VSOE is based on prices from stand-alone transactions are recognized as services are performed.

Hardware revenue is recognized upon delivery pursuant to SAB 104.

We provide outsourcing services to our clients. Under these arrangements we assume full, partial or transitional responsibilities for a
healthcare organization’s IT operations using our employees. Our outsourcing services include facilities management, network outsourcing
and transition management. These arrangements typically range from five to ten years in duration. Revenues from these arrangements are
recognized when services are performed.

Remote hosting contracts that are sold on a stand alone basis are recognized ratably over the contract term pursuant to SAB 104. Our remote
hosting arrangements generally require us to perform one-time set-up activities and include a one-time set-up fee. This one-time set-up fee is
generally paid by the client at contract execution. We have determined that these set-up activities do not constitute a separate unit of
accounting, and accordingly we recognize the related set-up fees ratably over the term of the contract.

The Company records reimbursable out-of-pocket expenses in both systems and services revenues and as a direct cost of system and services
in accordance with EITF 01-14, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred. In
2008, 2007, and 2006 reimbursable out-of-pocket expenses were $11.7 million, $11.6 million, $9.0 million, respectively.

Network service arrangements include the assessment, assembly and delivery of a wireless network which may include wireless carts or other
wireless equipment to the client. Our network services arrangements are sold to a client for a fixed fee. All services are performed prior to the
delivery of the equipment. These contracts are typically 60 to 90 days in length and are recognized pursuant to SAB 104, upon the delivery of
the network to the client. We exited the network services business in 2007.

Costs of Revenues
The principal costs of systems and services revenues are salaries, benefits and related overhead costs for implementation, maintenance,
remote hosting and outsourcing personnel. Other significant costs include third party costs, software rental and maintenance and the
amortization of capitalized software development costs and acquired technology intangible assets. Capitalized software development costs are
generally amortized over three years on a straight-line basis commencing upon general release of the related software, or are based on the ratio
that current revenues bear to total anticipated revenues for the applicable software. Acquired technology is amortized over three to five years
based upon the estimated economic life of the underlying asset. Cost of revenues related to hardware sales includes our cost to acquire the
hardware from the manufacturer.

Shipping Costs
In accordance with EITF 00-10, “Accounting for Shipping and Handling Fees,” the Company classifies the re-imbursement by clients of
shipping and handling costs as revenue and the associated cost as cost of revenue.

Sales Taxes
In accordance with EITF 06-3, “How Sales Taxes Collected from Clients and Remitted to Governmental Authorities Should Be Presented in the
Income Statement (That is, Gross Versus Net Presentation),” the Company reports sales taxes collected from clients and remitted to
governmental authorities on a net basis, that is both the sales tax expense and the associated re-imbursement by clients are classified as
expenses.

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Research and Development


Research and development costs are expensed as incurred. Research and development expenses consist primarily of salaries, benefits and
related overhead, as well as consulting costs related to design, development and testing of new software.

We capitalize certain software development costs subsequent to attaining technological feasibility. These costs are amortized as an element of
the cost of systems and services.

Income Taxes
The provision for income taxes and corresponding balance sheet accounts are determined in accordance with SFAS 109, “Accounting for
Income Taxes” (“SFAS 109”). Under SFAS 109, deferred tax assets and liabilities are determined based on the temporary differences between
the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified
according to the financial statement classification of the net assets and liabilities generating the differences. The Company provides a
valuation allowance for that portion of deferred tax assets, which it cannot determine is more likely than not to be recognized.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”). This
interpretation clarifies the criteria for recognizing income tax benefits under FASB Statement No. 109, “Accounting for Income Taxes,” and
requires additional disclosures about uncertain tax positions. Under FIN 48 the financial statement recognition of the benefit for a tax position
is dependent upon the benefit being more likely than not, based on its technical merits, to be sustainable upon audit by the applicable taxing
authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50 percent likely of
being realized upon ultimate settlement. Upon adoption of FIN 48 on January 1, 2007, the Company recognized no increase in its liability for
unrecognized income tax benefits. The Company accounts for any applicable interest and penalties on uncertain tax positions as a component
of income tax expense.

We file income tax returns in the U.S. federal jurisdiction, numerous states, Canada, India and Singapore. U.S. federal, state and Canada
jurisdictions are open to examination due to net operating loss carryforwards. India and Singapore jurisdictions are open to examination for
2006 and 2007, respectively.

Stock-Based Compensation
We account for stock-based employee compensation arrangements in accordance with SFAS 123(R), as adopted effective January 1, 2006.
Prior to January 1, 2006, we accounted for our stock-based employee compensation arrangements under the intrinsic value method prescribed
by APB 25, as allowed by SFAS 123, as amended by SFAS 148. As a result, no expense was recognized for options to purchase our common
stock that were granted with an exercise price equal to fair market value at the date of grant and no expense was recognized in connection with
purchases under our employee stock purchase plan prior to January 1, 2006.

We elected to adopt SFAS 123(R) using the modified prospective method. Under this method, compensation cost recognized during the period
includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant
date fair value estimated in accordance with the original provisions of SFAS 123 amortized over the awards’ vesting period, and
(b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123(R) amortized on a straight-line basis over the awards’ vesting period. The fair value of stock
options is estimated at the date of grant using the Black-Scholes option pricing model with weighted average assumptions for the activity
under our stock plans. Option pricing model input assumptions such as expected term, expected volatility, and risk-free interest rate, impact the
fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and generally
require significant analysis and judgment to develop. When estimating fair value, some of the assumptions were based on or determined from
external data (for example, the risk free interest rate) and other assumptions were derived from our historical experience with share-based
payment arrangements (for example, volatility and expected term). The appropriate weight to place on historical experience is a matter of
judgment, based on relevant facts and circumstances. Pro forma results for 2005 have not been restated.

We have elected to use the simplified method for estimating our expected term equal to the midpoint between the vesting period and the
contractual term as allowed by SAB 107, “Share-Based Payment.” SAB 110, “Year-End Help

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for Expensing Employee Stock Options,” requires the use of historical data to estimate an expected term, unless the terms of our share-option
grants have significantly changed, for options granted after December 31, 2007. The grants the Company issued after December 31, 2007 have
a contractual term of 7 years, which differs from the contractual term of the historical grants (generally 10 years). Therefore, we do not have
sufficient historical data to estimate the expected term for current option issuances. Accordingly, we continue to use the simplified method.
Additionally, this reduction in contractual term has lowered our assumption of our expected term.

We currently estimate volatility by using the weighted average historical volatility of our common stock. The risk-free interest rate is the
implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term input to the Black-
Scholes model. We estimate forfeitures using a weighted average historical forfeiture rate. Our estimate of forfeitures will be adjusted over the
requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from our estimate.

Concentration of Credit Risk


Our clients operate primarily in the healthcare industry. We sell our software and services under contracts with varying terms. The accounts
receivable amounts are unsecured. We believe that the allowance for doubtful accounts is sufficient to cover credit losses. Revenue related to
one of our customers represented 10.7%, 10.3% and 8.1% of total revenues for the years ended December 31, 2008, 2007 and 2006 respectively.

Foreign Currency
Our financial position and results of operations of our subsidiaries, with the exception of our subsidiary in India, are measured using the
currency of the respective countries as the functional currency. Assets and liabilities are translated at the foreign exchange rate in effect at the
balance sheet date, while revenue and expenses for the year are translated at the average exchange rate in effect during the year. Translation
gains and losses are not included in determining net income or loss but are accumulated and reported as a separate component of
stockholders’ equity.

The functional currency of our Indian subsidiary is the U.S. dollar, with monetary assets and liabilities remeasured into U.S. dollars at year-end
exchange rates, and revenues and expenses remeasured at average rates prevailing during the year.

We have not entered into any hedging contracts during the three-year period ended December 31, 2008.

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New Accounting Pronouncements


Recently Issued Standards
In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 161,
“Disclosures about Derivative Instruments and Hedging Activities – An Amendment of SFAS No. 133” (“SFAS 161”). SFAS 161 seeks to
improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on
financial position, financial performance, and cash flows. SFAS 161 requires: (1) the disclosure of the fair value of derivative instruments and
gains and losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related; and (3) cross-referencing within the
footnotes. SFAS 161 is effective for the Company on January 1, 2009. We currently do not believe this standard will have a material impact on
our condensed consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R continues to require
the purchase method of accounting to be applied to all business combinations, but it significantly changes the accounting for certain aspects
of business combinations. Under SFAS 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in
a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R will change the accounting treatment for certain specific
acquisition related items including: (1) expensing acquisition related costs as incurred; (2) valuing noncontrolling interests at fair value at the
acquisition date; and (3) expensing restructuring costs associated with an acquired business. SFAS 141R also includes a substantial number
of new disclosure requirements. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or
after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 160
establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
It clarifies that a noncontrolling interest in a subsidiary (minority interest) is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements and separate from the parent company’s equity. This statement is effective for us
on January 1, 2009. We currently do not believe this standard will have a material impact on our condensed consolidated financial statements.

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In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS 142-3, “Determination of the Useful Life of Intangible Assets.” This FSP
amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to
measure the fair value of the asset under SFAS 141R and other United States generally accepted accounting principles. This FSP shall be
effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We
currently do not believe that this FSP will have a material impact on our condensed consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-
class method. This FSP shall be effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods
within those years. The share-based payment awards that are granted by the Company contain dividend rights that are forfeitable on unvested
shares; therefore, we do not expect this FSP to have a material impact on our calculation of EPS.

Recently Adopted Standards


In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS
159 allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value
option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is
elected for an instrument, SFAS 159 specifies that unrealized gains and losses for that instrument be reported in earnings at each subsequent
reporting date. SFAS 159 was effective for us on January 1, 2008. As of December 31, 2008, we applied the fair value option to our auction rate
securities put option, which resulted in an initial $3.3 million gain recorded on the income statement. We did not apply the fair value option to
any other of our outstanding instruments.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a
framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods of those fiscal
years. We adopted SFAS 157 on January 1, 2008. Our most significant asset that is adjusted to fair value on a recurring basis is our long-term
investments.

In February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157” which delays the effective date of SFAS
No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. Therefore, in accordance with the
aforementioned FSP, we have only partially applied SFAS 157. Beginning January 1, 2009 we will also apply SFAS 157 to all nonfinancial
assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis as required
by SFAS 157. We do not expect the further application of SFAS 157 to have a material impact on our financial statements. See Note E – Fair
Value Measurement.

In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active” which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in
determining the fair value of a financial asset when the market for that financial asset is not active. Some of the key principles illustrated
include:
• determining fair value in a dislocated market depends on facts and circumstances, and may require the use of significant judgment
about whether individual market transactions are forced liquidations or distressed sales and therefore poor indicators of fair value;
• when relevant observable market data is not available, the use of assumptions about future cash flows and discount rates may be
appropriate in determining fair value; and
• the value of broker quotes in determining fair value depends on facts and circumstances, particularly when an active market does
not exist.

FSP 157-3 is effective immediately, including with respect to prior periods for which financial statements have not been issued. As of January
2008, the Company has consistently used the methodology described in this FSP in calculating the fair value of its auction rate securities.

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NOTE C - BASIC AND DILUTED NET INCOME PER SHARE


For all periods presented, basic and diluted earnings per common share is presented in accordance with SFAS 128, “Earnings per Share,”
which provides for the accounting principles used in the calculation of earnings per share. Basic earnings per common share is calculated by
dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the
period. Non-vested restricted stock carries dividend and voting rights and, in accordance with GAAP, is not included in the weighted-average
number of common shares outstanding used to compute basic earnings per share. Diluted earnings per common share reflect the potential
dilution from assumed conversion of all dilutive securities, such as stock options and unvested restricted stock, using the treasury stock
method. When the effect of the outstanding equity securities is anti-dilutive, they are not included in the calculation of diluted earnings per
common share. For the years ended December 31, 2008, 2007, and 2006 3,585,844, 2,534,981 and 2,720,448 anti-dilutive shares were excluded
from the calculation of diluted earnings per common share, respectively. The earnings amounts used for per-share calculations are the same for
both the basic and diluted methods.

The computations of the basic and diluted earnings per common share were as follows:

(in thou san ds, e xce pt pe r sh are data)


De ce m be r 31,
2008 2007 2006
Basic earnings per common share:
Net income $ 99,506 $ 41,141 $ 4,093
Weighted average common shares outstanding 54,089 52,737 51,472
Basic net income per common share $ 1.84 $ 0.78 $ 0.08
Diluted net income per common share:
Net income $ 99,506 $ 41,141 $ 4,093
Weighted average common shares outstanding 54,089 52,737 51,472
Dilutive effect of:
Stock options, restricted stock awards, and other stock compensation 864 1,263 1,442
Contingent shares issuable pursuant to earn-out agreements — 4 34
Total shares 54,953 54,004 52,948
Diluted net income per common share $ 1.81 $ 0.76 $ 0.08

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NOTE D - INVESTMENTS
Investment balances consist of the following (in thousands):

De ce m be r 31, De ce m be r 31,
2008 2007
Security Type:
Auction rate securities
UBS purchased (1) 32,413 44,053
Goldman Sachs purchased (2) 71,499 122,164
Auction rate securities put option (3) 3,303 —
Other securities (4) 154 2,708
Total $ 107,369 $ 168,925
(1) These securities are classified as trading, and the changes in fair value of these securities are included in earnings.
(2) As of December 31, 2008 the maturity date of our Goldman purchased ARS range from August 1, 2027 to November 1, 2047. These
securities are classified as available for sale, and the changes in fair value of these securities are included in accumulated other
comprehensive income.
(3) Our auction rate securities put option is exercisable from June 30, 2010 to July 30, 2012. We have accounted for the put option as a
freestanding financial instrument and elected to record the value under the fair value option of SFAS No. 159. Therefore, the changes in
fair value of the put option are included in earnings.
(4) As of December 31, 2008 the maturity date of our other securities is less than one year. These securities are classified as available for
sale, and the changes in fair value of these securities are included in accumulated other comprehensive income. As these securities are
currently in an unrealized gain position, they have not been evaluated for impairment.

As of December 31, 2008, the Company held approximately $116.6 million par value of investments in auction-rate securities (“ARS”) of which
$36.3 million was purchased through UBS Financial Services (“UBS”) and $80.3 million was purchased through Goldman Sachs. As of
December 31, 2008, our ARS purchased through UBS are entirely comprised of “AAA” rated pools of student loans, and our ARS purchased
through Goldman Sachs are comprised of $64.8 million of “AAA” rated pools of student loans and $15.5 million of “Baa3” rated pools of
student loans. These investments have long-term nominal maturities for which the interest rates are supposed to be reset through a Dutch
auction each month. Prior to February 2008, monthly auctions historically provided a liquid market for these securities. However, in February
2008, the broker-dealers managing the Company’s ARS portfolio experienced failed auctions of certain of these securities where the amount of
securities submitted for sale exceeded the amount of purchase orders. Our ARS continued to fail to settle at auctions through the fourth
quarter of 2008.

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The Company continues to earn interest on these investments at the contractual rate. In April 2008, a partial call transaction was closed related
to one of our ARS, as a result of which we received proceeds of $4.6 million. In May 2008, a call transaction was closed related to another one
of our ARS securities, as a result of which we received proceeds of $14.3 million. Each of these two transactions resulted in a recovery of the
full par value of the securities. On November 12, 2008, we entered into a settlement agreement with UBS pursuant to which the Company
(1) received the right (the “put option”) to sell its ARS, originally purchased through UBS, at par value, to UBS between June 30, 2010 and
July 2, 2012 and (2) gave UBS the right to purchase the ARS, originally purchased through UBS, from the Company any time after the
acceptance date of the settlement agreement as long as the Company receives the par value of the securities.

As of December 31, 2008, the Company has recorded these investments, including the put option, at their estimated fair value of $107.2 million.
All of our ARS were at an unrealized loss position as of December 31, 2008. Due to events in the credit markets, quoted prices in active markets
are not readily available at this time. A third-party appraisal firm provided an estimate of the fair value of the ARS and the put option held as of
December 31, 2008. In order to validate the fair value estimate of these securities and the put option for reporting, the Company considered the
appraiser’s pricing model which included factors such as credit quality, duration, insurance wraps, assumptions about future cash flows and
likelihood of redemption. The Company concluded that the pricing model, given the lack of market available pricing, provided a reasonable
basis for determining fair value of the ARS and the put option as of December 31, 2008.

The Company has accounted for the put option as a freestanding financial instrument and elected to record the value under the fair value
option of SFAS No. 159. This resulted in the recording of a $3.3 million asset with a corresponding credit to income for the value of the put
option for the year ended December 31, 2008. Simultaneously, the Company made an election pursuant to SFAS No. 115, “Accounting for
Certain Investments in Debt and Equity Securities” (“SFAS 115”), to transfer the related auction rate securities from available-for-sale to
trading securities. The transfer resulted in the reversal of prior unrealized losses, net of taxes, on the UBS purchased ARS from accumulated
other comprehensive income and the recognition of the unrealized losses as a charge to income of $3.9 million for the year ended December 31,
2008. The Company expects that the future changes in the fair value of the put option will be offset by the fair value movements in the related
ARS. We have recorded a temporary loss on the ARS purchased through Goldman Sachs of $8.8 million, as of December 31, 2008, in
accumulated other comprehensive income, reflecting the decline in the fair value of these securities, as these securities remain classified as
available for sale. The Company has concluded that no other-than-temporary impairment losses occurred for the year ended December 31, 2008
related to these securities because the Company believes that the declines in fair value that have occurred during 2008 are due to recent market
liquidity conditions.

The following table shows the gross unrealized losses of fair value of the Company’s investments with unrealized losses that are not deemed
to be other-than-temporarily impaired (in thousands), aggregated by investment category and length of time that individual securities have
been in a continuous unrealized loss position, as of December 31, 2008. The table excludes ARS purchased through UBS, as these investments
are classified as trading securities.

Le ss th an 12 Months
De scription of Fair Un re aliz e d
S e cu ritie s Value Losse s
Auction rate securities:
Goldman Sachs purchased $71,499 $ 8,751

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We believe these investments continue to be of high credit quality, and we currently plan to hold the ARS until such time as successful
auctions occur, secondary markets allow for a sufficient price to recover substantially all of our par value, or our put option becomes
exercisable. Accordingly, we have classified these securities as long-term investments in our consolidated balance sheet. The Company will
continue to analyze its ARS each reporting period for impairment and it may be required to record an impairment charge in the consolidated
statement of operations if the decline in fair value of the Goldman Sachs purchased ARS are determined to be other-than-temporary.

NOTE E - FAIR VALUE MEASUREMENT


We measure our financial assets and liabilities at fair value in accordance with SFAS 157. The fair value framework prescribed in SFAS 157
requires the categorization of assets into three levels based upon the assumptions (inputs) used to determine the estimated fair value of the
assets. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The
three levels are defined as follows:
• Level 1: Unadjusted quoted prices in active markets for identical assets.
• Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets in active markets or
quoted prices for identical assets in inactive markets.
• Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in estimating the value of the asset.

The following table summarizes our financial assets measured at fair value on a recurring basis in accordance with SFAS 157 as of
December 31, 2008 (in thousands):

De ce m be r 31, Ide n tical Asse ts O bse rvable Inpu ts Inpu ts


2008 (Le ve l 1) (Le ve l 2) (Le ve l 3)
Cash equivalents:
Money market funds $ 90,838 $ 90,838
Marketable securities:
Treasuries 154 154
Long-term investments:
Auction rate securities (1) 103,912 103,912
Put Option (2) 3,303 3,303
$ 198,207 $ 90,992 $ — $107,215

(1) Our auction rate securities, categorized as level 3, were $166.2 million as of December 31, 2007. During the year ended December 31, 2008,
net purchases, sales, issuances, and settlements totaled $49.1 million. In addition, we recorded an unrealized loss of $12.7 million on our
ARS for the year ended December 31, 2008. Of this $12.7 million unrealized loss, $3.9 million has been recorded on the income statement in
the line item “Gain (Loss) on Investments” and $8.8 million has been recorded on the balance sheet as a component of other
comprehensive income. See Note D for further information. We also received $0.5 million of interest receivable that was included in prior
year’s ending balance.
(2) Our put option, categorized as level 3, became effective November 2008 and was recorded as a $3.3 million asset with a corresponding
unrealized gain to “Gain (Loss) on Investments” for the value of the put option for the year ended December 31, 2008.

As of December 31, 2008, the Company has recorded these investments at their estimated fair value of $198.2 million. Due to events in credit
markets quoted prices in active markets are not readily available at this time for our ARS and put option. A third-party appraisal firm provided
an estimate of the fair value of the ARS and the put option held as of December 31, 2008. In order to validate the fair value estimate of these
securities and the put option for reporting, the Company considered the appraiser’s pricing model which included factors such as credit
quality, duration, insurance wraps, assumptions about future cash flows and likelihood of redemption. The Company concluded that the
pricing model, given the lack of market available pricing, provided a reasonable basis for determining fair value of the ARS and the put option
as of December 31, 2008. The assumptions that were used in the model were highly subjective and therefore considered level 3 unobservable
inputs in the fair value hierarchy. The fair value of these assets represents $107.2 million or 54.1% of total assets measured at fair value in
accordance with SFAS 157. The estimate of the fair value of the ARS we hold could change significantly based on future market conditions.

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As of December 31, 2008, $58.3 million of our money market funds held at Evergreen Investments have been guaranteed by the U.S. Treasury
Money Market Guarantee Program. The plan ensures that if a participating fund’s share value declines under $1.00 and a decision is made to
liquidate by the fund’s Board of Trustees, the U.S. Treasury would cover any shortfall between the share price at the time of liquidation and
$1.00 for investors as of September 19, 2008. This guarantee is effective until April 30, 2009.

NOTE F - ACCOUNTS RECEIVABLE AND UNBILLED RECEIVABLES


Accounts receivable are composed of the following (in thousands):

De ce m be r 31, De ce m be r 31,
2008 2007
Accounts Receivable:
Billed accounts receivable, net $ 90,144 $ 75,164
Unbilled accounts receivable, net 32,617 24,096
Total accounts receivable, net $ 122,761 $ 99,260

NOTE G - PROPERTY AND EQUIPMENT


The balances for property and equipment were as follows (in thousands):

De ce m be r 31,
2008 2007
Computer equipment $ 68,502 $ 58,263
Office equipment and other 12,245 9,852
Purchased software 38,394 32,653
Leasehold improvements 23,962 18,613
143,103 119,381
Less: Accumulated depreciation and amortization (89,107) (73,724)
$ 53,996 $ 45,657

Depreciation and amortization expense for property and equipment totaled $16.7 million, $16.7 million, and $14.8 million, in 2008, 2007, and 2006,
respectively.

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NOTE H - ACQUIRED TECHNOLOGY AND INTANGIBLE ASSETS, INCLUDING GOODWILL


The changes in the carrying amount of goodwill for the years ended December 31, 2008 and 2007 were as follows (in thousands):

De ce m be r 31,
2008 2007
Beginning Balance $ 7,772 $12,281
Earnouts 378 895
Acquisitions 89,181 —
CPMRC Sale (5,404)
Other (358)
Ending Balance $96,973 $ 7,772

During the year ended December 31, 2008, we acquired goodwill of $89.2 million in association with the acquisitions of EPSi, MediNotes, and
Premise. In addition, we recorded additional goodwill of $0.4 million in connection with earnout agreements. See Note O, “Acquisitions” to our
Consolidated Financial Statements for additional information.

During the year ended December 31, 2007, we disposed of goodwill of $5.4 million in connection with the sale of our Clinical Practice Model
Resource Center (“CPMRC”) business and recorded additional goodwill of $0.9 million in connection with earnout agreements. See Note P,
“Sale of Assets”, to our Consolidated Financial Statements for additional information.

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For the year ended December 31, 2008 and 2007, the gross and net amounts for acquired technology, ongoing customer relationships and
goodwill consist of the following:

2008 2007
C arrying Accum u late d Book C arrying Accum u late d Book Estim ate d
Am ou n t Am ortiz ation Value Am ou n t Am ortiz ation Value Life
Intangibles subject to amortization
Acquired technology $ 45,027 $ (5,317) $39,710 $ 1,967 $ (1,373) $ 594 3-4 years
Ongoing customer relationships 9,409 (1,382) 8,027 2,404 (1,028) 1,376 5-6 years
Non-compete agreements 2,640 (470) 2,170 2 years
Total $ 57,076 $ (7,169) $49,907 $ 4,371 $ (2,401) $1,970
Intangibles not subject to amortization:
Trade names 60
Goodwill 96,973 7,772
Total $97,033 $7,772

The Company’s intangible assets originated from acquisitions. The Company used an independent third-party appraiser at the time of
acquisition to determine the value of the acquired intangible assets.

During the year ended December 31, 2008, we acquired intangible assets of $43.1 million, $8.1 million, and $2.7 million related to acquired
technology, ongoing customer relationships and other, respectively, in connection with the acquisitions of EPSi, MediNotes, and Premise.
Amortization expense was $7.1 million for the year ended December 31, 2008, comprised of $5.3 million for acquired technology, $1.4 million for
client relationships, and $0.4 million for other intangible assets.

During the year ended December 31, 2007, we disposed of intangible assets of $0.9 million in connection with the sale of our CPMRC business.
Amortization expense was $1.7 million for the year ended December 31, 2007, comprised of $0.6 million for acquired technology and $1.1 million
for client relationships.

Amortization expense was $1.3 million for the year ended December 31, 2006, comprised of $0.4 million for acquired technology and $0.9 million
for client relationships.

The estimated aggregate amortization expense for each of the five succeeding fiscal years is as follows:

2009 2010 2011 2012 2013 Total


Total amortization expense $12,999 $12,628 $11,610 $7,783 $4,885 $49,907

NOTE I - AUTHORIZED SHARES


The total number of shares of all classes of stock which Eclipsys shall have authority to issue is 210,000,000 shares, consisting of:
(i) 200,000,000 shares of Common Stock, $.01 par value per share; (ii) 5,000,000 shares of Non-Voting Common Stock, $.01 par value per share;
and (iii) 5,000,000 shares of Preferred Stock, $.01 par value per share. As of December 31, 2009, no shares of the Non-Voting Common Stock
and Preferred Stock were issued and outstanding.

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NOTE J - STOCK-COMPENSATION PLANS


2008 Omnibus Incentive Plan
At our Annual Meeting of Stockholders held June 11, 2008, our stockholders approved the 2008 Omnibus Incentive Plan, or the 2008 Plan. The
maximum number of shares of common stock that may be issued under the 2008 Plan (subject to adjustment in the event of stock splits and
other similar events) is 4,164,364 shares. Any shares of common stock that are subject to options or stock appreciation rights (“SARs”)
granted under the 2008 Plan shall be counted against this limit as one share of common stock for every share granted, and in the amount of 1.6
shares of common stock for every share that is subject to awards other than options or SARs. In addition, if any shares of common stock
subject to an award under the 2008 Plan, or after December 31, 2007, any shares of common stock subject to an award under our 2005 Stock
Incentive Plan, are forfeited, expire or are settled for cash, the shares subject to the award may be used again for awards under the 2008 Plan, in
the amount of one share of common stock for every share that was subject to options or SARs and in the amount of 1.6 shares of common
stock for every share that was subject to awards other than options or SARs.

We expect to satisfy option exercises by issuing shares of the Company’s common stock. As of December 31, 2008, there were approximately
3,873,070 shares available for future awards under the 2008 Plan.

2005 Inducement Grant Stock Incentive Plan


In October 2005, our Board of Directors approved the 2005 Inducement Grant Stock Incentive Plan (the “Inducement Grant Plan”) for use in
making inducement grants of stock options and restricted stock to new employees pursuant to the NASDAQ Marketplace Rules. This
Inducement Grant Plan is substantially similar to our 2008 Omnibus Incentive Plan as approved by stockholders, except that eligible recipients
are limited to prospective and newly hired employees of the Company, consistent with its purpose as an employment inducement tool.

During the year ended December 31, 2008, we issued 106,800 stock options as inducement grants under the Inducement Grant Plan to founders
and employees of EPSi; and 342,714 shares of restricted stock to founders and employees of EPSi, MediNotes, and Premise all associated with
their continued employment.

Awards granted under the 2008 Plan, the Prior Plans and the Inducement Grant Plan generally have a contractual life of 7 to 10 years and
generally vest over a 4 to 5 year period.

Stock-Options Awards
Stock-option awards granted by the Company entitle recipients to purchase shares of Eclipsys common stock within prescribed periods at a
price equal to the fair market value on the date of grant. A summary of stock option transactions is as follows:

W e ighte d
W e ighte d Ave rage Aggre gate
Nu m be r Ave rage Re m aining Intrin sic
of Exe rcise C on tractu al Value
S h are s Price Life (in thou san ds)
Outstanding at January 1, 2008 5,254,121 $ 16.58
Options granted 1,195,225 $ 19.61
Options exercised (505,494) $ 12.78
Options canceled or forfeited (414,855) $ 21.63
Outstanding at December 31, 2008 5,528,997 $ 17.23 5.36 $ 5,442
Vested and expected to vest at December 31, 2008 5,239,016 $ 17.10 5.29 $ 5,420
Exercisable at December 31, 2008 3,031,304 $ 15.19 4.36 $ 5,263

As of December 31, 2008, $23.2 million of total unrecognized compensation costs related to stock options is expected to be recognized over a
weighted average period of 2.97 years.

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The weighted average grant date fair value of our employee stock options granted was $8.37, $12.63 and $15.11 per option during the years
ended December 31, 2008, 2007 and 2006, respectively. The intrinsic value of shares exercised was $4.0 million, $8.8 million and $30.5 million
during the years ended December 31, 2008, 2007 and 2006, respectively.

The weighted average fair value of outstanding stock options has been estimated at the date of grant using a Black-Scholes option pricing
model. The following are significant weighted average assumptions used for estimating the fair value of the activity under our stock option
plans:

Ye ars En de d De ce m be r 31,
2008 2007 2006
Expected term (in years) 4.58 5.91 6.46
Risk free interest rate 2.53% 4.31% 4.99%
Expected volatility 47.2% 59.3% 77.1%
Dividend yield 0% 0% 0%

We use the simplified method for estimating our expected term equal to the midpoint between the vesting period and the contractual term as
allowed by Staff Accounting Bulletin 107, “Share-Based Payment.”

Staff Accounting Bulletin 110, “Year-End Help for Expensing Employee Stock Options,” for options granted after December 31, 2007 requires
the use of historical data to estimate an expected term unless the company significantly changes the terms of its share-option grants. The
grants the Company issued after December 31, 2007 have a contractual term of 7 years, which differs from the contractual term of the historical
grants (generally 10 years). Therefore, we do not have sufficient historical data to estimate the expected term for current option issuances.
Accordingly, we continue to use the simplified method. Additionally, this reduction in contractual term has lowered our assumption of our
expected term.

We currently estimate volatility by using the historical volatility of our common stock.

The risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the
expected term input to the Black-Scholes model.

We estimate forfeitures using a historical forfeiture rate. Our estimate of forfeitures will be adjusted over the requisite service period based on
the extent to which actual forfeitures differ, or are expected to differ, from our estimate. During the third quarter of 2008, the Company elected
to change the application of the forfeiture rate used in the calculation of stock-based compensation expense which resulted in an incremental
expense of $1.5 million. In previous quarters, the Company applied a weighted average forfeiture rate which allocated or weighted the impact of
vested shares over the vesting period of the entire grant. Beginning with the third quarter of 2008, the Company applied the forfeiture rate
calculated for each respective vesting tranche which applies the impact of the vested shares to the respective vested tranche.

Non-Vested Restricted Stock


Non-vested restricted stock is sometimes granted by the Company. The restrictions lapse on a pro rata basis over a specified period of time,
generally four to five years. The grant date fair value per share of non-vested restricted stock, which is the stock price on the grant date, is
expensed on a straight-line basis over the period during which the restrictions lapse. The shares represented by restricted stock awards are
considered outstanding at the grant date, as the recipients are entitled to dividends and voting rights. A summary of restricted stock award
activity for the period is presented below:

W e ighte d
Non -ve ste d Ave rage Grant -
Nu m be r of S h are s Date Fair Valu e
Nonvested balance at January 1, 2008 382,230 $ 18.28
Granted 647,321 $ 20.33
Vested (194,250) $ 19.46
Forfeited (75,330) $ 20.92
Nonvested balance at December 31, 2008 759,971 $ 19.47

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Compensation expense recorded for stock-based awards of restricted stock was $5.3 million, $2.3 million, and $2.6 million, for the years ended
December 31, 2008, 2007 and 2006, respectively.

As of December 31, 2008, $11.9 million of total unrecognized compensation costs related to non-vested restricted awards is expected to be
recognized over a weighted average period of 2.54 years. The fair value of shares vested in each of the years ended December 31, 2008, 2007
and 2006 was $3.2 million, $2.7 million and $6.0 million, respectively.

Deferred Stock Units


Effective May 10, 2006, we implemented a deferred stock unit plan to provide for equity compensation for our non-employee directors in the
form of deferred stock units, or DSUs. As of the date of each annual meeting of the Company’s stockholders, each continuing non-employee
director receives a number of DSUs determined by dividing $125,000 by the fair market value of a share of the Company’s common stock on
the grant date. These DSUs vest monthly over the course of the ensuing year. In addition, in connection with joining the Company’s Board of
Director, each new non-employee director receives a number of DSUs determined by dividing $75,000 by the fair market value of a share of the
Company’s common stock on the grant date. These inducement DSUs vest monthly over the course of the ensuing 24 months. Each new non-
employee director also receives a number of DSUs equal to the product of $11,000 and the number of full 30-day periods from the date of
election or appointment to the Board until the next regular scheduled annual meeting of the Company’s stockholders. These initial
compensatory DSUs vest monthly over the course of the ensuing number of full 30-day month periods until the next regular scheduled annual
meeting of the Company’s stockholders. After cessation of board service, the Company will pay the DSUs by issuing to the former director a
number of shares of the Company's common stock equal to the number of accumulated vested deferred stock units. A non-employee director
may also elect to receive DSUs in lieu of all or a portion of his or her cash fees. All DSUs received for cash fees are fully vested.

We granted 56,320, 24,086 and 26,459 deferred stock units at an average market value of $20.64, $23.44 and $18.91 during the years ended
December 31, 2008, 2007 and 2006, respectively. The value of these deferred stock units is amortized to compensation expense and director
fees ratably over the vesting period. Expense recorded for deferred stock units was $0.8 million, $0.6 million and $0.3 million for the years ended
December 31, 2008, 2007 and 2006, respectively.

Employee Stock Purchase Plan


On June 29, 2005, our shareholders approved the 2005 Employee Stock Purchase Plan, or the 2005 Purchase Plan. In connection with the
approval, the Second Amended and Restated 1998 Employee Stock Purchase Plan was terminated and no further awards will be made under
such plan. Under the provisions of the 2005 Purchase Plan, our employees may purchase shares of our stock at a purchase price of 95% of the
closing price of our stock on the final day of the yearly offering period as defined. There were 42,240 shares issued under the 2005 Purchase
Plan as a result of employee participation during the year ended December 31, 2008. In addition, during 2008, the Company decreased the
shares available for issuance under the 2005 Purchase Plan by 600,000 shares. As of December 31, 2008, there were 287,706 shares available for
future issuance under the 2005 Purchase Plan.

Employee Savings Plan


During 1997, we established a Savings Plan pursuant to Section 401(k) of the Internal Revenue Code, or the Code, whereby employees may
contribute a percentage of their compensation, not to exceed the maximum amount allowable under the Code. At the discretion of our Board of
Directors, we may elect to make matching contributions, as defined in the Savings Plan. For the years ended December 31, 2008, 2007, and 2006
we made matching contributions of approximately $1.7 million, $1.5 million, and $1.3 million, respectively.

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Stock-Based Compensation
During the years ended December 31, 2008, 2007 and 2006, our stock-based compensation expense, as included in each respective expense
category, was as follows (in thousands):

Ye ar En de d De ce m be r 31,
2008 2007 2006
Cost of systems and services $ 7,346 $ 4,597 $ 3,215
Sales and marketing 6,244 3,137 3,495
Research and development 1,322 2,175 1,921
General and administrative 2,370 1,358 2,626
Restructuring charge — 2,846
Total stock-based compensation expense $17,282 $11,267 $14,103

The restructuring charge of $2.8 million for the year ended December 31, 2006 reflected in the table above, is included in the $14.7 million
restructuring charge disclosed separately in the consolidated Statement of Operations.

NOTE K - LONG-TERM FINANCING


On August 26, 2008, we entered into a credit agreement pursuant to which we received a senior secured revolving credit facility in the
aggregate principal amount of $125.0 million. All loans under the credit facility may be prepaid at any time and are due and payable on the date
that is three years from the closing date subject to certain mandatory prepayment obligations upon material asset sales, as described in the
credit agreement. The credit facility includes a letter of credit subfacility of up to $10.0 million and a swingline loan subfacility of up to $5.0
million.

We borrowed $51.0 million under the credit facility at closing. Of the $51.0 million borrowed at closing, $50.3 million was used to repay all
borrowings plus interest under our prior $50.0 million credit facility (previously borrowed to fund our February 2008 acquisition of EPSi) dated
as of May 9, 2008 and $0.7 million was used to pay transaction costs. On October 1, 2008 we borrowed an additional $16.0 million against the
credit facility for our acquisition of MediNotes. On December 31, 2008 we borrowed an additional $38.0 million against the credit facility for our
acquisition of Premise.

The interest rate applicable to the borrowed amount is based, at our option, on the prime rate, one-month LIBOR rate, three-month LIBOR rate,
six-month LIBOR rate or 12-month LIBOR rate at the initial debt draw date and interest rate contract end date plus an applicable margin. The
applicable margin is based on our leverage ratio, as defined in the credit agreement and as of December 31, 2008 was 1.75%. Our leverage ratio
increases to 2.0% in 2009 due to the increase in our outstanding debt. The effective interest rates at December 31, 2008 are as follows:

O u tstan ding De bt Inte re st Rate


$ 51,000 3.95%
16,000 3.97%
38,000 4.00%
$105,000 3.97%

We have also collateralized a letter of credit with $1.9 million of available principal and are incurring interest expense on the outstanding letter
of credit amount based on the applicable rate of 1.75% plus a 0.25% facing fee. We also incur interest on the unused principal balance based
on an applicable rate of 0.30%.

As of December 31, 2008, $18.1 million remains available for future borrowings. We believe these borrowings are currently available. However,
there can be no assurance that adequate liquidity would be available to finance extraordinary business opportunities. In addition, we may not
be able to draw on the full available balance of our $125.0 million credit facility if one or more of the financial institutions that have extended
credit commitments to us become unwilling or unable to fund such borrowings. In the current economic environment, the chance of a
syndicate bank failing to meet a funding commitment is less unlikely than under more normal circumstances, and our ability to replace a non-
funding bank in the syndicate is uncertain.

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The obligations under the credit facility are secured by first priority security interests in specified assets of Eclipsys, including cash, accounts
receivable, securities, and intellectual property. Under the credit facility, Eclipsys must comply with customary operating covenants and
financial covenants. The credit facility also contains other customary terms and conditions, including representations and warranties,
indemnity provisions, and negative covenants. As of December 31, 2008 we are not in violation of any of the covenants under the credit
facility agreement.

The fair value of our debt approximates the carrying value of our debt due to the nature of our credit facility.

NOTE L - RESTRUCTURING
In October 2007, the Company initiated a restructuring plan to relocate its corporate headquarters from Boca Raton, Florida to Atlanta, Georgia.
The intent of the restructuring plan was to consolidate more of the Company’s operations in one location, reduce overhead costs, and provide
a more accessible location for existing and potential clients as well as employees. The charges related to this plan primarily consist of
severance-related expenses associated with the termination of impacted employees and include one-time employee-related benefits. The
restructuring charges have been recorded in our Consolidated Statements of Operations as “restructuring charge.”

A summary of the restructuring activity related to the relocation of our corporate headquarters is as follows (in thousands):

Te rm ination
Re late d
Be n e fits
Balance at December 31, 2006 $ —
Restructuring charge 1,175
Payments (198)
Balance at December 31, 2007 $ 977
Payments (1,138)
Other 161
Balance at December 31, 2008 $ —

In January 2006, we effected a restructuring of our operations which included a reduction in headcount of approximately 100 individuals and
the reorganization of our Company. In December 2006, we realigned certain management resources and consolidated some facilities to
eliminate excess office space.

These activities resulted in total restructuring charges of $14.7 million, which were incurred in the year ended December 31, 2006. Severance
charges were $12.2 million, of which $2.8 million was for non-cash stock-based compensation. The excess office space consolidation resulted
in charges of $2.5 million related to the closing of three of our facilities. The remaining liability as of December 31, 2008 is expected to be paid
out through 2009.

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A summary of the 2007 and 2008 restructuring activity related to the 2006 actions is as follows (in thousands):

O n e -tim e
Em ploye e -
Re late d Facility
Be n e fits C losure s Total
Balance at December 31, 2006 $ 3,174 $ 2,486 $ 5,660
Payments (2,896) (1,587) (4,483)
Balance at December 31, 2007 $ 278 $ 899 $ 1,177
Payments (261) (602) (863)
Balance at December 31, 2008 $ 17 $ 297 $ 314

NOTE M - INCOME TAXES


The income tax provision (benefit) is as follows (in thousands):

For Th e Ye ar En de d
De ce m be r 31,
2008 2007 2006
Current Tax Provision:
Federal $ 530 $ 428 $—
State 5,854 85 —
Foreign 4,231 239 —
$ 10,615 $ 752 $—
Deferred Provision (Benefit):
Federal $(79,069) $ 448 $ 34
State (14,887) 94 4
Foreign 925 (5,286) —
(93,031) (4,744) 38

Total Provision $(82,416) $(3,992) $ 38

The Company’s U.S. and foreign income before income taxes was as follows (in thousands):

For Th e Ye ar En de d
De ce m be r 31,
2008 2007 2006
United States $12,705 $34,152 $4,929
Foreign $ 4,385 $ 2,997 $ (798)
$17,090 $37,149 $4,131

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A reconciliation of the effect of applying the federal statutory rate and the effective income tax rate on our income tax provision is as follows
(in thousands):

2008 2007 2006


Statutory federal income tax rate $ 6,064 $ 13,002 $ 1,405
State income taxes, net of federal benefit 1,460 1,488 164
Stock compensation 892 (1,045) (2,065)
Federal and state rate change 165 (2,840) —
FIN 48 liability 2,407 780 —
Foreign jurisdiction rate differentials (328) (658) —
Nondeductible items 884 578 708
Tax credits (7,090) — —
Other 15 418 (42)
Valuation allowance (86,885) (15,715) (132)
Income tax provision $(82,416) $ (3,992) $ 38

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The significant components of our net deferred tax assets (liabilities) are as follows (in thousands):

(in thou san ds)


De ce m be r 31,
2008 2007
Deferred tax assets:
Intangible assets $ 16,112 $ 17,053
Stock based compensation 10,105 6,889
Allowance for doubtful accounts 1,902 1,672
Accrued expenses 1,470 2,112
Deferred revenues 5,573 3,692
Unrealized loss on investments 5,013 —
Federal and state indirect tax benefits 7,326 —
Other 2,321 —
Credit carryforwards 11,577 —
Net operating loss carryforwards 76,879 92,494
138,278 123,912
Deferred tax liabilities:
Unbilled receivables (12,586) (9,804)
Goodwill amortization — (128)
Depreciation (1,636) (3,874)
Intangible assets (14,243) —
Capitalization of software development costs (14,932) (15,065)
Other (2,945) (2,226)
Net deferred tax asset 91,936 92,814
Valuation allowance (230) (87,115)
$ 91,706 $ 5,699

As of December 31, 2008, we had U.S. net operating loss carry forwards for federal income tax purposes of approximately $293.8 million. Of this
amount, $10.5 million expires in 2018 and $39.1 million expires in 2019; the balance expires in varying amounts through 2027. Of the total U.S.
net operating loss carry forward, approximately $96.1 million relates to stock option tax deductions which will be tax-effected and the benefit
credited as additional paid-in-capital when realized. Additionally, the Company has Canadian net operating loss carryovers of approximately
$27.7 million that expire in varying amounts through 2026. Our Indian subsidiary is entitled to a tax holiday which expires in 2009.

As a result of two acquisitions in 2008, the Company acquired a small amount of net operating loss carry forwards (“NOLs”) that are subject to
the limitations of Code Section 382. We do not expect that the limitations placed on these acquired NOLs as a result of this change in
ownership will result in the expiration of these NOLs prior to their usage. However, future equity transactions could limit the utilization of all or
a portion of the Company’s existing NOLs if the transactions resulted in the Company triggering certain percentage ownership change
thresholds under Code Section 382.

The Company regularly reviews its deferred tax assets for recoverability taking into consideration such factors as historical losses, projected
future taxable income and the expected timing of the reversals of existing temporary differences. SFAS 109 requires the Company to record a
valuation allowance when it is “more likely than not that some portion or all of the deferred tax assets will not be realized.” It further states that
“forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent
years.” Since inception through September 30, 2008, the Company has maintained a 100% valuation allowance equal to the deferred U.S. tax
assets after considering the U.S. deferred tax assets that can be realized through offsets to existing taxable temporary differences.

