10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

COMMISSION FILE NUMBER: 000-24539

ECLIPSYS CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE
(State of Incorporation) 65-0632092
(IRS Employer Identification Number)

1750 Clint Moore Road
Boca Raton, Florida
33487

(Address of principal executive offices)

561-322-4321

(Telephone number of registrant)

     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 for the past 90 days. Yesþ Noo

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yesþ Noo

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

Class	Shares outstanding as of August 1, 2005
Common Stock, $.01 par value	48,736,198

ECLIPSYS CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2005

INDEX

	Page
PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets (unaudited) — As of June 30, 2005 and December 30, 2004		3
Condensed Consolidated Statements of Operations (unaudited) — For the Three and Six Months ended June 30, 2005 and 2004		4
Condensed Consolidated Statements of Cash Flows (unaudited) — For the Three and Six Months ended June 30, 2005 and 2004		5
Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3. Quantitative and Qualitative Disclosures About Market Risk		27
Item 4. Controls and Procedures		27
PART II. Other Information
Item 1. Legal Proceedings		28
Item 4. Submission of Matters to a Vote of Security Holders		28
Item 6. Exhibits		29
Signatures		29

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     PART I.

     ITEM 1.

ECLIPSYS CORPORATION
Condensed Consolidated Balance Sheets — (Unaudited)
(In thousands)

	June 30,		December 31,
	2005		2004
Assets
Current assets:
Cash and cash equivalents	$	71,265	$	122,031
Marketable securities		37,154		—
Accounts receivable, net of allowance for doubtful accounts of $4,544 and $4,952 at June 30, 2005 and December 31, 2004		64,947		64,862
Prepaid and other current assets		17,923		15,586
Inventory		1,672		1,644
Total current assets		192,961		204,123
Property and equipment, net		34,498		35,002
Capitalized software development costs, net		32,335		29,819
Goodwill		2,883		2,863
Acquired technology and intangible assets, net		4,102		4,690
Other assets		23,264		14,923
Total assets	$	290,043	$	291,420
Liabilities and Stockholders’ Equity
Current liabilities:
Deferred revenue	$	102,083	$	106,804
Other current liabilities		28,842		32,587
Accrued compensation costs		16,501		12,738
Total current liabilities		147,426		152,129
Deferred revenue		18,858		15,892
Other long-term liabilities		1,266		122
Stockholders’ Equity:		122,493		123,277
	$	290,043	$	291,420

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ECLIPSYS CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)

	THREE MONTHS						SIX MONTHS
	ENDED JUNE 30,						ENDED JUNE 30,
	2005			2004			2005			2004
REVENUES
Systems and services	$	91,557		$	68,597		$	174,685		$	130,404
Hardware		4,308			5,046			5,615			11,623
TOTAL REVENUES		95,865			73,643			180,300			142,027
COSTS AND EXPENSES
Costs of systems and services revenues		55,248			41,795			107,513			81,133
Costs of hardware revenues		3,557			4,337			4,658			9,971
Sales and marketing		16,196			15,458			34,372			31,399
Research and development		13,974			14,536			26,550			29,273
General and administrative		6,511			4,407			10,867			7,576
Depreciation and amortization		3,583			3,295			7,266			6,377
TOTAL COSTS AND EXPENSES		99,069			83,828			191,226			165,729
LOSS FROM OPERATIONS		(3,204	)		(10,185	)		(10,926	)		(23,702	)
Interest income, net		719			225			1,280			679
LOSS BEFORE INCOME TAXES		(2,485	)		(9,960	)		(9,646	)		(23,023	)
Provision for income taxes		—			—			—			—
NET LOSS	$	(2,485	)	$	(9,960	)	$	(9,646	)	$	(23,023	)
BASIC NET LOSS PER COMMON SHARE	$	(0.05	)	$	(0.21	)	$	(0.20	)	$	(0.50	)
DILUTED NET LOSS PER COMMON SHARE	$	(0.05	)	$	(0.21	)	$	(0.20	)	$	(0.50	)
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		47,629			46,573			47,444			46,228
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		47,629			46,573			47,444			46,228

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ECLIPSYS CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2005			2004			2005			2004
OPERATING ACTIVITIES
Net loss	$	(2,485	)	$	(9,960	)	$	(9,646	)	$	(23,023	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		8,300			6,226			16,106			12,251
Provision for bad debts		600			450			1,050			1,000
Stock compensation expense		734			105			1,150			161
Changes in operating assets and liabilities:
Accounts receivable		(6,483	)		(4,986	)		(1,135	)		(106	)
Inventory		(108	)		21			(28	)		(1,148	)
Other current assets		1,107			966			(2,337	)		3,139
Other assets		(1,095	)		(459	)		(9,920	)		(2,450	)
Deferred revenue		(4,034	)		3,027			(1,755	)		269
Accrued compensation costs		2,498			2,525			3,763			(1,508	)
Other current liabilities		1,938			(1,334	)		(3,745	)		(1,001	)
Other long-term liabilities		727			(5	)		1,143			(537	)
Total adjustments to reconcile net loss to net cash provided by (used in) operating activities		4,184			6,536			4,292			10,070
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		1,699			(3,424	)		(5,354	)		(12,953	)
INVESTING ACTIVITIES
Purchases of property and equipment		(2,191	)		(2,777	)		(6,316	)		(6,795	)
Purchases of marketable securities		(21,848	)		(81,115	)		(159,866	)		(165,130	)
Proceeds from sales of marketable securities		21,554			80,974			122,712			124,181
Capitalized software development costs		(3,207	)		(3,881	)		(9,634	)		(8,519	)
Cash paid for acquisitions		(20	)		—			(20	)		(2,500	)
NET CASH USED IN INVESTING ACTIVITIES		(5,712	)		(6,799	)		(53,124	)		(58,763	)
FINANCING ACTIVITIES
Exercise of stock options		5,926			497			7,623			2,914
Proceeds from employee stock purchase plan		—			882			—			1,664
NET CASH PROVIDED BY FINANCING ACTIVITIES		5,926			1,379			7,623			4,578
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		8			(9	)		89			(20	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,921			(8,853	)		(50,766	)		(67,158	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		69,344			93,378			122,031			151,683
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	71,265		$	84,525		$	71,265		$	84,525
SUPPLEMENTAL DISCLOSURE
Non-cash investing activities:
Issuance of shares for acquisition	$	—		$	—		$	—		$	2,500

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ECLIPSYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements of Eclipsys Corporation, or the Company, and the notes thereto have been prepared in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission, or SEC. These unaudited condensed consolidated financial statements do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. However, such information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair statement of results for the interim periods presented.

     The results of operations for the six months ended June 30, 2005 are not necessarily indicative of annual results. The Company manages its business as one reportable segment.

     The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and the notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 that was filed with the SEC on March 16, 2005.

     Certain prior period amounts have been reclassified to conform to the 2005 presentation.

2. ACQUISITIONS

     In March 2004, we acquired CPM Resource Center, Ltd., or CPMRC. CPMRC provides consulting services and clinical content designed principally to improve and enhance the care process primarily related to the workflow of nurses and interdisciplinary healthcare professionals. CPMRC’s evidence-based content and practice guidelines have been incorporated into our current releases of SunriseXA software. We paid $2.5 million in cash and issued 184,202 shares of common stock for CPMRC, for a total consideration of $5.0 million. The prior owner of CPMRC may earn up to an additional $12.5 million over the next 5-year period based on future operating results. The earn-out consideration will be payable half in cash and half in shares of our common stock. The number of shares of the common stock to be issued, if any, will be based upon the average of the last reported sale prices of our common stock on the NASDAQ National Market for the five consecutive trading days ending on the trading day that is one day prior to the date on which the earn-out consideration is paid. The operating results of CPMRC have been combined with those of the Eclipsys since the date of acquisition. We did not present unaudited pro forma results of operations of Eclipsys and CPMRC for the six months ended June 30, 2004 because our pro forma results for this period would not be materially different from our actual results.

     As a result of the CPMRC acquisition, we recorded approximately $2.4 million in non-amortizable goodwill and $3.2 million in amortizable intangible assets. Amortizable intangible assets include customer relationships and acquired technology, and are being amortized over seven- and five-year periods, respectively, which we believe reflects the estimated expected utility of these assets. The non-amortizable goodwill is not tax deductible. The non-amortizable goodwill reflects approximately $700,000 of incremental consideration that the prior owner earned to date as part of the earn-out provisions of the agreement. All consideration paid under the earn-out provisions of the agreement will be recorded as non-amortizable goodwill.

     In December of 2004, we acquired eSys Medical Inc. (eSys). eSys develops and markets radiology information systems (RIS). We paid $2.3 million in cash consideration for the eSys acquisition. Under the terms of the transaction, the prior owners of eSys may earn up to an additional $2.5 million of future consideration. This consideration may be earned during the next eighteen months related to certain milestones in connection with future development efforts of the acquired technology. This future consideration, if earned, will be paid in cash (25%) and our common stock (75%). Additionally, the agreement contains an earn-out provision in which the prior owners can earn up to an additional $5.0 million in future consideration based on sales of the acquired technology over the next five years, payable in shares of our common stock. The number of shares of our common stock issued as earn-out consideration will be based on the average closing prices of our common stock on the NASDAQ National Market for the calendar quarter preceding the payment of the earn-out consideration.

     As a result of the eSys acquisition, we recorded approximately $2.0 million in amortizable intangible assets. These amortizable intangible assets include customer relationships ($1.1 million) and acquired technology ($914,000), which are being amortized over five- and three-year periods, respectively. We believe these amortization periods reflect the estimated expected utility of these assets. The operating results of eSys have been combined with those of Eclipsys since the date of acquisition. We did not present unaudited pro forma results of operations of Eclipsys and eSys for the three and six months ended June 30, 2004 because our pro forma results for this period would not be materially different from our actual results. The majority of future consideration, if earned, will be recorded as non-amortizable goodwill. In connection with the earn-out provisions of the agreement, we paid $20,000 in cash, during the quarter ended June 30, 2005.

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     With respect to the acquisitions of CPMRC and eSys, we assigned the total purchase price to the net assets and liabilities of the businesses, with any remaining amount assigned to goodwill. The value assigned to the identifiable intangible assets was based on an analysis as of the date of acquisitions.

3. STOCK-BASED COMPENSATION

     The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations. Under this method, compensation cost for stock options is measured as the excess, if any, of the estimated market price of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock. Accordingly, the Company provides the additional disclosures required under Statement of Financial Accounting Standards, or SFAS No. 123, “Accounting for Stock-Based Compensation” as amended by SFAS No. 148 “Accounting for Stock-Based Compensation — Transition and Disclosure.”

     The Company has adopted the disclosure-only provisions of SFAS 123. Had compensation cost for the Company’s stock option grants described above been determined based on the fair value at the grant date of the respective awards, consistent with the provisions of SFAS 123, the Company’s net loss and loss per share would have been the pro forma amounts indicated below for the three month and sixth month periods ended June 30, (in thousands, except per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net loss:
As reported	$	(2,485	)	$	(9,960	)	$	(9,646	)	$	(23,023	)
Add: Stock-based employee compensation expense included in reported net loss, net of related tax effects		734			105			1,150			161
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(3,395	)		(2,666	)		(5,811	)		(5,479	)
Pro forma		(5,146	)		(12,521	)		(14,307	)		(28,341	)
Basic net loss per share:
As reported		(0.05	)		(0.21	)		(0.20	)		(0.50	)
Pro forma		(0.11	)		(0.27	)		(0.38	)		(0.61	)
Diluted net loss per share:
As reported		(0.05	)		(0.21	)		(0.20	)		(0.50	)
Pro forma		(0.11	)		(0.27	)		(0.38	)		(0.61	)

4. MARKETABLE SECURITIES

Security Type	June 30,		December 31,
(in thousands)	2005		2004
Auction Rate Securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	$	10,600	$	—
Debt securities issued by states of the United States and political subdivisions of the states		23,475		—
		34,075		—
Other Securities:
Other debt securities		3,079
Total	$	37,154	$	—

     Marketable securities consist of funds that are highly liquid and are classified as available-for-sale. Marketable securities are recorded at fair value, and unrealized gains and losses are recorded as a component of other comprehensive income.

     As of June 30, 2005, all marketable securities except for auction rate securities have a maturity of less than 1 year. Auction rate securities of $33.4 million held at June 30, 2005 have an underlying maturity of greater than ten years, but typically have an interest rate reset feature every 30 days where we can sell or reset the interest rate on the security. At June 30, 2005, we believe that these investments are considered a part of our working capital and are appropriately classified as current assets.

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5. ACCOUNTS RECEIVABLE

Accounts receivable was comprised of the following (in thousands):

Unbilled Accounts Receivable and Deferred Revenue

     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. Customer payments are due under these arrangements in varying amounts upon the achievement of certain contractual milestones throughout the implementation periods, which generally range from 12 to 24 months. The current portion of unbilled accounts receivable is included in accounts receivable.