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Based upon the Company’s results of operations in recent years, and its expected profitability in this and future years, the Company
concluded, effective September 30, 2008, that it was more likely than not that substantially all of its net U.S. deferred tax assets would be
realized. As a result, in accordance with SFAS 109, substantially all of the valuation allowance applied to such net deferred tax assets has been
reversed in 2008. Reversal of the valuation allowance resulted in a non-cash income tax benefit in 2008 totaling $86.9 million.

As of December 31, 2008, a valuation allowance of approximately $0.2 million has been established against the U.S. state and Canada deferred
tax assets that management does not believe are more likely than not to be realized. This determination is based primarily on the Company’s
projected expiration of net operating losses in various state jurisdictions. We will continue to assess the requirement for a valuation allowance
on a quarterly basis.

In the third quarter of 2008, the Company completed its analysis of research and development expenditures for eligibility to qualify for a
research and development (“R&D”) tax credit. Accordingly, the Company recorded a deferred tax asset and related tax benefit of $10.6 million.
As of December 31, 2008, the Company has total R&D tax credit carryforwards of $13.8 million. In 2019, $0.6 million of the R&D credits begin to
expire.

In the fourth quarter of 2007, we concluded that it was more likely than not that the deferred tax assets in Canada would be recovered from
future taxable income. Accordingly, in 2007, we recorded a tax benefit of approximately $5 million for the reversal of the tax valuation allowance
related to our Canadian operation.

Eclipsys intends to indefinitely reinvest the undistributed earnings of its foreign subsidiaries. Accordingly, no deferred taxes have been
recorded for the difference between its financial and tax basis investment in its foreign subsidiaries. If these earnings were distributed to the
U.S. in the form of dividends, or otherwise, the Company would have additional U.S. taxable income and, depending on the Company’s tax
posture in the year of repatriation, may have to pay additional U.S. income taxes. Withholding taxes may also apply to the repatriated earnings.
Determination of the amount of unrecognized income tax liability related to these permanently reinvested and undistributed foreign subsidiary
earnings is currently not practicable.

The Company uses the “with-and-without” or “incremental” approach for ordering tax benefits derived from the share-based payment of
awards. Using the with-and-without approach, actual income taxes payable for the period are compared to the amount of tax payable that
would have been incurred absent the deduction for employee share-based payments in excess of the amount of compensation cost recognized
for financial reporting. As a result of this approach, tax net operating loss carry forwards not generated from share-based payments in excess
of cost recognized for financial reporting are considered utilized before the current period’s share-based deduction.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”). This
interpretation clarifies the criteria for recognizing income tax benefits under FASB Statement No. 109, “Accounting for Income Taxes,” and
requires additional disclosures about uncertain tax positions. Under FIN 48 the financial statement recognition of the benefit for a tax position
is dependent upon the benefit being more likely than not, based on its technical merits, to be sustainable upon audit by the applicable taxing
authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50 percent likely of
being realized upon ultimate settlement. Upon adoption of FIN 48 on January 1, 2007, the Company recognized no increase in its liability for
unrecognized income tax benefits. A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income
tax benefits during the years ended December 31, 2008 and 2007 is as follows (in thousands):

2008 2007
Balance at January 1, 2008 $ 716 $—
Additions for tax positions of prior years 12,330 548
Additions for tax positions related to 2008 1,073 168
Reductions for tax positions of prior years (333) —
Settlements — —
Foreign currency translation (539) —
Balance at December 31, 2008 $13,247 $716

Of the $13.4 million of additions, $13.4 million would affect the Company’s effective income tax rate in the respective period of change. The
Company accounts for any applicable interest and penalties on uncertain tax positions as a component of income tax expense. The liability for
uncertain income taxes for the years ended December 31, 2008 and 2007 include interest and penalties of $2.8 million and $0.2 million,
respectively. The income tax expense for the years ended December 31, 2008 and 2007 includes interest and penalties of $2.6 million and $0.2
million, respectively.

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The Company’s tax returns filed in multiple jurisdictions are subject to audit by taxing authorities. Years with net operating losses that can be
carried forward remain open for audit until the net operating loss is utilized or expires. As of December 31, 2008, the earliest years remaining
open for audit and/or settlement in our major taxing jurisdictions are as follows: United States – 1997 and Canada – 2002.

NOTE N - COMMITMENTS AND CONTINGENCIES


On May 22, 2008, The McKenna System (“TMS”) filed in the 274th Judicial District Court, Comal County, Texas, a complaint against the
Company stemming from an agreement between the Company and McKenna Health System (“McKenna”) pursuant to which McKenna agreed
to acquire software and services from the Company. McKenna terminated that agreement on April 18, 2007. The complaint alleges various
causes of action essentially amounting to breach of contract for failing to meet contractual obligations related to the software sold and the
timeliness of implementation, and intentionally or negligently misleading McKenna. TMS has asserted damages of approximately $7.5 million,
and seeks multiple damages under various theories. The outcome of this case and its impact on the Company’s results of operations depend
upon questions of fact and law that are disputed or not clear and cannot be predicted with confidence at this time. The Company intends to
contest this matter vigorously, including defending the allegations and pursuing McKenna’s unfulfilled obligations to Eclipsys.

In addition to the foregoing, the Company and its subsidiaries are from time to time parties to other legal proceedings, lawsuits and other
claims incident to their business activities. Such matters may include, among other things, assertions of contract breach or intellectual
property infringement, claims for indemnity arising in the course of our business and claims by persons whose employment with us has been
terminated. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, management is
unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance or recoverable from third
parties, or the financial impact with respect to these other matters as of December 31, 2008. However, based on our knowledge as of
December 31, 2008, management believes that the final resolution of such other matters pending at the time of this report, individually and in
the aggregate, will not have a material adverse effect upon our consolidated financial position, results of operations or cash flows.

Non-cancelable Operating Leases


We lease office space and certain equipment under non-cancelable operating leases. Rental expense under operating leases was $13.4 million,
$11.7 million, and $8.3 million for the years ended December 31, 2008, 2007, and 2006, respectively. Future minimum rental payments under non-
cancelable operating leases as of December 31, 2008 are as follows:

(in thou san ds)


Ye ar En ding De ce m be r
31,
2009 9,128
2010 7,515
2011 5,027
2012 4,452
2013 4,114
Thereafter 10,122
$ 40,358

We have unconditional purchase obligations that consist of minimum purchase commitments for telecommunication services, computer
equipment, maintenance, consulting and other commitments. In aggregate, these obligations total approximately $121.4 million. These
obligations will require payments of $47.8 million in 2009, with the majority of the balance occurring within the next three years.

Indemnification clauses
Our standard software license agreements contain indemnification clauses that are limited in amount. Pursuant to these clauses, we indemnify,
hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party. We account for these
clauses under FASB Staff Position FIN 45 45-1: Accounting for Intellectual Property Infringement Indemnifications under FASB Interpretation
No. 45. Accordingly, there are no liabilities recorded for these agreements as of December 31, 2008.

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NOTE O - ACQUISITIONS
EPSi
On February 25, 2008, we acquired all of the outstanding capital stock of Enterprise Performance Systems, Inc. (“EPSi”), a private company.
The aggregate purchase price was $57.1 million ($54.7 million net of cash acquired and transaction costs) and is subject to certain holdback
arrangements and working capital adjustments. EPSi is a provider of business intelligence solutions, including web-based software and related
consulting services that allow clients in the healthcare industry to improve financial performance and operational decision making. We
acquired EPSI to strengthen our position in providing clinical, operational and financial performance-improvement solutions that help
organizations manage the business of healthcare.

The purchase price has been allocated to the tangible assets, liabilities assumed, and identifiable intangible assets acquired based on their
estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The
fair value assigned to identifiable intangible assets acquired is determined using the income approach, which discounts expected future cash
flows to present value using estimates and assumptions determined by management. Purchased intangible assets are amortized on a straight-
line basis over the weighted-average respective useful lives based on an assessed pattern of use. For accounting purposes, the purchase price
is $54.7 million which includes $0.7 million of transaction costs and net of cash acquired of $2.4 million. Approximately $0.9 million of the
purchase price was allocated to in-process research and development and was charged to our income statement in the first quarter of 2008.

The resulting allocation of the purchase price is summarized below (in thousands):

$ Allocation Estim ate d


Am ou n t Use ful Live s
Net tangible assets acquired $ 2,961
Customer relationships 4,600 6 yrs.
Non-Compete agreements 1,210 3 yrs.
Acquired technology 13,260 4 yrs.
Goodwill 32,670
Purchase Price $ 54,701

For the year ended December 31, 2008, we recorded amortization expense of $3.8 million related to intangible assets acquired in the EPSi
acquisition.

The $0.9 million acquired in-process research and development, discussed above, was valued using the Multi-Period Excess Earnings Method
by an independent appraisal firm. The material assumptions, underlying the purchase price allocation, were as follows: projected revenue
assumptions, decay rate, cost assumptions, operating expense assumptions, charge assumptions for the use of contributory assets, and
discount rate assumptions. At the date of acquisition, the technology was still in the research and development phase and had not yet been
completed to a point of an existing or current product offering. At the time of acquisition, the projected cost to complete the project was $0.2
million. The in-process technology was incorporated within an EPSi product module that was released in January 2009.

MediNotes
On October 2, 2008, we acquired all of the outstanding capital stock of MediNotes Corporation (“MediNotes”), a provider of physician
practice information solutions. In connection with the transaction, the Company was obligated to pay a total of approximately $45 million (net
of certain closing balance sheet adjustments) in exchange for the acquisition of MediNotes and the cancellation of a previous MediNotes’
royalty arrangement. All of the consideration for the cancellation of the royalty arrangement and 61% of the consideration for the acquisition
of MediNotes was payable in the form of Eclipsys common stock, and the balance of the consideration for the acquisition of MediNotes was
payable in cash. The common stock portion of the purchase price was based on the arithmetic mean of the last sale price of a share of Eclipsys
common stock on each of the 10 consecutive trading days ending two trading days immediately prior to the acquisition closing date. We
acquired MediNotes to support our strategy of providing a comprehensive set of solutions that help health systems better connect with
physicians, and physicians with their patients.

The purchase price has been allocated to the tangible assets, liabilities assumed, and identifiable intangible assets acquired based on their
estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The
fair value assigned to identifiable intangible assets acquired is determined using the income approach, which discounts

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expected future cash flows to present value using estimates and assumptions determined by management. Purchased intangible assets are
amortized on a straight-line basis over the weighted-average respective useful lives based on an assessed pattern of use. For accounting
purposes, the purchase price is $45.1 million which includes $1.4 million of transaction costs and net of cash acquired of $0.1 million.

The resulting allocation of the purchase price is summarized below (in thousands):

$ Allocation Estim ate d


Am ou n t Use ful Live s
Tangible assets acquired $ (5,903)
Customer relationships 2,400 5 yrs.
Non-Compete agreements 1,030 2 yrs.
Acquired technology 12,700 4 yrs.
Goodwill 34,888
Purchase Price $ 45,115

For the year ended December 31, 2008, we recorded amortization expense of $1.0 million related to intangible assets acquired in the MediNotes
acquisition.

Premise
On December 31, 2008, we acquired all of the outstanding capital stock of Premise Corporation (“Premise”), a privately held company,
expanding our portfolio of solutions that help our clients improve operational performance, which also includes EPSi software and our growing
portfolio of analytics solutions. The purchase price was $38.5 million cash, subject to certain holdback escrow provisions and working capital
adjustments. Premise is a provider of integrated and clinically focused software solutions and services that help optimize patient flow,
streamline communications, enhance operational efficiency, and empower knowledge-based decision making. We acquired Premise to expand
our portfolio of solutions that help our clients improve operational performance, which also includes EPSi software and our growing portfolio
of analytics solutions.

The purchase price has been allocated to the tangible assets, liabilities assumed, and identifiable intangible assets acquired based on their
estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The
fair value assigned to identifiable intangible assets acquired is determined using the income approach, which discounts expected future cash
flows to present value using estimates and assumptions determined by management. Purchased intangible assets are amortized on a straight-
line basis over the weighted-average respective useful lives based on an assessed pattern of use. For accounting purposes, the purchase price
is $38.6 million which includes $1.1 million of transaction costs and net of cash acquired of $0.9 million.

The resulting allocation of the purchase price is summarized below (in thousands):

$ Allocation Estim ate d


Am ou n t Use ful Live s
Tangible assets acquired $ (1,706)
Customer relationships 1,100 5 yrs.
Non-Compete agreements 400 2 yrs.
Acquired technology 17,100 5 yrs.
Trade Names 60
Goodwill 21,623
Purchase Price $ 38,577

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NOTE P - SALE OF ASSETS


In December 2007, the Company entered into an Asset Purchase Agreement with Elsevier Inc. (“Elsevier”) pursuant to which Elsevier acquired
certain assets of our CPMRC business (including CPMRC’s proprietary clinical practice guidelines and related intellectual property), assumed
certain CPMRC content customer contracts and retained related CPMRC employees for $23.1 million in cash. The transaction resulted in a net
gain of $12.8 million in 2007 comprised of the following:

(in thousands):

Cash received $23,134


CPMRC earnout settlement payment (5,100)
Net assets sold (4,755)
Other costs (518)
Gain on sale $12,761

In connection with this transaction the Company, for $5.1 million, settled the remaining earnout obligation under the 2004 CPMRC acquisition
agreement and reflected this as a reduction of the gain on sale.

In addition to the aforementioned proceeds from sale, the CPMRC agreement allows for us to earn up to an additional $11.0 million through
2010 in the event Elsevier meets certain sales targets, we are successful in obtaining permission from a customer to transfer its contract to
Elsevier, and we complete certain minor data base application development for Elsevier. If these milestones are met, we would reflect any
contingent consideration received as additional gain on the sale of CPMRC. For the year ended December 31, 2008, we recognized $4.4 million
additional gain on the sale of CPMRC.

In connection with the sale, the Company and Elsevier entered into reseller and license agreements to allow Eclipsys to continue to acquire
CPMRC content and services from Elsevier in order to support existing and possible new customers who use Eclipsys’ Knowledge-Based
Charting software application, which contains the CPMRC content.

NOTE Q - RELATED PARTY TRANSACTIONS


License Agreement with Partners HealthCare System, Inc.
We have a license agreement with Partners HealthCare System, Inc., or Partners. Mr. Jay Pieper, a director of Eclipsys, is Vice President of
Corporate Development and Treasury Affairs for Partners. Under the terms of this license, we may develop, commercialize, distribute and
support certain technology of Partners, or the Partners’ Technology, and license it, as well as sell related services, to other healthcare
providers and hospitals throughout the world (with the exception of the Boston, Massachusetts metropolitan area). No royalties are payable
by us pursuant to the license with Partners.

In 2001, Partners entered into a contract with us for the license of a new Eclipsys software application and related professional services. This
new software application consisted of an upgrade to an existing software application that Partners had licensed from Transition Systems, Inc.,
an entity that was acquired by us in December 1998. Under this contract, Partners paid us the sums of $1.3 million, $1.2 million and $0.9 million,
in 2008, 2007 and 2006, respectively. As of December 31, 2008, Partners owed us the sum of approximately $0.7 million related to this contract.
Mr. Pieper was not affiliated with Eclipsys at the time of the negotiation of the Partners license from Transition Systems, Inc. In December
2008, Partners also entered into a contract with us for the licensing, support, and implementation of our EPSi software solution. As of
December 31, 2008, no payments under this new agreement were owed by Partners to us.

Lease Agreement and Cost-Sharing Arrangement with BG Jet Corp.


Effective March 1, 2007, we entered into a Lease Agreement and a Cost Sharing Agreement, each with BG Jet Corp., and an Assignment and
Consent among Eclipsys, BG Jet Corp, NetJets Sales, Inc., NetJets Services, Inc. and NetJets Aviation, Inc. BG Jet Corp. is 50% owned by
Mr. Eugene Fife, one of our directors and the Chairman of our Board. The NetJets entities are affiliated companies that in the aggregate
provide a fractional aircraft interest and related services to BG Jet Corp. This arrangement had an initial term of 11 months and was renewed for
a subsequent one year term in February 2008 and the arrangement is being renewed for an additional one year term, effective February 1, 2009.
Either Eclipsys or BG Jet Corp. may terminate the arrangement if Mr. Fife’s service on our Board ceases, or as a result of a change in control of
Eclipsys, or upon loss of use of the aircraft that is subject to the fractional interest, or upon transfer of the fractional interest in whole or part
by BG Jet Corp.

During the year ended December 31, 2008 and 2007, we paid $0.1 million and $0.1 million, respectively, to BG Jet Corp. under this arrangement.

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NOTE R - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


The following table presents consolidated statement of operations data for each of the eight quarters in the years ended December 31, 2008
and 2007. The data in the statement of operations is unaudited and, in the opinion of management, includes all adjustments (consisting of
normal recurring adjustments) necessary to state fairly the data for such periods.

For th e Ye ar En de d De ce m be r 31, 2008


(in thou san ds, e xce pt pe r sh are data)
First S e con d Th ird Fourth
Q u arte r Q u arte r Q u arte r Q u arte r Ye ar
Revenues $124,380 $132,142 $132,424 $126,816 $515,762
Income (loss) from operations (2,119) 7,224 6,761 (2,494) 9,372
Net income 290 8,511 87,396 3,310 99,506
Basic net income per common share $ 0.01 $ 0.16 $ 1.62 $ 0.06 $ 1.84
Diluted net income per common share $ 0.01 $ 0.16 $ 1.59 $ 0.06 $ 1.81

For th e Ye ar En de d De ce m be r 31, 2007


(in thou san ds, e xce pt pe r sh are data)
First S e con d Th ird Fourth
Q u arte r Q u arte r Q u arte r Q u arte r Ye ar
Revenues $113,030 $119,019 $121,080 $124,404 $477,533
Income (loss) from operations 906 4,125 7,513 4,774 17,318
Net income (loss) 2,401 5,694 8,864 24,182 41,141
Basic net income (loss) per common share $ 0.05 $ 0.11 $ 0.17 $ 0.45 $ 0.78
Diluted net income (loss) per common share $ 0.04 $ 0.11 $ 0.16 $ 0.45 $ 0.76

NOTE S - GEOGRAPHIC INFORMATION


Revenues are attributed to geographical areas based on customer’s geographical location. The Company’s revenues by geographic area are
summarized below (in thousands):

Ye ar e n de d De ce m be r 31,
2008 2007 2006
United States $484,240 $444,474 $394,536
Canada 26,410 31,761 30,592
Other 5,112 1,298 2,414
Total $515,762 $477,533 $427,542

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A summary of the Company’s long-lived assets by geographic area is summarized below (in thousands):

De ce m be r 31,
2008 2007
United States $437,663 $107,918
Canada 2,542 938
India 6,071 3,454
Total $446,276 $112,310

NOTE T - SUBSEQUENT EVENTS (UNAUDITED)


During the first quarter of 2009 we plan to reduce our workforce. Reductions will primarily be in our professional services organization. We
estimate total severance related costs incurred in the first quarter 2009 to be approximately $1.5 to $2.0 million.

Item 8. Financial Statements and Supplementary Data

SCHEDULE II — VALUATION OF QUALIFYING ACCOUNTS


For the Years Ended December 31, 2008, 2007 and 2006
(in thousands)

Balan ce
Balan ce at at
Be ginn ing W rite - En d of
of Pe riod Addition s offs Pe riod
December 31, 2008
Allowance for doubtful accounts $ 4,240 $ 4,408 $ (3,736) $ 4,912
Valuation allowance for deferred tax asset $ 87,115 $ — $(86,676) $ 439
December 31, 2007
Allowance for doubtful accounts $ 3,907 $ 2,078 $ (1,745) $ 4,240
Valuation allowance for deferred tax asset $ 131,523 $ 6,670 $(51,078) $ 87,115
December 31, 2006
Allowance for doubtful accounts $ 5,676 $ 1,457 $ (3,226) $ 3,907
Valuation allowance for deferred tax asset $ 133,182 $ — $ (1,659) $131,523

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

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Item 9A. Controls and Procedures


Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of December 31, 2008. Our disclosure controls and procedures
are designed to provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the
reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized
and reported, within the time periods specified in the SEC’s rules and forms. There is no assurance that our disclosure controls and procedures
will operate effectively under all circumstances. Based upon the evaluation described above our Chief Executive Officer and Chief Financial
Officer concluded that, as of December 31, 2008, our disclosure controls and procedures were effective at the reasonable assurance level.

Management Report on Internal Control Over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-
15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Management assessed our internal control over financial reporting as of December 31, 2008. In making this assessment, we used the criteria
established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework.
Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls,
process documentation, accounting policies, and our overall control environment.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2008
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting
purposes in accordance with U.S. generally accepted accounting principles.

The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP,
an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting


No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during
the fiscal quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.

Item 9B. Other Information


None.

Part III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding directors, executive officers and corporate governance will be set forth in the proxy statement for our 2009 annual
meeting of stockholders and is incorporated herein by reference.

Item 11. Executive Compensation


Information regarding executive compensation will be set forth in the proxy statement for our 2009 annual meeting of stockholders and is
incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information regarding security ownership of certain beneficial owners and management will be set forth in the proxy statement for our 2009
annual meeting of stockholders and is incorporated herein by reference.

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The following table provides information about shares of Eclipsys common stock that may be issued under our existing equity compensation
plans as of December 31, 2008:

Nu m be r of se cu ritie s re m aining
available for fu ture issu an ce
u n de r e qu ity com pe n sation plan s
Nu m be r of se cu ritie s to be W e ighte d-ave rage e xe rcise (e xcluding
issu e d u pon e xe rcise of price of ou tstan ding se cu ritie s re fle cte d in
ou tstan ding option s, warran ts options, warran ts and colum n (a))
an d righ ts (a) rights (b) (c)
Equity
compensation
plans approved
by security
holders 4,499,197 $ 16.94 3,873,070
Equity
compensation
plans not
approved by
security holders
(1) 1,029,800 (2) $ 18.52 327,486 (3)
Total 5,528,997 4,200,556 (4)
1 In October 2005, our Board of Directors approved the 2005 Inducement Grant Stock Incentive Plan (the “Inducement Grant Plan”) for use
in making inducement grants of stock options and restricted stock to new employees pursuant to the NASDAQ Marketplace Rules. This
Inducement Grant Plan was based upon and is substantially similar to our 2005 Stock Incentive Plan as approved by stockholders, except
that eligible recipients are limited to prospective and newly hired employees of the Company, consistent with its purpose as an
employment inducement tool. The Board initially authorized 1,200,000 shares under the Inducement Grant Plan, which was increased in
February 2008 by an additional 400,000 shares and in December 2008 by an additional 350,000 shares. As of December 31, 2008, a total of
1,950,000 shares were authorized under the Inducement Grant Plan.
2 Represents options which were granted as inducement hiring grants in accordance with NASDAQ rules to (i) Mr. Eckert as our President
and Chief Executive Officer in 2005; (ii) Mr. Deady as our Executive Vice President, Client Solutions in 2006; and (iii) to founders and
employees of Enterprise Performance Systems, Inc. in connection with our acquisition of that company in February 2008. These options
were issued pursuant to our 2005 Inducement Grant Stock Inducement Plan.
3 270,138 shares have been reserved for grants of inducement hiring stock options to founders and employees of Premise Corporation, to
be issued in the first quarter of 2009 in accordance with Eclipsys’ Stock Option Grant Guidelines.
4 The number of securities remaining available for future issuance under equity compensation plans as of December 31, 2008 included
287,706 shares available for future issuance under Eclipsys’ Employee Stock Purchase Plan, which takes into account the March 2008
reduction of 600,000 shares available under the Employee Stock Purchase Plan.

Item 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions will be set forth in the proxy statement for our 2009 annual meeting of
stockholders and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services


Information regarding principal accounting fees and services will be set forth in the proxy statement for our 2009 annual meeting of
stockholders and is incorporated herein by reference.

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Part IV
Item 15. Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements included in Item 8 of this report on Form 10-K
(2) Financial Statement Schedules included in Item 8 of this report on Form 10-K Schedule II—Valuation of Qualifying
Accounts
(3) The following exhibits are included in this report:

Exh ibit Incorporation by Re fe re n ce


Inde x Exh ibit De scription Form Exh ibit Filing Date

2.1 Asset Purchase Agreement dated December 19, 2007, by and among the Registrant, Eclipsys 10-K 2.1 February 27, 2008
Solutions Corporation, CPM Resource Center, Inc., and Elsevier Inc.
2.2 Stock Purchase Agreement, dated as of February 25, 2008, by and among the Registrant, 10-Q 2.1 May 12, 2008
Enterprise Performance Systems, Inc. (“EPSi”), and certain stockholders of EPSi
2.3 Agreement and Plan of Merger, dated September 19, 2008, by and among the Registrant, a 10-Q 10.2 November 10, 2008
subsidiary of the Registrant formed for purposes of the acquisition, MediNotes Corporation, and
certain stockholders of MediNotes
2.4 First Amendment to the Agreement and Plan of Merger, dated October 2, 2008, by and among the 10-Q 10.3 November 10, 2008
Registrant, a subsidiary of the Registrant formed for purposes of the acquisition, MediNotes
Corporation, and certain stockholders of MediNotes Corporation
2.5 Agreement and Plan of Merger, dated December 30, 2008, by and among the Registrant, a Filed herewith
subsidiary of the Registrant formed for purposes of the acquisition, Premise Corporation, and
certain stockholders of Premise Corporation
3.1 Third Amended and Restated Certificate of Incorporation of the Registrant 10-Q 3.1 September 21, 1998
3.2 Amended and Restated Bylaws of the Registrant 8-K 3.2 November 19, 2007
4.1 Specimen certificate for shares of Common Stock S-1 4.1 April 23, 1998
10.1* Amended and Restated 1999 Stock Incentive Plan 10-Q 10.2 August 13, 2002
10.2* Amended and Restated 2000 Stock Incentive Plan 10-Q 10.1 May 10, 2005
10.3* 2005 Stock Incentive Plan 8-K 10.1 July 6, 2005

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10.4* Appendix A to the Registrant’s 2005 Stock Incentive Plan: Deferred Stock Units for Non-Employee 8-K 10.1 May 17, 2006
Directors
10.5* 2005 Employee Stock Purchase Plan 8-K 10.2 July 6, 2005
10.6* Amended and Restated 2005 Inducement Grant Stock Incentive Plan 10-Q 10.1 May 12, 2008
10.7* 2008 Omnibus Incentive Plan 10-Q 10.1 August 7, 2008
10.8* Appendix A to the Registrant’s 2008 Omnibus Incentive Plan: Deferred Stock Units for Non- Filed herewith
Employee Directors
10.9* Form of Incentive and/or Non-Qualified Stock Option Agreement under the Registrant’s Amended 8-K 99.1 December 1, 2004
and Restated 2000 Stock Incentive Plan, as amended
10.10* Form of Restricted Stock Agreement under the Registrant’s Amended and Restated 2000 Stock 8-K 99.2 December 1, 2004
Incentive Plan, as amended
10.11* Form of Restricted Stock Agreement to be used in connection with issuance of restricted stock 10-K 10.15 May 23, 2007
under the Registrant’s 2005 Stock Incentive Plan
10.12* Form of Notice of Grant of Restricted Stock to be used in connection with issuance of restricted 10-K 10.16 May 23, 2007
stock under the Registrant’s 2005 Stock Incentive Plan
10.13* Form of Notice of Grant of Stock Option to be used in connection with grants of stock options 10-K 10.18 May 23, 2007
under the Registrant’s 2005 Stock Incentive Plan
10.14* Form of Restricted Stock Agreement to be used in connection with issuance of restricted stock Filed herewith
under the Registrant’s 2008 Omnibus Incentive Plan
10.15* Form of Notice of Grant of Restricted Stock to be used in connection with issuance of restricted Filed herewith
stock under the Registrant’s 2008 Omnibus Incentive Plan
10.16* Form of Notice of Grant of Stock Option to be used in connection with grants of stock options Filed herewith
under the Registrant’s 2008 Omnibus Incentive Plan

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10.17* Form of Indemnification Agreement between the Registrant and each non-employee director 10-K 10.11 March 15, 2004
10.18* Employment Agreement, effective as of March 15, 2005, by and between the Registrant and John 8-K 99.3 April 7, 2005
P. Gomez
10.19* Employment Agreement between the Registrant and R. Andrew Eckert dated as of October 24, 8-K 10.2 October 21, 2005
2005
10.20* Agreement re Specified Acts between the Registrant and R. Andrew Eckert dated as of October 8-K 10.3 October 21, 2005
24, 2005
10.21* February 7, 2008 Amendment No. 1 to Employment Agreement between the Registrant and R. 10-Q 10.2 May 12, 2008
Andrew Eckert dated as of October 24, 2005
10.22* Employment Agreement between the Registrant and John E. Deady dated December 22, 2005 10-K 10.31(1) March 7, 2006
10.23* Agreement re Specified Acts between the Registrant and John E. Deady dated December 22, 2005 10-K 10.31(1) March 7, 2006
10.24* February 7, 2008 Amendment No. 1 to Employment Agreement between the Registrant and John 10-Q 10.3 May 12, 2008
E. Deady dated December 22, 2005
10.25* Severance Agreement dated July 31, 2006 between the Registrant and Robert J. Colletti 8-K 10.1 August 4, 2006
10.26* Employment Offer Letter with Joseph C. Petro, dated February 8, 2007 10-Q 10.1 August 8, 2007
10.27* 2007 Incentive Compensation Plan for Specified Officers 10-Q 10.1 November 8, 2007
10.28 Credit Agreement, dated August 26, 2008, by and among the Registrant, certain lenders and 10-Q 10.1 November 10, 2008
Wachovia Bank, National Association, as Administrative Agent
21 Subsidiaries of the Registrant Filed herewith
23 Consent of PricewaterhouseCoopers LLP Filed herewith
31.1 Certification of R. Andrew Eckert Filed herewith
31.2 Certification of W. David Morgan Filed herewith
32.1 Certification Pursuant to 18 U.S.C. Section 1350 Filed herewith
32.2 Certification Pursuant to 18 U.S.C. Section 1350 Filed herewith

(1) The Registrant has requested confidential treatment with respect to certain portions of this exhibit. Such portions have been omitted from
this exhibit and have been filed separately with the United States Securities and Exchange Commission
* Indicates a management contract or compensatory plan or arrangement

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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

S ignature Title Date

/s/ R. Andrew Eckert President, Chief Executive Officer and Director February 24, 2009
R. Andrew Eckert (Principal Executive Officer)

/s/ W. David Morgan Interim Chief Financial Officer February 24, 2009
W. David Morgan (Principal Financial and Accounting Officer)

/s/ Dan L. Crippen Director February 24, 2009


Dan L. Crippen

/s/ John T. Casey Director February 24, 2009


John T. Casey

/s/ Eugene V. Fife Director February 24, 2009


Eugene V. Fife

/s/ Edward A. Kangas Director February 24, 2009


Edward A. Kangas

/s/ Craig Macnab Director February 24, 2009


Craig Macnab

/s/ Philip M. Pead Director February 24, 2009


Philip M. Pead

/s/ Jay B. Pieper Director February 24, 2009


Jay B. Pieper

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Exhibit 2.5

Execution Version

AGREEMENT AND PLAN OF MERGER

among

PREMISE CORPORATION,

THE STOCKHOLDER SIGNATORIES,

THE STOCKHOLDERS’ REPRESENTATIVE,

PANTHER ACQUISITION CORPORATION

and

ECLIPSYS CORPORATION

DATED AS OF DECEMBER 30, 2008


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TABLE OF CONTENTS

Page
ARTICLE I DEFINITIONS 1

ARTICLE II THE MERGER 17


2.1 The Merger 17
2.2 Closing; Effective Time 17
2.3 Effects of the Merger 18
2.4 Certificate of Incorporation and Bylaws 18
2.5 Directors; Officers 18
2.6 Subsequent Actions 18
2.7 Effect of Merger on the Capital Stock of Premise 19
2.8 Dissenting Shares 20
2.9 Payment for Shares, Company Options and Company Warrants 20
2.10 Calculation of Closing Date Net Working Capital, Closing Payment and Final Adjustments 25
2.11 Dispute Resolution of Calculation of Net Working Capital, the Closing Date Cash or the Closing Date Debt 27
2.12 Approval 28

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE MAJOR STOCKHOLDERS 28


3.1 Ownership of the Shares, Company Options and Company Warrants 28
3.2 Authorization, Validity and Effect of Agreements 28
3.3 No Violations; Consents 29
3.4 Related Party Transactions 29
3.5 No Brokers 30
3.6 Disclosure 30

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PREMISE 31


4.1 Premise Existence; Good Standing 31
4.2 Subsidiaries 31
4.3 Capitalization 31
4.4 Material Contracts; No Violation 32
4.5 Financial Statements; No Undisclosed Liabilities 35
4.6 Authority; No Violations; Consents 36
4.7 Compliance; Permits; Litigation 37
4.8 Absence of Certain Changes 39
4.9 Taxes 40
4.10 Certain Employee Plans 42
4.11 Labor Matters 44
4.12 Restrictions on Business Activities 45
4.13 Real Property 46
4.14 Intellectual Property 46
4.15 Other Assets 53

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4.16 Environmental Matters 54


4.17 Insurance 54
4.18 Warranties 55
4.19 Customers; Suppliers 56
4.20 Accounts Receivable 57
4.21 Accounts Payable 57
4.22 Bank Accounts 58
4.23 No Brokers 58
4.24 Disclosure 58

ARTICLE V REPRESENTATIONS AND WARRANTIES OF ECLIPSYS AND MERGER SUB 58


5.1 Existence; Good Standing; Corporate Authority 58
5.2 Authorization, Validity, and Effect of Agreements 59
5.3 No Violation 59
5.4 Legal Proceedings; Orders 59
5.5 No Brokers 60
5.6 Funds 60

ARTICLE VI COVENANTS 60
6.1 Conduct of Business 60
6.2 Further Action 63
6.3 Access to Information 65
6.4 Publicity 65
6.5 Expenses 65
6.6 Third-Party Offers 66
6.7 Restrictive Covenants 68
6.8 Directors 70
6.9 Stockholders’ Representative 71
6.10 Employee Matters 73
6.11 Release 74
6.12 Confidentiality 75
6.13 Covenants Regarding Contracts 77
6.14 Stockholder Notices 77
6.15 Indemnification of Directors and Officers 78
6.16 Termination of 401(k) Plan 78
6.17 Amendment to the Premise 2004 Plan 79
6.18 Collection of Grady Receivable 79
6.19 Post-Closing Software Development 79

ARTICLE VII SURVIVAL; INDEMNIFICATION; REMEDIES 82


7.1 Survival of Representations and Warranties and Covenants 82
7.2 Indemnification and Other Rights 82
7.3 Time Limitations 85
7.4 Other Limitations 86
7.5 Procedures Relating to Indemnification Involving Third-Party Claims 89
7.6 Other Claims 91

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7.7 Set-Off 91
7.8 Recovery in the Case of Strict Liability or Negligence 92
7.9 Sole and Exclusive Remedy 92

ARTICLE VIII CONDITIONS 93


8.1 Conditions to Each Party’s Obligation to Effect the Closing 93
8.2 Conditions to Obligations of Eclipsys 94
8.3 Conditions to the Obligations of Premise and the Stockholders 96

ARTICLE IX TERMINATION 97
9.1 Termination by Mutual Consent 97
9.2 Termination by Eclipsys or Premise 97
9.3 Termination by Premise 98
9.4 Termination by Eclipsys 98
9.5 Effect of Termination 99

ARTICLE X TAX MATTERS 100


10.1 Responsibility for Filing Tax Returns 100
10.2 Cooperation on Tax Matters 100
10.3 Tax-Sharing Agreements 101
10.4 Certain Taxes and Fees 101
10.5 Refunds or Credits 101
10.6 Amended Tax Returns 101

ARTICLE XI MISCELLANEOUS 102


11.1 Entire Agreement; Assignment 102
11.2 Validity 102
11.3 Notices 103
11.4 Governing Law 104
11.5 Construction 104
11.6 Counterparts 104
11.7 Parties In Interest 104
11.8 Prior Review and Counsel 104
11.9 Waiver 105
11.10 Amendments 105
11.11 Specific Performance 105
11.12 Cumulative Remedies 105
11.13 Arbitration 105
11.14 Costs and Fees 107
11.15 Counsel to Premise 107
11.16 Disclosure Schedule 107

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EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Escrow Agreement
Exhibit C Form of Paying Agency Agreement
Exhibit D-1 Form of Employment Agreement
Exhibit D-2 Key Employee Details
Exhibit E Form of Legal Opinion
Exhibit F Form of Termination Agreement

SCHEDULES
Schedule 1(a) Key Employees
Schedule 1(b) Severance Obligations
Schedule 1(c) Institutional Major Stockholder Knowledge Group
Schedule 2.9(b)(i) Employee Option Holders
Schedule 2.9(b)(ii) NonEmployee Option Holders
Schedule 2.9(e) General Release
Schedule 2.10 Hypothetical Calculation-Closing Date Net Worth
Schedule 2.10(b) Estimated Closing Date Net Working Capital, Estimated Closing Date Cash and Estimated Closing Date Debt
Schedule 5.10 Premise Broker Fees and Expenses
Schedule 6.10(a) Unused Vacation Benefits
Schedule 6.13 Seller Transaction Expenses to be Paid by Eclipsys at Closing
Schedule 6.16 Company 401(k) Plan Termination Resolution
Schedule 6.17(a) Amendment to Premise 2004 Plan
Schedule 6.19(i) Development Activity Categories and Development Plan
Schedule 6.19(ii) Development Staffing Plan

Disclosure Schedule
Section 3.1 Ownership of the Shares
Section 4.1 Foreign Jurisdictions
Section 4.3(a)(i) Shares, Options and Warrants
Section 4.3(c) Convertible Debt
Section 4.3(d) Breach of Certificate of Incorporation
Section 4.4(a) Material Contracts
Section 4.4(b)(ii) Performance of Material Obligations by Premise
Section 4.4(b)(iii) Performance of Material Obligations by Other Party
Section 4.4(b)(iv) Notice of Alleged Breach
Section 4.4(c) Consummation of Merger
Section 4.5(a) Financial Statements
Section 4.7(b) Permits
Section 4.7(d)(i) Litigation
Section 4.8 Absence of Certain Changes
Section 4.10(a) Company Benefit Plans
Section 4.10(e) Acceleration

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Section 4.10(g) 409A


Section 4.11(b)(i) Employees
Section 4.11(b)(ii) Independent Contractors
Section 4.11(b)(iii) Former Employee Benefits
Section 4.13(a) Leased Real Property
Section 4.14(a)(i) Company Scheduled IP
Section 4.14(a)(vi) Material Information
Section 4.14(b) Company Licensed IP
Section 4.14(c) Material Software and Software Documentation
Section 4.14(e) Software Escrow Contracts
Section 4.14(f)(i) Planned Products
Section 4.14(j) Open Source
Section 4.14(o) Consummation of the Transaction
Section 4.14(m) Software Incorporating Encryption Subroutines
Section 4.15(a) Liens
Section 4.17(a) Insurance
Section 4.17(b)(i) Termination of Insurance Policies
Section 4.17(b)(ii) Retrospective Premium Adjustment
Section 4.17(c) Material Open Claims
Section 4.18(a) Warranty Claims
Section 4.18(b) Documentation
Section 4.18(c)(ii) Customer Cancellations
Section 4.18(d)(ii) Future Services Without Payment
Section 4.18(d)(iii) Specific Results or Outcomes
Section 4.18(d)(v) Delivery Commitments
Section 4.19(a) Customer Contracts for License of Software
Section 4.19(c) Suppliers
Section 4.20 Accounts Receivable
Section 4.21 Accounts Payable
Section 4.22 Bank Accounts

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of December 30, 2008 (this “Agreement”), is entered into among Eclipsys
Corporation, a Delaware corporation (“Eclipsys”), Panther Acquisition Corporation, a Delaware corporation and a wholly owned Subsidiary of
Eclipsys (“Merger Sub”), Premise Corporation, a Delaware corporation registered with the Secretary of State of the State of Connecticut as
Premise Development Corporation (“Premise”), the stockholders of Premise named on the signature page hereto (the “Major Stockholders”)
and Richard Dumler, as the initial representative of the Stockholders contemplated by Section 6.9;

WHEREAS, the Boards of Directors of each of Eclipsys, Premise and Merger Sub have (i) determined that the merger of Merger Sub with
and into Premise (the “Merger”), with Premise surviving the Merger, is advisable and in the best interests of their respective stockholders and
(ii) approved the Merger upon the terms and subject to the conditions set forth in this Agreement and pursuant to the applicable laws of the
State of Delaware; and

WHEREAS, the parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger and
to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing, and the respective representations, warranties, covenants and agreements set
forth herein, and for other good and valuable consideration, intending to be legally bound, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

As used in this Agreement:

“Acceptance Notice” is defined in Section 2.10(c)(ii).

“Accounts Payable” means all accounts payable of Premise.

“Accounts Receivable” means (a) all trade accounts receivable and other rights to payment from customers of Premise, and (b) all other
accounts or notes receivable of Premise, in each case, whether billed or unbilled.

“ADP” is defined in Section 2.9(b).

“Affiliate,” as applied to any Person, means any other Person directly or indirectly controlling, controlled by or under common control
with the first Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled
by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the ownership of voting securities, by Contract or otherwise.
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“Aggregate Exercise Price” means the aggregate exercise price of all outstanding Company Options and Company Warrants.

“Aggregate Liquidation Preference” means an amount equal to the product of the Series B Liquidation Preference multiplied by the
number of shares of Series B Preferred Stock outstanding immediately prior to the Effective Time.

“Aggregate Option Consideration” means the aggregate amount of Option Consideration payable in respect of Company Options
pursuant to Sections 2.7(d) and (f).

“Agreement” is defined in the introductory paragraph.

“BSD” is defined in Section 4.14(j).

“Business” means the business of Premise of developing, marketing, selling and licensing software for patient flow and resource
management, including the Software Products, providing certain related support and services and any incidental, related or ancillary
businesses as currently conducted as well as the planned products and services of Premise set forth on Section 4.14(f)(i) of the Disclosure
Schedule as currently designed and intended to be implemented, marketed and used.

“Business Day” means any day other than a Saturday, Sunday or day on which banks in the State of New York are authorized or required
to close or the national securities exchanges in the United States are closed.

“Capital Stock” means common stock and preferred stock, partnership interests, profits interests, limited liability company interests or
other equity, equity equivalent or ownership interests entitling the holder thereof to vote with respect to matters involving the issuer thereof,
or to share in its profits, or to share in its distributions upon its liquidation, or the sale or transfer of its assets, and any securities exercisable,
or exchangeable for, or convertible into, such capital stock.

“Capitalization Update” is defined in Section 6.2(c)(ii).

“Certificate of Merger” is defined in Section 2.2(b).

“Certificates” is defined in Section 2.9(d).

“Change Notice” is defined in Section 6.19(c).

“Claimed Amount” is defined in Section 2.9(c).

“Claims” is defined in Section 6.11(a).

“Closing” is defined in Section 2.2(a).

“Closing Date” is defined in Section 2.2(a).

“Closing Payment” is defined in Section 2.9(a)(iii).

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“Code” means the Internal Revenue Code of 1986, as amended (or any successor thereto).

“Company 401(k) Plan” is defined in Section 6.16.

“Company Benefit Plans” means each of the following which is sponsored, maintained, contributed to or required to be contributed to
by Premise for the benefit of the current or former employees (including for such purposes persons filling a similar function), officers or
directors of Premise, has been so sponsored, maintained, contributed to or required to be contributed to by Premise prior to the Closing Date,
or with respect to which Premise has any liability (contingent or otherwise): (i) each “employee benefit plan,” as such term is defined in
Section 3(3) of ERISA (including, but not limited to, employee benefit plans, such as foreign plans, which are not subject to the provisions of
ERISA), and (ii) each employment agreement, stock purchase, restricted stock or stock option plan, bonus plan or arrangement, incentive
award plan or arrangement, change in control, severance or termination pay plan, policy or agreement, deferred compensation agreement or
arrangement, retiree medical or life insurance or supplemental income arrangement, and each other employee benefit plan, program or practice
which is not described in clause (i) of this sentence.

“Company Capital Stock” means the Company Common Stock, the Series B Preferred Stock, the Company Options and the Company
Warrants.

“Company Closing Payment Option” means each Company Option that is not a Company Deferred Payment Option.

“Company Common Stock” means the common stock, par value $0.001 per share, of Premise.

“Company Deferred Payment Option” is defined in Section 6.17.

“Company IP” means any Company Licensed IP or Company Owned IP, including Company Registered IP.

“Company IP Contract” is defined in Section 4.14(o).

“Company Licensed IP” means any Intellectual Property that is owned by any other Person and that is licensed to, used or distributed
by Premise.

“Company Option” means each option issued by Premise to purchase Company Capital Stock.

“Company Owned IP” means any Intellectual Property owned (in whole or in part) by Premise.