     In addition, we maintain certain long-term contracts used to finance a portion of certain customer hardware and software fees owed. These arrangements generally provide for payment terms that range from 3 to 5 years and carry interest rates that range from 7% to 10%. Such amounts are recorded as non-current unbilled accounts receivable. The non-current portion of amounts due related to these arrangements was $1.2 million and $1.1 million as of June 30, 2005 and December 31, 2004, respectively, and is included in other assets in the accompanying financial statements. The current portion of amounts due related to these arrangements is included in accounts receivable in the accompanying financial statements. Accounts receivable was composed of the following (in thousands):

	June 30, 2005		December 31, 2004
Accounts Receivable:
Billed accounts receivable, net	$	52,157	$	53,698
Total unbilled accounts receivable, net		12,790		11,164
Total accounts receivable, net	$	64,947	$	64,862

6. WARRANTY RESERVE

     The agreements that we use to license our software to our customers include a limited warranty. The warranty provides that the product, in its unaltered form, will perform substantially in accordance with the related documentation. Through September 30, 2003, Eclipsys had not incurred any material warranty costs related to its products. Due to the response time issues that we identified during the fourth quarter of 2003, we recorded provisions related to warranty costs of $4.6 million to date. Warranty costs are charged to costs of systems and services revenues when they are probable and reasonably estimable. A summary of the activity in our warranty reserve was as follows (in thousands):

Balance, December 31, 2004	$	2,057
Warranty utilized		(588	)
Balance, June 30, 2005	$	1,469

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7. GOODWILL AND OTHER INTANGIBLE ASSETS

The components of goodwill and other intangible assets were as follows (in thousands):

	As of June 30, 2005							As of December 31, 2004
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net Balance		Amount		Amortization			Net Balance
Amortized intangible assets:
Customer relationships	$	4,335	$	(970	)		3,365	$	4,335	$	(531	)	$	3,804
Acquired technology		914		(177	)		737		914		(28	)		886
	$	5,249	$	(1,147	)	$	4,102	$	5,249	$	(559	)	$	4,690
Unamortized intangible assets:
Goodwill	$	2,883	$	—		$	2,883	$	2,863	$	—		$	2,863

The estimated amortization for the next five fiscal years is as follows (in thousands):

For the year ending December 31,
2005	$	1,166
2006		1,155
2007		1,130
2008		851
2009		340
Thereafter		48
	$	4,690

     Acquired technology and customer relationships are amortized over their estimated useful lives generally on a straight-line basis. The carrying values of acquired technology and customer relationships are reviewed if the facts and circumstances suggest that they may be impaired and goodwill is reviewed at least annually. This review indicates whether assets will be recoverable based on future expected cash flows. We perform our review for impairment of our intangible assets including goodwill during the fourth quarter of each fiscal year. Such a review was performed in the fourth quarter of 2004 and no impairment related issues were noted.

8. OTHER COMPREHENSIVE LOSS

     The components of other comprehensive loss were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net Loss	$	(2,485	)	$	(9,960	)	$	(9,646	)	$	(23,023	)
Foreign currency translation adjustment		8			(9	)		89			(20	)
Total comprehensive loss	$	(2,477	)	$	(9,969	)	$	(9,557	)	$	(23,043	)

9. NEW ACCOUNTING PRONOUNCEMENTS

     On December 16, 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”, (SFAS 123R) which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). Statement 123R supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. SFAS 123R requires all share-based payments to employees to be recognized in the income statement over the corresponding service period based on their grant date fair values and also requires an estimation of forfeitures when calculating compensation expense. We must adopt SFAS 123R no later than January 1, 2006. SFAS 123R permits

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public companies to adopt its requirements using one of three methods: the modified prospective method, the modified retrospective method, or the modified retrospective method to all prior years for which SFAS 123 was effective. We have not yet determined which adoption method we will utilize and have not yet determined the effect of adopting SFAS 123R on our results of operations.

     In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”) which supersedes APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS No. 154 changes the requirements for accounting for and reporting of changes in accounting principle. The statement requires the retroactive application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period specific effects or the cumulative effect of the change. SFAS No. 154 does not change the guidance for reporting the correction of an error in previously issued financial statements or the change in accounting estimate. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe SFAS No. 154 will have a significant impact on our consolidated financial position or results of operations.

10. LITIGATION

     The Company and its subsidiaries are from time to time parties to legal proceedings, lawsuits and other claims incident to their business activities. Such matters may include, among other things, assertions of contract breach, 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 matters as of the date of this report. However, based on our knowledge at the time of this report, management believes that the final resolution of such 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.

11. MANAGEMENT TRANSITION

     On April 29, 2005, we announced that Eugene V. Fife, our Chairman of the Board of Directors, had been named interim Chief Executive Officer (CEO) and President, replacing our prior CEO and President who had left the company. In connection with the transition of our prior CEO, we recorded severance and other transition related costs of approximately $2.2 million in the quarter-ended June 30, 2005. Mr. Fife will also continue to serve as the Chairman of our Board of Directors. We are in the process of recruiting a new long-term CEO.

     In connection with his appointment as interim CEO, we entered into an employment agreement with Mr. Fife on April 29, 2005. Pursuant to this agreement, we agreed to employ Mr. Fife as interim CEO and President at an initial annual salary of $750,000. Pursuant to the employment agreement, we or Mr. Fife can terminate Mr. Fife’s employment with us at any time. Mr. Fife also agreed not to solicit our employees or customers during his employment and for 12 months after the termination of his employment. In addition, separate from the employment agreement, Mr. Fife will continue to receive $150,000 in annual compensation as the Chairman of our Board of Directors.

     Also on April 29, 2005, we entered into a restricted stock agreement (the “Restricted Stock Agreement”) with Mr. Fife under our Amended and Restated 2000 Stock Incentive Plan. Pursuant to the Restricted Stock Agreement, we sold Mr. Fife 100,000 shares of the common stock of the Registrant at a purchase price of $0.01 per share. Under the Restricted Stock Agreement, we maintain the right to repurchase the unvested portion of these shares at the original purchase price upon the termination of the Business Relationship (as defined in the Restricted Stock Agreement) between us and Mr. Fife. The shares vest over a two-year period, with 4.166% vesting each month.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

     This report contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our company and our industry. When used in this report, the words “may,” “will,” “should,” “predict,” “continue,” “plans,” “expects,” “anticipates,” “estimates,” “intends,” “believe,” and “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; benefits provided by Eclipsys software, outsourcing and consulting services; business mix; sales and growth in our client base; market opportunities; industry conditions; and our accounting, including its effects and potential changes in accounting.

     Actual results might differ materially from the results projected due to a number of risks and uncertainties. Software development may take longer and cost more than expected, and incorporation of anticipated features and functionality may be delayed, due to various factors including programming and integration challenges and resource constraints. We may change our product strategy in response to client requirements, market factors, resource availability, and other factors. Implementation of some of our software is complex and time consuming. Results depend upon a variety of factors and can vary by client. Each client’s circumstances may include unforeseen issues that make it more difficult or costly than anticipated to implement or derive benefit from software, outsourcing or consulting services. The success and timeliness of our services often depends at least in part upon client involvement, which can be difficult to control. We are required to meet specified performance standards, and contracts can be terminated or their scope reduced under certain circumstances. Competition is vigorous, and competitors may develop more compelling offerings or offer more aggressive pricing. New business is not assured and existing clients may migrate to competing offerings. Financial performance targets might not be achieved due to various risks, including slower-than-expected business development or new account implementation, or higher-than-expected costs to develop products, meet service commitments or sign new contracts. Our cash consumption may exceed expected levels if profitability does not meet expectations or strategic opportunities require cash investments. These and other risks and uncertainties are described in this report under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our other filings made from time to time with the Securities and Exchange Commission. The cautionary statements made in this report should be read as being applicable to all related forward-looking statements wherever they appear. These statements are only predictions. We cannot guarantee future results, levels of activity, performance or achievements. We assume no obligation to publicly 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. We nonetheless reserve the right to make such updates from time to time without the need for specific reference to this report. No such update shall be deemed to indicate that other statements not addressed by such updates remain correct or create an obligation to provide any other updates.

Executive Overview

     Eclipsys is a healthcare information technology company. We develop and license our proprietary software and content to hospitals and other healthcare organizations. Our software allows the organizations to automate many of the key clinical, administrative and financial functions that they require. Our software is designed to improve patient care and patient satisfaction for our customers, and allow them to reduce their operating costs and enhance their revenues. Our content provides practice guidelines for use in hospitals and other healthcare organizations.

     Our Web site address is www.eclipsys.com. We make available free of charge, on or through our Web site, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

Background

     We were founded in December 1995 and initially grew through a series of strategic acquisitions completed through 1999. Our acquisitions were focused on acquiring strong customer bases and advanced software for the healthcare industry.

     In addition to these acquisitions, in 1996 we licensed certain intellectual property on an exclusive basis from Partners HealthCare System, Inc., or Partners. This intellectual property related to clinical workflows including order management and clinical decision support. The Partners technology has been incorporated within our product offerings.

     In March 2004, we acquired CPM Resource Center, Ltd., or CPMRC. CPMRC provides consulting services and clinical content designed principally to improve and enhance the care process primarily related to the workflow of nurses and interdisciplinary healthcare professionals who provide the majority of hands-on care at the point of service. CPMRC’s evidence-based content and

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practice guidelines have been incorporated into the current release of our SunriseXA software.

     In December of 2004, we acquired eSys Medical Inc. (eSys). eSys develops and markets radiology information systems, or RIS. We believe eSys’ RIS will enhance our diagnostic imaging solution and extend our clinical workflow solutions in radiology.

Product Development

     In June 1999, we began re-expressing the intellectual property that we acquired through acquisitions on a common platform to provide integrated software to our customers. In 1999, we announced the general availability of Sunrise Clinical Manager, or SCM, the first version of our Sunrise^tm suite of software products. SCM provides advanced knowledge-based clinical decision-support capabilities including computerized physician order entry.

     In 2001, we announced our SunriseXA^tm strategy. This strategy was to migrate our Sunrise suite of products to an open architecture and platform. SunriseXA’s architecture is built on Microsoft’s .NET Framework, Microsoft SQL Server and the Microsoft Windows family of operating systems. In 2002 and 2003, we announced the general availability of certain components of our SunriseXA product offerings.

     In October 2003, we identified and announced response time issues within components of SunriseXA. Although some of our SunriseXA software components had been implemented in and were working at some customer sites, we determined that the software did not produce acceptable response times for complex, high-volume hospital environments. To address the issue, we implemented a strategy that was designed to allow SunriseXA customers to continue their deployment of SunriseXA which would, at the same time, allow us to continue the development of advanced SunriseXA solutions. This strategy replaced the affected SunriseXA components with components from our SCM product, which is our prior generation, core clinical product. The response time issue resulted in a product delivery delay for some of our advanced SunriseXA functionality. The announcement of these issues also impacted the implementation schedules for a number of our customers. As previously disclosed, this announcement had an adverse effect on our sales for 2004.

     In June 2004, we released Sunrise Clinical Manager 3.5 XA and in March 2005 we released Sunrise Clinical Manager 4.0 XA. The general availability of these releases fulfilled key deliverables expected by our customers in connection with the SunriseXA response time issue. These releases were consistent with our strategy and contained enhanced functionality as planned.

Operational Initiatives

     During 2001, our management made two strategic decisions that significantly impacted our operating results. First, we substantially increased our gross research and development spending, which includes research and development expenses and capitalized software development costs. This decision was made to enable us to bring components of our SunriseXA product line to market more rapidly. Second, we invested heavily in sales and marketing to enhance market awareness surrounding Eclipsys and its products and services. We did this to capitalize on perceived market demand for our products and services. Additionally, in 2002, we moved aggressively to change our contracting model, offering our customers payment terms which are more evenly distributed over the term of the contract compared to the traditional licensing model we used previously, in which software license fees were paid in advance. We did this to meet the needs of our customers, by matching the timing of their payments to the value that we deliver to them. We believe that this contracting model makes purchasing decisions easier for our customers.

     The change in our contracting model has had a material affect on our business. Most notably, our revenues, gross margins, and cash flows have been affected by our adoption of this approach. Because the payments from our customers for software license fees are more evenly distributed over the term of the contract, our revenue from a particular transaction is recognized over a longer period of time compared to the traditional licensing model, while a significant portion of our operating expenses remain relatively fixed and are recognized early in the contract term. For example, in 2003, our gross margins, operating margins, and cash flow from operating activities were negatively affected by lower upfront software payments. However, we believe that this contracting model provides for more predictable revenues on a year-over-year basis.

     During the quarter-ended June 30, 2005, we announced that Eugene V. Fife our Chairman of the Board of Directors had been named interim Chief Executive Officer and President, replacing Paul L. Ruflin who had left the company. Mr. Fife will also continue to serve as the Chairman of our Board of Directors. We are currently in the process of recruiting a long-term Chief Executive Officer.

     We consumed cash in 2003, 2004 and the first half of 2005, primarily because cash collections under our new contracting method from new contract signings were not sufficient to offset our higher operating expenses. To fund our business, we used a portion of our cash on hand.

Operational Environment and Other Challenges for 2005

     During the fourth quarter of 2004, we experienced a slow down in sales transactions as a result of increasing competition within our sector, and this has continued through the first half of 2005. New sales in 2005 are the primary source of revenue growth for 2006. As a result of the 2005 sales performance to date, achieving our objectives for 2006 revenue growth depends significantly on

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sales results in the second half of 2005. We expect that competition may continue to intensify, which could result in delayed sales, pricing pressures, a decrease in profitability on new contracts or a loss of future business. Additionally, we have a significant number of customers scheduled to go live on one or more modules of our software applications throughout 2005. The successful implementation of these customers will be critical to our success. We released Sunrise Clinical Manager 4.0 XA in March of 2005 and we are scheduled to release Sunrise Clinical Manager 4.5 XA during the fourth quarter of 2005. If we experience a delay in future releases, or they do not achieve market acceptance, our business may suffer.

Critical Accounting Policies

     We believe there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amount of revenue and other significant areas involving management’s judgments and estimates. On an ongoing basis, management evaluates and adjusts its estimates and judgments, if necessary. These significant accounting policies relate to revenue recognition, allowance for doubtful accounts, capitalized software development costs and our warranty reserve. Please refer to Note 2 of the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2004 as filed with the SEC on March 16, 2005, for further discussion of our accounting policies, which have not changed materially since our filing.

Revenue Recognition

     We generally contract under multiple element arrangements, which include software license fees, hardware and services including consulting, implementation, and software maintenance, for periods of 3 to 10 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 products and services are fixed or determinable;

• whether collection of our fees is reasonably assured;

• whether professional services are essential to the functionality of the related software product;

• 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 products and services.

     We recognize revenues in accordance with the provisions of Statement of Position, or SOP, No. 97-2, “Software Revenue Recognition” as amended by SOP No. 98-9, Staff Accounting Bulletin, or SAB, 104, “Revenue Recognition” and Emerging Issues Task Force, or EITF 00-21, “Revenue Arrangements with Multiple Deliverables.” SOP 97-2 and SAB 104, as amended, require, among other things, that there be a signed contract evidencing that an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable.

     Many of our contracts with our customers are multiple element arrangements, which may provide for multiple software products, including the rights to future products we may offer within the software suites the customer purchases or rights to 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 future products or platform protection rights. We refer to these arrangements as traditional software contracts. Finally, we offer many of our products and services on a stand-alone basis. Revenue under each of these arrangements is recognized as follows:

Subscription Contracts

     Our subscription contracts typically include the following deliverables:

• 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 Statement of Position 98-9, “Modification of Statement of Position 97-2 With Respect to Certain Transactions,” or SOP 98-9. These contracts contain the rights to unspecified future products

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within the product 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 Statement of Position 97-2, “Software Revenue Recognition,” or 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, 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.

     In the case of remote hosting services, where VSOE is based upon consistent pricing charged to customers based on volumes and performance requirements on a stand-alone basis and substantive renewal terms, 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 customer 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 Emerging Issues Task Force 00-3, or 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 customer 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 services 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 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 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 24 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.

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Stand-Alone Products and Services

     We also market products and services on a stand-alone basis. These products and services include the following:

• software license;

• maintenance;

• professional services;

• hardware;

• network services;

• remote hosting services;

• outsourcing.

Revenue related to these products and services is recognized as follows:

     Software license fees and maintenance are marketed on a stand-alone basis and may be licensed either under traditional contracts or under subscription arrangements. Software license fees under traditional contracts are recognized pursuant to SOP 97-2 if, when the software has been delivered, persuasive evidence of an arrangement exists, the fee is fixed or determinable and collectibility is probable. Under subscription agreements for stand-alone products, 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 customers including implementation and consulting 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 services arrangements include the assessment, assembly and delivery of a wireless network, which may include wireless carts or other wireless equipment to the customer. Our network services arrangements are sold to a customer 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 customer.

     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 customer 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.

     We provide outsourcing services to our customers. Under these arrangements we assume all responsibilities for a healthcare organization’s information technology 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.

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

Allowance for Doubtful Accounts

     In evaluating the collectibility of our accounts receivable, we assess a number of factors, including a specific customer’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 customers. If circumstances related to specific customers 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 our consolidated financial statements.

Capitalized Software Development Costs

     We capitalize software development costs in accordance with FASB Statement No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.” We capitalize software development costs incurred subsequent to establishing

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technological feasibility of the software being developed. These costs include salaries, benefits, consulting and other directly related costs incurred in connection with coding and testing software products. Capitalization ceases when the products are generally released for sale to customers, at which time amortization of the capitalized costs begins. This amortization is reflected in the costs of systems and services revenues. At each balance sheet date, we perform a detailed assessment of our capitalized software development costs, which includes a review of, among other factors, projected revenues, customer demand requirements, product lifecycle, changes in software and hardware technologies, and product development plans. Based on this analysis we record adjustments, when appropriate, to reflect the net realizable value of our capitalized software development costs. The estimates of expected future revenues generated by the software, the remaining economic life of the software, or both, could change, materially affecting the carrying value of capitalized software development costs, as well as our consolidated operating results in the period of change.

Warranty Reserve

     The agreements that we use to license our software include a limited warranty. The warranty provides that our software, in its unaltered form, will perform substantially in accordance with the related documentation. Through September 30, 2003 we did not incur any material warranty costs related to our products. In October 2003, we identified and announced response time issues within components of SunriseXA. Although some of our SunriseXA software components had been implemented in and were working at some customer sites, we determined that the software did not produce acceptable response times for complex, high-volume hospital environments. The response time issue resulted in a product delivery delay for some of our advanced SunriseXA functionality. The announcement of these issues also impacted the implementation schedules for a number of our customers. In connection with this issue, we have recorded warranty provisions to date of $4.6 million.

     Warranty costs are charged to costs of systems and services revenues when they are probable and reasonably estimable. In determining this warranty reserve, we used significant judgments and estimates for the additional professional service hours and third party costs that will be necessary to remedy this issue on a customer-by-customer basis. The timing and amount of our warranty reserve could have been different if we had used other judgments or assumptions in our evaluation.

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THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE MONTHS ENDED JUNE 30, 2004

Eclipsys Corporation
Statement of Operations Data — Unaudited
(in thousands, except per share amounts)

	Three Months Ended June 30,
				% of Total						% of Total
	2005			Revenues			2004			Revenues			Change $			Change %
Revenues
Systems and services	$	91,557			95.5	%	$	68,597			93.1	%	$	22,960			33.5	%
Hardware		4,308			4.5	%		5,046			6.9	%		(738	)		-14.6	%
Total revenues		95,865			100.0	%		73,643			100.0	%		22,222			30.2	%
Costs and expenses
Costs of systems and services revenues		55,248			57.6	%		41,795			56.8	%		13,453			32.2	%
Costs of hardware revenues		3,557			3.7	%		4,337			5.9	%		(780	)		-18.0	%
Sales and marketing		16,196			16.9	%		15,458			21.0	%		738			4.8	%
Research and development		13,974			14.6	%		14,536			19.7	%		(562	)		-3.9	%
General and administrative		6,511			6.8	%		4,407			6.0	%		2,104			47.7	%
Depreciation and amortization		3,583			3.7	%		3,295			4.5	%		288			8.7	%
Total costs and expenses		99,069			103.3	%		83,828			113.8	%		15,241			18.2	%
Loss from operations		(3,204	)		-3.3	%		(10,185	)		-13.8	%		6,981			68.5	%
Interest income, net		719			0.8	%		225			0.3	%		494			219.6	%
Loss before income taxes		(2,485	)		-2.6	%		(9,960	)		-13.5	%		7,475			75.1	%
Provision for income taxes		—						—
Net loss	$	(2,485	)		-2.6	%	$	(9,960	)		-13.5	%	$	7,475			75.1	%
Basic net loss per share	$	(0.05	)				$	(0.21	)				$	0.16
Diluted net loss per share	$	(0.05	)				$	(0.21	)				$	0.16

RESULTS OF OPERATIONS

     Total revenues increased $22.2 million, or 30.2%, to $95.9 million for the quarter-ended June 30, 2005, compared with $73.6 million for the second quarter of 2004.

     Systems and services revenues increased $23.0 million, or 33.5%, to $91.6 million for the quarter-ended June 30, 2005, compared with $68.6 million for the second quarter of 2004. Systems and services revenues increased primarily as a result of an increase in revenues generated under long-term contracts including increases in software, software maintenance, outsourcing and remote hosting. These revenues, which are generally recognized ratably over the term of the respective agreements, increased by $14.6 million, or 30.1%. The increase in these revenues was associated with incremental revenues related to contracts that were entered into during the second half of 2004 and Q1 2005 and progress made on customer implementations. Additionally, in conjunction with these contracts, professional services revenues, which include implementation and consulting services, were $21.2 million, an increase of $6.6 million, or 45.6%. The increase in professional services was driven by a higher level of revenues associated with customer activations and ongoing consulting projects at numerous customer sites. A significant level of the activity was associated with the activation of our clinical software suite which includes Sunrise Clinical Manager 3.5 XA and 4.0 XA. The release of these products occurred in June 2004 and March 2005, respectively. These releases of our product contained incremental functionality of our core clinical offering which includes an electronic medical record and computerized physician order entry. Additionally, these offerings expanded the workflow capabilities of our software products to enable the software to function within the ambulatory, emergency department and medication management venues of care. The increase in volume of professional services is expected to continue throughout the remainder of 2005 as a significant number of our customers continue to activate our applications. Our continued growth in systems and services revenues in 2006 will require increased sales in the second half of 2005.

     Hardware revenues decreased $738,000, or 14.6%, to $4.3 million for the quarter-ended June 30, 2005, compared with $5.0 million for the second quarter of 2004. Hardware revenues in 2005 are expected to remain at levels that are lower than 2004 as a significant number of customers purchased hardware in the prior year based on the scheduled activation of their respective implementations. Additionally, sales volumes of hardware decreased as some customers have elected to obtain remote hosting services from us in lieu of hardware purchases in connection with the purchase of our applications.

     Costs of systems and services revenues increased $13.5 million, or 32.2%, to $55.2 million, for the quarter-ended June 30, 2005, compared to $41.8 million for the second quarter of 2004. Gross margins on systems and services revenues were 39.7% for the quarter-ended June 30, 2005, compared to 39.1% for the second quarter of 2004. The increase in costs of systems and services

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revenues was primarily a result of incremental costs associated with higher levels of outsourcing and remote hosting revenues. Additionally, costs in the quarter increased as a result of a higher level of third party consulting costs used to supplement the delivery of implementation and consulting services on our customer projects. Furthermore, the amortization of capitalized software development costs increased by $2.0 million primarily as a result of the releases of our clinical product suite in 2004 and 2005.

     Costs of hardware revenues decreased $780,000, or 18.0%, to $3.6 million for the quarter-ended June 30, 2005, compared to $4.3 million for the second quarter of 2004. Gross margins on hardware revenues were 17.4% in the second quarter of 2005 and 14.1% in the second quarter of 2004. The decrease in the costs of hardware revenues was a result of lower hardware volume.

     Sales and marketing expenses increased $738,000 or 4.8%, to $16.2 million for the quarter-ended June 30, 2005, compared to $15.5 million for the second quarter of 2004. The increase in sales and marketing expenses was primarily related to an increase in payroll, training and travel costs.

     Research and development expenses decreased $562,000, or 3.9%, to $14.0 million, for the quarter-ended June 30, 2005, compared to $14.5 million for the second quarter of 2004. Research and development costs decreased as a result of a $1.3 million reduction in expenditures, offset by lower capitalized software development costs. Capitalized software development costs were $3.2 million in the quarter-ended June 30, 2005 compared to $3.9 million in the quarter-ended June 30, 2004. The higher level of capitalized software development costs in 2004 was due to increased costs associated with coding, testing and other activities associated with the release of Sunrise Clinical Manager 3.5 XA, which was made generally available in June 2004. In 2005, the capitalized software development costs relate to activities associated with our Sunrise Clinical Manger 4.5 XA release which is scheduled for general availability in the fourth quarter of 2005. Amortization of capitalized software development costs, which is included as a component of costs of systems and services revenues, increased by approximately $2.0 million, to $3.9 million for the three months ended June 30, 2005, compared to $1.9 million for second quarter of 2004. The increase in amortization is the result of releases of Sunrise Clinical Manager 3.5 XA and 4.0 XA.

     General and administrative expenses increased $2.1 million, or 47.7%, to $6.5 million for the quarter-ended June 30, 2005, compared to $4.4 million for the second quarter of 2004. Included in general and administrative expenses is $2.2 million of costs associated with the transition of our prior Chief Executive Officer. Without these costs, general and administrative expenses in the quarter-ended June 30, 2005 were essentially unchanged.

     Depreciation and amortization increased $288,000, or 8.7%, to $3.6 million, for the quarter-ended June 30, 2005, compared to $3.3 million, for the second quarter of 2004. The increase was primarily the result of higher depreciation related to fixed assets purchased in our continued effort to expand our research and development infrastructure and to increase capacity at our Technology Solutions Center.