“Company Registered IP” means all Company Owned IP that is the subject of any registrations, or applications or filings for registration
with or by any Governmental Entity, including without limitation the USPTO, foreign patent offices, the United States Copyright Office or any
ICANN domain registrar.

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“Company Stockholder Approval” is defined in Section 4.6(a).

“Company Warrant” means each warrant to purchase Company Capital Stock issued by Premise.

“Confidential Information” means the disclosing party’s confidential and proprietary information, including information concerning the
disclosing party’s business, products (including, with respect to Premise, any source code, object code, functions, current and future design
documents, documentation and associated functions and functionality provided by and related to any Software Product), operations,
employees (including for such purposes persons filling a similar function), customers, suppliers and other technical and nontechnical
information and trade secrets, whenever disclosed, whether before or after the date hereof, and whether prepared by the disclosing party, its
officers, employees, agents or advisors or otherwise and irrespective of the form of communication, and all notes, analyses, compilations,
studies, interpretations or other documents which contain, reflect or are based upon, in whole or in part, the Confidential Information of
another party.

Notwithstanding the foregoing, the term “Confidential Information” shall not include information that (i) is or becomes generally
available to the public other than as a result of a disclosure by the receiving party or its representatives, (ii) was within the receiving party’s
possession prior to its being furnished to it, provided that the source of such information was not known by the receiving party to be bound
by a confidentiality agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, the disclosing party with respect to
such information, (iii) becomes available to the receiving party on a nonconfidential basis from a source other than the disclosing party or any
of its representatives, provided that such source is not bound by a confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, the disclosing party or any other Person with respect to such information, or (iv) is developed by the receiving
party independently of Confidential Information provided by the disclosing party.

“Confidentiality Agreement” means that certain confidentiality agreement, dated November 3, 2008, between Eclipsys and Premise.

“Consent” means any consent, approval, authorization, waiver, permit, grant, franchise, concession, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person, including in each case any Governmental Entity.

“Contract” means any contract, agreement, commitment or other instrument or understanding of any kind, including any amendment,
supplement, modification, extension or renewal in respect of the foregoing, in each case, whether written or oral.

“Core Representations” is defined in Section 7.1(a).

“Core Representations Losses” means all Damages arising from or in connection with any of the matters set forth in Sections 7.2(a)(i)
through (vi) for which the Major Stockholders are obligated to indemnify the Eclipsys Indemnified Parties in excess of the Escrow Fund
pursuant to Section 7.4(d), including the Core Representations.

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“Co-Sale and Transfer Agreement” means that certain Co-Sale and Transfer Agreement, dated April 9, 2007, among Premise and the
Stockholders named therein, as amended.

“Costs and fees” is defined in Section 11.14.

“Covenant Not to Compete” is defined in Section 6.7(b).

“Current Assets” means the aggregate assets of Premise that would be categorized as “current assets” on a balance sheet of Premise
under GAAP, as of 11:59 p.m. on the Closing Date, but excluding (i) all cash and cash equivalents, (ii) deferred costs, including but not limited
to implementation costs, patent costs, commissions and other deferred costs, and (iii) the amount of the Grady Receivable.

“Current Liabilities” means the aggregate liabilities of Premise that would be categorized as “current liabilities” on a balance sheet of
Premise under GAAP, as of 11:59 p.m. on the Closing Date, including any severance payments resulting from the post-Closing termination of
any employee listed on Schedule 1(b) within 120 days after the Closing, but excluding (i) deferred revenues, other than deferred revenues, if
any, representing accruals for customer claims or settlements, (ii) the current portion of any Final Closing Date Debt (or, for purposes of the
Estimated Closing Date Net Working Capital, the Estimated Closing Date Debt), (iii) the current portion of any obligations under capital leases,
to the extent included in Final Closing Date Debt (or, for purposes of the Estimated Closing Date Net Working Capital, the Estimated Closing
Date Debt), (iv) the Payoff Amounts and (v) Seller Transaction Expenses unpaid as of the Closing Date. For the avoidance of doubt, Current
Liabilities shall include any amounts payable to Premise’s employees (including for such purposes persons filling a similar function) as a result
of or in connection with consummation of the Merger, including any bonuses, but except as set forth above shall not include any severance
payments resulting from the post-Closing termination of any employee.

“Customer Documentation” is defined in Section 4.18(b).

“Damages” is defined in Section 7.2(a).

“Debt” means, as to any Person, (i) any indebtedness of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or other similar instruments or letters of credit (or reimbursement agreements in respect thereof) or
banker’s acceptances or representing capitalized lease obligations, (ii) all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person), (iii) all obligations contingent or otherwise, of such Person under
letters of credit or similar facilities, and (iv) to the extent not otherwise included in clauses (i) through (iii), any guaranty by such Person of any
Debt of any other Person.

“Deferred Payment Amount” is defined in Section 2.9(a)(iv).

“Development Activity Category” is defined in Section 6.19.

“Development Managers” is defined in Section 6.19(b)(i).

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“Development Plans” is defined in Section 6.19(b)(ii).

“Disclosure Schedule” is defined in the introductory paragraph of Article III.

“Dissenting Shares” is defined in Section 2.8.

“Dissenting Share Amount” means the sum of: (i) the product of the Per Share Common Consideration and the number of Dissenting
Shares that are shares of Company Common Stock, and (ii) the product of (A) the number of Dissenting Shares that are shares of Series B
Preferred Stock and (B) the sum of the Series B Liquidation Preference, plus the Per Share Common Consideration.

“Eclipsys” is defined in the introductory paragraph of this Agreement.

“Eclipsys Final Calculations” is defined in Section 2.10(c)(i).

“Eclipsys Indemnified Parties” is defined in Section 7.2(a).

“Effective Time” is defined in Section 2.2(c).

“Effective Time Company Holder” means any holder of record of any Company Capital Stock immediately prior to the Effective Time.

“Emerson Software Development Bonus” means a cash bonus payable to William Emerson in an amount not to exceed $25,000 from the
Stockholders’ Fund. Such bonus will be payable on the terms and conditions set forth in that certain letter agreement, among Premise, the
Stockholders’ Representative and William Emerson, dated December 30 2008.

“Employee Option Holders” is defined in Section 2.9(b).

“Employment Agreements” is defined in Section 8.2(j).

“Environmental Laws” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq., the Resource Conservation and Recovery Act,
42 U.S.C. § 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. § 136 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. § 1251 et
seq., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq., the Occupational Safety and Health Act, 29 U.S.C. § 641 et seq., and the Hazardous
Materials Transportation Act, 49 U.S.C. § 1801 et seq., as any of the above statutes have been or may be amended from time to time, all rules
and regulations promulgated pursuant to any of the above statutes, and any other Legal Requirements related to or governing Environmental
Matters, as the same have been or may be amended from time to time, including any common law cause of action providing any right or
remedy with respect to Environmental Matters, and all applicable Orders, of any Governmental Entity relating to Environmental Matters.

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“Environmental Matters” means all matters involving the prevention of or response to pollution, the handling or management of
Hazardous Materials, the regulation of wetlands and other natural resources, and the protection of the environment, noise, human health and
occupational health and safety.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended (or any successor thereto).

“ERISA Affiliate” means any trade or business, whether or not incorporated, under common control with Premise and that, together
with Premise, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

“Escrow Agent” means U.S. Bank National Association, or such other escrow agent selected by Eclipsys and Premise, or after the
Closing, Eclipsys and the Stockholders’ Representative.

“Escrow Agreement” means the Escrow Agreement, among Eclipsys, the Stockholders’ Representative and the Escrow Agent, to be
entered into concurrently with the Closing, substantially in the form attached hereto as Exhibit B, relating to the escrow of the Holdback
Amount.

“Escrow Amount” means $3,850,000 in cash.

“Escrow Fund” is defined in Section 2.9(c).

“Escrow Merger Consideration” means any remaining portion of the Escrow Fund not subject to claims and therefore released by the
Escrow Agent to the Effective Time Company Holders as provided by this Agreement and the Escrow Agreement.

“Estimated Closing Date Cash” means Premise’s good faith estimate of the Final Closing Date Cash determined pursuant to
Section 2.10(a).

“Estimated Closing Date Debt” means Premise’s good faith estimate of the Final Closing Date Debt determined pursuant to
Section 2.10(a).

“Estimated Closing Date Net Working Capital” means Premise’s good faith estimate of the Final Closing Date Net Working Capital
determined pursuant to Section 2.10(a).

“Estimated Closing Date Net Working Capital Adjustment” is the amount equal to the Estimated Closing Date Net Working Capital
less the Minimum Net Working Capital. For the avoidance of doubt, if the Estimated Closing Date Net Working Capital is greater than the
Minimum Net Working Capital, there shall be an increase in the Estimated Purchase Price in respect thereof, and if the Estimated Closing Date
Net Working Capital is less than the Minimum Net Working Capital, there shall be a decrease in the Estimated Purchase Price in respect
thereof.

“Estimated Purchase Price” means an amount equal to (i) $38,500,000, less (ii) the Estimated Closing Date Debt, plus (iii) the Estimated
Closing Date Cash, plus (iv) the Estimated Closing Date Net Working Capital Adjustment, less (v) the Seller Transaction Expenses, to the
extent not paid at or before the Closing.

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“Excess Hartford Consulting Services” means the value of all consulting services provided to Hartford Hospital under the Hartford
Addendum that relate to Performance Check-up Patient Flow Optimization, in excess of $25,000, but the value of the Excess Harford Consulting
Services shall not exceed $50,000.

“Excess Hartford Project Hours” means the number of project hours to install the EVS/PSA Dashboard and Transport Dashboard
applications at Hartford Hospital under the Hartford Addendum in excess of 1,000 project hours, but the Excess Harford Project Hours shall
not exceed 2,000 project hours.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Final Closing Date Cash” means the amount of cash and cash equivalents of Premise, as of 11:59 p.m. on the Closing Date, but shall
not be reduced by the Payoff Amounts, to the extent such payments are paid from the cash of Premise.

“Final Closing Date Debt” means all Debt of Premise, as of 11:59 p.m. on the Closing Date, including (i) capital lease obligations and
(ii) the Payoff Amounts whether or not paid as of such date and time.

“Final Closing Date Net Working Capital” means the Current Assets less the Current Liabilities determined in accordance with Section
2.10.

“Final Closing Date Net Working Capital Adjustment” is the amount equal to the Final Closing Date Net Working Capital less the
Minimum Net Working Capital. For the avoidance of doubt, if the Final Closing Date Net Working Capital is greater than the Minimum Net
Working Capital, there shall be an increase in the Purchase Price in respect thereof, and if the Final Closing Date Net Working Capital is less
than the Minimum Net Working Capital, there shall be a decrease in the Purchase Price in respect thereof.

“Financial Statements” is defined in Section 4.5(a).

“Fraud” means fraud or intentional misrepresentation or omission.

“GAAP” means United States generally accepted accounting principles.

“Governmental Entity” means any foreign, domestic, federal, territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self regulatory organization, commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing which has or claims to have
competent jurisdiction over the relevant Persons or its business, property, assets or operations.

“GPL” is defined in Section 4.14(j).

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“Grady” means Grady Health System.

“Grady Collection Date” is defined in Section 6.18(b).

“Grady Receivable” means the amount owed to Premise by Grady under the Software License and Services Agreement, dated
November 9, 2005, as set forth on Section 4.20 of the Disclosure Schedule.

“Gravina Software Development Bonus” means a cash bonus payable to Craig Gravina in an amount not to exceed $100,000, from the
Stockholders’ Fund, if any funds are paid from the Software Development Escrow Fund into such fund. Such bonus will be payable on the
terms and conditions set forth in that certain letter agreement, among Premise, the Stockholders’ Representative and Craig Gravina, dated
December 30, 2008, and will be based on and in proportion to the achievement of Premise of the Development Plans consistent with the
Staffing Plan.
“Hartford Addendum” means the 2nd Addendum entered into by Premise and Hartford Hospital on December 2, 2008, as an addendum to
the Proposal to Implement an EVA/PSA Dashboard and the Transport Dashboard Agreement, dated January 18, 2005.

“Hazardous Materials” means any substance or material that is defined under the Environmental Laws as a “hazardous substance,”
“regulated substance,” “pollutant,” “contaminant,” “hazardous waste,” “extremely hazardous substance,” “toxic substance” or “hazardous
material,” or that is otherwise defined in or regulated under the Environmental Laws, including, without limitation, petroleum, asbestos-
containing materials, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials and radon.

“Holdback Amount” means an amount equal to the sum of the Escrow Amount, the Stockholders’ Amount, the True-Up Reserve
Amount and the Software Development Escrow Amount.

“Holdback Termination Date” means the date that is 16 months after the Closing Date. For purposes of illustration only, if the Closing
Date is December 31, 2008, the Holdback Termination Date would be April 30, 2010.

“Institutional Major Stockholders” means Aetna Ventures, LLC, Inflection Point Ventures II, L.P., Milestone Venture Partners III LP
and Connecticut Innovations, Incorporated.

“Instruments” means Option Instruments or Warrant Instruments, as applicable.

“Insurance Policies” is defined in Section 4.17(a).

“Intellectual Property” means any patent, patent application, trademark (whether registered or unregistered), trademark application,
trade name, fictitious business name, service mark (whether registered or unregistered), service mark application, domain name, copyright
(whether registered or unregistered), copyright application, mask work, mask work application, trade secret, know-how, customer list,
franchise, system, Software, including, without limitation, Software development processes, practices, methods and policies recorded in
permanent form, relating thereto, invention, work of authorship, design, blueprint, engineering drawing, proprietary product, technology or
other intellectual property right.

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“Interim Financial Statements” is defined in Section 4.5(a).

“Investor Rights Agreement” means that certain Investor Rights Agreement, dated April 9, 2007, among Premise and the Stockholders
named therein, as amended.

“Key Employees” means the employees of Premise listed on Schedule 1(a).

“Knowledge of Premise” means the actual knowledge of Eric Rosow, Craig Gravina, John Hannon, Jim Maher, Joe Adam or Chris
Aulbach or any current director of Premise. In the case of the officers of Premise, actual knowledge of any matter shall be deemed to include
such knowledge as such person could have obtained after making reasonable inquiry and investigation of such matter, including reasonable
consultation with subordinates of the officers as to whom such officers reasonably believe would have actual knowledge of the matter
represented.

“Knowledge of a Major Stockholder” means, (i) if such Major Stockholder is an individual, the actual knowledge of such Major
Stockholder and, (ii) if such Major Stockholder is a corporation, limited liability company or a partnership, the actual knowledge of the persons
set forth on Schedule 1(c) next to the name of such Major Stockholder thereon, who such Major Stockholder represents is a director of Premise
or an observer to meetings of the Board of Directors of Premise.

“Lease” means any lease or sublease as lessee or lessor of, or option, occupancy or space agreement relating to, real estate used, useful
or held by Premise.

“Leased Real Property” is defined in Section 4.13(a).

“Legal Requirement” means any federal, state, local, municipal, foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, rule, statute or treaty, including any interpretation thereof by any
Governmental Entity.

“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether
known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured,
joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, whether or not the same is
required to be accrued on the financial statements of such Person and whether or not the same is disclosed on any schedule to this
Agreement.

“License-In Agreement” is defined in Section 4.14(b).

“Lien” means any lien (including judgment and mechanics’ liens, regardless of whether liquidated), mortgage, assessment, security
interest, easement, claim, pledge, trust (constructive or otherwise), deed of trust, option or other charge, title defect or objection, encumbrance,
restriction or any other Contract having the same effect as any of the foregoing.

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“Major Stockholders” is defined in the introductory paragraph of this Agreement.

“Material Adverse Effect” means one or more changes, events, occurrences, conditions or circumstances (whether or not covered by
insurance) which, individually or in the aggregate, result in a material adverse effect on or change in (i) the business, operations, assets,
Liabilities, condition (financial or otherwise), prospects or results of operations of Premise or (ii) the ability of Premise and the Stockholders to
timely (A) perform its or their obligations hereunder or (B) consummate the transactions contemplated in this Agreement and the other
Transaction Documents; provided, however, a material adverse effect shall not include any event, circumstance, change or effect (x) resulting
from conditions in the United States economy or securities markets in general, provided, that such events, circumstances, changes or effects
do not materially and disproportionately impact Premise, compared to other similarly situated companies, or (y) directly resulting from the
public announcement of the Merger.

“Material Contracts” is defined in Section 4.4(a).

“Merger” is defined in the recitals.

“Merger Consideration” means the cash payable to Effective Time Company Holders pursuant to Section 2.7 of this Agreement.

“Merger Sub” is defined in the introductory paragraph of this Agreement.

“Minimum Net Working Capital” means $1,085,000.

“Net Grady Collection” is defined in Section 6.18(b).

“NonEmployee Option Holders” is defined in Section 2.9(b).

“Objection Notice” is defined in Section 2.10(c)(ii).

“Off-the-Shelf Software” is defined in Section 4.14(b).

“Option Consideration” is defined in Section 2.7(d)(i).

“Option Holders” means holders of Company Options as of the Effective Time.

“Option Instruments” means any instrument representing Company Options.

“Order” means any award, decision, injunction, judgment, decree, stipulation, order, ruling, subpoena or verdict entered, issued, made or
rendered by any court, administrative agency or other Governmental Entity or by any arbitrator.

“Participating Shares” means the sum of (i) the number of shares of Series B Preferred Stock and Company Common Stock outstanding
immediately prior to the Effective Time, (ii) the number of shares of Company Common Stock and Series B Preferred Stock for which Company
Warrants are exercisable immediately prior to the Effective Time and (iii) the number of shares of Company Common Stock for which all
Company Options are exercisable immediately prior to the Effective Time, whether a Company Closing Payment Option or a Company Deferred
Payment Option.

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“Paying Agency Agreement” means the Cash Exchange Agent Agreement, between Eclipsys and the Paying Agent, to be entered into
concurrently with the Closing, substantially in the form attached hereto as Exhibit C, relating to the distribution of the Closing Payment and
the Deferred Payment Amount.

“Paying Agent” means U.S. Bank National Association, or such other paying agent selected by Eclipsys and Premise.

“Payoff Amounts” is defined in Section 6.13(b).

“Per Share Common Consideration” means the quotient obtained by dividing (i) the sum of the Purchase Price, plus the Aggregate
Exercise Price, less the Holdback Amount, less the Aggregate Liquidation Preference, by (ii) the Participating Shares.

“Per Share Escrow Amount” means the quotient obtained by dividing the Escrow Merger Consideration by the Participating Shares.

“Performance Plans” is defined in Section 6.19(a).

“Permits” means all licenses, permits, easements, variances, exemptions, Consents, certificates, orders, approvals and other
authorizations required by applicable Legal Requirements in connection with the Business.

“Permitted Liens” means (i) Liens for utilities and current taxes that are not yet due and payable or that may thereafter be paid without
penalty in the ordinary course of business consistent with past practices, (ii) mechanics’, carriers’, workers’, repairers’, materialmen’s,
warehousemen’s, lessor’s, landlord’s and other similar Liens arising or incurred in the ordinary course of business with respect to which the
underlying obligations are not yet due and payable and which do not exceed $50,000 in the aggregate, (iii) Liens arising under original
purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business and
(iv) minor irregularities and defects of title which do not materially interfere with the Business or impair the ownership, use or operation of the
assets to which they relate, or the transfer thereof.

“Person” means any individual, corporation, limited liability company, partnership, trust, joint venture, association, organization or other
entity or group (which term shall include a “group” as such term is defined in Section 13(d)(3) of the Exchange Act) or Governmental Entity.

“POR” is defined in Section 6.19(a).

“Portfolio Company” of any Institutional Major Stockholder, means any entity with an operating business in which entity such
Institutional Major Stockholder or any of its Affiliates owns any capital stock, convertible equity, or other equity or debt interest, excluding
any entity that is a majority-owned direct or indirect subsidiary of such Institutional Major Stockholder.

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“Precipitating Cause” is defined in Section 6.19(c).

“Premise” is defined in the introductory paragraph of this Agreement, and unless the context otherwise requires, after the Effective Time
shall mean the Surviving Corporation.

“Premise 2004 Plan” means the 2004 Company Stock Option/Stock Issuance Plan of Premise.

“Premise Certificate of Incorporation” means the Second Amended and Restated Certificate of Incorporation of Premise, as amended
and in effect on the date hereof.

“Premise Indemnified Parties” is defined in Section 7.2(b).

“Premise Software Development Organization” is defined in Section 6.19(a).

“Privacy Regulations” is defined in Section 4.14(q).

“Pro Rata Portion” means with respect to each Effective Time Company Holder the quotient obtained by dividing (A) the sum of the
number of shares of Series B Preferred Stock and shares of Company Common Stock held by such Effective Time Company Holder immediately
prior to the Effective Time, if any, and the number of shares of Series B Preferred Stock and shares of Common Stock for which Company
Options and Company Warrants held by such Effective Time Company Holder immediately prior to the Effective Time, if any, were exercisable,
by (B) the Participating Shares.

“Purchase Price” means an amount equal to (i) $38,500,000, less (ii) the Final Closing Date Debt, plus (iii) the Final Closing Date Cash,
plus (iv) the Final Closing Date Net Working Capital Adjustment, less (v) the Seller Transaction Expenses, to the extent not paid at or before
the Closing.

“Put Agreement” means that certain Put Agreement, dated April 9, 2007, among Premise and the Stockholders named therein, as
amended.

“Registered Intellectual Property” means any Intellectual Property that is the subject of any registrations, or applications or filings for
registration with or by any Governmental Entity, including without limitation the USPTO, foreign patent offices or the United States Copyright
Office.

“Released Parties” is defined in Section 6.11(a).

“Restricted Employees” is defined in Section 6.7(d)(i).

“Restrictive Covenants” is defined in Section 6.7(e).

“Restrictive Period” is defined in Section 6.7(b).

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“Scheduled Development End Date” means the earlier of (i) 16 months after the Effective Date, (ii) completion in all material respects of
all Performance Requirements and (iii) the occurrence of a payment event as described in Section 6.19(b)(iv) or (vi).

“Seller Transaction Expenses” means all costs and expenses (including fees of attorneys, accountants and brokers or finders) of
Premise incurred or payable in connection with this Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby, including all amounts owed to the brokers disclosed in Section 4.23, or any other broker, finder or similar agent employed
by or acting on behalf of Premise, or any of its Affiliates or agents (to the extent Premise is liable therefor) in connection with this Agreement
or any other Transaction Documents, or the transactions contemplated hereby or thereby.

“Series B Liquidation Preference” is defined in Section 2.7(c)(i).

“Series B Preferred Stock” means the Series B Convertible Preferred Stock of Premise, par value $0.001 per share.

“Shares” means shares of Company Common Stock or Series B Preferred Stock.

“Software” means all of the following used, licensed or sold in the Business, but excluding any Company Licensed IP: (i) computer
programs, including any and all software implementations of algorithms, heuristics, models and methodologies, whether in source code or
object code; and (ii) machine-readable databases and compilations of data.

“Software Development Escrow Amount” means $1,000,000 in cash.

“Software Development Escrow Fund” is defined in Section 2.9(c).

“Software Documentation” means (i) descriptions, schematics, flow charts and other work product used to design, plan, organize and
develop Software, (ii) testing, validation and verification materials relating to Software, (iii) documentation, including user manuals; web
materials; architectural, design, feature and functionality specifications; and training materials, relating to Software, and (iv) performance
metrics, bug and feature lists, build, release and change control manifests recorded in permanent form relating to Software.

“Software Products” means all Software produced by Premise for sale or license to third parties, including, but not limited to Premise Bed
Management, Premise Bed Turnover, Premise Transport, Premise Care Visibility, Premise Performance Reporting and PremiseLive.

“Staffing Plan” is defined in Section 6.19(a).

“Stockholder” means a record owner of Company Common Stock or Series B Preferred Stock.

“Stockholder Agreements” means, collectively, the Investor Rights Agreement, Co-Sale and Transfer Agreement, Voting Agreement
and Put Agreement.

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“Stockholder Fraud” means Fraud by any of the Stockholders, or Fraud by any employee or other representative or agent of Premise
(other than a Stockholder) as to which Premise had Knowledge or any of the Major Stockholders had actual Knowledge.

“Stockholder Notice” is defined in Section 6.14(a).

“Stockholders’ Amount” means $125,000 in cash.

“Stockholders’ Fund” is defined in Section 2.9(c).

“Stockholders’ Representative” is defined in Section 6.9.

“Stockholder Written Consents” means the irrevocable approval of the Merger, this Agreement and the transactions contemplated by
this Agreement, including the matters set forth in Section 6.9, pursuant to Stockholder action by written consent, pursuant to and in
accordance with the applicable provisions of Delaware General Corporation Law and the Premise Certificate of Incorporation and Bylaws of
Premise.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, joint venture or other entity of
which such Person (either alone or through or together with any other Subsidiary), owns, directly or indirectly, securities or other interests
(A) the holders of which are generally entitled to at least 50% of the vote for the election of the board of directors or other similar governing
body of such corporation or other legal entity, or otherwise having the power to direct the business and policies of that Person, or
(B) representing at least 50% of the outstanding Capital Stock of such corporation or other legal entity.

“Superior Proposal” means any unsolicited bona fide binding written proposal by any Person or “group” as described in Section 13(d)
of the Exchange Act (other than Eclipsys or any of its Subsidiaries) to acquire, directly or indirectly, (x) businesses or assets of Premise that
generated 50% or more of Premise’s consolidated net revenue or earnings for the preceding twelve months, or (y) more than 50% of the voting
power of Premise’s Capital Stock, in each case whether by way of merger, stock purchase, amalgamation, share exchange, tender offer,
exchange offer, recapitalization, consolidation, sale of assets or otherwise, that the Board of Directors of Premise determines in good faith
(after consultation with outside counsel and its financial advisors), taking into account all legal, financial, regulatory and other aspects of the
proposal and the Person or group making the proposal, is (A) if consummated in accordance with its terms, more favorable to the Stockholders
from a financial point of view than the transactions contemplated by this Agreement (including any adjustment to the terms and conditions
proposed by Eclipsys in response to such proposal or otherwise), (B) not subject to any financing condition or, if financing is required, such
financing is reasonably likely to be obtained, and (C) reasonably likely of being completed on the terms proposed on a timely basis.

“Supplemental Costs Notice” is defined in Section 6.19(d).

“Supplemental Development Costs” is defined in Section 6.19(d).

“Survival Period” is defined in Section 7.1(a).

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“Surviving Corporation” is defined in Section 2.1.

“Tax” means (A) all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts with respect thereto payable to any Governmental Entity, (B) any Liability for payment of
amounts described in clause (A) whether as a result of transferee Liability, joint and several liability for being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through operation of law, and (C) any Liability for the payment of
amounts described in clauses (A) or (B) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied
Contract to indemnify any other Person.

“Tax Return” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.

“Termination Date” is defined in Section 9.3(a)(i).

“Third-Party Acquisition” means (i) the acquisition by a Person, other than Eclipsys and its Affiliates, of any of the Capital Stock or
assets or property of Premise, or any interest therein, whether by issuance, or sale or other disposition of Capital Stock, sale, lease, license or
other disposition of assets, merger or otherwise, other than (A) shares issued upon exercise of Company Options or Company Warrants
outstanding on the date hereof or conversion of Series B Preferred Stock, outstanding on the date hereof, in each case, pursuant to the terms
thereof, or (B) sales or licenses of products to customers in the ordinary course of business consistent with past practice, or (ii) any other
transaction that would interfere with or delay the Closing or the ability of Premise to operate the Business and control its assets substantially
as operated and controlled by Premise on the date hereof.

“Third-Party Claim” is defined in Section 7.5(a).

“Threatened” means a claim, proceeding, dispute or other matter with respect to which any demand or statement has been made, or any
other notice has been given, that would lead a prudent person to conclude that such a claim, proceeding, dispute or other matter is reasonably
likely to be asserted, commenced or otherwise pursued, whether in writing or orally.

“Transaction Documents” means, collectively, this Agreement, the Escrow Agreement, the Employment Agreements and the letter of
transmittal of each Stockholder, and all certificates contemplated to be delivered hereunder.

“True-Up Reserve Amount” means $150,000 in cash.

“True-Up Reserve Fund” is defined in Section 2.9(c).

“Unrelated Accounting Firm” is defined in Section 2.11.

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“USPTO” is defined in Section 4.14(a).

“Voting Agreement” means that certain Voting Agreement, dated April 9 2007, among Premise and the Stockholders named therein, as
amended.

“WARN Act” is defined in Section 6.10(c).

“Warrant Instruments” is defined in Section 2.9(d).

“Warranty Claim” means any claim based upon any theory of product liability, strict liability, negligence, misrepresentation, product
defect, breach of warranty (express or implied) and any other similar claims that relates to the products and services of Premise, including the
Software Products.

“Year-End Financial Statements” is defined in Section 4.5(a).

ARTICLE II
THE MERGER

2.1 The Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time and in accordance with the laws
of the State of Delaware, Merger Sub shall be merged with and into Premise pursuant to which (a) the separate corporate existence of Merger
Sub shall cease, (b) Premise shall be the surviving corporation in the Merger (the “Surviving Corporation”) and shall continue its existence
under the laws of the State of Delaware as a wholly owned Subsidiary of Eclipsys, (c) all of the properties, rights, privileges, powers and
franchises of Premise shall vest in the Surviving Corporation, and all of the debts, liabilities, obligations and duties of Premise shall become the
debts, liabilities, obligations and duties of the Surviving Corporation; and (d) all of the properties, rights, privileges, powers and franchises of
Merger Sub shall vest in the Surviving Corporation, and all of the debts, liabilities, obligations and duties of Merger Sub shall become the
debts, liabilities, obligations and duties of the Surviving Corporation.

2.2 Closing; Effective Time


(a) The closing of the Merger (the “Closing”) shall take place at the offices of Gibson, Dunn & Crutcher LLP, in Irvine, CA, at 10:00
A.M., Pacific time, on the second Business Day following the satisfaction or, to the extent permitted by applicable law, waiver of all
conditions to the obligations of the parties set forth in Article VIII (other than such conditions as may, by their terms, only be satisfied at
the Closing or on the Closing Date, subject to such satisfaction or waiver), or at such other place or at such other time or on such other
date as Eclipsys and Premise may agree in writing. The day on which the Closing takes place is referred to as the “Closing Date.”
Subject to the provisions of Article IX, failure to consummate the Merger on the date and time and at the place determined pursuant to
this Section 2.2 shall not in and of itself result in the termination of this Agreement and shall not relieve any party of any obligation
under this Agreement.
(b) As soon as practicable on the Closing Date, and immediately prior to the Closing, the parties shall cause a certificate of merger
substantially in the form attached as Exhibit A (the “Certificate of Merger”) to be executed and filed with the Secretary of State of the
State of Delaware.

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(c) The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of
Delaware or at such other time as Eclipsys and Premise shall agree and as shall be specified in the Certificate of Merger. The date and
time that the Merger shall become effective is herein referred to as the “Effective Time.”

2.3 Effects of the Merger.


(a) The Merger shall have the effects provided for herein and in the applicable provisions of the Delaware General Corporation Law.
(b) At the Effective Time, each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one (1) validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares of common stock of Merger Sub
shall thereafter evidence ownership of such shares of common stock of the Surviving Corporation.

2.4 Certificate of Incorporation and Bylaws. From and after the Effective Time, (a) the Premise Certificate of Incorporation, as in effect
immediately prior to the Effective Time, as amended as set forth in the Certificate of Merger, shall be the certificate of incorporation of the
Surviving Corporation, until amended in accordance with the provisions thereof and applicable law, and (b) the bylaws of Merger Sub, as in
effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation, until amended in accordance with the
provisions thereof and applicable law.

2.5 Directors; Officers. From and after the Effective Time, (a) the directors of Merger Sub serving immediately prior to the Effective Time
shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be, and (b) the officers of Merger Sub serving immediately prior to the Effective Time shall be the
officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.

2.6 Subsequent Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either Premise or
Merger Sub acquired or to be acquired by the Surviving Corporation as a result of or in connection with the Merger or otherwise to carry out
this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name of and on behalf
of Premise or Merger Sub, as applicable, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and things as such officers or directors may deem necessary or
desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.

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2.7 Effect of Merger on the Capital Stock of Premise.


(a) Notwithstanding anything to the contrary in this Section 2.7, at the Effective Time, by virtue of the Merger and without any
action on the part of Eclipsys, Merger Sub or Premise, each Share that is held by Eclipsys, Premise or any Subsidiary of Eclipsys or
Premise immediately prior to the Effective Time, shall be cancelled and extinguished without any consideration paid therefor or in respect
thereof.
(b) Notwithstanding anything to the contrary in this Section 2.7, at the Effective Time, Dissenting Shares shall be treated in
accordance with Section 2.8.
(c) Subject to Section 2.7(g), at the Effective Time, by virtue of the Merger and without any action on the part of Eclipsys, Merger
Sub, Premise or the Stockholders, each Share that is issued and outstanding immediately prior to the Effective Time (other than any
Dissenting Shares and any Shares cancelled pursuant to Section 2.7(a)) shall be cancelled and extinguished and shall be converted
automatically into the right to receive, subject to the terms and conditions set forth in this Agreement, the following consideration
(without interest):
(i) each share of Series B Preferred Stock shall be converted into the right to receive an amount equal to the sum of (A) $8.16
in cash, plus an amount equal to any accrued and unpaid dividends thereon (the “Series B Liquidation Preference”), (B) the Per
Share Common Consideration, and (C) the Per Share Escrow Amount; and
(ii) each share of Company Common Stock shall be converted into the right to receive an amount equal to the sum of (A) the
Per Share Common Consideration and (B) the Per Share Escrow Amount.
(d) Subject to Section 2.7(g), at the Effective Time, each Company Closing Payment Option then outstanding shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled and converted without exercise only into and, subject to
the terms and conditions set forth in this Agreement, represent only the right to receive, with respect to each share of Company Common
Stock then subject to purchase under such Company Closing Payment Option, an amount equal to the sum of cash equal to (without
interest):
(i) the Per Share Common Consideration less the exercise price per share of such Company Option (such difference, the
“Option Consideration”); and
(ii) the Per Share Escrow Amount.

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(e) Subject to Section 2.7(g), at the Effective Time, each Company Warrant then outstanding shall by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and converted without exercise only into and, subject to the terms and
conditions set forth in this Agreement, represent only the right to receive (without interest), with respect to:
(i) each share of Company Common Stock then subject to purchase under such Company Warrant, an amount equal to the
sum of cash equal to (A) the Per Share Common Consideration less the exercise price per share of such Company Warrant and
(B) the Per Share Escrow Amount; and
(ii) each share of Series B Preferred Stock then subject to purchase under such Company Warrant, an amount equal to the sum
of (A) the sum of the Series B Liquidation Preference and Per Share Common Consideration less the exercise price per share of such
Company Warrant and (B) the Per Share Escrow Amount.
(f) At the Effective Time, each Company Deferred Payment Option then outstanding shall be treated as set forth in Sections 2.9(e)
and 6.17.
(g) All Merger Consideration payable to an Effective Time Company Holder at any time pursuant to the foregoing provisions shall
be aggregated with all other Merger Consideration payable to such Effective Time Company Holder at such time and rounded to the
nearest whole cent. Escrow Merger Consideration and payments out of the Software Development Escrow Fund, if any, shall be paid to
the Effective Time Company Holders in their Pro Rata Portion (rounded to the nearest whole cent), as set forth in the Escrow Agreement.

2.8 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, Shares (other than any Shares to be cancelled
pursuant to Section 2.7(a)) outstanding immediately prior to the Effective Time and held by a Stockholder who has not voted in favor of the
Merger or consented thereto in writing and who has properly demanded appraisal for such Shares in accordance with Section 262 of the
Delaware General Corporation Law (“Dissenting Shares”) shall not be converted into or be exchangeable for the right to receive a portion of
the Merger Consideration unless and until such Stockholder fails to perfect or withdraws or otherwise loses such holder’s right to appraisal
and payment thereunder. If, after the Effective Time, any such Stockholder fails to perfect or withdraws or loses such holder’s right to
appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the
portion of the Merger Consideration, if any, to which such holder is entitled pursuant to Section 2.7(c), without interest. Premise shall give
Eclipsys (a) prompt notice of any demands received by Premise for appraisal of Shares, attempted written withdrawals of such demands, and
any other instruments served pursuant to Delaware law and received by Premise relating to a stockholders’ rights to appraisal with respect to
the Merger, and (b) the opportunity to direct all negotiations and proceedings with respect to any exercise of such appraisal rights. Premise
shall not, except with the prior written consent of Eclipsys, voluntarily make any payment with respect to any demands for payment for Capital
Stock of Premise, offer to settle or settle any such demands or approve any withdrawal of any such demands.

2.9 Payment for Shares, Company Options and Company Warrants.


(a) (i) At or prior to the Effective Time, Eclipsys shall, or shall cause the Surviving Corporation to, make available to the Paying
Agent, for the benefit of the Effective Time Company Holders (other than the holders of Company Options, in their capacity as such), the
Closing Payment.

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(ii) At or prior to the Effective Time, Eclipsys shall, or shall cause the Surviving Corporation to, make available to the Paying
Agent, for the benefit of the holders of the Company Deferred Payment Options, the Deferred Payment Amount.
(iii) The “Closing Payment” shall be an amount equal to (A) the Estimated Purchase Price, less (B) the Holdback Amount, less
(C) the Dissenting Share Amount, less (D) the Aggregate Option Consideration.
(iv) The “Deferred Payment Amount” shall be an amount equal to the aggregate amount of Option Consideration payable in
respect of Company Deferred Payment Options pursuant to Section 2.7(f).
(v) The Closing Payment shall be held by the Paying Agent in accordance with the Paying Agency Agreement for the benefit
of Eclipsys or the Surviving Corporation, as the case may be, pending payment therefor by the Paying Agent to the Effective Time
Company Holders (other than the holders of Company Closing Payment Options, in their capacity as such). The Deferred Payment
Amount shall be held by the Paying Agent in accordance with the Paying Agency Agreement for the benefit of Eclipsys or the
Surviving Corporation, as the case may be, pending payment therefor by the Paying Agent to the holders of Company Deferred
Payment Options. Earnings from any investment of the Closing Payment or the Deferred Payment Amount pursuant to the Paying
Agency Agreement shall be the sole and exclusive property of Eclipsys or the Surviving Corporation, as the case may be, and no
part thereof shall accrue to the benefit of Effective Time Company Holders.
(vi) If any Shares become Dissenting Shares after the payment by Eclipsys or the Surviving Corporation to the Paying Agent
of the Closing Payment, Eclipsys may instruct the Paying Agent to, and the Paying Agent shall promptly upon receipt of such
instruction, remit to Eclipsys the portion of the Closing Payment allocable to such Dissenting Shares.
(b) At or immediately following the Effective Time, Eclipsys shall deposit with the Surviving Corporation the Aggregate Option
Consideration payable in respect of all Company Closing Payment Options and the Surviving Corporation shall, as promptly as
practicable, pay (i) to Automatic Data Processing, Inc. (“ADP”) the Aggregate Option Consideration payable in respect of Company
Closing Payment Options held by each Option Holder listed on Schedule 2.9(b)(i) (the “Employee Option Holders”), and (ii) to each
Option Holder listed on Schedule 2.9(b)(ii) (the “NonEmployee Option Holders”), the Option Consideration payable in respect of each
share of Company Common Stock then subject to purchase under the Company Closing Payment Options of such NonEmployee Option
Holder (net of any applicable tax withholding). The Surviving Corporation shall use all commercially reasonable efforts to cause ADP to
pay, as promptly as practicable, to each Employee Option Holder, the Option Consideration with respect to each share of Company
Common Stock then subject to purchase under the Company Closing Payment Options of such Employee Option Holder (net of
applicable tax withholding).

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(c) At the Closing, Eclipsys shall deposit, or cause to be deposited, the Holdback Amount with the Escrow Agent in four separate
escrow accounts. The Escrow Amount shall be deposited in an account (the “Escrow Fund”), which shall be used to pay Damages, if
any, to the Eclipsys Indemnified Parties. The Stockholders’ Amount shall be deposited in an account (the “Stockholders’ Fund”), which
shall be used to reimburse the Stockholders’ Representative for out-of-pocket costs and expenses incurred in the performance of his or
her duties hereunder, including fees of attorneys and accountants employed by the Stockholders’ Representative necessary to
discharge his or her duties as Stockholders’ Representative, payment of the Emerson Software Development Bonus, if any, and the
Gravina Software Development Bonus, if any, and for other payments on behalf of the Effective Time Company Holders set forth herein.
The True-Up Reserve Amount shall be deposited in an account (the “True-Up Reserve Fund”), which shall be used to pay to Eclipsys
any shortfall if the Estimated Purchase Price exceeds the Purchase Price. The Software Development Escrow Amount shall be deposited
in an account (the “Software Development Escrow Fund”), which shall be used to pay to Eclipsys any amounts pursuant to
Section 6.19. Promptly following the Holdback Termination Date, Eclipsys and the Stockholders’ Representative shall give joint written
instructions to the Escrow Agent to (A) retain any portion of the Escrow Fund subject to good faith pending claims by Eclipsys under
this Agreement or the other Transaction Documents (the “Claimed Amount”) as of such date, and (B) pay any remaining part of the
Escrow Fund to the Effective Time Company Holders according to Section 2.7(g). Each of the Escrow Fund, the Stockholders’ Fund, the
True-Up Reserve Fund and the Software Development Escrow Fund shall be held as a trust fund and shall not be subject to any Lien,
attachment or other judicial process of any creditor of any Person, and shall be held and disbursed solely for the purposes and in
accordance with the terms hereof and of the Escrow Agreement. Any Claimed Amount unpaid at the Holdback Termination Date shall be
paid pursuant to the Escrow Agreement upon a final resolution of the applicable claim. Any amount remaining in the Stockholders’ Fund
or the True-Up Reserve Fund shall be paid in accordance with the Escrow Agreement no later than the final payment out of the Escrow
Fund. Promptly following the Scheduled Development End Date, Eclipsys and the Stockholders’ Representative shall give joint written
instructions to the Escrow Agent to pay any remaining part of the Software Development Escrow Fund to the Effective Time Company
Holders according to Section 2.7(g). Whenever Eclipsys and the Stockholders’ Representative are required to provide joint instructions
to the Escrow Agent under the terms of the Escrow Agreement or this Agreement, such parties shall promptly provide such joint
instructions, unless either party in good faith disputes that the terms and conditions requiring such delivery of such joint instructions
have not been met or disputes the terms of such joint instructions, in which case, such dispute shall be promptly resolved as set forth in
Section 11.13. The interests of the Effective Time Company Holders in the Escrow Fund, the Stockholders’ Fund, the True-Up Reserve
Fund and the Software Development Escrow Fund shall not be assignable or transferable, whether directly, indirectly or by operation of
law, except in the event of death of an Effective Time Company Holder to such Effective Time Company Holder’s estate, personal
representative or heirs by will or the laws of descent and distribution; provided, however, that as a condition to any such transfer the
transferee(s) shall hold such interests subject to the terms and conditions of this Agreement and the Escrow Agreement and the
transferee(s) shall execute and deliver to Eclipsys and the Escrow Agent an agreement in form and substance satisfactory to Eclipsys
agreeing to be bound by the terms and conditions of this Agreement and the Escrow Agreement.

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(d) As promptly as practicable after the Closing Date, Eclipsys or the Surviving Corporation shall cause the Paying Agent to mail to
each Effective Time Company Holder (other than the Option Holders, in their capacity as such) whose Company Capital Stock was
converted into the right to receive the consideration described in Section 2.7: (i) a letter of transmittal in form acceptable to Eclipsys; and
(ii) instructions for surrendering certificates that represented Shares immediately prior to the Effective Time (“Certificates”) and any
instruments representing Company Warrants (“Warrant Instruments”), in exchange for payment therefor (other than holders of
Certificates representing Dissenting Shares). Upon surrender of a Certificate for cancellation to the Paying Agent or such other agent or
agents as may be appointed by Eclipsys, together with such letter of transmittal duly executed and delivered, the holder of such
Certificate shall become entitled to receive in exchange therefor (as promptly as practicable thereafter), the consideration specified in
Section 2.7(c). Upon surrender, such Certificate shall be cancelled. Upon receipt of a duly executed and delivered letter of transmittal by
Eclipsys and any associated Warrant Instrument, the holder of Company Warrants shall become entitled to receive (as promptly as
practicable thereafter) consideration therefor in accordance with Section 2.7(e). No portion of any Merger Consideration shall be paid to
(A) the holder of any Shares or Company Warrants until a letter of transmittal has been validly executed and delivered pursuant hereto,
with all Certificates and related Warrant Instruments, and (B) the holder of any Company Options until a Form W-9 and any other
documentation reasonably requested by Eclipsys or the Paying Agent has been validly executed and delivered by such holder of
Company Options. Payment pursuant to this Section 2.9(d) shall be made by the Paying Agent from the Closing Payment, provided that
if at the time of any payment hereunder, the Final Closing Date Net Working Capital, the Final Closing Date Cash and the Final Closing
Date Debt shall have been determined pursuant to Section 2.10(d), such payment hereunder shall be based on any adjusted amounts
pursuant to the provisions of Section 2.10(d). If payment in respect of any Certificate or Warrant Instrument is to be made to a Person
other than the Person in whose name such Certificate or Warrant Instrument is registered, it shall be a condition of payment that the
Certificate or Warrant Instrument so surrendered shall be properly endorsed or shall otherwise be in proper form for transfer, that the
signatures on such Certificate or Warrant Instrument or any related stock power shall be properly guaranteed by an eligible institution
and that the Person requesting such payment shall have established to the satisfaction of Eclipsys and the Paying Agent that any
transfer and other Taxes required by reason of such payment to a Person other than the registered holder of such Certificate or Warrant
Instrument have been paid or are not applicable. Until surrendered in accordance with the provisions of this Section 2.9, any Certificate
(other than Certificates representing Shares described in Section 2.7(a) and any Dissenting Shares) or Warrant Instrument shall be
deemed, at any time after the Effective Time, to represent only the right to receive (upon execution and delivery as described herein) the
portion of the Merger Consideration payable with respect thereto, without interest, as contemplated herein.
(e) As promptly as practicable after the Closing Date, Eclipsys or the Surviving Corporation shall cause the Paying Agent to mail to
each holder of Company Deferred Payment Options a notice describing the payment terms for such options, including an ability to elect
to execute a general release in the form attached as Schedule 2.9(e), in the event the holder thereof elects to execute and accelerate
payment for such options. If, on any day prior to the 60th day after the Closing Date, the Paying Agent receives a general release from a
holder of Company Deferred Payment Options in the form of Schedule 2.9(e) (which has not been revoked

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by such holder within seven days after the date of such release), the holder of such Company Deferred Payment Options shall become
entitled to receive (as promptly as practicable after such seven day period), the consideration specified in Section 2.7(f) in respect of
such Company Deferred Payment Options (without interest thereon). Payment pursuant to this Section 2.9(e) shall be made by the
Paying Agent from the Deferred Payment Amount. Promptly following the date that is 60 days after the Closing Date (plus any unexpired
revocation period with respect to a general release received prior to such date), Eclipsys shall be entitled to require the Paying Agent to
deliver to it any portion of the Deferred Payment Amount that has not been disbursed to holders of Company Deferred Payment Options.
Promptly following the first anniversary of the Closing Date, the holders of Company Deferred Payment Options that did not provide an
unrevoked general release to the Paying Agent as provided in this Section 2.9(e) shall become entitled to receive from Eclipsys the
consideration specified in Section 2.7(f) in respect of such Company Deferred Payment Options (without interest thereon). The interests
of a holder of Company Deferred Payment Options in any portion of the Deferred Payment Amount payable to such holder shall not be
assignable or transferable, whether directly, indirectly or by operation of law, except in the event of death of such holder to such holder’s
estate, personal representative or heirs by will or the laws of descent and distribution; provided, however, that as a condition to any
such transfer the transferee(s) shall hold such interests subject to the terms and conditions of this Agreement and the Premise 2004 Plan
and the transferee(s) shall execute and deliver to Eclipsys an agreement in form and substance satisfactory to Eclipsys agreeing to be
bound by the terms and conditions of this Agreement and the Premise 2004 Plan.
(f) At the Effective Time, the stock transfer books of Premise shall be closed and there shall thereafter be no further registration of
transfers of any Shares, Company Options or Company Warrants, or any conversion or exercise thereof. If, after the Effective Time, a
Certificate or Instrument (other than a Certificate representing Shares described in Section 2.7(a)) is presented to the Surviving
Corporation, it shall be cancelled and exchanged as provided in this Section 2.9 (subject to Section 2.8 with regard to Dissenting Shares).
(g) All Merger Consideration paid upon conversion of the Company Capital Stock, Company Options and Company Warrants in
accordance with the terms of this Article II, subject to adjustment as set forth in Section 2.10, shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Company Capital Stock, Company Options and Company Warrants. From and after the
Effective Time, the holders of Certificates and Instruments shall cease to have any rights with respect to the Company Capital Stock,
Company Options and Company Warrants represented thereby, except as otherwise provided herein or by applicable law.
(h) If any Certificate (other than a Certificate representing Dissenting Shares) or Instrument shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the holder thereof, and delivery of a duly executed letter of transmittal, in the
case of Shares and Company Warrants, the Surviving Corporation shall pay or cause to be paid in exchange for such lost, stolen or
destroyed Certificate or Instrument the relevant portion of the Merger Consideration payable in respect thereof pursuant to Section 2.7
for the Shares, Company Options or Company Warrants represented thereby; provided, however, that the Surviving Corporation or the
Paying Agent may, in their discretion, require the delivery of a satisfactory indemnity.

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(i) Promptly following the date that is 180 days after the Effective Time, Eclipsys shall be entitled to require the Paying Agent to
deliver to it any funds and other property (including any interest or other income received with respect thereto) that had been made
available to the Paying Agent and that have not been disbursed to Effective Time Company Holders, and any Certificates, Warrant
Instruments or other documents relating to the Merger in its possession, and thereafter such holders shall be entitled to look to Eclipsys
only as general creditors thereof with respect to any portion of the Merger Consideration payable upon due surrender of their
Certificates or Warrant Instruments, without interest. Notwithstanding anything to the contrary in this Section 2.9, to the fullest extent
permitted by Legal Requirements, none of the Paying Agent, Eclipsys or the Surviving Corporation shall be liable to any holder of a
Certificate or Instrument for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat
or similar Legal Requirements.
(j) The amount of the Merger Consideration payable to holders of Shares, the Company Warrants and the Company Options and
any other applicable numbers or amounts shall be adjusted as necessary to reflect appropriately the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of securities convertible into Shares), reorganization, recapitalization,
reclassification or other like change with respect to Company Capital Stock occurring or having a record date on or after the date hereof
and prior to the Effective Time.
(k) Eclipsys, the Surviving Corporation, the Escrow Agent, the Paying Agent and ADP shall be entitled to deduct and withhold
from any consideration payable or otherwise deliverable pursuant to this Agreement or the Escrow Agreement to any holder or former
holder of Company Capital Stock, Company Option or Company Warrant such amounts as may be required to be deducted or withheld
therefrom under the Code, or any provision of state, local or foreign Tax law or under any applicable Legal Requirement. To the extent
that amounts are so deducted or withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the
holders in respect of whom such deduction and withholding were made and shall be duly and timely paid to the proper Governmental
Entity.

2.10 Calculation of Closing Date Net Working Capital, Closing Payment and Final Adjustments.
(a) (i) The Current Assets, the Current Liabilities, the Final Closing Date Net Working Capital, the Estimated Closing Date Net
Working Capital, the Final Closing Date Debt, the Estimated Closing Date Debt, the Final Closing Date Cash and the Estimated Closing
Date Cash shall be calculated, as applicable (A) consistent with the hypothetical calculations set forth in Schedule 2.10; (B) consistent
with the practices and policies of Premise used in preparing the Financial Statements; and (C) with all normal and recurring accounting
entries reflected therein and all errors and omissions corrected.
(ii) Each line item component or subcomponent of the Current Assets, Current Liabilities, the Final Closing Date Debt, the
Estimated Closing Date Debt, the Final Closing Date Cash and the Estimated Closing Date Cash shall be calculated in conformity
with GAAP.

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(iii) For purposes of calculating the Current Assets, the Current Liabilities, the Final Closing Date Net Working Capital, the
Estimated Closing Date Net Working Capital, the Final Closing Date Debt and the Estimated Closing Date Debt, such calculation
shall not take into account the impact of any purchase accounting adjustments relating to Eclipsys’s acquisition of Premise,
including any write-up or write-down of assets or liabilities resulting from such purchase accounting.
(iv) At least two Business Days prior to the Closing Date, Premise shall provide Eclipsys with its good faith estimate of the
Seller Transaction Expenses that are unpaid as of such date.
(b) Prior to the execution of this Agreement, Premise delivered to Eclipsys its good faith calculations of the Estimated Closing Date
Net Working Capital, the Estimated Closing Date Cash and the Estimated Closing Date Debt as set forth on Schedule 2.10(b), and
Eclipsys accepted such calculations. For purposes of calculating the Closing Payment, Estimated Closing Date Net Working Capital,
Estimated Closing Date Cash and Estimated Closing Date Debt shall be as set forth on Schedule 2.10(b).
(c) (i) Within 60 days following the Closing, Eclipsys shall prepare and deliver to the Stockholders’ Representative a balance sheet
of Premise as of the Closing Date showing Eclipsys’ good faith determination of the Final Closing Date Net Working Capital, the Final
Closing Date Cash and the Final Closing Date Debt (the “Eclipsys Final Calculations”).
(ii) On or before the date which is 15 days after the date of Eclipsys’ delivery to the Stockholders’ Representative of the
Eclipsys Final Calculations, the Stockholders’ Representative shall deliver to Eclipsys a notice of objection, stating in reasonable
detail the grounds for such objection and signed by the Stockholders’ Representative (an “Objection Notice”), or a notice of
acceptance signed by the Stockholders’ Representative (an “Acceptance Notice”), with respect to the Eclipsys Final Calculations.
Eclipsys shall provide the Stockholders’ Representative and any accountants and other representatives engaged by the
Stockholders’ Representative, upon reasonable advance notice, access to such books and records of Premise relating to the
Eclipsys Final Calculations as may be reasonably requested by the Stockholders’ Representative.
(iii) The Eclipsys Final Calculations shall be final and binding on the parties if an Acceptance Notice is delivered to Eclipsys
or if no Objection Notice is delivered to Eclipsys with respect to such amounts within the 15-day period required by
Section 2.10(c)(ii). If an Objection Notice is delivered, the potential dispute with respect to the Eclipsys Final Calculations shall be
resolved as set forth in Section 2.11, and the Final Closing Date Net Working Capital, the Final Closing Date Cash or the Final
Closing Date Debt, to the extent in dispute, determined pursuant to such procedures, in addition to the undisputed amounts, shall
be final and binding on the parties.

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(d) Upon determination of the Final Closing Date Net Working Capital, the Final Closing Date Cash and the Final Closing Date Debt
pursuant to Section 2.10(c), Eclipsys shall determine the Purchase Price. If the Purchase Price exceeds the Estimated Purchase Price, then
Eclipsys shall deposit with the Paying Agent an amount in cash equal to the difference (less a ratable portion attributable to any
Dissenting Shares), which the Paying Agent shall distribute to the holders of Participating Shares (other than holders of Dissenting
Shares) in their Pro Rata Portion. If the Purchase Price is less than the Estimated Purchase Price, then the Stockholders’ Representative
shall provide written instructions to the Escrow Agent to pay that shortfall in cash to Eclipsys out of the True-Up Reserve Fund, and if
the shortfall exceeds the amount in the True-Up Reserve Fund, such excess shall be paid to Eclipsys from the Escrow Fund. Payments
pursuant to this Section 2.10(d) shall be made in cash or by wire transfer of immediately available funds within five Business Days after,
as applicable, the delivery of the Acceptance Notice, the expiration of the 15-day period, if no Objection Notice is delivered, the
agreement of Eclipsys and the Stockholders’ Representative after consultation, or the issuance by the Unrelated Accounting Firm of its
final report pursuant to Section 2.11. Notwithstanding anything contained herein to the contrary, if the Purchase Price exceeds the
Estimated Purchase Price, but in an amount less than $50,000, then Eclipsys shall deposit with the Escrow Agent, for addition to the
Escrow Fund, such difference. Further, if the Purchase Price exceeds the Estimated Purchase Price by $50,000 or more, but the Paying
Agent has paid to Effective Time Company Holders more than 50% of the Closing Payment, then Eclipsys may, upon notice to the
Paying Agent, make such payment directly to the Effective Time Company Holders, in its discretion.

2.11 Dispute Resolution of Calculation of Net Working Capital, the Closing Date Cash or the Closing Date Debt. If an Objection Notice is
given with respect to any or all of the Eclipsys Final Calculations, the Stockholders’ Representative and Eclipsys shall consult with each other
with respect to the objection. If Eclipsys and the Stockholders’ Representative are unable to reach agreement within 15 days after an Objection
Notice has been given, any unresolved disputed items shall be promptly referred to the Washington, D.C. office of such nationally recognized
independent accounting firm, or economic consulting or valuation firm, as is mutually agreed to by Eclipsys and the Stockholders’
Representative (the “Unrelated Accounting Firm”). The Unrelated Accounting Firm shall be directed to render a written report on the
unresolved disputed issues as promptly as practicable (but in no event later than 45 days following submission of the matter to the Unrelated
Accounting Firm) and to resolve only those issues of dispute set forth in the Objection Notice (subject to any items resolved by Eclipsys and
the Stockholders’ Representative after consultation pursuant to the first sentence of this Section 2.11). In resolving any disputed issues
relating to the Eclipsys Final Calculations, the Unrelated Accounting Firm shall act as experts and not as arbitrators. The resolution by the
Unrelated Accounting Firm of the disputed amount, and the undisputed amounts, shall be final and binding on the parties for purposes of
determining the Final Closing Date Net Working Capital, the Final Closing Date Cash and the Final Closing Date Debt, and the amounts owed
by the parties under Section 2.10(d), if any. If the Unrelated Accounting Firm determines Eclipsys to be correct in its determination, net in the
aggregate, of the Final Closing Date Net Working Capital, the Final Closing Date Cash and the Final Closing Date Debt, the entire amount of
the expenses of the Unrelated Accounting Firm shall be paid from the Stockholders’ Fund. Eclipsys shall promptly pay the entire amount of
the expenses of the Unrelated Accounting Firm if the Unrelated Accounting Firm determines the Stockholders’ Representative to be correct,
net in the aggregate, in his or her determination of the Final Closing Date Net Working Capital, the Final Closing Date Cash and the Final
Closing Date Debt. If neither Eclipsys nor the Stockholders’

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Representative is correct, then Eclipsys and the Effective Time Company Holders shall share the expenses of the Unrelated Accounting Firm in
such proportion as the Unrelated Accounting Firm may determine appropriately reflects the relative accuracy of their respective
determinations. If the Effective Time Company Holders are obligated to pay any or all of the expenses of the Unrelated Accounting Firm, the
Stockholders’ Representative shall provide written instructions to the Escrow Agent to pay such portion of the expenses of the Unrelated
Accounting Firm in cash to the Unrelated Accounting Firm out of the Stockholders’ Fund, and if the expenses exceeds the amount in the
Stockholders’ Fund, such excess will be paid to the Unrelated Accounting Firm from the Escrow Fund.

2.12 Approval. To the fullest extent permitted by law, the receipt of the Company Stockholder Approval shall be deemed to constitute
approval of all arrangements relating to the transactions contemplated hereby and to the provisions hereof binding upon the Stockholders and
the Effective Time Company Holders.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MAJOR STOCKHOLDERS

Each Major Stockholder represents and warrants to Eclipsys, as to itself, severally and not jointly, as of the date of this Agreement and
as of the Closing Date, except as set forth in the disclosure schedule delivered to Eclipsys concurrently herewith, that is arranged in Sections
corresponding to the numbered and lettered Sections contained in this Agreement (the “Disclosure Schedule”), as follows:

3.1 Ownership of the Shares, Company Options and Company Warrants. Such Major Stockholder is the sole record and beneficial owner
of the Shares, Company Options and Company Warrants set forth next to such Stockholder’s name in Section 3.1 of the Disclosure Schedule,
has good and valid title in such Shares, Company Options and Company Warrants, free and clear of all adverse claims and other Liens, and its
interests in Premise represented by such Shares, Company Options and Company Warrants shall be transferred to Eclipsys in the Merger free
and clear of all adverse claims and other Liens (other than Liens arising from the actions of Eclipsys). The stock certificates evidencing the
Shares were not issued directly or indirectly in respect of any stock certificates issued in replacement of any lost or destroyed stock
certificates. Except for this Agreement and the Voting Agreement, the Shares are not subject to any voting trust or stockholder agreement or
other similar Contract, including any such Contract restricting or otherwise relating to the voting, dividend rights or disposition of the Shares.

3.2 Authorization, Validity and Effect of Agreements. Such Major Stockholder has all requisite right, capacity, power and authority to
execute and deliver this Agreement and the other Transaction Documents to be executed and delivered by such Major Stockholder and to
consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by such Major
Stockholder and constitutes, and the other Transaction Documents to be executed by such Major Stockholder (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of such Major Stockholder, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws
relating to creditors’ rights and general principles of equity, whether in equity or at law.

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3.3 No Violations; Consents.


(a) The execution and delivery by such Major Stockholder of this Agreement, and the other Transaction Documents to which such
Major Stockholder is a party and the consummation of the transactions contemplated herein and therein in accordance with the terms
hereof and thereof do not and will not (i) violate any settlement agreement, Order or material Legal Requirement applicable to such Major
Stockholder, or such Major Stockholder’s properties or assets, or (ii) violate, or conflict with, or result in a material breach of any
provision of, or constitute a material default (or an event which, with notice or lapse of time or both, would constitute a material breach or
default) under, any of the terms, conditions or provisions of any Contract to which such Major Stockholder is a party or by which such
Major Stockholder’s assets or properties are bound (including the Shares).
(b) Except as has been obtained, no Consent is required to be made by or with respect to such Major Stockholder in connection
with the execution, delivery and performance of this Agreement and the other Transaction Documents, or the consummation of the
transactions contemplated hereby and thereby.
(c) There are no pending or, to the Knowledge of such Major Stockholder, Threatened lawsuits, arbitrations, proceedings,
investigations or other claims against such Major Stockholder that would be reasonably expected to prevent or materially alter or delay
the transactions contemplated by this Agreement and the other Transaction Documents.
(d) If the Major Stockholder is not an individual, neither the execution and delivery by such Major Stockholder of this Agreement
or the other Transaction Documents, nor the consummation by such Major Stockholder of the transactions contemplated herein and
therein in accordance with the terms hereof and thereof, will conflict with or result in a breach of any provisions of its articles of
incorporation or bylaws, trust agreement or other governing documents.
(e) There is no pending proceeding by or against such Major Stockholder, or its officers and directors (as such), that challenges or,
to the Knowledge of such Major Stockholder, that may have the effect of preventing, delaying, making illegal or otherwise materially
interfering with the Merger and any other transactions contemplated in this Agreement. To the Knowledge of such Major Stockholder,
no such proceeding has been Threatened.

3.4 Related Party Transactions. Except, if such Major Stockholder is an Institutional Major Stockholder, for commercial or financial
transactions negotiated at arms’ length to provide products, services or financing to Premise or any officer, director or employee (including for
such purposes persons filling a similar function) of Premise or any other Person on terms and conditions and other trade terms generally
available to other customers of such Major Stockholder:
(a) Neither such Major Stockholder nor any Affiliate or any immediate family member thereof:
(i) has, or at any time since January 1, 2007 had, any interest in any assets or property (whether real, personal, or mixed and
whether tangible or intangible), used by Premise, or otherwise used in or pertaining to the Business;

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(ii) owns, or at any time since January 1, 2007 has owned (of record or as a beneficial owner) Capital Stock or other financial
interest in, any Person that (A) has, or at any time since January 1, 2007 had, business dealings with Premise or a material financial
interest in any transaction with Premise, or (B) is, or at any time since January 1, 2007 has, engaged in activities that are, or could
reasonably be expected to become, competitive with the Business, except in each case for (1) the acquisition of Company Capital
Stock, or (2) ownership (of record or as a beneficial owner) of less than one percent (1%) of the outstanding capital stock of any
Person that is publicly traded on any national or foreign stock exchange, or the over-the-counter market; provided, however, that
(x) with respect to the matters in clause (A), any Institutional Major Stockholder makes such representation or warranty solely to
the Knowledge of such Major Stockholder, and (y) no Institutional Major Stockholder makes any representation or warranty with
respect to any matter in clause (B) above; or
(iii) is, or since January 1, 2007 was, a party to any Contract with, or has any claim or right against, Premise, with the exception
of the Stockholder Agreements and agreements to purchase Shares, all of which have been fully performed or will be extinguished
on or before the Effective Time.
(b) There are no Contracts between (A) such Major Stockholder, or his or its Affiliates (other than Premise), or, if applicable, any
immediate family member of such Major Stockholder, on the one hand, and (B) to the Knowledge of such Major Stockholder, any officer,
director or employee (including for such purposes persons filling a similar function) of Premise, on the other hand.

3.5 No Brokers. Except for Montgomery & Co., no broker, finder or similar agent has been employed by or acted on behalf of, directly or
indirectly, such Major Stockholder or any of its Affiliates or agents, in connection with this Agreement or the other Transaction Documents or
the transactions contemplated hereby or thereby. Neither such Major Stockholder nor any of its Affiliates, has entered into any arrangement
or other Contract with any Person, or taken any other actions, which could obligate such Major Stockholder, Eclipsys, Premise or any of their
respective Affiliates to pay any brokerage commission, finder’s fee or any similar compensation in connection with this Agreement, the other
Transaction Documents or the transactions contemplated hereby and thereby.

3.6 Disclosure. No representation or warranty of such Major Stockholder contained in this Article III or the Transaction Documents to
which it is a party and no statement contained in any sections of the Disclosure Schedule relating to the representations of such Major
Stockholder in this Article III contains, or will contain upon delivery as set forth herein, any untrue statement of a material fact, or omits, or will
omit upon delivery, to state any material fact necessary in order to make the statements herein or therein, in light of the circumstances under
which it was or will be made, not misleading.

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PREMISE

Premise represents and warrants to Eclipsys, as of the date of this Agreement and as of the Closing Date, except as set forth in the
Disclosure Schedule, as follows:

4.1 Premise Existence; Good Standing. Premise is a corporation duly incorporated, validly existing and in good standing under the laws of
the State of Delaware. Premise is licensed or qualified to do business as a foreign corporation and in good standing in each of the jurisdictions
listed on Section 4.1 of the Disclosure Schedule, except where the lack of such license or qualification would not reasonably be expected to
have a Material Adverse Effect. Premise is not required to be licensed or qualified to do business as a foreign corporation under the laws of
any other jurisdiction, except where the lack of such license or qualification would not reasonably be expected to have a Material Adverse
Effect. Premise has all requisite corporate power and authority to own, operate and lease its properties and assets and carry on its business as
now conducted. The copies of the Premise Certificate of Incorporation and Bylaws of Premise previously delivered, or made available, to
Eclipsys are true, correct and complete, and such documents are in full force and effect and have not been supplemented or amended since
they were delivered or made available to Eclipsys.

4.2 Subsidiaries. Premise does not hold, nor has it ever held, directly or indirectly, any Capital Stock of any other Person. There are no
obligations or other Contracts, contingent or otherwise, of Premise to make any investment (in the form of a loan, capital contribution or
otherwise) in any other Person.

4.3 Capitalization.
(a) The authorized Capital Stock of Premise consists solely of 2,469,154 shares of Company Common Stock, of which 863,981 shares
are issued and outstanding on the date hereof, and 1,097,827 shares of preferred stock, of which (i) 47,058 shares are designated as Series
A Preferred Stock, of which no shares are issued and outstanding on the date hereof, and (ii) 1,050,769 shares are designated as Series B
Preferred Stock, of which 1,022,232 shares are issued and outstanding on the date hereof. The Shares, Company Options and Company
Warrants are held of record by the Persons and in the amounts set forth in Section 4.3(a)(i) of the Disclosure Schedule, and except as set
forth therein, there is no Capital Stock of Premise outstanding. The parties acknowledge that the outstanding shares set forth above may
change prior to the Closing Date as a result of conversion of shares of Series B Preferred Stock outstanding on the date hereof according
to the terms of such preferred stock or exercise of the Company Options and Company Warrants outstanding on the date hereof
according to terms of such Company Options or Company Warrants, as the case may be, in each case for shares of Company Common
Stock or Series B Preferred Stock, and Premise agrees to provide the Capitalization Update on or before the Closing Date, which shall set
forth an accurate and complete update of all such changes through the Closing Date, arising after the date hereof in the holders of
Premise Capital Stock, or the number and class of shares of Premise Capital Stock held by any such holder. Except for the Stockholder
Agreements and the Company Options and Company Warrants set forth in Section 4.3(a)(i) of the Disclosure Schedule, and the rights
granted to Eclipsys and Merger Sub under this Agreement, there are no outstanding obligations

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of Premise, contingent or otherwise, to issue, sell or transfer or repurchase, redeem or otherwise acquire, or that relate to the holding,
voting or disposition of, or that restrict the transfer of, the issued or unissued Capital Stock of Premise. Each share of Series B Preferred
Stock is convertible into one share of Company Common Stock. All repurchases of Company Capital Stock have been conducted in
compliance with all Legal Requirements and the Stockholder Agreements.
(b) All issued and outstanding Shares are duly authorized, validly issued, fully paid and nonassessable, and none of such Shares
has been issued in violation of or, except as specified in the Investor Rights Agreement and Co-Sale and Transfer Agreement, is subject
to, any option, call, right of first refusal, preemptive, subscription or similar right. Except for the Company Options set forth in
Section 4.3(a)(i) of the Disclosure Schedule and the Company Warrants set forth in Section 4.3(a)(i) of the Disclosure Schedule, there are
no options, warrants, calls, subscriptions, convertible securities, convertible debt or other rights or other Contracts which obligate
Premise to issue, or Premise or any of the Stockholders to transfer, any Capital Stock of Premise. The outstanding Company Capital Stock
has been issued in compliance with all applicable Legal Requirements.
(c) Premise does not have, and has not ever had, any outstanding bonds, debentures, notes or other obligations, the holders of
which have the right to vote (or which are convertible into or exercisable or exchangeable for securities having the right to vote) with its
Stockholders on any matter and there are no, and have never been any, equity equivalent interests in the ownership or earnings, or
distributions upon liquidation or sale of assets, of Premise.
(d) Premise is not in default or breach (and no event has occurred which with notice or lapse of time or both, would constitute a
breach or default) of any term or provision of the Premise Certificate of Incorporation or its Bylaws.

4.4 Material Contracts; No Violation.


(a) Except for the Contracts listed in Section 4.4(a) of the Disclosure Schedule, Premise is not a party to, and none of its assets or
properties is bound by, any:
(i) Contract that involves performance of services or delivery of Software or other products of Premise or any other Person,
except for Contracts providing for payments by or to Premise of less than $25,000 annually or $100,000 in the aggregate;
(ii) Contract with or obligation to any Governmental Entity, including but not limited to development agreements;
(iii) Contract for the future purchase of materials, services or equipment (A) with a future Liability potentially in excess of
$25,000 annually or $100,000 in the aggregate, or (B) that are not cancelable by Premise on no more than 60 days’ notice without
liability, penalty or premium;

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(iv) license, option, escrow agreement or other Contract relating in whole or in part to Company IP, other than licenses
contained in Contracts entered into in the ordinary course of business, consistent with past practice, with resellers and other
customers of Premise for the delivery of Software or other products of Premise;
(v) lease, sublease or similar Contract under which (A) it is a lessor or sublessor of real property owned by any other Person,
or makes available for use to any Person, any portion of any premises otherwise occupied, leased or subleased by it or (B) it is a
lessee or sublessee of, or holds or uses any real property owned by any other Person;
(vi) lease, sublease or similar Contract under which (A) it is a lessee or sublessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by any Person or (B) it is a lessor or sublessor of, or makes available
for use by any Person, any tangible personal property owned or leased by it, except in each case for Contracts providing for
payments by or to Premise of less than $25,000 annually or $100,000 in the aggregate;
(vii) Contract with any of its officers, directors or employees (including for such purposes persons filling a similar function) or
any of its former officers, directors or employees (including for such purposes persons filling a similar function), including
employee policies of Premise (including any severance pay or change in control agreement or policy of Premise to provide such
payments, and whether such payments are payable upon a termination that is voluntary or nonvoluntary);
(viii) employee collective bargaining agreement or other Contract with any labor union;
(ix) covenant not to compete or other Contract restricting, or imposing requirements related to, the conduct or location of its
business, including any restriction on hiring or soliciting of employees (including for such purposes persons filling a similar
function);
(x) management, consulting, financial advisory or other similar type of Contract;
(xi) Contract under which it has borrowed any money from, or issued any Debt to, any Person;
(xii) Contract under which it or any other Person has guaranteed Debt or other obligations directly or indirectly;
(xiii) Contract that grants or contemplates the granting of a security interest or other Lien in any of its assets or property;
(xiv) Contract not entered into in the ordinary course of business;
(xv) Contract providing for indemnification of any Person;

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(xvi) power of attorney;


(xvii) Tax sharing or Tax allocation agreement;
(xviii) joint venture or partnership agreement or similar Contract;
(xix) Contract (A) that commits Premise to make any fixed or contingent payment or expenditure or any related series of fixed or
contingent payments or expenditures totaling more than $100,000 in the aggregate, or (B) that does not terminate pursuant to its
terms within one year of the date hereof, and is not cancelable by Premise within one year without liability, penalty or premium;
(xx) Contract providing for the purchase or other acquisition of any business or operations of another Person, whether
through merger, stock purchase, asset purchase or otherwise;
(xxi) Contract to which the Company and one or more of the Stockholders are parties; or
(xxii) any other Contract that is material to it that is not otherwise listed in Section 4.4(a) of the Disclosure Schedule.

The Contracts listed on Section 4.4(a) of the Disclosure Schedule, or required to be listed thereon, are referred to herein as the “Material
Contracts.”
(b) (i) Each of the Material Contracts is valid, binding and in full force and effect and is enforceable against Premise, and to the
Knowledge of Premise, the other parties thereto, in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization or other similar laws relating to creditors’ rights and general principles of equity, whether in
equity or at law, (ii) Premise has performed all material obligations required to be performed by it under the Material Contracts and it is
not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder, (iii) to the
Knowledge of Premise, (A) no other party to any Material Contract is (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder, and (B) without limiting the representation contained in clause (ii), no event has
occurred or circumstance or condition exists (with or without the lapse of time or the giving of notice, or both) that may contravene,
conflict with or result in a violation or breach of any Material Contract, result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the triggering of any payment obligations under, or result in the creation of any
Lien upon any of the assets or properties of Premise under, or result in being declared void, voidable or without further binding effect, or
result in any other modification of or trigger any right or obligation under, any Material Contract or provisions thereof, (iv) no party to
any Material Contract has given any written notice of an alleged breach thereof or otherwise, to the Knowledge of Premise, Threatened
such a breach and (v) Premise has not received any written notice that any party to any Material Contract intends to cancel or terminate
such Material Contract, to renegotiate such Material Contract, or to exercise or not exercise any options thereunder, and, to the
Knowledge of Premise, no such intent to cancel, terminate, renegotiate or exercise has been otherwise Threatened.

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(c) Neither the execution and delivery by Premise of this Agreement and the other Transaction Documents, nor the consummation
of the Merger and any other transactions contemplated herein and therein in accordance with the terms hereof and thereof, will violate,
or conflict with, or result in a breach of any provision of, or constitute a material default (or an event that, with notice or lapse of time or
both, would constitute a breach or default) under, or result in the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the triggering of any payment obligations under, or result in the creation of any Lien upon any
of the assets or properties of Premise under, or result in being declared void, voidable or without further binding effect, or result in any
other modification of or trigger any right or obligation under, any Material Contract or provision thereof.
(d) No Consent of any party to a Material Contract is required in connection with the execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation of the Merger, and the other transactions contemplated hereby
and thereby.
(e) True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of the Material Contracts entered
into on or prior to the date hereof have been provided to Eclipsys, and true, complete and accurate copies (or, as to oral Contracts,
written summaries of the terms) of any Material Contracts entered into after the date hereof and prior to or on the Closing Date will be
provided to Eclipsys promptly after being so entered into. There are no terms of any Material Contract not set forth in the copies thereof
provided to Eclipsys. The terms and conditions of all of the Material Contracts were negotiated at arm’s length.

4.5 Financial Statements; No Undisclosed Liabilities.


(a) Section 4.5(a) of the Disclosure Schedule sets forth true and complete copies of (i)(A) Premise’s balance sheet, and related
statement of income, statement of cash flows and changes in stockholders equity as of and for the twelve-month periods ended
February 28, 2005, compiled by Guilio D. Cessario, Certified Public Accountant, P.C., and (B) Premise’s balance sheet, and related
statement of income, statement of cash flows and changes in stockholders equity as of and for the twelve-month periods ended
December 31, 2007 and 2006, in each case audited by Fiondella, Milone & LaSaracina LLP, independent certified public accountants, with
such accountant’s unqualified reports attached thereto (collectively, the financial statements under clauses (A) and (B), the “Year-End
Financial Statements”), and (ii) Premise’s balance sheet and related statement of income and cash flows as of and for the eleven months
ended November 30, 2008 (the “Interim Financial Statements”). The Year-End Financial Statements and the Interim Financial
Statements are collectively referred to herein as the “Financial Statements”).
(b) The Financial Statements (i) were prepared by Premise in accordance with the books and records of Premise, (ii) are true, correct
and complete in all material respects, (iii) reflect the consistent application of all accounting principles, practices and methods of Premise

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throughout the periods thereof, except as disclosed therein, and (iv) fairly present the financial condition and results of operation of
Premise as of the dates and for the periods covered thereby, all in accordance with GAAP (consistently applied, except as disclosed
therein), subject, in the case of the Interim Financial Statements, to the absence of notes and to normal year-end audit adjustments. The
Financial Statements do not contain any material items of a special or nonrecurring nature, except as expressly stated therein. No
financial statements of any other Person are required by GAAP to be included in the financial statements of Premise.
(c) There are no Liabilities of Premise other than: (i) Liabilities accrued on the balance sheet dated as of November 30, 2008; and
(ii) current Liabilities incurred and unpaid since November 30, 2008 that have been incurred in the ordinary course of business consistent
with past practice, are accrued on the balance sheet of Premise as of the Closing Date, and are included in the calculations of the
Estimated Closing Date Debt, Estimated Closing Date Net Working Capital, Final Closing Date Debt and the Final Closing Date Net
Working Capital, as applicable. Deferred revenue amounts indicated on the balance sheet dated as of November 30, 2008 do not, and the
Current Liabilities will not, reflect reserves for Threatened claims against Premise or claims that, to the Knowledge of Premise, are likely to
be made against Premise.
(d) Premise maintains a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are
executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements that are in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with respect to the differences. None of the
Stockholders or Premise have been advised by any independent certified public accountant of Premise that there is a significant
deficiency or material weakness in the design or operation of Premise’s internal controls, except as set forth in the management letter of
Fiondella, Milone & LaSaracina LLP, independent certified public accountants, to the Premise Audit Committee and management, dated
June 30, 2008, each of which significant deficiencies and material weaknesses have been remediated.

4.6 Authority; No Violations; Consents.


(a) Premise has full corporate power and authority to execute and deliver this Agreement and each of the Transaction Documents to
which it will be a party and, subject to obtaining approval of (i) holders of sixty-six percent (66%) of the outstanding Series B Preferred
Stock, voting as a separate class, and (ii) holders of a majority of the outstanding shares of Company Common Stock and Series B
Preferred Stock, voting together as a single class (collectively, the “Company Stockholder Approval”), to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and
performance by Premise of this Agreement and each of the Transaction Documents to which Premise will be party and the consummation
by Premise of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of
Premise. Except for obtaining the Company Stockholder Approval, no other corporate proceedings on the part of Premise are necessary
to authorize the execution, delivery or performance of this Agreement or any other Transaction Document or to consummate the

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transactions contemplated hereby and thereby. This Agreement has been, and upon their execution each of the other Transaction
Documents to which Premise will be a party will have been, duly executed and delivered by Premise. This Agreement constitutes, and
upon their execution each of the Transaction Documents to which Premise will be a party will constitute, the legal, valid and binding
obligations of Premise, enforceable against Premise in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium, fraudulent conveyance, reorganization or other similar laws relating to creditors’ rights and general principles of
equity, whether in equity or at law.
(b) The Board of Directors of Premise has (i) adopted the plan of merger set forth in this Agreement and approved this Agreement,
the Merger and the other transactions contemplated by this Agreement; (ii) declared that this Agreement, the Merger and the other
transactions contemplated by this Agreement are advisable and in the best interests of Premise and the Stockholders; and
(iii) recommended adoption of this Agreement, the Merger and the other transactions contemplated by this Agreement to the
Stockholders.
(c) The execution and delivery by Premise of this Agreement, and the other Transaction Documents and the consummation of the
transactions contemplated herein and therein in accordance with the terms hereof or thereof will not:
(i) conflict with or result in a breach of any provisions of the Premise Certificate of Incorporation or its bylaws; or
(ii) violate any settlement agreement, Order or material Legal Requirement applicable to Premise, or its properties or assets; or
(iii) result in the imposition of any Lien upon or with respect to any of the assets or properties owned or used by Premise.
(d) No Consent is required to be made by or with respect to Premise in connection with the execution, delivery and performance of
this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby.

4.7 Compliance; Permits; Litigation.


(a) Premise is, and at all times has been, in compliance in all material respects with all settlement agreements, material Permits, Orders
and material Legal Requirements to which it or any of its properties, assets, operations or business is subject and all nongovernmental
restrictions as to its property or asset use. Without limiting the representation contained in the preceding sentence, to the Knowledge of
Premise, no event has occurred or circumstance or condition exists that (with or without the lapse of time, the giving of notice or both)
(A) has resulted in or may constitute or result in a violation by Premise of, or a failure on the part of Premise to comply in all material
respects with the terms of any settlement agreement, material Permit, Order or material Legal Requirement or (B) has resulted in or may
give rise to any obligation of Premise to undertake or bear all or any portion of the cost of any material remedial action of any nature.
Neither Premise nor any of the Stockholders has received any written notice or other written communication from any Governmental
Entity or other Person regarding

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any actual, alleged, possible or potential violation of, or failure to comply with, the terms of any settlement agreement, material Permit,
Order or material Legal Requirement, or that give rise to any obligation of Premise to undertake, or bear all or any portion of the cost of,
any material remedial action of any nature, and, to the Knowledge of Premise, no such actual, alleged, possible or potential violation or
failure to comply or obligation has been otherwise Threatened.
(b) Premise has at all times obtained all material Permits. Except where the failure to have a Permit would not individually or in the
aggregate be material, Premise currently holds all of the Permits necessary to permit Premise to lawfully conduct and operate its business
and to own and use its assets and properties in the manner it currently operates the business and owns and uses such assets and
properties, and all such Permits are in full force and effect. No suspension, cancellation, modification, revocation or nonrenewal of any
Permit is pending or, to the Knowledge of Premise, Threatened. No Permit is held in the name of any current or former employee
(including for such purposes persons filling a similar function) of Premise. Section 4.7(b) of the Disclosure Schedule sets forth a list of
the material Permits held by Premise. No material Permit held by Premise (A) is scheduled to expire within the period beginning on the
date hereof through six months after the Closing, or (B) will be subject to suspension, modification, revocation or nonrenewal as a result
of the execution and delivery of this Agreement and the other Transaction Documents, or the consummation of the transactions
contemplated hereby and thereby.
(c) To the Knowledge of Premise, there is no proposed plan, proceeding or effort or proposed change to any Legal Requirements,
whether or not directly involving Premise, by any Governmental Entity or other Person which in any way challenges or would be
reasonably expected to adversely affect Premise or the Business, including any Permits.
(d) (i) Section 4.7(d)(i) of the Disclosure Schedule sets forth a list and description of all pending or, to the Knowledge of Premise,
Threatened or reasonably probable, lawsuits, arbitrations, proceedings, investigations or other claims against Premise or any of its
properties, assets, operations or business, including but not limited to any action which would be reasonably expected to prevent or
materially alter or delay the transactions contemplated by this Agreement and the other Transaction Documents and, to the Knowledge
of Premise, no such lawsuit, arbitration, proceeding, investigation or other claim is pending, Threatened or reasonably probable against
its officers, directors or employees (including for such purposes persons filling a similar function) (as such).
(ii) There is no lawsuit, arbitration, proceeding, investigation or other claim by Premise pending, threatened or contemplated
against any other Person.
(iii) To the Knowledge of Premise, no event has occurred or circumstance or condition exists that may give rise to or serve as
the basis for the commencement of any lawsuit, arbitration, proceeding, investigation or other claim described in Section 4.7(d)(i) or
(ii).
(e) Premise is not a party to, and its assets and properties are not subject to, any Order, or any settlement agreement with any
Governmental Entity or arbitration tribunal or other Person.

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(f) There is no pending proceeding by or against Premise, or its officers and directors (as such), that challenges or, to the
Knowledge of Premise, that may have the effect of preventing, delaying, making illegal or otherwise materially interfering with the Merger
and any other transactions contemplated in this Agreement. To the Knowledge of Premise, no such proceeding has been Threatened.

4.8 Absence of Certain Changes. Since January 1, 2008, Premise has conducted its business only in the usual, regular and ordinary
course of such business consistent with past practice and there has not been:
(a) any event that has occurred or circumstance or condition that exists which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other distribution with respect to the Company Capital Stock or
any redemption or repurchase of any Capital Stock of Premise, any stock split, combination or reclassification of Company Capital Stock
or other change in its capitalization, or any other payment by Premise of any kind to any Stockholder or any Affiliate of any Stockholder
(other than salary or employment related expenses in the ordinary course of business consistent with past practice);
(c) any material change in the accounting principles, practices or methods of Premise or any revaluation by Premise of any of its
assets (whether tangible or intangible);
(d) any amendment to the Premise Certificate of Incorporation or its Bylaws;
(e) any increase in the salaries or other compensation payable to any officer, director or employee (including for such purposes
persons filling a similar function) of Premise or any increase in, or addition to, other benefits to which such officer, director or employee
may be entitled (except as required by the terms of plans as in effect on the date of this Agreement and which are listed on
Section 4.10(a) of the Disclosure Schedule, or as required by law), any new employee benefit plan adopted (including any stock option,
restricted stock or stock purchase plan), or any existing employee benefit plan amended in any respect materially adverse to Premise, or
any increase in the amount, or expansion of the scope, of any indemnification provided for employees (including for such purposes
persons filling a similar function), officers or directors;
(f) any material adverse change or, to the Knowledge of Premise, any Threat of a material adverse change in the relations of Premise
with any of the suppliers or customers or employees of Premise or other Persons having business relationships with Premise;
(g) any sale, assignment, transfer, license or other disposal of any Intellectual Property or interest therein, except licenses of the
Software Products to customers in the ordinary course of business consistent with past practice;
(h) any termination, cancellation, amendment or waiver of any material Contract or other right material to Premise;

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(i) any material failure to maintain the assets and properties of Premise in the ordinary course of business consistent with past
practice or any destruction of, damage to, or loss of any material assets (whether tangible or intangible) of Premise, whether or not
covered by insurance;
(j) (i) any Debt incurred or assumed or any Debt securities issued, (ii) any guaranty or endorsement or other assumption (whether
directly, indirectly, contingently or otherwise) for the obligations of any other Person, (iii) any modification in any manner adverse to
Premise of any outstanding Debt or other obligation of Premise or (iv) any mortgage or pledge of any of its assets, tangible or intangible,
or creation of any Lien of any kind in respect to such assets except in the ordinary course of business consistent with past practices;
(k) any settlement or compromise of any pending or threatened suit, proceeding, action or claim or commencement of any litigation;
(l) any change in any material election in respect of Taxes, any adoption or change in any material accounting method in respect of
Taxes, any material agreement or settlement of any claim or assessment in respect of Taxes, or any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes;
(m) any transaction by Premise that is material to Premise, except in the ordinary course of business and consistent with past
practices;
(n) any capital expenditure or commitment by Premise exceeding $50,000 individually or $100,000 in the aggregate;
(o) any payment, discharge or satisfaction of any Liability in excess of $20,000 individually, or $50,000 in the aggregate, other than
payment, discharge or satisfaction of Liabilities in the ordinary course of business; or
(p) any agreement to take any action or omit to take any action (A) described in this Section 4.8, or (B) that would constitute a
breach of any of the representations and warranties of Premise or the Major Stockholders contained in this Agreement.