     Interest income increased $494,000, or 219.6%, to $719,000 for the quarter-ended June 30, 2005, compared to $225,000 for the second quarter of 2004. The increase was due to a significant improvement in yields resulting from higher interest rates in the quarter.

     As a result of these factors, we had a net loss of $2.5 million for the quarter-ended June 30, 2005, compared to a net loss of $10.0 million for the second quarter in 2004.

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SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004

Eclipsys Corporation
Statement of Operations Data — Unaudited
(in thousands)

	Six Months Ended June 30,
				% of Total						% of Total
	2005			Revenues			2004			Revenues			Change $			Change %
Revenues
Systems and services	$	174,685			96.9	%	$	130,404			91.8	%	$	44,281			34.0	%
Hardware		5,615			3.1	%		11,623			8.2	%		(6,008	)		-51.7	%
Total revenues		180,300			100.0	%		142,027			100.0	%		38,273			26.9	%
Costs and expenses
Costs of systems and services revenues		107,513			59.6	%		81,133			57.1	%		26,380			32.5	%
Costs of hardware revenues		4,658			2.6	%		9,971			7.0	%		(5,313	)		-53.3	%
Sales and marketing		34,372			19.1	%		31,399			22.1	%		2,973			9.5	%
Research and development		26,550			14.7	%		29,273			20.6	%		(2,723	)		-9.3	%
General and administrative		10,867			6.0	%		7,576			5.3	%		3,291			43.4	%
Depreciation and amortization		7,266			4.0	%		6,377			4.5	%		889			13.9	%
Total costs and expenses		191,226			106.1	%		165,729			116.7	%		25,497			15.4	%
Loss from operations		(10,926	)		-6.1	%		(23,702	)		-16.7	%		12,776			53.9	%
Interest income, net		1,280			0.7	%		679			0.5	%		601			88.5	%
Loss before income taxes		(9,646	)		-5.3	%		(23,023	)		-16.2	%		13,377			58.1	%
Provision for income taxes		—						—
Net loss	$	(9,646	)		-5.3	%	$	(23,023	)		-16.2	%	$	13,377			58.1	%
Basic net loss per share	$	(0.20	)				$	(0.50	)				$	0.30
Diluted net loss per share	$	(0.20	)				$	(0.50	)				$	0.30

RESULTS OF OPERATIONS

     Total revenues increased $38.3 million, or 26.9%, to $180.3 million for the six months ended June 30, 2005, compared with $142.0 million for the same period in 2004.

     Systems and services revenues increased $44.3 million, or 34.0 %, to $174.7 million for the six months ended June 30, 2005, compared with $130.4 million for the same period in 2004. Systems and services revenues increased primarily as a result of an increase in revenues generated under long-term contracts including increases in software, software maintenance, outsourcing and remote hosting. These revenues, which are generally recognized on a monthly basis, increased by $27.2 million, or 28.5%. The increase in revenues was a result of higher revenues in connection with contracts entered into the second of half of 2004 and Q1 2005. Additionally, revenues related to our remote hosting offering increased as more customers have elected this service in lieu of purchasing hardware. Furthermore, systems and services revenues were favorably impacted by progress made in connection with customer implementations, which resulted in higher software and software maintenance revenues. Additionally, in connection with these long-term contracts, professional services revenues increased to $37.4 million, or 41.7%, an increase of $11.0 million. The increase in professional services was driven by a higher level of revenues associated with customer activations and ongoing consulting projects at numerous customer sites. A significant level of this activity was associated with the activation of our clinical software suite which includes Sunrise Clinical Manager 3.5 XA and 4.0 XA. The higher level of professional services is expected to continue throughout the remainder of 2005 as we continue to activate numerous customers on the newest releases of our software product. Our continued growth in systems and services revenues in 2006 will require increased sales in the second half of 2005.

     Hardware revenues decreased $6.0 million, or 51.7%, to $5.6 million for the six months ended June 30, 2005, compared with $11.6 million for the same period in 2004. As previously mentioned, 2005 hardware revenues are expected to remain at levels that are lower than 2004 due to the change in sales mix related to the purchase of remote hosting services in lieu of hardware purchases by our customers and a lower level of hardware volume associated with the status of customer implementations compared to the prior year.

     Costs of systems and services revenues increased $26.4 million, or 32.5%, to $107.5 million, for the six months ended June 30, 2005, compared to $81.1 million for the same period in 2004. Gross margins on systems and services revenues were 38.5% for the six months ended June 30, 2005, compared to 37.4% for the same period in 2004. The increase in costs of systems and services revenues was largely a result of incremental costs associated with higher levels of outsourcing and remote hosting revenues. Additionally, costs in the period increased as a result of a higher level of third party consulting costs used to supplement our delivery of services in connection with customer implementation and consulting projects. Furthermore, the amortization of capitalized software development

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costs increased by $3.3 million as a result of the releases of our clinical product suite in 2004 and 2005.

     Costs of hardware revenues decreased $5.3 million, or 53.3%, to $4.7 million for the six months ended June 30, 2005, compared to $10.0 million for the same period in 2004. Gross margins on hardware revenues were 17.0% in the six months ended June 30, 2005 and 14.2% in the same period in 2004. The decrease in the costs of hardware revenues was attributable to the decrease in hardware revenues discussed above.

     Sales and marketing expenses increased $3.0 million, or 9.5%, to $34.4 million for the six months ended June 30, 2005, compared to $31.4 million for the same period in 2004. The increase in sales and marketing expenses was primarily related to increases in payroll related costs including incentive compensation related costs, travel, training and costs associated with marketing events.

     Research and development expenses decreased $2.7 million, or 9.3%, to $26.6 million, for the six months ended June 30, 2005, compared to $29.3 million for the same period in 2004. The decrease in research and development expenses was primarily related to an increase in capitalized software development costs and lower overall expenditures. Capitalized software development costs increased to $9.6 million in 2005 compared to $8.5 million in 2004. The increase in capitalized software development costs was related to development efforts in connection with the release of Sunrise Clinical Manger 4.0 XA which was made generally available in March 2005 and activities associated with the completion of Sunrise Clinical Manager 4.5 XA which is currently scheduled to be released at the end of 2005.

     General and administrative expenses increased $3.3 million, or 43.4%, to $10.9 million for the six months ended June 30, 2005, compared to $7.6 million for the same period in 2004. As mentioned earlier, 2005 general and administrative expenses include $2.2 million of costs associated with the transition of our former Chief Executive Officer. Additionally, these expenses further increased as a result of incremental payroll related costs and professional services.

     Depreciation and amortization increased $889,000 or 13.9%, to $7.3 million, for the six months ended June 30, 2005, compared to $6.4 million, for the same period in 2004. The increase was primarily the result of higher depreciation related to computer purchases at our Technology Solutions Center and incremental amortization associated with acquisitions which were completed in 2004.

     Interest income increased $601,000, or 88.5%, to $1.3 million for the six months ended June 30, 2005, compared to $679,000 for the same period in 2004. The increase was due to an improvement in yields resulting from higher interest rates in the quarter.

     As a result of these factors, we had a net loss of $9.6 million for the six months ended June 30, 2005, compared to a net loss of $23.0 million for the same period in 2004.

LIQUIDITY AND CAPITAL RESOURCES

     During the quarter-ended June 30, 2005, operating activities generated $1.7 million of cash, primarily related to the collection of accounts receivables from customers and an overall improvement in our results of operations. Investing activities used $5.7 million of cash, primarily related to $3.2 million of capitalized software development costs and $2.2 million of capital expenditures. Financing activities provided $5.9 million of cash from the exercise of stock options. For the six months ended June 30, 2005, operating activities used $5.4 million of cash, primarily related to up-front costs in connection with a significant outsourcing contract, costs associated with the Chief Executive Officer transition and payments made in conjunction with prior year employee incentive compensation plans. These items were partially offset by improvements in our results of operations. Investing activities used $53.1 million of cash, primarily related to $9.6 million of capitalized software development costs, $6.3 million of capital expenditures and $37.2 million of purchases of marketable equity securities. Financing activities provided $7.6 million of cash from the exercise of stock options.

     As of June 30, 2005, our principal source of liquidity is our combined cash and marketable securities balance of $108.4 million. Our future liquidity requirements will depend on a number of factors including, among other things, the timing and volume of our new sales, the cost of our development efforts, the success and market acceptance of our future product releases, and other related items. As of June 30, 2005, we did not have any material commitments for capital expenditures. We believe that our current cash and marketable securities balances, combined with our anticipated cash collections from customers will be adequate to meet our liquidity requirements through 2005.

Risk Factors

     There are a number of important factors that could affect our business and future operating results, including without limitation, the factors set forth below. The information contained in this report should be read in light of such factors. Any of the following factors could harm our business and future operating results.

We face risks relating to our product strategy

     In October 2003, we announced the existence of certain response time issues within some components of SunriseXA, the newest version of our Sunrise family of products. We concluded that the root cause of the issue was in the technical design of SunriseXA, which did not adequately support the throughput required in the highly interactive patient care environment. After substantial analysis,

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we pursued and continue to pursue a strategy that we believe addresses these issues. Our strategy was to replace the affected SunriseXA components with certain components from our SCM product, which is our prior generation, core clinical product. Although we believe that the releases of Sunrise Clinical Manager 3.5 XA in June 2004 and Sunrise Clinical Manager 4.0 XA in March 2005 were significant milestones in the implementation of our product strategy, we continue to face a variety of risks and uncertainties in this regard including among others, the following:

• We may encounter technical obstacles and delays in implementing this approach. As we continue to implement our strategy, it is possible that we could discover additional problems with our software.

• It is possible future releases of SunriseXA, with anticipated additional features for our products, may be delayed. This could result in delayed or lost sales.

• Customers who are currently implementing SunriseXA have faced delays in their implementations. As a result, existing SunriseXA customers could attempt to cancel their contracts with us or seek financial or other concessions from us.

• As a result of the changes we will make to our SunriseXA product offering, potential customers may find such products less appealing, which could decrease demand for our products.

• 2003 operating results reflect a $1.2 million write-down of capitalized software development costs for certain SunriseXA components. Additionally, to date we have recorded warranty related costs of $4.6 million related to the anticipated costs associated with the SunriseXA response time issue.

     These issues could harm our relationships with customers generally and our reputation in the marketplace. This announcement adversely affected our 2004 sales. Additionally, it is possible that this issue may continue to make sales more challenging for the affected SunriseXA applications.

Recent changes in our executive team could distract management and cause uncertainty that could result in delayed or lost sales

     On April 29, 2005, we announced that our Chairman, Eugene V. Fife, replaced Paul L. Ruflin as our President and Chief Executive Officer on an interim basis. At the same time, our board of directors announced that it had initiated a search for a new, long-term Chief Executive Officer. There can be no assurance that we will be able to recruit an appropriate candidate to become our long-term Chief Executive Officer in a timely manner. Any transition of this type could divert our management’s time and attention from the operation of our business and if we do not manage this process effectively, it could cause some level of uncertainty among our customers and potential customers that could lead to delays in closing new business or ultimately in lost sales.

Our product strategy is dependent on the continued development and support by Microsoft of its .Net Framework and other technologies

     Our product strategy is substantially dependent upon Microsoft’s .Net Framework and other Microsoft technologies. The .Net Framework, in particular, is a relatively new and evolving technology. If Microsoft were to cease actively supporting .Net or other technologies, 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 products. This could lead to lost or delayed sales, unanticipated development expenses and harm to our reputation, and would cause our financial results and business to suffer.

Our software development efforts may not meet the demands of the market or commitments to our clients, which could adversely affect our results of operations

     We continuously strive to develop new software products, and improve our existing software products to add new features and functionality. 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. Sometimes this takes longer than we expect. Sometimes we encounter unanticipated difficulties that require us to re-direct or scale-back our efforts. Sometimes we change our plans in response to changes in client requirements, market demands, resource availability, regulatory requirements, or other factors. All of this can result in acceleration of some initiatives and delay of others. If we make the wrong choices or do not manage our development efforts well, we may fail to produce software that responds appropriately to clients’ needs, and fail to meet commitments to clients regarding delivery of new or enhanced features and functionality. We have experienced such failures and previous or potential failures of this kind can impair existing customer relationships and new sales, which in turn could have a material adverse effect upon our results of operations.

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Given the length of our sales and implementation cycles, if a significant number of our customers delay implementation, our future operating results may suffer

     We have experienced 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 hospitals, our target customer market. Furthermore, our software generally requires significant capital expenditures by our customers. The sales cycle for our software ranges from 6 to 18 months or more from initial contact to contract execution. Historically, our implementation cycle has 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 and financial resources preparing contract proposals, negotiating the contract and implementing the software. We may not realize any revenues to offset these expenditures and, if we do, accounting principles may not allow us to recognize the revenues during corresponding periods. This could harm our future operating results. Additionally, any decision by our customers to delay purchasing or implementing our products may adversely affect our revenues.

Implementation costs may exceed expectations, which can negatively affect our margins

     Some of our software is complex and our implementations may require substantial investments of time and resources by us and our customers. Each customer’s circumstances may include unforeseen issues that make it more difficult or costly than anticipated to implement our software. We may fail to project, price or manage our implementation services correctly, resulting in losses of margin and inefficient use of our implementation staff, which could have a material adverse affect upon our results of operations.