4.9 Taxes.
(a) All Tax Returns that were required to be filed by or with respect to Premise have been accurately prepared in all material respects
and timely filed. All such Tax Returns are true, correct, and complete in all material respects and do not contain a disclosure statement
under Section 6662 of the Code or any predecessor provision or comparable provision of state, local or foreign Legal Requirements.
(b) Premise has timely paid all material Taxes that have become due or payable (without regard to whether or not such Taxes are
shown on any Tax Return) and has established in the Interim Financial Statements an adequate reserve for all Taxes (other than any
reserve for deferred Taxes established to reflect timing differences between book and Tax income) that have accrued but are not yet due
or payable as of the date of such statements. All Taxes of Premise accrued following the end of the most recent period covered by the
Interim

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Financial Statements have been accrued in the ordinary course of business and do not materially exceed comparable amounts incurred in
similar periods in prior years, taking into account any changes in Premise’s operating results and changes in Legal Requirements. The
provisions for Taxes currently payable on the Interim Financial Statements are at least equal, as of the date thereof, to all unpaid Taxes of
Premise as of the date of such statements.
(c) No claim has been made in writing by any taxing authority in any jurisdiction where Premise does not file Tax Returns that
Premise is or may be subject to Tax by that jurisdiction and to the Knowledge of Premise no such claim is being contemplated. No
extensions or waivers of statutes of limitations with respect to any Tax Returns or Taxes have been given by or requested from Premise.
No power of attorney has been granted by Premise with respect to any matter relating to Taxes.
(d) To the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters), no foreign, federal,
state or local Tax audits or administrative or judicial Tax proceedings are pending, being conducted or are Threatened with respect to
Premise and to the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters) no such action or
proceeding is being contemplated. All deficiencies asserted or assessments made against Premise in writing as a result of any
examinations, audits or other proceedings by any Taxing authority have been fully paid unless such assessment had been appealed in
good faith. To the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters), no issue has been
raised in any such examination, audit or other proceeding which by application of the same or similar principles reasonably could be
expected to result in a proposed deficiency in Taxes of Premise.
(e) There are no Liens for Taxes (other than for current Taxes not yet due and payable) upon the assets or properties of Premise.
(f) Premise is not a party to or bound by any closing agreement, offer in compromise or other Contract with any Taxing authority
that could affect Taxes for which Premise or Eclipsys may be liable. Premise is not a party to or bound by any Tax indemnity, Tax sharing
or Tax allocation agreement.
(g) Premise is not and has not been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code,
or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes. Premise has no liability for Taxes of
any Person under Treasury Regulations Section 1.1502-6 or any corresponding provision of state, local or foreign income Tax Legal
Requirements, as transferee or successor, by Contract or otherwise.
(h) Premise is not a party to any plan or other Contract that has resulted or would result, separately or in the aggregate, in
connection with this Agreement, in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code.
(i) Premise has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third party.

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(j) There is no taxable income of Premise that is required under applicable Tax Legal Requirements to be reported by Premise for a
taxable period beginning after the date hereof which taxable income was realized (and reflects economic income arising) prior to the date
hereof or relates to a transaction that occurred prior to the date hereof. Premise has not taken any action that is not in accordance with
past practice or required by applicable Legal Requirements that could defer a liability for Taxes of Premise from any taxable period ending
on or before the date hereof to any taxable period ending after such date.
(k) Premise will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period
ending on or prior to the Closing Date (including pursuant to Section 481(a) of the Code or any similar Legal Requirement), (ii) “closing
agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign Tax law) executed on
or prior to the Closing Date or (iii) installment sale or open transaction disposition made on or prior to the Closing Date.
(l) To the Knowledge of Premise (including the knowledge of the employee(s) responsible for Tax matters), Premise has not
engaged in a transaction that constitutes a “reportable transaction,” as such term is defined in Treasury Regulation Section 1.6011-
4(b)(1).
(m) Premise does not have a permanent establishment in any jurisdiction outside of the United States of America, as defined in any
applicable Tax treaty or convention between the United States of America and such foreign jurisdiction.
(n) Premise is not a party to any joint venture, partnership or other arrangement or Contract that could be treated as a partnership
for federal income tax purposes.
(o) Premise is not, nor has it ever been, a United States real property holding corporation, as defined in Section 897(c)(2) of the
Code.
(p) Premise has not been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in
Section 355 of the Code.
(q) Premise does not currently hold, and has not at any time held, an interest in any Subsidiary that was organized under the laws of
a jurisdiction outside the United States.

4.10 Certain Employee Plans.


(a) Section 4.10(a) of the Disclosure Schedule lists all Company Benefit Plans. Each Company Benefit Plan is in writing. A true,
complete and correct copy of each Company Benefit Plan has been provided to Eclipsys, together with, as applicable: (i) the most recent
summary plan descriptions and any summaries of material modifications; (ii) the two most recent annual reports on Form 5500 (including
schedules) filed with the Internal Revenue Service; (iii) the most recent favorable Internal Revenue Service determination letter; (iv) a
copy of each trust or other funding arrangement; and (v) the most recently prepared actuarial report and financial statement. Premise has
no express or implied commitment: (i) to create, incur

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liability with respect to or cause to exist any other employee benefit plan, program or arrangement; (ii) to enter into any Contract to
provide compensation or benefits to any individuals; or (iii) to modify, change or terminate any Company Benefit Plan, other than with
respect to a modification required by ERISA or the Code.
(b) Neither Premise nor any ERISA Affiliate sponsors, maintains or contributes to or has ever sponsored, maintained, contributed
to or incurred an obligation to contribute or incurred any Liability with respect to any “multiemployer plan” (as such term is defined in
Section 3(37) of ERISA) or any other employee benefit plan that is subject to Title IV of ERISA, Part 3 of Subtitle B of Title I of ERISA or
Section 412 of the Code.
(c) Premise does not provide any health, welfare or life insurance benefits to any of its former or retired employees (including for
such purposes persons filling a similar function) other than pursuant to Section 4980B of the Code or similar state laws.
(d) (i) Each Company Benefit Plan has been maintained and operated in all material respects in accordance with its terms and all
applicable Legal Requirements.
(ii) Premise has in all material respects performed all obligations, whether arising by operation of any Legal Requirements or by
Contract, required to be performed by it in connection with the Company Benefit Plans.
(iii) There are no actions, suits or claims pending (other than routine claims for benefits) or, to the Knowledge of Premise,
Threatened against, or with respect to, any of the Company Benefit Plans, there is no matter pending with respect to any of the
Company Benefit Plans before any Governmental Entity and, to the Knowledge of Premise, there is no basis for any such action,
suit or claim.
(iv) Each Company Benefit Plan intended to be qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service (whether by reliance on a prototype determination letter or opinion or otherwise), and
since the date of each most recent determination, no event has occurred, and no condition or circumstance exists, that has
adversely affected or is reasonably likely to adversely affect such qualified status.
(v) Except as would not reasonably be expected to have a Material Adverse Effect, neither Premise nor, to the Knowledge of
Premise, any other fiduciary or party in interest of any Company Benefit Plan has participated in, engaged in or been a party to any
transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the
Code or Section 408 of ERISA, respectively.
(vi) Except as would not reasonably be expected to have a Material Adverse Effect, Premise and, to the Knowledge of Premise,
its ERISA Affiliates, have made full and timely payment of all amounts required to be contributed or paid as expenses or accrued
such payments in accordance with normal procedures under the terms of each Company Benefit Plan and applicable Legal
Requirements.

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(e) The execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby (either alone or in combination with any other action or event) will not (i) require Premise to make a
larger contribution to, or pay greater benefits or provide other rights under, any Contract or Company Benefit Plan than it otherwise
would, (ii) create or give rise to any additional vested rights or service credits under any Contract or Company Benefit Plan or (iii) entitle
any employee (including for such purposes persons filling a similar function), officer or director of Premise to severance, termination
allowance or similar payments. Premise is not a party to any Contract, nor has Premise established any other policy or practice, requiring
it to make a payment or provide any other form of compensation or benefit to any person performing services for Premise upon
termination of such services which would not be payable or provided in the absence of the consummation of the transactions
contemplated by this Agreement.
(f) Except as would not reasonably be expected to have a Material Adverse Effect, each current and former employee (including for
such purposes persons filling a similar function) of Premise has been correctly classified for purposes of each Company Benefit Plan as
an eligible or ineligible employee and any retroactive reclassification will not affect any employee’s benefit under any Company Benefit
Plan.
(g) Except as would not reasonably be expected to have a Material Adverse Effect, each Company Benefit Plan that is a
nonqualified deferred compensation plan (as defined under Section 409A of the Code) satisfies the applicable requirements of Sections
409A(a)(2), (3) and (4) of the Code, and has, since January 1, 2005, been operated in good faith compliance with Sections 409A(a)(2),
(3) and (4) of the Code.

4.11 Labor Matters.


(a) Premise is not a party to, or bound by, any collective bargaining agreement or other Contract with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of Premise, Threatened
against Premise or relating to its business. There has not been and, to the Knowledge of Premise, there are no organizational efforts with
respect to the formation of a collective bargaining unit being made or threatened involving employees of Premise. There are no pending
claims or controversies by or between Premise and any of its current or former employees (including for such purposes persons filling a
similar function), no such claims or controversies are, to the Knowledge of Premise, Threatened and no event has occurred or
circumstances or conditions exist that would support a claim by any current or former employee against Premise. None of the Major
Stockholders or Premise has received notice of any strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with respect
to any employees of Premise. Premise is and has always been in compliance in all material respects with all applicable Legal Requirements
relating to employees (including for such purposes persons filling a similar function) and the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity and collective bargaining.
(b) Section 4.11(b)(i) of the Disclosure Schedule sets forth a complete and accurate list of all employees (including for such
purposes persons filling a similar function) employed by Premise, including the salaries or wages or other payment terms and positions
and

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duties of each such employee, the state in which such employee is located and whether such employee is required to be paid overtime
pay under any applicable Legal Requirements. Each employee listed on Section 4.11(b)(i) of the Disclosure Schedule is hired “at will,”
meaning Premise or such employee can terminate such employment, with or without cause, at any time, without liability.
Section 4.11(b)(ii) of the Disclosure Schedule sets forth a complete and accurate list of independent contractors retained by Premise who
(i) assisted with the development of Company IP or (ii) were paid in the aggregate more than $50,000 since January 1, 2007, indicating the
purposes or projects for which each was retained. All Persons who have performed services for Premise and have been classified as
independent contractors, and all Persons who have performed services for Premise and have been classified as exempt employees not
entitled to overtime pay under applicable Legal Requirements, have been at all times properly classified as such in accordance with all
Legal Requirements. The classification, job description or duties of the employees of Premise and independent contractors of Premise
have not been changed. Section 4.11(b)(iii) of the Disclosure Schedule contains a complete and accurate list of each former employee
(including for such purposes persons filling a similar function) of Premise receiving benefits or entitled to receive benefits under any life
insurance, medical insurance or other coverage or benefits offered by Premise or which Premise is obligated to provide or fund, other
than medical insurance provided, at no cost to Premise, pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985.
(c) To the Knowledge of Premise, no employee (including for such purposes persons filling a similar function) of Premise is a party
to, or is otherwise bound by, any Contract, including any confidentiality, noncompetition or proprietary rights agreement, between such
employee and any other Person that in any way adversely affects or will affect (i) the performance of his or her duties as an employee of
Premise or (ii) the ability of Premise to conduct its business. No Key Employee has threatened to terminate his or her employment with
Premise as a result of the transaction contemplated hereby or otherwise.
(d) There has not been and there is no pending or, to the Knowledge of Premise, Threatened discrimination, wrongful termination or
wage and hour proceedings, claims, charges or complaints against or involving Premise before the National Labor Relations Board, the
Occupational Safety & Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC) or any other
Governmental Entity, and no event has occurred or circumstances or conditions exist that would support such a claim.

4.12 Restrictions on Business Activities.


(a) There is no currently effective Order or Legal Requirement, or any Order, or, to the Knowledge of Premise, any Legal
Requirement or other action by a Governmental Entity, pending before a Governmental Entity or, to the Knowledge of Premise, being
considered by a Governmental Entity, which has or would have the effect of restricting the conduct of the Business.
(b) Neither Premise nor any officer of Premise, nor, to the Knowledge of Premise, any director or other agent, employee, consultant
or contractor of Premise, has directly or indirectly: (i) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or
other payment to any Person, private or public, regardless of form, whether in money, property or services, that (A) is illegal or
(B) violates any policy of Premise; or (ii) established or maintained any fund or asset that has not been recorded in the books and
records of Premise.

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4.13 Real Property.


(a) Section 4.13(a) of the Disclosure Schedule provides a true, correct and complete list of all of the Contracts relating to all real
property leased to Premise (which property includes Premise’s right title and interest in any leasehold improvements thereon and
personal property and fixtures therein, and in each case all of Premise’s rights and interest in any other rights, subleases, licenses,
permits, deposits and profits appurtenant or related to such Lease, the “Leased Real Property”). The Leased Real Property constitutes
all the fee and leasehold interests in real property (A) held by Premise or (B) used in connection with the Business.
(b) Premise has valid and enforceable Leases relating to the Leased Real Property under which Premise is entitled to occupy and
use such Leased Real Property in connection with the operation of the Business, and there is no breach or default on the part of Premise
under any such Lease or, to the Knowledge of Premise, any other party to any such Lease.
(c) To the Knowledge of Premise, all of the buildings, fixtures and other improvements respecting the Leased Real Property are in
good operating condition and repair, and the operation thereof as presently conducted is not in violation of any applicable building
code, zoning ordinance or other Legal Requirements.

4.14 Intellectual Property.


(a) Section 4.14(a) of the Disclosure Schedule sets forth a true, complete and accurate list of both the Company Registered IP that is
currently active, and any material unregistered trademarks for which no applications are pending (collectively, the “Company Scheduled
IP”), indicating for each item of the listed Company Scheduled IP: (i) the record owner thereof; and (ii) the status of each such listed
Company Registered IP, including the date and description of any action that is due or recommended within 90 days of the date hereof.
Premise represents and warrants: (i) that no Person other than Premise holds any current, future, contingent or partial interest or license
in any of the Company Scheduled IP (other than in the ordinary course of business pursuant to written, nonexclusive licenses granted to
end-users or distribution rights granted to resellers or distributors); (ii) all maintenance, annuity and other fees with respect to the
Company Registered IP have been fully paid and all filings applicable thereto have been properly made; (iii) that the copyright
registration referred to on Section 4.14(a) of the Disclosure Schedule is valid, enforceable (including without limitation against the
Stockholders and third parties) and in full force and effect; (iv) that no trademark registration issuing from any of the trademark
applications would be unenforceable due to inequitable conduct or violation of the duty of candor owed to, as applicable, the United
States Patent and Trademark Office (“USPTO”) or any similar foreign registering authority; (v) that no patent issuing from any of the
patent applications would be unenforceable due to inequitable conduct or violation of the duty of candor owed to, as applicable, the
USPTO or any similar foreign registering authority; (vi) that, except for those patent applications where information disclosure statement
(IDS) submissions are identified as needing to be filed, preferably within the next 90 days, as set forth

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on Section 4.14(a) of the Disclosure Schedule, neither Premise nor any agent or representative of Premise has failed to disclose any
material information or prior art to, as applicable, the USPTO or any similar foreign registering authority; (vii) that, except as set forth on
Section 4.14(a) of the Disclosure Schedule, Premise has not claimed small entity status in any registrations, applications or filings made
with the USPTO; (viii) that Premise is not, and will not with the passage of time or satisfaction of conditions become, obligated to make
any payment to any Person in connection with the exploitation of any of the listed Company Scheduled IP; (ix) that Premise has good
and valid title to all of the listed Company Scheduled IP, free and clear of any Liens, except for Permitted Liens; (x) that there is no
trademark included in the listed Company Registered IP that is now involved in, or has been involved in, any opposition or cancellation
proceeding and, with respect to trademarks included in Company Scheduled IP, Premise has not received any notice of any third party
having superior rights to Premise concerning the use of such trademarks; and (xi) that no patent or patent application included in the
listed Company Registered IP is now involved in any interference, reissue or reexamination proceeding. Except as set forth on
Section 4.14(a) of the Disclosure Schedule, within the past twelve (12) months, no Company Registered IP has lapsed or become
abandoned for any reason.
(b) Section 4.14(b) of the Disclosure Schedule (i) sets forth a true, complete and accurate list of all Company Licensed IP (including
without limitation Software, Software Documentation and trade secrets) that is (A) incorporated into the products of Premise or provided
to customers by Premise in connection with products or services of Premise, indicating which of the Software Products such Company
Licensed IP is incorporated into, (B) “resold” or sublicensed to customers by Premise, (C) used by Premise in the development of
Software Products or used as a development tool (excluding commercially available, noncustomized software and PC applications at an
aggregate cost of less than $15,000 for current use by Premise, such as Word or Windows, that are not incorporated into Premise’s
products (“Off-the-Shelf Software”)) or (D) material to the Business and is not covered under clauses (A), (B) or (C); (ii) identifies the
license or other Contract pursuant to which such Company Licensed IP is being licensed to or used by Premise (each, a “License-In
Agreement”); (iii) identifies, to the extent applicable, any material limitation on the use or distribution of Company Licensed IP; (iv) sets
forth, to the extent applicable, the number or quantity of copies of the Company Licensed IP that Premise is permitted to use or distribute
and the number or quantity that Premise is using or distributing; and (v) sets forth a complete and accurate list of the amount of any
remaining unused prepaid royalty and identifies those License-In Agreements under which such royalty or license fee (excluding fees for
maintenance and support) was paid or will become payable by Premise by reason of the passage of time, use or exploitation of the
Intellectual Property licensed thereunder. True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of
all License-In Agreements entered into by Premise on or prior to the date hereof have been provided to Eclipsys and true, complete and
accurate copies (or, as to oral Contracts, written summaries of the terms) of any License-In Agreements entered into by Premise after the
date hereof and prior to or on the Closing Date will be provided to Eclipsys promptly after being so entered into. There are no terms of
any License-In Agreements not set forth in the copies thereof provided to Eclipsys. The terms and conditions of all of the License-In
Agreements were negotiated at arm’s length. Without limiting the foregoing, Premise has acquired rights to all Company Licensed IP
(including without limitation Off-the-Shelf Software) in sufficient quantities and of sufficient scope to cover all of Premise’s past and
current use(s) and copies of the Company Licensed IP and those reasonably anticipated to be needed (x) for internal use

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during the year after the Closing Date in accordance with current business plans and (y) for the duration of the terms (including during
any periods subject to a renewal right) of any Contract with or binding on Premise or its properties pursuant to which Company Licensed
IP is used by third parties. Furthermore, the rights licensed under each License-In Agreement shall be exercisable by Premise on and after
the Closing Date to the same extent and at the same cost as Premise had prior to the Closing Date, and no Person granting rights under
any License-In Agreement has threatened or given notice in writing or in such other form as permitted by such License-In Agreement to
the Major Stockholders or Premise or that it intends to terminate such License-In Agreement prior to the expiration of the existing term
thereof or to deny any request for an extension of such term and Premise has not breached and is not in breach of any material term of
any License-In Agreement.
(c) Section 4.14(c) of the Disclosure Schedule sets forth a true, complete and accurate list of the material Software and Software
Documentation of Premise, with respect to which Premise represents and warrants: (i) that no Person other than Premise (including
without limitation any Stockholder) holds any current, future, contingent or partial interest or license in any of the listed Software or
Software Documentation (excluding rights granted under (x) and (y) hereof); (ii) Premise has good and valid title to all Software and
Software Documentation, free and clear of any Liens, except for Permitted Liens; (iii) that Premise is not, and will not with the passage of
time or satisfaction of conditions become, obligated to make any payment to any Person in connection with the manufacture, use, sale,
importation, distribution, display, modification or other exploitation of the listed Software or Software Documentation; and (iv) that
Premise is free to make, use, modify, copy, distribute, sell, license, import, export and otherwise exploit the Software and Software
Documentation on an exclusive basis subject only to nonexclusive: (x) use pursuant to end-user licenses granted to customers;
(y) distribution rights granted to the resellers or distributors pursuant to written agreements and listed in Section 4.14(c) of the
Disclosure Schedule; and (z) nondisclosure or confidentiality agreements pursuant to which any Person has been granted access to the
listed Software but in which such agreement does not grant the right to exploit such listed Software; in each case of (x) through (z) in the
ordinary course of business consistent with past practice and disclosed to Eclipsys prior to the date hereof, including without limitation
the provision of true and accurate copies of such applicable form(s) and agreement(s).
(d) All Company Owned IP was created solely by employees or contractors of Premise and without any participation or funding by
any Governmental Entity or other Person. Premise has where necessary required each Person who has contributed to, or participated in
the creation or development of, any of the Software Products or other Company Owned IP to execute and deliver to Premise an
agreement assigning all rights in the Software Products and other Company Owned IP to Premise, in form(s) delivered to Eclipsys.
(e) Premise has taken reasonable measures and precautions to protect, preserve and maintain the confidentiality and secrecy of all
Premise trade secrets and other confidential information material to the Business, including at a minimum: (i) maintaining the security of
its facilities and systems so that confidential information and trade secrets are not available to Persons who are not authorized to have
access; (ii) policing the use of such information; and (iii) taking appropriate action to address any misuse or compromise of the
confidentiality of such information. None of the Major Stockholders or Premise has disclosed or

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delivered or has permitted to be disclosed or delivered to any Person, and no Person has access to (other than employees or agents of
Premise) or has any rights with respect to, Premise trade secrets and other confidential or proprietary information material to the
Business, the source code or any portion of the source code related to the Software Products or otherwise material to the Business or
any proprietary information or algorithm contained in any source code related to the Software Products or of any other Software that
comprises Company Owned IP, other than instances where (A) such trade secrets, confidential information and source code have been
disclosed subject to and in accordance with the terms of a written agreement with any Person pursuant to which such Person is required
to maintain, and has not breached, the confidentiality thereof, or where (B) such trade secrets, confidential information or source code
have been disclosed in any of the Company Registered IP. Without limiting the generality of the foregoing, and with respect to instances
of disclosure under 4.14(e)(A), true and correct copies of such form(s) of such agreements have been provided to Eclipsys; all such
agreements are valid, enforceable and in full force and effect. Section 4.14(e) of the Disclosure Schedule sets forth all Software escrow
Contracts relating to the Software Products or any other Software that comprises Company Owned IP, the parties to such escrow
Contracts and the code escrowed pursuant to such escrow Contracts. No code has ever been released pursuant to any such escrow
Contract. True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of all such escrow Contracts have
been provided to Eclipsys.
(f) Premise represents and warrants that:
(i) The making, using, selling, offering for sale, exporting or importing of the Software Products and services offered by
Premise (including current Software Products as well as the planned products and services of Premise set forth on Section 4.14(f)(i)
of the Disclosure Schedule as currently designed and intended to be implemented, marketed and used) has not (whether directly,
indirectly or contributorily) infringed, misappropriated, diluted or otherwise used without authorization, is not (whether directly,
indirectly or contributorily) infringing, misappropriating, diluting or otherwise using without authorization, and will not (whether
directly, indirectly or contributorily) infringe, misappropriate, dilute or otherwise use without authorization any intellectual property
rights (other than foreign patents) of any other Person or, to the Knowledge of Premise, any foreign patent.
(ii) Premise has not received (A) any notice or claim (oral or written) in the past six (6) years, and no Person has threatened
during such period to provide a notice or claim alleging or asserting that any such infringement, misappropriation, violation,
dilution or unauthorized use is or may be occurring, or has or may have occurred, or (B) any written notice or claim alleging or
asserting that any such infringement, misappropriation, violation, dilution or unauthorized use is or may be occurring, has or may
have occurred or will occur under any circumstances.
(iii) No confidential information, invention or other Intellectual Property owned by any current or former employee or
consultant of Premise, or by any third-party employer or customer any current or former employee or consultant of Premise, is
incorporated into, used or relied upon in the products or services of Premise.

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(iv) There is no pending or threatened claim or demand that challenges the ownership, legality, validity, enforceability, use,
exploitation or modification by Premise of Company Owned IP or any of the products or services of Premise or, to the Knowledge
of Premise, the Intellectual Property used by Premise in its operations or Software Products (including the Company Licensed IP)
not included in Company Intellectual Property, and, to the Knowledge of Premise, no facts or circumstances exist that could
reasonably be expected to result in such a claim or demand. No Company Owned IP or any of the products or services of Premise
or, to the Knowledge of Premise, the Intellectual Property used by Premise in its operations or Software Products (including the
Company Licensed IP) not included in Company Intellectual Property is subject to any outstanding Order restricting the use
thereof by Premise or, in the case of any Intellectual Property licensed by Premise to others, restricting the sale, transfer,
assignment or licensing thereof by Premise to any Person.
(v) Premise has the right to grant the licenses it grants in the course of its business.
(vi) The Company IP held by Premise: (A) constitutes all of the Intellectual Property used in or necessary for the conduct of
the Business; and (B) constitutes all of the Intellectual Property necessary to operate the Business after the Closing in
substantially the same manner as the Business has heretofore been operated by Premise (including for such purposes, current
Software Products as well as the planned products and services of Premise set forth on Section 4.14(f)(i) of the Disclosure
Schedule as currently designed and intended to be implemented, marketed and used), except in each case, for the development
work of Premise that has not been completed for the planned products and services of Premise set forth on Section 4.14(f)(i) of the
Disclosure Schedule.
(g) To the Knowledge of Premise, no Person is infringing or misappropriating any Company Owned IP in any respect or making any
unlawful use of any products of Premise in any respect. None of the Major Stockholders or Premise (including its representatives) has
given notice to any Person in the last three years of any such infringement, misappropriation or unlawful use or alleged infringement,
misappropriation or unlawful use. Premise has not initiated, nor is it maintaining before a court or in an arbitration proceeding, claims or
causes of action against any other Person for infringement or misappropriation by such Person of Company Owned IP (including claims
for past infringement or misappropriation of Intellectual Property). Premise has not, during the last twelve months, threatened in a writing
sent by the legal counsel of Premise to initiate such proceeding.
(h) No Software Product, contains any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or other
Software routines or hardware components designed to permit unauthorized access or to disable or erase Software, hardware or data
without the consent of the user.
(i) The existing and currently manufactured and marketed products of Premise, including the Software Products, in all material
respects, have the features and perform the functions described in (i) any agreed specifications, responses by Premise to requests for

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proposals or end user documentation provided to customers (including potential customers who later become customers) of Premise and
(ii) any Contracts or representations made by Premise or its representatives (either orally or in writing) that such customers could
reasonably rely on in deciding to purchase the products (notwithstanding any subsequent disclaimer of any representations or
warranties) or would reasonably be expected to rely upon when licensing or otherwise acquiring such products, in each case, subject to
subsequent changes requested by the customer and to standard nonmaterial error and maintenance items addressed by Premise in the
ordinary course of business. Excluding error and maintenance items resolved by Premise in the ordinary course of business, Premise has
not received any notice or complaints alleging that such products do not perform as described. There are no material errors or omissions
in the design, creation, implementation or maintenance of any of the Software Products. Premise has performed all obligations (legal and
contractual) required to be performed by it under the Contracts with customers and it is not (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect thereunder, and, with respect to material obligations required to be
performed under such Contracts that are not yet due, there is no reason to expect that such obligations will not be fulfilled when they
become due.
(j) No current Software Product and none of the planned products and services of Premise set forth on Section 4.14(f)(i) of the
Disclosure Schedule as currently designed and intended to be implemented, marketed and used is, in whole or in part, subject to the
provisions of any open source, quasi-open source or other source code license agreement that (i) requires the distribution of source
code in connection with the distribution of the licensed Software in object code form; (ii) prohibits or limits Premise or any Affiliate from
charging a fee or receiving consideration in connection with sublicensing or distributing such licensed Software (whether in source code
or object code form); or (iii) allows a customer or requires that a customer have the right to decompile, disassemble or otherwise reverse
engineer the Software by its terms and not by operation of law, including without limitation, any version of any of the following:
(A) GNU’s General Public License (“GPL”) or Lesser/Library GPL, (B) The Artistic License (e.g., PERL), (C) the Mozilla Public License,
(D) the Netscape Public License, (E) the Berkeley software design (“BSD”) license including Free BSD or BSD-style license, (F) the Sun
Community Source License, (G) an Open Source Foundation License (e.g., CDE and Motif UNIX user interfaces), and (H) the Apache
Server license.
(k) Premise has taken all reasonable actions customary in the United States software industry to document any Software and its
operation that is part of the Company Owned IP, such that the Software, including the source code, and Software Documentation:
(i) have been written in a clear and professional manner so that they may be understood, modified, maintained, enhanced and
debugged in an efficient manner by programmers of ordinary skill in the art and comply with all applicable contractual
requirements;
(ii) fully describe the programming of the Software, including specifications, functional and flow diagrams, tracked changes to
each version of the Software; and

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(iii) allow debugging of the software and addition and changes of personnel who maintain and enhance the Software without
undue experimentation and exploration.
(l) Premise has not exported or transmitted Software, trade secrets or any other technical information, including any technical data,
or the direct product of such data, to or in any country to which such export or transmission or creation is restricted by any applicable
Legal Requirement, without first having obtained all necessary and appropriate United States or other Government Entity Permit(s).
(m) Section 4.14(m) of the Disclosure Schedule identifies all Software Products and any other Software that comprises Company
Owned IP that incorporate encryption subroutines, listing for each applicable Software Product or other Software the modules upon
which such subroutines operate and the type of encryption employed with respect to each such module.
(n) (i) Each Contract relating to Company IP (each, a “Company IP Contract”) is valid, binding and in full force and effect and is
enforceable by Premise in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws relating to creditors’ rights and general principles of equity, whether in equity or at law;
(ii) Premise has performed all material obligations required to be performed by it under the Company IP Contracts and it is not
(with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder;
(iii) To the Knowledge of Premise, no other party to any of the Company IP Contracts is (with or without the lapse of time or
the giving of notice, or both) in breach or default in any material respect thereunder; and
(iv) True, complete and accurate copies (or, as to oral Contracts, written summaries of the terms) of the Company IP Contracts
entered into on or prior to the date hereof have been provided to Eclipsys, and true, complete and accurate copies (or, as to oral
Contracts, written summaries of the terms) of any Company IP Contracts entered into after the date hereof will be provided to
Eclipsys promptly after being so entered into.
(o) Neither the execution and delivery by Premise or the Major Stockholders of this Agreement and the other Transaction
Documents, nor the consummation of the transactions contemplated herein and therein in accordance with the terms hereof and thereof,
will violate, or conflict with, or result in a breach of any provision of, or constitute a material default (or an event that, with notice or lapse
of time or both, would constitute a breach or default) under, or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the triggering of any payment obligations under or additional grant, or vesting of any
grant, of rights by Premise under, or result in the impairment or diminution of rights granted to Premise by, or result in the creation of any
Lien

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upon any of the material properties of Premise under, or result in being declared void, voidable or without further binding effect, any of
the provisions of any Company IP Contract. Premise has not (i) transferred ownership of, or granted any exclusive license of, or exclusive
right to use, or authorized the retention of any exclusive rights to use, or joint ownership of, any material Intellectual Property that is or
was Company Owned IP to any other Person or (ii) permitted the Company’s rights in such material Company Owned IP to lapse or enter
into the public domain.
(p) With respect to third-party Software provided by Premise to customers:
(i) the rights provided by Premise to the customer are within the scope of what Premise is permitted to provide pursuant to
Premise’s Contract with the third-party provider thereof;
(ii) Premise has obtained from the customer all end-user agreements and other commitments required by the third-party
provider thereof; and
(iii) any obligations undertaken by Premise in respect of the third-party Software (for example, but without limitation,
representations regarding features or functionality, maintenance commitments and indemnities) are consistent with, and do not
exceed, the corresponding obligations of the third-party provider thereof to Premise.
(q) The Software Products will, in their intended and ordinary use, not cause the violation of any applicable Legal Requirements
restricting the collection, use, retention or distribution of personally identifiable information, including without limitation the Health
Insurance Portability and Accountability Act of 1996 and the regulations issued by the United States Department of Health and Human
Services thereunder (collectively, “Privacy Regulations”). Premise has not violated and is not violating any Privacy Regulations, and
the continuation of the Business substantially consistent with past practices, including the continued use of all Company Owned IP,
after the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, will not violate any
Privacy Regulations.

4.15 Other Assets.


(a) Premise owns beneficially and of record, and has good and valid title to, all assets reflected on the balance sheet of Premise as
of December 31, 2007, contained in the Year-End Financial Statements or thereafter acquired (except those sold or otherwise disposed of
since December 31, 2007 in the ordinary course of business consistent with past practice and not in violation of this Agreement), in each
case subject only to Permitted Liens.
(b) All the material tangible personal property used or owned by Premise has been maintained in accordance with generally
accepted industry practice and is in good operating condition and repair, ordinary wear and tear excepted.
(c) All of the books and records of Premise (including without limitation, the financial records and minute books of Premise) are
true, complete and accurate in all material respects and have been maintained in accordance with generally accepted business practices.
Premise has made true, complete and accurate copies of such books and records available to Eclipsys, and at the Closing, all of such
books and records will be in the possession of Premise.

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4.16 Environmental Matters. Except as has not and would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect: (a) Premise is now and always has been in compliance with all Environmental Laws; (b) Premise has all Permits necessary
under Environmental Laws for the conduct and operation of the business as now being conducted by Premise and, to the Knowledge of
Premise, all such Permits are in good standing; (c) there is not now, and to the Knowledge of Premise there has not been, any Hazardous
Material used, generated, treated, stored, transported, disposed of, released, handled or otherwise existing on, under, about or emanating from
or to any property owned, leased or operated by Premise except in compliance with all applicable Environmental Laws; (d) neither Premise nor,
to the Knowledge of Premise, any of the Major Stockholders (with respect to Premise or the Business) has received any notice of alleged,
actual or potential responsibility for, or any inquiry or investigation regarding, any release or threatened release of Hazardous Material or
alleged violation of, or noncompliance with, any Environmental Law, nor to the Knowledge of Premise is there any basis for such a notice or
claim; (e) there is no site to which Premise has transported or arranged for the transport of Hazardous Material, which, to the Knowledge of
Premise, is or may become the subject of any environmental action; and (f) to the Knowledge of Premise, no event has occurred, and no
circumstance or condition exists that, with or without notice or lapse of time, or both, might form the basis of any Liability of Premise pursuant
to Environmental Laws.

4.17 Insurance.
(a) Section 4.17(a) of the Disclosure Schedule contains a true and complete list of all liability, property, workers’ compensation,
directors’ and officers’ liability, life and other insurance policies in effect at any time since January 1, 2005 that insure or did insure the
business, operations, directors or employees (including for such purposes persons filling a similar function) of Premise or affect or relate
to the ownership, use or operation of any of the property or assets (both past and present) of Premise, whether issued to Premise or to
any other Person for the benefit of Premise (collectively, the “Insurance Policies”). For each Insurance Policy, Section 4.17(a) of the
Disclosure Schedule lists (i) the names and addresses of the insurers, (ii) the names of the Persons to whom such policies have been
issued (including additional insureds), (iii) the expiration dates thereof, (iv) whether the policies are currently in effect, (v) the annual
premiums and payment terms thereof, (vi) whether it is a “claims made” or an “occurrence” policy, (vii) any self insured retention or
deductible, (viii) the aggregate limit of the policy and the currently available limit and (ix) a brief description of the interests insured
thereby. Premise has provided Eclipsys with true, accurate and complete copies of each Insurance Policy.
(b) With respect to Insurance Policies currently in effect: (i) the insurance coverage provided by the Insurance Policies will not
terminate or lapse by reason of consummation of the transactions contemplated by this Agreement and the other Transaction
Documents; (ii) to the Knowledge of Premise, the Insurance Policies are sufficient for compliance with all applicable Legal Requirements
and Contracts to which Premise is a party or by which its property or assets are bound; (iii) the Insurance Policies do not provide for any
retrospective premium adjustment or other experienced-based liability on the part of Premise; and (iv) no side agreements or other
Contracts exist that alter the terms of the Insurance Policies. Each current Insurance Policy is valid and binding and in full force and
effect, no premiums due thereunder have not been paid and neither Premise nor, to the Knowledge of Premise, any Major Stockholder or
Person to whom such policy has been issued has received any notice of cancellation or termination in respect of any such policy or is in
default thereunder.

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(c) Section 4.17(c) of the Disclosure Schedule contains a listing of all material open claims made or otherwise asserted by Premise or
its officers, directors or employees (including for such purposes persons filling a similar function) against any Insurance Policy. Neither
Premise nor, to the Knowledge of Premise, any Major Stockholder or Person to whom any Insurance Policy has been issued, has
received written notice that any insurer under such Insurance Policy is denying liability with respect to a claim thereunder or defending
under a reservation of rights clause or, to the Knowledge of Premise, indicated any intent to do so or not to renew any such policy. All
material claims under the Insurance Policies have been filed in a timely fashion. To the Knowledge of Premise, the activities and
operations of Premise have been conducted in a manner so as to conform in all material respects to all applicable provisions of the
Insurance Policies. Neither Premise nor, to the Knowledge of Premise, any Major Stockholder or other Person to whom any Insurance
Policy has been issued, has failed to disclose any fact to the insurance companies or failed to take any other action, the consequences of
which nondisclosure or failure to take action would render any Insurance Policy void, or voidable, or suspend, impair or defeat in whole
or in part the insurance coverage issued thereunder. Neither Premise nor, to the Knowledge of Premise, any Major Stockholder or other
Person to whom any Insurance Policy has been issued (with respect to Premise or the Business), has received (A) any refusal of
coverage from any insurer from which Premise or such other Person sought coverage, (B) any notice that a defense will be afforded with
reservation of rights, (C) any notice of cancellation or termination or any other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder or (D) any
notice that Premise or such other Person is in default under any Insurance Policy; and to the Knowledge of Premise, no event has
occurred and no circumstance or condition exists that, with or without notice or lapse of time or both, might form the basis of any such
notice or refusal.

4.18 Warranties.
(a) Premise has delivered to Eclipsys complete and accurate copies of all written warranties that are in effect with respect to
Premise’s products and services, including the Software Products. There have not been any material deviations from such warranties and
none of the employees or agents of Premise (i) is authorized to undertake obligations to any customer or to other third parties which
expands such warranties, or (ii) to the Knowledge of Premise, has made any oral warranty with respect to such products or services of
Premise. Section 4.18(a) of the Disclosure Schedule sets forth a list of all Warranty Claims currently made in writing against Premise or
otherwise, to the Knowledge of Premise, Threatened, and Premise’s reasonable judgment of the estimate of the aggregate Liability of
Premise in respect of such Warranty Claims. Such estimate was prepared in good faith, based on the Knowledge of Premise, although
Premise and the Major Stockholders do not provide any assurance that such aggregate Liability will not be exceeded. The foregoing
sentence does not limit the Stockholders’ liability under Article VII.

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(b) Without limiting the foregoing, Section 4.18(b) of the Disclosure Schedule includes all material documentation and other written
materials pertaining to the Software Products that has been developed by or for Premise and distributed to any customers of Premise (the
“Customer Documentation”). The Software Products conform to the Customer Documentation in all material respects and Premise has
not made any material representations or commitments regarding features or functionality of the Software Products other than as set
forth in the Customer Documentation.
(c) Since January 1, 2006, no former customer has, and no current customer has at any time, (i) made any claim or assertion that the
Software Products do not conform in any material respect to commitments made by Premise, (ii) cancelled any Contract with Premise or
(iii) refused to accept, or demanded a full or partial refund or abatement of purchase price for, Software Products delivered by Premise
pursuant to any Contract.
(d) Premise has not, with respect to former customers since January 1, 2006, and with respect to current customers at any time,
(i) given any rebates or refunds on license, installation or support fees that any customers have contracted to pay, (ii) made any
commitments to provide future services or Software without payment by the recipient thereof of Premise’s ordinary fees, other than
discounts provided for in sales contracts with customers as a sales term at the time of original sale of products, in the ordinary course of
business consistent with past practice, and not as a service credit or other concession, (iii) made any commitment to deliver any specific
results or outcomes to any customer, (iv) had a material cost overrun (i.e., costs in excess of estimates) for any consulting services or
(v) committed to deliver to any customer any Software, or features or functionality thereof, that did not exist on the date the commitment
was made.

4.19 Customers; Suppliers.


(a) Section 4.19(a) of the Disclosure Schedule sets forth a complete and accurate list of all Contracts with customers of Premise for
the license of Software and the provision of related services executed from January 1, 2007 to the date hereof, showing for each such
Contract: (i) whether it is a subscription license or perpetual license; (ii) the contractual amounts due for the Software license fees;
(iii) the aggregate implementation, training, professional and consulting services fees; (iv) the aggregate annual maintenance fees; (v) if a
subscription Contract, the subscription fee; (vi) the total revenue expected from the Contract; and (vii) the date the Contract was
executed.
(b) Other than nonmaterial occurrences in the ordinary course of business that have been remedied, since January 1, 2006, Premise
has not received from: (i) any current or former customer any written notice or assertion of material breach, misrepresentation, breach of
warranty (including Warranty Claims), Software defects, design errors or malfunctions or other failures of Premise to deliver upon any
promises or legal or contractual obligations, and, to the Knowledge of Premise, no such assertion of breach, misrepresentation, breach of
warranty (including Warranty Claims), Software defects, design errors or malfunctions, or other failures have been otherwise Threatened,
nor to the Knowledge of Premise, has any event occurred, or does any circumstance or condition exist that, with or without the giving of
notice or lapse of time, or both, might form the basis of any such notice or assertion; or (ii) any current customer

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any written notice that such customer has ceased or intends to cease or terminate its use of the products or services of Premise, or
materially reduced or intends to materially reduce such use, whether or not as a result of the transactions contemplated hereby, or has
sought to reduce the price that it pays for such products and services, and, to the Knowledge of Premise, no customer has otherwise
Threatened such a cessation, termination, or material reduction in use or price or intends to provide such notice.
(c) Section 4.19(c) of the Disclosure Schedule sets forth a complete and accurate list of all present and past suppliers of Premise
from which Premise ordered supplies or other products or services with an aggregate purchase price of more than $10,000 during the
years ended December 31, 2007 and 2006, or during the 11 months ended November 30, 2008, showing for each the type of product or
service purchased, and the amount of such purchases, during such periods.
(d) Neither Premise, nor, to the Knowledge of Premise, any of the Major Stockholders, has received from: (i) any current supplier or,
since January 1, 2006, any former supplier, any notice or assertion of material breach, misrepresentation, breach of warranty or other
failures of Premise to deliver upon any promises or legal or contractual obligations, nor to the Knowledge of Premise, has any event
occurred, or does any circumstance or condition exist that, with or without the giving of notice or lapse of time, or both, might form the
basis of any such notice or assertion; or (ii) any current supplier any notice that such supplier has ceased or intends to cease or
terminate supplying the products or services to Premise, or materially reduced or intends to materially reduce such supply, whether or
not as a result of the transactions contemplated hereby, or has sought to increase the price that Premise pays for such products and
services, other than general and customary price increases in the ordinary course of business, consistent with past practice, and, to the
Knowledge of Premise, no supplier intends to provide such notice.

4.20 Accounts Receivable. Section 4.20 of the Disclosure Schedule sets forth the Accounts Receivable of Premise as of the date of the
Interim Financial Statements, with the aging of each such Account Receivable. Such Accounts Receivable represent valid obligations of the
obligor thereunder and arose in the ordinary course of business of Premise. The Accounts Receivable of Premise arising after the date of the
Interim Financial Statements represent valid obligations of the obligor thereunder and arose in arm’s length transactions in the ordinary course
of business. All of such Accounts Receivable, that have not been paid, are collectible in the ordinary course of business, net of the reserves
shown on Premise’s balance sheet, provided that Premise makes no representation with respect to the Grady Receivable. No obligor under any
Accounts Receivable has disputed or refused to pay all or any portion thereof.

4.21 Accounts Payable. Section 4.21 of the Disclosure Schedule sets forth all Accounts Payable as of a date no more than five Business
Days prior to the date hereof, with the date incurred, creditor and amount of each Accounts Payable. Such Accounts Payable arose, and as of
the Closing, the Accounts Payable reflected in the Estimated Closing Date Net Working Capital calculation (the list of which, in the same
format as Section 4.21 of the Disclosure Schedule, will be provided to Eclipsys on or before the Closing) and the Final Closing Date Net
Working Capital calculation, will have arisen in arm’s length transactions in the ordinary course of business of Premise. No Accounts Payable
are delinquent, and there are no bills representing amounts alleged to be owed by Premise, or other alleged obligations of Premise, which
Premise has disputed or determined to dispute or refuse to pay all or any portion thereof.

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4.22 Bank Accounts. Section 4.22 of the Disclosure Schedule sets forth the names and locations of all banks and other financial
institutions at which Premise maintains accounts of any nature and the names of all persons authorized to draw thereon or make withdrawals
therefrom.

4.23 No Brokers. Except for Montgomery & Co., no broker, finder or similar agent has been employed by or acted on behalf of, directly or
indirectly, Premise or any of its Affiliates or agents, in connection with this Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby. Neither Premise nor any of its Affiliates has entered into any arrangement or other Contract with any Person,
or taken any other actions, which could obligate any Stockholder, Eclipsys, Premise or any of their respective Affiliates to pay any brokerage
commission, finder’s fee or any similar compensation in connection with this Agreement, the other Transaction Documents or the transactions
contemplated hereby and thereby, except for the letter agreement, dated June 3, 2008, with Montgomery & Co.

4.24 Disclosure.
(a) None of the information included in any information statement relating to a meeting of the Stockholders to be held in connection
with the Merger, or action by written consent in lieu thereof will, at the date delivered to the Stockholders and at the date of such
meeting or consent, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.
(b) No representation or warranty of Premise contained in this Agreement, the Transaction Documents to which it is a party or the
certificates delivered pursuant to this Agreement or such Transaction Documents, and no statement contained in the Disclosure
Schedule or such certificates, contains, or will contain upon delivery as set forth herein, any untrue statement of a material fact, or omits,
or will omit upon delivery, to state any material fact necessary in order to make the statements herein or therein, in light of the
circumstances under which it was or will be made, not misleading.
(c) To the Knowledge of Premise, there is no fact or circumstance existing or event that has occurred that has specific application to
Premise that has had or is reasonably likely to have a Material Adverse Effect that has not been set forth in this Agreement, including
the Disclosure Schedule.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ECLIPSYS AND MERGER SUB

Eclipsys and Merger Sub, jointly and severally, represent and warrant to Premise, as of the date of this Agreement and as of the Closing
Date, as follows:

5.1 Existence; Good Standing; Corporate Authority. Each of Eclipsys and Merger Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. Each of Eclipsys and Merger Sub is duly licensed or qualified to do business as
a foreign corporation and is in good standing under the laws of each other state of the United States in which such qualification is required,
except where the failure to be so qualified or in good standing would not have a material adverse effect on Eclipsys and its subsidiaries, taken
as a whole.

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5.2 Authorization, Validity, and Effect of Agreements. Each of Eclipsys and Merger Sub has the requisite corporate power and authority
to execute and deliver this Agreement and the other Transaction Documents to be executed by it and the consummation by Merger Sub of the
Merger, and by Eclipsys and Merger Sub of the other transactions contemplated herein and therein, has been duly authorized by all requisite
corporate action on the part of each of Eclipsys and Merger Sub. This Agreement constitutes, and the other Transaction Documents to be
executed by Eclipsys and Merger Sub (when executed and delivered pursuant hereto) will constitute, the valid and legally binding obligations
of Eclipsys and Merger Sub, respectively, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization or other similar laws relating to creditors’ rights and general principles of equity, whether in
equity or at law.

5.3 No Violation. Neither the execution and delivery by each of Eclipsys and Merger Sub of this Agreement or the Transaction
Documents, nor the consummation by either of Eclipsys or Merger Sub of the transactions contemplated herein and therein in accordance with
the terms hereof and thereof, will:
(i) conflict with or result in a breach of any provisions of the certificate of incorporation or bylaws of Eclipsys or Merger Sub,
as applicable;
(ii) violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any Lien upon any of the material properties of Eclipsys or
Merger Sub under, or result in being declared void, voidable or without further binding effect, any of the terms, conditions or
provisions of any material Contract to which Eclipsys or its Subsidiaries is a party, or by which any of their respective assets or
properties are bound; or
(iii) require any Consent to be made by or with respect to Eclipsys or Merger Sub (other than approvals by their respective
boards of directors, and the stockholder of Merger Sub, each of which have been obtained).

5.4 Legal Proceedings; Orders. There is no pending proceeding by or against Eclipsys or Merger Sub, or their respective officers and
directors (as such), that challenges or, to the knowledge of Eclipsys and Merger Sub, that may have the effect of preventing, delaying, making
illegal or otherwise materially interfering with the Merger and any other transactions contemplated in this Agreement. To Eclipsys’ and Merger
Sub’s knowledge, no such proceeding has been Threatened.

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5.5 No Brokers. Neither Eclipsys nor any of its Subsidiaries has entered into any Contract with any Person, or taken any other action,
which may result in the obligation of any other party to this Agreement to pay any finder’s fees, brokerage or agent’s commissions or other
like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby,
except for the engagement letter with Piper Jaffray & Co., for which all obligations thereunder Eclipsys shall be solely liable.

5.6 Funds. Eclipsys will have at the Closing Date the funds necessary to pay the Closing Payment and the Deferred Payment Amount in
accordance with this Agreement.

ARTICLE VI
COVENANTS

6.1 Conduct of Business. Except as expressly consented to in writing by Eclipsys, from the date hereof to the earlier of the termination of
this Agreement or the Closing Date, Premise shall:
(a) to conduct its business according to the usual, regular and ordinary course in substantially the same manner as heretofore
conducted;
(b) to preserve intact its business organization and goodwill, and use its commercially reasonable efforts to (i) keep available the
services of its officers and employees (including for such purposes persons filling a similar function), and (ii) maintain satisfactory
relationships with its customers, suppliers and other Persons having business relationships with it in substantially the same manner as
heretofore maintained;
(c) to confer on a regular basis with one or more representatives of Eclipsys, including to report material operational matters and
any proposals of Premise to engage in material transactions, and to provide such other information as Eclipsys may reasonably request;
(d) not to amend the organizational documents of Premise;
(e) to notify Eclipsys within one Business Day of (i) any material change in the condition (financial or otherwise) of the business,
properties, assets, Liabilities or prospects of Premise, (ii) any material litigation or material complaints, investigations or hearings of any
Governmental Entity or other Person (or communications indicating that the same may be contemplated) against Premise or involving the
business, operations or properties of Premise, or (iii) the breach in any material respect of any representation or warranty or covenant
contained herein;
(f) to deliver to Eclipsys within one Business Day any material report, statement, schedule or correspondence (i) filed or submitted
by Premise, or (ii) received by or, to the Knowledge of Premise, on behalf of Premise from, any Governmental Entity;
(g) not to (i) issue any Capital Stock (other than the issuance of Company Common Stock or Series B Preferred Stock (1) upon
exercise of the Company Options and Company Warrants pursuant to the terms thereof and (2) upon conversion of the Series B
Preferred Stock pursuant to the Premise Certificate of Incorporation), effect any stock split or

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combination, reclassify the Shares or otherwise change its capitalization from that which existed on the date of the Interim Financial
Statements, (ii) grant, confer or award any option, warrant, conversion right or other right to acquire any of its Capital Stock, (iii) increase
any compensation or benefits or enter into or amend any employment, severance, termination or similar Contract with any of its present
or future employees (including for such purposes persons filling a similar function), officers or directors, except for normal increases in
compensation and benefits to employees consistent with past practice, (iv) adopt any new employee benefit plan (including any stock
option, restricted stock or stock purchase plan) or amend any existing employee benefit plan in any respect materially adverse to Premise,
except for changes which may be required by applicable Legal Requirements, or (v) increase the amount, or expand the scope, of any
indemnification currently provided for employees (including for such purposes persons filling a similar function), officers or directors;
(h) not to (i) declare, set aside or pay any dividend or make any other distribution or payment with respect to any of its Shares, or
(ii) directly or indirectly redeem, purchase or otherwise acquire any of its Capital Stock;
(i) not to sell, lease, license or otherwise dispose of any assets, or enter into any commitment to do so (other than licenses of its
products in the ordinary course of business consistent with past practice);
(j) except in the ordinary course of business consistent with past practice, to use commercially reasonable efforts to maintain the
assets and properties of Premise in substantially the same condition existing as of the date of this Agreement;
(k) not to (i) incur or assume any Debt or issue any Debt securities, (ii) assume, guaranty, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise) for the obligations of any other Person, (iii) modify in any manner
adverse to Premise any outstanding Debt or other obligation of Premise, (iv) pledge or otherwise encumber any Shares, or (v) mortgage
or pledge any of its assets, tangible or intangible, or create or suffer to create any Lien of any kind in respect to such assets except in the
ordinary course of business consistent with past practices;
(l) not to change any of its accounting principles or practices, except as required by GAAP;
(m) not to:
(i) acquire (by merger, consolidation or acquisition of stock or assets) any Person or division thereof or any Capital Stock of
any Person,
(ii) except (i) in the ordinary course of business consistent with past practices and (ii) as contemplated by Section 6.13(b),
enter into any Contract which would be required to be listed on Section 4.4(a) of the Disclosure Schedule if entered into prior to the
date hereof, terminate any Material Contract or amend any Material Contract in any respect materially adverse to Premise; or

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(iii) authorize any new capital expenditure or expenditures (except in the ordinary course of business consistent with past
practice or pursuant to Contracts listed in Section 4.4(a) of the Disclosure Schedule), which, individually or in the aggregate, is in
excess of $50,000;
(n) not to pay, discharge or satisfy any Liabilities, other than the payment, discharge or satisfaction in the ordinary course of
business of Liabilities reflected, reserved against or disclosed in the Interim Financial Statements, incurred in the ordinary course of
business thereafter consistent with past practice or contemplated by Section 6.13;
(o) not to settle or compromise any pending or threatened suit, proceeding, action or claim or commence any litigation that is not
fully covered by insurance maintained by Premise on the date hereof;
(p) except as required by applicable Legal Requirements, not to make any material Tax election (other than in a manner consistent
with prior practice), or take any material position on any material Tax Return filed on or after the date of this Agreement, change any
method of accounting for Tax purposes, amend any material Tax Return, settle or compromise any Tax liability or liabilities for an amount
in excess of $10,000, in the aggregate, agree to an extension of a statute of limitations, or fail to file in a timely manner any Tax Returns
(except as to filings for which a proper extension has been obtained) that become due or fail to pay any material Taxes that become due;
(q) not to loan or advance any amount to, or enter into any Contract or other transaction with, or otherwise make any payments to
any Stockholder, or any of their respective Affiliates or, with the exception of payments of salary or expense advancement in the ordinary
course of business, consistent with past practice, in their capacity as employees of Premise, any officer or director thereof;
(r) except in the ordinary course of business, not to delay or postpone the payment of any Accounts Payable or other expenses, or
accelerate collection of any Accounts Receivable;
(s) not to take any action that would knowingly result in a breach of any representation, warranty or covenant of Premise or the
Major Stockholders contained in this Agreement;
(t) take such action as is necessary under the terms of all Company Benefit Plans and any other documents governing the Company
Options to permit all Company Options to be treated in the Merger in accordance with Section 2.7(d) or (f), as applicable;
(u) take such action, if any, as is necessary under the documents governing the Company Warrants to permit all Company
Warrants to be treated in the Merger in accordance with Section 2.7(e); and
(v) except as contemplated by Section 6.6, not to take any action or fail to take any reasonable action, or agree in writing or
otherwise to take or not take any such actions, (i) having the same or similar effect, or being of the same or similar nature, as any of the
actions

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described in Sections 6.1(a) through (u), or (ii) that would or would be reasonably expected to (A) prevent or materially delay Premise or
the Major Stockholders from performing its covenants hereunder, or (B) cause or result in any closing condition not being satisfied.
The parties acknowledge and agree that (i) nothing contained in this Agreement shall give Eclipsys, directly or indirectly, the right
to control or direct Premise’s operations prior to the Effective Time, and (ii) prior to the Effective Time, Premise shall exercise, consistent
with the terms and conditions of this Agreement, complete control and supervision over its operations.

6.2 Further Action.


(a) Except as contemplated by Section 6.6, upon the terms and subject to the conditions of this Agreement, Premise, Eclipsys and
Merger Sub shall use all commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated in this
Agreement, to obtain and file in a timely manner all Consents required to consummate the transactions contemplated hereby, and
otherwise to satisfy or cause to be satisfied in all material respects all conditions precedent to their obligations under this Agreement,
provided, however, that none of Eclipsys, Merger Sub nor Premise shall be required to agree to any divestiture, transfer or license by
Eclipsys, Merger Sub or Premise or any of their respective Subsidiaries or Affiliates, of any shares of Capital Stock or of any business,
assets or property.
(b) (i) From the date of this Agreement until the termination of this Agreement or the Closing Date, Premise and the Major
Stockholders, on the one hand, and Eclipsys and Merger Sub, on the other hand, shall promptly notify the other of any fact, change,
circumstance, condition or occurrence that is reasonably likely to (A) materially adversely affect the ability of such party to obtain or file
any Consents required for the transactions contemplated in this Agreement and the other Transaction Documents or (B) materially
adversely affect the ability of such party to perform its covenants and agreements under this Agreement or the other Transaction
Documents.
(ii) Each party shall promptly notify the other parties orally and in writing if such party becomes aware of:
(A) (1) a material inaccuracy at any time of any representation or warranty contained in this Agreement of such party;
or (2) the breach of any covenant or agreement under this Agreement of such party or the inability of such party to comply
with or satisfy in any material respect any covenant, condition or agreement under this Agreement; provided, however, that
no such notification under clauses (1) or (2) shall affect the representations, warranties, covenants or agreements of any
party or the conditions to the obligations of any party hereunder; and
(B) except to the extent the facts alleged in such allegation are not disputed and expressly known by the parties, any
notice or other communication from any third party alleging that the Consent of such third party is or may be required in
connection with the transactions contemplated in this Agreement or the other Transaction Documents or that such third
party has a right to any portion of the Purchase Price.

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(c) (i) If any such changes from the capitalization set forth in Section 4.3 of the Disclosure Schedule have occurred, Premise shall
deliver a supplement to Section 4.3 of the Disclosure Schedule on or before the Closing Date that sets forth the capitalization of Premise
and holders of all outstanding Capital Stock of Premise as of the Closing Date, which supplement may solely reflect changes from the
capitalization set forth in Section 4.3 of the Disclosure Schedule as a result of the exercise of Company Options and Company Warrants
outstanding on the date hereof or conversion of shares of Series B Preferred Stock outstanding as of the date hereof, in each case,
between the date hereof and the Effective Time, provided, that such exercise or conversion is in conformity with the agreements
governing such exercise delivered to Eclipsys prior to the date hereof, the Premise Certificate of Incorporation and the terms and
conditions of this Agreement (the “Capitalization Update”).
(ii) Without limiting any other obligations hereunder, at least one Business Day prior to the Closing Date, Premise shall give
Eclipsys written notice of any matter, fact, event or circumstance, which if existing, occurring or known on the date hereof would
have been required to be set forth in the Disclosure Schedule.
(iii) Notwithstanding the foregoing, except for the Capitalization Update, no notice under this Section 6.2 shall affect or be
deemed to modify any representation or warranty contained herein or affect any rights of Eclipsys under Article VII.
(d) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the
Effective Time, each Major Stockholder agrees that (i) it will not take any affirmative action that would prevent Premise from performing
or complying with, in any material respect, any covenant or agreement of Premise under this Agreement, and (ii) it will vote any Shares
held by such Major Stockholder against any matter submitted to the Stockholders for their approval that, if implemented, would prevent
Premise from performing or complying with, in any material respect, any covenant or agreement of Premise under this Agreement.
(e) In case at any time, including after the Closing, any further action is necessary or desirable to carry out the purposes of this
Agreement, the parties agree (i) to furnish upon request to each other such further information, (ii) to execute and deliver to each other
such other documents and (iii) to use its commercially reasonable efforts to do such other acts and things, or cause to be taken such
other acts and things, all as any other party hereto may reasonably request for the purpose of carrying out the transactions
contemplated by this Agreement pursuant to the terms hereof.
(f) The Surviving Corporation shall use commercially reasonable efforts to collect, in the ordinary course of business, and
consistent with the collection policies of Eclipsys, the Accounts Receivable outstanding as of the Closing Date. Until the Holdback
Termination

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Date, the Surviving Corporation shall consult regularly with the Stockholders’ Representative on its efforts to collect the Accounts
Receivable and give the Stockholders’ Representative the opportunity to provide input into material decisions affecting such collection
and the handling thereof, including any decision to commence legal actions to collect such receivables, and shall in good faith consider
such input.

6.3 Access to Information. From the date hereof until the earlier of termination of this Agreement or the Closing Date, upon reasonable
notice and subject to applicable Legal Requirements, Premise shall provide Eclipsys and its accountants, counsel and other representatives,
(A) during normal business hours, access to all of the properties and assets, books, Contracts and other records of Premise reasonably
requested by Eclipsys and (B) any other information concerning the Business (including suppliers and customers), properties and personnel
of Premise reasonably requested by Eclipsys; provided, however, that neither Eclipsys nor any of its Affiliates, or any of their respective
agents or advisors, shall communicate with any employee, consultant, customer or supplier of Premise without the prior authorization of
Premise (which shall not be unreasonably withheld or delayed), except for communications made in the ordinary course of business. Eclipsys
shall, and shall cause its advisors and representatives to:
(i) conduct its investigation in such a manner that will not unreasonably interfere with the normal operations, customers or
employee relations of Premise; and
(ii) treat as confidential in accordance the terms hereof all information obtained hereunder or in connection herewith regarding
Premise and not otherwise known to them prior to disclosure hereunder.
No information or knowledge obtained pursuant to this Section 6.3 shall affect or be deemed to modify any representations or
warranty contained herein or affect any rights of Eclipsys under Article VII.

6.4 Publicity. The initial press release relating to this Agreement shall be in the form approved by Premise and Eclipsys. Thereafter until
the Closing Date, none of Premise, the Major Stockholders, the Stockholders’ Representative, Eclipsys or Merger Sub may make any public
statement with respect to the transactions contemplated by this Agreement or the other Transaction Documents, without the prior written
consent of Eclipsys on the one hand, and Premise, on the other hand, except to the extent disclosure is legally required (including the
requirements and rules of any stock exchange on which the common stock of Eclipsys is traded), in which case Premise and Eclipsys shall
consult with each other, and use reasonable efforts to agree upon the text prior to any such disclosure, to the extent reasonably feasible under
the circumstances.

6.5 Expenses. Except as set forth herein, including Section 9.5, all costs and expenses (including fees of attorneys, accountants and
brokers or finders) incurred in connection with this Agreement, the other Transaction Documents and the transactions contemplated hereby
and thereby shall be paid by the party incurring such expenses. Without limiting the foregoing, (a) Eclipsys shall pay the fees and expenses of
any broker engaged by Eclipsys and its Affiliates,

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including any disclosed in Section 5.5, (b) each Major Stockholder shall pay the fees and expenses of any broker engaged by such Major
Stockholder or its Affiliates, and (c) Premise shall pay the fees and expenses of any broker engaged by Premise and its Affiliates, including any
disclosed in Section 4.23, and if unpaid as of the Closing Date, shall be (i) Seller Transaction Expenses that reduce that Estimated Purchase
Price and the Purchase Price, and (ii) listed in Schedule 5.10 and payable in full at the Closing.

6.6 Third-Party Offers.


(a) From and after the date of this Agreement, until the earlier of the Closing or termination of this Agreement, Premise and each of
the Major Stockholders shall, and shall cause each of their Affiliates and their respective officers, directors, employees, representatives
(including, without limitation, any investment banker, attorney or accountant) and agents to immediately cease any discussions or
negotiations with any Persons with respect to any Third-Party Acquisition, and none of the Major Stockholders or Premise shall, or shall
authorize or permit any of its respective Affiliates or their respective officers, directors, employees, representatives (including, without
limitation, any investment banker, attorney or accountant) or agents to, directly or indirectly, encourage, solicit, participate in or initiate
any inquiries, discussions or negotiations with or provide any information or access to any Person concerning any potential Third-Party
Acquisition or that may reasonably be expected to lead to any Third-Party Acquisition or attempted Third-Party Acquisition, or
otherwise facilitate any effort or attempt to make or implement a Third-Party Acquisition. Premise shall, within 24 hours, communicate to
Eclipsys the existence or occurrence and the terms of any potential Third-Party Acquisition or contact or inquiry related to any potential
Third-Party Acquisition that the Major Stockholders, Premise or any of their respective Affiliates, or their respective officers, directors,
employees, representatives or agents, receive in respect of such a proposed transaction, and the identity of the Person from whom such
proposal, inquiry, or other contact was received.
(b) Notwithstanding the foregoing, if at any time following execution of this Agreement and prior to obtaining the Company
Stockholder Approval, (i) Premise receives a written proposal for a Third-Party Acquisition that the Board of Directors of Premise
believes in good faith to be bona fide, (ii) such proposal was unsolicited and did not otherwise result from a breach of this Section 6.6,
(iii) the Board of Directors of Premise determines in good faith (after consultation with outside counsel and its financial advisor) that
such proposal constitutes or could reasonably lead to a Superior Proposal and (iv) the Board of Directors of Premise determines in good
faith (after consultation with outside counsel and its financial advisor) that the failure to take the actions referred to in clause (x), (y) or
(z) below would constitute a breach of its fiduciary duties to the Stockholders under applicable law, then Premise may (x) furnish
information with respect to Premise to the Person making such proposal pursuant to a customary confidentiality agreement containing
terms substantially similar to, and no less favorable to Premise than, those set forth herein and in the Confidentiality Agreement;
provided, that any nonpublic information provided to any Person given such access shall have been previously provided to Eclipsys or
shall be provided to Eclipsys prior to or concurrently with the time it is provided to such Person, (y) participate in discussions or
negotiations with the Person making such proposal regarding such proposal and (z) make or authorize any statement, recommendation or
solicitation in support of such proposal.

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(c) The Board of Directors of Premise shall not withdraw, amend or modify its approval of this Agreement, the Merger and the
transactions contemplated by this Agreement, including its recommendation in favor of this Agreement, the Merger and the transactions
contemplated by this Agreement, provided however, that the Board of Directors of Premise may withdraw, amend or modify its
recommendation with respect to the Merger and the other transactions contemplated hereby if (i) such withdrawal, amendment or
modification is prior to receipt by Premise of the Company Stockholder Approval, (ii) the Board of Directors of Premise determines in
good faith, after consultation with outside counsel and its financial advisors, that its fiduciary obligations require it to do so, (iii) the
Board of Directors of Premise provides notice of such proposed action to Eclipsys prior to taking such action, and if such withdrawal,
amendment or modification is due to the existence of a proposal for a Third-Party Acquisition, specifying the material terms and
conditions of such Third Party Acquisition and identifying the Person making such proposal for a Third-Party Acquisition, (iv) Premise
provides at least five (5) Business Days following receipt by Eclipsys of the notice required pursuant to clause (iii) above, for Eclipsys, in
its sole discretion, to make any revised proposal, and (v) after such five Business Day period, and taking into account any such revised
proposal, the Board of Directors of Premise maintains its determination described in clause (ii) above. Notwithstanding the foregoing,
nothing in this Section 6.6(c) shall be deemed to affect any other obligation of Premise under this Agreement not inconsistent herewith,
regardless of whether the Board of Directors of Premise has withdrawn or modified its recommendation.
(d) (i) Premise represents and warrants to Eclipsys that (i) Premise and its Affiliates, officers, directors and employees, and to the
Knowledge of Premise, the representatives (including, without limitation, any investment banker, attorney or accountant) and other
agents of Premise, have terminated any and all existing discussions with third parties relating to a Third-Party Acquisition, and
(ii) Premise has instructed all of its officers, directors, employees, representatives and agents to terminate all discussions relating to a
Third-Party Acquisition.
(ii) Each of the Major Stockholders, as to itself, severally but not jointly, represents and warrants, to Eclipsys that (A) such
Major Stockholder, and its Affiliates, officers, directors and employees and, to the Knowledge of such Major Stockholder, the
representatives (including, without limitation, any investment banker, attorney or accountant) and other agents of such Major
Stockholder, have terminated any and all existing discussions with third parties relating to a Third-Party Acquisition, and (B) such
Major Stockholder has instructed all of its officers, directors, employees, representatives and agents to terminate all discussions
relating to a Third-Party Acquisition.
(e) Premise agrees that any violation of the restrictions set forth in this Section 6.6 by Premise, the Major Stockholders or any
representative of Premise or the Major Stockholders, whether or not such Person is purporting to act on behalf of Premise or otherwise,
shall be deemed to be a material breach of this Agreement by Premise and the Major Stockholders.

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6.7 Restrictive Covenants.


(a) The Major Stockholders recognize that the covenants of the Major Stockholders contained in this Section 6.7 are an essential
part of this Agreement and that but for the agreement of each Major Stockholder to comply with such covenants Eclipsys would not
enter into this Agreement. The Major Stockholders acknowledge and agree that the covenants set forth in this Section 6.7 are necessary
to protect the legitimate business interests of the Business acquired by Eclipsys pursuant to this Agreement, including without
limitation, trade secrets and other confidential information and goodwill, and that irreparable harm and damage will be done to Eclipsys if
any Major Stockholder takes any action in any way prohibited by such covenants. In addition, the Major Stockholders acknowledge that
the Purchase Price is paid in part as consideration for customer contacts and marketplace reputation developed by Premise for the
Business and such covenants are necessary for Eclipsys to receive the full benefit of this Agreement.
(b) From and after the Closing, each Major Stockholder shall not individually, or in concert with any other Person, directly or
indirectly:
(i) engage or become interested in, as owner, employee, partner, through equity ownership (not including up to a five percent
passive equity interest in a company for which such Major Stockholder does not serve as an officer, director, employee or
consultant), investment of capital, lending of money or property, rendering of services, including as a director (or equivalent), or
otherwise create or initiate, any business competitive with the Business;
(ii) take, or assist any other Person in taking, any action intended to advance an interest of any competitor or potential
competitor of the Business, or encourage any other Person to take such action; or
(iii) take, or assist any other Person in taking, any material action intended to cause any customer or prospective customer of
the Business to use the services or purchase or license the products of any competitor of the Business.
The covenants of the Major Stockholders set forth in this Section 6.7(b) are referred to herein as the “Covenant Not to Compete.”
The Covenant Not to Compete shall cover all of the counties and other political subdivisions of the states of the United States. The
Covenant Not to Compete shall bind each Major Stockholder for the three year period immediately following the Closing Date, as the
same may be extended pursuant to the terms of Section 6.7(f) (the “Restrictive Period”). The Major Stockholders agree that the duration
and area for which the Covenant Not to Compete set forth in this Section 6.7(b) is to be effective are reasonable.
Each of the Major Stockholders hereby acknowledges and agrees that the benefit of the Covenant Not to Compete may be
assigned by Eclipsys to any Subsidiary of Eclipsys in connection with any corporate restructuring or reorganization of Eclipsys of the
Business, without the further consent of such Major Stockholder.

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(c) In addition, and not in limitation of the prohibitions described in Section 6.7(b), for the Restrictive Period, each of the Major
Stockholders shall not, and shall cause such Major Stockholder’s Affiliates and family members not to, directly or indirectly, and shall
not cause, encourage or assist any other Person to, divert or attempt to divert or take advantage of or attempt to take advantage of any
actual or potential business or opportunities of Eclipsys, Premise or their Affiliates of which any of the Major Stockholders become
aware which relate to the Business, or any part thereof, and which are located in any county or any other political subdivision of the
states of the United States of America.
(d) During the Restrictive Period, each of the Major Stockholders shall not, and each Major Stockholder shall cause its Affiliates
not to, and shall not, cause or encourage or assist any other Persons to, directly or indirectly:
(i) perform any action, activity or course of conduct consisting of or encouraging the following: (A) soliciting, or recruiting
any employees of Premise listed on Section 4.11(b) of the Disclosure Schedules (the “Restricted Employees”) to leave the
employment of Premise or its Affiliates; (B) hiring any Restricted Employees; or (C) soliciting or encouraging any such Restricted
Employee to leave the employment of Premise or its Affiliates; or
(ii) cause, solicit or encourage any customer, or contractor, subcontractor or other supplier of Premise to terminate or
adversely alter any relationship such customer or supplier may have with Premise.

Notwithstanding the foregoing, nothing herein shall prohibit general solicitations by the Major Stockholders or their Affiliates not
directed at any specific employees of Eclipsys or Premise or their respective Affiliates, including any newspaper advertisements.
(e) The covenants set forth in this Section 6.7 are in addition to and not by way of limitation of any other duties any Major
Stockholder may have to Eclipsys, Premise or their Affiliates. The Major Stockholders acknowledge that the covenants contained in this
Section 6.7 impose a reasonable restraint on the Major Stockholders in light of the activities and business and future plans of Eclipsys.
The Major Stockholders acknowledge that if they violate any of the covenants contained in this Section 6.7 (collectively, the
“Restrictive Covenants”), it will be difficult to determine the resulting damages to Eclipsys, Premise and their Affiliates and, in addition
to any other remedies Eclipsys, Premise and their Affiliates may have, Eclipsys, Premise and their Affiliates shall be entitled to temporary
injunctive relief and permanent injunctive relief without the necessity of proving actual damages in the event of any breach or threatened
breach of such covenants. The nonprevailing party or parties shall be liable to pay all costs, including reasonable attorneys’ fees and
expenses, that the prevailing party or parties may incur in enforcing or defending, to any extent, any of the Restrictive Covenants,
whether or not litigation is actually commenced and including litigation of any appeal. Eclipsys, Premise and their Affiliates may elect to
seek one or more remedies at their discretion on a case-by-case basis. Failure to seek any or all remedies in one case shall not restrict
Eclipsys, Premise and their Affiliates from seeking any remedies in another situation or for a continuing breach. Such action by Eclipsys,
Premise and their Affiliates shall not constitute a waiver of any of their rights.

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(f) Each of the Restrictive Covenants shall be read and interpreted with every reasonable inference given to its enforceability.
However, if any term, provision or condition of the Restrictive Covenants is held by a court or arbitrator to be invalid, void or
unenforceable, the remainder of the provisions thereof shall remain in full force and effect and shall in no way be affected, impaired or
invalidated. If a court or arbitrator determines that any of the Restrictive Covenants are unenforceable, in whole or in part, then the court
or arbitrator shall modify such covenant so as to make it enforceable to the fullest extent the court or arbitrator deems enforceable under
the prevailing circumstances. As to each Major Stockholder, the Covenant Not to Compete shall be deemed to be a series of separate
covenants, one for each and every county or other political subdivision of the states of the United States of America, which is where the
Covenant Not to Compete is intended to be effective. Any violation of the provisions of this Section 6.7 shall automatically toll the
passage of the three-year period with respect to the breaching Major Stockholder and extend the Restrictive Period for the duration of
such violations with respect to the breaching Major Stockholder.
(g) At any time during the Restrictive Period, each or any of the Major Stockholders shall, within five (5) days of the written request
of Eclipsys, certify to Eclipsys in writing (in form and substance reasonably satisfactory to Eclipsys) that such Major Stockholder is in
full compliance with the covenants contained in this Section 6.7.
(h) Nothing contained in this Section 6.7 is intended to confer upon any Major Stockholder any right to employment with Eclipsys,
Premise or their Affiliates at any time after the Closing Date.
(i) Notwithstanding the foregoing, the Restrictive Covenants shall not apply to any Institutional Major Stockholder and its
Affiliates as follows: (i) to the extent that such Restrictive Covenants would prevent such Institutional Major Stockholder and its
Affiliates from conducting its business in the ordinary course as such business is currently conducted, provided that the exception set
forth in this Section 6.7(i)(i) shall not apply to any Affiliates of such Institutional Major Stockholders if such Affiliates are also Major
Stockholders; (ii) the Restrictive Covenants shall apply to the Institutional Major Stockholder and its Affiliates, but shall not apply to
any Portfolio Company of such Major Stockholder or any investor in such Institutional Major Stockholder (solely in such investor’s
capacity as such); and (iii) in the case of each of Aetna Ventures. LLC and Connecticut Innovations, Inc., the Restrictive Covenants shall
apply only to such entity and its direct and indirect subsidiaries, but not to any Person controlling or under common control with such
entity; provided that in the cases of clauses (ii) and (iii), such Institutional Major Stockholder does not perform any action, activity or
course of conduct consisting of or encouraging the following: (y) soliciting or recruiting any Restricted Employees for hire by any such
Portfolio Company, investor, or controlling Person or Person under common control; or (z) soliciting or encouraging any such employee
of Premise to leave the employment of Eclipsys, Premise or their Affiliates.

6.8 Directors. Effective as of the Closing Date, the Major Stockholders shall cause each director to resign from their position as a director
of the Board of Directors of Premise.

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6.9 Stockholders’ Representative.


(a) The Stockholders shall at all times maintain a representative (the “Stockholders’ Representative”) for the purposes described in
this Agreement, including the taking of actions and the giving of consents on behalf of the Major Stockholders prior to the Closing and
the Effective Time Company Holders from and after the Closing as specified herein. The Major Stockholders hereby appoint Richard
Dumler as the initial Stockholders’ Representative. The approval and adoption of this Agreement by the Stockholders and the
acceptance of the Merger Consideration by the Effective Time Company Holders shall constitute, to the fullest extent permitted by law,
the irrevocable authorization, direction and appointment of Richard Dumler as the initial Stockholders’ Representative (or any then acting
successor pursuant to the terms hereof) as the attorney-in-fact and agent of each Effective Time Company Holder for such purposes.
This appointment and grant of power and authority by each Effective Time Company Holder is coupled with an interest and is
irrevocable and shall not be terminated by any act of any Effective Time Company Holder or by operation of law, whether by the death or
incapacity of any individual Effective Time Company Holder or by the occurrence of any other event. Another person shall be appointed
as the Stockholders’ Representative if the person so designated (or any successor thereof) is unwilling or unable to so act. The
Stockholders’ Representative hereby accepts such appointment. Accordingly, the Stockholders’ Representative shall have full power
and authority to:
(i) take any action on behalf of the Major Stockholders or the Effective Time Company Holders, as applicable, to facilitate or
administer the transactions contemplated hereby, including, without limitation, amending this Agreement, and executing such other
documents or instruments as the Stockholders’ Representative deems appropriate;
(ii) (A) dispute or refrain from disputing, or approve, any claim made by an Eclipsys Indemnified Party under this Agreement
that may be satisfied from the Escrow Fund, (B) authorize payment of any claim to an Eclipsys Indemnified Party under Article VII
of this Agreement, (C) negotiate and compromise any dispute that may arise under Article VII of this Agreement or arise under this
Agreement generally and be satisfied from the Escrow Fund and (D) execute any settlement agreement, release or other document
with respect to such dispute or remedy;
(iii) (A) dispute or refrain from disputing, or approve, the Eclipsys Final Calculations, (B) authorize payment of any Purchase
Price shortfall determined under Sections 2.10 and 2.11 of this Agreement or any expenses of an Unrelated Accounting Firm
contemplated by Section 2.11 of this Agreement, (C) negotiate and compromise any dispute that may arise with respect to the
Eclipsys Final Calculations and (D) execute any settlement agreement, release or other document with respect to such dispute or
remedy;
(iv) engage attorneys, accountants and agents and authorize payment of the amount of the expenses for such Persons from
the Stockholders’ Fund;
(v) exercise all rights of, and take all actions that may be taken on behalf of the Effective Time Company Holders under the
Escrow Agreement;

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(vi) give such instructions and take such action or refrain from taking such action as the Stockholders’ Representative deems,
in his or her discretion, necessary or appropriate to carry out the provisions of this Section 6.9; and
(vii) to the extent not prohibited or otherwise provided by this Agreement, distribute funds from the Stockholders’ Fund for
the Emerson Software Development Bonus, the Gravina Software Development Bonus and the Stockholders’ Fund and the True-
Up Reserve Fund, in their Pro Rata Portion, to the Effective Time Company Holders.
(b) To the fullest extent permitted by applicable law, each of the Effective Time Company Holders hereby (i) irrevocably appoints
the Stockholders’ Representative as such Effective Time Company Holder’s agent for service of any and all legal process, summons,
notices and documents which may be served in any action or proceeding under or pursuant to this Agreement and (ii) waives any
requirement of personal notice or any claim that service on the Stockholders’ Representative is invalid or insufficient to constitute valid
personal service on such Effective Time Company Holder.
(c) Each of the Effective Time Company Holders acknowledges that actions taken, consents given and representations made by the
Stockholders’ Representative on behalf of the Effective Time Company Holders pursuant hereto shall be binding upon the Major
Stockholders and the Effective Time Company Holders, as applicable, including all actions and consents under the Escrow Agreement.
(d) The Stockholders’ Representative may resign at any time, and may be removed for any reason or no reason by the vote or
written consent of, as applicable, (i) if prior to the Effective Time, the Major Stockholders holding a majority of the then outstanding fully
diluted Shares held by the Major Stockholders, or (ii) from and after the Effective Time, the Effective Time Company Holders holding a
majority of the outstanding fully diluted Shares at the Effective Time.
(e) The approval and adoption of this Agreement by the Stockholders and the acceptance of the Merger Consideration by the
Effective Time Company Holders shall constitute, to the fullest extent permitted by law, the irrevocable agreement of each of them (i) that
the Stockholders’ Representative shall not be liable to any of them for Damages with respect to any action taken or any omission by the
Stockholders’ Representative pursuant to this Section 6.9, except to the extent such Damages are caused by the Stockholders’
Representative’s bad faith, fraud or criminal misconduct and (ii) to indemnify the Stockholders’ Representative against any Damages that
the Stockholders’ Representative may suffer or incur in connection with any action taken or any omission by the Stockholders’
Representative, except to the extent such Damages are caused by the Stockholders’ Representative’s bad faith, fraud or criminal
misconduct.
(f) To the fullest extent permitted by applicable law, each of the Effective Time Company Holders hereby (i) irrevocably appoints the
Stockholders’ Representative as such Effective Time Company Holder’s agent for service of any and all legal process, summons, notices
and documents which may be served in any action or proceeding under or pursuant to

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this Agreement, (ii) waives any requirement of personal notice or any claim that service on the Stockholders’ Representative is invalid or
insufficient to constitute valid personal service on such Effective Time Company Holder and (iii) ratifies and confirms, and agrees to be
bound by, all actions taken by the Stockholders’ Representative on its behalf pursuant to the foregoing authorization.

6.10 Employee Matters.


(a) The employees of Premise shall, subject to Section 6.10(b), continue as at-will employees of Premise or Eclipsys or another
Subsidiary of Eclipsys following the Closing, on terms to be determined by Eclipsys. If employment is continued by Eclipsys or another
Subsidiary of Eclipsys other than Premise, the new employer shall assume any accrued but unused vacation benefits as listed on
Schedule 6.10(a). Employees of Premise who continue in the employ of Premise, Eclipsys or a Subsidiary of Eclipsys shall, following a
reasonable transition period determined by Eclipsys, have benefits and be employed on terms consistent with those provided by
Eclipsys to its other employees at comparable levels in the organization, including annual base compensation, as applicable based on
employment level, plus an opportunity to receive equity based compensation and an annual bonus pursuant to the performance-based
corporate bonus plan, if established by Eclipsys’s Board of Directors. Following the Closing, to the extent permitted by Legal
Requirements, applicable Tax qualification requirements and the terms of the applicable employee benefit plans and policies of Eclipsys,
and subject to any generally applicable break in service or similar rule, Eclipsys shall recognize the years of service of each continuing
employee of Premise with Premise prior to the Closing Date for purposes of vesting and eligibility to participate (but not benefit accrual)
under the employee benefit plans and policies of Eclipsys; provided, however, that such service shall not be recognized if recognition
would result in a duplication of benefits for the same period of service or to the extent that such service was not recognized under the
corresponding Company Benefit Plan.
(b) Nothing contained in this Agreement confers upon any employee (including for such purposes persons filling a similar
function) of Premise any right to continued employment or participation in any Company Benefit Plan (other than the Premise 2004 Plan
to the extent provided by Section 6.17) or any employee benefit plan or policy of Eclipsys or its Subsidiaries at any time after the Closing
Date, nor shall anything contained herein be deemed an amendment or modification of any Company Benefit Plan or any employee
benefit plan or policy of Eclipsys or its Subsidiaries.
(c) Eclipsys shall be solely responsible for any required notice and payments under the Worker Adjustment Retraining and
Notification Act of 1988 (the “WARN Act”) and any similar state statutes, and otherwise to comply with any such statute with respect to
any “plant closing” or “mass layoff” (as defined in the WARN Act) or group termination or similar event affecting any continuing
employees of Premise occurring after the Closing Date. Premise shall provide any required notice and payments under the WARN Act,
and any similar state statutes, and otherwise to comply with any such statute with respect to any “plant closing” or “mass layoff” (as
defined in the WARN Act) or group termination or similar event affecting any employees of Premise on or before the Closing Date.

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6.11 Release. In consideration of the payments to the Major Stockholders by Eclipsys of their share of the Purchase Price and as a
condition to the execution and delivery of this Agreement by Eclipsys, each Major Stockholder hereby gives the following general release
effective as of the Closing Date:
(a) Each Major Stockholder on behalf of such Major Stockholder and such Major Stockholder’s agents, heirs, successors and
assigns, hereby irrevocably and unconditionally releases, acquits and forever discharges Premise, Eclipsys, each of their respective
Affiliates and their respective partners, members, managers, stockholders, directors, officers and agents, and their respective successors
and assigns (collectively, the “Released Parties”), to the fullest extent permitted by applicable Legal Requirements, from any and all
charges, complaints, claims, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands,
remedies, costs, losses, debts, expenses and fees, of every type, kind, nature, description or character, whether known or unknown,
suspected or unsuspected, liquidated or unliquidated, that such Major Stockholder has, owns or holds, or claims to have, hold or own,
including but not limited to those arising out of or in connection with (i) the Major Stockholder’s employment, or other relationship with
Premise, (ii) the Major Stockholder’s right to or interest in any Intellectual Property or other assets or properties of Premise, (iii) the Major
Stockholder’s right to or any interest in or under any Contract (including the Stockholder Agreements) with Premise, or (iv) any equity or
other interests the Major Stockholder may have or claim to have in, or any other claims the Major Stockholder may have against, Premise
or its predecessors (collectively, the “Claims”). Each Major Stockholder represents that such Major Stockholder has not assigned or
transferred or purported to have assigned or transferred to any Person any Claims. This general release set forth in this Section 6.11 shall
not affect any rights that the Major Stockholder may have (x) that arise solely under this Agreement (including payment of the Purchase
Price) or the Escrow Agreement, (y) that arise after the Closing Date or (z) based on any claim, demand or cause of action such Major
Stockholder may have against Eclipsys or any of its Affiliates (other than Premise) that is not related to Premise (including the Business),
the Merger, this Agreement or the other transactions contemplated by this Agreement.
(b) Each Major Stockholder acknowledges and agrees that the releases made herein constitute final and complete releases of the
Released Parties with respect to all Claims. Each Major Stockholder expressly acknowledges and agrees that this general release is
intended to include in its effect, without limitation, all Claims that such Major Stockholder does not know or suspect to exist at the time
hereof, and this general release contemplates the extinguishment of any and all such Claims. Furthermore, each Major Stockholder
hereby expressly waives and relinquishes any rights and benefits that such Major Stockholder may have under any Legal Requirements,
including any state law or any common law principles limiting waivers of unknown claims. Each Major Stockholder understands that the
facts and circumstances under which such Major Stockholder gives this full and complete release and discharge of the Released Parties
set forth herein may hereafter prove to be different than now known or believed by such Major Stockholder and such Major Stockholder
hereby accepts and assumes the risk thereof and agrees that such Major Stockholder’s full and complete release and discharge of the
Released Parties with respect to the Claims shall remain effective in all respects and not be subject to termination, rescission or
modification by reason of any such difference in facts and circumstances.

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(c) Each Major Stockholder represents and agrees that such Major Stockholder has not filed with any Governmental Entity or
arbitrator or any other Person any complaint, charge or lawsuit against any of the Released Parties involving any Claims, and that such
Major Stockholder shall not do so at any time hereafter.
(d) Each Major Stockholder represents and acknowledges that in executing this general release such Major Stockholder does not
rely and has not relied upon any representation or statement not set forth herein made by any of the Released Parties or by any of the
Released Parties’ Affiliates, agents, representatives or attorneys with regard to the subject matter, basis or effect of this general release
or otherwise.
(e) Without limiting the foregoing general release, each Major Stockholder agrees that such Major Stockholder shall not, directly or
indirectly, (i) bring or cause to be brought, or encourage or participate in the prosecution of, any action, proceeding or suit seeking
recovery by or on behalf of any Person from any Released Party of any amount in respect of, or Damages with respect to, any of the
Claims, or (ii) defend any action, proceeding or suit in whole or in part on the grounds that any or all of the terms or provisions of this
Section 6.11 violate any Legal Requirements, or are illegal, invalid, inequitable, not binding, unenforceable or against public policy.

6.12 Confidentiality.
(a) Each party and such party’s representatives shall (i) use any Confidential Information of any other party solely for the purpose
of pursuing the transactions contemplated hereby and (ii) not directly or indirectly use or exploit the Confidential Information of any
other party for its own benefit or the benefit of another Person, including to create, adopt or modify products or services which would
compete with the disclosing party’s products or services. For purposes of this Agreement, Confidential Information of Eclipsys shall,
from and after the Closing Date, include the Confidential Information of Premise and the Business, and, without limiting any other
obligations relating thereto, the Major Stockholders shall be subject to all obligations set forth herein with respect to such Confidential
Information of Eclipsys and Premise. This provision is not intended to restrict independent business activities, in each case undertaken
without use of any other party’s Confidential Information and without violating the Restrictive Covenants, employment terms or other
legal or contractual duties (but this sentence does not limit the Restrictive Covenants or any employment terms or other legal or
contractual duties).
(b) Each party agrees that (i) the Confidential Information of any other party received or otherwise held by it or any memoranda,
notes, analyses, reports, compilations or studies generated by it or its representatives based upon such Confidential Information shall be
kept confidential, (ii) except as permitted hereunder, such party and its advisors and other representatives shall not disclose any of the
Confidential Information of any other party in any manner whatsoever and (iii) such party and its representatives shall use the same level
of care to prohibit disclosure of the other party’s Confidential Information as such party uses to protect its own confidential information,
but in no event using less than reasonable care and diligence; provided, however, that (A) such party may make any disclosure of such
information to which the other party to whom the Confidential Information belongs gives its prior written consent, and

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(B) any of such information may be disclosed to such party’s representatives who need to know such information for the sole purpose of
pursuing the transactions contemplated hereby, and who agree to keep such information confidential. In any event, each party shall be
responsible for any breach of this Agreement by its representatives and shall, at its sole expense, take all reasonable measures (including
but not limited to court proceedings) to restrain its representatives from prohibited or unauthorized disclosure or use of the Confidential
Information of any other party.
(c) The receiving party shall immediately notify the disclosing party upon any loss or unauthorized disclosure of the other party’s
Confidential Information.
(d) In the event that any party or any of its representatives are requested or required (by oral questions, interrogatories, requests
for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any of the
Confidential Information of any other party, it shall provide the disclosing party with prompt written notice of any such request or
requirement, if permitted by law to do so, so that the disclosing party may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver
by the disclosing party, the receiving party or any of its representatives are nonetheless, in the opinion of its outside counsel, legally
compelled to disclose Confidential Information of the disclosing party or else stand liable for contempt or suffer other similar censure or
penalty, the receiving party or its representative may, without liability hereunder, disclose only that portion of the Confidential
Information of the disclosing party that such counsel advises is legally required to be disclosed, provided that the receiving party and
its Affiliates and agents exercise their respective commercially reasonable efforts to preserve the confidentiality of such Confidential
Information, including, without limitation, by cooperating with the disclosing party to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded such Confidential Information.
(e) Each party acknowledges that the Confidential Information of the other parties has tangible value and it is further understood
and agreed that money damages would not be a sufficient remedy for any breach of the provisions set forth herein by any party or any
of their representatives and that the parties hereto shall be entitled to equitable relief, including injunction and specific performance, as a
remedy for any such breach or threatened breach. Such remedies shall not be deemed to be the exclusive remedies for a breach of the
provisions set forth herein, but shall be in addition to all other remedies available at law or equity to the parties.
(f) The covenants set forth in this Section 6.12 shall survive until the fifth anniversary of the Closing Date, provided, that nothing
herein shall limit the obligations of the parties hereto with respect to the Confidential Information of the other parties, whether before or
after such date, under any Legal Requirements relating thereto, including state and common laws relating to misappropriation of trade
secrets.
(g) Nothing herein shall limit the obligations of the parties under the Confidentiality Agreement, and to the extent of any
inconsistency between this Section 6.12 and the Confidentiality Agreement, the Confidentiality Agreement shall govern with respect to
the parties thereto.