The healthcare industry faces financial constraints that could adversely affect the demand for our products and services

     The healthcare industry faces significant financial constraints. For example, the shift to managed healthcare in the 1990’s put pressure on healthcare organizations to reduce costs, and the Balanced Budget Act of 1997 dramatically reduced Medicare reimbursement to healthcare organizations. Our software often involves a significant financial commitment by our customers. Our ability to grow our business is largely dependent on our customers’ information technology budgets. To the extent healthcare information technology spending declines or increases more slowly than we anticipate, demand for our products would be adversely affected.

We have a history of operating losses and we cannot predict future profitability

     For the first half of 2005, we had a net loss of $9.6 million. We had a net loss of $32.6 million for the year ended December 31, 2004. We also had net losses of $56.0 million in 2003, $29.8 million in 2002, $34.0 million in 2000, $9.4 million in 1999, and $35.3 million in 1998. In 2001, we had net income of $4.4 million, although we had a loss from operations of $1.6 million. We may continue to incur net losses and cannot predict when, or if, we will be profitable in the future.

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:

• our progress in implementing our strategy to address our SunriseXA response time issues and the level of costs associated with that effort;

• the timing, size and complexity of our product sales and implementations;

• overall demand for healthcare information technology;

• the financial condition of our customers and potential customers;

• market acceptance of new services, products and product enhancements by us and our competitors;

• customer decisions regarding renewal of their respective contracts;

• product and price competition;

• the relative proportions of revenues we derive from software, services and hardware;

• changes in our operating expenses;

• the timing and size of future acquisitions;

• personnel changes;

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• the performance of our products;

• significant judgments and estimates made by management in the application of generally accepted accounting principles; 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 product 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 customer, the effectiveness of the customer’s management, general economic conditions and the regulatory environment. In addition, the timing of our revenue recognition could vary considerably depending upon the extent to which our customers elect to license our products under arrangements under which revenues are recognized monthly. Generally, less revenue is recognized under these arrangements during the first 12 to 24 months compared to our traditional licensing arrangements. We also continue to offer contracts using our traditional licensing arrangements. 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.

Because in many cases we recognize revenues for our software monthly over the term of a customer 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 customers monthly over the terms of their agreements, which are typically 7 years and can be up to 10 years. As a result, much of the revenues that we report each quarter are attributable to agreements executed during prior quarters. Consequently, a decline in sales, client renewals, or market acceptance of our products in one quarter will not necessarily be reflected in lower revenues in that quarter, and may negatively affect our revenues and profitability in future quarters. In addition, we may be unable to adjust our cost structure to compensate for these reduced revenues. This monthly revenue recognition also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as revenues from new customers must be recognized over the applicable agreement term.

We operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than we do

     We operate in a market that is intensely competitive. Our principal competitors include Cerner Corporation, Epic Systems Corporation, GE Medical Systems, IDX Systems Corporation, McKesson Corporation, QuadraMed and Siemens AG. We also face competition from providers of practice management systems, general decision support, database systems and other segment-specific applications, as well as from healthcare IT consultants. A number of existing and potential competitors are more established than we are, and have greater name recognition and financial, technical and marketing resources than we do. We expect that competition will continue to increase, which could lead to a loss of market share or pressure on our prices and could make it more difficult to grow our business profitably.

If the healthcare industry continues to undergo consolidation, this could impose pressure on our products’ prices, reduce our potential customer base and reduce demand for our products

     Many hospitals have consolidated to create larger healthcare enterprises with greater market power. If this consolidation continues, it could erode our customer base and reduce the size of our target market. In addition, the resulting enterprises could have greater bargaining power, which may lead to erosion of the prices for our products.

Potential regulation by the U.S. Food and Drug Administration of our products as medical devices could impose increased costs, delay the introduction of new products and hurt our business

     The U.S. Food and Drug Administration, or FDA, is likely to 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 products 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 products, or third party products that we resell, as medical devices, it could impose extensive requirements upon us, including the following:

• requiring us to seek FDA clearance of a pre-market notification submission demonstrating that a product is substantially equivalent to a device already legally marketed, or to obtain FDA approval of a pre-market approval application establishing the safety and effectiveness of the product;

• requiring us to comply with rigorous regulations governing the pre-clinical and clinical testing, manufacture, distribution, labeling and promotion of medical devices; and

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• requiring us to 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 product corrections, suspending production, refusing to grant pre-market clearance or approval of products, 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 products or may prevent us from marketing our products.

Changes in federal and state regulations relating to patient data could depress the demand for our products and impose significant product redesign costs on us

     The demand for health care information systems is affected by state and federal laws and regulations that govern the collection, use, transmission and other disclosures of electronic health information. These laws and regulations may change rapidly and may be unclear or difficult to apply.

     Federal regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes 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. Collectively, these groups are known as covered entities. The HIPAA standards prescribe 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. Though we are not a covered entity, most of our customers are and require that our software and services adhere to HIPAA standards. Any failure or perception of failure of our products or services to meet HIPAA standards could adversely affect demand for our products and services and force us to expend significant capital, research and development and other resources to modify our products or services to address the privacy and security requirements of our customers.

     States and foreign jurisdictions in which we or our customers 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 customers may demand 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 or state governmental authorities 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 products and services may decrease if we are not able to develop and offer products and services that can address the regulatory challenges and compliance obligations facing our customers.

Our products and content are used to assist clinical decision-making and provide information about patient medical histories and treatment plans; If our products fail to provide accurate and timely information or the treatment methodologies suggested by our content are faulty, our customers could assert claims against us that could result in substantial cost to us, harm our reputation in the industry and cause demand for our products to decline

     We provide products and embedded content that assist in clinical decision-making, suggest treatment methodologies, provide access to patient medical histories and assist in creating patient treatment plans. If our software fails to provide accurate and timely information, or if treatment methodologies utilizing our content or practice guidelines is determined to be faulty, customers could assert liability claims against us. Litigation with respect to liability claims, regardless of its outcome, could result in substantial cost to us, divert management’s attention from operations and decrease market acceptance of our products. We attempt to limit by contract our liability for damages arising from negligence, errors or mistakes. In addition, we require that our customers approve all system rules and protocols. Despite these precautions, the limitations of liability set forth in our contracts may not be enforceable or may not otherwise protect us from liability for damages. We maintain general liability insurance coverage, including coverage for errors or omissions. However, 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.

     Highly complex software products such as ours often contain undetected errors or failures when first introduced or as updates and new versions are released. It is particularly challenging for us to test our products because it is difficult to simulate the wide variety of computing environments or treatment methodologies that our customers may deploy or rely upon. Despite testing, from time to time we have discovered defects or errors in our products. Defects, errors or difficulties could cause delays in product introductions and shipments, result in increased costs and diversion of development resources, require design modifications or decrease market acceptance or customer satisfaction with our products. In addition, despite testing by us and by current and potential customers, errors may be found after commencement of commercial shipments, resulting in loss of or delay in market acceptance.

If we undertake additional acquisitions, they 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. Since 1997, we have completed eleven acquisitions.

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     Any future acquisitions would involve a number of risks, including the following:

• The anticipated benefits from any acquisition may not be achieved. The integration of acquired businesses requires substantial attention from management. The diversion of management’s attention and any difficulties encountered in the transition process could hurt our business.

• In future acquisitions, we could issue additional shares of our capital stock, incur additional indebtedness or pay consideration in excess of book value, which could have a dilutive effect on future net income, if any, per share.

• New business acquisitions must be accounted for under the purchase method of accounting. These acquisitions may generate significant intangible assets and result in substantial related amortization charges to us.

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. 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.

Changing customer requirements could decrease the demand for our products, which could harm our business and decrease our revenues

     The market for our products and services is characterized by rapidly changing technologies, evolving industry standards and new product introductions and enhancements that may render existing products obsolete or less competitive. As a result, our position in the healthcare information technology market could erode rapidly due to unforeseen changes in the features and functions of competing products, as well as the pricing models for such products. Our future success will depend in part upon our ability to enhance our existing products and services, particularly our ability to continue to release our products onto the .NET Framework under the SunriseXA initiative, and to develop and introduce new products and services to meet changing customer requirements. The process of developing products and services such as those we offer is extremely complex and is expected to become increasingly complex and expensive in the future as new technologies are introduced. If we are unable to enhance our existing products or develop new products to meet changing customer requirements, demand for our products could suffer.

We depend on licenses from third parties for rights to the technology used in several of our products, 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 products from a number of third-party vendors, including Computer Corporation of America, Computer Associates, Oracle Corporation and Microsoft. 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 product shipments 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 products.

Our products rely on our intellectual property, and any failure by us to protect our intellectual property, or any misappropriation of it, could enable our competitors to market products with similar features, which could reduce demand for our products

     We are dependent upon our proprietary information and technology. Our means of protecting our proprietary rights may not be adequate to prevent misappropriation. The laws of some foreign countries may not protect our proprietary rights as fully as do the laws of the United States. 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 products, reverse engineer our products or otherwise obtain and use information that we regard as proprietary. In some limited instances, customers 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 these customers 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 products. Furthermore, others could independently develop technologies similar or superior to our technology or design around our proprietary rights. In addition, infringement or invalidity claims or claims for indemnification resulting from infringement claims could be asserted or prosecuted against us. Regardless of the validity of any claims, defending against these claims could result in significant costs and diversion of our resources. The assertion of infringement claims could also result in injunctions preventing us from

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distributing products. If any claims or actions are asserted against us, we might be required to obtain a license to the disputed intellectual property rights, which might not be available on reasonable terms or at all.

Provisions of our charter documents and Delaware law may inhibit potential acquisition bids that a stockholder may believe is 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 4,900,000 shares of preferred stock. The 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. In August 2000, our board of directors adopted a shareholder rights plan under which we issued preferred stock purchase rights that would adversely affect the economic and voting interests of a person or group that seeks to acquire us or a 15% or more interest in our common stock without negotiations with our board of directors.

     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 stockholder meetings.

Section 203 of the Delaware corporate statute may inhibit potential bids to acquire our company. We are subject to the anti-takeover provisions of the Delaware General Corporation Law which prohibits us from engaging, under specified circumstances, in a business combination with any interested stockholder for three years following the date that the interested stockholder became an interested stockholder, unless our board of directors or a supermajority of our uninterested stockholders agree. For purposes of Delaware law, a business combination includes a merger or consolidation involving us and the interested stockholder, and the sale of more than 10% of our assets. In general, Delaware law defines an interested stockholder as any holder beneficially owning 15% or more of the outstanding voting stock of a corporation and any entity or person affiliated with or controlling or controlled by the holder.
These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock. As a result, these provisions may prevent the market price of our common stock from increasing substantially in response to actual or rumored takeover attempts. These provisions may also prevent changes in our management.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not currently use derivative financial instruments. We generally buy investments that are highly liquid. Based upon the nature of our investments, we do not expect any material loss from our investments.

     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 and cash and marketable securities account balances.

     Annualized interest income based upon hypothetical values for cash and marketable securities combined balances and interest rates:*

	Combined cash and cash equivalents and
Hypothetical	marketable securities balances (in thousands)
Interest Rate	$100,000		$110,000		$120,000
1.5%		1,500		1,650		1,800
2.0%		2,000		2,200		2,400
2.5%		2,500		2,750		3,000
3.0%		3,000		3,300		3,600
3.5%		3,500		3,850		4,200
4.0%		4,000		4,400		4,800

* (This sensitivity analysis is not a forecast of future interest income.)

     We account for cash equivalents and marketable securities in accordance with SFAS No. 115. “Accounting for Certain Investments in Debt and Equity Securities.” Cash equivalents are short-term highly liquid investments with original maturity dates of three months or less. Cash equivalents are carried at cost, which approximates fair market value. Marketable securities consist of funds that are highly liquid and are classified as available-for-sale. Marketable securities are recorded at fair value, and unrealized gains and losses are recorded as a component of other comprehensive income.

     We do not currently enter into foreign currency hedge transactions. Through June 30, 2005, foreign currency fluctuations have not had a material impact on our financial position or results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure and Controls and Procedures in Internal Control Over Financial Reporting

      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 Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of June 30, 2005. 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 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 June 30, 2005, our disclosure controls and procedures were effective at the reasonable assurance level.

      No change in the Company’s 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 June 30, 2005.

27

PART II.

ITEM 1. LEGAL PROCEEDINGS

     We and our subsidiaries are from time to time parties to legal proceedings, lawsuits and other claims incident to their business activities. Such matters may include, among other things, assertions of contract breach, claims for indemnity arising in the course of our business and claims by persons whose employment 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 matters as of the date of this report. However, based on our knowledge at the time of this report, management believes that the final resolution of such 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

(a) The Annual Meeting of Stockholders was held on June 29, 2005.

(b) Two Class 1 directors were elected to serve for a term of three years ending at the 2008 annual meeting of stockholders. The two Class 1 directors are Eugene V. Fife and Braden R. Kelley. Continuing directors included two Class 2 directors, Steven A. Denning and Jay B. Pieper, and two Class 3 directors, Dan L. Crippen and Edward A. Kangas.