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6.13 Covenants Regarding Contracts.


(a) On or before the Closing Date, unless waived by Eclipsys, Premise shall use all commercially reasonable efforts to obtain, and
Eclipsys shall use commercially reasonable efforts to assist Premise in obtaining, all Consents required under the Material Contracts in
connection with the execution, delivery and performance of this Agreement, the other Transaction Documents or the consummation of
the transactions contemplated hereby and thereby, on terms that are not materially burdensome to Eclipsys or Premise, and Premise shall
deliver copies of such Consents to Eclipsys.
(b) On or before the Closing Date, Premise shall obtain payoff letters for the Debt of Premise to Silicon Valley Bank, including any
applicable per diem amounts and any penalty interest, prepayment penalties, exit fees or other penalties due as a result of such Debt
payment (the “Payoff Amounts”). At the Closing, Eclipsys shall pay the Payoff Amounts to Silicon Valley Bank, provided that Premise
shall be liable for the Payoff Amounts, and such amounts shall be included in the calculation of Estimated Closing Date Debt and Final
Closing Date Debt and shall have the effect of decreasing the Estimated Purchase Price and the Purchase Price.
(c) At the Closing or, if such payment is not due until after the Closing, at such later time as such payment is due, Eclipsys shall
pay each of the Seller Transaction Expenses listed on Schedule 6.13, provided that Premise shall be liable for all Seller Transaction
Expenses, including those listed on Schedule 6.13, and such amounts shall have the effect of decreasing the Estimated Purchase Price
and the Purchase Price.

6.14 Stockholder Notices.


(a) Premise shall promptly, but in no event later than five (5) Business Days after the Closing Date or such earlier date as may be
required under the Delaware General Corporation Law, deliver notice to its Stockholders of the Company Stockholder Approval and the
availability of appraisal rights (along with such other information required under applicable law), pursuant to and in accordance with the
applicable provisions of the Delaware General Corporation Law (including Section 228(e)) and the Premise Certificate of Incorporation
and Bylaws of Premise (the “Stockholder Notice”).
(b) As soon as practicable following execution of this Agreement, if the Stockholder Written Consents are not delivered within two
hours after execution, and without limiting any of the rights of Eclipsys hereunder, Premise shall take all action necessary in accordance
with Delaware law and the Premise Certificate of Incorporation and Bylaws of Premise to duly call, give notice of, convene and hold a
meeting for Stockholders to consider and vote upon the adoption and approval of this Agreement, the Merger and the other transactions
contemplated hereby, including the appointment of the Stockholders’ Representative, or solicit the written consent of Stockholders
thereto. Subject to Section 6.6, Premise shall, through its Board of Directors, recommend to the Stockholders the adoption and approval
of this Agreement and shall not withdraw, modify or change such recommendation, and shall use reasonable efforts to obtain the
Company Stockholders’ Approval.

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6.15 Indemnification of Directors and Officers.


(a) Prior to the Effective Time, Premise may purchase tail coverage under its directors’ and officers’ liability insurance and fiduciary
insurance policies covering Premise’s directors, officers and fiduciaries, with respect to claims arising from facts or events that occur at
or before the Effective Time. Eclipsys shall use, and cause the Surviving Corporation to use, commercially reasonable efforts to keep any
such tail coverage in effect for the term thereof, provided that neither Eclipsys nor the Surviving Corporation shall in any event be
obligated to make payments with respect to any such policy beyond the premiums paid by Premise prior to the Closing.
(b) This Section 6.15 is intended for the irrevocable benefit of, and to grant third-party rights to, the directors, officers and
fiduciaries of Premise at or prior to the Effective Time, to the extent such persons are covered by any such tail policies purchased by
Premise prior to the Effective Time, and shall be binding on all successors and assigns of Eclipsys and the Surviving Corporation. Each
director, officer or fiduciary of Premise so covered shall be entitled to enforce the post-closing covenants of Eclipsys and the Surviving
Corporation contained in this Section 6.15.
(c) Following the Closing, the organizational documents of the Surviving Corporation shall, to the fullest extent permitted by
applicable law, contain provisions in the aggregate no less favorable (in all material respects) with respect to indemnification,
advancement of expenses and exculpation of the directors and officers of the Surviving Corporation than are currently set forth in the
Premise Certificate of Incorporation and Bylaws of Premise. Any indemnification agreements with the directors and officers of Premise in
existence on the date of this Agreement and listed on Section 4.4(a) of the Disclosure Schedule shall remain effective, without any further
action, and shall survive the Closing and continue in full force and effect in accordance with their terms.
(d) In the event that the Surviving Corporation (i) consolidates with or merges into any other Person and shall not be the
continuing entity after such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so that such continuing entity or transferee of such assets, as the case may
be, shall assume the obligations set forth in Section 6.15(c).

6.16 Termination of 401(k) Plan. Effective no later than the Closing Date, Premise shall terminate any and all Company Employee Plans
intended to include a Code Section 401(k) arrangement (each such plan, a “Company 401(k) Plan”) pursuant to resolutions of Premise’s
Board of Directors that are substantially in the form attached hereto as Schedule 6.16. At or prior to the Closing, Premise shall provide Eclipsys
with evidence that all Company 401(k) Plans have been terminated (effective no later than the Closing Date) and shall thereafter take such
other actions in furtherance of terminating any Company 401(k) Plans as Eclipsys may reasonably require. This Section 6.16 is not intended to
require that all assets of such Company 401(k) Plans be fully distributed as of or prior to the Closing Date.

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6.17 Amendment to the Premise 2004 Plan. Prior to the Effective Time, the Board of Directors of Premise shall amend the Premise 2004
Plan as set forth in Schedule 6.17(a) such that each Company Option that could be assumed by Eclipsys pursuant to Section III.A. of Article
Two of the Premise 2004 Plan as in effect immediately prior to such amendment (each, a “Company Deferred Payment Option”) shall become
fully vested as of immediately prior to the Closing Date and be converted into the right to receive the same amount of Merger Consideration in
respect of such Company Deferred Payment Option, as the holder thereof would receive pursuant to Section 2.7(d) if such Company Deferred
Payment Option were a Company Closing Payment Option. Such amendment shall also provide that such Merger Consideration shall be
payable on the first anniversary of the Closing Date, without interest, except that, to the extent the holder of any Company Deferred Payment
Option elects to execute a general release in the form of Schedule 2.9(e) prior to the date that is 60 days after the Closing Date, such Merger
Consideration shall be payable promptly after the expiration of any period during which such general release may be revoked.

6.18 Collection of Grady Receivable.


(a) The Surviving Corporation shall use commercially reasonable efforts to collect the Grady Receivable. Until the Grady Collection
Date, the Surviving Corporation shall consult regularly with the Stockholders’ Representative on its efforts to collect the Grady
Receivable and give the Stockholders’ Representative the opportunity to provide input into material decisions affecting such collection
and the handling thereof, including any decision to commence legal actions to collect such receivable, and shall in good faith consider
such input.
(b) Promptly after the earlier of (i) complete payment of the Grady Receivable and (ii) the first anniversary of the Closing Date (such
earlier date, the “Grady Collection Date”), the Surviving Corporation shall provide the Stockholders’ Representative with a complete
accounting of the amount collected on the Grady Receivable as of such date, less any out-of-pocket expenses incurred by Eclipsys and
the Surviving Corporation to collect such amounts, including the costs of any legal proceeding (such net amount, the “Net Grady
Collection”). If, on or before the Grady Collection Date, Eclipsys enters into any transaction with Grady not in effect on the date of this
Agreement and the Grady Receivable is liquidated in whole or part in connection with that transaction, Eclipsys will be deemed for
purposes of this Section 6.18 to have received from Grady a payment against the Grady Receivable equal to the amount, if any, by which
the total amount payable by Grady in that transaction exceeds Eclipsys list prices for what is being delivered by Eclipsys in the
transaction.

6.19 Post-Closing Software Development.


(a) Schedule 6.19(i) sets forth certain “Performance Plans” as of the date hereof for the Premise software development
organization (the “Premise Software Development Organization”) for 2009. Schedule 6.19(ii) sets forth Premise’s projection as of the
date hereof of Premise’s 2009 Plan of Record (the “POR”) and Premise’s staffing plans for 2009 for the Premise Software Development
Organization (the “Staffing Plan”). The Performance Plans and Staffing Plan together reflect plans of Premise, which Premise in good
faith believes are realistic and achievable in the ordinary course of business as previously conducted without adding additional
headcount, staff overtime, supplemental headcount from Eclipsys or third parties, or other extraordinary efforts, the costs of which in the
aggregate exceed, in any material respect, aggregate costs of the Staffing Plan reflected in the POR. It is important to Eclipsys that the
Development Plan be achieved within the Staffing Plan.

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(b) For purposes of facilitating the efforts of the Premise Software Development Organization to meet the Performance Plans in
accordance with the Staffing Plan, it is agreed that:
(i) Subject to paragraph (c) below, Eric Rosow and Craig Gravina (the “Development Managers”) shall have day-to-day
operational control over the Premise Software Development Organization, including without limitation staffing (hiring/firing of
employees and consultants), allocation of resources and other employment related issues, subject to reasonable oversight by the
executive officers of Eclipsys, consistent with the responsibilities of those officers for management of the business of Eclipsys;
and provided that the Development Managers (A) may not deviate from the Performance Plans, the POR or the Staffing Plan in any
material respect without prior written consent by the Chief Executive Officer of Eclipsys it being understood that the Development
Managers will have flexibility as to how best to allocate resources within the costs contemplated by the Staffing Plan, and (B) shall
operate the Premise Software Development Organization consistent with past practices to the extent that doing so is not
inconsistent with the Performance Plans, the POR and the Staffing Plan.
(ii) The Development Managers shall prepare reasonable written plans to achieve the Performance Plans within the POR and
Staffing Plan (the “Development Plans”), which Development Plans shall (A) include planned resource allocations, schedules, and
interim milestones; (B) be of such quality, scope and level of detail at least as good as previous Premise practice and consistent
with reasonable professional standards for commercial software development; and (C) be prepared and delivered to Eclipsys
management not later than January 31, 2009 and subsequently as materially modified or supplemented by the Development
Managers with the written consent of any of the Eclipsys CEO, EVP Client Solutions or SVP Software Development, which consent
shall not be unreasonably withheld.
(iii) As and when reasonably requested by the Eclipsys CEO, EVP Client Solutions or SVP Software Development, the
Development Managers will report the status of performance against the Development Plans so as to permit Eclipsys to exercise
reasonable oversight and evaluate the results of the activities and performance of the Premise Software Development Organization.
(iv) The balance, if any, remaining in the Software Development Escrow Fund shall be liquidated, and paid to the
Stockholders’ Fund if, prior to December 31, 2009, either of the Development Managers is terminated without “Cause” without the
consent of the Stockholders Representative or resigns for “Good Reason” or “Justification”, as those terms are defined in their
respective Employment Agreements and/ or employees’ Proprietary Information Protection Agreement with Eclipsys.

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(v) If there is any material change, modification or additions to the Performance Plans without the approval of the
Stockholders Representative, an appropriate and corresponding change shall be made in the POR, as mutually agreed between
Eclipsys, on the one hand, and, on the other, the Development Managers and the Stockholders’ Representative.
(vi) The balance, if any, remaining in the Software Development Escrow Fund shall be liquidated, and paid to the Stockholders
Fund if Eclipsys (A) does not provide the Premise Software Development Organization with resources reasonably comparable to
those as have been employed and as called for by the Staffing Plan and with related operations support and funding substantially
consistent with the POR, or (B) otherwise takes any action that in any material respect adversely affects the ability of the Premise
Software Development Organization to meet the Performance Plans consistent with the POR and Staffing Plan, without the
approval of the Stockholders’ Representative.
(c) During 2009, Eclipsys and the Development Managers shall assess the performance of the Premise Software Development
Organization against the Performance Plans. If (i) the Premise Software Development Organization fails to meet in any material respect
any of the Performance Plans; (ii) or if any release of Software contemplated by the Performance Plans is of substandard quality, as
measured by unreasonable levels of non-acceptance or complaints by clients or by unreasonable inordinate levels of support activity
compared to prior Premise Software releases (each of the events described in these items (i) and (ii) a “Precipitating Cause”), then
Eclipsys may give notice (a “Change Notice”) to the Development Managers and the Stockholders’ Representative, and shall thereafter
promptly consult with the Development Managers regarding appropriate courses of action, and following such consultation Eclipsys
may add resources to the Premise Software Development Organization beyond those indicated in the Staffing Plan through additional
headcount, staff overtime, supplemental headcount from Eclipsys or third parties, or other measures, as Eclipsys determines in its
reasonable discretion are necessary or advisable to remedy the Precipitating Cause and minimize the risk that of subsequent Precipitating
Causes, or to remedy issues associated with released Software.
(d) The total direct cost to Eclipsys of such additional resources (including all salaries and wages, incentive compensation,
benefits, taxes, and other direct costs) (collectively, “Supplemental Development Costs”) from the date of their engagement until the
Scheduled Development End Date, shall be set forth in a notice (a “Supplemental Costs Notice”) which will be sent to the Development
Managers and the Stockholders’ Representative within ten (10) days after the end of each month in which they are incurred, and the
Stockholders’ Representative and Eclipsys shall provide the Escrow Agent joint instructions to pay such amounts from the Software
Development Escrow Fund to Eclipsys promptly after the delivery of each Supplemental Costs Notice, as and when such Supplemental
Development Costs are incurred by Eclipsys. The Development Managers or the Stockholders’ Representative may object to any
Change Notice or Supplemental Costs Notice within five (5) Business Days of his receipt thereof, and such objection shall be subject to
Section 11.13 but shall not delay delivery of joint payment instructions to the Escrow Agent or payment of Supplemental Development
Costs from the Software Development Escrow Fund to Eclipsys. Any balance remaining in the

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Software Development Escrow Fund at the Scheduled Development End Date shall be deposited to the Stockholders’ Fund. If the entire
Software Development Escrow Fund is exhausted pursuant to this Section 6.19 before the Scheduled Development End Date, no
amounts from the Software Development Escrow Fund shall be payable for the benefit of the Effective Time Company Holders.
(e) It is understood and agreed that no representations or warranties are made in this Section 6.19 or elsewhere in this Agreement or
the other Transaction Documents as to the ability to achieve the Performance Plans with the Staffing Plan or otherwise, it being
understood that the Staffing Plan and Performance Plans are planning documents prepared by Premise in good faith, and therefore, other
than access to the Software Development Escrow Fund by Eclipsys in the manner set forth in this Section 6.19, no additional liability is
created by this Section 6.19. Although the failure to achieve the Performance Plans with the Staffing Plan does not cause any other
Damages under this Agreement, payments from the Software Development Escrow Fund to Eclipsys shall not prevent Eclipsys making a
claim for Damages under this Agreement in excess of amounts recovered by Eclipsys from the Software Development Escrow Fund if and
to the extent that the Damages incurred by Eclipsys in excess of amounts recovered by Eclipsys from the Software Development Escrow
Fund would be recoverable by Eclipsys other than pursuant to this Section 6.19.

ARTICLE VII
SURVIVAL; INDEMNIFICATION; REMEDIES

7.1 Survival of Representations and Warranties and Covenants.


(a) The representations and warranties made in this Agreement shall survive until the Holdback Termination Date (the “Survival
Period”). Notwithstanding the foregoing, the representations and warranties set forth in Sections 3.1, 3.2, 4.2, 4.3, 4.6(a), 4.9, 4.10, 4.11(b),
4.14(a), 4.14(c), 4.14(f)(i), 4.14(f)(iii), 4.14(j), and 4.16 (the “Core Representations”) shall survive until the earlier of (i) 90 days after the
expiration of the applicable statute of limitations period or (ii) the seventh anniversary of the Closing Date. The right to indemnification,
reimbursement or other remedy based upon such representations, warranties, covenants and obligations shall not be affected by any
investigation conducted with respect to, or knowledge acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date.
(b) The covenants and agreements of the parties contained in this Agreement shall survive the Closing indefinitely, except as
expressly provided otherwise herein.

7.2 Indemnification and Other Rights.


(a) If the Closing occurs, each of the Effective Time Company Holders shall, subject to Sections 7.3 and 7.4(d), indemnify and
defend Eclipsys, and its Affiliates (including Premise following the Closing), each of their respective officers, directors, employees,
stockholders, agents and representatives, and each of their respective successors and assigns (the “Eclipsys Indemnified Parties”)
against and hold them harmless, reimburse and make them whole from and against any and all loss, claim, Liability, cost, damage or
expense (including

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reasonable legal and expert fees and expenses incurred in investigation or defense (including any appeal) of any of the same, or in
asserting, preserving or enforcing its rights hereunder) actually incurred or claims suffered and not otherwise reimbursed or recovered
from any third person (collectively “Damages”) by any such indemnified party, to the extent arising from or in connection with any of
the following:
(i) any breach or inaccuracy of any representation or warranty of Premise or the Major Stockholders, or any of them,
contained in this Agreement (as modified by the Disclosure Schedule), or any of the other Transaction Documents (without giving
effect to (A) any supplement to the Disclosure Schedule after the date hereof, except for the Capitalization Update, or (B) any
disclosures set forth in Sections 4.4(e), 4.7(d)(i), 4.14(d), 4.14(e) or 4.19(b) of the Disclosure Schedule or deemed set forth in such
sections pursuant to Section 11.16);
(ii) any breach of any covenant of Premise prior to the Closing, or any breach of any covenant of the Major Stockholders, or
any of them, contained in this Agreement;
(iii) (x) a Third-Party Claim arising from or in connection with the operations of the Business before the Closing Date,
including but not limited to (A) errors and omissions in design, creation, implementation or maintenance of any of the Software
Products, (B) any failure of any of the Software Products to conform to commitments made on or before the Closing Date by or on
behalf of Premise to customers or third parties, or (C) any failure by Premise prior to the Closing Date to perform all material
obligations under the Material Contracts, and in each case notwithstanding disclosures set forth in the Disclosure Schedule; or
(y)(A) any return to Stryker Corporation of any amounts previously paid by Stryker Corporation to Premise under the iBed
Application Software Development Services Agreement between Premise and Stryker Corporation, dated February 25, 2008, (B) any
Excess Hartford Project Hours (which hours, for such purpose, shall be valued consistent with the estimates used to price
installation services under the Hartford Addendum), and any Excess Hartford Consulting Services (which consulting services, for
such purpose, shall be valued consistent with the estimates used to price installation services under the Hartford Addendum),
provided that the value of the Excess Hartford Project Hours and the Excess Hartford Consulting Services, in the aggregate,
subject to indemnity under this provision, shall not exceed $150,000, or (C) any deficit in the net amount collected for the Grady
Receivable during the period commencing one day after the Closing Date through the Grady Collection Date (that is, the amount by
which the Grady Receivable on the date hereof is greater than the Net Grady Collection, if any, through such date).
(iv) any claims by any current or former employees (including for such purposes persons filling a similar function) of Premise
or any of its predecessors arising from or in connection with events or circumstances preceding the Closing, or arising from or in
connection with the employment policies of Premise in place at any time prior to the Closing, or for the Emerson Software
Development Bonus or the Gravina Software Development Bonus, in each case to the extent not satisfied with funds in the
Stockholder Development Escrow Fund or the Stockholders’ Fund;

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(v) (A) any and all Taxes of Premise with respect to (x) taxable periods ending on or before the Closing Date or (y) any taxable
period that commences before and ends after the Closing Date to the extent attributable to the period prior to Closing, (B) any and
all Taxes arising as a result of the transactions contemplated by this Agreement, (C) any and all costs and expenses incurred by
Premise in connection with disputes with taxing authorities relating to Taxes covered by this clause (v), including reasonable third-
party costs and expenses relating to disputes with taxing authorities; and
(vi) any payments made by the Surviving Corporation, Eclipsys or their successors and assigns pursuant to the
indemnification provisions referenced in Section 6.15(c),

provided that Eclipsys shall not be entitled to recover duplicate Damages under clauses (i) through (vi) to the extent claims could be made
under more than one of such clauses and such recovery of Damages shall be reduced by any Tax benefit or refund actually received by the
Surviving Corporation or Eclipsys as a result of the Damages.

The express written waiver by Eclipsys of any condition set forth in Section 8.2 based on the inaccuracy of any representation or
warranty, or on the nonperformance of or noncompliance with any covenant or obligation, will not preclude any right of Eclipsys or any other
Eclipsys Indemnified Party to indemnification, payment of Damages, or other remedy based on such representation, warranty, covenant, or
obligation to the extent arising from a Third-Party Claim. For purposes of this Agreement, Damages may include in a particular case, to the
extent proven, but not be limited to, the amount by which the value of Premise and the Business is less than it would have been but for a
breach or inaccuracy of the representations and warranties of Premise or the Major Stockholders, or the failure by Premise or the Major
Stockholders to fulfill their obligations hereunder.
(b) Eclipsys shall indemnify the Effective Time Company Holders and their Affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives, and each of their respective successors and assigns (the “Premise Indemnified
Parties”) against and hold them harmless, reimburse and make them whole from and against any and all Damages to the extent arising
from or in connection with (i) any breach or inaccuracy of any representation or warranty of Eclipsys or Merger Sub contained in this
Agreement or any of the other Transaction Documents and (ii) any breach of any covenant of Eclipsys or Merger Sub contained in this
Agreement. The express written waiver by Premise of any condition set forth in Section 8.3 based on the inaccuracy of any
representation or warranty, or on the nonperformance of or noncompliance with any covenant or obligation, shall not preclude any right
of the Premise Indemnified Parties to indemnification, payment of Damages or other remedy based on such representation, warranty,
covenant or obligation to the extent arising from a Third-Party Claim.
(d) Any payments made pursuant to this Article VII shall, except as may otherwise be required by applicable Legal Requirements,
be treated for all purposes as an adjustment to the Purchase Price for Tax purposes.

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(e) For the sole purpose of appropriately apportioning any Taxes relating to any taxable period that commences before and ends
after the Closing Date, the portion of such Tax that is attributable to Premise for the part of such taxable period that ends on the Closing
Date shall be (i) in the case of any Taxes other than Taxes based upon income or receipts, the amount of such Tax for the entire Tax
period multiplied by a fraction the numerator of which is the number of days in the Tax period ending on the Closing Date and the
denominator of which is the number of days in the entire Tax period, and (ii) in the case of any Taxes based upon or related to income or
receipts, the amount which would be payable if the relevant Tax period ended as of the close of business on the Closing Date. The
Effective Time Company Holders shall reimburse Eclipsys or the Surviving Corporation for any Taxes of Premise that are the
responsibility of the Effective Time Company Holders pursuant to this Section 7.2 within fifteen (15) business days after payment of any
such Taxes by Eclipsys or the Surviving Corporation.

7.3 Time Limitations.


(a) Neither Eclipsys, nor the Effective Time Company Holders shall have any liability (for indemnification or otherwise) with respect
to any representation or warranty contained in this Agreement (other than the Core Representations), except to the extent that on or
before the last day of the Survival Period, the party seeking recovery for Damages provides notice in writing pursuant to Section 7.5 or
Section 7.6 of a claim for Damages specifying the factual basis of that claim in reasonable detail to the extent then known by such party.
In such event, the party giving such notice shall continue to have the right to recover hereunder, and to all other rights and remedies
under this Agreement, with respect to the matter or matters to which such claim relates until such claim has been finally resolved and
payment made, if any.
(b) A claim with respect to the Core Representations or under Section 7.2(a)(v) must be made at any time prior to the earlier of (i) 90
days after the expiration of the applicable statute of limitations period or (ii) the seventh anniversary of the Closing Date, except to the
extent that on or before such date, the party seeking recovery for Damages provides notice in writing pursuant to Section 7.5 or
Section 7.6 of a claim for Damages specifying the factual basis of that claim in reasonable detail to the extent then known by such party.
In such event, the party seeking recovery for Damages shall continue to have the right to recover hereunder, and to all other rights and
remedies under this Agreement, with respect to the matter or matters to which such claim relates until such claim has been finally
resolved and payment made, if any.
(c) A claim made under Section 7.2(a)(ii), with respect to actions of Premise or the Major Stockholders prior to the Closing, must be
made at any time prior to the last day of the Survival Period, except to the extent that on or before such date, the party seeking recovery
for Damages provides notice in writing pursuant to Section 7.5 or Section 7.6 of a claim for Damages specifying the factual basis of that
claim in reasonable detail to the extent then known by such party. In such event, the party seeking recovery for Damages shall continue
to have the right to recover hereunder, and to all other rights and remedies under this Agreement, with respect to the matter or matters to
which such claim relates until such claim has been finally resolved and payment made, if any.

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(d) A claim under Sections 7.2(a)(iii), (iv) or (vi) must be made at any time prior to the earlier of (i) 90 days after the expiration of the
applicable statute of limitations period or (ii) the third anniversary of the Closing Date, except to the extent that on or before such date,
the party seeking recovery for Damages provides notice in writing pursuant to Section 7.5 or Section 7.6 of a claim for Damages
specifying the factual basis of that claim in reasonable detail to the extent then known by such party. In such event, the party seeking
recovery for Damages shall continue to have the right to recover hereunder, and to all other rights and remedies under this Agreement,
with respect to the matter or matters to which such claim relates until such claim has been finally resolved and payment made, if any.

7.4 Other Limitations.


(a) Notwithstanding anything contained herein to the contrary, the Effective Time Company Holders shall have no liability (for
indemnification or otherwise) with respect to any matters under this Agreement unless the total Damages for matters hereunder exceed
$200,000, but once such amount has been met, the Effective Time Company Holders shall be liable for all of such Damages, including
such $200,000; provided, that, with respect to claims, rights or causes of action arising (i) from Stockholder Fraud, (ii) during the Survival
Period from a breach of any of the Core Representations, (iii) from the Emerson Software Development Bonus or the Gravina Software
Development Bonus; or (iv) with respect to matters under this Agreement described in Sections 7.2(a)(iii)(y), (v) or (vi): (A) these
thresholds shall be inapplicable so that the Effective Time Company Holders have liability from the first dollar of Damages; and (B) all
such Damages will be counted toward the threshold described in this Section 7.4(a).
(b) Notwithstanding anything contained herein to the contrary, Eclipsys and Merger Sub shall have no liability (for indemnification
or otherwise) with respect to any matters under this Agreement unless the total Damages for matters hereunder exceed $200,000, but
once such amount has been met, Eclipsys shall be liable for all of such Damages, including such $200,000; provided, that, with respect to
claims, rights or causes of action arising (i) from Fraud by Eclipsys or (ii) during the Survival Period from a breach of the representations
and warranties contained in Section 5.5: (A) these thresholds shall be inapplicable so that Eclipsys has liability from the first dollar of
Damages; and (B) all such Damages will be counted toward the threshold described in this Section 7.4(b).
(c) For purposes of determining amounts to be indemnified under this Article VII (but not for purposes of determining whether
there is any breach or inaccuracy of any representation or warranty contained in this Agreement), the representations and warranties
contained herein shall not be deemed qualified by any references herein to materiality generally or to whether any such breach results or
may result in a Material Adverse Effect.
(d) Any claims by the Eclipsys Indemnified Parties for claims under Section 7.2(a)(i) through (vi) shall be first made against the
Escrow Fund; provided, however, that (1) any claim by the Eclipsys Indemnified Parties against a Major Stockholder under
Section 7.2(a)(i), with respect to a breach or inaccuracy of any representation or warranty of such Major Stockholder, or Section 7.2(a)(ii),
with respect to a breach of any covenant of such Major Stockholder, shall only be made directly against the Major Stockholder
(including the right to

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make a claim with respect to any amounts payable to such Major Stockholder out of the Stockholders’ Fund, the True-Up Reserve Fund,
the Software Development Escrow Fund or the Escrow Fund in accordance with the terms and conditions of the Escrow Agreement), and
(2) unless otherwise agreed by Eclipsys in writing, any payments to be made to an Eclipsys Indemnified Party in respect of Core
Representation Losses out of the Escrow Fund shall only be paid therefrom after payment of all Damages that are not Core
Representation Losses have been paid, or if payments are made with respect to Core Representation Losses prior to payment of all non-
Core Representation Losses, and the Escrow Fund is depleted as a result of such payments in respect of such Core Representation
Losses, then to the extent amounts are used to make payments in respect of such Core Representation Losses out of the Escrow Fund,
then the Eclipsys Indemnified Parties shall be entitled to be indemnified by the Major Stockholders as set forth herein for all Damages
that are not Core Representation Losses up to such amounts paid out of the Escrow Fund for Core Representation Losses. Liability for
claims in excess of the Escrow Fund for which all of the Major Stockholders are responsible shall be apportioned among the Major
Stockholders based on their Pro Rata Portion, and subject to the further limits described below. Once the Escrow Fund is exhausted, no
Effective Time Company Holder, other than the Major Stockholders, shall have any further liability under this Article VII, but each Major
Stockholder shall continue to be severally, but not jointly, liable to the extent provided in this Article VII; provided, however, that each
Major Stockholders’ liability (for indemnification or otherwise) with respect to any Damages:
(i) relating to any breach or inaccuracy of a Core Representation for which a claim is made prior to the third anniversary of the
Closing Date shall not exceed, in the aggregate, one hundred percent (100%) of the portion of the Purchase Price payable to such
Major Stockholder,
(ii) relating to any breach or inaccuracy of a Core Representation for which a claim is made on or after the third anniversary of
the Closing Date but prior to the fifth anniversary of the Closing Date, shall not exceed, in the aggregate, fifty percent (50%) of the
portion of the Purchase Price payable to such Major Stockholder,
(iii) relating to any breach or inaccuracy of a Core Representation for which a claim is made on or after the fifth anniversary of
the Closing Date shall not exceed, in the aggregate, fifteen percent (15%) of the portion of the Purchase Price payable to such
Major Stockholder,
(iv) relating to any breach or inaccuracy of a representation or warranty contained in Article III or Article IV (other than the
Core Representations) or to any matters under this Agreement described in Section 7.2(a)(ii), with respect to actions of Premise or
the Major Stockholders prior to the Closing, or Section 7.2(a)(iii), (iv) or (vi) shall not exceed, in the aggregate, twenty-five percent
(25%) of the portion of the Purchase Price payable to such Major Stockholder, and
(v) relating to any matters under this Agreement described in Section 7.2(a)(v) shall not exceed one hundred percent (100%) of
the portion of the Purchase Price payable to such Major Stockholder (and such Major Stockholder’s liability shall not be limited by
anything contained in clause (iv), even if such liability may also relate to a claim under Sections 7.2(a)(ii), (iii), (iv) or (vi)),

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provided, however, that with respect to a breach or inaccuracy of the representations and warranties of a Major Stockholder under Article III,
such Major Stockholder shall only be liable for such Major Stockholder’s breaches or inaccuracies. The Major Stockholders’ liability arising
from claims or causes of actions arising from Stockholder Fraud, and with respect to claims arising under Section 7.2(a)(ii) with respect to
actions of a Major Stockholder after the Closing, shall not be subject to any cap or limitation on amount, provided, that (1) with respect to
claims arising under Section 7.2(a)(ii) with respect to actions of a Major Stockholder, each Major Stockholder shall only be liable for breaches
by such Major Stockholder or breaches arising from the concerted action of such Major Stockholder, and (2) with respect to Stockholder
Fraud, each Major Stockholder shall only be liable if such Major Stockholder committed, or conspired to commit, such Stockholder Fraud.
(e) Notwithstanding anything herein to the contrary, payments to Eclipsys for Damages shall be limited to the amount of Damages,
if any, that remains after deducting therefrom any provision or reserve with respect to such Damages reflected as a Current Liability.
Eclipsys and the Surviving Corporation (i) shall use commercially reasonably efforts to attempt to recover insurance proceeds to mitigate
Damages under any applicable insurance policies of Premise in place prior to the Effective Time, and shall consult with the Stockholders’
Representative in connection with any such insurance claim and give the Stockholders’ Representative the opportunity to provide input
into material decisions affecting such insurance claim and the handling thereof, and shall in good faith consider such input, and (ii) may,
but shall have no obligation to, attempt to recover under any insurance policy of Eclipsys in place at any time or under any insurance
policy of the Surviving Corporation in place after the Effective Time to mitigate any Damages. In the event of any recovery under clauses
(i) or (ii), Damages shall be reduced by the amount of any recovery under such policies, net of any costs of recovery, including any
increase in premiums arising from such claim. Notwithstanding anything herein to the contrary, no party shall be entitled to punitive
damages unless assessed in connection with a Third-Party Claim.
(f) The liability of Eclipsys (for indemnification or otherwise) with respect to any breach or inaccuracy of its representations,
warranties or covenants in this Agreement, shall not exceed, in the aggregate the portion of the Purchase Price remaining unpaid,
provided, this limitation on liability shall not be applicable to any Damages incurred by the Effective Time Company Holders with respect
to any Third-Party Claim, solely to the extent such Damages arise as a direct and proximate result of any breach or inaccuracy by
Eclipsys of its representations, warranties or covenants in this Agreement.
(g) Subject to the terms of this Article VII, each party shall use commercially reasonable efforts to mitigate all Damages relating to a
claim for indemnification pursuant to this Article VII; provided, that the costs of mitigation efforts incurred by an indemnified Person
may be claimed as an indemnifiable Damages under this Article VII.

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(h) Nothing herein shall limit, or be deemed to limit, the rights of Eclipsys against any Stockholder arising under the letter of
transmittal delivered by such Stockholder as described in Section 2.9(d).
(i) In no event shall any Stockholder be entitled to require that any Claim be made or brought against any other Person, including
Premise, before any claim for Damages is brought or claim is made by any Eclipsys Indemnified Party against such Stockholder or the
Escrow Fund hereunder in accordance with the terms and subject to the limitations of this Agreement.

7.5 Procedures Relating to Indemnification Involving Third-Party Claims.


(a) In order for a party to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement against such party (a “Third-Party Claim”), such
indemnified party must promptly notify the indemnifying party in writing, and in reasonable detail, of the Third-Party Claim after receipt
by such indemnified party of written notice of the Third-Party Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent that the indemnifying party is actually prejudiced as a result of such
failure. Thereafter, the indemnified party shall promptly deliver to the indemnifying party after the indemnified party’s receipt thereof,
copies of all notices and documents (including court papers) received by the indemnified party relating to the Third-Party Claim. In the
event that more than one Major Stockholder is an indemnifying party hereunder, the indemnified party may provide the notices and other
communications required pursuant to this Section 7.5 solely to the Stockholders’ Representative.
(b) If a Third-Party Claim is made against an indemnified party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it promptly so chooses and acknowledges its obligation to indemnify the indemnified party therefor, to assume the
defense thereof with counsel selected by the indemnifying party, provided, that such counsel is not reasonably objected to by the
indemnified party. Should the indemnifying party assume the defense of a Third-Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ
counsel (not reasonably objected to by the indemnifying party), at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall control such defense. However, notwithstanding the
foregoing, if Eclipsys or any of its Affiliates is an indemnified party in connection with a Third-Party Claim involving any Company IP,
any then current employee or other person filling a similar function, or any then current client or supplier (including the owner of any
Intellectual Property then used in the Business), Eclipsys may control the defense, at the cost of the indemnifying party; provided,
however, that in such event, that Eclipsys shall in good faith, and to the extent reasonably permitted by any applicable protective or
confidentiality orders and subject to the maintenance of all applicable attorney-client and attorney work product privileges, provide
updates to the indemnifying party (or if there is more than one indemnified party, the Stockholders’ Representative) to permit the
indemnifying party to reasonably monitor and provide the indemnifying party the opportunity to provide input into material decisions
affecting such claim and the handling thereof, including, as applicable, the potential settlement of such claim, and shall in good faith
consider such input.

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(c) The indemnifying party shall be liable for the reasonable fees and expenses of counsel employed by the indemnified party in
connection with a Third-Party Claim for any period during which the indemnifying party has failed to assume or is not entitled to assume
the defense thereof; provided, however, that the indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys (in addition to one local counsel, where applicable). In connection with
any Third-Party Claim, the indemnified party and the indemnifying party shall cooperate with each other in the defense or prosecution
thereof. Such cooperation shall include the retention and (upon the indemnified or indemnifying party’s request) the provision to such
party of records and information which are reasonably relevant to such Third-Party Claim, and making employees (including persons
filling a similar function) available on a mutually convenient basis to provide additional information and explanation of any material
provided hereunder, including deposition or trial testimony.
(d) If the indemnifying party shall have assumed the defense of a Third-Party Claim, the indemnifying party may settle, compromise
or discharge such Third-Party Claim in good faith with the indemnified party’s prior written consent, which consent shall not be
unreasonably withheld or delayed, provided such settlement, compromise or discharge, by its terms, obligates the indemnifying party to
pay the full amount of the liability in connection with such Third-Party Claim, releases the indemnified party completely in connection
with such Third-Party Claim and does not impose any equitable remedies. If the indemnifying party shall not have assumed the defense
of a Third-Party Claim or if the indemnified party assumes the defense thereof, the indemnified party may settle, compromise or discharge
such Third-Party Claim in good faith with the indemnifying party’s prior written consent, which consent shall not be unreasonably
withheld or delayed.
(e) Notwithstanding the foregoing, the indemnifying party shall not be entitled to assume the defense of any Third-Party Claim (and
shall be liable for the reasonable fees and expenses of counsel incurred by the indemnified party in defending such Third-Party Claim) if:
(i) the Third-Party Claim seeks an Order or other equitable relief or relief for other than money damages against the indemnified
party, which the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any
related claim for money damages, or
(ii) the indemnified party reasonably determines, after conferring with its outside counsel, that joint representation would be
expected to give rise to a conflict of interest.
If such equitable relief or other relief portion of the Third-Party Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion relating to money damages. All claims under Section 7.2 other
than Third-Party Claims shall be governed by Section 7.6.

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(f) Notwithstanding the foregoing, Eclipsys and Premise shall have the sole right to represent the interests of Premise in all Tax
audits and administrative and court proceedings and to employ counsel of its choice; provided, however, that, to the extent relating to
Taxes for which the Major Stockholders are liable pursuant to Section 7.2(a), the Stockholders’ Representative, in its sole discretion,
shall have the right to participate in or control any such proceeding and shall have full control over the resolution or settlement of any
such matters; provided, that, in the event that any such adjustment would have an adverse effect on Premise for a period ending after
the Closing Date, the Stockholders’ Representative (i) shall permit Eclipsys to participate in the proceeding to the extent the adjustment
may affect the Tax liability of Premise for a period ending after the Closing Date and (ii) shall not settle or otherwise compromise such
proceeding without the prior written consent of Eclipsys, which consent shall not be unreasonably withheld or delayed. To the extent
the Stockholders’ Representative does not assume full control over any such matters, Eclipsys shall use commercially reasonable efforts
to defend positions taken on Tax Returns for Taxes for which the Major Stockholders are liable pursuant to Section 7.2(a) and shall keep
the Stockholders’ Representative reasonably informed of the progress of any such proceedings and shall not settle or otherwise
compromise such proceeding without prior written consent of the Stockholders’ Representative, which shall not be unreasonably
withheld or delayed. Eclipsys and the Stockholders’ Representative shall bear their own expenses incurred in connection with audits and
other administrative judicial proceedings relating to Taxes for which such party and its Affiliates are liable under Section 7.2(a).

7.6 Other Claims. A claim by any party for reimbursement, make whole or other recovery for Damages arising from any event,
circumstance or condition not involving a Third-Party Claim that may be payable under the terms of this Agreement may be asserted by
written notice to the party or parties from whom such recovery is sought (or to the Stockholders’ Representative, if such recovery is sought
from more than one of the Stockholders) and, unless disputed, shall be paid promptly after receipt of such notice. Notwithstanding the
foregoing, no party shall be liable to any other for any punitive damages pursuant to this Section 7.6. Any dispute relating thereto shall be
settled in accordance with Section 11.13.

7.7 Set-Off. In addition to any rights of set-off, off-set or other rights that Eclipsys may have at common law, by statute or otherwise,
Eclipsys shall have the right to set-off against the Escrow Fund, at any time, and any amounts payable to Major Stockholders out of the True-
Up Reserve Fund, the Software Development Escrow Fund and the Stockholders’ Fund held by the Escrow Agent pursuant to the Escrow
Agreement, subject to the terms and conditions hereof and the Escrow Agreement, any amounts owing by any Major Stockholder to Eclipsys
pursuant to this Article VII; provided, however, that (A) notwithstanding the exercise by Eclipsys of the right to set-off described in this
Section 7.7, Eclipsys and the Stockholders shall remain obligated to first comply with their respective obligations described in Section 7.5 and
Section 7.6 and (B) with respect to a breach or inaccuracy of the representations and warranties of a Major Stockholder under Article III,
Eclipsys shall only have the right of set-off against amounts owed to such breaching Major Stockholder. Neither the exercise of nor failure to
exercise any such right of set-off will constitute an election of remedies or limit Eclipsys in any manner in the

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enforcement of other remedies available to it hereunder and the exercise by Eclipsys of the right of set-off against the Escrow Fund or other
amounts the Escrow Agent or Eclipsys would otherwise be required to pay to any Major Stockholder shall not be the sole or exclusive remedy
of Eclipsys for recovery of any amounts owed by the Stockholders to Eclipsys under this Article VII.

7.8 Recovery in the Case of Strict Liability or Negligence. THE PARTIES HERETO INTEND THAT, SUBJECT TO THE OTHER TERMS
AND CONDITIONS IN THIS ARTICLE VII, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION FOR ALL OF ITS
DAMAGES, AND THE PROVISIONS OF THIS ARTICLE VII SHALL BE INTERPRETED TO PERMIT RECOVERY OF SUCH DAMAGES TO
THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW, AND SUCH INDEMNIFICATION SHALL NOT BE LIMITED AS A
RESULT OF ANY LEGAL REQUIREMENTS (INCLUDING ANY ENVIRONMENTAL LAW OR PRODUCTS LIABILITY LAW), OR AS A
RESULT OF SOLE OR CONCURRENT STRICT LIABILITY BEING IMPOSED ON THE PERSON SEEKING SUCH INDEMNIFICATION OR
OTHER RECOVERY, AND ANY CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING SUCH
INDEMNIFICATION OR OTHER RECOVERY SHALL NOT LIMIT DAMAGES TO THE EXTENT SUCH DAMAGES ARE NOT
ATTRIBUTABLE TO SUCH CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE.