(c) The following describes the voting on each matter considered at the meeting.

			Votes
			Against or				Broker
Matter	Votes For		Withheld		Abstain		Non-votes
1. Election of Directors
Eugene V. Fife		42,799,388		1,467,398
Braden R. Kelley		43,801,702		465,084
2. Approval of the Company’s 2005 Stock Incentive Plan and authorization for issuance of 2,000,000 new shares of the Company’s common stock there under, plus up to an additional 8,328,635 shares previously approved and available under predecessor plans.		27,689,823		8,541,289		87,979		7,947,695
3. Approval of the Company’s 2005 Employee Stock Purchase Plan and authorization for issuance of 1,000,000 shares of the Company’s common stock there under.		35,852,908		394,323		71,860		7,947,695
4. Ratification of the selection of PricewaterhouseCoopers LLP as the Company’s registered public accounting firm for the fiscal year ending December 31, 2005.		44,065,553		165,735		35,498

28

ITEM 6. EXHIBITS

     Exhibits: See Index to exhibits.

SIGNATURES

Pursuant to the requirements 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.

	ECLIPSYS CORPORATION
Date: August XX, 2005	/s/ Robert J. Colletti
	Robert J. Colletti
	Senior Vice President and Chief Financial Officer (Principal financial officer and duly authorized officer)

29

ECLIPSYS CORPORATION
EXHIBIT INDEX

Exhibit
Number			Description
	3.1	(1)	Third Amended and Restated Certificate of Incorporation of Eclipsys Corporation
	3.2	(3)	Certificate of Designation of Series A Junior Participating Preferred
	3.3	(2)	Amended and Restated Bylaws of Eclipsys Corporation
	4.1	(3)	Rights Agreement dated July 26, 2000 by and between Eclipsys Corporation and Fleet National Bank, as Rights Agent, which includes as Exhibit A, the Form of Certificate of Designation, as Exhibit B, the form of Rights Certificate, and as Exhibit C, the Summary of Rights to Purchase Preferred Stock.
	10.1		Form of Restricted Stock Agreement to be used in connection with issuance of restricted stock to executive officers and members of the registrant’s board of directors under the Eclipsys Corporation 2005 Stock Incentive Plan
	10.2		Form of Notice of Grant of Restricted Stock Agreement to be used in connection with issuance of restricted stock to executive officers under the Eclipsys Corporation 2005 Stock Incentive Plan
	10.3		Form of Notice of Grant of Restricted Stock Agreement to be used in connection with issuance of restricted stock to members of the registrant’s board of directors under the Eclipsys Corporation 2005 Stock Incentive Plan
	10.4		Form of Notice of Grant of Stock Option to be used in connection with grants of stock options to executive officers under the Eclipsys Corporation 2005 Stock Incentive Plan
	10.5		Form of Notice of Grant of Stock Option to be used in connection with grants of stock options to members of the registrant’s board of directors under the Eclipsys Corporation 2005 Stock Incentive Plan
	31.1		Rule 13a-14(a) Certification of Eugene V. Fife
	31.2		Rule 13a-14(a) Certification of Robert J. Colletti
	32.1		Rule 13a-14(b) Certification of Eugene V. Fife
	32.2		Rule 13a-14(b) Certification of Robert J. Colletti

(1) Previously filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 000-24539 and incorporated herein by reference.

(2) Previously filed with the Registrant’s Registration Statement on Form S-1, as amended (Registration No. 333-50781) and incorporated herein by reference.

(3) Previously filed with the Company’s Current Report on Form 8-K filed August 8, 2000 and incorporated herein by reference.

30

EX-10.1

Exhibit 10.1

RESTRICTED STOCK AGREEMENT

     This Restricted Stock Agreement (this “Agreement") is made as of                                by Eclipsys Corporation, a Delaware corporation (“Eclipsys”) and                                          (“Recipient”) to govern awards of restricted stock by Eclipsys to Recipient made from time to time pursuant to Grant Notices (as defined below) that reference this Agreement as governing the awards reflected therein.

     1.      Grants of Restricted Stock. From time to time in its discretion, Eclipsys may grant and issue to Recipient shares of Eclipsys’s common stock that are subject to the restrictions described in and other provisions of this Agreement (the “Restricted Stock”). No grants of Restricted Stock are promised by this Agreement. Each grant of Restricted Stock will be documented by a written notice delivered by Eclipsys to Recipient (a “Grant Notice") stating: (i) that the Restricted Stock described therein is subject to this Agreement, (ii) the number of shares of Restricted Stock subject to the grant, (iii) the schedule and any other conditions for vesting of the Restricted Stock, and (iv) such other terms and conditions applicable to the Restricted Stock as Eclipsys may determine. As a condition to each grant of Restricted Stock, Recipient is required to pay to Eclipsys $.01 by cash or check for each share of Restricted Stock (the “Acquisition Consideration”).

     2.      Governing Plan. The Restricted Stock shall be granted pursuant to and (except as specifically set forth herein or in another written agreement between Eclipsys and Recipient) subject in all respects to the applicable provisions of the Eclipsys Corporation 2005 Stock Incentive Plan or its successor plan (the “Plan”), which are incorporated herein by reference. Terms not otherwise defined in this Agreement have the meanings ascribed to them in the Plan.

     3.      Restrictions on the Restricted Stock.

     (a)      Limitation on Transfer. The Restricted Stock (including any shares received by Recipient with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization or a similar transaction affecting Eclipsys’s securities without receipt of consideration) may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated or encumbered unless and until the conditions to vesting set forth in the Grant Notice are met and any additional requirements or restrictions contained in this Agreement, the Grant Notice or the Plan have been satisfied, terminated or expressly waived by Eclipsys in writing. However, this will not prohibit nominal transfers of Restricted Stock for estate planning purposes that do not effect a change in beneficial ownership, if the transferee agrees in writing to the terms of this Agreement. Satisfaction of the conditions to vesting set forth in the Grant Notice and any additional requirements or restrictions contained in this Agreement, and the resulting removal of the restrictions imposed hereunder from particular shares of Restricted Stock, is also referred to as “vesting” of those shares and shares from which the restrictions have been removed are referred to as “vested.”

     (b)      Cancellation of Restricted Stock. Notwithstanding Section 3(a), but subject to the Plan, any applicable Grant Notice, and any other separate written agreement between Eclipsys and Recipient providing for vesting of any Restricted Stock in connection with termination of Recipient’s employment or service or a change in control of Eclipsys, if any Cancellation Event occurs, then (i) vesting of any shares of Restricted Stock originally scheduled to vest after the time that Cancellation Event occurred will cease; (ii) any grant insofar as it relates to Restricted Stock that has not yet vested will be cancelled; (iii) unvested Restricted Stock will be forfeited to Eclipsys and all rights of Recipient as a stockholder of such

Restricted Stock Agreement
              - date

shares will cease; (iv) Eclipsys shall be obligated to pay to Recipient, by cash or equivalent or by cancellation of amounts owed by Recipient to Eclipsys or any Affiliate, the Acquisition Consideration per share previously received from Recipient in respect of all shares of Restricted Stock that are forfeited to Eclipsys; and (v) Recipient shall have no rights to or in respect of shares of Restricted Stock that are forfeited to Eclipsys except the right to receive the Acquisition Consideration in respect thereof. In case of a Cancellation Event, any partially vested share will be rounded up to the nearest whole share for purposes of determining the number of shares that are forfeited to Eclipsys. For these purposes, if Recipient is an employee of Eclipsys or any of its present or future parent or subsidiary corporations (each an “Affiliate”) as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”), a “Cancellation Event” means, and shall be deemed to occur upon, the cessation of Recipient’s employment with Eclipsys or any of its Affiliates or its successor (other than in situations in which the Recipient is or is becoming a member of the Board of Directors of Eclipsys) for any reason, including without limitation resignation by Recipient with or without good reason, or termination of employment by Eclipsys or any Affiliate or its successor with or without cause . If Recipient is a member of the Board of Directors of Eclipsys, a Cancellation Event means, and shall be deemed to occur upon, cessation of Recipient’s service as a director of Eclipsys, unless at the time of such cessation Recipient is then an employee of Eclipsys or any of its Affiliates, in which case Recipient shall thereafter be treated as an employee for these purposes.

     4.      Voting and Other Rights. During the period prior to vesting, except as otherwise provided herein, Recipient will have all of the rights of a stockholder with respect to all of the Restricted Stock, including without limitation the right to vote such Restricted Stock and the right to receive all dividends or other distributions with respect to such Restricted Stock. In connection with the payment of such dividends or other distributions, Eclipsys will be entitled to deduct from any amounts otherwise payable by Eclipsys to Recipient (including without limitation salary or other compensation), except to the extent prohibited by applicable law or regulation, any taxes or other amounts required by any governmental authority to be withheld and paid over or deposited to such authority for Recipient’s account.

     5.      Handling of Shares.

     (a)      Certificates or Book Entries. Eclipsys may in its discretion issue physical certificates representing Restricted Stock, or cause the Restricted Stock to be recorded in book entry form and reflected in records maintained by or for Eclipsys. Each certificate or data base entry representing any unvested portion of any Restricted Stock may be endorsed with a legend substantially as set forth below, as well as such other legends as Eclipsys may deem appropriate to comply with applicable laws and regulations:

The securities evidenced by this certificate are subject to certain limitations on transfer and other restrictions as set forth in that certain Restricted Stock Agreement, dated as of                                         , between Eclipsys and the holder of such securities, the Eclipsys Corporation 2005 Stock Incentive Plan (copies of which are available for inspection at the offices of Eclipsys), and the notice of grant applicable to the securities.

     (b)      Escrow. With respect to each unvested share of Restricted Stock (including any shares received by Recipient with respect to shares of Restricted Stock that have not yet vested as a result of stock dividends, stock splits or any other form of recapitalization or a similar transaction affecting Eclipsys’s securities without receipt of consideration), the Secretary of Eclipsys, or such other escrow holder as the Secretary may appoint, will retain physical custody of any certificate representing such share until such share vests.

Restricted Stock Agreement
              - date

2

     (c)      Delivery of Certificates. As soon as practicable after the vesting of any Restricted Stock and upon request by Recipient, but subject to Section 5(d), Eclipsys will deliver to Recipient or Recipient’s designee a certificate(s) free of restrictive legends representing such vested Restricted Stock, or cause appropriate book entry or other electronic changes to be made to reflect Recipient’s ownership of such vested Restricted Stock free of restrictions, in any case net of the number of shares withheld by Eclipsys in payment of tax pursuant to Section 6(a).

     (d)      Conditions to Vesting. At the time for vesting of any shares of Restricted Stock, and as a condition to vesting, Recipient must, if requested by Eclipsys, make appropriate representations in a form satisfactory to Eclipsys that such Restricted Stock will not be sold other than (A) pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an applicable exemption from the registration requirements of such Act; (B) in compliance with all applicable state securities laws and regulations; and (C) in compliance with all terms and conditions of the Plan, the applicable Grant Notice, any applicable policy of Eclipsys or any of its Affiliates, and any other written agreement between Recipient and Eclipsys or any of its Affiliates.

     6.      Tax Matters.

     (a)      Recipient’s Tax Obligations. The vesting of Restricted Stock generally results in taxable income for employees and is subject to appropriate income tax withholding, deposits, or other deductions required by applicable laws or regulations. Subject to any separate written agreement between Recipient and Eclipsys, Recipient and Recipient’s successors will be responsible for all income and other taxes payable as a result of grant or vesting of the Restricted Stock or otherwise in connection with this Agreement. All obligations of Eclipsys or its Affiliates to pay tax deposits to any federal, state or other taxing authority as a result of grant or vesting of Restricted Stock will result in a commensurate obligation of Recipient to reimburse Eclipsys or its Affiliate the amount of such tax deposits. Such obligation of Recipient shall, unless otherwise specified in the applicable Grant Notice or in a separate written agreement between Eclipsys and Recipient, be satisfied by the Recipient forfeiting and Eclipsys deducting and retaining from the shares vesting at any particular time that number of shares with a value equal to the amount of the required minimum tax withholdings that Eclipsys or its Affiliate is required to pay as a result of such vesting, with such value measured by the same value per share used by Eclipsys or its Affiliate to determine its tax deposit obligation and based on the minimum statutory withholding rates for federal and state income and payroll tax purposes that are applicable to supplemental wages. If Eclipsys or its Affiliate is required to pay additional tax deposits after the initial issuance to Recipient of the net number of vested shares, Eclipsys or its Affiliate may require Recipient to make up the difference in cash. If the tax deposits paid are less than Recipient’s tax obligations, Recipient is solely responsible for any additional taxes due. If Eclipsys or its Affiliate pays tax deposits in excess of Recipient’s tax obligations, Recipient’s sole recourse will be against the relevant taxing authorities, and Eclipsys and its Affiliates will have no obligation to issue additional shares or pay cash to Recipient in respect thereof. Recipient is responsible for determining Recipient’s actual income tax liabilities and making appropriate payments to the relevant taxing authorities to fulfill Recipient’s tax obligations and avoid interest and penalties.