7.9 Sole and Exclusive Remedy.


(a) Should the Closing occur (i) the sole and exclusive remedies of Eclipsys and Merger Sub for any breach or inaccuracy of the
representations and warranties and covenants of Premise and the Major Stockholders under this Agreement and any other Transaction
Documents (except to the extent expressly provided in such Transaction Documents), whether such claims be in contract, tort or
otherwise, shall be the remedies provided in this Article VII, and Eclipsys and Merger Sub hereby waive, from and after the Closing, any
and all other remedies which may be available at law or equity for any breach or inaccuracy or alleged breach or inaccuracy of the
representations and warranties and covenants of Premise and the Major Stockholders hereunder, and (ii) the Stockholders’ sole and
exclusive remedies for any breach or inaccuracy of the representations and warranties and covenants of Eclipsys and Merger Sub under
this Agreement and any other Transaction Documents (except to the extent expressly provided in such Transaction Documents),
whether such claims be in contract, tort or otherwise, shall be the remedies provided in this Article VII, and each of the Stockholders, to
the fullest extent permitted by law, hereby waives, and by approval hereof by the Stockholders, shall be deemed to have waived, from
and after the Closing, any and all other remedies which may be available at law or equity for any breach or inaccuracy or alleged breach
or inaccuracy of the representations and warranties and covenants of Eclipsys and Merger Sub hereunder. If the Closing does not occur,
the sole and exclusive remedy of the parties shall be as set forth in Section 9.5, and the provisions of this Article VII shall be inapplicable.
(b) Nothing in this Article VII shall (i) limit the right of any party to seek injunctive or other equitable relief for any breach or alleged
or threatened breach of any covenant in this Agreement or any other Transaction Document, provided that the exercise of any

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equitable relief shall be subject to Section 11.11, or (ii) limit the rights of the Major Stockholders to seek any remedies with respect to
Fraud by Eclipsys, or Eclipsys to seek any remedies with respect to Stockholder Fraud in connection herewith or transactions
contemplated hereby (including limiting the time such claims can be made, or making such claims subject to any deductibles set forth
herein).
(c) For the avoidance of doubt, the concept of “indemnity” as used in this Article VII is intended to include claims between or
among the parties to this Agreement and not involving any third-party, as well as Third-Party Claims, and the limitation set forth in this
Section 7.9 of remedies for breach or inaccuracies of representations and warranties under this Agreement is not intended to preclude
claims between or among the parties, including but not limited to claims for breach of contract or Fraud, which claims are, however,
intended to be governed by this Article VII.

ARTICLE VIII
CONDITIONS

8.1 Conditions to Each Party’s Obligation to Effect the Closing. The respective obligations of each party to effect the Closing and the
other transactions contemplated hereby are subject to the satisfaction or waiver at or prior to the Closing Date of each of the following
conditions:
(a) All filings with any Governmental Entity required to be made prior to the Closing Date by Premise, the Major Stockholders,
Eclipsys, Merger Sub or any of their respective Affiliates, and all other Consents of any Governmental Entity required to be obtained
prior to the Closing Date by Premise, the Major Stockholders, Eclipsys, Merger Sub or any of their respective Affiliates in connection
with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions
contemplated herein and therein by Premise, the Major Stockholders, Eclipsys and Merger Sub shall have been made or obtained (as the
case may be).
(b) No court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered
any Legal Requirement or Order, whether temporary, preliminary or permanent, that is in effect and restrains, enjoins or otherwise
prohibits, materially delays, makes illegal or would be violated (provided that with respect to any Legal Requirement, such violation is
not immaterial in light of the transactions contemplated hereby) by consummation of the transactions contemplated by this Agreement or
the other Transaction Documents.
(c) The Company Stockholder Approval shall have been validly obtained under Delaware law, the Premise Certificate of
Incorporation and the Bylaws of Premise.

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8.2 Conditions to Obligations of Eclipsys. The obligations of Eclipsys to effect the Closing are also subject to the satisfaction or waiver
by Eclipsys at or prior to the Closing Date of the following conditions:
(a) each of the representations and warranties of Premise and the Major Stockholders set forth in this Agreement qualified as to
materiality shall be true and correct, and those not so qualified shall each be true and correct in all material respects, as of the date of this
Agreement and as of the Closing Date (without giving effect to any amendment or supplement to the Disclosure Schedule after the date
hereof, except for the Capitalization Update), except to the extent such representations and warranties speak as of an earlier date, in
which case such representation or warranty shall be true and correct as of such earlier date;
(b) Premise and the Major Stockholders shall have performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date;
(c) Eclipsys shall have been furnished with a certificate, executed by Premise and the Stockholders’ Representative, dated the
Closing Date, certifying as to the fulfillment of the conditions in Sections 8.2(a) and (b);
(d) each of the other Transaction Documents, and such further instruments of sale, transfer, conveyance, assignment, delivery or
confirmation, or any part thereof, as Eclipsys may reasonably require, shall have been fully executed and delivered by Premise or the
Major Stockholders, as applicable, to Eclipsys and shall remain in full force and effect, and there shall be no default thereunder;
(e) all Consents required under the Material Contracts in connection with the execution, delivery and performance of this
Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby or thereby, shall have
been obtained by Premise on terms that are not materially burdensome to Premise or Eclipsys, shall be in full force and effect and shall
have been delivered to Eclipsys;
(f) since the date of this Agreement, there shall have been no event, change, occurrence, condition or circumstance that Eclipsys
determines, in good faith, (i) has had or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, or (ii) has
caused or is reasonably likely to cause, individually or in the aggregate, employees of Premise, of a quantity and having the skills
sufficient for the operation of the Business, not to be continuing their affiliation with the Business through employment with Eclipsys or
Premise, after the Closing Date;
(g) Eclipsys shall have received the resignations of the directors of Premise pursuant to Section 6.8;
(h) the Escrow Agent and the Stockholders’ Representative shall have executed the Escrow Agreement;
(i) the Paying Agent shall have executed the Paying Agency Agreement;
(j) each of the Key Employees shall have entered into an employment agreement, on the terms set forth in Exhibit D-2, and in the
form attached hereto as Exhibit D-1 or another form acceptable to Eclipsys and such Key Employee, with Eclipsys or, in the discretion of
Eclipsys, a Subsidiary of Eclipsys (including Premise) (the “Employment Agreements”), and all such agreements shall be in full force
such that each of the Key Employees is continuing their affiliation with the Business through employment with Eclipsys or Premise after
the Closing Date;

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(k) Eclipsys shall have received an opinion of counsel to Premise in the form attached hereto as Exhibit E;
(l) all required corporate action on the part of Premise and the Stockholders, including without limitation, approval by the board of
directors of Premise, shall have been taken (and not rescinded) to approve the execution, delivery and performance of this Agreement
and the other Transaction Documents;
(m) the Merger shall be effective;
(n) [intentionally deleted];
(o) the Dissenting Shares shall constitute no more than five percent (5%) of the Shares outstanding as of the Effective Date;
(p) Eclipsys shall have received a certificate from Premise, in form and substance reasonably satisfactory to Eclipsys, to the effect
that Premise is not a U.S. real property holding company meeting the requirements of Treasury Regulations 1.1445-2(c)(3) and 1.897-2(h);
(q) the Stockholder Agreements shall have been terminated effective on or before the Closing, and the Stockholders party thereto
shall have waived all rights thereunder with respect to the transactions contemplated hereby;
(r) the Engagement Letter Agreement, dated June 3, 2008, between Premise and Montgomery & Co. shall have been terminated
effective as of the Closing pursuant to a Termination Agreement in the form attached hereto as Exhibit F;
(s) there shall not be pending or Threatened by any Governmental Entity any suit, action or proceeding (or by any other Person
any suit, action or proceeding which Eclipsys determines in good faith has a reasonable likelihood of success): (A) seeking to obtain
from Eclipsys, the Surviving Corporation or their Affiliates, in connection with the Merger or the other transactions contemplated hereby
or by the other Transaction Documents, any material money damages; (B) seeking to prohibit or limit the ownership or operation by
Eclipsys or Premise of any material portion of the Business, or to compel Eclipsys or Premise to dispose of, license or hold separate any
material portion of the Business in each case as a result of the Merger or any of the other transactions contemplated by this Agreement
or by the other Transaction Documents; (C) seeking to impose limitations on the ability of Eclipsys to acquire or hold, or exercise full
rights of ownership of the Capital Stock of Premise, including the right to vote such Capital Stock on all matters properly presented to the
equityholders of Premise; (D) seeking to prohibit Eclipsys from effectively controlling in any material respect the Business; (E) claiming
that such Person is a beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any Capital Stock or assets of
Premise or is entitled to any portion of the Purchase Price, other than ownership set forth on the Disclosure Schedule; (F) affecting a
material portion of the Business, as determined by Eclipsys, in good faith; or (G) that may otherwise have the effect of preventing,
materially delaying or otherwise materially interfering with the transactions contemplated by this Agreement and the other Transaction
Documents;

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(t) Eclipsys shall have received such other documents as Eclipsys reasonably requests evidencing the satisfaction of any condition
referred to in this Section 8.2.

8.3 Conditions to the Obligations of Premise and the Stockholders. The obligations of Premise and the Stockholders to effect the Closing
are also subject to the satisfaction or waiver by Premise prior to the Closing Date of the following conditions:
(a) each of the representations and warranties of Eclipsys and Merger Sub set forth in this Agreement qualified as to materiality
shall be true and correct, and those not so qualified shall each be true and correct in all material respects, as of the date of this
Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier date);
(b) Eclipsys and Merger Sub shall have performed in all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date;
(c) the Stockholders’ Representative shall have been furnished with a certificate, executed by a duly authorized officer of Eclipsys,
dated the Closing Date, certifying as to the fulfillment of the conditions in Sections 8.3(a) and (b);
(d) the Escrow Agent and Eclipsys shall have executed the Escrow Agreement;
(e) the Paying Agent and Eclipsys shall have executed the Paying Agency Agreement;
(f) Eclipsys shall have delivered the Closing Payment and the Deferred Payment Amount to the Paying Agent;
(g) Eclipsys shall have delivered the Holdback Amount to the Escrow Agent;
(h) all required corporate action on the part of Eclipsys and Merger Sub, including without limitation, approval by the boards of
directors of Eclipsys and Merger Sub, shall have been taken (and not rescinded) to approve the execution, delivery and performance of
this Agreement and the other Transaction Documents;
(i) the Stockholders’ Representative shall have received such other documents as the Stockholders’ Representative reasonably
requests evidencing the satisfaction of any condition referred to in this Section 8.3; and
(j) there shall not be pending or Threatened by any Governmental Entity any suit, action or proceeding (or by any other Person any
suit, action or proceeding which Premise or any Major Stockholder determines in good faith has a reasonable likelihood of success), in
each case that is filed or Threatened after the execution of this Agreement by a plaintiff other

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than Premise or any Major Stockholder or any Affiliate of Premise or any Major Stockholder, and without consultation with or assistance
of Premise or any Major Stockholder or their respective Affiliates (and provided that Premise and the Major Stockholders and their
respective Affiliates may not encourage or assist, and must use commercially reasonable efforts to cause the prompt dismissal or other
disposition satisfactory to Eclipsys of, any such suit, action or proceeding): (A) seeking to obtain from Premise or such Major
Stockholder, or their respective Affiliates, in connection with the Merger or the other transactions contemplated hereby or by the other
Transaction Documents, any material money damages; (B) seeking to prohibit or limit the ownership or operation by Eclipsys or Premise
of any material portion of the Business, or to compel Eclipsys or Premise to dispose of, license or hold separate any material portion of
the Business in each case as a result of the Merger or any of the other transactions contemplated by this Agreement or by the other
Transaction Documents; (C) seeking to impose limitations on the ability of Eclipsys to acquire or hold, or exercise full rights of
ownership of the Capital Stock of Premise, including the right to vote such Capital Stock on all matters properly presented to the
equityholders of Premise; (D) seeking to prohibit Eclipsys from effectively controlling in any material respect the Business; (E) claiming
that such Person is a beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any Capital Stock or assets of
Premise or is entitled to any portion of the Purchase Price, other than ownership set forth on the Disclosure Schedule; (F) affecting a
material portion of the Business, as determined by Premise or such Major Stockholder, as the case may be, in good faith; or (G) that may
otherwise have the effect of preventing, materially delaying or otherwise materially interfering with the transactions contemplated by this
Agreement and the other Transaction Documents (provided, that this condition shall be deemed met to the extent that Eclipsys has
agreed to indemnify and defend the Premise Indemnified Parties against and hold them harmless, reimburse and make them whole from
and against any Damages (other than Damages for which the Effective Time Company Holders are required to indemnify the Eclipsys
Indemnified Parties hereunder), to the extent arising from or in connection with any such suit, action or proceeding).

ARTICLE IX
TERMINATION

9.1 Termination by Mutual Consent. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at
any time prior to the Closing Date, by mutual written consent of Premise and Eclipsys.

9.2 Termination by Eclipsys or Premise. This Agreement may be terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Closing Date by either Eclipsys or Premise if any Order permanently restraining, enjoining or otherwise prohibiting the
Merger shall be entered and such Order is or shall have become nonappealable, provided that (i) the party seeking to terminate this Agreement
shall have complied with its obligations under Section 6.2 with respect to the removal or lifting of such Order (including, with respect to
Premise, the Major Stockholders), and (ii) the noncompliance with this Agreement by the party seeking to terminate this Agreement (including,
with respect to Premise, the Major Stockholders) shall not have been the proximate cause of the issuance of the Order.

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9.3 Termination by Premise. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Closing Date, by Premise if:
(a) (i) the Closing shall not have been consummated on or before January 15, 2009 (the “Termination Date”), or
(ii) any of the conditions (other than absence of material breach as addressed in Section 9.3(b)) set forth in Section 8.1 or 8.3
shall have become incapable of fulfillment;

provided, however, that the right to terminate this Agreement pursuant to this subsection (a) shall not be available to Premise if Premise or the
Major Stockholders or any of them has breached in any material respect their obligations under this Agreement in any manner that shall have
proximately contributed to the failure referenced in this subsection (a);
(b) there has been a material breach by Eclipsys or Merger Sub of any representation, warranty, covenant or agreement of Eclipsys
or Merger Sub contained in this Agreement that is not curable or, if curable, is not cured prior to the Termination Date; or
(c) the Board of Directors of Premise shall have withdrawn, amended or modified its recommendation, or recommended against
adoption of this Agreement and the Merger in accordance with Section 6.6(c) and terminates this Agreement to accept and enter into a
definitive binding agreement with respect to a Superior Proposal; provided, that Premise may not effect such termination unless
(i) Premise has contemporaneously with such termination paid to Eclipsys the fee pursuant to Section 9.5(a)(ii) and (ii) Premise has not
breached the terms of Section 6.6.

9.4 Termination by Eclipsys. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any
time prior to the Closing Date by Eclipsys if:
(a) (i) the Closing shall not have been consummated on or before the Termination Date, or
(ii) any of the conditions (other than absence of material breach as addressed in Section 9.4(b)) set forth in Section 8.1 or
Section 8.2 shall have become incapable of fulfillment;

provided, however, that the right to terminate this Agreement pursuant to this subsection (a) shall not be available to Eclipsys if Eclipsys or
Merger Sub has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed
to the failure referred to in this subsection (a);
(b) there has been a material breach of any representation, warranty, covenant or agreement of Premise or the Major Stockholders
or any of them contained in this Agreement that is not curable or, if curable, is not cured prior to the Termination Date;
(c) this Agreement has not been approved and adopted as provided herein pursuant to the Stockholder Written Consents in
accordance with applicable law and the Premise Certificate of Incorporation and Bylaws of Premise, and delivery of the Stockholder
Written Consents has not been made to Eclipsys, within two (2) hours of the execution of this Agreement, or, at any time, such
Stockholder Written Consents are rescinded, terminated or

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otherwise considered or alleged to be null and void so that sufficient Stockholder Written Consents to authorize and approve all actions
to be authorized or approved by the Stockholders under this Agreement and under the applicable provisions of Delaware General
Corporation Law, the Premise Certificate of Incorporation and Bylaws of Premise no longer remain in full force and effect without any
challenge thereto; or
(d) (i) the Board of Directors of Premise shall have withdrawn, or amended or modified, in any manner that is adverse to Eclipsys, its
approval or recommendation to the Stockholders with respect to this Agreement and the Merger, or (ii) Premise or the Board of Directors
of Premise approves or recommends any Third-Party Acquisition or approves any letter of intent, agreement in principle, acquisition
agreement or similar agreement relating to any Third-Party Acquisition (other than a confidentiality agreement consistent with the terms
of Section 6.6(b));

provided, however, that the right to terminate this Agreement pursuant to subsection (d)(i) shall not be available to Eclipsys if Eclipsys or
Merger Sub has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed
to the failure referred to in this subsection (d); or
(e) Premise has materially breached its obligations under Section 6.6 or Section 6.14(b).

9.5 Effect of Termination.


(a) Except for termination under Section 9.1, any termination shall be effective upon receipt of written notice thereof given to
Eclipsys or Premise, as applicable. If this Agreement is terminated, all obligations of the parties under this Agreement shall terminate,
without any Liability on the part of any party hereto to any Person in respect hereof or the transactions contemplated hereby and the
other Transaction Documents, and no party shall have any claim against another, whether under contract, tort or otherwise, except that:
(i) Sections 6.3(ii), 6.5 and 6.12, this Section 9.5, and Article XI hereof and the Confidentiality Agreement shall survive;
(ii) if this Agreement is terminated by (A) Premise pursuant to Section 9.3(c) or (B) by Eclipsys pursuant to Section 9.4(d) or
(e), Premise shall pay Eclipsys a fee of $1,500,000, in cash, by wire transfer of immediately available funds to an account designated
by Eclipsys, and Eclipsys shall have no liability to Premise and the Stockholders. If the fee shall be payable pursuant to clause
(B) of the immediately preceding sentence, the fee shall be paid no later than two Business Days after notice of termination of this
Agreement, and if the fee shall be payable pursuant to clause (A) of the immediately preceding sentence, the fee shall be paid on
the date of and concurrent with termination of this Agreement; and
(iii) except in situations where the termination fee set forth in clause (ii) above is paid, if this Agreement is terminated by a
party because of the breach of this Agreement by another party or parties or because one or more of the conditions to the
terminating party’s obligations under this Agreement is not satisfied as a result of another

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party’s or parties’ intentional failure to comply with its obligations under this Agreement, the terminating party’s right to pursue all
legal remedies for such breach shall survive such termination unimpaired, provided, that Premise and the Major Stockholders each
agree that to the extent they have incurred any Damages in connection with termination of this Agreement as set forth in this
clause (iii), the maximum liability of Eclipsys and Merger Sub (and the sole and exclusive remedy of Premise and the Stockholders)
for such Damages shall be limited in the aggregate to $1,500,000.
(b) The remedies set forth in this Section 9.5 are the sole and exclusive remedies of the parties if this Agreement is terminated, and
Premise and the Major Stockholders shall not be entitled to specific performance of the obligations of Eclipsys and Merger Sub to
consummate the Merger. Notwithstanding the foregoing, in the event of termination of this Agreement, the parties shall be entitled to
specific performance to enforce the provisions that expressly survive termination.

ARTICLE X
TAX MATTERS

The following provisions shall govern the allocation of responsibility as between Eclipsys and the Stockholders for certain Tax matters
following the Closing Date:

10.1 Responsibility for Filing Tax Returns. Eclipsys shall prepare or cause to be prepared, and file or cause to be filed, all Tax Returns for
Premise for Tax periods described in Section 7.2(a)(v) and that are filed after the Closing Date on a basis consistent with past custom and
practice, unless there is not substantial authority for such position. Eclipsys shall deliver, at least 30 days prior to the due date for the filing of
such Tax Return (taking into account extensions), to the Stockholders’ Representative a statement setting forth the amount of Tax, if any, for
which the Effective Time Company Holders are responsible pursuant to Section 7.2(a), and a copy of such Tax Returns. The Stockholders’
Representative shall have the right to review such Tax Returns and statement prior to the filing of such Tax Returns. The Stockholders’
Representative, on the one hand, and Eclipsys, on the other hand, agree to consult and resolve in good faith any issue arising as a result of
the Stockholders’ Representative’s review of such Tax Returns and mutually to consent to the filing of such Tax Returns as promptly as
possible.

10.2 Cooperation on Tax Matters.


(a) Subject to Section 7.5(f), Eclipsys, Premise, and Stockholders’ Representative shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Article X and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the
provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Eclipsys
shall permit the Stockholders’ Representative to retain a copy of Premise’s books and records with respect to Tax matters pertinent to
Premise relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Eclipsys, any extensions thereof) of the respective taxable periods.

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(b) Eclipsys and the Stockholders’ Representative further agree, upon request, to use their commercially reasonable efforts to
obtain any certificate or other document from any Governmental Entity or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).

10.3 Tax-Sharing Agreements. All tax-sharing agreements or similar agreements with respect to or involving Premise shall be terminated
as of the Closing Date and, after the Closing Date, Premise shall not be bound thereby or have any liability thereunder.

10.4 Certain Taxes and Fees. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the
transactions contemplated by this Agreement shall be paid by the Stockholders when due, and each Stockholder shall, at its own expense, file
all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges, and, if required by applicable law,
Eclipsys shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

10.5 Refunds or Credits. Except to the extent included as Current Asset, any refund or credit of Taxes that are received, recognized or
recognizable by the Surviving Corporation, or any of its successors or assignees, or credited against Tax to which the Surviving Corporation,
or any of its successors or assignees, become entitled that relate to Tax periods described in Section 7.2(a)(v) shall be for the account of the
Effective Time Company Holders and Eclipsys shall cause the Surviving Corporation to pay over to the Effective Time Company Holders, in
their Pro Rata Portion, the amount of any such refund or credit on an after-tax basis within fifteen (15) days after receipt, recognition or
entitlement thereto.

10.6 Amended Tax Returns.


(a) Any amended Tax Return or claim for Tax refund with respect to a Tax Return filed on or prior to the Closing Date shall be filed,
or caused to be filed, only by the Stockholders’ Representative. The Stockholders’ Representative shall not, without the prior written
consent of Eclipsys, make or cause to be made any such filing to the extent such filing, if accepted, reasonably might change the Tax
liability of Eclipsys or the Surviving Corporation for any Tax period.
(b) Any amended Tax Return or claim for Tax refund with respect to a Tax Return filed after the Closing Date, shall be filed, or
caused to be filed, only by Eclipsys. Eclipsys shall not, without the prior written consent of the Stockholders’ Representative, file, or
cause to be filed, any amended Tax Return or claim for Tax refund for any such post Closing Date period to the extent that such filing, if
accepted, reasonably might change the Tax liability of the Stockholders for any pre-Closing Date period.

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ARTICLE XI
MISCELLANEOUS

11.1 Entire Agreement; Assignment.


(a) This Agreement, including the schedules and exhibits hereto (which are incorporated herein by this reference), the other
Transaction Documents and the Confidentiality Agreement constitute the entire agreement, and supersede all prior agreements,
understandings and other Contracts, both written and oral, and all contemporaneous oral agreements, understandings and other
Contracts, among the parties with respect to the subject matter hereof. Except for express representations, warranties and covenants of
Eclipsys, Merger Sub, Premise and the Major Stockholders contained herein, or in the other Transaction Documents, there are no
representations or warranties whatsoever by or on behalf of Premise, the Major Stockholders, their Affiliates or agents relating to
Premise or their ownership interests therein, on the one hand, and Eclipsys, Merger Sub and their Affiliates or agents relating to Eclipsys
or Merger Sub, on the other hand.
(b) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of each of the other parties hereto; provided, however, that
Eclipsys may assign all or a portion of its rights and obligations, or those of Merger Sub, under this Agreement to any other Subsidiary
of Eclipsys without the consent of Premise or the Major Stockholders (which assignment shall not relieve Eclipsys of any obligation or
liability under this Agreement).
(c) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

11.2 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, each of which shall remain in full force and effect and in lieu of such invalid or unenforceable provision
there shall be automatically added as part of this Agreement a valid and enforceable provision as similar in terms to the invalid or
unenforceable provision as possible, provided that this Agreement as amended (i) reflects the intent of the parties hereto and (ii) does not
change the bargained for consideration or benefits to be received by each party hereto.

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11.3 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or facsimile (provided that such notice is delivered during regular business
hours in the location of receipt, and if not, then on the next Business Day) to the respective parties as follows:
If to Eclipsys:
Eclipsys Corporation
Three Ravinia Drive
Suite 1000
Atlanta, GA 30348
Fax: (404) 847-5777
Attn.: General Counsel
with a copy to (which copy shall not constitute notice):
Gibson, Dunn & Crutcher LLP
3161 Michelson Drive
Irvine, CA 92612
Fax: (949) 475-4703
Attn.: Michelle Hodges
If to Premise or the Major Stockholders (prior to the Closing):
Premise Corporation
Pond View Corporate Center
76 Batterson Park Road
Farmington, CT 06032
Fax: (860) 246-3001
Attn.: Eric Rosow, Chief Executive Officer
If to the Stockholders’ Representative:
Richard Dumler
Milestone Venture Partners
551 Madison Avenue, 7th Floor
New York, NY 10022
Fax: (212) 223-0315
in each case, with a copy to (which copy shall not constitute notice):
Wiggin and Dana LLP
One Century Tower
265 Church Street
New Haven, CT 06508-1832
Fax: (203) 782-2889
Attn.: Frank Marco

or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth
above.

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11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
regardless of the laws or rules that might otherwise govern under applicable principles of conflicts of laws thereof. In the event of the bringing
of any action or suit by a party hereto against another party hereunder arising out of or relating to this Agreement, which claim or suit is not
subject to arbitration, as determined pursuant to Section 11.13, then in that event, the sole forum for resolving such disputes shall be the state
and federal courts located in Delaware, and each of the parties hereby irrevocably submits to such exclusive jurisdiction. This Section 11.4
shall survive any termination of this Agreement and the Closing.

11.5 Construction.
(a) The headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. Unless the context clearly requires otherwise “or” is not exclusive, and “includes” means “includes, but
is not limited to.”
(b) Each of the parties acknowledges that it has been represented by counsel of its choice throughout all negotiations that have
preceded the execution of this Agreement and that each party and its counsel cooperated in the drafting and preparation of this
Agreement and the other Transaction Documents, and any and all drafts relating thereto exchanged between the parties shall not be
construed against any party by reason of its preparation. Accordingly, any ambiguities in this Agreement shall not be interpreted
against any party that may have drafted this Agreement.
(c) For purposes of this Agreement, “commercially reasonable efforts” shall not be deemed to require a Person to undertake
extraordinary or unreasonable measures, including the payment of amounts in excess of normal and usual filing fees and processing fees.

11.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile
transmission or PDF by electronic transmission shall be effective delivery of a manually executed counterpart to this Agreement.

11.7 Parties In Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, except for the
Persons expressly set forth in Section 7.2 and Section 11.8, with respect to such sections, nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement, including
any employee or former employee of Premise (or any beneficiary or dependent thereof), including for such purposes persons filling a similar
function.

11.8 Prior Review and Counsel. Eclipsys and Merger Sub, on the one hand, and Premise and the Major Stockholders, severally and not
jointly, on the other hand, each represents and warrants that: (a) it was provided a fair and reasonable time in which to evaluate this
Agreement and the other Transaction Documents and to negotiate their respective terms and conditions; (b) it has regularly consulted with
and received advice and counsel from one or more

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attorneys of its own choice regarding the Merger, this Agreement, the other Transaction Documents and the negotiation of each and every
one of them, which attorney(s) is/are not and was/were not any of the other party’s attorneys; (c) it has not received any legal or other
substantive advice or any attorney work product from any of the other party’s attorneys (including in-house attorneys), and it has not relied
upon any comment, observation, remark, communication or information (whether oral or written) made or delivered by any of the other party’s
attorneys (including in-house attorneys); and (d) it has read and fully understands this Agreement and each of the other Transaction
Documents. Each party’s attorneys (including in-house attorneys) shall be entitled to rely on the other party’s representations and warranties
made in this Section 11.8 as intended beneficiaries of such representations and warranties.

11.9 Waiver. No waiver of any breach of the provisions of this Agreement shall be deemed to have been made by any party, unless such
waiver is expressed in writing and signed by the party against which it is to be enforced (or the Stockholders’ Representative, with respect to
matters relating to all Major Stockholders or all Stockholders). The waiver by any party of any right under this Agreement or to a remedy for
the breach of any of the provisions herein shall not operate or be construed by the breaching party as a waiver of the nonbreaching party’s
remedies with respect to any other or continuing or subsequent breach.

11.10 Amendments. No amendment or modification in respect of this Agreement shall be effective unless it shall be in writing and signed
by the parties hereto (or the Stockholders’ Representative, with respect to matters relating to all Major Stockholders prior to the Closing or all
Stockholders after the Closing Date).

11.11 Specific Performance. The parties agree that irreparable damage would occur in the event any provision of this Agreement were not
performed by any other party in accordance with the terms hereof and, except as set forth in Section 9.5(b), that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in
any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which the parties are entitled at
law or in equity.

11.12 Cumulative Remedies. Except as expressly limited herein, the rights, remedies, powers and privileges herein provided are cumulative
and not exclusive of any other rights, remedies, powers and privileges provided by law or equity.

11.13 Arbitration.
(a) Any dispute, claim or controversy arising out of or relating to this Agreement or any other Transaction Document (other than
the Employment Agreements) or the breach, termination, enforcement, interpretation or validity thereof, including the determination of
the scope or applicability of this Agreement to arbitrate, shall be determined by arbitration in Washington, D.C., before a sole arbitrator;
provided, however, if the claim and any counterclaim, in the aggregate, exceed $750,000, exclusive of interest and attorneys’ fees, the
dispute shall be heard and determined by three arbitrators as provided herein. If any such dispute, claim or controversy arises at the
same time and relates to the same or similar facts, claims or events as any one or more other disputes, claims or controversies, such
disputes, claims or controversies

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(including any dispute, claim or controversy under Section 2.11), shall, to the extent practicable, be combined in one arbitration
proceeding under this Section 11.13, and in such event, the provisions of this section governing dispute resolution shall supersede any
other provisions relating to such matters in this Agreement or the other Transaction Documents. If any dispute, claim or controversy
arising out of or relating to this Agreement or any other Transaction Document (other than the Employment Agreements) arises at the
same time and relates to the same or similar facts, claims or events as a dispute, claim or controversy relating to or arising out of the
Employment Agreement of any Stockholder, the employment of any Stockholder by Eclipsys or any of its Affiliates including Premise,
such disputes, claims or controversies shall, to the extent practicable, be combined in one arbitration proceeding, and in such event, the
provisions of this Agreement governing dispute resolution shall supersede any provisions relating to such matters in the Employment
Agreement between any such Stockholder and Eclipsys or any Affiliate of Eclipsys. For the avoidance of doubt, no claim under any
Employment Agreement shall be governed by this provision, unless it arises at the same time and relates to the same or similar facts,
claims or events as a dispute, claim or controversy relating to or arising out of this Agreement or any other Transaction Document (other
than the Employment Agreements).
(b) Notwithstanding the foregoing, if any dispute, claim or controversy arises out of or relates to this Agreement or any other
Transaction Document (other than a dispute solely relating to any Employment Agreement), the parties shall first try to resolve their
dispute through informal and good faith negotiation between an authorized officer of Premise (or, after the Closing, the Stockholders’
Representative) and an authorized officer of Eclipsys, with authority to settle such dispute claim or controversy, before resorting to
arbitration. Such persons shall meet for the purpose of endeavoring to resolve such dispute, claim or controversy within ten Business
Days after a written request from either Premise (or, after the Closing, the Stockholders’ Representative) or Eclipsys to the other. Such
representatives shall discuss the problem and negotiate in good faith in an effort to resolve the dispute promptly and without the
necessity of any formal arbitration proceeding relating thereto. The location, format and duration (not to exceed three Business Days,
unless mutually agreed by such representatives) of these negotiations shall be left to the discretion of the representatives involved. If
such negotiations do not lead to resolution of the underlying dispute, claim or controversy to the satisfaction of any party, then any
party may provide notice of the election to pursue resolution by arbitration as set forth herein.
(c) Any arbitration shall be conducted by JAMS pursuant to the Comprehensive Arbitration Rules of JAMS. All arbitrators shall be
retired or former district court or appellate court judges of any United States District Court or United States Court of Appeals, other than
courts in the States of Connecticut or Georgia, or such other person with such other qualifications as Eclipsys and Premise (or, after the
Closing, the Stockholders’ Representative) may agree, and shall be selected within seven Business Days after receipt of notice from one
party to another that it intends to seek arbitration hereunder. The Federal Rules of Evidence shall govern the admissibility of evidence
during the arbitration. The arbitrator(s) shall have no authority to award punitive or other damages not measured by the prevailing
party’s actual damages, except as may be required by statute. The determination of the arbitrator(s) shall be final and binding on the
parties and a judgment on such award or determination may be entered in any court of competent jurisdiction and such judgment shall be
final and nonappealable. The decision and award of the arbitrator(s) shall be accompanied by a reasoned opinion.

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(d) All parties covenant not to appeal or otherwise litigate or file any court action that would seek to delay, amend, vacate or
otherwise alter the determination of the arbitrator(s).

11.14 Costs and Fees. The prevailing party in any arbitration or court proceeding under this Agreement, including any related appeal,
shall be entitled to recover its fees and costs incurred in the arbitration or proceeding (including attorneys and arbitration fees and costs) from
the nonprevailing party, provided, that the arbitrator or judge has the discretion to determine that there is no prevailing party or to eliminate or
reduce the prevailing party’s recovery of its costs and fees to the extent that the arbitrator or judge determines that full recovery thereof would
be unreasonable or disproportionate to the harm suffered by the prevailing party. In absence of a determination of a prevailing party, the
parties shall split equally all costs and fees. “Costs and fees” mean all reasonable pre-award expenses of the arbitration or other proceeding,
including the arbitrators’ fees, administrative fees, travel expenses, out-of-pocket expenses such as copying and telephone, court costs,
witness fees, expert costs and fees, and attorneys’ fees, costs and expenses and other costs incurred in enforcing, perfecting and executing
such judgment or order. For the purposes of this section, attorneys’ fees, costs and expenses shall include all such fees, costs and expenses
incurred in (i) appeals, (ii) post-judgment motions, (iii) contempt proceedings, (iv) garnishment, levy and debtor and third-party examinations,
(v) discovery and (vi) bankruptcy litigation.

11.15 Counsel to Premise. Eclipsys and Merger Sub acknowledge and agree that Wiggin and Dana LLP has represented Premise and the
Premise Indemnified Parties in connection with this Agreement and all other agreements and instruments contemplated by this Agreement, and
Premise hereby waives the conflicts of interest associated with such multiple representation in accordance with the Connecticut Rules of
Professional Conduct. Accordingly, Premise has agreed (a) that the attorney-client privilege with respect to the Merger and any other
transactions contemplated in this Agreement is held jointly by Premise and the Premise Indemnified Parties and may be waived by the
Stockholders’ Representative in accordance with the Connecticut Rules of Professional Conduct and (b) that Wiggin and Dana LLP shall
maintain the confidentiality of all attorney-client privileged communications with respect to the negotiation of this Agreement and any other
Transaction Documents for the benefit of Premise and the Premise Indemnifying Parties and shall not disclose the content of any such
attorney-client privileged communications to Eclipsys, Merger Sub or the Surviving Corporation (or any of their successors or assigns), or any
of their directors, officers, employees, agents, consultants, advisors or other representatives, including legal counsel, accountants and
financial advisors, before or after the Effective Time without the advance written consent of the Stockholders’ Representative.

11.16 Disclosure Schedule. The exceptions, modifications and disclosures made in any part of the Disclosure Schedule shall be deemed
to be disclosed and incorporated by reference in any other section of the Disclosure Schedule as though fully set forth in such section of the
Disclosure Schedule to the extent that the applicability of such disclosure in the Disclosure Schedule to another part of the Disclosure
Schedule is reasonably apparent on its face.

[Signature page follows]

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed as of the day and year first above written.

“ECLIPSYS” “PREMISE”
Eclipsys Corporation, Premise Corporation,
a Delaware corporation a Delaware corporation

By: /s/ Brian W. Copple By: /s/ Eric Rosow


Name: Brian W. Copple Name: Eric Rosow
Title: Secretary Title: Chief Executive Officer

“MERGER SUB”
Panther Acquisition Corporation,
a Delaware corporation

By: /s/ Brian W. Copple


Name: Brian W. Copple
Title: Secretary

“STOCKHOLDERS’ REPRESENTATIVE”

By: /s/ Richard Dumler


Name: Richard Dumler

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]


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“MAJOR STOCKHOLDER”
INFLECTION POINT VENTURES II, L.P.

By: /s/ Jeffrey A. Davison


Name: Jeffrey A. Davison
Title: General Partner

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]


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“MAJOR STOCKHOLDER”
AETNA VENTURES, LLC
By Aetna Life Insurance Company, its Sole Member

By: /s/ David M. Clarke


Name: David M. Clarke
Title: Investment Manager

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]


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“MAJOR STOCKHOLDER”
MILESTONE VENTURE PARTNERS III LP
By Milestone Managers LP

By: /s/ Richard J. Dumler


Name: Richard J. Dumler
Title: General Partner

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]


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“MAJOR STOCKHOLDER”
CONNECTICUT INNOVATIONS, INCORPORATED

By: /s/ George D. Bellas


Name: George D. Bellas
Title: VP Finance and Administration

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]


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“MAJOR STOCKHOLDER”

By: /s/ Eric Rosow


Name: Eric Rosow

“MAJOR STOCKHOLDER”

By: /s/ Joseph Adam


Name: Joseph Adam

[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]


Exhibit 10.8

Effective June 11, 2008

ECLIPSYS CORPORATION

2008 OMNIBUS INCENTIVE PLAN

APPENDIX A: DEFERRED STOCK UNITS FOR NON-EMPLOYEE DIRECTORS

1. Purpose
The purpose of this Appendix A to the Eclipsys Corporation 2008 Omnibus Incentive Plan (the “Plan”) is to grant Awards of deferred
stock units (“DSUs”) to Non-employee directors of the Company (“Non-employee Directors”). The Awards hereunder are made pursuant to
Section 8 of the Plan and are subject to the provisions of the Plan. Terms not specifically defined in this Appendix A shall have the same
meaning as in the main body of the Plan.

2. DSU Awards
(a) Initial Awards
In connection with joining the Company’s board of directors (the “Board”), each new Non-employee Director shall be granted:
(i) for inducement and retention purposes, a number of DSUs equal to the quotient obtained by dividing $75,000 by the
Fair Market Value of the Company’s Common Stock (as defined in the Plan) on the date of issuance (the “Inducement
DSUs”); and
(ii) for compensatory purposes, a number of DSUs equal to the product of $11,000 and the number of full 30-day
periods from the date of election or appointment to the Board until the scheduled date of the next regular annual meeting of
stockholders (if the next annual meeting has not yet been scheduled, assuming the next annual meeting is scheduled to be
held on the same month and day as the immediately preceding annual meeting) (the “Pro-Rata DSUs”).

The Inducement DSUs and the Pro-Rata DSUs will be issued on the date of election or appointment to the Board, but if the date of
election or appointment to the Board is during a regular quarterly blackout period under the Company’s Insider Trading Policy, then upon
termination of that regular quarterly blackout period, but not earlier than the day after the completion of two full day trading sessions of the
principal exchange or market system upon which the Company’s common stock trades following the filing of the SEC report on Form 10-Q or
Form 10-K that includes financial statements for the most recently completed fiscal quarter of the Company. Each DSU will represent a notional
right to receive one share of Common Stock at the time specified below.
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Each Initial DSU shall vest during continuation of Board service in 24 equal consecutive monthly increments following the date of award
or, if earlier, upon the occurrence of a DSU Change in Control (as defined below). Each Pro-Rata DSU will vest during continuation of Board
service in the same manner as described below for Annual DSUs.

b. Annual Awards
Each individual who is elected as a Non-employee Director at an annual meeting of stockholders of the Company (“Annual Meeting”), or
who is a continuing Non-employee Director immediately after such Annual Meeting, will be granted a number of DSUs equal to the quotient
obtained by dividing $125,000 by the Fair Market Value of the Company’s Common Stock (as defined in the Plan) on the date of the Annual
Meeting (the “Annual DSUs”). However, if the date of the Annual Meeting is during a regular quarterly blackout period under the Company’s
Insider Trading Policy, then the Annual DSUs shall be granted upon termination of that regular quarterly blackout period, but not earlier than
the day after the completion of two full day trading sessions of the principal exchange or market system upon which the Company’s common
stock trades following the filing of the SEC report on Form 10-Q or Form 10-K that includes financial statements for the most recently
completed fiscal quarter of the Company. Each DSU will represent a notional right to receive one share of Common Stock at the time specified
below.

Each Annual DSU shall vest during continuation of Board service in 12 equal consecutive monthly installments following the date of the
Annual Meeting on which such Annual DSUs is issued or, if earlier, upon the occurrence of a DSU Change in Control, or the annual meeting
of stockholders immediately following the meeting with respect to which the Annual DSU was granted.

(c) DSU Change in Control


For purposes of this Appendix A, a “DSU Change in Control” shall occur if there is a Change in Control and there also is a change in
ownership or a change of effective control of the Company determined as follows:
(i) A change in the ownership of the Company that is a DSU Change in Control shall occur if any one person, or more
than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such
person or group, constitutes more than 50 percent of the total fair market value or total voting power of the Company.
However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the
total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same
person or persons is not considered to cause a change in the ownership of the Company (or to cause a change in the
effective control of the Company (within the meaning of paragraph (ii) below)). An increase in the percentage of stock
owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its
stock in exchange for property will be treated as an acquisition of stock for

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purposes of this paragraph. This paragraph applies only when there is a transfer of stock of the Company (or issuance of
stock of the Company) and stock in the Company remains outstanding after the transaction.
For purposes of paragraph (i), persons will not be considered to be acting as a group solely because they purchase or
own stock of the Company at the same time, or as a result of the same public offering. However, persons will be considered
to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition
of stock, or similar business transaction with the Company. If a person, including an entity, owns stock in both corporations
(including the Company) that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction,
such shareholder is considered to be acting as a group with other shareholders in the Company prior to the transaction
giving rise to the change and not with respect to the ownership interest in the other corporation.
(ii) Notwithstanding that the Company has not undergone a change in ownership that is a DSU Change in Control
under paragraph (i), a change in the effective control of the Company that is a DSU Change in Control shall occur on the
date that either:
(A) Any one person, or more than one person acting as a group (as determined under paragraph (i)),
acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such
person or persons) ownership of stock of the Company possessing 35 percent or more of the total voting power of the
stock of the Company; or
(ii) A majority of members of the Company’s board of directors is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of
directors prior to the date of the appointment or election.
(iii) A change in effective control of the Company that is a DSU Change in Control shall also occur as a result of any
transaction in which either of the Company or the other corporation involved in the transaction has an event described in
paragraph (i) or (vi). For example, assume that the Company transfers more than 40 percent of the total gross fair market
value of its assets to company X in exchange for 35 percent of X’s stock. The Company has undergone a change in
ownership of a substantial portion of its assets under paragraph (vi) and company X has a change in effective control under
paragraph (ii).
(iv) If any one person, or more than one person acting as a group, is considered to effectively control the Company (as
described herein), the acquisition of additional control of the Company by the same person or persons is not considered to
cause a change in the effective control of the corporation (or to cause a change in the ownership of the Company within the
meaning of paragraph (i)).

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(v) For purposes of paragraph (ii), persons will not be considered to be acting as a group solely because they purchase
or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be
considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or
acquisition of stock, or similar business transaction with the Company. If a person, including an entity, owns stock in both
corporations (including the Company) that enter into a merger, consolidation, purchase or acquisition of stock, or similar
transaction, such shareholder is considered to be acting as a group with other shareholders in the Company only with
respect to the ownership in the Company prior to the transaction giving rise to the change and not with respect to the
ownership interest in the other corporation.
(vi) The following rules determine whether there has been a change in the ownership of a substantial portion of the
Company’s assets so that a DSU Change in Control has occurred:
(A) A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any
one person, or more than one person acting as a group (as defined in paragraph (i)), acquires (or has acquired during
the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the
Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value
of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair
market value means the value of the assets of the Company, or the value of the assets being disposed of, determined
without regard to any liabilities associated with such assets.
(B) (1) There is no DSU Change in Control under this paragraph (vi) when there is a transfer to an entity that
is controlled by the shareholders of the Company immediately after the transfer, as provided in this subparagraph
(vi)(B). A transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets
are transferred to:
(I) A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect
to its stock;
(II) An entity, 50 percent or more of the total value or voting power of which is owned, directly or
indirectly, by the Company;
(III) A person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent or
more of the total value or voting power of all the outstanding stock of the Company; or

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(IV) An entity, at least 50 percent of the total value or voting power of which is owned, directly or
indirectly, by a person described in subparagraph (III) immediately above.
(2) For purposes of this subparagraph (vi)(B) and except as otherwise provided, a person’s status is
determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company
has no ownership interest before the transaction, but which is a majority-owned subsidiary of the Company after the
transaction is not treated as a change in the ownership of the assets of the Company.
(3) Persons will not be considered to be acting as a group solely because they purchase assets of the
Company at the same time. However, persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction
with the Company. If a person, including an entity shareholder, owns stock in both corporations (including the
Company) that enter into a merger, consolidation, purchase or acquisition of assets, or similar transaction, such
shareholder is considered to be acting as a group with other shareholders in the Company only to the extent of the
ownership in the Company prior to the transaction giving rise to the change and not with respect to the ownership
interest in the other corporation.

3. Elective Deferral of Cash Compensation


(a) A Non-employee Director may elect to defer all or a portion of his or her cash annual retainer fees (but not committee chair fees or per-
meeting fees). All cash annual retainers that are being deferred to DSUs will be converted to DSUs on the day after the completion of two full
day trading sessions of the principal exchange or market system upon which the Company’s common stock trades following the filing of the
SEC report on Form 10-Q or Form 10-K that includes financial statemen