     (b)      Section 83(b) Election. Recipient understands that Recipient may make an election pursuant to Section 83(b) of the Code (by filing an election with the Internal Revenue Service within thirty (30) days after the date Recipient acquired the Restricted Stock) to include in Recipient’s gross income the fair market value (as of the date of acquisition) of the Restricted Stock. Recipient may make such an election under Section 83(b), or comparable provisions of any state tax law, only if, prior to making any such election, Recipient (a) notifies Eclipsys of Recipient’s intention to make such election, by delivering to Eclipsys a copy of the fully-executed Section 83(b) Election Form attached hereto as Exhibit A, and (b) pays to Eclipsys an amount sufficient to satisfy any taxes or other amounts required by

Restricted Stock Agreement
              - date

3

any governmental authority to be withheld or paid over to such authority for Recipient’s account, or otherwise makes arrangements satisfactory to Eclipsys for the payment of such amounts through withholding or otherwise. Recipient understands that if Recipient has not made a proper and timely Section 83(b) election, at the time the forfeiture restrictions applicable to the Restricted Stock lapse, Section 83 will generally provide that Recipient will recognize ordinary income and be taxed in an amount equal to the fair market value (as of the date the forfeiture restrictions lapse) of the Restricted Stock less the Acquisition Consideration paid for the Restricted Stock. For this purpose, the term “forfeiture restrictions” includes the right of Eclipsys to acquire the Restricted Stock pursuant to its rights under Section 3 of this Agreement. Recipient acknowledges that it is Recipient’s sole responsibility, and not the responsibility of Eclipsys or any of its Affiliates, to file a timely election under Section 83(b), even if Recipient requests Eclipsys or its representative to make this filing on Recipient’s behalf. Recipient is relying solely on Recipient’s advisors with respect to the decision as to whether or not to file a Section 83(b) election.

     7.      Additional Agreements

     (a)      Independent Advice; No Representations. Recipient acknowledges that (i) Recipient was and is free to use professional advisors of Recipient’s choice in connection with this Agreement and any grant of Restricted Stock, that Recipient understands this Agreement and the meaning and consequences of receiving grants of Restricted Stock, and is entering into this Agreement freely and without coercion or duress; and (ii) Recipient has not received and is not relying, and will not rely, upon any advice, representations or assurances made by or on behalf of Eclipsys or any Affiliate or any employee of or counsel to Eclipsys or any Affiliate regarding any tax or other effects or implications of the Restricted Stock or other matters contemplated by this Agreement or any Grant Notice.

     (b)      Value of Restricted Stock. No representations or promises are made to Recipient regarding the value of the Restricted Stock or the business prospects of Eclipsys or any Affiliate. Recipient acknowledges that information about investment in Eclipsys stock, including financial information and related risks, is contained in Eclipsys’s SEC reports on Form 10-Q and Form 10-K, which have been made available from Eclipsys’s Human Resources department and/or on Eclipsys’s internal web site for Recipient’s review at any time before Recipient’s acceptance of this Agreement or at any time during Recipient’s employment or service. Further, Recipient understands that Eclipsys and its Affiliates do not provide tax or investment advice and acknowledges Eclipsys’s recommendation that Recipient consult with independent specialists regarding such matters. Sale or other transfer of Eclipsys stock may be limited by and subject to policies of Eclipsys or its Affiliates as well as applicable securities laws and regulations.

     (c)      Merger, Consolidation or Reorganization. In the event of a Reorganization of Eclipsys in which holders of shares of Common Stock of Eclipsys are entitled to receive in respect of such shares any additional shares or new or different shares or securities, cash or other consideration (including, without limitation, a different number of shares of Common Stock) (“Exchange Consideration”), then Recipient will be entitled to receive a proportionate share of the Exchange Consideration in exchange for any Restricted Stock that is then still owned by Recipient and not cancelled; provided that, subject to any Grant Notice or other separate written agreement between Eclipsys and Recipient providing for vesting of any Restricted Stock in connection with termination of Recipient’s employment or a change in control of Eclipsys, any Exchange Consideration issued to Recipient in respect of unvested Restricted Stock will be subject to the same restrictions and vesting provisions that were applicable to the Restricted Stock in exchange for which the Exchange Consideration was issued.

     (d)      No Right to Continued Employment or Service; No Positive Inference. Neither this Agreement nor any grant of Restricted Stock confers upon Recipient any right to continue as an

4

Restricted Stock Agreement
               - date

employee, director or consultant of, or in any other relationship with, Eclipsys or its Affiliates, or to any particular employment or service tenure or minimum vesting of Restricted Stock, or limits in any way the right of Eclipsys or its Affiliates to terminate Recipient’s services to Eclipsys or any of its Affiliates at any time, with or without cause. Restricted Stock is to motivate and reward future performance, and no grant of Restricted Stock will be interpreted as a reward for past performance that dictates vesting in advance of the vesting schedule specified in the applicable Grant Notice, or an indication that the Recipient has performed well or is entitled to any particular employment or service tenure.

     8.      General.

     (a)      Successors and Assigns. This Agreement is personal in its nature and Recipient may not assign or transfer his rights under this Agreement, except as specifically provided herein or permitted by Eclipsys in writing.

     (b)      Notices. Any notices, demands or other communications required or desired to be given by any party shall be in writing and shall be validly given to another party if served personally or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested. If such notice, demand or other communication shall be served personally, service shall be conclusively deemed made at the time of such personal service. If such notice, demand or other communication is given by mail, such notice shall be conclusively deemed given forty-eight (48) hours after the deposit thereof in the United States mail addressed to the party to whom such notice, demand or other communication is to be given as hereinafter set forth:

To Eclipsys:	Eclipsys, Inc. 1750 Clint Moore Road Boca Raton, Florida 33487 Attention: General Counsel
To Recipient:	At his address of record as maintained in Eclipsys’s employment files

Any party may change its address for the purpose of receiving notices, demands and other communications by providing written notice to the other party in the manner described in this paragraph.

     (c)      Entire Agreement. Except as this Agreement and/or another written agreement between Eclipsys and Recipient may expressly provide otherwise, this Agreement, the Plan, and any Grant Notices constitute the entire agreement and understanding of Eclipsys (together with its Affiliates) and Recipient with respect to Restricted Stock, and supersede all prior written or verbal agreements and understandings between Recipient and Eclipsys (together with its Affiliates) relating to such subject matter. Recipient has not received and is not relying upon, and will not rely upon, any representations by any employee of or counsel to or other representative of Eclipsys or any of its Affiliates in connection with this Agreement or any grant of Restricted Stock hereunder. This Agreement may only be amended by written instrument signed by Recipient and an authorized officer of Eclipsys.

     (d)      Governing Law; Severability. This Agreement will be construed and interpreted under the laws of the State of Delaware applicable to agreements executed and to be wholly performed within the State of Delaware. If any provision of this Agreement as applied to any party or to any circumstance is adjudged by a court of competent jurisdiction to be void or unenforceable for any reason, the invalidity of that provision shall in no way affect (to the maximum extent permissible by law) the application of such provision under circumstances different from those adjudicated by the court, the application of any other provision of this Agreement, or the enforceability or invalidity of this Agreement as a whole. If any provision of this Agreement becomes or is deemed invalid, illegal or unenforceable in any jurisdiction by

5

Restricted Stock Agreement
               - date

reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision will be stricken and the remainder of this Agreement shall continue in full force and effect.

     (e)      Remedies. All rights and remedies provided pursuant to this Agreement or by law shall be cumulative, and no such right or remedy shall be exclusive of any other. A party may pursue any one or more rights or remedies hereunder or may seek damages or specific performance in the event of another party’s breach hereunder or may pursue any other remedy by law or equity, whether or not stated in this Agreement.

     (f)      Arbitration. Any and all disputes and claims between Recipient and Eclipsys that arise out of this Agreement shall be resolved through final and binding arbitration. Any claim under this Agreement must be commenced by a claimant within 365 days of the date on which the cause of action accrues (unless a contractual limitation on duration of claims is impermissible or a longer period of time is required by law, in which case the end of the minimum required period will be the deadline for commencing claims), or it will be deemed waived. Binding arbitration will be conducted in Atlanta, Georgia in accordance with the rules and regulations of the American Arbitration Association. Recipient understands and agrees that the arbitration shall be instead of any civil litigation and that this means that Recipient is waiving Recipient’s right to a jury trial as to such claims. The parties further understand and agree that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law and enforceable by any court having jurisdiction. If and to the extent necessary to make this arbitration provision enforceable, Eclipsys shall pay the arbitrator’s compensation and any fees for the arbitration, unless the arbitrator directs otherwise in the award, or unless the law where the arbitration occurs provides otherwise.

     (g)      Interpretation. Headings herein are for convenience of reference only, do not constitute a part of this Agreement, and will not affect the meaning or interpretation of this Agreement. References herein to Sections are references to the referenced Section hereof, unless otherwise specified.

     (h)      Waivers; Amendments. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any later breach of that provision. This Agreement may be modified only by written agreement signed by Recipient and Eclipsys.

     (i)      Counterparts. This Agreement may be executed in more than one counterpart, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument. Facsimile or photographic copies of originally signed copies of this Agreement will be deemed to be originals.

ECLIPSYS CORPORATION

By:
	name
Name:
Title:

6

Restricted Stock Agreement
_______ -date

EXHIBIT A
to Restricted Stock Agreement

ELECTION TO INCLUDE VALUE OF RESTRICTED PROPERTY
IN GROSS INCOME IN YEAR OF TRANSFER
INTERNAL REVENUE CODE § 83(b)

     The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below, and supplies the following information in accordance with the regulations promulgated thereunder:

1.      Name, address and taxpayer identification number of the undersigned:

Taxpayer I.D. No.:                                                     

2.      Description of property with respect to which the election is being made:
                                         shares of Common Stock of Eclipsys Corporation, a Delaware corporation (the “Company”)

3.      Date on which property was transferred:                                         

4.      Taxable year to which this election relates:                                         

5.      Nature of the restrictions to which the property is subject:
If the taxpayer’s service to the Company terminates for any reason before the Common Stock vests, the Company will repurchase the Common Stock from the taxpayer at $.01 per share. The Common Stock vests according to the following schedule:                                         

The Common Stock is non-transferable in the taxpayer’s hands, by virtue of language to that effect stamped on the stock certificate.

6.      Fair market value of the property:
The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions that by their terms will never lapse) of the property with respect to which this election is being made is $                               per share.

7.      Amount paid for the property:
The amount paid by the taxpayer for said property is $.01 per share.

8.      Furnishing statement to employer:
A copy of this statement has been furnished to                                         

Date:
	Signature
	Printed Name

This election must be filed with the Internal Revenue Service Center with which taxpayer files his or her Federal income tax returns and must be made within thirty (30) days after receipt of the Restricted Stock. This filing should be made by registered or certified mail, return receipt requested. The taxpayer must retain two (2) copies of the completed form, one for filing with his or her Federal and state tax returns for the current tax year and an additional copy for his or her records.

7

Restricted Stock Agreement
__________ - __________ EX-10.2 3 w11600exv10w2.htm EXHIBIT 10.2

Exhibit 10.2

Notice of Grant of Restricted Stock
Employee Eclipsys Corporation
ID: 65-0632092

	Grant Number:
[name of recipient]	Plan:	2005 Stock Incentive Plan
[address of recipient]	Employee ID:

Effective ____________ (the “Grant Date”), you have been granted the right to purchase, at a price of $0.01 per share, [No. of shares] shares (the “Shares”) of common stock of Eclipsys Corporation (the “Company”). You must pay the aggregate purchase price for the Shares to the Company by cash, check or other method acceptable to the Company within 30 days of the date of this Notice or the Company may cancel the grant.

This notice is a “Grant Notice” as described in the Restricted Stock Agreement between you and the Company (the "Agreement”). This grant is made under, and this grant and the Shares are subject to and governed by the terms and conditions of this notice, the Agreement, including the restrictions on transfer set forth therein, the Company’s 2005 Stock Incentive Plan (the “Plan”), and any other applicable written agreement between you and the Company. By your acceptance and payment for the Shares, you agree to such terms and conditions and confirm that your receipt of and payment for the Shares is voluntary.

For purposes of this Notice, (i) “Vesting Date” means each June 1 and December 1; and (ii) a complete calendar month will begin on the first day of each calendar month and end on the last day of that calendar month. Subject to the Agreement, on the Vesting Date that is on or immediately following the first anniversary of the Grant Date (the “First Vesting Date”), there shall vest a number of the Shares equal to the sum of (A) 20% of the total number of Shares and (B) a number of Shares equal to the product of 1.667% of the total number of Shares and the number of complete calendar months, if any, elapsed during the period beginning on the first anniversary of the Grant Date and ending on the First Vesting Date. On each of the eight Vesting Dates next succeeding the First Vesting Date, there shall vest an additional number of Shares equal to 10% of the total number of Shares, except that the number of Shares vesting on the last of such eight succeeding Vesting Dates will be less than 10% of the total number of Shares if and to the extent that the number of Shares Vesting on the First Vesting Date exceeded 20% of the total number of Shares. Unless otherwise provided in the Agreement or in another written agreement between you and the Company, (i) no Shares will vest before the First Vesting Date, (ii) vesting of Shares will occur only on Vesting Dates, without any ratable vesting for periods of time between Vesting Dates, and (iii) all Shares will be vested by the fourth anniversary of the First Vesting Date as long as all conditions to vesting are satisfied.

Except as otherwise provided in the Plan, the Agreement, or a separate written agreement between you and the Company signed by an executive officer of the Company, termination of your employment for any reason will result in cessation of vesting, cancellation of this grant, and forfeiture to the Company of any Shares not vested at the time your employment terminates.

For purposes of this grant and the Shares, the definition of “Good Reason” under the Plan shall be as follows, notwithstanding any Plan provision to the contrary: “Good Reason” shall mean any significant diminution in the Participant’s responsibilities from and after such Reorganization Event or Change in Control Event, as the case may be, or any reduction in the annual cash compensation payable to the Participant from and after such Reorganization Event or Change in Control Event, as the case may be.

The Prospectus for the Plan, the Plan document and the Company’s Annual Report on Form 10-K, and other filings made by the Company with the Securities and Exchange Commission are available for your review on the Company’s internal employee web site. You may also obtain paper copies of these documents upon request to the Company’s HR department.

No representations or promises are made regarding the duration of your employment or service, vesting of the Shares, the value of the Company’s stock or this grant, or the Company’s prospects. The Company provides no advice regarding tax consequences or your handling of the Shares; you agree to rely only upon your own personal advisors.

ECLIPSYS CORPORATION
By:
	Name & Title

EX-10.2

exv10w2

EX-10.3

Exhibit 10.3

Notice of Grant of Restricted Stock	Eclipsys Corporation
Director	ID: 65-0632092

[name of recipient]	Grant Number:
[address of recipient]	Plan: 2005	Stock Incentive Plan

Effective                                                    (the “Grant Date”), you have been granted the right to purchase, at a price of $0.01 per share,                                                    [No. of shares] shares (the “Shares”) of common stock of Eclipsys Corporation (the “Company”). You must pay the aggregate purchase price for the Shares to the Company by cash, check or other method acceptable to the Company within 30 days of the date of this Notice or the Company may cancel the grant.

This notice is a “Grant Notice” as described in the Restricted Stock Agreement between you and the Company (the "Agreement”). This grant is made under, and this grant and the Shares are subject to and governed by the terms and conditions of this notice, the Agreement, including the restrictions on transfer set forth therein, the Company’s 2005 Stock Incentive Plan (the “Plan”), and any other applicable written agreement between you and the Company. By your acceptance and payment for the Shares, you agree to such terms and conditions and confirm that your receipt of and payment for the Shares is voluntary.

For purposes of this Notice, (i) “Vesting Date” means each June 1 and December 1; and (ii) a complete calendar month will begin on the first day of each calendar month and end on the last day of that calendar month. Subject to the Agreement, on the Vesting Date that is on or immediately following the first anniversary of the Grant Date (the “First Vesting Date”), there shall vest a number of the Shares equal to the sum of (A) 20% of the total number of Shares and (B) a number of Shares equal to the product of 1.667% of the total number of Shares and the number of complete calendar months, if any, elapsed during the period beginning on the first anniversary of the Grant Date and ending on the First Vesting Date. On each of the eight Vesting Dates next succeeding the First Vesting Date, there shall vest an additional number of Shares equal to 10% of the total number of Shares, except that the number of Shares vesting on the last of such eight succeeding Vesting Dates will be less than 10% of the total number of Shares if and to the extent that the number of Shares Vesting on the First Vesting Date exceeded 20% of the total number of Shares. Unless otherwise provided in the Agreement or in another written agreement between you and the Company, (i) no Shares will vest before the First Vesting Date, (ii) vesting of Shares will occur only on Vesting Dates, without any ratable vesting for periods of time between Vesting Dates, and (iii) all Shares will be vested by the fourth anniversary of the First Vesting Date as long as all conditions to vesting are satisfied.

Except as otherwise provided in the Plan, the Agreement, or a separate written agreement between you and the Company signed by an executive officer of the Company, termination of your service as a member of the Company’s Board of Directors for any reason will result in cessation of vesting, cancellation of this grant, and forfeiture to the Company of any Shares not vested at the time your service as a director terminates, unless you are then or are then becoming an employee of the Company (as defined in the Plan).

If you cease to be a director of the Company in connection with a Change in Control Event (as defined in the Plan) for any reason other than voluntary resignation from the Board, which Board will continue in place following the Change in Control Event, then upon such a cessation of your directorship all of the Shares will vest and become free of contractual restrictions on transfer.

The Prospectus for the Plan, the Plan document and the Company’s Annual Report on Form 10-K, and other filings made by the Company with the Securities and Exchange Commission are available for your review on the Company’s internal employee web site. You may also obtain paper copies of these documents upon request to the Company’s HR department.

No representations or promises are made regarding the duration of your employment or service, vesting of the Shares, the value of the Company’s stock or this grant, or the Company’s prospects. The Company provides no advice regarding tax consequences or your handling of the Shares; you agree to rely only upon your own personal advisors.

ECLIPSYS CORPORATION
By:
	Name & Title

EX-10.4

Exhibit 10.4

Notice of Grant of Stock Option	Eclipsys Corporation
Employee	ID: 65-0632092

«Name»	Option Number:	«OptionNumber»
«StreetAddress»	Plan:	2005 Stock Incentive Plan
«CityStateZip»	Employee ID:	«IDNumber»

Effective                      (the “Grant Date”), you have been granted a non-statutory option to buy «TotalShares» shares of common stock of Eclipsys Corporation (the “Company”) at an exercise price of $                     per share. This option vests as described below under Vesting Type                     .

The option is granted under and governed by the terms and conditions of this notice, the Company’s 2005 Stock Incentive Plan (the “Plan”), and any other applicable written agreement between you and the Company. By your acceptance of this option, and also by its exercise, you agree to such terms and conditions and confirm that your receipt and exercise of this option is voluntary.

Except as otherwise provided in the Plan or a separate written agreement between you and the Company signed by an executive officer of the Company, (i) termination of your employment for any reason (unless you are then or are becoming a member of the Board of Directors of the Company) will result in cessation of vesting and lapse of the option to the extent not yet vested at the time of termination; and (ii) vested options may be exercised only for a period of 90 days following termination of your employment (or Board service if you are a member of the Company’s Board of Directors at the time of termination of your employment) (or, if your employment ends as a result of death, the first anniversary of death). The option expires on the tenth anniversary of the Grant Date or such earlier date as the Plan provides.

Unless otherwise permitted by the Company’s Board of Directors, you must pay the exercise price and meet any tax obligations in cash.

For purposes of this option, the definition of “Good Reason” under the Plan shall be as follows, notwithstanding any Plan provision to the contrary: “Good Reason” shall mean any significant diminution in the Participant’s responsibilities from and after such Reorganization Event or Change in Control Event, as the case may be, or any reduction in the annual cash compensation payable to the Participant from and after such Reorganization Event or Change in Control Event, as the case may be.

The Prospectus for the Plan, the Plan document, the Company’s Annual Report on Form 10-K, and other filings made by the Company with the Securities and Exchange Commission are available for your review on the Company’s internal employee web site. You may also obtain paper copies of these documents upon request to the Company’s HR department.

No representations or promises are made regarding the duration of your employment or service, vesting of the option, the value of the Company’s stock or this option, or the Company’s prospects. The Company provides no advice regarding tax consequences or your handling of this option; you agree to rely only upon your own personal advisors.

ECLIPSYS CORPORATION
By:
	Name
	Title

Vesting Type 1 options vest and become exercisable (i) with respect to 20% of the underlying shares on the first anniversary of the date of commencement of your employment with the Company (as defined in the Plan) if your employment commenced on the first day of a calendar month, and otherwise on the first day of the calendar month immediately following the first anniversary of the date of commencement of your employment with the Company; and (ii) with respect to the remaining 80% of the underlying shares in 48 equal consecutive monthly installments on the first day of each calendar month following the initial vesting date as described in the preceding clause (i), provided that vesting will not occur if you are not employed with the Company (as defined in the Plan) (or serving as a member of the Company’s Board of Directors) on the scheduled vesting date.

Vesting Type 2 options vest and become exercisable (i) with respect to 20% of the underlying shares on the first anniversary of the Grant Date if the Grant Date was on the first day of a calendar month, and otherwise on the first day of the calendar month immediately following the first anniversary of the Grant Date; and (ii) with respect to the remaining 80% of the underlying shares in 48 equal consecutive monthly installments on the first day of each calendar month following the initial vesting date as described in the preceding clause (i), provided that vesting will not occur if you are not employed with the Company (as defined in the Plan) (or serving as a member of the Company’s Board of Directors) on the scheduled vesting date.

EX-10.5

Exhibit 10.5

Notice of Grant of Stock Option	Eclipsys Corporation
Director	ID: 65-0632092

«Name»	Option Number:	«OptionNumber»
«StreetAddress»	Plan:	2005 Stock Incentive Plan
«CityStateZip»

Effective                      (the “Grant Date”), you have been granted a non-statutory option to buy «TotalShares» shares of common stock of Eclipsys Corporation (the “Company”) at an exercise price of $                     per share. This option vests as described below under Vesting Type                     .

The option is granted under and governed by the terms and conditions of this notice, the Company’s 2005 Stock Incentive Plan (the “Plan”), and any other applicable written agreement between you and the Company. By your acceptance of this option, and also by its exercise, you agree to such terms and conditions and confirm that your receipt and exercise of this option is voluntary.

If you cease to be a member of the Company’s Board of Directors in connection with a Change in Control Event (as defined in the Plan) for any reason other than voluntary resignation from the Board, which Board will continue in place following the Change in Control Event, then upon such a cessation of your directorship the option will vest in full.

Except as otherwise provided in this Notice or the Plan or a separate written agreement between you and the Company signed by an executive officer of the Company, (i) termination of your service as a member of the Company’s Board of Directors for any reason (unless you are then or then becoming an employee of the Company as defined in the Plan) will result in cessation of vesting and lapse of the option to the extent not yet vested at the time of termination; and (ii) vested options may be exercised only for a period of 365 days following termination of your service as a member of the Company’s Board of Directors (or, if later, 365 days following termination of your employment). The option expires on the tenth anniversary of the Grant Date or such earlier date as the Plan provides.

Unless otherwise permitted by the Company’s Board of Directors, you must pay the exercise price and meet any tax obligations in cash.

The Prospectus for the Plan, the Plan document, the Company’s Annual Report on Form 10-K, and other filings made by the Company with the Securities and Exchange Commission are available for your review on the Company’s internal employee web site. You may also obtain paper copies of these documents upon request to the Company’s HR department.

No representations or promises are made regarding the duration of your service, vesting of the option, the value of the Company’s stock or this option, or the Company’s prospects. The Company provides no advice regarding tax consequences or your handling of the option; you agree to rely only upon your own personal advisors.

ECLIPSYS CORPORATION
By:
	Name
	Title

Vesting Type 1 options vest and become exercisable (i) with respect to 20% of the underlying shares on the first anniversary of the date of commencement of your service as a member of the Company’s Board of Directors if your service commenced on the first day of a calendar month, and otherwise on the first day of the calendar month immediately following the first anniversary of the date of commencement of your service; and (ii) with respect to the remaining 80% of the underlying shares in 48 equal consecutive monthly installments on the first day of each calendar month following the initial vesting date as described in the preceding clause (i), provided that vesting will not occur if you are not serving as a member of the Board of Directors of the Company or employed with the Company (as defined in the Plan) on the scheduled vesting date.

Vesting Type 2 options vest and become exercisable (i) with respect to 20% of the underlying shares on the first anniversary of the Grant Date if the Grant Date was on the first day of a calendar month, and otherwise on the first day of the calendar month immediately following the first anniversary of the Grant Date; and (ii) with respect to the remaining 80% of the underlying shares in 48 equal consecutive monthly installments on the first day of each calendar month following the initial vesting date as described in the preceding clause (i), provided that vesting will not occur if you are not serving as a member of the Board of Directors of the Company or employed with the Company (as defined in the Plan) on the scheduled vesting date.

EX-31.1

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Robert J. Colletti, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Eclipsys Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 05, 2005	/s/ Robert J. Colletti
	Robert J. Colletti
	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     In connection with this quarterly report on Form 10-Q of Eclipsys Corporation (the “Company”) for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Eugene V. Fife, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 05, 2005

/s/ Eugene V. Fife  

Eugene V. Fife 

President and Chief Executive Officer 

EX-32.2

Exhibit 32.2

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     In connection with this quarterly report on Form 10-Q of Eclipsys Corporation (the “Company”) for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Robert J. Colletti, Senior Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 05, 2005

/s/ Robert J. Colletti  

Robert J. Colletti 

Senior Vice President and Chief Financial Officer